EXHIBIT 10.1.5
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
April 1, 1997
among
PATINA OIL & GAS CORPORATION,
as Borrower,
The Financial Institutions Listed on Schedule 1 hereto,
as Banks,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent,
NATIONSBANK OF TEXAS, N.A.,
as Documentary Agent,
and
▇▇▇▇▇ FARGO BANK, N.A., CIBC, INC., and
CREDIT LYONNAIS NEW YORK BRANCH,
as Co-Agents
$140,000,000
TABLE OF CONTENTS
Page
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ARTICLE I TERMS DEFINED........................................................... 2
SECTION 1.1. Definitions.................................................... 2
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SECTION 1.2. Accounting Terms and Determinations............................ 20
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ARTICLE II THE CREDIT FACILITIES.................................................. 20
SECTION 2.1. Commitment..................................................... 20
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SECTION 2.2. Method of Borrowing............................................ 22
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SECTION 2.3. Method of Requesting Letters of Credit......................... 23
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SECTION 2.4. Notes.......................................................... 24
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SECTION 2.5. Interest Rates; Payments....................................... 24
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SECTION 2.6. Mandatory Termination of Commitments; Termination Date and
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Maturity................................................................ 26
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SECTION 2.7. Voluntary Reduction of Total Commitment........................ 26
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SECTION 2.8. Application of Payments........................................ 26
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SECTION 2.9. Commitment Fee................................................. 26
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SECTION 2.10. Agency and Other Fees......................................... 26
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ARTICLE III GENERAL PROVISIONS.................................................... 27
SECTION 3.1. Delivery and Endorsement of Notes.............................. 27
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SECTION 3.2. General Provisions as to Payments.............................. 27
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SECTION 3.3. Funding Losses................................................. 28
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SECTION 3.4. Foreign Lenders, Participants, and Assignees................... 28
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ARTICLE IV BORROWING BASE......................................................... 29
SECTION 4.1. Reserve and Related Asset Report; Proposed Borrowing Base...... 29
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SECTION 4.2. Determination of Borrowing Base................................ 29
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SECTION 4.3. Special Determination of Borrowing Base........................ 30
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SECTION 4.4. Borrowing Base Deficiency...................................... 30
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SECTION 4.5. Initial Borrowing Base......................................... 31
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ARTICLE V COLLATERAL.............................................................. 31
SECTION 5.1. Security....................................................... 31
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SECTION 5.2. Guarantee...................................................... 31
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ARTICLE VI CONDITIONS TO BORROWINGS............................................... 32
SECTION 6.1. Restatement of Existing Credit Agreement/Conditions to Initial
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Extension of Credit................................................ 32
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SECTION 6.2. Conditions to each Borrowing and each Letter of Credit......... 34
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SECTION 6.3. Agreements Regarding Initial Borrowing......................... 35
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ARTICLE VII REPRESENTATIONS AND WARRANTIES........................................ 35
SECTION 7.1. Corporate Existence and Power.................................. 35
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SECTION 7.2. Existence and Power (Other Companies).......................... 36
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SECTION 7.3. Corporate, Limited Liability Company, Partnership and
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Governmental Authorization; Contravention.......................... 36
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SECTION 7.4. Binding Effect................................................. 36
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SECTION 7.5. Financial Information.......................................... 36
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SECTION 7.6. Litigation..................................................... 37
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SECTION 7.7. ERISA.......................................................... 37
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SECTION 7.8. Taxes and Filing of Tax Returns................................ 37
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SECTION 7.9. Title to Properties; Liens..................................... 37
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SECTION 7.10. Business; Compliance.......................................... 37
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SECTION 7.11. Licenses, Permits, Etc........................................ 38
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SECTION 7.12. Compliance with Law........................................... 38
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SECTION 7.13. Ownership Interests........................................... 38
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SECTION 7.14. Full Disclosure............................................... 38
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SECTION 7.15. Subsidiaries.................................................. 39
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SECTION 7.16. Obligations of Unrestricted Subsidiaries...................... 39
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SECTION 7.17. Environmental Matters......................................... 39
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SECTION 7.18. Merger Documents.............................................. 40
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SECTION 7.19. Burdensome Obligations........................................ 40
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SECTION 7.20. Government Regulations........................................ 40
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ARTICLE VIII AFFIRMATIVE COVENANTS................................................ 40
SECTION 8.1. Information.................................................... 40
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SECTION 8.2. Business of Borrower........................................... 42
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SECTION 8.3. Maintenance of Existence....................................... 42
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SECTION 8.4. Title Data..................................................... 43
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SECTION 8.5. Right of Inspection............................................ 43
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SECTION 8.6. Maintenance of Insurance....................................... 43
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SECTION 8.7. Payment of Taxes and Claims.................................... 44
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SECTION 8.8. Compliance with Laws and Documents............................. 44
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SECTION 8.9. Operation of Properties and Equipment.......................... 44
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SECTION 8.10. Further Assurances............................................ 45
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SECTION 8.11. Environmental Law Compliance and Indemnity.................... 45
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ARTICLE IX NEGATIVE COVENANTS..................................................... 46
SECTION 9.1. Debt of Borrower and its Restricted Subsidiaries............... 46
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SECTION 9.2. Restricted Payments............................................ 46
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SECTION 9.3. Negative Pledge................................................ 47
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SECTION 9.4. Consolidations and Mergers..................................... 47
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SECTION 9.5. Asset Dispositions............................................. 47
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SECTION 9.6. Amendments to Material Documents............................... 47
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SECTION 9.7. Use of Proceeds................................................ 48
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SECTION 9.8. Investments.................................................... 48
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SECTION 9.9. Transactions with Affiliates................................... 48
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SECTION 9.10. Plans......................................................... 48
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SECTION 9.11. Oil and Gas Hedge Transactions................................ 48
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SECTION 9.12. Obligations of Unrestricted Subsidiaries...................... 49
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SECTION 9.13. Acquisitions.................................................. 49
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SECTION 9.14. Operating Leases.............................................. 49
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SECTION 9.15. Speculative Hedge Transactions................................ 49
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ARTICLE X FINANCIAL COVENANTS..................................................... 49
ARTICLE XI DEFAULTS............................................................... 50
SECTION 11.1. Events of Default............................................. 50
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ARTICLE XII AGENTS................................................................ 53
SECTION 12.1. Appointment and Authorization................................. 53
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SECTION 12.2. Agents and Affiliates......................................... 53
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SECTION 12.3. Action by Agents.............................................. 53
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SECTION 12.4. Consultation with Experts..................................... 54
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SECTION 12.5. Liability of Agents........................................... 54
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SECTION 12.6. Delegation of Duties.......................................... 54
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SECTION 12.7. Indemnification............................................... 54
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SECTION 12.8. Credit Decision............................................... 54
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SECTION 12.9. Successor Agent............................................... 55
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ARTICLE XIII PROTECTION OF YIELD; CHANGE IN LAWS.................................. 55
SECTION 13.1. Basis for Determining Interest Rate Applicable to Eurodollar
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Tranches Inadequate................................................ 55
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SECTION 13.2. Illegality of Eurodollar Loans................................ 56
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SECTION 13.3. Increased Cost of Eurodollar Tranche.......................... 56
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SECTION 13.4. Adjusted Base Rate Tranche Substituted for Affected Eurodollar
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Tranche............................................................ 57
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SECTION 13.5. Capital Adequacy.............................................. 58
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SECTION 13.6. Taxes......................................................... 59
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SECTION 13.7. Discretion of Banks as to Manner of Funding................... 59
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ARTICLE XIV MISCELLANEOUS......................................................... 59
SECTION 14.1. Notices....................................................... 59
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SECTION 14.2. No Waivers.................................................... 60
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SECTION 14.3. Expenses; Documentary Taxes; Indemnification.................. 60
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SECTION 14.4. Right and Sharing of Set-Offs................................. 60
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SECTION 14.5. Amendments and Waivers........................................ 61
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SECTION 14.6. Survival...................................................... 61
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SECTION 14.7. Limitation on Interest........................................ 62
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SECTION 14.8. Invalid Provisions............................................ 62
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SECTION 14.9. Waiver of Consumer Credit Laws................................ 62
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SECTION 14.10. Successors and Assigns....................................... 62
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SECTION 14.11. TEXAS LAW.................................................... 64
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SECTION 14.12. Consent to Jurisdiction; Waiver of Immunities................ 64
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SECTION 14.13. Counterparts; Effectiveness.................................. 64
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SECTION 14.14. No Third Party Beneficiaries................................. 65
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SECTION 14.15. COMPLETE AGREEMENT........................................... 65
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SECTION 14.16. WAIVER OF JURY TRIAL......................................... 65
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EXHIBITS
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Exhibit A Note
Exhibit B Pledge Agreement
Exhibit C Restricted Subsidiary Guaranty
Exhibit D Request for Borrowing
Exhibit E Request for Letter of Credit
Exhibit F Rollover Notice
Exhibit G Assignment and Assumption Agreement
Exhibit H Certificate of Ownership Interests
SCHEDULES
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Schedule 1 Financial Institutions
Schedule 2 Investments
Schedule 3 Taxes
Schedule 4 Subsidiaries
Schedule 5 Obligations
Schedule 6 Debt
AMENDED AND RESTATED CREDIT AGREEMENT
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THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is entered
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into effective as of the 1st day of April, 1997, among Patina Oil & Gas
Corporation, a Delaware corporation ("Borrower"), Texas Commerce Bank National
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Association, as Administrative Agent ("Administrative Agent"), NationsBank of
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Texas, N.A., as Documentary Agent ("Documentary Agent"), ▇▇▇▇▇ Fargo Bank, N.A.,
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CIBC, Inc. and Credit Lyonnais New York Branch, as Co-Agents ("Co-Agents") and
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the financial institutions listed on Schedule 1 hereto as Banks (individually a
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"Bank" and collectively "Banks")
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W I T N E S E T H
WHEREAS, Borrower, ▇▇▇▇▇▇▇ Oil & Gas Corporation, a Delaware corporation
("▇▇▇▇▇▇▇") and SOCO Wattenberg Corporation, a Delaware corporation ("SWAT"), as
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Borrowers (collectively, referred to herein as the "Existing Borrowers"), Agents
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and the financial institutions listed on Schedule 1 thereto as Banks
(collectively referred to herein as "Existing Banks") are parties to that
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certain Credit Agreement dated as of May 2, 1996, as heretofore amended (the
"Existing Credit Agreement"), pursuant to which credit is outstanding to the
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Existing Borrowers; and
WHEREAS, pursuant to that certain Merger Certificate (as hereinafter
defined), ▇▇▇▇▇▇▇ will merge with and into Borrower with Borrower being the
surviving corporation; and
WHEREAS, pursuant to an Assignment and Assumption Agreement dated effective
as of April 1, 1997 (the "Bank Assignment Agreement"), Bank One, Texas, N.A., a
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national banking association ("Bank One") has purchased and assumed certain
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rights and interests of Existing Banks under the Existing Credit Agreement; and
WHEREAS, immediately after giving effect to the Merger and the Bank
Assignment (as each term is hereinafter defined), but subject to the conditions
precedent set forth herein, Borrower, Banks (including Bank One) and Agents
desire to amend and restate the Existing Credit Agreement in it entirety in
order, among other things, (a) to amend and restate the aggregate Commitments of
Banks, and (b) to modify certain other provisions of the Existing 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, Administrative Agent, Documentary Agent, Co-Agents and
Banks hereby agree that the Existing Credit Agreement is hereby amended and
restated in its entirety on the terms and conditions set forth herein. It is
the intention of Borrower, Agents and Banks that this Agreement supersede and
replace the Existing Credit Agreement in its entirety; provided, that (a) such
amendment and restatement shall operate to renew, amend and modify the rights
and obligations of the parties under the Existing Credit Agreement as provided
herein, but shall not effect a novation thereof, and (b) except for such Liens
securing the Obligations under and as defined in the Existing Credit Agreement
which are no longer required
1
pursuant to the terms of this Agreement (and which are being terminated and
released pursuant to express written instruments to such effect duly filed and
recorded in the appropriate jurisdictions), the Liens securing the Obligations
under and as defined in the Existing Credit Agreement shall not be extinguished,
but shall be carried forward and shall secure such Obligations as renewed,
amended, restated and modified hereby. Borrower, Administrative Agent,
Documentary Agent, Co-Agents and Banks hereby further agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein, have the
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following meanings:
"Adjusted Base Rate" means, on any day, the greater of (a) the Base Rate in
effect on such day, or (b) the sum of (i) the Federal Funds Rate in effect on
such day, plus (ii) one half of one percent (.5%). Each change in the Adjusted
Base Rate shall become effective automatically and without notice to Borrower or
any Bank upon the effective date of each change in the Federal Funds Rate or the
Base Rate, as the case may be.
"Adjusted Base Rate Tranche" means the portion of the principal of the Loan
bearing interest with reference to the Adjusted Base Rate.
"Adjusted Consolidated EBITDA" means, with respect to any Person for any
period, Consolidated EBITDA of such Person for such period, adjusted to reflect
all revenues and expenses (including lease operating expense, severance Taxes,
additional overhead and other expenses) attributable to material oil and gas
properties purchased by such Person or any of its Subsidiaries after the first
day of such period as if such properties had been owned by such Person or such
Subsidiaries on the first day of such period. As used in this definition,
"material oil and gas properties" means oil and gas properties purchased for a
purchase price of not less than $25,000,000.
"Adjusted Eurodollar Rate" applicable to any Interest Period, means a rate
per annum equal to the quotient obtained (rounded upwards, if necessary, to the
next higher 1/16 of 1%) by dividing (a) the applicable Eurodollar Rate by (b)
1.00 minus the Eurodollar Reserve Percentage.
"Administrative Agent" means Texas Commerce Bank National Association in
its capacity as Administrative Agent for Banks hereunder or any successor
thereto.
"Affiliate" means, as to any Person, any Subsidiary of such Person, or any
other Person which, directly or indirectly, controls, is controlled by, or is
under common control with, such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management
2
and policies of such Person, whether through the ownership of voting securities
or partnership interests, or by contract or otherwise.
"Agent" means any of the Administrative Agent, the Documentary Agent or any
Co-Agent, and "Agents" means the Administrative Agent, the Documentary Agent and
the Co-Agents collectively.
"Agreement" means this Amended and Restated Credit Agreement, including the
Schedules and Exhibits hereto, as the same may be amended or supplemented from
time to time.
"Annualized" means, with respect to Adjusted Consolidated EBITDA of any
Person for a period of less than four (4) complete Fiscal Quarters, the Adjusted
Consolidated EBITDA of such Person for the number of complete Fiscal Quarters in
such period multiplied times a fraction, the numerator of which is four (4) and
the denominator of which is the number of complete Fiscal Quarters in such
period.
"Applicable Environmental Law" means any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority or any board of
fire underwriters (or other body exercising similar functions), affecting any
real or personal property owned, operated or leased by any Company or any other
operation of any Company in any way pertaining to health, safety or the
environment, including, without limitation, all applicable zoning ordinances and
building codes, flood disaster laws and health, safety and environmental laws
and regulations, and further including without limitation, (a) the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, herein referred to as "CERCLA"), (b) the Resource Conservation and
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Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Recovery Act of 1976, as amended by the Solid Waste Disposal Act of
1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended from time
to time, herein referred to as "RCRA"), (c) the Safe Drinking Water Act, as
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amended, (d) the Toxic Substances Control Act, as amended, (e) the Clean Air
Act, as amended, (f) the Occupational Safety and Health Act of 1970, as amended,
(g) the laws, rules and regulations of any state having jurisdiction over any
real or personal property owned, operated or leased by any Company or any other
operation of any Company which relate to health, safety or the environment, as
each may be amended from time to time, and (h) any federal, state or municipal
laws, ordinances or regulations which may now or hereafter require removal of
asbestos or other hazardous wastes or impose any liability related to asbestos
or other hazardous wastes. The terms "hazardous substance", "petroleum",
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"release" and "threatened release" have the meanings specified in CERCLA, and
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the terms "solid waste" and "disposal" (or "disposed") have the meanings
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specified in RCRA; provided, however, in the event either CERCLA or RCRA is
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amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment with
respect to all provisions of this Agreement; and provided further that, to the
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extent the laws of the state in which any real or personal property owned,
operated or leased by any Company is located establish a meaning for "hazardous
substance", "petroleum", "release", "solid waste" or "disposal" which is broader
than that specified
3
in either CERCLA or RCRA, such broader meaning shall apply in so far as such
broader meaning is applicable to the real or personal property owned, operated
or leased by such Company and located in such state.
"Applicable Margin" means, for purposes of determining the interest rate
applicable to the Loan at any time, the amount set forth in the table below
under the applicable Type of Tranche and opposite the applicable Ratio of
Consolidated Funded Debt to Adjusted Consolidated EBITDA. The Applicable Margin
in effect at any time shall be based on the Ratio of Consolidated Funded Debt to
Adjusted Consolidated EBITDA as of the last day of the Fiscal Quarter then most
recently ended for which Borrower has provided to Banks the financial statements
required by Section 8.1(b) hereof (in the case of the first three (3) Fiscal
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Quarters of each Fiscal Year) or Section 8.1(a) hereof (in the case of the
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fourth Fiscal Quarter of each Fiscal Year).
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Ratio of Consolidated Funded Debt to Adjusted Base Rate Eurodollar
Adjusted Consolidated EBITDA Tranches Tranches
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less than 1.5 to 1 0 .625%
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greater than 1.5 to 1 less than 2.0 to 1 0 .75%
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greater than 2.0 to 1 less than 2.5 to 1 0 .875%
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greater than 2.5 to 1 less than 3.0 to 1 0 1.000%
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greater than 3.0 to 1 0 1.125%
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"Approved Petroleum Engineer" means any one or more of Netherland, ▇▇▇▇▇▇ &
Associates, Inc., ▇▇▇▇▇ ▇▇▇▇▇ Company, ▇▇▇▇▇▇▇▇▇▇ Petroleum Consultants, Inc.,
▇▇▇▇▇▇ and Click, Inc., or such other reputable firm(s) of independent petroleum
engineers as shall be approved by Required Banks and, as to oil and gas
properties aggregating not more than twenty percent (20%) of the total value of
Borrower's and its Restricted Subsidiaries' oil and gas properties (based on the
Recognized Value), Borrower's in-house staff shall be deemed an Approved
Petroleum Engineer.
"Assignee" has the meaning given such term in Section 14.10(c).
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"Assignment and Assumption Agreement" has the meaning given such term in
Section 14.10(c).
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"Authorized Officer" means, as to any Person, its Chairman, Vice-Chairman,
President, Executive Vice President(s), Senior Vice President(s) or Vice
President duly authorized to act on behalf of such Person.
"Availability" means, at any time, (a) the Borrowing Base in effect at such
time, minus (b) the Outstanding Credit at such time.
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"Bank" means any financial institution listed on Schedule 1 hereto as
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having a Commitment, and its successors and assigns, and "Banks" shall mean all
Banks.
"Bank Assignment Agreement" means that certain Assignment and Assumption
Agreement dated effective as of April 1, 1997, entered into by and among Bank
One and Existing Banks, pursuant to which Bank One purchased and assumed certain
rights and interests of Existing Banks under the Existing Credit Agreement.
"Bank One" means Bank One, Texas, N.A., a national banking association.
"Base Rate" means the floating rate of interest established from time to
time by Administrative Agent as its "prime rate" of interest, which rate is not
the lowest rate of interest which Administrative Agent charges, each change in
the Base Rate to become effective without notice to Borrower on the effective
date of each such change.
"Borrower" means Patina Oil & Gas Corporation, a Delaware corporation.
"Borrowing" means any disbursement to Borrower under, or to satisfy the
obligations of any Company under, any of the Loan Papers. Any Borrowing which
will constitute an Adjusted Base Rate Tranche is referred to herein as a "Base
Rate Borrowing," and any Borrowing which will constitute a Eurodollar Tranche is
referred to herein as a "Eurodollar Borrowing."
"Borrowing Base" has the meaning set forth in Section 4.2 hereof.
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"Borrowing Base Deficiency" means, as of any date, the amount, if any, by
which (a) the Outstanding Credit on such date, exceeds (b) the Borrowing Base in
effect on such date; provided, that, for purposes of computing the existence and
amount of any Borrowing Base Deficiency, Letter of Credit Exposure will not
constitute Outstanding Credit to the extent funds have been deposited with
Administrative Agent to secure such Letter of Credit Exposure pursuant to
Section 2.1(b).
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"Borrowing Date" means the Eurodollar Business Day or the Domestic Business
Day, as the case may be, upon which the proceeds of any Borrowing are made
available to Borrower or to satisfy the obligation of any Company.
"Capital Lease" means, for any Person as of any date, any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared as of such date in accordance with generally accepted accounting
principles.
"Closing Date" means April 1, 1997.
"Co-Agents" means ▇▇▇▇▇ Fargo Bank, N.A., CIBC, Inc. and Credit Lyonnais
New York Branch in their capacities as Co-Agents hereunder or any successor
thereto, and "Co-Agent" means any one of the foregoing.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, with respect to any Bank, the amount set forth opposite
such Bank's name on Schedule 1 hereto, as such amount may be terminated or
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reduced from time to time in accordance with the provisions hereof.
"Commitment Fee Percentage" means, at any time, the amount set forth in the
table below opposite the applicable Ratio of Consolidated Funded Debt to
Adjusted Consolidated Cash Flow. The Commitment Fee Percentage in effect at any
time pursuant to the table below shall be based on the Ratio of Consolidated
Funded Debt to Adjusted Consolidated EBITDA as of the last day of the Fiscal
Quarter then most recently ended for which Borrower has provided to Banks the
financial statements required by Section 8.1(b) hereof (in the case of the first
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three (3) Fiscal Quarters of each Fiscal Year) or Section 8.1(a) hereof (in the
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case of the fourth Fiscal Quarter of each Fiscal Year).
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Ratio of Consolidated Funded Debt to Commitment Fee
Adjusted Consolidated EBITDA Percentage
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less than 2.5 to 1 .25%
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greater than 2.5 to 1 less than 3.0 to 1 .30%
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greater than 3 to 1 .375%
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"Commitment Percentage" means, with respect to any Bank at any time, the
Commitment Percentage for such Bank set forth on Schedule 1 hereto.
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"Common Stock" means Borrower's Common Stock, par value $.01 per share.
"Companies" means Borrower and all direct and indirect Subsidiaries of
Borrower whether existing on the date hereof or hereafter acquired or created,
and "Company" means any one of the foregoing.
"Consolidated Current Assets" means, for any Person at any time, the sum of
(a) consolidated current assets of such Person and its Consolidated Subsidiaries
including accounts or notes receivable (if properly reserved in accordance with
generally accepted accounting principles), but excluding (i) prepaid expenses,
and (ii) assets held for resale, plus (b) the Availability.
"Consolidated Current Liabilities" means, for any Person at any time, the
current liabilities of such Person and its Consolidated Subsidiaries at such
time, but excluding the current portion of the principal outstanding under the
Loan.
"Consolidated EBITDA" means, for any Person for any period, the
Consolidated Net Income of such Person for such period, plus each of the
following determined for such Person and its
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Consolidated Subsidiaries on a consolidated basis for such period: (a) any
provision for (or less any benefit from) income or franchise Taxes included in
determining Consolidated Net Income; (b) Consolidated Net Interest Expense
deducted in determining Consolidated Net Income; (c) depreciation, depletion and
amortization expense deducted in determining Consolidated Net Income; and (d)
other noncash charges deducted in determining Consolidated Net Income and not
already deducted in accordance with clauses (b) and (c) of this definition.
"Consolidated Free Cash Flow" means, for Borrower for any period, the
remainder of (a) Borrower's Consolidated EBITDA for such period, minus (b)
Borrower's Consolidated Net Interest Expense for such period, minus (c) all
income and franchise Taxes actually paid in cash by Borrower and its
Consolidated Subsidiaries during such period, minus (d) all dividends on the
Preferred Stock paid during such period.
"Consolidated Funded Debt" means, for Borrower at any time, all Debt of
Borrower and its Consolidated Subsidiaries at such time.
"Consolidated Net Income" means, for any Person as of any period, the net
income (or loss) of such Person and its Consolidated Subsidiaries for such
period determined in accordance with generally accepted accounting principles,
but excluding: (a) the income of any other Person (other than its Consolidated
Subsidiaries) in which such Person or any of its Subsidiaries has an ownership
interest, unless received by such Person or its Consolidated Subsidiaries in a
cash distribution; (b) any after-tax gains attributable to asset dispositions;
(c) to the extent not included in clauses (a) and (b) above, any after-tax (i)
extraordinary gains, (ii) non-cash gains or (iii) nonrecurring gains; and (d)
non-cash or nonrecurring charges due to changes in accounting principles
required by generally accepted accounting principles.
"Consolidated Net Interest Expense" means, for any Person for any period,
the remainder of the following for such Person and its Consolidated Subsidiaries
for such period: (a) interest expense, minus (b) interest income.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, at any time, any Subsidiary or other entity the accounts of which would
be consolidated with those of such Person in its consolidated financial
statements as of such time.
"Consolidated Total Capital" means, for any Person as of any date, the sum
of (a) the Consolidated Funded Debt of such Person and its Consolidated
Subsidiaries as of such date, and (b) the shareholders' equity of such Person
which would be reflected on a consolidated balance sheet of such Person and its
Consolidated Subsidiaries prepared as of such date in accordance with generally
accepted accounting principles.
"Conversion Date" has the meaning set forth in Section 2.5(c).
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7
"Credit Period" means the period commencing on the date hereof and ending
on the Termination Date.
"Current Financials" means the consolidated balance sheet of Borrower as of
December 31, 1996, and the related consolidated statements of operations and
cash flow for the Fiscal Year then ended, reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP,
copies of which have been provided to Banks.
"Current Reserve Report" means that certain Estimate of Reserves and Future
Revenue dated February 5, 1997, prepared as of December 31, 1996 by Netherland,
▇▇▇▇▇▇ & Associates, Inc. setting forth Netherland, ▇▇▇▇▇▇ & Associates, Inc.'s
analysis of certain oil and gas properties owned by Borrower (after giving
effect to the Merger) and its Restricted Subsidiaries as of December 31, 1996.
"Debt" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all other
indebtedness (including obligations under Capital Leases, other than Capital
Leases which are usual and customary oil and gas leases) of such Person on which
interest charges are customarily paid or accrued, (d) all Guarantees by such
Person, (e) the unfunded or unreimbursed portion of all letters of credit issued
for the account of such Person, and (f) all liability of such Person as a
general partner of a partnership for obligations of such partnership of the
nature described in (a) through (e) preceding.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Determination" means any Periodic Determination or Special Determination.
"Determination Date" means (a) each May 1 and November 1, and (b) with
respect to any Special Determination, the first day of the first month which is
not less than twenty (20) Domestic Business Days following the date of a request
for a Special Determination. The Closing Date shall also constitute a
Determination Date for purposes of this Agreement.
"Distribution" by any Person, means (a) with respect to any stock issued by
such Person or any partnership interest of such Person, the retirement,
redemption, purchase, or other acquisition for value of any such stock or
partnership interest, (b) the declaration or payment of any dividend or other
distribution on or with respect to any stock or any partnership interest of any
Person, and (c) any other payment by such Person with respect to such stock or
partnership interest.
"Documentary Agent" means NationsBank of Texas, N.A. in its capacity as
Documentary Agent for Banks hereunder or any successor thereto.
8
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which national banks in Houston, Texas, are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office identified on
Schedule 1 hereto as its Domestic Lending Office or such other office as such
----------
Bank may hereafter designate as its Domestic Lending Office by notice to
Borrower and Administrative Agent.
"Environmental Liability" means any liability, loss, fine, penalty, charge,
lien, damage, cost, or expense of any kind that results directly or indirectly,
in whole or in part (a) from the violation of any Applicable Environmental Law,
(b) from the release or threatened release of any hazardous substance, (c) from
removal, remediation, or other actions in response to the release or threatened
release of any hazardous substance, (d) from actual or threatened damages to
natural resources, (e) from the imposition of injunctive relief or other orders,
(f) from personal injury, death, or property damage which occurs as a result of
any Company's use, storage, handling, or the release or threatened release of a
hazardous substance, or (g) from any environmental investigation performed at,
on, or for any real property owned by any Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in the applicable Eurodollar interbank market.
"Eurodollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address identified on Schedule 1 hereto as its
----------
Eurodollar Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Eurodollar Lending Office by notice to
Borrower and Administrative Agent.
"Eurodollar Rate" applicable to any Interest Period means the rate per
annum determined by Administrative Agent (rounded upward, if necessary, to the
next higher 1/16 of 1%) at which deposits in dollars are offered to
Administrative Agent by first class banks in the eurodollar interbank market
which has been selected by Administrative Agent at approximately 10:00 a.m.
(Houston, Texas time) two (2) Eurodollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Eurodollar Tranche to which such Interest Period is to apply and for a
period of time comparable to such Interest Period. Administrative Agent shall
determine the Eurodollar Rate and shall notify Borrower and Banks as soon as
practicable.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in Houston, Texas in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on
9
Eurodollar Tranches is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Eurodollar Tranche" means, with respect to any Interest Period, any
portion of the principal amount outstanding under the Loan which bears interest
at a rate computed by reference to the Adjusted Eurodollar Rate for such
Interest Period.
"Event of Default" has the meaning set forth in Section 11.1 hereof.
------------
"Exempt Transfer" means any transfer of oil and gas properties or Related
Assets (a) by Borrower to any of its Restricted Subsidiaries, or (b) by any of
the Restricted Subsidiaries of Borrower to Borrower or to any other Restricted
Subsidiary of Borrower.
"Exhibit" refers to an exhibit attached to this Agreement and incorporated
herein by reference, unless specifically provided otherwise.
"Existing Banks" means the financial institutions listed on Schedule 1 of
----------
the Existing Credit Agreement.
"Existing Borrowers" means the Borrowers under and as defined in the
Existing Credit Agreement.
"Existing Credit Agreement" means that certain Credit Agreement dated as of
May 2, 1996, by and among Existing Borrowers, Agents and Existing Banks as
amended by that certain (i) First Amendment to Credit Agreement dated as of June
28, 1996, by and among Existing Borrowers, Agents and Existing Banks, (ii)
Second Amendment to Credit Agreement dated as of October 8, 1996, by and among
Existing Borrowers, Agents and Existing Banks, (iii) Third Amendment to Credit
Agreement dated as of November 1, 1996, by and among Existing Borrowers, Agents
and Existing Banks, and (iv) Fourth Amendment to Credit Agreement dated as of
February 18, 1997, by and among Existing Borrowers, Agents and Existing Banks.
"Existing Mortgages" means the mortgages, deeds of trust, security
agreements, assignments, pledges and other documents, instruments and agreements
which establish Liens on oil and gas properties owned by ▇▇▇▇▇▇▇ and its
Restricted Subsidiaries and on ▇▇▇▇▇▇▇ Related Assets (as defined in the
Existing Credit Agreement) to secure certain obligations under the Existing
Credit Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (a) if the day for which such rate is to be
determined is not a
10
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (b) if such rate is not so
published on such next succeeding Domestic Business Day, the Federal Funds Rate
for any day shall be the average rate charged to Administrative Agent on such
day on such transactions as determined by Administrative Agent.
"Fiscal Quarter" means the three (3) month periods ending March 31, June
30, September 30 or December 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending December 31.
"▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ Oil & Gas Corporation, a Delaware corporation,
which will be merged with an into Borrower pursuant to the Merger with Borrower
being the surviving corporation.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions, by "comfort letter"
or other similar undertaking of support or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Indenture" means that certain Indenture dated as of June 30, 1994, by and
between ▇▇▇▇▇▇▇ and Chemical Bank as Trustee, as supplemented and amended by
that certain Supplemental Indenture dated as of March 31, 1997, by and among
Borrower, ▇▇▇▇▇▇▇ and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Trustee, which Indenture sets forth certain terms applicable to the
Subordinate Notes.
"Initial Borrowing Base" means a Borrowing Base in the amount of
$120,000,000, which shall be in effect during the period commencing on the
Closing Date and continuing until the first Special Determination or Periodic
Determination after the Closing Date.
"Interest Option" has the meaning given such term in Section 2.5(c).
--------------
"Interest Period" means, with respect to each Eurodollar Tranche, the
period commencing on the Borrowing or Conversion Date applicable to such Tranche
and ending one (1), two (2), three (3) or six (6) months thereafter, as Borrower
may elect in the applicable Request for Borrowing; provided that: (a) any
Interest Period which would otherwise end on a day which is not a Eurodollar
11
Business Day shall be extended to the next succeeding Eurodollar Business Day
unless such Eurodollar Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Eurodollar Business
Day; (b) any Interest Period which begins on the last Eurodollar Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Eurodollar Business Day of a calendar month;
(c) if any Interest Period includes a date on which any payment of principal of
the Loan subject to such Eurodollar Tranche is required to be made hereunder,
but does not end on such date, then (i) the principal amount of each Eurodollar
Tranche required to be repaid on such date shall have an Interest Period ending
on such date, and (ii) the remainder of each such Eurodollar Tranche shall have
an Interest Period determined as set forth above; and (d) no Interest Period
shall extend past the expiration of the Credit Period.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase of the
stock securities of, or interests in, any other Person; provided, that
"Investment" shall not include current customer and trade accounts which are
payable in accordance with customary trade terms.
"Lending Office" means, as to any Bank, its Domestic Lending Office or its
Eurodollar Lending Office, as the context may require.
"Letter of Credit Exposure" of any Bank means, collectively, such Bank's
aggregate participation in the unfunded portion of Letters of Credit outstanding
at any time.
"Letter of Credit Issuer" has the meaning set forth in Section 2.1(b).
--------------
"Letters of Credit" means, collectively, letters of credit issued for the
account of Borrower and its Restricted Subsidiaries pursuant to Section 2.1(b).
--------------
"Lien" means with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For
purposes of this Agreement, Borrower and its Subsidiaries shall be deemed to own
subject to a Lien any asset which is acquired or held subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means the revolving credit loan made by Banks to Borrower pursuant
to the Commitment.
"Loan Papers" means this Agreement, the Notes, the SWAT Guarantee, the
Pledge Agreement, and all other certificates, documents or instruments delivered
in connection with this Agreement, as the foregoing may be amended from time to
time.
"Margin Regulations" mean Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
12
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by which
such Person is directly or indirectly bound, or to which any assets of such
Person may be subject, which is not cancelable by such Person upon notice of
ninety (90) days or less without liability for further payment other than
nominal penalty.
"Material Debt" means Debt of Borrower or any of its Subsidiaries issued
under one or more related or unrelated agreements or instruments in an aggregate
principal amount exceeding $2,500,000.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if the
context so permits or requires, an amount calculated at such rate) of interest
which, at the time in question would not cause the interest charged on the
portion of the 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
Papers. To the extent the laws of the State of Texas are applicable for purposes
of determining the "Maximum Lawful Rate," such term shall mean the "indicated
rate ceiling" from time to time in effect under Article 1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, or, if permitted by applicable law
and effective upon the giving of the notices required by such Article 1.04 (or
effective upon any other date otherwise specified by applicable law), the
"quarterly ceiling" or "annualized ceiling" from time to time in effect under
such Article 1.04, whichever Administrative Agent (with the approval of Required
Banks) shall elect to substitute for the "indicated rate ceiling," and vice
----
versa, each such substitution to have the effect provided in such Article 1.04,
-----
and Administrative Agent (with the approval of Required Banks) shall be entitled
to make such election from time to time and one or more times and, without
notice to Borrower, to leave any such substitute rate in effect for subsequent
periods in accordance with subsection (h)(1) of such Article 1.04.
"Merger" means the merger of ▇▇▇▇▇▇▇ with and into Borrower pursuant to,
and in accordance with, the Merger Certificate, with Borrower being the
surviving corporation.
"Merger Certificate" means that certain Certificate of Ownership and Merger
of ▇▇▇▇▇▇▇ Oil & Gas Corporation with and into Patina Oil & Gas Corporation
dated March 21, 1997, and filed on March 26, 1997 with the Secretary of State of
Delaware.
"Merger Documents" means (a) the Merger Certificate, and (b) all other
material documents, instruments and agreements executed or delivered by any
Company pursuant to the Merger Certificate or the Merger.
"Mortgages" means all mortgages, deeds of trust, security agreements,
pledge agreements and similar documents, instruments and agreements creating,
evidencing, perfecting or otherwise
13
establishing the Liens required by Article V hereof as may have been heretofore
---------
or may hereafter be granted or assigned to Administrative Agent to secure
payment of the Obligations or any part thereof.
"Nonrecourse Debt" means Debt (a) secured solely by the assets acquired
with the proceeds of such Debt, (b) with respect to which neither Borrower nor
any of its Subsidiaries have any liability for repayment beyond the assets
pledged, and (c) with respect to which Borrower has delivered to Banks an
opinion in a form satisfactory to Required Banks of counsel acceptable to
Administrative Agent stating that such indebtedness meets the criteria set forth
in (a) and (b) preceding.
"Note" means a promissory note of Borrower, payable to the order of a Bank,
in substantially the form of Exhibit A hereto, evidencing the obligation of
---------
Borrower to repay to such Bank its Commitment Percentage of the Loan, together
with all modifications, extensions, renewals and rearrangements thereof, and
"Notes" means all of such Notes.
"Obligations" means, collectively, all present and future indebtedness,
obligations and liabilities, and all renewals and extensions thereof, or any
part thereof, of Borrower and its Restricted Subsidiaries (including obligations
under the SWAT Guarantee) to any Bank or to any Affiliate of any Bank (a)
arising pursuant to the Existing Credit Agreement, (b) arising pursuant to the
Loan Papers, and all interest accrued thereon and costs, expenses and attorneys'
fees incurred in the enforcement or collection thereof, (c) arising under or in
connection with any Oil and Gas Hedge Transaction entered into between Borrower
or any of its Restricted Subsidiaries and any Bank or any Affiliate of any Bank,
(d) arising under or in connection with any interest rate swap, cap, collar,
hedge or other interest rate protection device entered into between Borrower or
any of its Restricted Subsidiaries and any Bank or any Affiliate of any Bank,
and (e) arising under or in connection with any other financial "derivative"
product provided by any Bank or any Affiliate of any Bank to any Company,
regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several. It is the intention of Borrower, Agents and Banks that Borrower
and its Restricted Subsidiaries shall be jointly and severally liable for all
obligations of each other.
"Oil and Gas Hedge Transactions" means transactions pursuant to which
Borrower or any of its Subsidiaries hedge the price to be received by them for
future production of hydrocarbons, including price swap agreements under which
Borrower or any of its Subsidiaries agree to pay a price for a specified amount
of hydrocarbons determined by reference to a recognized market on a specified
future date and the contracting party agrees to pay Borrower or its Subsidiaries
a fixed price for the same or similar amount of hydrocarbons.
"Operating Lease" means any lease, sublease, license or similar arrangement
(other than a Capital Lease and other than leases with a primary term of one
year or less or which can be terminated by the lessee upon notice of one year or
less without incurring a penalty) pursuant to which a Person leases, subleases
or otherwise is granted the right to occupy, take possession of, or
14
use property whether real, personal or mixed; provided, that "Operating Lease"
shall not include oil, gas or mineral leases entered into or assigned to any
Company in the ordinary course of such Company's business.
"Outstanding Credit" means, at any time, the sum of (i) the aggregate
Letter of Credit Exposure at such time plus (ii) the aggregate principal balance
of the Loan.
"Participant" has the meaning given such term in Section 14.10(b).
----------------
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Periodic Determination" means any determination of the Borrowing Base
pursuant to Section 4.2.
-----------
"Permitted Encumbrances" means with respect to any asset:
(a) Liens in favor of Banks or their Affiliates under the Loan Papers;
(b) Minor defects in title which do not secure the payment of money
and otherwise have no material adverse effect on the value or operation of oil
and gas properties, and for the purposes of this Agreement, a minor defect in
title shall include (i) those instances where record title to an oil and gas
lease is in a predecessor in title to Borrower or any of its Subsidiaries, but
where Borrower or any of its Subsidiaries, by reason of a farmout or other
instrument is presently entitled to receive an assignment of its interest or
other evidence of title and the appropriate Person is proceeding diligently to
obtain such assignment, and (ii) easements, rights-of-way, servitudes, permits,
surface leases and other similar rights in respect of surface operations, and
easements for pipelines, streets, alleys, highways, telephone lines, power
lines, railways and other easements and rights-of-way, on, over or in respect of
any of the properties of Borrower (or its Subsidiaries, as applicable) that are
customarily granted in the oil and gas industry; so long as, with respect to any
of such minor defects in title, the same are minor defects which are customary
and usual in the oil and gas industry and which are customarily accepted by a
reasonably prudent operator dealing with its properties;
(c) Inchoate statutory or operators' liens securing obligations for
labor, services, materials and supplies furnished to oil and gas properties
which are not delinquent (except to the extent permitted by Section 8.7);
-----------
(d) Mechanic's, materialmen's, warehouseman's, journeyman's and
carrier's liens and other similar liens arising by operation of law or statute
in the ordinary course of business which are not delinquent (except to the
extent permitted by Section 8.7);
-----------
15
(e) Production sales contracts, gas balancing agreements and joint
operating agreements; provided, that the amount of all gas imbalances known to
any Authorized Officer of Borrower and the amount of all production which has
been paid for but not delivered shall have been disclosed or otherwise taken
into account in the Reserve Reports delivered to Banks hereunder;
(f) Liens for Taxes or assessments not yet due or not yet delinquent,
or, if delinquent, that are being contested in good faith in the normal course
of business by appropriate action, as permitted by Section 8.7;
-----------
(g) All rights to consent by, required notices to, filings with, or
other actions by, governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein if Borrower (or its
Subsidiaries, as applicable) is entitled to such consent, the same are
customarily obtained subsequent to such sale or conveyance and the appropriate
Person is proceeding diligently to obtain such consent, notice or filing;
(h) The terms and provisions of any of the oil and gas leases pursuant
to which Borrower (or its Subsidiaries, as applicable) derives its interests;
(i) Lease burdens payable to third parties which are deducted in the
calculation of discounted present value in the Reserve Reports including,
without limitation, any royalty, overriding royalty, net profits interest,
production payment, carried interest or reversionary working interest and which
have been disclosed to the Administrative Agent in writing; provided, however,
-------- -------
that Borrower shall not be required to disclose such lease burdens unless the
same are lease burdens which are not customarily and usually found in the oil
and gas industry or unless the same are lease burdens which obligate Borrower
and/or its Subsidiaries, as applicable, in a fashion not customarily and usually
found in the oil and gas industry;
(j) All applicable laws, rules and orders of governmental authorities
having jurisdiction over the affairs of Borrower;
(k) Liens securing Debt incurred to finance the acquisition of the
assets which are the subject of such Liens (to the extent permitted by Section
-------
9.1 hereof); and
---
(l) Liens securing the obligations due and owing under the Existing
Credit Agreement (to the extent such Liens are carried forward pursuant to the
terms of this Agreement).
"Permitted Investment" means, with respect to Borrower or any Restricted
Subsidiary, (a) readily marketable direct obligations of the United States of
America, (b) fully insured time deposits and certificates of deposit with
maturities of one (1) year or less of any commercial bank operating in the
United States having capital and surplus in excess of $50,000,000.00, (c)
commercial paper of a domestic issuer if at the time of purchase such paper is
rated in one of the two highest ratings categories of Standard and Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, (d) any reverse repurchase agreement
entered into with a commercial bank meeting the criteria described
16
in clause (b) preceding which is secured by a fully perfected security interest
in a security of the type described in clauses (a) through (c) preceding and
which security has a market value at the time such reverse repurchase agreement
is entered into of not less than 100% of the obligation of such commercial bank
under such reverse repurchase agreement, (e) Investments by Borrower and its
Restricted Subsidiaries in Borrower or Restricted Subsidiaries of Borrower, (f)
Investments outstanding as of the date hereof described on Schedule 2 hereof,
----------
and (g) Investments by Borrower and its Restricted Subsidiaries which when made,
together with all other Investments made pursuant to this clause (g) do not
exceed an amount (measured at cost) greater than five percent (5%) of the
Borrowing Base then in effect.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is now or
was previously covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code.
"Preferred Stock" means Borrower's Series A Convertible Preferred Stock
containing the rights and preferences set forth in, and issued pursuant to, the
Preferred Stock Designation.
"Preferred Stock Designation" means the Certificate of Designation of
Rights and Preferences of Series A Preferred Stock filed with the Secretary of
State of Delaware on or about May 1, 1996, setting forth the rights and
preferences of the Preferred Stock.
"Process Agent" has the meaning set forth in Section 14.12.
-------------
"Ratio of Consolidated Funded Debt to Adjusted Consolidated EBITDA" means,
for any Person as of the last day of any Fiscal Quarter, such Person's ratio of
Consolidated Funded Debt on such day to its Adjusted Consolidated EBITDA for the
period of four (4) Fiscal Quarters ended on such day (or to its Annualized
Adjusted Consolidated EBITDA for the period from July 1, 1996 to (a) December
31, 1996 to the extent such ratio is being calculated as of December 31, 1996,
or (b) March 31, 1997 to the extent such ratio is being calculated as of March
31, 1997.
"Recognized Value" means, with respect to oil and gas properties, the pre-
tax value of such properties determined in accordance with Financial Accounting
Standards Board Statement 69, generally known as the "standardized measure of
discounted cash flow".
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Related Assets" means all pipelines, gathering systems, gas processing
plants and similar assets owned by Borrower and its Restricted Subsidiaries,
including, related personal property or
17
other fixed assets and all easements, servitudes and similar real property
interests owned by Borrower and its Restricted Subsidiaries on which such
systems are located.
"Related Assets Reports" means reports to be delivered by Borrower to Banks
simultaneously with each delivery by Borrower of a Reserve Report pursuant to
Sections 4.1 and 4.3 which shall (a) be in form and substance acceptable to
--------------------
Required Banks, (b) be prepared by the Approved Petroleum Engineer (with the
exception of the Related Asset Report required to be delivered on or before
September 15 of each year or pursuant to any Special Determination which may be
prepared by Borrower's in-house staff) in accordance with customary and prudent
practices of the petroleum engineering industry, and (c) which shall set forth
the discounted present value of the Related Assets owned by Borrower (which
valuation shall be determined as of the same date as the discounted present
value of the oil and gas properties which are the subject of the Reserve Report
delivered simultaneously therewith pursuant to Sections 4.1 and 4.3 as
--------------------
applicable) as determined by the Approved Petroleum Engineer or Borrower's in-
house staff (as applicable). Each Related Asset Report shall also designate the
owner (either Borrower, or one of its Restricted Subsidiaries) of each Related
Asset which is the subject of such report.
"Rentals" means amounts payable by a lessee under an Operating Lease.
"Request for Borrowing" has the meaning set forth in Section 2.2.
-----------
"Request for Letter of Credit" has the meaning given such term in Section
-------
2.3.
---
"Required Banks" means Banks holding greater than sixty-six and two-thirds
percent (66 2/3%) of the Total Commitment.
"Reserve Report" means an engineering analysis of the oil and gas
properties owned by Borrower and its Restricted Subsidiaries in form and
substance acceptable to Required Banks prepared by the Approved Petroleum
Engineer or reviewed and approved by the Approved Petroleum Engineer (with the
exception of the Reserve Reports required to be delivered on or before September
15 of each year pursuant to Section 4.1 or pursuant to any Special Determination
-----------
pursuant to Section 4.3 which may be prepared by Borrower's in-house staff) in
-----------
accordance with customary and prudent practices in the petroleum engineering
industry and Financial Accounting Standards Board Statement 69.
"Restricted Payment" means (a) any Distribution by Borrower or any of its
Restricted Subsidiaries other than Distributions by such Restricted Subsidiaries
to Borrower, and (b) the retirement, redemption or prepayment prior to the
scheduled maturity by Borrower or a Restricted Subsidiary of Borrower of Debt of
Borrower or any Restricted Subsidiary of Borrower (including without limitation,
retirement, redemption or prepayment prior to the scheduled maturity of any of
the Subordinate Notes).
18
"Restricted Payment Limit" means (a) as of any date during the period from
the Closing Date through the date of delivery to Banks of Borrower's
consolidated financial statements required by Section 8.1(b) for the Fiscal
--------------
Quarter ending March 31, 1997, an amount equal to $10,000,000, and (b) as of any
date (the "measurement date") on and after the date of delivery to Banks of
----------------
Borrower's consolidated financial statements required by Section 8.1(b) for the
--------------
Fiscal Quarter ending March 31, 1997, the sum of (i) $10,000,000, plus (ii) an
amount equal to twenty percent (20%) of Borrower's Consolidated Free Cash Flow
for the period commencing January 1, 1997 and ending on the last day of the
Fiscal Quarter most recently ended as of the measurement date for which
Borrower's consolidated financial statements required by Section 8.1(b) (in the
--------------
case of the first three quarters of each Fiscal Year, and Section 8.1(a) in the
--------------
case of the fourth Fiscal Quarter of each Fiscal Year) have been delivered to
Banks.
"Restricted Subsidiary" means, as of the date hereof, SWAT. "Restricted
Subsidiary" shall also refer to any other Subsidiary of Borrower which Required
Banks and Borrower hereafter, in their sole discretion, designate as a
"Restricted Subsidiary;" provided, that no Subsidiary of Borrower will be a
Restricted Subsidiary unless (a) one hundred percent (100%) of its issued and
outstanding capital stock has been pledged to Administrative Agent to secure the
Obligations pursuant to a Restricted Subsidiary Pledge Agreement, and (b) it has
executed a Restricted Subsidiary Guaranty.
"Restricted Subsidiary Guarantee" means a Guarantee in the form of Exhibit
-------
C attached hereto to be executed by each Restricted Subsidiary of Borrower
-
pursuant to which such Restricted Subsidiary shall guarantee payment and
performance of the Obligations.
"Restricted Subsidiary Pledge Agreement" means a Pledge Agreement
substantially in the form of Exhibit B attached hereto to be executed by
---------
Borrower or a Restricted Subsidiary pursuant to which Borrower or such
Restricted Subsidiary pledges the issued and outstanding capital stock of each
Restricted Subsidiary owned by Borrower or such Restricted Subsidiary of every
class to Administrative Agent to secure the Obligations.
"Rollover Notice" has the meaning given such term in Section 2.5(c).
--------------
"Schedule" means a "schedule" attached to this Agreement and incorporated
herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement unless
specifically indicated otherwise.
"SOCO" means ▇▇▇▇▇▇ Oil Corporation, a Delaware corporation, which is the
legal and beneficial owner of seventy four percent (74%) of the issued and
outstanding Common Stock (on a non-diluted basis).
19
"Subordinate Notes" means those certain 11 3/4% Senior Subordinate Notes
due July 15, 2004, as the same are more particularly described in the Indenture.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Surplus Commitment" has the meaning set forth in Section 13.5.
------------
"SWAT" means SOCO Wattenberg Corporation, a Delaware corporation, which is
a wholly owned Subsidiary of Borrower.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges, or
other charges of any nature whatsoever, from time to time or at any time imposed
by law or any federal, state or local governmental agency. "Tax" means any one
of the foregoing.
"Termination Date" means July 15, 1999.
"Total Commitment" means the aggregate of all Banks' Commitments.
"Tranche" means an Adjusted Base Rate Tranche or a Eurodollar Tranche and
"Tranches" means Adjusted Base Rate Tranches or Eurodollar Tranches or any
combination thereof.
"Type" means with reference to a Tranche, the characterization of such
Tranche as an Adjusted Base Rate Tranche or a Eurodollar Tranche based on the
method by which the accrual of interest on such Tranche is calculated.
"Unrestricted Subsidiary" shall mean any Subsidiary of Borrower which is
not a Restricted Subsidiary.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent with the most recent audited consolidated financial
statements of Borrower and its Consolidated Subsidiaries delivered to Banks
except for changes in which Borrower's independent certified public accountants
concur and which are disclosed to Administrative Agent on the next date on which
financial statements are required to be delivered to Banks pursuant to Sections
--------
8.1(a) and (b); provided that, unless Borrower and Required Banks shall
------ --- -------- ----
otherwise agree
20
in writing, no such change shall modify or affect the manner in which compliance
with the covenants contained in Article X are computed such that all such
---------
computations shall be conducted utilizing financial information presented
consistently with prior periods.
ARTICLE II
THE CREDIT FACILITIES
SECTION 2.1. Commitment. (a) Each Bank severally agrees, subject to
----------
Section 2.1(c) and the other terms and conditions set forth in this Agreement,
--------------
to lend to Borrower from time to time during the Credit Period amounts not to
exceed in the aggregate at any one time outstanding, the amount of such Bank's
Commitment reduced by an amount equal to such Bank's Letter of Credit Exposure.
Each Borrowing shall (i) be in an aggregate principal amount of $500,000 or any
larger integral multiple of $100,000 (except that any Adjusted Base Rate
Borrowing may be in an amount equal to the Availability at such time), and (ii)
be made from each Bank ratably in accordance with its respective Commitment
Percentage. Subject to the foregoing limitations and the other provisions of
this Agreement, Borrower may borrow under this Section 2.1(a), repay amounts
--------------
borrowed under this Section 2.1(a) and request new Borrowings under this Section
-------------- -------
2.1(a).
------
(b) Administrative Agent, or such Bank designated by Administrative
Agent which (without obligation to do so) consents to the same ("Letter of
---------
Credit Issuer"), will issue Letters of Credit, from time to time during the
-------------
Credit Period, upon request by Borrower, for the account of Borrower or any
Restricted Subsidiary designated by Borrower, so long as (i) the sum of (A) the
total Letter of Credit Exposure then existing, and (B) the amount of the
requested Letter of Credit does not exceed $10,000,000, and (ii) Borrower would
be entitled to a Borrowing under Sections 2.1(a) and (c) in the amount of the
-----------------------
requested Letter of Credit. Not less than three (3) Domestic Business Days
prior to the requested date of issuance of any such Letter of Credit, Borrower
(and any Restricted Subsidiary of Borrower for whose account such Letter of
Credit is being issued) shall execute and deliver to Letter of Credit Issuer,
Letter of Credit Issuer's customary letter of credit application. Each Letter
of Credit shall be in form and substance acceptable to Letter of Credit Issuer.
No Letter of Credit shall have an expiration date later than the earlier of (i)
the Termination Date, or (ii) one (1) year from the date of issuance. Upon the
date of issuance of a Letter of Credit, Letter of Credit Issuer shall be deemed
to have sold to each other Bank, and each other Bank shall be deemed to have
unconditionally and irrevocably purchased from Letter of Credit Issuer, a non-
recourse participation in the related Letter of Credit and Letter of Credit
Exposure equal to such Bank's Commitment Percentage of such Letter of Credit and
Letter of Credit Exposure. Upon request of any Bank, but not less often than
quarterly, Administrative Agent shall provide notice to each Bank by telephone,
teletransmission or telex setting forth each Letter of Credit issued and
outstanding pursuant to the terms hereof and specifying the Letter of Credit
Issuer, beneficiary and expiration date of each such Letter of Credit, each
Bank's participation percentage of each such Letter of Credit and the actual
dollar amount of each Bank's participation held by Letter of Credit
21
Issuer(s) thereof for such Bank's account and risk. If any Letter of Credit is
presented for payment by the beneficiary thereof, Administrative Agent shall
cause an Adjusted Base Rate Borrowing to be made from each Bank participating in
such Letter of Credit and Letter of Credit Exposure to reimburse Letter of
Credit Issuer for the payment under the Letter of Credit, whether or not
Borrower would then be entitled to a Borrowing pursuant to the terms hereof, and
each Bank which participated in such Letter of Credit and Letter of Credit
Exposure shall be obligated to lend its Commitment Percentage of such Adjusted
Base Rate Borrowing. At the time of issuance of each Letter of Credit, Borrower
shall pay to Administrative Agent a fee equal to the sum of (i) the greater of
(A) $500, or (B) one-eighth of one percent (1/8%) per annum (based on the face
amount and term of such Letter of Credit), plus (ii) the greater of (A) $500, or
(B) a per annum percentage equal to the Applicable Margin in effect on the date
of issuance of such Letter of Credit (based upon the amount and term of such
Letter of Credit). Administrative Agent shall distribute the fee described in
subclause (i) of the preceding sentence paid on issuance of such Letter of
Credit to the Letter of Credit Issuer which issued such Letter of Credit. The
remaining portion of such fee shall be paid to Banks participating in such
Letter of Credit and Letter of Credit Exposure based on the relative amounts of
their participation in such Letter of Credit and Letter of Credit Exposure.
Upon the occurrence of an Event of Default, Borrower shall, on the next
succeeding Domestic Business Day, deposit with Administrative Agent such funds
as Administrative Agent may request, up to a maximum amount equal to the
aggregate existing Letter of Credit Exposure of all Banks. Any funds so
deposited shall be held by Administrative Agent for the ratable benefit of all
Banks as security for the outstanding Letter of Credit Exposure and the other
Obligations, and Borrower will, in connection therewith, execute and deliver
such security agreements in form and substance satisfactory to Administrative
Agent which it may, in its discretion, require. As drafts or demands for
payment are presented under any Letter of Credit, Administrative Agent shall
apply such funds to satisfy such drafts or demands. When all Letters of Credit
have expired and the Obligations have been repaid in full (and the Commitments
of all Banks have terminated) or such Event of Default has been cured to the
satisfaction of Required Banks, Administrative Agent shall release to Borrower
any remaining funds deposited under this Section 2.1(b). Whenever Borrower is
--------------
required to make deposits under this Section 2.1(b) and fails to do so on the
--------------
day such deposit is due, Administrative Agent or any Bank may, without notice to
Borrower, make such deposit (whether by application of proceeds of any
collateral for the Obligations, by transfers from other accounts maintained with
any Bank or otherwise) using any funds then available to any Bank of Borrower,
and of its Restricted Subsidiaries, any guarantor, or any other Person liable
for all or any part of the Obligations.
(c) No Bank will be obligated to lend to Borrower under this Section
-------
2.1 or incur Letter of Credit Exposure, and Borrower shall not be entitled to
---
borrow hereunder or obtain Letters of Credit hereunder (i) during the existence
of any Borrowing Base Deficiency, or (ii) in an amount which would cause a
Borrowing Base Deficiency. Nothing in this Section 2.1(c) shall be deemed to
--------------
limit any Bank's obligation to fund its ratable share of Adjusted Base Rate
Borrowings with respect to its participation in Letters of Credit made as a
result of any drawing under any Letter of Credit.
22
SECTION 2.2. Method of Borrowing. (a) In order to request any Borrowing
-------------------
hereunder, Borrower shall hand deliver, telex or telecopy to Administrative
Agent a duly completed Request for Borrowing (herein so called) prior to 12:00
noon (Houston, Texas time), (i) at least one (1) Domestic Business Day before
the Borrowing Date specified for a proposed Adjusted Base Rate Borrowing, and
(ii) at least three (3) Eurodollar Business Days before the Borrowing Date of a
proposed Eurodollar Borrowing. Each such Request for Borrowing shall be
substantially in the form of Exhibit D hereto, and shall specify:
---------
(i) whether such Borrowing is to be an Adjusted Base Rate Borrowing
or a Eurodollar Borrowing;
(ii) the Borrowing Date of such Borrowing, which shall be a Domestic
Business Day in the case of an Adjusted Base Rate Borrowing, or a
Eurodollar Business Day in the case of a Eurodollar Borrowing;
(iii) the aggregate amount of such Borrowing; and
(iv) in the case of a Eurodollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Request for Borrowing described in Section
-------
2.2(a) above, Administrative Agent shall promptly notify each Bank of the
------
contents thereof and the amount of the Borrowing to be loaned by such Bank
pursuant thereto, and such Request for Borrowing shall not thereafter be
revocable by Borrower.
(c) Not later than 12:00 noon (Houston, Texas time) on the date of
each Borrowing, each Bank shall make available its Commitment Percentage of such
Borrowing, in Federal or other funds immediately available in Houston, Texas to
Administrative Agent at its address set forth on Schedule 1 hereto.
----------
Notwithstanding the foregoing, if Borrower delivers to Administrative Agent a
Request for Borrowing prior to 10:00 a.m. (Houston, Texas time) on a Domestic
Business Day requesting an Adjusted Base Rate Borrowing on such day, each Bank
shall use its best efforts to make available to Administrative Agent its
Commitment Percentage of such Borrowing by 1:00 p.m. (Houston, Texas time) on
the same day. Unless Administrative Agent determines that any applicable
condition specified in Section 6.2 has not been satisfied, Administrative Agent
-----------
will make the funds so received from Banks available to Borrower at
Administrative Agent's aforesaid address.
SECTION 2.3. Method of Requesting Letters of Credit. (a) In order to
--------------------------------------
request any Letter of Credit hereunder, Borrower shall hand deliver, telex or
telecopy to Administrative Agent a duly completed Request for Letter of Credit
(herein so called) prior to 12:00 noon (Houston, Texas time) at least three (3)
Domestic Business Days before the date specified for issuance of such Letter of
Credit. Each Request for Letters of Credit shall be substantially in the form
of Exhibit E hereto,
---------
23
shall be accompanied by the applicable Letter of Credit Issuer's duly completed
and executed letter of credit application and agreement and shall specify:
(i) the requested date for issuance of such Letter of Credit;
(ii) the terms of such requested Letter of Credit, including the name
and address of the beneficiary, the stated amount, the expiration date
and the conditions under which drafts under such Letter of Credit are
to be available; and
(iii) the purpose of such Letter of Credit.
(b) Upon receipt of a Request for Letter of Credit described in
Section 2.3(a) above, Administrative Agent shall promptly notify each Bank and
--------------
the proposed Letter of Credit Issuer of the contents thereof, including the
amount of the requested Letter of Credit, and such Request for Letter of Credit
shall not thereafter be revocable by Borrower.
(c) No later than 12:00 noon (Houston, Texas time) on the date each
Letter of Credit is requested, unless Administrative Agent or the applicable
Letter of Credit Issuer determines that any applicable condition precedent set
forth in Section 6.2 hereof has not been satisfied, the applicable Letter of
-----------
Credit Issuer will issue and deliver such Letter of Credit pursuant to the
instructions of Borrower.
SECTION 2.4. Notes. Each Bank's Commitment Percentage of the Loan shall
-----
be evidenced by a single Note payable to the order of such Bank in an amount
equal to such Bank's Commitment.
SECTION 2.5. Interest Rates; Payments. (a) The principal amount of the
------------------------
Loan outstanding from day to day which is the subject of an Adjusted Base Rate
Tranche shall bear interest at a rate per annum equal to the sum of the
Applicable Margin plus the Adjusted Base Rate in effect from day to day;
provided that in no event shall the rate charged hereunder or under the Notes
-------- ----
exceed the Maximum Lawful Rate. Interest on any portion of the principal of the
Loan subject to an Adjusted Base Rate Tranche shall be payable as it accrues on
the last day of each calendar month.
(b) The principal amount of the Loan outstanding from day to day which
is the subject of a Eurodollar Tranche shall bear interest for the Interest
Period applicable thereto at a rate per annum equal to the sum of the Applicable
Margin plus the applicable Adjusted Eurodollar Rate; provided that in no event
-------- ----
shall the rate charged hereunder or under the Notes exceed the Maximum Lawful
Rate. Interest on any portion of the principal of the Loan subject to a
Eurodollar Tranche having an Interest Period of one (1), two (2) or three (3)
months shall be payable on the last day of the Interest Period applicable
thereto. Interest on any portion of the principal of the Loan subject to a
Eurodollar Tranche having an Interest Period of six (6) months shall be payable
on the last day of the Interest Period applicable thereto and on the last day of
each Fiscal Quarter during such Interest Period.
24
(c) So long as no Default or Event of Default shall be continuing,
subject to the provisions of this Section 2.5, Borrower shall have the option of
-----------
having all or any portion of the principal outstanding under the Loan borrowed
by it be the subject of an Adjusted Base Rate Tranche or one (1) or more
Eurodollar Tranches, which shall bear interest at rates based upon the Adjusted
Base Rate and the Adjusted Eurodollar Rate, respectively (each such option is
referred to herein as an "Interest Option"); provided, that each Eurodollar
---------------
Tranche shall be in a minimum amount of $500,000 and shall be in an amount which
is an integral multiple of $100,000. Each change in an Interest Option made
pursuant to this Section 2.5(c) shall be deemed both a payment in full of the
--------------
portion of the principal of the Loan which was the subject of the Adjusted Base
Rate Tranche or Eurodollar Tranche from which such change was made and a
Borrowing (notwithstanding that the unpaid principal amount of the Loan is not
changed thereby) of the portion of the principal of the Loan which is the
subject of the Adjusted Base Rate Tranche or Eurodollar Tranche into which such
change was made. Prior to the termination of each Interest Period with respect
to each Eurodollar Tranche, Borrower shall give written notice (a "Rollover
--------
Notice") in the form of Exhibit F attached hereto to Administrative Agent of the
------ ---------
Interest Option which shall be applicable to such portion of the principal of
the Loan upon the expiration of such Interest Period. Such Rollover Notice shall
be given to Administrative Agent at least one (1) Domestic Business Day, in the
case of an Adjusted Base Rate Tranche selection and three (3) Eurodollar
Business Days, in the case of a Eurodollar Tranche selection, prior to the
termination of the Interest Period then expiring. If Borrower shall specify a
Eurodollar Tranche, such Rollover Notice shall also specify the length of the
succeeding Interest Period (subject to the provisions of the definitions of such
term), selected by Borrower. Each Rollover Notice shall be irrevocable and
effective upon notification thereof to Administrative Agent. If the required
Rollover Notice shall not have been timely received by Administrative Agent,
Borrower shall be deemed to have elected that the principal of the Loan subject
to the Interest Period then expiring be the subject of an Adjusted Base Rate
Tranche upon the expiration of such Interest Period and Borrower will be deemed
to have given Administrative Agent notice of such election. Subject to the
limitations set forth in this Section 2.5(c) on the minimum amount of Eurodollar
--------------
Tranches, Borrower shall have the right to convert each Adjusted Base Rate
Tranche to a Eurodollar Tranche by giving Administrative Agent a Rollover Notice
of such election at least three (3) Eurodollar Business Days prior to the date
on which Borrower elects to make such conversion (a "Conversion Date"). The
---------------
Conversion Date selected by Borrower shall be a Eurodollar Business Day.
Notwithstanding anything in this Section 2.5 to the contrary, no portion of the
-----------
principal of the Loan which is the subject of an Adjusted Base Rate Tranche may
be converted to a Eurodollar Tranche and no Eurodollar Tranche may be continued
as such when any Default or Event of Default has occurred and is continuing, but
each such Tranche shall be automatically converted to an Adjusted Base Rate
Tranche on the last day of each applicable Interest Period. In no event shall
more than four (4) Interest Options be in effect with respect to the Loan at any
time.
(d) Notwithstanding anything to the contrary set forth in Section
-------
2.5(a) or (b) above, all overdue principal of and, to the extent permitted by
------ ---
law, overdue interest on the Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the lesser of
25
(a) the sum of (i) two percent (2%), plus (ii) the Adjusted Base Rate in effect
from day to day, and (b) the Maximum Lawful Rate.
(e) Administrative Agent shall determine each interest rate applicable
to the Loan in accordance with the terms hereof. Administrative Agent shall
promptly notify Borrower and Banks by telex, telecopy or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of interest
calculated with reference to the Adjusted Base Rate or the Eurodollar Rate
hereunder (the "contract rate") is limited to the Maximum Lawful Rate, any
-------------
subsequent reductions in the contract rate shall not reduce the rate of interest
on the Loan below the Maximum Lawful Rate until the total amount of interest
accrued equals the amount of interest which would have accrued if the contract
rate had at all times been in effect. In the event that at maturity (stated or
by acceleration), or at final payment of any Note, the total amount of interest
paid or accrued on such Note is less than the amount of interest which would
have accrued if the contract rate had at all times been in effect with respect
thereto, then at such time, to the extent permitted by law, Borrower shall pay
to the holder of such Note an amount equal to the difference between (i) the
lesser of the amount of interest which would have accrued if the contract rate
had at all times been in effect and the amount of interest which would have
accrued if the Maximum Lawful Rate had at all times been in effect, and (ii) the
amount of interest actually paid on such Note.
(g) Interest payable on the principal of any portion of the Loan
subject to a Eurodollar Tranche shall be computed based on the number of actual
days elapsed assuming that each calendar year consisted of 360 days. Interest
payable on the principal of any portion of the Loan subject to an Adjusted Base
Rate Tranche shall be computed based on the number of actual days elapsed and
based on the actual number of days in the calendar year for which accrued
interest is being computed.
SECTION 2.6. Mandatory Termination of Commitments; Termination Date and
----------------------------------------------------------
Maturity. The Commitment of each Bank shall terminate on the Termination Date.
--------
The outstanding principal balance of the Loan, all accrued but unpaid interest
thereon and all other Obligations shall be due and payable in full on the
Termination Date.
SECTION 2.7. Voluntary Reduction of Total Commitment. (a) Borrower may,
---------------------------------------
by notice to Administrative Agent one (1) Domestic Business Day prior to the
effective date of any such reduction, permanently reduce the Total Commitment
(and thereby permanently reduce the Commitment of each Bank ratably in
accordance with such Bank's Commitment Percentage) in amounts not less than
$1,000,000 or any larger multiple of $100,000. On the effective date of any
such reduction in the Total Commitment, Borrower shall, to the extent required
as a result of such reduction, make a principal payment on the Loan in an amount
sufficient to cause the Outstanding Credit to be equal to or less than the Total
Commitment as thereby reduced. Notwithstanding the foregoing, Borrower shall
not be permitted to voluntarily reduce the Total Commitment (a) if, as a
26
result of such reduction, Borrower would be required to prepay all or any
portion of the principal amount of any Eurodollar Tranche prior to the last day
of the Interest Period applicable thereto, or (b) to an amount less than the
aggregate Letter of Credit Exposure of all Banks.
SECTION 2.8. Application of Payments. Each repayment pursuant to
-----------------------
Sections 2.6, 2.7, 4.4 and 4.5 shall be made together with accrued interest to
---------------------- ---
the date of payment, and shall be applied to payment of the Loan in accordance
with Section 3.2 and the other provisions of this Agreement.
-----------
SECTION 2.9. Commitment Fee. On the Termination Date and on the last day
--------------
of each Fiscal Quarter until the Termination Date, commencing on June 30, 1997,
Borrower shall pay to Administrative Agent, for the ratable benefit of each
Bank, a commitment fee equal to the Commitment Fee Percentage (computed on the
basis of actual days elapsed and as if each calendar year consisted of 360 days)
of the average daily Availability for the Fiscal Quarter (or portion thereof)
ending on such date.
SECTION 2.10. Agency and Other Fees. Borrower shall pay to each Agent
---------------------
and its Affiliates such fees and other amounts as Borrower shall be required to
pay to such Agent and its Affiliates from time to time pursuant to any separate
agreement between Borrower and such Agent or any of its Affiliates setting forth
the compensation to be paid to such Agent and its Affiliates in consideration
for acting as Agent hereunder and for providing other services in connection
with the credit facilities provided pursuant hereto. Such fees and other
amounts shall be retained by the applicable Agent and its Affiliates, and no
Bank (other than the applicable Agents) shall have any interest therein.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.1. Delivery and Endorsement of Notes. Simultaneously with the
---------------------------------
execution of this Agreement, Administrative Agent shall deliver to each Bank the
Note payable to such Bank. Each Bank may endorse (and prior to any transfer of
its Note shall endorse) on the schedule attached to its Note appropriate
notations to evidence the date and amount of each advance of funds made by it in
respect of any Borrowing, the Interest Period applicable thereto, and the date
and amount of each payment of principal received by such Bank with respect to
the Loan; provided that the failure by any Bank to so endorse its Note shall not
--------
affect the liability of Borrower for the repayment of all amounts outstanding
under such Notes together with interest thereon. Each Bank is hereby
irrevocably authorized by Borrower to endorse its Note and to attach to and make
a part of any Note a continuation of any such schedule as required.
SECTION 3.2. General Provisions as to Payments. (a) Borrower shall make
---------------------------------
each payment of principal of, and interest on, the Loan and all fees payable by
Borrower hereunder not later than 12:00 noon (Houston, Texas time) on the date
when due, in Federal or other funds immediately
27
available in Houston, Texas, to Administrative Agent at its address set forth on
Schedule 1 hereto. Administrative Agent will promptly (and if such payment is
----------
received by Administrative Agent by 10:00 a.m., and otherwise if reasonably
possible, on the same Domestic Business Day) distribute to each Bank its
Commitment Percentage of each such payment received by Administrative Agent for
the account of Banks. Whenever any payment of principal of, or interest on, that
portion of the Loan subject to an Adjusted Base Rate Tranche or of fees shall be
due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day (subject to the
definition of Interest Period). Whenever any payment of principal of, or
interest on, that portion of the Loan subject to a Eurodollar Tranche shall be
due on a day which is not a Eurodollar Business Day, the date for payment
thereof shall be extended to the next succeeding Eurodollar Business Day
(subject to the definition of Interest Period). If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time. Borrower hereby authorizes Administrative
Agent to charge from time to time against Borrower's account or accounts with
Administrative Agent any amount then due by Borrower.
(b) Prior to the occurrence of an Event of Default, all principal
payments received by Banks with respect to the Loan shall be applied first to
Eurodollar Tranches outstanding under the Loan with Interest Periods ending on
the date of such payment, then to the Adjusted Base Rate Tranches outstanding
under the Loan, and then to Eurodollar Tranches outstanding under the Loan next
maturing until such principal payment is fully applied.
(c) After the occurrence of an Event of Default, all amounts collected
or received by Administrative Agent or any Bank from Borrower and its Restricted
Subsidiaries or in respect of any of the Assets of Borrower or any of its
Restricted Subsidiaries shall be applied first to the payment of all proper
costs incurred by Administrative Agent in connection with the collection thereof
(including reasonable expenses and disbursements of counsel to Administrative
Agent), second to the payment of all proper costs incurred by Banks in
connection with the collection thereof (including reasonable expenses and
disbursements of counsel to Banks), third to the reimbursement of any advances
made by Banks to effect performance of any unperformed covenants of Borrower or
any of its Restricted Subsidiaries under any of the Loan Papers, fourth to the
payment of any unpaid fees required pursuant to Section 2.10, fifth to the
------------
payment of any unpaid fees required pursuant to Sections 2.1(b) and 2.9, sixth,
--------------- ---
to each Bank for application to its Commitment Percentage of the outstanding
balance of the Loan then outstanding (including accrued but unpaid interest
thereon) in accordance with their respective Commitment Percentages, and seventh
to establish the deposits required by Section 2.1(b) if any. All payments
--------------
received by a Bank after the occurrence of an Event of Default for application
to the principal of the Loan pursuant to this Section 3.2(c) shall be applied by
--------------
such Bank in the manner provided in Section 3.2(b).
--------------
SECTION 3.3. Funding Losses. If Borrower makes any payment of principal
--------------
subject to a Eurodollar Tranche (whether pursuant to Section 2.6, 2.7, 4.4, 4.5,
--------------------------
Article XI or XIII and whether as a voluntary or mandatory prepayment or
---------- ----
otherwise) on any day other than the last day of an Interest Period applicable
thereto, or if Borrower fails to borrow any Eurodollar Borrowing, after
28
notice has been given to any Bank in accordance with Section 2.2, Borrower shall
-----------
reimburse each Bank on demand for any resulting loss or expense incurred by it,
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, or any loss arising from the reemployment
of funds at rates lower than the cost to such Bank of such funds and related
costs, which in the case of the payment or prepayment prior to the end of the
Interest Period for any Eurodollar Tranche, shall include the amount, if any, by
which (a) the interest which such Bank would have received absent such payment
or prepayment for the applicable Interest Period exceeds (b) the interest which
such Bank would receive if its Commitment Percentage of the amount of such
Eurodollar Borrowing were deposited, loaned, or placed by such Bank in the
interbank eurodollar market on the date of such payment or prepayment for the
remainder of the applicable Interest Period. Such Bank shall promptly deliver to
Borrower and Administrative Agent a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 3.4. 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 Papers, and (b)
covenants to (i) provide Administrative Agent and Borrower a new Form 4224, Form
1001, Form W-8, or other form acceptable to Administrative Agent upon the
expiration or obsolescence 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 Papers any United States federal-income Tax at the maximum rate under the
Code.
ARTICLE IV
BORROWING BASE
SECTION 4.1. Reserve and Related Asset Report; Proposed Borrowing Base.
---------------------------------------------------------
As soon as available and in any event by March 15 and September 15 of each year
commencing September 15, 1997, Borrower shall deliver to each Bank a Reserve
Report and Related Asset Report prepared as of the immediately preceding
December 31 and June 30, respectively; provided, that Borrower shall not be
required to deliver a Related Asset Report unless Borrower intends to request
Administrative Agent and Banks to take the value of Related Assets into account
for purposes of establishing the
29
Borrowing Base. On or before each April 10 and October 10 of each year
commencing April 10, 1997, Borrower shall notify each Bank of the Borrowing Base
and Borrower requests for the period commencing on the next Determination Date.
SECTION 4.2. Determination of Borrowing Base. Based in part on the
-------------------------------
Reserve Reports and Related Asset Reports delivered pursuant to Section 4.1 (and
-----------
in the case of the Scheduled Determination scheduled to occur on or around May
1, 1997 based on the Current Reserve Report), Administrative Agent shall, not
later than ten (10) days prior to each Determination Date commencing with the
Determination Date falling on May 1, 1997, submit a proposed Borrowing Base to
become effective on such Determination Date to Banks for their approval. In the
event Required Banks, or all Banks in the event of a proposed increase in the
Borrowing Base, fail to promptly approve such proposed Borrowing Base,
Administrative Agent shall propose one or more alternative Borrowing Bases to
Banks and shall consult with Banks regarding the proposed Borrowing Base until
such time as Required Banks, or all Banks in the event of a proposed increase in
the Borrowing Base, approve a Borrowing Base and proposed by Administrative
Agent. Promptly upon the approval by Required Banks, or all Banks in the event
of a proposed increase in the Borrowing Base to become effective on a
Determination Date, Administrative Agent shall provide written notice of the
amount of such Borrowing Base to Borrower. In the event Administrative Agent
and Required Banks, or all Banks in the event of a proposed increase in the
Borrowing Base, fail to approve a Borrowing Base (and notify Borrower of the
amount thereof) on or prior to any applicable Determination Date, the Borrowing
Base in effect prior to such Determination Date shall remain in effect
thereafter until such time as Administrative Agent and Required Banks, or all
Banks in the event of a proposed increase in the Borrowing Base, approve such
Borrowing Base (which shall each become effective immediately upon notice to
Borrower from Administrative Agent setting forth the amounts thereof). Any
determination of a proposed Borrowing Base by Administrative Agent and any
decision by Banks regarding the approval or disapproval of any Borrowing Base
shall be made by Administrative Agent and Banks in their sole discretion in
accordance with their respective standards for oil and gas loans, which may vary
between Administrative Agent and Banks and from Bank to Bank. Without limiting
the right of Administrative Agent to propose the amount of any Borrowing Base or
the right of Banks to approve or disapprove such proposed Borrowing Base in
their sole discretion, Borrower acknowledges and agrees that subject to
Administrative Agent's and Banks' consistent application of their respective
standards for similar loans, Administrative Agent and Banks (i) may make such
assumptions regarding appropriate existing and projected pricing for
hydrocarbons as they deem appropriate in their sole discretion, (ii) may make
such assumptions regarding projected rates and quantities of future production
of hydrocarbons from oil and gas properties and Related Assets owned by Borrower
and its Restricted Subsidiaries as they deem appropriate in their sole
discretion, (iii) may consider the projected cash requirements of Borrower and
its Subsidiaries, including, without limitation, obligations under the Preferred
Stock, obligations under the Subordinate Notes, and debt service and lease
obligations of Borrower and its Subsidiaries, further including, without
limitation, the full amount Borrower may be required to pay in connection with
any redemption or repurchase of the Subordinate Notes, (iv) will not consider
any asset other than oil and gas reserves and Related Assets, (v) will not
consider any asset owned by an entity other than Borrower and its Restricted
30
Subsidiaries, and (vi) may make such other assumptions, considerations and
exclusions as each Bank deems appropriate in the exercise of its sole
discretion.
SECTION 4.3. Special Determination of Borrowing Base. In addition to the
---------------------------------------
redeterminations of the Borrowing Base pursuant to Section 4.2, Borrower,
-----------
Administrative Agent or Required Banks may each request Special Determinations
of the Borrowing Base from time to time; provided, that Borrower shall not
request more than two (2) Special Determinations in any Fiscal Year. In the
event Administrative Agent or Required Banks request such a Special
Determination, Administrative Agent shall promptly deliver notice of such
request to Borrower and Borrower shall, within ten (10) days following the date
of such request, deliver to Banks a Related Asset Report and a Reserve Report
prepared as of the last day of the calendar month preceding the date of such
request. In the event Borrower requests a Special Determination, Borrower shall
deliver written notice of such request to Banks which shall include (i) a
Related Asset Report and a Reserve Report prepared as of a date not more than
thirty (30) days prior to the date of such request, and (ii) the amount of the
Borrowing Base requested by Borrower and to become effective on the
Determination Date applicable to such Special Determination. Upon receipt of
such Reserve Report and Related Asset Report, Administrative Agent shall,
subject to approval of Required Banks, or all Banks in the event of a proposed
increase in the Borrowing Base, redetermine the Borrowing Base in accordance
with the procedure set forth in Section 4.2 which Borrowing Base shall become
-----------
effective on the Determination Date applicable to such Special Determination (or
as soon thereafter as Administrative Agent and Required Banks, or all Banks in
the event of a proposed increase in the Borrowing Base, approve such Borrowing
Base and provide notice thereof to Borrower).
SECTION 4.4. Borrowing Base Deficiency. If a Borrowing Base Deficiency
-------------------------
exists at any time, Borrower shall, within ninety (90) days following the date
such Borrowing Base Deficiency first occurs, at its option, either (a) make a
prepayment of principal on the Loan in an amount sufficient to eliminate such
Borrowing Base Deficiency, and if such Borrowing Base Deficiency cannot be
eliminated by prepaying the Loan in full (as a result of outstanding Letter of
Credit Exposure), Borrower jointly and severally shall also deposit with
Administrative Agent sufficient funds to be held by Administrative Agent as
security for outstanding Letter of Credit Exposure in the manner contemplated by
Section 2.1(b) as necessary to eliminate such Borrowing Base Deficiency, (b)
--------------
submit additional oil and gas properties owned by Borrower and its Restricted
Subsidiaries for consideration in connection with the determination of the
Borrowing Base which Administrative Agent and Required Banks deem sufficient in
their sole discretion to eliminate such Borrowing Base Deficiency, or (c) take
such other action as Administrative Agent and Required Banks shall deem
appropriate in their sole discretion to eliminate such Borrowing Base
Deficiency.
SECTION 4.5. Initial Borrowing Base. Notwithstanding anything contained
----------------------
herein to the contrary, the Borrowing Base in effect during the period from the
Closing Date until the date of the first Special or Periodic Determination after
the Closing Date shall be the Initial Borrowing Base.
31
ARTICLE V
COLLATERAL AND GUARANTEE
SECTION 5.1. Security. (a) The Obligations shall be secured by first
--------
and prior Liens (subject only to Permitted Encumbrances) encumbering one hundred
percent (100%) of the issued and outstanding capital stock of every class of
each Restricted Subsidiary of Borrower. On or before the Closing Date, Borrower
shall (i) execute and deliver to Administrative Agent (a) a Restricted
Subsidiary Pledge Agreement, and (b) such UCC-1 financing statements as
Administrative Agent shall request to fully evidence and perfect the Liens
created by such Restricted Subsidiary Pledge Agreement, and (ii) deliver to
Administrative Agent the certificate(s) evidencing the issued and outstanding
capital stock of SWAT, duly endorsed or accompanied by appropriate blank stock
powers.
(b) The Obligations shall be further secured by first and prior Liens
(subject only to Permitted Encumbrances) encumbering (i) certain oil and gas
properties owned by Borrower and its Restricted Subsidiaries designated by
Administrative Agent and Required Banks, and (ii) all Related Assets (to the
extent Borrower has requested that the value of such Related Assets be taken
into account by Administrative Agent and Required Banks for purposes of
establishing the Borrowing Base). Within sixty (60) days after the Closing
Date, Borrower shall deliver to Administrative Agent for the ratable benefit of
each Bank, such assignments, conveyances, amendments, agreements and other
writings, including, without limitation, UCC-3 amendments and assignments (each
duly authorized and executed) as Administrative Agent shall deem necessary or
appropriate to assign and convey the Existing Mortgages to Administrative Agent
for the benefit of each Bank and to confirm, evidence and perfect the Liens
created by the Existing Mortgages in favor of Administrative Agent for the
ratable benefit of the Banks.
SECTION 5.2. Guarantee. Payment and performance of the Obligations shall
---------
be fully guaranteed by each Restricted Subsidiary of Borrower pursuant to a
Restricted Subsidiary Guarantee. On or before the Closing Date, Borrower shall
deliver to Administrative Agent a Restricted Subsidiary Guarantee, duly
authorized and executed by SWAT.
ARTICLE VI
CONDITIONS TO BORROWINGS
SECTION 6.1. Restatement of Existing Credit Agreement/Conditions to
------------------------------------------------------
Initial Extension of Credit. Borrower hereby acknowledges that Administrative
---------------------------
Agent and each Bank have relied on the documents, instruments, agreements and
actions referred to in this Article VI in amending and restating the Existing
----------
Credit Agreement on the terms set forth herein, and but for Borrower's execution
and/or delivery and/or performance (as applicable) of the documents,
instruments, agreements, conditions and obligations referred to in this Article
-------
VI, Banks and Agents would not
--
32
have amended and restated the Existing Credit Agreement on the terms set forth
herein. The obligation of each Bank to loan its Commitment Percentage of the
initial Borrowing hereunder, and the obligation of Administrative Agent to issue
(or cause another Bank to issue), the initial Letter of Credit issued hereunder
is subject to the satisfaction of each of the following conditions:
(a) Closing Deliveries. Administrative Agent shall have received each
------------------
of the following documents, instruments and agreements, each of which shall be
in form and substance and executed in such counterparts as shall be acceptable
to Administrative Agent and Required Banks and each of which shall, unless
otherwise indicated, be dated the Closing Date:
(i) a Note payable to the order of each Bank in the amount of such
Bank's Commitment, duly executed by Borrower;
(ii) a Restricted Subsidiary Guarantee duly executed by SWAT;
(iii) a Restricted Subsidiary Pledge Agreement duly executed by
Borrower together with (A) certificates evidencing one hundred percent
of the issued and outstanding capital stock of SWAT of every class
(all certificates delivered pursuant to this Section 6.1(a)(iii) shall
-------------------
be duly endorsed or accompanied by duly executed blank stock powers),
and (B) such financing statements executed by Borrower as
Administrative Agent shall request to perfect the Liens granted
pursuant to such Pledge Agreement;
(iv) a Certificate of Ownership Interests substantially in the form
of Exhibit H, duly executed and delivered by an Authorized Officer of
---------
Borrower;
(v) an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇, Vice President and Corporate Counsel
for Borrower, favorably opining as to such matters as Administrative
Agent or Required Banks may request;
(vi) an opinion of Gardere & ▇▇▇▇▇, L.L.P., special counsel to
Administrative Agent, in form and substance satisfactory to
Administrative Agent;
(vii) a Certificate executed by an Authorized Officer of Borrower
stating that (A) the representations and warranties of Borrower
contained in this Agreement and the other Loan Papers are true and
correct in all respects, (B) no Default or Event of Default has
occurred which is continuing, and (C) all conditions set forth in this
Section 6.1 and Section 6.2 have been satisfied;
----------- -----------
(viii) such resolutions, certificates and other documents relating to
the existence of the Companies, the corporate authority for the
execution, delivery and performance of this Agreement, the Notes, the
other Loan Papers, the Merger Documents, and certain other matters
relevant hereto, in form and substance satisfactory to
33
Administrative Agent, which resolutions, certificates and documents
include resolutions of the directors of each of the Companies
authorizing the execution, delivery and performance of the Loan Papers
and certificates of incumbency for each Company;
(ix) a Certificate executed by an Authorized Officer of Borrower
confirming that the Merger has been consummated;
(x) a copy of each Merger Document, together with a certificate
executed by an Authorized Officer of Borrower certifying that such
copies are accurate and complete and represent the complete
understanding and agreement of the parties with respect to the subject
matter thereof; and
(xi) a copy of a notice from Borrower to the Indenture Trustee
delivered pursuant to the definition of "Bank Credit Agreement"
contained in the Indenture specifying that this Agreement is the "Bank
Credit Agreement" as defined in the Indenture, together with evidence
that such notice has been delivered to the Indenture Trustee.
(b) Merger. The Merger shall have occurred (or Administrative Agent
------
shall be satisfied that such transactions will occur simultaneously therewith).
Without limiting the foregoing, the Merger shall have been completed pursuant to
the terms of the Merger Documents, and pursuant thereto the Merger Certificate
shall have been duly filed with the Secretary of State of Delaware.
(c) Refinancing of Existing Credit Agreement. Borrower shall have
----------------------------------------
refinanced in full (or simultaneously with the initial Borrowing hereunder,
Borrower shall refinance in full) with proceeds of a Borrowing under this
Agreement, all Obligations accrued and outstanding under the Existing Credit
Agreement as of the Closing Date, including, without limitation, (i) the entire
outstanding principal balance of the Loans made thereunder, (ii) all accrued but
unpaid interest, (iii) all accrued but unpaid commitment and other fees, and
(iv) all amounts payable under Section 3.3 of the Existing Credit Agreement as a
-----------
result of the prepayment of the other Obligations thereunder.
(d) No Material Adverse Change. In the sole discretion of each Bank,
--------------------------
no material adverse change shall have occurred in the assets, liabilities,
financial condition or prospects of any of the Companies.
(e) No Legal Prohibition. The transactions contemplated by this
--------------------
Agreement, the other Loan Papers and the Merger Documents shall be permitted by
applicable law and regulation and shall not subject Agents, any Bank, Borrower
or any of its Subsidiaries to any material adverse change in their assets,
liabilities, financial condition or prospects.
(f) No Litigation. No litigation, arbitration or similar proceeding
-------------
shall be pending which calls into question the validity or enforceability of
this Agreement, the other Loan Papers, the Merger Documents or the Merger.
34
(g) Other Matters. All matters related to this Agreement, the other
-------------
Loan Papers, the Merger Documents, the Borrower, its Subsidiaries and the Merger
shall be acceptable to Administrative Agent and each Bank in their sole
discretion, and Borrower shall have delivered to Administrative Agent and each
Bank such evidence as they shall request to substantiate any matters related to
this Agreement, the other Loan Papers, the Merger Documents, the Borrower, its
Subsidiaries and the Merger as Administrative Agent or any Bank shall request.
(h) Closing Fees. Borrower shall have paid to each Agent any fees
------------
payable to such Agent pursuant to Section 2.10.
------------
SECTION 6.2. Conditions to each Borrowing and each Letter of Credit. The
------------------------------------------------------
obligation of each Bank to loan its Commitment Percentage of each Borrowing and
the obligation of any Letter of Credit Issuer to issue Letters of Credit on the
date any Letter of Credit is to be issued is subject to the further satisfaction
of the following conditions:
(a) timely receipt by Administrative Agent of a Request for Borrowing
or Request for Letter(s) of Credit;
(b) immediately before and after giving effect to such Borrowing or
issuance of such Letter(s) of Credit, no Default or Event of Default shall have
occurred and be continuing and neither such Borrowing nor the issuance of such
Letter(s) of Credit shall cause a Default or Event of Default;
(c) the representations and warranties of Borrower contained in this
Agreement shall be true and correct on and as of the date of such Borrowing or
the issuance of such Letter(s) of Credit;
(d) the funding of such Borrowing or the issuance of such Letter(s)
of Credit and all other Borrowings to be made and/or Letter(s) of Credit to be
issued on the same day under this Agreement, shall not cause a Borrowing Base
Deficiency;
(e) following the issuance of any Letter(s) of Credit, the aggregate
Letter of Credit Exposure shall not exceed $10,000,000; and
(f) within sixty (60) days after the Closing Date, Borrower shall
have executed and delivered to Administrative Agent for the ratable benefit of
each Bank, the Mortgages and other instruments required by Section 5.1(b)
--------------
hereof.
Each Borrowing and the issuance of each Letter of Credit hereunder shall
constitute a representation and warranty by Borrower that on the date of such
Borrowing or issuance of such Letter of Credit the statements contained in
subclauses (b), (c), (d) and (e) above are true.
35
SECTION 6.3. Agreements Regarding Initial Borrowing. Borrower, Agent and
--------------------------------------
each Bank acknowledge and agree that Borrower has requested a Borrowing to be
made on the Closing Date in the aggregate amount of $87,450,000 ($10,450,000 of
which will constitute a Base Rate Borrowing, and $77,000,000 of which will
constitute a Eurodollar Borrowing), all the proceeds of which are to be applied
to refinance all Obligations outstanding under and as defined in the Existing
Credit Agreement (the "Refinancing Borrowing"). Each Agent and each Bank hereby
---------------------
waive the requirements of Sections 2.2 and 6.2(a) hereof with respect to the
------------ ------
Refinancing Borrowing to the extent, but only to the extent, such Sections
require the delivery of a Notice of Borrowing as a condition precedent. Each
Bank, each Agent and Borrower further acknowledge and agree that,
notwithstanding the contrary provisions of Section 2.2(c), each Bank shall only
--------------
be required to fund as part of such Borrowing the remainder, if any, of (a) its
Commitment Percentage of such Refinancing Borrowing, minus (b) the amount it is
to receive as a result of the application of the proceeds of the Refinancing
Borrowing to refinance all Obligations outstanding under the Existing Credit
Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that each of the following statements is
true and correct on the date hereof, will be true and correct on the Closing
Date (before and immediately after giving effect to the Merger) and will be true
and correct on the occasion of each Borrowing and the issuance of each Letter of
Credit:
SECTION 7.1. Corporate Existence and Power. Borrower (a) is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, (b) has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its businesses as now conducted and as proposed to be conducted, and (c) is
duly qualified to transact business as a foreign corporation in each
jurisdiction where a failure to be so qualified could have a material adverse
effect on its financial condition or operations.
SECTION 7.2. Existence and Power (Other Companies). Each Company other
-------------------------------------
than Borrower (a) is a corporation, limited liability company or partnership
duly incorporated or organized (as applicable), validly existing and in good
standing under the laws of its state of incorporation or organization (as
applicable), (b) has all corporate, limited liability company or partnership
power (as applicable) and all material governmental licenses, authorizations,
consents and approvals required to carry on its businesses as now conducted and
as proposed to be conducted, and (c) is duly qualified to transact business as
foreign corporations, foreign limited liability companies or foreign
partnerships (as applicable) in each jurisdiction where a failure to be so
qualified could have a material adverse effect on their respective financial
condition or operations.
36
SECTION 7.3. Corporate, Limited Liability Company, Partnership and
-----------------------------------------------------
Governmental Authorization; Contravention. The execution, delivery and
-----------------------------------------
performance of this Agreement, the Notes, and the other Loan Papers by each
Company purporting to execute the same are within such Company's corporate,
limited liability company or partnership powers (as applicable), when executed
will be duly authorized by all necessary corporate, limited liability company or
partnership action (as applicable), require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulations
(including, without limitation, the Margin Regulations) or of the partnership
agreement, articles of incorporation, certificate of incorporation, bylaws,
regulations or other organizational documents (as applicable) of such Companies
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon such Company or result in the creation or imposition of any Lien on
any asset of any such Company except Liens securing the Notes.
SECTION 7.4. Binding Effect. This Agreement constitutes a valid and
--------------
binding agreement of Borrower; the Notes and the other Loan Papers when executed
and delivered in accordance with this Agreement, will then constitute valid and
binding obligations of each Company executing the same; and each Loan Paper is
enforceable against each Company executing the same in accordance with its terms
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors rights generally, and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 7.5. Financial Information. (a) The Current Financials fairly
---------------------
present, in conformity with generally accepted accounting principles, the
consolidated financial position of Borrower as of December 31, 1996 and its
consolidated results of operations and cash flows for the periods covered
thereby.
(b) There has been no material adverse change in the business,
financial position, results of operations or prospects of any Company since (i)
December 31, 1996 to the extent this representation and warranty is made or
deemed to be made as of any date prior to the receipt by Banks of the financial
statements for Borrower and its Subsidiaries required to be delivered by
Borrower to Banks pursuant to Sections 8.1(a) and (b) hereof, prepared as of the
--------------- ---
end of the first complete Fiscal Quarter following the Closing Date, or (ii)
since the date of the most recent financial statements delivered to Banks
pursuant to Sections 8.1(a) and (b) hereof to the extent this representation and
--------------- ---
warranty is made or deemed made as of any date after receipt by Banks of the
financial statements prepared as of the end of the first complete Fiscal Quarter
following the Closing Date required to be delivered by Borrower to Banks
pursuant to Sections 8.1(a) and (b) hereof.
--------------- ---
SECTION 7.6. Litigation. Except for matters disclosed in the Existing
----------
Credit Agreement or arising after the date of this Agreement which are promptly
disclosed in writing to Banks, there is no action, suit or proceeding pending
against, or to the knowledge of Borrower, threatened against or affecting any
Company before any court or arbitrator, any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely
37
affect the business, consolidated financial position or consolidated results of
operations of any Company or which could in any manner draw into question the
validity of the Loan Papers.
SECTION 7.7. ERISA. No Company is a party to or bound by, or at any time
-----
prior to the date hereof, has been a party to, or bound by, any Plan.
SECTION 7.8. Taxes and Filing of Tax Returns. Except as disclosed on
-------------------------------
Schedule 3, each Company and its predecessors have filed all material tax
----------
returns required to have been filed and have paid all Taxes shown to be due and
payable on such returns, including interest and penalties, and all other Taxes
which are payable by such party, to the extent the same have become due and
payable other than Taxes with respect to which a failure to pay would not have a
material adverse effect on any Company. Except as disclosed on Schedule 3,
----------
Borrower does not know of any proposed material Tax assessment against any
Company, and all Tax liabilities of each Company and its predecessors are
adequately provided for. Except as disclosed on Schedule 3 and except as
----------
hereinafter disclosed in writing to Banks, no income tax liability of any
Company or any of their respective predecessors or Subsidiaries has been
asserted by the Internal Revenue Service for Taxes in excess of those already
paid.
SECTION 7.9. Title to Properties; Liens. Borrower and each of its
--------------------------
Subsidiaries has good and valid title to all material assets purported to be
owned by it subject only to Permitted Encumbrances. Without limiting the
foregoing, (a) Borrower and its Restricted Subsidiaries have good and valid
title to all oil and gas properties and all Related Assets owned by Borrower and
its Restricted Subsidiaries which are included in the most recent Reserve
Reports and Related Asset Reports provided to Banks (except for oil and gas
properties disposed of in compliance with Section 9.5 to the extent this
-----------
representation and warranty is made or deemed made after the Closing Date) and
except for Permitted Encumbrances, and (b) the Companies have good and valid
title to all material assets reflected in the Current Financials and any
subsequent financial statements delivered to Banks pursuant to Sections 8.1(a)
---------------
and (b) hereof.
---
SECTION 7.10. Business; Compliance. Each Company has performed and
--------------------
abided by all obligations required to be performed under each license, permit,
order, authorization, grant, contract, agreement, or regulation to which any
Company is a party or by which any Company or any of the assets of any Company
are bound to the extent a failure to perform and abide by such obligations could
have a material adverse effect on the assets, liabilities, financial condition,
operations or prospects of such Company individually or the Companies taken as a
whole; provided that to the extent oil and gas properties owned by any Company
-------- ----
are operated by operators other than a Company or an Affiliate of a Company,
Borrower does not have any knowledge that any such obligation remains
unperformed and the appropriate Person has diligently enforced all contractual
obligations of such operators to insure performance.
SECTION 7.11. Licenses, Permits, Etc. Each Company possesses such valid
----------------------
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders of tribunals,
as are necessary to carry on its business as now
38
being conducted except to the extent a failure to obtain any such item would not
have a material adverse effect on such Company individually or on the Companies
taken as a whole; provided that to the extent oil and gas properties owned by
-------- ----
any Company are operated by operators other than a Company or an Affiliate of a
Company, Borrower does not have any knowledge that possession of such items has
not been obtained, and the appropriate Person has diligently enforced all
contractual obligations of such operators to obtain such items.
SECTION 7.12. Compliance with Law. The business and operations of each
-------------------
Company have been and are being conducted in accordance with all applicable
laws, rules and regulations of all tribunals, other than laws, rules and
regulations the violation of which could not (either individually or
collectively) have a material adverse effect on any Company's individual
financial condition or operations or on the financial condition or operations of
the Companies taken as a whole (both before and after giving effect to the
Merger); provided that to the extent oil and gas properties owned by any Company
-------- ----
are operated by operators other than a Company or an Affiliate of a Company,
Borrower does not have any knowledge of non-compliance and the appropriate
Person has diligently enforced all contractual obligations of such operators to
insure compliance.
SECTION 7.13. Ownership Interests. The Reserve Reports and Related Asset
-------------------
Reports most recently provided to Banks accurately reflect, and all Reserve
Reports and Related Asset Reports hereafter delivered pursuant to this Agreement
will reflect, in all material respects, the ownership interests in the oil and
gas properties and Related Assets referred to therein (including all before and
after payout calculations).
SECTION 7.14. Full Disclosure. All information heretofore furnished by
---------------
any Company (or any other party on any Company's behalf) to any Agent or any
Bank for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by any
Company or on behalf of any Company to any Agent or any Bank will be, true,
complete and accurate in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. Borrower has
disclosed to Banks in writing any and all facts (other than facts of general
public knowledge) which might reasonably be expected to materially and adversely
affect or might affect (to the extent Borrower can now reasonably foresee), the
business, operations, prospects or condition, financial or otherwise, of any
Company or the ability of Borrower or any Company to perform its obligations
under this Agreement and the other Loan Papers.
SECTION 7.15. Subsidiaries. Schedule 4 hereto accurately reflects, after
------------ ----------
giving effect to the Merger (i) the name and jurisdiction of incorporation of
each Subsidiary of Borrower, (ii) each jurisdiction in which each Subsidiary of
Borrower is qualified to transact business as a foreign corporation, partnership
or limited liability company, (iii) the authorized, issued and outstanding
capital stock of each such Subsidiary, including, the record (and to Borrower's
knowledge, beneficial) owner of such capital stock, and (iv) all outstanding
warrants, options, subscription rights, convertible securities or other rights
to purchase capital stock of each Subsidiary of Borrower.
39
SECTION 7.16. Obligations of Unrestricted Subsidiaries. Except as set
----------------------------------------
forth on Schedule 5 hereto, neither Borrower nor any of its Restricted
----------
Subsidiaries has any obligation of any nature to any Unrestricted Subsidiary of
Borrower.
SECTION 7.17. Environmental Matters. No real or personal property owned
---------------------
or leased by any Company (including without limitation, oil and gas properties
and Related Assets) and no operations conducted thereon, and to Borrower's
knowledge, no operations of any prior owner, lessee or operator of any such
properties, is or has been in violation of any Applicable Environmental Law
other than violations which individually and in the aggregate will not have a
material adverse effect on any Company individually or the Companies taken as a
whole, nor is any such property or operation the subject of any existing,
pending or, to Borrower's knowledge, threatened action, suit, investigation,
inquiry or preceding with respect to Applicable Environmental Laws which could,
individually or in the aggregate, have a material adverse effect on Borrower and
its Subsidiaries taken as a whole (both before and after giving effect to the
Merger). All notices, permits, licenses, and similar authorizations, if any,
required to be obtained or filed in connection with the ownership or operation
of any and all real and personal property owned, leased or operated by any of
the Companies, including, without limitation, notices, licenses, permits and
authorizations required in connection with any past or present treatment,
storage, disposal, or release of hazardous substances, petroleums, or solid
waste into the environment, have been duly obtained or filed except to the
extent the failure to obtain or file such notices, licenses, permits and
authorizations would not have a material adverse effect on any Company
individually or the Companies taken as a whole (both before and after giving
effect to the Merger). To Borrower's knowledge, all hazardous substances, if
any, generated at any and all real and personal property owned, leased or
operated by the Companies have been transported, treated, and disposed of only
by carriers maintaining valid permits under RCRA and any other Applicable
Environmental Laws. Except as disclosed in the Existing Credit Agreement, there
has been no release or threatened release of any quantity of any hazardous
substances or petroleum on, to or from any real or personal property owned,
leased, or operated by the Companies which was not in compliance with Applicable
Environmental Laws other than releases which would not, individually or in the
aggregate, have a material adverse effect on any Company individually or the
Companies taken as a whole (both before and after giving effect to the Merger).
Except as disclosed in the Existing Credit Agreement, no Company has any
contingent liability in connection with any release or threatened release of any
hazardous substance, petroleum, or solid waste into the environment which could
have a material adverse effect on any Company individually or the Companies
taken as a whole.
SECTION 7.18. Merger Documents. Borrower has provided Administrative
----------------
Agent with a true and correct copy of each Merger Document. No rights or
obligations of any party to any of the Merger Documents have been waived in any
material respect, and no party to any of the Merger Documents is in default of
its obligations thereunder. Each of the Merger Documents is a valid, binding
and enforceable obligation of the parties thereto in accordance with its terms
and is in full force and effect.
40
SECTION 7.19. Burdensome Obligations. Except as disclosed in writing to
----------------------
Banks prior to the date hereof, neither any Company nor the properties of any
Company is subject to any law or regulation or subject to any restriction under
the certificate or articles of incorporation, partnership agreement, regulations
or other organizational documents of any Company or under any agreement or
instrument to which any Company is a party or by which any of their respective
properties may be subject or bound, which is so unusual or burdensome as to be
likely in the foreseeable future to have a material adverse effect on the
assets, liabilities, financial condition, operations or prospects of any Company
individually or the Companies taken as a whole.
SECTION 7.20. Government Regulations. No Company is subject to
----------------------
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 (as
any of the preceding acts have been amended) or any other law or regulation
which regulates the incurring by it of Debt, including, but not limited to, laws
relating to common carriers or the sale of electricity, gas, steam, water or
other public utility services.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 8.1. Information. Borrower will deliver, or cause to be
-----------
delivered, to each Bank:
(a) as soon as available and in any event within ninety (90) days
after the end of each Fiscal Year of Borrower, consolidated balance sheets of
Borrower as of the end of such Fiscal Year and the related consolidated
statements of income and cash flow for such Fiscal Year, setting forth in each
case in comparative form the figures for the previous Fiscal Year, all reported
by Borrower in accordance with generally accepted accounting principles and
audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other independent public accountants of
nationally recognized standing acceptable to Administrative Agent;
(b) as soon as available and in any event within forty-five (45) days
after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year
of Borrower, consolidated balance sheets of Borrower as of the end of such
quarter and the related consolidated statements of income and cash flow for such
quarter and for the portion of Borrower's Fiscal Year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of Borrower's previous
Fiscal Year. All financial statements delivered pursuant to this Section 8.1(b)
--------------
shall be certified as to fairness of presentation, generally accepted
41
accounting principles and consistency by the chief financial officer or the
chief accounting officer of Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 8.1(a) and (b), a certificate of an
--------------- ---
Authorized Officer of Borrower, (i) setting forth in reasonable detail the
calculations required to establish whether Borrower was in compliance with the
requirements of Article X on the date of such financial statements, (ii) stating
---------
whether there exists on the date of such certificate any Default and, if any
Default then exists, setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect thereto, and (iii) stating
whether or not such financial statements fairly reflect the business and
financial condition of Borrower as of the date of the delivery of such financial
statements;
(d) immediately upon any Authorized Officer of Borrower becoming
aware of the occurrence of any Default, including, without limitation, a Default
under Article X, a certificate of an Authorized Officer of Borrower setting
---------
forth the details thereof and the action which Borrower is taking or proposes to
take with respect thereto ;
(e) promptly upon the mailing thereof to the stockholders of Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all final
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent), post effective amendments thereto and
annual, quarterly or special reports which Borrower shall have filed with the
Securities and Exchange Commission;
(g) promptly notify Banks (i) of any material adverse change in the
financial condition of Borrower or any of its Subsidiaries, or (ii) of the
occurrence of any acceleration of the maturity of any Debt owing by Borrower or
any of its Subsidiaries or any default under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such default or acceleration might
have a material adverse effect upon their financial condition;
(h) immediately upon receipt of the same, a copy of any notice
received by Borrower of the occurrence of any Event of Default under and as
defined in the Indenture or any event which with notice, lapse of time or both,
would, unless cured or waived, become an Event of Default;
(i) promptly upon receipt of same, any notice or other information
received by Borrower or any Subsidiary of Borrower indicating any potential,
actual or alleged (i) non-compliance with or violation of the requirements of
any Applicable Environmental Law which could result in liability to Borrower or
any Subsidiary for fines, clean up or any other remediation obligations or any
other liability in excess of $250,000 in the aggregate; (ii) release or
threatened release of any toxic or hazardous waste, substance, or constituent,
or other substance into the
42
environment which release would impose on Borrower or any Subsidiary a duty to
report to a governmental authority or to pay cleanup costs or to take remedial
action under any Applicable Environmental Law which could result in liability to
Borrower or any Subsidiary for fines, clean up and other remediation obligations
or any other liability in excess of $250,000 in the aggregate; or (iii) the
existence of any Lien arising under any Applicable Environmental Law securing
any obligation to pay fines, clean up or other remediation costs or any other
liability in excess of $250,000 in the aggregate. Without limiting the
foregoing, Borrower shall provide to Banks promptly upon receipt of same copies
of all environmental consultants or engineers reports received by Borrower or
any Subsidiary of Borrower which would render the representation and warranty
contained in Section 7.17 untrue or inaccurate in any respect;
------------
(j) In the event any notification is provided by Borrower to any Bank
or Administrative Agent pursuant to Section 8.1(i) hereof or Administrative
--------------
Agent or any Bank otherwise learns of any event or condition under which any
such notice would be required, then, upon request of Required Banks, Borrower
shall, within ninety (90) days of such request, cause to be furnished to each
Bank a report by an environmental consulting firm acceptable to Administrative
Agent and Required Banks, stating that a review of such event, condition or
circumstance has been undertaken (the scope of which shall be acceptable to
Administrative Agent and Required Banks) and detailing the findings,
conclusions, and recommendations of such consultant. Borrower shall bear all
expenses and costs associated with such review and updates thereof, as well as
all remediation or curative action recommended by any such environmental
consultant; and
(k) from time to time such additional information regarding the
financial position or business of Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
SECTION 8.2. Business of Borrower. The primary business of Borrower and
--------------------
its Subsidiaries will be the acquisition, exploration for, development,
production, transportation, processing and marketing of liquid or gaseous
hydrocarbons and accompanying elements and related businesses.
SECTION 8.3. Maintenance of Existence. Borrower shall, and shall cause
------------------------
each Restricted Subsidiary to, at all times (a) maintain its corporate,
partnership or limited liability company existence in its state of incorporation
or organization except to the extent any Restricted Subsidiary ceases to be in
existence as a result of a merger or consolidation expressly permitted pursuant
to Section 9.4, and (b) maintain its good standing and qualification to transact
-----------
business in all jurisdictions where the failure to maintain good standing or
qualification to transact business could have a material adverse effect on the
financial condition or operations of Borrower or any of its Restricted
Subsidiaries individually or Borrower and its Restricted Subsidiaries taken as a
whole.
SECTION 8.4. Title Data. Borrower shall, upon the reasonable request of
----------
Required Banks, cause to be delivered to Administrative Agent such title
opinions and other information in its
43
possession, control or direction regarding title to the oil and gas properties
owned by Borrower and its Restricted Subsidiaries as are appropriate to
determine the status thereof.
SECTION 8.5. Right of Inspection. Borrower will permit, and will cause
-------------------
each of its Subsidiaries to permit, any officer, employee or agent of
Administrative Agent or any Bank to visit and inspect any of the assets of
Borrower and its Subsidiaries, examine Borrower's and its Subsidiaries' books of
record and accounts, take copies and extracts therefrom, and discuss the
affairs, finances and accounts of Borrower and its Subsidiaries with any of
Borrower's and its Subsidiaries' officers, accountants and auditors, all at such
reasonable times and as often as Administrative Agent or any Bank may desire,
all at the expense of Borrower. Banks covenant and agree to preserve the
confidentiality of any information with respect to which Borrower or any of its
Subsidiaries have an obligation of confidentiality to a third party (to the
extent such obligation has been disclosed to Banks), except to the extent Banks
are required to disclose such information pursuant to any applicable law, rule
or regulation of any governmental body or pursuant to the order of any court of
competent jurisdiction.
SECTION 8.6. Maintenance of Insurance. Borrower will, and will cause
------------------------
each of its Subsidiaries to (and will use its best efforts to cause all
operators of oil and gas properties owned by Borrower and its Subsidiaries and
Related Assets to) at all times maintain or cause to be maintained insurance
covering such risks as are customarily carried by businesses similarly situated
including, without limitation, the following: (a) workmen's compensation
insurance; (b) employer's liability insurance; (c) comprehensive general public
liability and property damage insurance in respect of all activities in which
Borrower or any of its Subsidiaries might incur personal liability for the death
or injury of an employee or third person, or damage to or destruction of
another's property; (d) insurance against loss or damage by fire, lightning,
hail, tornado, explosion and other similar risk; (e) reservoir damage insurance;
and (f) comprehensive automobile liability insurance. All loss payable clauses
or provisions in all policies of insurance maintained by Borrower pursuant to
this Section 8.6 shall be endorsed in favor of and made payable to
-----------
Administrative Agent for the ratable benefit of Banks, as their interests may
appear. Administrative Agent for the ratable benefit of Banks shall have the
right to collect, and Borrower hereby assigns to Administrative Agent for the
ratable benefit of Banks, any and all monies that may become payable under any
such policies of insurance by reason of damage, loss or destruction of any
property which stands as security for the Obligations or any part thereof, and
Administrative Agent may, at its election, either apply for the ratable benefit
of Banks all or any part of the sums so collected toward payment of the
Obligations (or the portion thereof with respect to which such property stands
as security), whether or not such Obligations are then due and payable, in such
manner as Administrative Agent may elect or release same to Borrower.
SECTION 8.7. Payment of Taxes and Claims. Borrower will, and will cause
---------------------------
each of its Subsidiaries to, pay (a) all Taxes imposed upon it or any of its
assets or with respect to any of its franchises, business, income or profits
before any material penalty or interest accrues thereon, and (b) all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
might become a
44
Lien (other than a Permitted Encumbrance) on any of its assets; provided,
however, no payment of Taxes or claims shall be required if (i) the amount,
applicability or validity thereof is currently being contested in good faith by
appropriate action promptly initiated and diligently conducted in accordance
with good business practices and no material part of the property or assets of
Borrower or any of its Subsidiaries are subject to levy or execution, (ii)
Borrower, as and to the extent required in accordance with generally accepted
accounting principles, shall have set aside on its books, reserves (segregated
to the extent required by generally accepted accounting practices) deemed by it
to be adequate with respect thereto, and (iii) Borrower has notified
Administrative Agent of such circumstances, in detail satisfactory to
Administrative Agent.
SECTION 8.8. Compliance with Laws and Documents. Borrower will, and will
----------------------------------
cause each of its Subsidiaries to, comply with all laws, their respective
articles and certificates of incorporation, bylaws, partnership agreements,
regulations and similar organizational documents and all Material Agreements to
which Borrower or any Subsidiary of Borrower is a party, if a violation, alone
or when combined with all other such violations, could have a material adverse
effect on the financial condition or operations of Borrower or any of its
Restricted Subsidiaries individually or Borrower and its Restricted Subsidiaries
taken as a whole.
SECTION 8.9. Operation of Properties and Equipment. (a) Borrower will,
-------------------------------------
and will cause each of its Subsidiaries to, maintain, develop and operate their
respective oil and gas properties and Related Assets in a good and workmanlike
manner, and observe and comply with all of the terms and provisions, express or
implied, of all oil and gas leases relating to such properties so long as such
oil and gas leases are capable of producing hydrocarbons and accompanying
elements in paying quantities, to the extent that the failure to so observe and
comply could have a material adverse effect on the financial condition or
operations of Borrower individually or Borrower and its Subsidiaries taken as a
whole.
(b) Borrower will, and will cause each of its Subsidiaries to, comply
in all respects with all contracts and agreements applicable to or relating to
their respective oil and gas properties or the production and sale of
hydrocarbons and accompanying elements therefrom, except to the extent a failure
to so comply could not have a material adverse effect on the financial condition
or operations of Borrower individually or Borrower and its Subsidiaries taken as
a whole.
(c) Borrower will, and will cause each of its Subsidiaries at all
times to, maintain, preserve and keep all operating equipment used with respect
to the oil and gas properties of Borrower in proper repair, working order and
condition, and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the efficiency of such
operating equipment shall at all times be properly preserved and maintained,
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if Borrower shall in good faith determine that
such action is not necessary or desirable for the continued efficient and
profitable operation of the business of Borrower and its Subsidiaries.
45
(d) With respect to the oil and gas properties of Borrower and its
Subsidiaries which are operated by operators other than Borrower or one of its
Subsidiaries, Borrower and its Subsidiaries shall not be obligated to directly
perform any undertakings contemplated by the covenants and agreements contained
in this Section 8.9 which are performable only by such operators and are beyond
-----------
the control of Borrower, but shall be obligated to seek to enforce such
operators' contractual obligations to maintain, develop and operate the oil and
gas properties subject to such operating agreements.
SECTION 8.10. Further Assurances. Borrower will execute and deliver or
------------------
cause to be executed and delivered such other and further instruments or
documents and take such further action as in the judgment of Administrative
Agent may be required to carry out the provisions and purposes of the Loan
Papers including without limitation to create, preserve, protect and perfect the
Liens of the Administrative Agent for the ratable benefit of the Banks as
required by Section 5.1.
-----------
SECTION 8.11. Environmental Law Compliance and Indemnity. Borrower will,
------------------------------------------
and will cause each of its Subsidiaries to, comply in all material respects with
all Applicable Environmental Laws, including, without limitation, (a) all
licensing, permitting, notification and similar requirements of Applicable
Environmental Laws, and (b) all provisions of Applicable Environmental Law
regarding storage, discharge, release, transportation, treatment and disposal of
hazardous substances, petroleum, solid waste or other contaminants. Borrower
will, and will cause each of its Subsidiaries to, promptly pay and discharge
when due all debts, claims, liabilities and obligations with respect to any
clean-up or remediation measures necessary to comply with Applicable
Environmental Laws. Borrower hereby indemnifies and agrees to defend and hold
Banks and their successors and assigns harmless from and against any and all
claims, demands, causes of action, loss, damage, liabilities, costs and expenses
(including reasonable attorneys' fees and court costs) of any and every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by any of the Banks at any time and from time to time including, without
limitation, those asserted or arising subsequent to the payment or other
satisfaction of the Loan, by reason of or arising out of the ownership,
construction, occupancy, operation, use and maintenance of any of the collateral
for the Loan, including matters arising out of the negligence of Banks;
provided, however, this indemnity shall not apply with respect to matters caused
by or arising out of (i) the gross negligence or willful misconduct of Banks (IT
BEING THE EXPRESS INTENTION HEREBY THAT BANKS SHALL BE INDEMNIFIED FROM THE
CONSEQUENCES OF THEIR NEGLIGENCE); and (ii) the construction, occupancy,
operation, use and maintenance of the collateral for the Loan by any owner,
lessee or party in possession of the collateral for the Loan subsequent to the
ownership of the collateral for the Loan by Borrower or any of its Subsidiaries
(as applicable), provided further, however, that this subclause (ii) shall not
exclude from the foregoing indemnity and agreement, liability, claims, demands,
causes of action, loss, damage, costs and expenses imposed by reason of the
ownership of the collateral for the Loan by Banks after purchase by Banks at any
foreclosure sale or transfer in lieu thereof from Borrower or any Restricted
Subsidiary in partial or entire satisfaction of the Loan (unless the same shall
be solely attributable to the subsequent use of the collateral by Banks during
their ownership thereof). The foregoing indemnity and agreement applies to the
violation of any Applicable Environmental Law prior to the payment or other
satisfaction of the
46
Loan and any act, omission, event or circumstance existing or occurring on or
about the collateral for the Loan (including without limitation the presence on
the collateral for the Loan or release from the collateral for the Loan of
asbestos or other hazardous substances or solid waste disposed of or otherwise
present in or released prior to the payment or other satisfaction of the Loan).
It shall not be a defense to the covenant of Borrower to indemnify that the act,
omission, event or circumstance did not constitute a violation of any Applicable
Environmental Law at the time of its existence or occurrence. The provisions of
this Section 8.11 shall survive the repayment of the Loan and shall continue
------------
thereafter in full force and effect. In the event of the transfer of the Loan
or any portion thereof, Banks or any prior holder of the Loan and any
participants shall continue to be benefitted by this indemnity and agreement
with respect to the period of such holding of the Loan.
ARTICLE IX
NEGATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 9.1. Debt of Borrower and its Restricted Subsidiaries. Neither
------------------------------------------------
Borrower nor any Restricted Subsidiary of Borrower will incur, become or remain
liable for any Debt other than (a) Debt secured by Permitted Encumbrances
described in subpart (k) of the definition of Permitted Encumbrances, (b)
Nonrecourse Debt, (c) the Loan, (d) the Subordinate Notes, (e) Debt outstanding
on the Closing Date described on Schedule 6 hereto, and (f) Guarantees by
----------
Borrower or a Restricted Subsidiary of Borrower of Debt and other liabilities of
Borrower or other Restricted Subsidiaries of Borrower provided that such Debt
and other liabilities are permitted pursuant to this Agreement; provided, that
--------
the Debt permitted pursuant to Section 9.1(a) and (b) incurred by Borrower and
-------------- ---
its Restricted Subsidiaries shall not exceed $1,000,000 in the aggregate.
SECTION 9.2. Restricted Payments. Neither Borrower nor any Restricted
-------------------
Subsidiary of Borrower will declare or make any Restricted Payment; provided,
that, so long as no Default, Event of Default or Borrowing Base Deficiency then
exists, and provided that no Default or Event of Default would result therefrom
Borrower shall be permitted to (a) declare and pay accrued dividends on the
Preferred Stock, (b) repurchase any of its Common Stock or Preferred Stock or
warrants, options or other rights to acquire such Common Stock or Preferred
Stock, and (c) repurchase, redeem or defease Subordinate Notes, so long as, at
any date, the sum of (x) the aggregate amount of all such dividends declared and
paid pursuant to clause (a) above during the period commencing on the Closing
Date to and including such date, plus (y) the aggregate amount paid by Borrower
and the Restricted Subsidiaries in respect of the repurchase of all such Common
Stock or Preferred Stock or warrants, options or other rights to acquire such
Common Stock or Preferred Stock pursuant to clause (b) above, plus (z) an amount
equal to the excess of the aggregate repurchase, redemption or defeasance price
paid by Borrower for all Subordinate Notes repurchased, redeemed or defeased by
Borrower subsequent to the Closing Date over the sum of (i) 101% of the
aggregate principal
47
balance of all such Subordinate Notes on the date of repurchase, redemption or
defeasance, plus (ii) accrued but unpaid interest on all such Subordinate Notes
redeemed, repurchased or defeased on the date of redemption, repurchase or
defeasance, shall not exceed the Restricted Payment Limit in effect at such
date.
SECTION 9.3. Negative Pledge. Neither Borrower nor any Restricted
---------------
Subsidiary will create, assume or suffer to exist any Lien on any asset owned by
it (other than Permitted Encumbrances).
SECTION 9.4. Consolidations and Mergers. Neither Borrower nor any
--------------------------
Subsidiary of Borrower will consolidate or merge with or into any other Person;
provided, that so long as no Default or Event of Default exists or will result
(a) Borrower may merge or consolidate with another Person so long as Borrower is
the surviving corporation, (b) any Restricted Subsidiary of Borrower may merge
or consolidate with or into another Restricted Subsidiary of Borrower, (c) any
Unrestricted Subsidiary may merge with or into another Unrestricted Subsidiary,
(d) any Unrestricted Subsidiary may merge with any other Person other than a
Restricted Subsidiary so long as such Unrestricted Subsidiary is the surviving
corporation, and (e) any Restricted Subsidiary may merge with any other Person
so long as such Restricted Subsidiary is the surviving corporation and is a
wholly owned Subsidiary of Borrower after giving effect thereto.
SECTION 9.5. Asset Dispositions. Except as provided in this Section 9.5,
------------------ -----------
neither Borrower nor any Restricted Subsidiary shall sell, lease, abandon or
otherwise transfer any of its assets to any other Person other than pursuant to
an Exempt Transfer. Borrower and its Restricted Subsidiaries shall be permitted
to sell or otherwise dispose of any asset other than (a) oil and gas properties,
(b) Related Assets, (c) debt and equity securities issued by any Restricted
Subsidiary, and (d) accounts (as such term is defined in the Uniform Commercial
Code). Borrower and its Restricted Subsidiaries shall be permitted to sell oil
and gas properties and Related Assets; provided that the aggregate value of all
oil and gas properties and Related Assets sold by Borrower and its Restricted
Subsidiaries during any period between Periodic Determinations shall not exceed
the greater of (i) $5,000,000, or (ii) five percent (5%) of the Borrowing Base
then in effect.
SECTION 9.6. Amendments to Material Documents. Borrower will not, nor
--------------------------------
will Borrower permit any of its Restricted Subsidiaries to, (a) enter into any
material modification or amendment of, grant any material consent under, or
waive any material right or obligation of any Person under (i) its certificate
or articles of incorporation, bylaws, partnership agreement, regulations or
other organizational documents, or (ii) any of the Merger Documents, or (b)
enter into any modification or amendment of, grant any consent under, or waive
any right or obligation of any Person under (i) the Indenture, or (ii) the
Subordinate Notes.
SECTION 9.7. Use of Proceeds. The proceeds of Borrowings under the
---------------
Commitment will not be used for any purpose other than (a) working capital, (b)
to finance the acquisition, exploration and development of oil and gas
properties and Related Assets and the transportation, processing and marketing
of hydrocarbons by Borrower and its Restricted Subsidiaries, (c) Restricted
Payments
48
permitted pursuant to Section 9.2, (d) Investments permitted pursuant to Section
----------- -------
9.8, and (e) to refinance the obligations outstanding under the Existing Credit
---
Agreement. None of the proceeds of the Loan nor any Letter of Credit issued
hereunder will be used, directly or indirectly, (i) for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin Stock,
or (ii) in violation of applicable law or regulation (including, without
limitation, the Margin Regulations).
SECTION 9.8. Investments. Neither Borrower nor any Restricted Subsidiary
-----------
of Borrower will, directly or indirectly, make any Investment other than
Permitted Investments.
SECTION 9.9. Transactions with Affiliates. Borrower will not, and
----------------------------
Borrower will not permit any of its Subsidiaries to, engage in any material
transaction with an affiliated Person (other than, in the case of Borrower and
its Restricted Subsidiaries, with each other) unless such transaction is
generally as favorable to Borrower or such Subsidiary as could be obtained in an
arm's length transaction with an unaffiliated Person in accordance with
prevailing industry customs and practices.
SECTION 9.10. Plans. Borrower will not, and Borrower will not permit any
-----
of its Subsidiaries to, create, adopt or become bound by any Plan.
SECTION 9.11. Oil and Gas Hedge Transactions. Borrower will not, and
------------------------------
Borrower will not permit any of its Restricted Subsidiaries to, enter into Oil
and Gas Hedge Transactions which would cause the volume of (a) (i) the aggregate
notional volume of oil which is the subject of oil Oil and Gas Hedge
Transactions in existence at any time to exceed seventy-five percent (75%) of
Borrower's and its Restricted Subsidiaries' anticipated production of oil from
proved, developed producing reserves during the entire term of such existing Oil
and Gas Hedge Transactions, and (ii) the notional volume of oil with respect to
which a settlement is required on a particular settlement date under such Oil
and Gas Hedge Transactions to exceed seventy-five percent (75%) of Borrower's
and its Restricted Subsidiaries' anticipated production of oil from proved,
developed producing reserves for the period (a "Settlement Period") from the
-----------------
immediately preceding settlement date under any oil Oil and Gas Hedge
Transaction (or the commencement of such Oil and Gas Hedge Transactions in the
event there is no prior settlement date) to such settlement date, and (b) (i)
the aggregate notional volume of gas which is the subject of gas Oil and Hedge
Transactions in existence at any time to exceed seventy-five percent (75%) of
Borrower's and its Restricted Subsidiaries' anticipated production of gas from
proved, developed producing reserves during the entire term of such existing Oil
and Gas Hedge Transactions, and (ii) the notional volume of gas with respect to
which a settlement is required on a particular settlement date under such gas
Oil and Gas Hedge Transactions to exceed seventy-five percent (75%) of
Borrower's and its Restricted Subsidiaries' anticipated production of gas from
proved, developed producing reserves for any Settlement Period.
SECTION 9.12. Obligations of Unrestricted Subsidiaries. Except as
----------------------------------------
expressly permitted by Section 9.2, Borrower will not, nor will Borrower permit
-----------
any of its Restricted Subsidiaries to, incur any liability or obligation to any
Unrestricted Subsidiary of Borrower of any nature, or have any
49
liability (whether by operation of law or otherwise) for any liability, Debt or
obligation of any Unrestricted Subsidiary.
SECTION 9.13. Acquisitions. Borrower will not, nor will Borrower permit
------------
any of its Restricted Subsidiaries to, acquire, in a single transaction or a
series of related transactions, all or substantially all of the assets or
capital stock (or other outstanding equity interests of any Person) or all or
substantially all of the assets comprising a division of any Person; provided,
that nothing contained in this Section 9.13 shall prohibit Borrower or any
------------
Restricted Subsidiary of Borrower from making any acquisition of assets
consisting of oil and gas properties or any other acquisition which is also a
Permitted Investment.
SECTION 9.14. Operating Leases. Borrower will not, nor will Borrower
----------------
permit any of its Subsidiaries to, incur, become, or remain liable under any
Operating Lease which would cause the aggregate amount of all Rentals payable by
Borrower and its Restricted Subsidiaries in any Fiscal Year to be greater than
$1,500,000.
SECTION 9.15. Speculative Hedge Transactions. Borrower will not, nor
------------------------------
will Borrower permit any of its Restricted Subsidiaries to, enter into any
commodity, interest rate, currency or other swap, option, collar or other
derivative transaction pursuant to which Borrower or such Restricted Subsidiary
speculates on the movement of commodity prices, securities prices, interest
rates, financial markets, currency markets or other items; provided, that
nothing contained in this Section 9.15 shall prohibit Borrower from (a) entering
------------
into interest rate swaps or other interest rate hedge transactions pursuant to
which Borrower ▇▇▇▇▇▇ interest rate risk with respect to the interest reasonably
anticipated to be incurred pursuant to this Agreement, (b) entering into Oil and
Gas Hedge Transactions permitted by Section 9.11 hereof, or (c) making Permitted
------------
Investments.
ARTICLE X
FINANCIAL COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
(a) Borrower will not permit its ratio of Consolidated Current Assets
to its Consolidated Current Liabilities as of the end of any Fiscal Quarter to
be less than 1 to 1.
(b) Borrower will not permit its ratio of Consolidated Funded Debt to
Consolidated Total Capital as of (i) the end of any Fiscal Quarter during the
Fiscal Year ending December 31, 1997, to exceed .55 to 1, and (ii) the end of
any Fiscal Quarter ending on or after March 31, 1998, to exceed .50 to 1.
50
(c) Borrower will not permit its Ratio of Consolidated Funded Debt to
Adjusted Consolidated EBITDA as of the end of any Fiscal Quarter commencing with
the Fiscal Quarter ending March 31, 1997, to exceed 3.5 to 1.
ARTICLE XI
DEFAULTS
SECTION 11.1. Events of Default. If one or more of the following events
-----------------
(collectively "Events of Default" and individually an "Event of Default") shall
----------------- ----------------
have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal of any Note or
any reimbursement obligation with respect to any Letters of Credit when due;
(b) Borrower shall fail to pay any accrued interest due and owing on
any Note or any fees or any other amount payable hereunder when due and such
failure shall continue for a period of five (5) days;
(c) Borrower shall fail to observe or perform any covenant or
agreement contained in Article IX or X;
---------- -
(d) Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant or agreement contained in this Agreement or the other Loan
Papers (other than those covered by Sections 11.1(a), (b) and (c)) for thirty
---------------- --- ---
(30) days after written notice thereof has been given to Borrower by
Administrative Agent at the request of any Bank, provided, that, as to Defaults
under Section 8.1(d) and (g), Borrower shall not be entitled to more than one
-------------- ---
(1) notice and period of cure during each calendar year, and as to each other
type of Default, Borrower shall not be entitled to more than two (2) notices and
periods of cure during any calendar year;
(e) Borrower shall fail to cause the financial statements described
in Section 8.1(a) to be accompanied by the opinion without qualification (except
--------------
for qualifications required by changes in accounting methods with which
Borrower's auditors concur) of the accountants preparing such opinion, that such
financial statements were prepared in accordance with generally accepted
accounting principles and fairly present the consolidated financial position and
results of operations of Borrower;
(f) any representation, warranty, certification or statement made or
deemed to have been made by any Company in this Agreement or by any Company or
any other Person on behalf of any Company in any other Loan Paper or any other
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when made;
51
(g) any Company shall fail to pay any Material Debt at maturity or
any event or condition (i) shall occur which results in the acceleration of the
maturity of any Material Debt of any Company, or (ii) shall occur and continue
for a period of thirty (30) days (or such shorter cure period as is provided
pursuant to the terms of such Material Debt) which entitles (or, with the giving
of notice or lapse of time or both, would unless cured or waived, entitle) the
holder of such Material Debt to accelerate the maturity thereof;
(h) any Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced
against any Company seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against any Company under the federal bankruptcy laws as now or
hereafter in effect;
(j) one (1) or more judgments or orders for the payment of money
aggregating in excess of $1,000,000 shall be rendered against any Company and
such judgment or order (i) shall continue unsatisfied and unstayed (unless
bonded with a supersedeas bond at least equal to such judgment or order) for a
period of thirty (30) days or (ii) is not fully paid and satisfied at least ten
(10) days prior to the date on which any of its assets may be lawfully sold to
satisfy such judgment or order;
(k) one (1) or more judgments or orders for the payment of money
aggregating in excess of the sum of (i) ten percent (10%) of the Borrowing Base
then in effect, plus (ii) (A) the amount of such judgment which is covered by
----
insurance to the satisfaction of Administrative Agent and its counsel, and (B)
any amounts which Borrower or any of its Restricted Subsidiaries has deposited
with Administrative Agent to be held by Administrative Agent as security for the
payment of such judgment shall be rendered against Borrower or any of its
Subsidiaries, whether or not otherwise bonded or stayed;
(l) an Event of Default shall occur under and as defined in the
Indenture;
(m) any Company shall incur Environmental Liabilities which,
individually or when considered in the aggregate for all Companies, exceeds
$10,000,000;
52
(n) this Agreement or any other Loan Paper shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower or any
Restricted Subsidiary of Borrower, or Borrower or any Restricted Subsidiary of
Borrower shall deny that it has any further liability or obligation under any of
the Loan Papers, or any Lien created by the Loan Papers shall for any reason
(other than the release thereof in accordance with the Loan Papers) cease to be
a valid, first priority, perfected Lien upon any of the property purported to be
covered thereby;
(o) any Person or group (as defined in Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934) shall become the direct or indirect
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934) of more than 30% of the total voting power of all classes of capital stock
then outstanding of SOCO entitled (without regard to the occurrence of any
contingency) to vote in elections of directors of SOCO;
(p) at any date, more than fifty percent (50%) of the Person's
comprising SOCO's board of directors are Persons who were not directors of SOCO
one year prior to such date; or
(q) SOCO shall cease, for any reason, to be the legal and beneficial
owner of more than fifty percent (50%) of the total voting power of all classes
of capital stock then outstanding of Borrower entitled (without regard to the
occurrence of any contingency) to vote in elections of directors of Borrower;
then, and in every such event, Administrative Agent shall without presentment,
notice or demand (unless expressly provided for herein) of any kind (including,
without limitation, notice of intention to accelerate and acceleration), all of
which are hereby waived, (a) if requested by Required Banks, terminate the
Commitment and it shall thereupon terminate, and (b) if requested by Required
Banks, take such other actions as may be permitted by the Loan Papers including,
declaring the Notes, or any of them, (together with accrued interest thereon) to
be, and the Notes, or any of them, shall thereupon become, immediately due and
payable; provided that (c) in the case of any of the Events of Default specified
-------- ----
in Section 11.1(h) or (i), without any notice to Borrower or any other act by
--------------- ---
Administrative Agent or Banks, the Commitment shall thereupon terminate and the
Notes (together with accrued interest thereon) shall become immediately due and
payable.
ARTICLE XII
AGENTS
SECTION 12.1. Appointment and Authorization. Each Bank irrevocably
-----------------------------
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Notes and the other Loan
Papers as are delegated to such Agent by the terms hereof or thereof, together
with all such powers as are reasonably incidental thereto, provided that, as
-------- ----
between and among Banks and Agents, no Agent will prosecute, settle or
compromise any claim
53
against Borrower or release or institute enforcement proceedings, except with
the consent of Required Banks. Each Bank and Borrower agree that none of the
Agents are a fiduciary for Banks or for Borrower but each simply is acting in
the capacity described herein to alleviate administrative burdens for both
Borrower and Banks and that no Agent has any duties or responsibilities to Banks
or Borrower except those expressly set forth herein.
SECTION 12.2. Agents and Affiliates. Each Agent in its individual
---------------------
capacity and not as Agent hereunder shall have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not an Agent hereunder and each Agent in its individual
capacity and not as Agent hereunder may accept deposits from, lend money to, and
generally engage in any kind of business with Borrower and its Subsidiaries and
Affiliates as if such parties were not Agents hereunder.
SECTION 12.3. Action by Agents. The obligations of Agents hereunder are
----------------
only those expressly set forth herein. Without limiting the generality of the
foregoing, no Agent shall be required to take any action with respect to any
Default or Event of Default, except as expressly provided in Article XI.
----------
Notwithstanding the administrative authority delegated to Agents, no Agent shall
without the prior written approval of all Banks cause or permit any modification
of the Loan Papers which would (a) increase the Commitment of any Bank or
subject any Bank to any additional obligations, (b) forgive any of the principal
or reduce the rate of interest on the Loan or any fees hereunder, (c) postpone
the date fixed for payment of principal of or interest on the Loan or any fees
hereunder including the Termination Date, (d) change the percentage of the Total
Commitment, or the number of Banks which shall be required for Banks or any of
them to take any action under Section 14.5 or any other provision of this
------------
Agreement, (e) permit Borrower to assign any of its rights hereunder, (f) amend
or waive any of the provisions of Article IV or of the definitions contained in
----------
Section 1.1 applicable thereto, or (g) provide for the release or substitution
-----------
of collateral for the Loan other than releases required pursuant to sales of
collateral which are expressly permitted under Section 9.5. Subject to the
-----------
foregoing, each Agent shall make such requests or take such actions in respect
of Borrower as the Required Banks shall direct. Further, subject to the
foregoing, each Agent shall grant such waivers, consents or approvals in favor
of Borrower as the Required Banks shall direct.
SECTION 12.4. Consultation with Experts. Each Agent may consult with
-------------------------
legal counsel (who may be counsel for Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
SECTION 12.5. Liability of Agents. None of the Agents nor any of their
-------------------
respective directors, officers, agents, or employees shall be liable for any
action taken or not taken by such Agent in connection herewith (a) with the
consent or at the request of Required Banks, or (b) in the absence of its own
gross negligence or willful misconduct, IT BEING THE INTENTION OF BANKS THAT
SUCH PARTIES SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF THEIR ORDINARY
NEGLIGENCE. None of the Agents nor any of their respective officers,
54
directors, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with this Agreement or any borrowing hereunder, (ii) the
performance or observance of any of the covenants or agreements of Borrower,
(iii) the satisfaction of any condition specified in Article VI, except receipt
----------
of items required to be delivered to Administrative Agent, or (iv) the validity,
effectiveness or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. No Agent shall incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
believed by it to be genuine or to be signed by the proper party or parties or
upon any oral notice which Agent believes will be confirmed in writing by the
proper party or parties. If any Agent fails to take any action required to be
taken by it under the Loan Papers after the occurrence of an Event of Default
and within a reasonable time after being requested to do so by any Bank (after
such requesting Bank has obtained the approval of such other Banks as required),
such Agent shall not suffer or incur any liability as a result thereof, but such
requesting Bank may request such Agent to resign, whereupon such Agent shall so
resign pursuant to Section 12.9.
------------
SECTION 12.6. Delegation of Duties. Each Agent may execute any of its
--------------------
duties hereunder by or through officers, directors, employees, attorneys, or
agents.
SECTION 12.7. Indemnification. Each Bank shall, ratably in accordance
---------------
with its Commitment Percentage, indemnify each Agent (to the extent not
reimbursed by Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such Agent's gross negligence or willful misconduct) that such Agent may
suffer or incur in connection with this Agreement or any action taken or omitted
by such Agent hereunder, including without limitation, matters arising out of
such Agent's own negligence. IT BEING THE INTENTION OF EACH BANK THAT EACH
AGENT SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS ORDINARY NEGLIGENCE.
SECTION 12.8. Credit Decision. Each Bank acknowledges that it has,
---------------
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 12.9. Successor Agent. Each Agent may resign at any time by
---------------
giving written notice thereof to Banks and Borrower. In addition, Borrower may,
prior to a Default, request the designation by Banks of a successor Agent. Upon
any such request by Borrower or resignation by an Agent, Required Banks shall
have the right to appoint a successor Agent, which shall be one of Banks. If no
successor Agent shall have been so appointed by Required Banks and accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation or Borrower's request for a successor Agent, then the retiring
Agent may, on behalf of Banks, appoint a successor Agent (as applicable), which
shall (a) be a commercial bank organized under the laws
55
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000 and (b) unless the successor Agent
is a Bank, be reasonably acceptable to Borrower. Upon the acceptance of its
appointment as a successor Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any Agent's resignation hereunder, the provisions
of this Section 12.9 shall continue to inure to its benefit as to any actions
------------
taken or omitted to be taken by it while it was Agent hereunder. Borrower shall
be entitled to recommend a successor Agent at the time of designation of any
successor Agent pursuant to this Section 12.9. Banks shall give due
------------
consideration to the successor nominated by Borrower, but shall have no
obligation to approve such nominee.
ARTICLE XIII
PROTECTION OF YIELD; CHANGE IN LAWS
SECTION 13.1. Basis for Determining Interest Rate Applicable to
-------------------------------------------------
Eurodollar Tranches Inadequate. If on or prior to the first day of any Interest
------------------------------
Period with respect to a Borrowing:
(a) Administrative Agent is advised by any Bank that deposits in
dollars (in the applicable amounts) are not being offered to such Bank(s) in the
relevant market for such Interest Period, or
(b) Banks having fifty percent (50%) or more of the aggregate amount
of the Total Commitment advise Administrative Agent that the Adjusted Eurodollar
Rate as determined by Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding their respective shares of the
requested Borrowing which will be subject to a Eurodollar Tranche for such
Interest Period, Administrative Agent shall give notice thereof to Borrower and
Banks, whereupon the obligations of Banks to allow interest to be computed by
reference to the Adjusted Eurodollar Rate shall be suspended until
Administrative Agent notifies Borrower that the circumstances giving rise to
such suspension no longer exist. Unless Borrower notifies Administrative Agent
at least two (2) Domestic Business Days before the date of any Borrowing for
which a Request for Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as an Adjusted Base
Rate Borrowing.
SECTION 13.2. Illegality of Eurodollar Loans. (a) If, after the date of
------------------------------
this Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank (or its Eurodollar Lending Office)
to make, maintain or fund any portion of the Loan subject to a Eurodollar
Tranche and such Bank shall so notify Administrative Agent, Administrative
56
Agent shall forthwith give notice thereof to the other Banks and Borrower.
Until such Bank notifies Borrower and Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to maintain or fund any portion of the Loan subject to a Eurodollar
Tranche shall be suspended. Before giving any notice to Administrative Agent
pursuant to this Section 13.2, such Bank shall designate a different Eurodollar
------------
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall determine that it may not lawfully continue to
maintain and fund any portion of the Loan outstanding subject to a Eurodollar
Tranche to maturity and shall so specify in such notice, Borrower shall
immediately convert the principal amount of the Loan which is subject to a
Eurodollar Tranche to an Adjusted Base Rate Tranche of an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the unaffected Eurodollar Tranches of the other Banks).
(b) No Bank shall be required to make the Loan (or any portion
thereof) hereunder if the making of the Loan (or any portion thereof) would be
in violation of any law applicable to such Bank.
SECTION 13.3. Increased Cost of Eurodollar Tranche. If after the date
------------------------------------
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(a) shall subject any Bank (or its Lending Office) to any tax, duty
or other charge with respect to maintaining or funding any portion of the Loan
subject to a Eurodollar Tranche, its Note or its obligation to allow interest to
be computed by reference to the Adjusted Eurodollar Rate shall change the basis
of taxation of payments to any Bank (or its Lending Office) of the principal of
or interest on any portion of the Loan which is subject to any Eurodollar
Tranche or any other amounts due under this Agreement in respect of any portion
of the Loan which is subsequent to any Eurodollar Tranche or its obligation to
allow interest to be computed by reference to the Adjusted Eurodollar Rate
(except for changes in the rate of Tax on the overall net income of such Bank or
its Lending Office imposed by the jurisdiction in which such Bank's principal
executive office or Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Eurodollar Tranche any such requirement included
in an applicable Eurodollar Reserve Percentage) against assets of, deposits with
or for the account of or credit extended by, any Bank's Lending Office or shall
impose on any Bank (or its Lending Office) or the applicable interbank
Eurodollar market or any other condition affecting Eurodollar Tranches, its Note
or its obligation to allow interest to be computed by reference to the Adjusted
Eurodollar Rate;
57
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of funding or maintaining any portion of the Loan subject to
a Eurodollar Tranche, or to reduce the amount of any sum received or receivable
by such Bank (or its Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then, within
five (5) days after demand by such Bank (with a copy to the Administrative
Agent), Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such increased cost or reduction. Each Bank will
promptly notify Borrower and Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section 13.3 and will designate a different
------------
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming compensation
under this Section 13.3 and setting forth the additional amount or amounts to be
------------
paid to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 13.4. Adjusted Base Rate Tranche Substituted for Affected
---------------------------------------------------
Eurodollar Tranche. If (a) the obligation of any Bank to fund or maintain any
------------------
portion of the Loan subject to a Eurodollar Tranche has been suspended pursuant
to Section 13.2, or (b) any Bank has demanded compensation under Section 13.3
------------ ------------
and Borrower shall, by at least five (5) Eurodollar Business Days prior notice
to such Bank through the Administrative Agent, have elected that the provisions
of this Section 13.4 shall apply to such Bank, then, unless and until such Bank
------------
notifies Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer apply:
(a) any Tranche which would otherwise be characterized by such Bank as
a Eurodollar Tranche shall instead be deemed an Adjusted Base Rate Tranche (on
which interest and principal shall be payable contemporaneously with the
unaffected Eurodollar Tranches of the other Banks); and
(b) after all of its Eurodollar Tranches have been repaid, all
payments of principal which would otherwise be applied to repay Eurodollar
Tranches shall be applied to repay its Adjusted Base Rate Tranches instead.
SECTION 13.5. Capital Adequacy. If after the date hereof, the adoption
----------------
of any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof, by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law), shall:
(a) impose, modify or deem applicable any reserve, special deposit,
compensatory loan, deposit insurance, capital adequacy, minimum capital, capital
ratio or similar requirement against all or any assets held by, deposits or
accounts with, credit extended by or to, or commitments to extend credit or any
other acquisition of funds by any Bank (or its Lending Office), or impose on
58
any Bank (or its Lending Office) any other condition, with respect to the
maintenance by such Bank of all or any part of its Commitment; or
(b) subject any Bank (or its Lending Office) to, or cause the
termination or reduction of a previously granted exemption with respect to, any
Tax with respect to the maintenance by such Bank of all or any part of its
Commitment (other than Taxes assessed against such Bank's overall net income);
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of maintaining its Commitment or to reduce the amount of any
sums received or receivable by it (or its Lending Office) under this Agreement
or any other Loan Paper, or to reduce the rate of return on such Bank's equity
in connection with this Agreement, as the case may be, by an amount which such
Bank deems material then, in any such case, within five (5) days of demand by
such Bank (or its Lending Office) (with a copy to Administrative Agent),
Borrower shall pay to such Bank (or its Lending Office) such additional amount
or amounts as will compensate such Bank for any additional cost, reduced
benefit, reduced amount received or reduced rate of return. Each Bank will
promptly notify Borrower and Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section 13.5. A certificate of any Bank claiming
------------
compensation under this Section 13.5 and setting forth the additional amount or
------------
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
Without limiting the foregoing, in the event any event or condition
described in this Section 13.5 shall occur or arise which relates to the
------------
maintenance by any Bank of that part of its Commitment which is in excess of its
Commitment Percentage of the Borrowing Base then in effect (such excess portion
of such Commitment of any Bank is hereinafter referred to as its "Surplus
-------
Commitment"), such Bank shall notify Administrative Agent and Borrower of the
----------
occurrence of such event or the existence of such condition and of the amount of
a fee (to be computed on a per annum basis with respect to such Bank's Surplus
Commitment) which such Bank determines in good faith will compensate such Bank
for such additional cost, reduced benefit, reduced amount received or reduced
rate of return. Within five (5) Domestic Business Days following receipt of
such notice, Borrower shall notify such Bank whether it accepts or rejects such
fee (if Borrower fails to timely respond to such notice it will be deemed to
have accepted such fee). If Borrower rejects such fee, the applicable
Commitment of each Bank will be automatically and permanently reduced to the
Borrowing Base applicable to such Commitment and then in effect. If Borrower
accepts such fee, such fee shall accrue from and after the date of such Bank's
notice and shall be payable in arrears (based on the daily average balance of
such Bank's Surplus Commitment) on the last day of each Fiscal Quarter and on
the Termination Date. Such fee shall be in lieu of any amounts to which such
Bank would otherwise be entitled in respect of its Surplus Commitment pursuant
to the other provisions of this Section 13.5 for the period on and after the
------------
date of such notice unless such Bank determines that such fee is not adequate to
fully compensate such Bank for any additional cost, reduced benefit, reduced
amount received or reduced rate of return such Bank may thereafter incur in
respect of such Bank's Surplus Commitment. In that event such Bank shall be
entitled to such additional compensation to which such Bank is otherwise
entitled pursuant to this Section 13.5.
------------
59
SECTION 13.6. Taxes. All amounts payable by Borrower under the Loan
-----
Papers (whether principal, interest, fees, expenses, or otherwise) to or for the
account of each Bank shall be paid in full, free of any deductions or
withholdings for or on account of any Taxes. If Borrower is prohibited by law
from paying any such amount free of any such deductions and withholdings, then
(at the same time and in the same manner that such original amount is otherwise
due under the Loan Papers) Borrower shall pay to or for the account of such Bank
such additional amount as may be necessary in order that the actual amount
received by such Bank after deduction and/or withholding (and after payment of
any additional Taxes due as a consequence of the payment of such additional
amount, and so on) will equal the amount such Bank would have received if such
deduction or withholding were not made.
SECTION 13.7. Discretion of Banks as to Manner of Funding.
-------------------------------------------
Notwithstanding any provisions of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of its
Commitment in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such
Bank had actually funded and maintained the Loan (or any portion thereof)
subject to a Eurodollar Tranche during the Interest Period for the Loan (or any
portion thereof) through the purchase of deposits having a maturity
corresponding to the last day of such Interest Period and bearing an interest
rate equal to the Adjusted Eurodollar Rate for such Interest Period.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Notices. All notices, requests and other communications to
-------
any party hereunder shall be in writing (including bank wire, telecopy or
similar writing) and shall be given (a) if to Agent or any Bank, to such party
at its address, telex or telecopy number set forth on Schedule 1 hereof, or (b)
----------
if to Borrower or any of its Subsidiaries, at the address, telex or telecopy
number for Borrower set forth on the signature page hereto or such other
address, telex or telecopy number as such party may hereafter specify for the
purpose by notice to Administrative Agent and Borrower, as the case may be.
Each such notice, request or other communication shall be effective (a) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
in this Section 14.1 and the appropriate answerback is received or receipt is
------------
otherwise confirmed, (b) if given by mail, one (1) Domestic Business Day after
deposit in the mails with first class postage prepaid, addressed as aforesaid,
or (c) if given by any other means, when delivered at the address specified in
this Section 14.1; provided that notices to Administrative Agent under Article
------------ -------- ---- -------
II or XIII shall not be effective until received.
-- ----
60
SECTION 14.2. No Waivers. No failure or delay by any Agent or any Bank
----------
in exercising any right, power or privilege hereunder or under any Note or other
Loan Paper shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law
or in any of the other Loan Papers.
SECTION 14.3. Expenses; Documentary Taxes; Indemnification. (a) Borrower
--------------------------------------------
shall pay (i) all out-of-pocket expenses of Administrative Agent, including
reasonable fees and disbursements of special counsel for Administrative Agent,
in connection with the preparation of this Agreement and the other Loan Papers
and, if appropriate, the recordation of the Loan Papers, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder,
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
each Agent and each Bank, including fees and disbursements of counsel in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom, fees of auditors and consultants incurred in
connection therewith and investigation expenses incurred by each Agent and each
Bank in connection therewith. Borrower shall indemnify each Bank against any
Taxes imposed by reason of the execution and delivery of this Agreement or the
Notes.
(b) Borrower agrees to indemnify each Agent and each Bank and hold
each Agent and each Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including, without limitation,
the reasonable fees and disbursements of counsel for each Agent and each Bank in
connection with any investigative, administrative or judicial proceeding,
whether or not such Bank shall be designated a party thereto) which may be
incurred by any Agent or any Bank relating to or arising out of this Agreement
or any actual or proposed use of proceeds of the Loan; provided that no Bank
-------- ----
shall have the right to be indemnified hereunder for its own gross negligence or
willful misconduct, IT BEING THE INTENTION HEREBY THAT EACH BANK AND EACH AGENT
SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE.
SECTION 14.4. Right and Sharing of Set-Offs. (a) Upon the occurrence and
-----------------------------
during the continuance of any Event of Default, each Bank is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank to or for the credit or the account of Borrower against any and all
of the obligations of Borrower now or hereafter existing under this Agreement
and any Note held by such Bank, irrespective of whether or not such Bank shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Bank agrees promptly to notify Borrower
after any such setoff and application made by such Bank, provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section 14.4(a) are in addition
---------------
to other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.
61
(b) Each Bank agrees that if it shall, by exercising any right of
setoff or counterclaim or otherwise, receive payment after the occurrence and
during the continuance of an Event of Default of a proportion of the aggregate
amount of principal and interest due with respect to the Loan which is greater
than the proportion received by any other Bank in respect of the Loan, the Bank
receiving such proportionately greater payment shall purchase such
participations in the interests in the Loan held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Loan held by Banks shall be shared by
Banks ratably in accordance with their respective Commitment Percentages;
provided that nothing in this Section 14.4 shall impair the right of any Bank to
-------- ---- ------------
exercise any right of setoff or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of Borrower other than
its indebtedness under the Loan. Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that Participants may exercise rights of
setoff or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of Borrower in
the amount of such participation.
SECTION 14.5. Amendments and Waivers. Any provision of this Agreement,
----------------------
the Notes or the other Loan Papers may be amended or waived if, but only if such
amendment or waiver is in writing and is signed by Borrower and Required Banks
(and, if the rights or duties of any Agent are affected thereby, by such Agent);
provided that no such amendment or waiver shall, unless signed by all Banks, (a)
-------- ----
increase the Commitment of any Bank or subject any Bank to any additional
obligation, (b) forgive any of the principal of or reduce the rate of interest
on the Loan or any fees hereunder, (c) postpone the date fixed for any payment
of principal of or interest on the Loan or any fees hereunder including the
Termination Date, (d) change the percentages of the Total Commitment, or the
number of Banks which shall be required for the Banks or any of them to take any
action under this Section 14.5 or any other provision of this Agreement, (e)
------------
permit Borrower to assign any of its rights hereunder, (f) amend or waive any of
the provisions of Article IV or the definitions contained in Section 1.1
---------- -----------
applicable thereto, or (g) provide for release or substitution of collateral for
the Obligations or any part thereof other than releases required pursuant to
sales of collateral which are expressly permitted by Section 9.5 hereof.
-----------
Borrower, Agent and each Bank further acknowledge that any decision by any Agent
or any Bank to enter into any amendment, waiver or consent pursuant hereto shall
be made by such Bank or Agent in its sole discretion, and in making any such
decision each such Agent and each such Bank shall be permitted to give due
consideration to any credit or other relationship any such Agent or any such
Bank may have with Borrower, any Affiliate of Borrower, or any other
Unrestricted Subsidiary of Borrower.
SECTION 14.6. Survival. All representations, warranties and covenants
--------
made by Borrower herein or in any certificate or other instrument delivered by
it or in its behalf under the Loan Papers shall be considered to have been
relied upon by Banks and shall survive the delivery to Banks of such Loan Papers
or the extension of the Loan (or any part thereof), regardless of any
investigation made by or on behalf of Banks.
SECTION 14.7. Limitation on Interest. Regardless of any provision
----------------------
contained in the Loan Papers, Banks shall never be entitled to receive, collect,
or apply, as interest on the Loan, any
62
amount in excess of the Maximum Lawful Rate, and in the event Banks ever
receive, collect or apply as interest any such excess, such amount which would
be deemed excessive interest shall be deemed a partial prepayment of principal
and treated hereunder as such; and if the Loan is paid in full, any remaining
excess shall promptly be paid to Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Maximum
Lawful Rate, Borrower and Banks shall, to the extent permitted under applicable
law, (a) characterize any nonprincipal payment as an expense, fee or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof and (c) amortize, prorate, allocate and spread, in equal parts, the
total amount of the interest throughout the entire contemplated term of the
applicable Notes, so that the interest rate is the Maximum Lawful Rate
throughout the entire term of the Notes; provided, however, that if the unpaid
-------- -------
principal balance thereof is paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Lawful Rate, Banks shall refund
to Borrower the amount of such excess and, in such event, Banks shall not be
subject to any penalties provided by any laws for contracting for, charging,
taking, reserving or receiving interest in excess of the Maximum Lawful Rate.
SECTION 14.8. Invalid Provisions. If any provision of the Loan Papers is
------------------
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable, the
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of the Loan Papers a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 14.9. Waiver of Consumer Credit Laws. Pursuant to Article
------------------------------
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as
amended, Borrower agrees that such Chapter 15 shall not govern or in any manner
apply to the Loan.
SECTION 14.10. Successors and Assigns. (a) Each Loan Paper binds and
----------------------
inures to the parties to it, any intended beneficiary of it, and each of their
respective successors and permitted assigns. No Company may assign or transfer
any rights or obligations under any Loan Paper without first obtaining all
Banks' consent, and any purported assignment or transfer without all Banks'
consent is void. No Bank may transfer, pledge, assign, sell any participation
in, or otherwise encumber its portion of the Obligations except as permitted by
clauses (b) or (c) below.
(b) Any Bank may (subject to the provisions of this section, in
accordance with applicable law, in the ordinary course of its business, and at
any time) sell to one or more Persons (each a "Participant") participating
-----------
interests in its portion of the Obligations. The selling Bank remains a "Bank"
under the Loan Papers, the Participant does not become a "Bank" under the Loan
Papers, and the selling Bank's obligations under the Loan Papers remain
unchanged. The selling Bank remains solely responsible for the performance of
its obligations and remains the holder of its
63
share of the outstanding Loan for all purposes under the Loan Papers. Borrower
and each Agent shall continue to deal solely and directly with the selling Bank
in connection with that Bank's rights and obligations under the Loan Papers, and
each Bank must retain the sole right and responsibility to enforce due
obligations of the Companies. Participants have no rights under the Loan Papers
except certain voting rights as provided below. Subject to the following, each
Bank may obtain (on behalf of its Participants) the benefits of Article XIII
------------
with respect to all participations in its part of the Obligations outstanding
from time to time so long as Borrower is not obligated to pay any amount in
excess of the amount that would be due to that Bank under Article XIII
------------
calculated as though no participations have been made. No Bank may sell any
participating interest under which the Participant has any rights to approve any
amendment, modification, or waiver of any Loan Paper except as to matters in
Sections 14.5(a) through 14.5(g).
---------------- -------
(c) Each Bank may make assignments to the Federal Reserve Bank. Each
Bank may also assign to one or more assignees (each an "Assignee") all or any
--------
part of its rights and obligations under the Loan Papers so long as (i) the
assignor Bank and Assignee execute and deliver to each Agent and Borrower for
their consent and acceptance (that may not be unreasonably withheld) an
assignment and assumption agreement in substantially the form of Exhibit G (an
---------
"Assignment and Assumption Agreement") and pay to Administrative Agent a
------------------------------------
processing fee of $2,500, (ii) the Assignee acquires an identical percentage
interest in the Commitment of the assignor Bank and an identical percentage of
the interests in the outstanding Loan held by such assignor Bank, and (iii) the
conditions (including, without limitation, minimum amounts of the Total
Commitment that may be assigned or that must be retained) for that assignment
set forth in the applicable Assignment and Assumption Agreement are satisfied.
The "Effective Date" in each Assignment and Assumption Agreement must (unless a
shorter period is agreeable to Borrower and Administrative Agent) be at least
five (5) Domestic Business Days after it is executed and delivered by the
assignor Bank and Assignee to Administrative Agent and Borrower for acceptance.
Once that Assignment and Assumption Agreement is accepted by Administrative
Agent and Borrower, then, from and after the Effective Date stated in it (i)
Assignee automatically becomes a party to this Agreement and, to the extent
provided in that Assignment and Assumption Agreement, has the rights and
obligations of a Bank under the Loan Papers, (ii) the assignor Bank, to the
extent provided in that Assignment and Assumption Agreement, is released from
its obligations to fund Borrowings under this Agreement and its reimbursement
obligations under this Agreement and, in the case of an Assignment and
Assumption Agreement covering all of the remaining portion of the assignor
Bank's rights and obligations under the Loan Papers, that Bank ceases to be a
party to the Loan Papers, (iii) Borrower shall execute and deliver to the
assignor Bank and Assignee the appropriate Notes in accordance with this
Agreement following the transfer, (iv) upon delivery of the Notes under clause
(iii) preceding, the assignor Bank shall return to Borrower all Notes previously
delivered to that Bank under this Agreement, and (v) Schedule 1 is automatically
----------
deemed to be amended to reflect the name, address, telecopy number, and
Commitment of Assignee and the remaining Commitment (if any) of the assignor
Bank, and Administrative Agent shall prepare and circulate to Borrower and Banks
an amended Schedule 1 reflecting those changes.
----------
64
SECTION 14.11. TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN
---------
PAPERS HAVE BEEN EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE LAWS OF
ANY STATE IN WHICH ANY PROPERTY INTENDED AS SECURITY FOR THE OBLIGATIONS IS
LOCATED NECESSARILY GOVERN (A) THE PERFECTION AND PRIORITY OF THE LIENS IN FAVOR
OF AGENT AND BANKS WITH RESPECT TO SUCH PROPERTY, AND (B) THE EXERCISE OF ANY
REMEDIES (INCLUDING FORECLOSURE) WITH RESPECT TO SUCH PROPERTY.
SECTION 14.12. Consent to Jurisdiction; Waiver of Immunities. (a)
----------------------------------------------
Borrower hereby irrevocably submits to the jurisdiction of any Texas State or
Federal court sitting in the Northern District of Texas over any action or
proceeding arising out of or relating to this Agreement or any other Loan
Papers, and Borrower hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such Texas State or
Federal court. Borrower hereby irrevocably appoints The Corporation Company
(the "Process Agent"), with an office on the date hereof at ▇▇▇▇ ▇▇▇▇▇▇▇▇,
-------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as its agent to receive on behalf of Borrower proper
service of copies of the summons and complaint and any other process which may
be made by mailing or delivering a copy of such process to Borrower (as
applicable) in care of the Process Agent at the Process Agent's above address,
and Borrower hereby irrevocably authorizes and directs the Process Agent to
accept such service on their behalf. As an alternative method of service,
Borrower also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to Borrower
at its address specified in Section 14.1. Borrower agrees that a final judgment
------------
on any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(b) Nothing in this Section 14.12 shall affect any right of Banks to
-------------
serve legal process in any other manner permitted by law or affect the right of
any Bank to bring any action or proceeding against Borrower or any of its
Subsidiaries or their properties in the courts of any other jurisdictions.
(c) To the extent that Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the other Loan Papers.
SECTION 14.13. Counterparts; Effectiveness. This Agreement may be signed
---------------------------
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when Administrative Agent shall have
received counterparts hereof signed by all of the parties hereto or, in the case
of any Bank as to which an executed counterpart shall not have been received,
65
Administrative Agent shall have received telegraphic or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank.
SECTION 14.14. No Third Party Beneficiaries. It is expressly intended
----------------------------
that there shall be no third party beneficiaries of the covenants, agreements,
representations or warranties herein contained other than Participants and
Assignees permitted pursuant to Section 14.10 and Affiliates of any Bank which
-------------
hold any part of the Obligations.
SECTION 14.15. COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
------------------
PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS, AGENTS AND
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENTS AND BORROWER. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG BANKS, AGENTS AND BORROWER.
SECTION 14.16. WAIVER OF JURY TRIAL. BORROWER, AGENTS AND BANKS HEREBY
--------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND FOR
ANY COUNTERCLAIM THEREIN.
[Remainder of page intentionally left blank]
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers effective as of the day
and year first above written.
BORROWER:
--------
PATINA OIL & GAS CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
BANKS:
-----
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇, Senior Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
67
CIBC, Inc.
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Authorized Signatory
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
----------------------------------------------
Pascal Poupelle, Senior Vice President
▇▇▇▇▇ FARGO BANK, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
BANK ONE, TEXAS, N.A.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, Vice President
ADMINISTRATIVE AGENT:
--------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇, Senior Vice President
DOCUMENTARY AGENT:
-----------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
68
CO-AGENTS:
---------
CIBC, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Authorized Signatory
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
----------------------------------------------
Pascal Poupelle, Senior Vice President
▇▇▇▇▇ FARGO BANK, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
69