Exhibit 10.6
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CREDIT AGREEMENT
____________________________________________
KEY PRODUCTION COMPANY, INC.,
as Borrower,
and
BANK OF AMERICA, N.A.,
as Administrative Agent,
BANK ONE, NA,
as Documentation Agent,
BANC OF AMERICA SECURITIES LLC,
as Lead Arranger and Book Manager,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
____________________________________________
$150,000,000
November 12, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I - Definitions and References....................................................... 1
Section 1.1. Defined Terms............................................................ 1
Section 1.2. Exhibits and Schedules; Additional Definitions........................... 16
Section 1.3. Amendment of Defined Instruments......................................... 16
Section 1.4. References and Titles.................................................... 16
Section 1.5. Calculations and Determinations.......................................... 17
Section 1.6. Joint Preparation; Construction of Indemnities and Releases.............. 17
ARTICLE II - The Loans and Letters of Credit................................................. 17
Section 2.1. Commitments to Lend; Notes............................................... 17
Section 2.2. Requests for New Loans................................................... 18
Section 2.3. Continuations and Conversions of Existing Loans.......................... 19
Section 2.4. Use of Proceeds.......................................................... 20
Section 2.5. Interest Rates and Fees.................................................. 20
Section 2.6. Regularly Scheduled Principal Payments................................... 21
Section 2.7. Optional Prepayments..................................................... 21
Section 2.8. Mandatory Prepayments.................................................... 21
Section 2.9. Initial Borrowing Base................................................... 22
Section 2.10. Borrowing Base by Borrower Subsequent Determinations of Borrowing Base;
Reduction of............................................................. 22
Section 2.11. Letters of Credit........................................................ 23
Section 2.12. Requesting Letters of Credit............................................. 24
Section 2.13. Reimbursement and Participations......................................... 24
Section 2.14. Letter of Credit Fees.................................................... 25
Section 2.15. No Duty to Inquire....................................................... 26
Section 2.16. LC Collateral............................................................ 27
ARTICLE III - Payments to Lenders............................................................ 28
Section 3.1. General Procedures....................................................... 28
Section 3.2. Change of Applicable Lending Office...................................... 29
Section 3.3. Replacement of Lenders................................................... 29
Section 3.4. Increased Cost and Reduced Return........................................ 29
Section 3.5. Limitation on Types of Loans............................................. 31
Section 3.6. Illegality............................................................... 31
Section 3.7. Treatment of Affected Loans.............................................. 32
Section 3.8. Compensation............................................................. 32
Section 3.9. Taxes.................................................................... 33
ARTICLE IV - Conditions Precedent to Lending................................................. 34
Section 4.1. Documents to be Delivered................................................ 34
Section 4.2. Additional Conditions Precedent.......................................... 36
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ARTICLE V - Representations and Warranties................................................... 37
Section 5.1. No Default............................................................... 37
Section 5.2. Organization and Good Standing........................................... 37
Section 5.3. Authorization............................................................ 37
Section 5.4. No Conflicts or Consents................................................. 37
Section 5.5. Enforceable Obligations.................................................. 37
Section 5.6. Initial Financial Statements............................................. 38
Section 5.7. Other Obligations and Restrictions....................................... 38
Section 5.8. Full Disclosure.......................................................... 38
Section 5.9. Litigation............................................................... 38
Section 5.10. Labor Disputes and Acts of God........................................... 38
Section 5.11. ERISA Plans and Liabilities.............................................. 39
Section 5.12. Environmental and Other Laws............................................. 39
Section 5.13. Names and Places of Business............................................. 39
Section 5.14. Borrower's Subsidiaries.................................................. 40
Section 5.15. Title to Properties; Licenses............................................ 40
Section 5.16. Government Regulation.................................................... 41
Section 5.17. Insider.................................................................. 41
Section 5.18. Solvency................................................................. 41
Section 5.19. Year 2000 Compliance..................................................... 41
Section 5.20. Mortgaged Properties..................................................... 41
ARTICLE VI - Affirmative Covenants of Borrower............................................... 41
Section 6.1. Payment and Performance.................................................. 42
Section 6.2. Books, Financial Statements and Reports.................................. 42
Section 6.3. Other Information and Inspections........................................ 44
Section 6.4. Notice of Material Events and Change of Address.......................... 44
Section 6.5. Maintenance of Properties................................................ 45
Section 6.6. Maintenance of Existence and Qualifications.............................. 45
Section 6.7. Payment of Trade Liabilities, Taxes, etc................................. 45
Section 6.8. Insurance................................................................ 45
Section 6.9. Performance on Borrower's Behalf......................................... 46
Section 6.10. Interest................................................................. 46
Section 6.11. Compliance with Agreements and Law....................................... 47
Section 6.12. Environmental Matters; Environmental Reviews............................. 47
Section 6.13. Evidence of Compliance................................................... 47
Section 6.14. Agreement to Deliver Security Documents.................................. 47
Section 6.15. Perfection and Protection of Security Interests and Liens................ 48
Section 6.16. Bank Accounts; Offset.................................................... 48
Section 6.17. Guaranties of Borrower's Subsidiaries.................................... 48
Section 6.18. Production Proceeds...................................................... 49
Section 6.19. Year 2000 Compliance..................................................... 49
Section 6.20. Maintenance of Liens on Eighty Percent of Properties..................... 49
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ARTICLE VII - Negative Covenants of Borrower................................................. 49
Section 7.1. Indebtedness............................................................. 50
Section 7.2. Limitation on Liens...................................................... 50
Section 7.3. Hedging Contracts........................................................ 50
Section 7.4. Limitation on Mergers, Issuances of Securities........................... 51
Section 7.5. Limitation on Sales of Property.......................................... 51
Section 7.6. Limitation on Distributions.............................................. 52
Section 7.7. Limitation on Investments and New Businesses............................. 52
Section 7.8. Limitation on Credit Extensions.......................................... 52
Section 7.9. Transactions with Affiliates............................................. 53
Section 7.10. Prohibited Contracts;.................................................... 53
Section 7.11. Current Ratio............................................................ 53
Section 7.12. Tangible Net Worth....................................................... 53
ARTICLE VIII - Events of Default and Remedies................................................ 54
Section 8.1. Events of Default........................................................ 54
Section 8.2. Remedies................................................................. 56
ARTICLE IX - Agent........................................................................... 56
Section 9.1. Appointment, Powers, and Immunities...................................... 56
Section 9.2. Reliance by Agent........................................................ 57
Section 9.3. Defaults................................................................. 57
Section 9.4. Rights as Lender......................................................... 57
Section 9.5. Indemnification.......................................................... 58
Section 9.6. Non-Reliance on Agent and Other Lenders.................................. 58
Section 9.7. Rights as Lender......................................................... 58
Section 9.8. Sharing of Set-Offs and Other Payments................................... 59
Section 9.9. Investments.............................................................. 59
Section 9.10. Benefit of Article IX.................................................... 59
Section 9.11. Resignation.............................................................. 59
ARTICLE X - Miscellaneous.................................................................... 60
Section 10.1. Waivers and Amendments; Acknowledgments.................................. 60
Section 10.2. Survival of Agreements; Cumulative Nature................................ 61
Section 10.3. Notices.................................................................. 62
Section 10.4. Payment of Expenses; Indemnity........................................... 62
Section 10.5. Joint and Several Liability; Parties in Interest......................... 64
Section 10.6. Assignments and Participations........................................... 64
Section 10.7. Confidentiality.......................................................... 65
Section 10.8. Governing Law; Submission to Process..................................... 66
Section 10.9. Limitation on Interest................................................... 66
Section 10.10. Termination; Limited Survival............................................ 67
Section 10.11. Severability............................................................. 67
Section 10.12. Counterparts; Fax........................................................ 67
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc.............................. 67
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Schedules and Exhibits:
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Insurance Schedule
Schedule 4 - Title Opinion Properties Schedule
Schedule 5 - Lender Schedule
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Certificate Accompanying Engineering Reports
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CREDIT AGREEMENT
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THIS CREDIT AGREEMENT is made as of November 12, 1999, by and among Key
Production Company, Inc., a Delaware corporation (herein called "Borrower"),
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Bank of America, N.A., individually and as Administrative Agent (in its capacity
as Administrative Agent herein called "Agent"), and the Lenders referred to
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below. In consideration of the mutual covenants and agreements contained herein
the parties hereto agree as follows:
ARTICLE I - Definitions and References
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Section 1.1. Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given to such term in this Section 1.1 or in the
sections and subsections referred to below:
"Adjusted Base Rate" means the Base Rate plus the Base Rate Margin,
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provided that the Adjusted Base Rate charged by any Person shall never exceed
the Highest Lawful Rate.
"Adjusted Consolidated Net Income" shall mean for any period, Borrower's
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Consolidated Net Income for such period, provided that there shall be excluded
from such net income (to the extent otherwise included therein) the following:
(a) the net income of any Person in which Borrower or any Consolidated
Subsidiary of Borrower has an interest (which interest does not cause the net
income of such other Person to be Consolidated with the net income of Borrower
in accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to Borrower or
to a Consolidated Subsidiary of Borrower, as the case may be; (b) the net income
(but not loss) of any Consolidated Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Subsidiary is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, Law, rule or
regulation applicable to such Consolidated Subsidiary, or is otherwise
restricted or prohibited, in each case determined in accordance with GAAP; (c)
any extraordinary gains or losses, including gains or losses attributable to
property sales not in the ordinary course of business; and (d) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest
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Period therefor, the rate per annum equal to the sum of (a) the Eurodollar
Margin plus (b) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by Agent to be equal to the quotient obtained by
dividing (i) the Eurodollar Rate for such Eurodollar Loan for such Interest
Period by (ii 1 minus the Reserve Requirement for such Eurodollar Loan for such
Interest Period, provided that no Adjusted Eurodollar Rate charged by any Person
shall ever exceed the Highest Lawful Rate. The Adjusted Eurodollar Rate for any
Eurodollar Loan shall change whenever the Eurodollar Margin or the Reserve
Requirement changes.
"Affiliate" means, as to any Person, each other Person that directly or
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indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control
with, such Person. A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent" means Bank of America, N.A., as Administrative Agent hereunder, and
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its successors in such capacity; provided, however, that until such time as a
Lender other than Bank of America, N.A. becomes a party hereto, "Agent" shall
mean Bank of America, N.A., individually.
"Aggregate Value" means the Value determined by reference to the
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Engineering Report (or supplement thereto) most recently furnished to Agent
(which may or may not be the same Engineering Report referenced for purposes of
determining the Value of any individual oil and gas property or group of oil and
gas properties sold by Borrower), in each case taking into account all
categories of proved reserves. "Value" of any oil and gas property means the
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value determined at the time of sale by reference to the Engineering Report (or
supplement thereto) most recently furnished to Agent.
"Agreement" means this Credit Agreement.
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"Applicable Lending Office" means, for each Lender and for each Type of
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Loan, the "Lending Office" of such Lender (or of an Affiliate of such Lender)
designated for such Type of Loan on the Lender Schedule or such other office of
such Lender (or an Affiliate of such Lender) as such Lender may from time to
time specify to Agent and Borrower by written notice in accordance with the
terms hereof as the office by which its Loans of such Type are to be made and
maintained.
"Base Rate" means, for any day, the rate per annum equal to the higher of
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(a) the Federal Funds Rate for such day plus one-half of one percent (.5%) and
(b) the Prime Rate for such day. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate. As used in this
definition, "Prime Rate" means the per annum rate of interest established from
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time to time by Agent as its prime rate, which rate may not be the lowest rate
of interest charged by Agent to its customers.
"Base Rate Loan" means a Loan which does not bear interest at the
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Eurodollar Rate.
"Base Rate Margin" means, on each day:
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(a) for each period in which the Facility Usage Ratio is less than or
equal to eighty percent (80%), 0.00% per annum;
2
(b) for each period in which the Facility Usage Ratio is greater than
eighty percent (80%) but in which the Facility Usage Ratio is less than or equal
to ninety percent (90%), 0.25% per annum; and
(c) for each period in which the Facility Usage Ratio is greater than
ninety percent (90%), 0.50% per annum.
"Base Rate Payment Date" means (i) the last day of each Fiscal Quarter,
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beginning December 31, 1999; (ii) the date the full remaining principal balance
of the Notes shall become due and payable; and (iii) any day on which past due
interest or principal is owed hereunder and is unpaid. If the terms hereof
provide that payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a Base Rate
Payment Date.
"Borrower" means Key Production Company, Inc., a Delaware corporation.
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"Borrowing" means a borrowing of new Loans of a single Type pursuant to
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Section 2.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
"Borrowing Base" means, at the particular time in question, either the
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amount provided for in Section 2.9 or the amount determined by Agent and
Majority Lenders in accordance with the provisions of Section 2.10(a), as
reduced by Borrower pursuant to Section 2.10(b); provided, however, that in no
event shall the Borrowing Base ever exceed the Maximum Credit Amount.
"Borrowing Base Deficiency" has the meaning given to such term in Section
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2.8(b).
"Borrowing Notice" means a written or telephonic request, or a written
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confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to Eurodollar Loans (such as the day on which
an Interest Period begins or ends) must also be a day on which, in the judgment
of Agent, significant transactions in dollars are carried out in the interbank
eurocurrency market.
"▇▇▇▇▇" means ▇▇▇▇▇ Exploration Corporation, a Delaware corporation.
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"Cash Equivalents" means Investments in:
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(a) marketable obligations, maturing within twelve months after
acquisition thereof, issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;
3
(b) demand deposits, and time deposits (including certificates of deposit)
maturing within twelve months from the date of deposit thereof, with any office
of any Lender or with a domestic office of any national or state bank or trust
company which is organized under the Laws of the United States of America or any
state therein, which has capital, surplus and undivided profits of at least
$500,000,000, and whose long term certificates of deposit are rated at least Aa3
by ▇▇▇▇▇'▇ or AA- by S & P;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subsection (a) above entered
into with any commercial bank meeting the specifications of subsection (b)
above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by ▇▇▇▇▇'▇ or A-1 by S & P;
and
(e) money market or other mutual funds substantially all of whose assets
comprise securities of the types described in subsections (a) through (d) above.
"Change of Control" means the occurrence of either of the following events:
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(a) any Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, as amended, and including holding
proxies to vote for the election of directors other than proxies held by
Borrower's management or their designees to be voted in favor of Persons
nominated by Borrower's Board of Directors) of 25% or more of the outstanding
voting securities of Borrower, measured by voting power (including both common
stock and any preferred stock or other equity securities entitling the holders
thereof to vote with the holders of common stock in elections for directors of
Borrower) without the prior approval of at least two-thirds of the members of
the Borrower's Board of Directors who are unaffiliated with Borrower, (b) any
Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, as amended, and including holding
proxies to vote for the election of directors other than proxies held by
Borrower's management or their designees to be voted in favor of Persons
nominated by Borrower's Board of Directors) of 50% or more of the outstanding
voting securities of Borrower, measured by voting power (including both common
stock and any preferred stock or other equity securities entitling the holders
thereof to vote with the holders of common stock in elections for directors of
Borrower), or (c) individuals who constitute two-thirds or more of the directors
of Borrower at the beginning of a 24-month period shall cease to constitute at
least two-thirds or more of the directors of Borrower at any time during such
period, unless the election of any new or replacement directors of Borrower was
approved by a vote of at least the majority of the members of the Board of
Directors of Borrower in office immediately prior to such period and of the new
and replacement directors so approved.
"Collateral" means all property of any kind which is subject to a Lien in
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favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
4
"Commitment Amount" means the amount designated as such set forth opposite
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each Lender's name on the Lender Schedule.
"Commitment Fee Rate" means:
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(a) for each period in which the Facility Usage Ratio is less than or
equal to fifty percent (50%), 0.30% per annum;
(b) for each period in which the Facility Usage Ratio is greater than
fifty percent (50%) but less than or equal to eighty percent (80%), 0.40% per
annum; and
(c) for each period in which the Facility Usage Ratio is greater than
eighty percent (80%), 0.50% per annum.
"Commitment Period" means the period from and including the date hereof
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until January 1, 2002 (or, if earlier, the day on which the obligations of
Lenders to make Loans hereunder or the obligations of LC Issuer to issue Letters
of Credit hereunder have been terminated or the Notes first become due and
payable in full).
"Consolidated" refers to the consolidation of any Person, in accordance
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with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Net Income" means, for any period, Borrower's Consolidated
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gross revenues for such period, including any cash dividends or distributions
actually received from any other Person during such period, minus Borrower's
Consolidated expenses and other proper charges against income (including taxes
on income, to the extent imposed), determined on a Consolidated basis after
eliminating earnings or losses attributable to outstanding minority interests
and excluding the net earnings of any Person other than a subsidiary of Borrower
in which Borrower has an ownership interest.
"Continuation" shall refer to the continuation pursuant to Section 2.3
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hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the
next Interest Period.
"Continuation/Conversion Notice" means a written or telephonic request, or
------------------------------
a written confirmation, made by Borrower which meets the requirements of Section
2.3.
"Conversion" shall refer to a conversion pursuant to Section 2.3 or Article
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III of one Type of Loan into another Type of Loan.
"Default" means any Event of Default and any default, event or condition
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which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
5
"Default Rate" means, at the time in question (a) with respect to any Base
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Rate Loan, the rate per annum equal to two percent (2.00%) above the Adjusted
Base Rate then in effect and (b) with respect to any Eurodollar Loan, the rate
per annum equal to two percent (2.00%) above the Adjusted Eurodollar Rate then
in effect for such Loan, provided in each case that no Default Rate charged by
any Person shall ever exceed the Highest Lawful Rate.
"Determination Date" has the meaning given to such term in Section 2.10(a).
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"Disclosure Report" means either a notice given by Borrower under Section
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6.4 or a certificate given by Borrower's chief financial officer under Section
6.2(b).
"Disclosure Schedule" means Schedule 1 hereto.
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"Distribution" means (a) any dividend or other distribution made by a
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Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"Domestic Lending Office" means, with respect to any Lender, the office of
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such Lender specified as its "Domestic Lending Office" on the Lender Schedule,
or such other office as such Lender may from time to time specify to Borrower
and Agent; with respect to LC Issuer, the office, branch, or agency through
which it issues Letters of Credit; and, with respect to Agent, the office,
branch, or agency through which it administers this Agreement.
"Eligible Transferee" means a Person which either (a) is a Lender or an
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Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by Agent
and, so long as no Default or Event of Default is continuing, by Borrower, which
consents in each case will not be unreasonably withheld (provided that no Person
organized outside the United States may be an Eligible Transferee if Borrower
would be required to pay withholding taxes on interest or principal owed to such
Person).
"Engineering Report" means the Initial Engineering Report and each
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engineering report delivered pursuant to Section 6.2.
"Environmental Laws" means any and all Laws relating to the environment or
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to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time and any successor statutes or statute, together with
all rules and regulations promulgated with respect thereto.
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"ERISA Affiliate" means Borrower and all members of a controlled group of
---------------
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
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ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the office
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of such Lender specified as its "Eurodollar Lending Office" on the Lender
Schedule (or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender as such Lender may from time to time specify to
Borrower and Agent.
"Eurodollar Loan" means a Loan that bears interest at the Adjusted
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Eurodollar Rate.
"Eurodollar Margin" means, on each day:
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(a) for each period in which the Facility Usage Ratio is less than or
equal to fifty percent (50%), 1.00% per annum;
(b) for each period in which the Facility Usage Ratio is greater than
fifty percent (50%) but less than or equal to eighty percent (80%), 1.25% per
annum;
(c) for each period in which the Facility Usage Ratio is greater than
eighty percent (80%) but less than or equal to ninety percent (90%), 1.50% per
annum; and
(d) for each period in which the Facility Usage Ratio is greater than
ninety percent (90%), 1.75% per annum.
"Eurodollar Rate" means, for any Eurodollar Loan within a Borrowing and
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with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).
"Eurodollar Rate Payment Date" means, with respect to any Eurodollar Loan:
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(i) the day on which the related Interest Period ends and, if such Interest
Period is six months in length, each
7
date specified by Agent which is approximately three months after such Interest
Period begins; provided that the last Business Day of each calendar month shall
also be a Eurodollar Interest Payment Date for each such Loan so long as any
Event of Default exists under Section 8.1(a), and (ii) any day on which past due
interest or past due principal is owed hereunder with respect to such Eurodollar
Loan and is unpaid.
"Evaluation Date" means each of the following:
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(a) April 1 and October 1 of each year, beginning April 1, 2000;
(b) Each date on which Borrower or any of its Subsidiaries sells oil and
gas properties included in any Engineering Report, whether producing or non-
producing (including without limitation any properties constituting Collateral)
with an Aggregate Value of more than two percent (2%) of the Aggregate Value of
all oil and gas properties of Borrower and its Subsidiaries included in any one
or more of the Engineering Report (including without limitation any properties
constituting Collateral);
(c) Each other date that Majority Lenders, at their option, specify as a
date as of which the Borrowing Base is to be redetermined, which date must be
either the first day or last day of a calendar month; provided that Majority
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Lenders shall not be entitled to request any such redetermination more than once
during any 12-month period; and
(d) Each other date that Borrower, at its option, specifies as a date as
of which the Borrowing Base is to be redetermined, which date must be either the
first day or last day of a calendar month; provided that Borrower shall not be
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entitled to request any such redetermination more than once during any 12-month
period.
"Event of Default" has the meaning given to such term in Section 8.1.
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"Facility Usage" means, at the time in question, the aggregate amount of
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outstanding Loans and existing LC Obligations at such time.
"Facility Usage Ratio" means, at the time in question, the quotient
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obtained by dividing (a) the Facility Usage by (b) the Borrowing Base (and which
may be expressed as a percentage).
"Federal Funds Rate" means, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100th of one percent) 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 of
recognized standing on such day, as published by the Federal Reserve Bank of
Texas on the Business Day next succeeding such day, provided that (a) if the day
for which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate quoted to Agent by at least three (3) Federal
8
funds brokers of recognized standing on such day with respect to such
transactions as determined by Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
--------------
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
-----------
year.
"GAAP" means those generally accepted accounting principles and practices
----
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower and its Consolidated Subsidiaries may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to each Lender and Majority Lenders agree to such change insofar
as it affects the accounting of Borrower or of Borrower and its Consolidated
Subsidiaries.
"Guarantor" means ▇▇▇▇▇ or any other Person who has guaranteed some or all
---------
of the Obligations and who has been accepted by Agent as a Guarantor or any
Subsidiary of Borrower which now or hereafter executes and delivers a guaranty
to Agent pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
-------------------
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options, swaps,
----------------
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
-------------------
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
9
"Indebtedness" of any Person means Liabilities in any of the following
------------
categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities which (i) would under GAAP be shown on such Person's
balance sheet as a liability, and (ii are payable more than one year from the
date of creation thereof (other than reserves for taxes and reserves for
contingent obligations),
(e) Liabilities arising under Hedging Contracts,
(f) Liabilities constituting principal under leases capitalized in
accordance with GAAP,
(g) Liabilities arising under conditional sales or other title retention
agreements,
(h) Liabilities owing under direct or indirect guaranties of Liabilities
of any other Person or otherwise constituting obligations to purchase or acquire
or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities (for example, repurchase agreements, mandatorily
redeemable preferred stock and sale/leaseback agreements) consisting of an
obligation to purchase or redeem securities or other property, if such
Liabilities arises out of or in connection with the sale or issuance of the same
or similar securities or property,
(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities with respect to payments received in consideration of oil,
gas, or other minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment), or
--
(l) Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing
10
goods and services for use by such Person in the ordinary course of its
business, unless and until such Liabilities are outstanding more than 90 days
past the original invoice or billing date therefor.
"Initial Engineering Report" means the engineering report concerning oil
--------------------------
and gas properties of Restricted Persons dated July 31, 1999, prepared by
petroleum engineers who are employees of Borrower, as of July 1, 1999.
"Initial Financial Statements" means (a) the audited annual Consolidated
----------------------------
financial statements of Borrower dated as of December 31, 1998, and (b) the
unaudited quarterly Consolidated financial statements of Borrower dated as of
June 30, 1999.
"Insurance Schedule" means Schedule 3 attached hereto.
------------------
"Interest Payment Date" means (a) with respect to each Base Rate Loan, each
---------------------
Base Rate Payment Date and (b) with respect to each Eurodollar Loan, the
Eurodollar Rate Payment Date for such Eurodollar Loan.
"Interest Period" means, with respect to each particular Eurodollar Loan in
---------------
a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, or six months
thereafter, as Borrower may elect in such notice; provided that: (a) any
Interest Period which would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day; (b) any Interest Period which begins on the
last Business Day in a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day in a calendar month; and (c)
notwithstanding the foregoing, (i) any Interest Period which would otherwise end
after the last day of the Commitment Period shall end on the last day of the
Commitment Period (or, if the last day of the Commitment Period is not a
Business Day, on the next preceding Business Day) and (ii) no Interest Period
may be selected for a Loan that would end after the Maturity Date.
"Internal Revenue Code" means the United States Internal Revenue Code of
---------------------
1986, as amended from time to time and any successor statute or statutes,
together with all rules and regulations promulgated with respect thereto.
"Investment" means any investment, made directly or indirectly, in any
----------
Person or any property, whether by acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan, advance, capital
contribution or otherwise and whether made in cash, by the transfer of property,
or by any other means.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
---
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United
11
States or any state or political subdivision thereof or of any foreign country
or any department, province or other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
--------------
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.16(a).
-------------
"LC Issuer" means Bank of America, N.A. in its capacity as the issuer of
---------
Letters of Credit hereunder, and its successors in such capacity. Agent may,
with the consent of Borrower and the Lender in question, appoint any Lender
hereunder as an LC Issuer in place of or in addition to Bank of America, N.A.
"LC Obligations" means, at the time in question, the sum of all Matured LC
--------------
Obligations plus the maximum amounts which LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit then outstanding.
"Lender Parties" means Agent, LC Issuer, and all Lenders.
--------------
"Lender Schedule" means Schedule 5 hereto.
---------------
"Lenders" means each signatory hereto (other than Borrower and any
-------
Restricted Person that is a party hereto), including Bank of America, N.A. in
its capacity as a Lender hereunder rather than as Agent or LC Issuer, and the
successors of each such party as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer hereunder
----------------
at the application of Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities and
-----------
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Lien" means, with respect to any property or assets, any right or interest
----
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"Lien" also means any filed financing statement, any registration of a pledge
(such as with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing
12
statement is filed, such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
--------------
the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets and commitment
letters).
"Loans" has the meaning given to such term in Section 2.1.
-----
"Majority Lenders" means Lenders whose aggregate Percentage Shares equal or
----------------
exceed sixty-six and two-thirds percent (66 2/3%).
"Material Adverse Change" means a material and adverse change, from the
-----------------------
state of affairs presented in the Initial Financial Statements or as represented
or warranted in any Loan Document, to (a) Borrower's Consolidated financial
condition, (b) Borrower's Consolidated operations, properties or prospects,
considered as a whole, (c) Borrower's ability to timely pay the Obligations, or
(d) the enforceability of the material terms of any Loan Documents.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts or
----------------------
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Loans or otherwise).
"Maturity Date" means January 1, 2006.
-------------
"Maximum Drawing Amount" means at the time in question the sum of the
----------------------
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit which are then outstanding.
"Maximum Credit Amount" means the amount of $150,000,000.
---------------------
"Moody's" means ▇▇▇▇▇'▇ Investor Service, Inc., or its successor.
-------
"Mortgaged Properties" means the oil and gas properties that are mortgaged
--------------------
to Agent under the Security Documents.
"Note" has the meaning given to such term in Section 2.1.
----
"Obligations" means all Liabilities from time to time owing by any
-----------
Restricted Person to any Lender Party under or pursuant to any of the Loan
Documents, including all LC Obligations. "Obligation" means any part of the
----------
Obligations.
"Percentage Share" means, with respect to any Lender (a) when used in
----------------
Section 2.1, 2.2 or 2.5, in any Borrowing Notice or when no Loans are
outstanding hereunder, the percentage
13
designated as such for each Lender on the Lender Schedule, and (b) when used
otherwise, the percentage obtained by dividing (i) the sum of the unpaid
principal balance of such Lender's Loans at the time in question plus the
Matured LC Obligations which such Lender has funded pursuant to Section 2.13(c)
plus the portion of the Maximum Drawing Amount which such Lender might be
obligated to fund under Section 2.13(c), by (ii the sum of the aggregate unpaid
principal balance of all Loans at such time plus the aggregate amount of LC
Obligations outstanding at such time.
"Permitted Investments" means (a) Cash Equivalents and (b) Investments by
---------------------
Borrower in any of its wholly owned Subsidiaries which is a Guarantor.
"Permitted Liens" means:
---------------
(a) statutory Liens for taxes, assessments or other governmental
charges or levies which are not yet delinquent or which are being contested
in good faith by appropriate action and for which adequate reserves have
been maintained in accordance with GAAP;
(b) landlords', operators', carriers', warehousemen's, repairmen's,
mechanics', materialmen's Liens which do not secure Indebtedness, in each
case only to the extent arising in the ordinary course of business and only
to the extent securing obligations which are not delinquent or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP;
(c) Liens under the Security Documents;
(d) with respect only to property subject to any particular Security
Document, Liens burdening such property which are expressly allowed by such
Security Document;
(e) minor defects and irregularities in title to any property, so
long as such defects and irregularities neither secure Indebtedness nor
materially impair the value of such property or the use of such property
for the purposes for which such property is held;
(f) deposits of cash or securities to secure the performance of bids,
trade contracts, leases, statutory obligations and other obligations of a
like nature (excluding appeal bonds) incurred in the ordinary course of
business;
(g) easements, zoning restrictions, or other charges or restrictions
on the use of real property which do not materially impair the use of the
property by Restricted Persons in the conduct of their operations or
business.
"Person" means an individual, corporation, partnership, limited liability
------
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Tribunal, or any
other legally recognizable entity.
14
"Rating Agency" means either S & P or Moody's.
-------------
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect.
"Reserve Requirement" means, at any time, the maximum rate at which
-------------------
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to (a) any category of liabilities which
includes deposits by reference to which the Adjusted Eurodollar Rate is to be
determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans.
"Restricted Person" means any of Borrower, each Subsidiary of Borrower, and
-----------------
each Guarantor.
"S & P" means Standard & Poor's Ratings Services (a division of McGraw Hill
-----
Companies, Inc.), or its successor.
"Security Documents" means the instruments listed in the Security Schedule
------------------
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Restricted Person to Agent in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Restricted Person's other
duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
-----------------
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled by or owned fifty
percent or more by such Person, provided that associations, joint ventures or
other relationships (a) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (b) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state Law, and (c)
---
whose businesses are limited to the exploration, development and operation of
oil, gas or mineral properties and interests owned directly by the parties in
such associations, joint ventures or relationships, shall not be deemed to be
"Subsidiaries" of such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
-----------------
of (i) a reportable event described in Section 4043(b)(5) or (6) of ERISA or (ii
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the
15
provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant
to a waiver by such corporation under Section 4043(a) of ERISA, or (b) the
withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or any
--------
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such Loans
----
as either Base Rate Loans or Eurodollar Loans.
"Unused Borrowing Base" means, at the time in question, the Borrowing Base
---------------------
minus the Facility Usage.
Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits
----------------------------------------------
and Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to the Security Schedule for the meaning of certain
terms defined therein and used but not defined herein, which definitions are
incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
--------------------------------
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement to
---------------------
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall
16
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under the
-------------------------------
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender Party of amounts to be
paid under Article III or any other matters which are to be determined hereunder
by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, Interest Period, or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to any Lender Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
Section 1.6. Joint Preparation; Construction of Indemnities and Releases.
-----------------------------------------------------------
This Agreement and the other Loan Documents have been reviewed and negotiated by
sophisticated parties with access to legal counsel and no rule of construction
shall apply thereto which would require or allow any Loan Document to be
construed against any party because of its role in drafting such Loan Document.
All indemnification and release provisions of this Agreement shall be construed
broadly (and not narrowly) in favor of the Persons receiving indemnification
from or being released.
ARTICLE II - The Loans and Letters of Credit
-------------------------------
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
--------------------------
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
-----
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such Loans, the Facility Usage does not exceed the Borrowing Base
determined as of the date on which the requested Loans are to be made, and (c)
after giving effect to such Loans, the Loans by each Lender plus the existing LC
Obligations of such Lender does not exceed such Lender's Commitment Amount. The
aggregate amount of all Loans in any Borrowing must be greater than or equal to
$1,000,000 or must equal the remaining availability under the Borrowing Base.
Borrower may have no more than five Borrowings of Eurodollar Loans outstanding
at any time. The obligation of Borrower to repay to each Lender the aggregate
amount of all Loans made by such Lender, together with interest accruing in
connection therewith, shall be evidenced by a single promissory note (herein
called such Lender's "Note") made by Borrower payable to the order of such
Lender in the form of Exhibit A with appropriate insertions. The amount of
principal owing on any Lender's Note at any given time shall be the aggregate
amount of all Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Note. Interest on each
Note shall accrue
17
and be due and payable as provided herein and therein. Each Note shall be due
and payable as provided herein and therein, and shall be due and payable in full
on the Maturity Date. Subject to the terms and conditions hereof, Borrower may
borrow, repay, and reborrow hereunder.
Section 2.2. Requests for New Loans. Borrower must give to Agent written
----------------------
notice (or telephonic notice promptly confirmed in writing) of any requested
Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes a
"Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or (ii
the aggregate amount of any such Borrowing of new Eurodollar Loans, the date on
which such Eurodollar Loans are to be advanced (which shall be the first day of
the Interest Period which is to apply thereto), and the length of the applicable
Interest Period; and
(b) be received by Agent not later than 10:00 a.m., Dallas, Texas time,
on (i) the day on which any such Base Rate Loans are to be made, or (ii the
third Business Day preceding the day on which any such Eurodollar Loans are to
be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Agent shall give each Lender prompt notice of the terms thereof. If all
conditions precedent to such new Loans have been met, each Lender will on the
date requested promptly remit to Agent at Agent's office in Dallas, Texas the
amount of such Lender's new Loan in immediately available funds, and upon
receipt of such funds, unless to its actual knowledge any conditions precedent
to such Loans have been neither met nor waived as provided herein, Agent shall
promptly make such Loans available to Borrower. Unless Agent shall have received
prompt notice from a Lender that such Lender will not make available to Agent
such Lender's new Loan, Agent may in its discretion assume that such Lender has
made such Loan available to Agent in accordance with this section and Agent may
if it chooses, in reliance upon such assumption, make such Loan available to
Borrower. If and to the extent such Lender shall not so make its new Loan
available to Agent, such Lender and Borrower severally agree to pay or repay to
Agent within three days after demand the amount of such Loan together with
interest thereon, for each day from the date such amount was made available to
Borrower until the date such amount is paid or repaid to Agent, with interest at
(i) the Federal Funds Rate, if such Lender is making such payment and (ii the
interest rate applicable at the time to the other new Loans made on such date,
if Borrower is making such repayment. If neither such Lender nor Borrower pays
or repays to Agent such amount within such three-day period, Agent shall in
addition to such amount be entitled to recover from such Lender and from
Borrower, on demand, interest thereon at the Default Rate applicable to Base
Rate Loans, calculated from the date such amount was made available to Borrower.
The failure of any Lender to make any new Loan to be made by it hereunder shall
not relieve any other Lender of its obligation hereunder, if any, to make its
new Loan, but no Lender shall be responsible for the failure of any other Lender
to make any new Loan to be made by such other Lender.
18
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
-----------------------------------------------
may make the following elections with respect to Loans already outstanding: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to Base
Rate Loans on the last day of the Interest Period applicable thereto, and to
continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Loans made pursuant to
separate Borrowings into one new Borrowing or divide existing Loans made
pursuant to one Borrowing into separate new Borrowings, provided that Borrower
may have no more than five Borrowings of Eurodollar Loans outstanding at any
time. To make any such election, Borrower must give to Agent written notice (or
telephonic notice promptly confirmed in writing) of any such Conversion or
Continuation of existing Loans, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans
into which such existing Loans are to be continued or converted and the date on
which such Continuation or Conversion is to occur, or (ii the aggregate amount
of any Borrowing of Eurodollar Loans into which such existing Loans are to be
continued or converted, the date on which such Continuation or Conversion is to
occur (which shall be the first day of the Interest Period which is to apply to
such Eurodollar Loans), and the length of the applicable Interest Period; and
(c) be received by Agent not later than 10:00 a.m., Dallas, Texas time,
on (i) the day on which any such Continuation or Conversion to Base Rate Loans
is to occur, or (ii the third Business Day preceding the day on which any such
Continuation or Conversion to Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and
binding on Borrower. During the continuance of any Default, Borrower may not
make any election to convert existing Loans into Eurodollar Loans or continue
existing Loans as Eurodollar Loans. If (due to the existence of a Default or for
any other reason) Borrower fails to timely and properly give any
Continuation/Conversion Notice with respect to a Borrowing of existing
Eurodollar Loans at least three days prior to the end of the Interest Period
applicable thereto, such Eurodollar Loans shall automatically be converted into
Base Rate Loans at the end of such Interest Period. No new funds shall be repaid
by Borrower or advanced by any Lender in connection with any Continuation or
Conversion of existing Loans pursuant to this section, and no such Continuation
or Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
19
Section 2.4. Use of Proceeds. Borrower shall use all Loans to refinance
---------------
all existing indebtedness owed to Bank of America, N.A., to finance capital
expenditures, to refinance Matured LC Obligations, to finance the acquisition of
oil and gas reserves, to finance exploration of oil and gas properties, and to
provide working capital for its operations and for other general business
purposes. Borrower shall use all Letters of Credit for its general corporate
purposes. In no event shall the funds from any Loan or any Letter of Credit be
used directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others directly or indirectly for the
purpose of purchasing or carrying any such margin stock. Borrower represents and
warrants that Borrower is not engaged principally, or as one of Borrower's
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock.
Section 2.5. Interest Rates and Fees.
-----------------------
(a) Interest Rates. Each Base Rate Loan shall bear interest on each day
--------------
outstanding at the Adjusted Base Rate in effect on such day. Each Eurodollar
Loan shall bear interest on each day during the related Interest Period at the
related Adjusted Eurodollar Rate in effect on such day. Anything to the contrary
herein notwithstanding, if an Event of Default has occurred and is continuing,
all Loans shall bear interest on each day outstanding at the applicable Default
Rate. Past due payments of principal and interest shall also bear interest at
the rates and in the manner set forth in the Notes.
(b) Commitment Fees. In consideration of Lenders' commitment to make
---------------
Loans, Borrower will pay to Agent, on a quarterly basis during the Commitment
Period, for pro rata distribution to each Lender in accordance with its
Percentage Share, a commitment fee determined on a daily basis equal to the
product of (i) the Commitment Fee Rate multiplied by (ii) the Unused Borrowing
Base. Promptly at the end of each Fiscal Quarter, Agent shall calculate the
commitment fee then due and shall notify Borrower thereof in writing. Borrower
shall pay such commitment fee to Agent within five Business Days after receiving
such written notice.
(c) Agent's Fees. In addition to all other amounts due to Agent under the
------------
Loan Documents, Borrower will pay fees to Agent as described in a letter
agreement of even date herewith between Agent, Banc of America Securities LLC,
and Borrower.
Section 2.6. Regularly Scheduled Principal Payments. Borrower shall
--------------------------------------
repay the principal balance of the Loans in sixteen (16) quarterly installments,
each in an amount equal to one-sixteenth (1/16) of the aggregate principal
balance of all Loans outstanding on the last day of the Commitment Period. Such
installments shall be due and payable on each Base Rate Payment Date, beginning
with the first Base Rate Payment Date which occurs after the end of the
Commitment Period and ending on the Maturity Date.
20
Section 2.7. Optional Prepayments. Borrower may (a) upon one Business
--------------------
Day's notice to Agent, from time to time and without premium or penalty prepay
the Base Rate Loans, in whole or in part, and (b) upon three Business Days'
notice to Agent, from time to time and without premium or penalty prepay the
Eurodollar Loans, in whole or in part, provided that with respect to prepayments
of Eurodollar Loans, Borrower shall concurrently therewith pay amounts required
under Section 3.8, and, in the case of prepayments of either Base Rate Loans or
Eurodollar Loans, only so long as (i) the aggregate amounts of all partial
prepayments of principal on the Notes equals $1,000,000 or any higher integral
multiple of $1,000,000, and (ii) Borrower does not make any prepayments which
would reduce the unpaid principal balance of any Loan to less than $100,000
without first either (x) terminating this Agreement or (y) providing assurance
satisfactory to Agent in its discretion that Lenders' legal rights under the
Loan Documents are in no way affected by such reduction. Each partial prepayment
of principal made after the end of the Commitment Period shall be applied to the
regular installments of principal due under the Notes in the inverse order of
their maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.
Section 2.8. Mandatory Prepayments
---------------------
(a) If at any time the Facility Usage exceeds the Maximum Credit Amount
(whether due to a reduction in the Maximum Credit Amount in accordance with this
Agreement, or otherwise), Borrower shall immediately upon demand prepay the
principal of the Loans in an amount at least equal to such excess.
(b) If at any time the Facility Usage is less than the Maximum Credit
Amount but in excess of the Borrowing Base (such excess being herein called a
"Borrowing Base Deficiency"), Borrower shall either:
-------------------------
(i) within ninety (90) days after Agent gives notice of such fact
to Borrower, prepay the principal of the Loans in an aggregate amount at
least equal to such Borrowing Base Deficiency (or, if the Loans have been
paid in full, pay to LC Issuer LC Collateral as required under Section
2.16(a)), or
(ii) within five (5) days after Agent gives notice of such fact to
Borrower, give notice to Agent electing to prepay the principal of the
Loans in up to six monthly installments in an aggregate amount at least
equal to such Borrowing Base Deficiency, with each such installment equal
to or in excess of one-sixth of such Borrowing Base Deficiency, and with
the first such installment to be paid one month after the giving of such
notice and the subsequent installments to be due and payable at one month
intervals thereafter until such Borrowing Base Deficiency has been
eliminated, or
(iii) within five (5) days after Agent gives notice of such fact to
Borrower, give notice to Agent that Borrower desires to provide Agent with
deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other security documents
21
in form and substance satisfactory to Agent, granting, confirming, and
perfecting first and prior liens or security interests in collateral
acceptable to Majority Lenders, to the extent needed to allow Majority
Lenders to increase the Borrowing Base (as they in their reasonable
discretion deem consistent with prudent oil and gas banking industry
lending standards at the time) to an amount which eliminates such Borrowing
Base Deficiency, and then provide such security documents within thirty
days after Agent specifies such collateral to Borrower. If, prior to any
such specification by Agent, Majority Lenders determine that the giving of
such security documents will not serve to eliminate such Borrowing Base
Deficiency, then, within five Business Days after receiving notice of such
determination, Borrower will elect to make, and thereafter make, the
prepayments specified in either of the preceding subsections (i) or (ii) of
this subsection (b).
(c) Each prepayment of principal under this section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid. Any
principal or interest prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
Section 2.9. Initial Borrowing Base. During the period from the date
----------------------
hereof to the first Determination Date the Borrowing Base shall be $85,000,000.
Section 2.10. Subsequent Determinations of Borrowing Base; Reduction of
---------------------------------------------------------
Borrowing Base by Borrower.
--------------------------
(a) By each Evaluation Date Borrower shall furnish to each Lender all
information, reports and data which Agent has then requested concerning
Restricted Persons' businesses and properties (including their oil and gas
properties and interests and the reserves and production relating thereto),
together with the Engineering Report described in Section 6.2(e). Within forty-
five days after receiving such information, reports and data, or as promptly
thereafter as practicable, Majority Lenders shall agree upon an amount for the
Borrowing Base (provided that all Lenders must agree to any increase in the
Borrowing Base) and Agent shall by notice to Borrower designate such amount as
the new Borrowing Base available to Borrower hereunder, which designation shall
take effect immediately on the date such notice is sent (herein called a
"Determination Date") and shall remain in effect until but not including the
------------------
next date as of which the Borrowing Base is redetermined. If Borrower does not
furnish all such information, reports and data by the date specified in the
first sentence of this section, Agent may nonetheless designate the Borrowing
Base at any amount which Majority Lenders determine and may redesignate the
Borrowing Base from time to time thereafter until each Lender receives all such
information, reports and data, whereupon Majority Lenders shall designate a new
Borrowing Base as described above. Majority Lenders shall determine the amount
of the Borrowing Base based upon the loan collateral value which they in their
discretion assign to the various oil and gas properties of Restricted Persons at
the time in question and based upon such other credit factors (including without
limitation the assets, liabilities, cash flow, hedged and unhedged exposure to
price, foreign exchange rate, and interest rate changes, business, properties,
prospects, management and ownership of Borrower and its Affiliates) as they in
their discretion deem significant. It is expressly understood that Lenders and
Agent have no obligation to agree upon
22
or designate the Borrowing Base at any particular amount, whether in relation to
the Maximum Credit Amount or otherwise, and that each Lender's' commitment to
advance funds hereunder is determined by reference to the Borrowing Base from
time to time in effect, which Borrowing Base shall be used for calculating
commitment fees under Section 2.5 and, to the extent permitted by Law and
regulatory authorities, for the purposes of capital adequacy determination and
reimbursements under Article III.
(b) Until the termination of the Commitment Period, Borrower may, during
the fifteen-day period beginning on each Determination Date (each such period
being called in this section an "Option Period"), reduce the Borrowing Base from
-------------
the amount designated by Agent to any lesser amount. To exercise such option
Borrower must within an Option Period send notice to Agent of the amount of the
Borrowing Base chosen by Borrower. If Borrower does not affirmatively exercise
this option during an Option Period, the Borrowing Base shall be the amount
designated by Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the Option Period during which such choice was
made and shall continue in effect until the next date as of which the Borrowing
Base is redetermined.
Section 2.11. Letters of Credit. Subject to the terms and conditions
-----------------
hereof, Borrower may during the Commitment Period request LC Issuer to issue one
or more Letters of Credit, provided that, after taking such Letter of Credit
into account:
(a) the Facility Usage does not exceed the Borrowing Base at such time;
and
(b) the aggregate amount of LC Obligations at such time does not exceed
$5,000,000; and
(c) the expiration date of such Letter of Credit is prior to the end of
the Commitment Period.
and further provided that:
(d) such Letter of Credit is to be used for general corporate purposes of
Borrower;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Indebtedness of any Person other than
Indebtedness of any Restricted Person;
(f) the issuance of such Letter of Credit will be in compliance with all
applicable governmental restrictions, policies, and guidelines and will not
subject LC Issuer to any cost which is not reimbursable under Article III;
(g) the form and terms of such Letter of Credit are acceptable to LC
Issuer in its sole and absolute discretion; and
23
(h) all other conditions in this Agreement to the issuance of such Letter
of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.12 called the "LC Conditions") have been met as
-------------
of the date of issuance of such Letter of Credit. LC Issuer may choose to honor
any such request for any other Letter of Credit but has no obligation to do so
and may refuse to issue any other requested Letter of Credit for any reason
which LC Issuer in its sole discretion deems relevant.
Section 2.12. Requesting Letters of Credit. Borrower must make written
----------------------------
application to LC Issuer for any Letter of Credit at least five Business Days
before the date on which Borrower desires for LC Issuer to issue such Letter of
Credit. By making any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions described in Section 2.11 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a Letter of Credit must be made in writing in the form and
substance of Exhibit G, the terms and provisions of which are hereby
incorporated herein by reference (or in such other form as may mutually be
agreed upon by LC Issuer and Borrower). Two Business Days after the LC
Conditions for a Letter of Credit have been met as described in Section 2.11 (or
if LC Issuer otherwise desires to issue such Letter of Credit), LC Issuer will
issue such Letter of Credit at LC Issuer's office in Dallas, Texas. If any
provisions of any LC Application conflict with any provisions of this Agreement,
the provisions of this Agreement shall govern and control.
Section 2.13. Reimbursement and Participations.
--------------------------------
(a) Reimbursement by Borrower. Each Matured LC Obligation shall constitute
-------------------------
a loan by LC Issuer to Borrower. Borrower promises to pay to LC Issuer, or to LC
Issuer's order, on demand, the full amount of each Matured LC Obligation,
together with interest thereon at the Default Rate applicable to Base Rate
Loans.
(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit
-------------------------
makes a draft or other demand for payment thereunder then Borrower may, during
the interval between the making thereof and the honoring thereof by LC Issuer,
request Lenders to make Loans to Borrower in the amount of such draft or demand,
which Loans shall be made concurrently with LC Issuer's payment of such draft or
demand and shall be immediately used by LC Issuer to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower shall be made in
compliance with all of the provisions hereof, provided that for the purposes of
the first sentence of Section 2.1, the amount of such Loans shall be considered,
but the amount of the Matured LC Obligation to be concurrently paid by such
Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
------------------------
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk, an undivided
interest equal to such Lender's Percentage Share of LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid
24
by LC Issuer thereunder. Each Lender unconditionally and irrevocably agrees with
LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit
for which LC Issuer is not reimbursed in full by Borrower in accordance with the
terms of this Agreement and the related LC Application (including any
reimbursement by means of concurrent Loans or by the application of LC
Collateral), such Lender shall (in all circumstances and without set-off or
counterclaim) pay to LC Issuer on demand, in immediately available funds at LC
Issuer's address for notices hereunder, such Lender's Percentage Share of such
Matured LC Obligation (or any portion thereof which has not been reimbursed by
Borrower). Each Lender's obligation to pay LC Issuer pursuant to the terms of
this subsection is irrevocable and unconditional. If any amount required to be
paid by any Lender to LC Issuer pursuant to this subsection is paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer shall in addition to such amount be entitled to recover from such
Lender, on demand, interest thereon calculated from such due date at the Federal
Funds Rate. If any amount required to be paid by any Lender to LC Issuer
pursuant to this subsection is not paid by such Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer shall in addition to
such amount be entitled to recover from such Lender, on demand, interest thereon
calculated from such due date at the Default Rate applicable to Base Rate Loans.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
-----------------------------
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from Borrower or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
-------- -------
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail the
------------
amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.14. Letter of Credit Fees. In consideration of LC Issuer's
---------------------
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Lenders in accordance with their respective Percentage Shares, a
letter of credit issuance fee at a rate determined by applying the Eurodollar
Margin then in effect to the face amount of such Letter of Credit for the term
thereof and (b) to such LC Issuer for its own account, a letter of credit
fronting fee at a rate equal to one-eighth percent (0.125%) per annum. Each such
fee will be calculated based on the face amount of all Letters of Credit
outstanding on each day at the above applicable rate and will be payable
quarterly in arrears. In addition, Borrower will pay to LC Issuer its customary
administrative issuance fees and drawing fees.
Section 2.15. No Duty to Inquire.
------------------
25
(a) Drafts and Demands. LC Issuer is authorized and instructed to accept
------------------
and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. Prior to making payment on any Letter of Credit, LC
Issuer will examine with reasonable care all documents required to be presented
to LC Issuer under the terms of such Letter of Credit in order for LC Issuer to
ascertain that such documents appear on their face to be in accordance with the
terms and conditions of such Letter of Credit. LC Issuer is under no duty to
determine the proper identity of anyone presenting such a draft or making such a
demand (whether by tested telex or otherwise) as the officer, representative or
agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to
any such beneficiary when requested by any such purported officer,
representative or agent is hereby authorized and approved. Borrower releases
each Lender Party from, and agrees to hold each Lender Party harmless and
indemnified against, any liability or claim in connection with or arising out of
the subject matter of this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT
ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY Lender Party,
provided only that no Lender Party shall be entitled to indemnification for that
portion, if any, of any liability or claim which is proximately caused by its
own individual gross negligence or willful misconduct, as determined in a final
judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
---------------------
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any Lender
Party in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
--------------------------------
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
LC Issuer to any purported transferee or transferees as determined by LC Issuer
is hereby authorized and approved, and Borrower releases each Lender Party from,
and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the foregoing, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY Lender Party, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is
26
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.
Section 2.16. LC Collateral.
-------------
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
------------------------------------------
all mandatory prepayments required under Section 2.8, the outstanding LC
Obligations will exceed the Borrowing Base, then in addition to prepayment of
the entire principal balance of the Loans Borrower will immediately pay to LC
Issuer an amount equal to such excess. LC Issuer will hold such amount as
security for the remaining LC Obligations (all such amounts held as security for
LC Obligations being herein collectively called "LC Collateral") and the other
-------------
Obligations, and such collateral may be applied from time to time to any Matured
LC Obligations or other Obligations which are due and payable. Neither this
subsection nor the following subsection shall, however, limit or impair any
rights which LC Issuer may have under any other document or agreement relating
to any Letter of Credit, LC Collateral or LC Obligation, including any LC
Application, or any rights which any Lender Party may have to otherwise apply
any payments by Borrower and any LC Collateral under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
------------------------------
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Majority Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding.
(c) Investment of LC Collateral. Pending application thereof, all LC
---------------------------
Collateral shall be invested by LC Issuer in such Investments as LC Issuer may
choose in its sole discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured LC Obligations or other
Obligations which are due and payable. When all Obligations have been satisfied
in full, including all LC Obligations, all Letters of Credit have expired or
been terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, LC Issuer shall release any remaining LC
Collateral. Borrower hereby assigns and grants to LC Issuer a continuing
security interest in all LC Collateral paid by it to LC Issuer, all Investments
purchased with such LC Collateral, and all proceeds thereof to secure its
Matured LC Obligations and its Obligations under this Agreement, each Note, and
the other Loan Documents, and Borrower agrees that such LC Collateral,
Investments and proceeds shall be subject to all of the terms and conditions of
the Security Documents. Borrower further agrees that LC Issuer shall have all of
the rights and remedies of a secured party under the Uniform Commercial Code as
adopted in the State of Texas with respect to such security interest and that an
Event of Default under this Agreement shall constitute a default for purposes of
such security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
------------------------
Collateral for any reason and fails to do so on the day when required, LC Issuer
may without notice to Borrower or any other Restricted Person provide such LC
Collateral (whether by application of
27
proceeds of other Collateral, by transfers from other accounts maintained with
LC Issuer, or otherwise) using any available funds of Borrower or any other
Person also liable to make such payments. Any such amounts which are required to
be provided as LC Collateral and which are not provided on the date required
shall, for purposes of each Security Document, be considered past due
Obligations owing hereunder, and LC Issuer is hereby authorized to exercise its
respective rights under each Security Document to obtain such amounts.
ARTICLE III - Payments to Lenders
-------------------
Section 3.1. General Procedures. Borrower will make each payment which
------------------
it owes under the Loan Documents to Agent for the account of the Lender Party to
whom such payment is owed, in lawful money of the United States of America,
without set-off, deduction or counterclaim, and in immediately available funds.
Each such payment must be received by Agent not later than 11:00 a.m., Dallas,
Texas time, on the date such payment becomes due and payable. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Lender Party shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section 6.9 or 10.4 and then to the partial
payment of all other Obligations then due in proportion to the amounts thereof,
or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.7 and 2.8. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to each Lender Party then owed
Obligations described in such subsection in proportion to all amounts owed to
all Lender Parties which are described in such subsection; provided that if any
Lender then owes payments to
28
LC Issuer for the purchase of a participation under Section 2.13(c) or to Agent
under Section 9.9, any amounts otherwise distributable under this section to
such Lender shall be deemed to belong to LC Issuer, or Agent, respectively, to
the extent of such unpaid payments, and Agent shall apply such amounts to make
such unpaid payments rather than distribute such amounts to such Lender.
Section 3.2. Change of Applicable Lending Office. Each Lender Party
-----------------------------------
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.4 through 3.9 with respect to such Lender Party, it will, if
requested by Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that such Lender
Party and its Applicable Lending Office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such section. Nothing in this section shall affect
or postpone any of the obligations of Borrower or the rights of any Lender Party
provided in Sections 3.4 through 3.9.
Section 3.3. Replacement of Lenders. If any Lender Party seeks
----------------------
reimbursement for increased costs under Sections 3.4 through 3.9, then within
ninety days thereafter -- provided no Event of Default then exists -- Borrower
shall have the right (unless such Lender Party withdraws its request for
additional compensation) to replace such Lender Party by requiring such Lender
Party to assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Agent and to Borrower, provided that: (a)
all Obligations of Borrower owing to such Lender Party being replaced (including
such increased costs, but excluding principal and accrued interest on the Notes
being assigned) shall be paid in full to such Lender Party concurrently with
such assignment, and (b) the replacement Eligible Transferee shall purchase the
Note being assigned by paying to such Lender Party a price equal to the
principal amount thereof plus accrued and unpaid interest thereon. In
connection with any such assignment Borrower, Agent, such Lender Party and the
replacement Eligible Transferee shall otherwise comply with Section 10.6.
Notwithstanding the foregoing rights of Borrower under this section, however,
Borrower may not replace any Lender Party which seeks reimbursement for
increased costs under Section 3.4 through 3.9 unless Borrower is at the same
time replacing all Lender Parties which are then seeking such compensation.
Section 3.4. Increased Cost and Reduced Return.
---------------------------------
(a) If, after the date hereof, the adoption of any applicable Law, rule,
or regulation, or any change in any applicable Law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender Party (or its Applicable
Lending Office) with any request or directive (whether or not having the force
of Law) of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender Party (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any Eurodollar
Loans, its Note, or its obligation to make Eurodollar Loans, or change the
basis of taxation of any amounts payable to such Lender Party (or its
Applicable Lending Office) under this Agreement or its Note in
29
respect of any Eurodollar Loans (other than taxes imposed on the overall
net income of such Lender Party by the jurisdiction in which such Lender
Party has its principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Adjusted Eurodollar Rate)
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Lender Party (or its
Applicable Lending Office), including the commitment of such Lender Party
hereunder; or
(iii) shall impose on such Lender Party (or its Applicable Lending
Office) or the London interbank market any other condition affecting this
Agreement or its Notes or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
Party (or its Applicable Lending Office) of making, converting into, continuing,
or maintaining any Eurodollar Loans or to reduce any sum received or receivable
by such Lender Party (or its Applicable Lending Office) under this Agreement or
its Notes with respect to any Eurodollar Loans, then Borrower shall pay to such
Lender Party on demand such amount or amounts as will compensate such Lender
Party for such increased cost or reduction. If any Lender Party requests
compensation by Borrower under this Section 3.4(a), Borrower may, by notice to
such Lender Party (with a copy to Agent), suspend the obligation of such Lender
Party to make or continue Loans of the Type with respect to which such
compensation is requested, or to convert Loans of any other Type into Loans of
such Type, until the event or condition giving rise to such request ceases to be
in effect; provided that such suspension shall not affect the right of such
--------
Lender Party to receive the compensation so requested.
(b) If, after the date hereof, LC Issuer or any Lender Party shall have
determined that the adoption of any applicable Law, rule, or regulation
regarding capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of Law) of any such governmental authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of such Lender Party or any corporation controlling such Lender Party as
a consequence the obligations of LC Issuer or such Lender Party hereunder to a
level below that which such Lender Party or such corporation could have achieved
but for such adoption, change, request, or directive (taking into consideration
its policies with respect to capital adequacy), then from time to time upon
demand Borrower shall pay to LC Issuer or such Lender Party such additional
amount or amounts as will compensate LC Issuer or such Lender Party for such
reduction, but only to the extent that such Lender Party has not been
compensated therefor by any increase in the Adjusted Eurodollar Rate.
(c) LC Issuer and each Lender Party shall promptly notify Borrower and
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle LC Issuer or
30
such Lender Party to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Lender Party, be otherwise disadvantageous to it. LC Issuer or any Lender Party
claiming compensation under this Section shall furnish to Borrower and Agent a
statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, LC Issuer or such Lender Party shall act in good faith
and may use any reasonable averaging and attribution methods.
Section 3.5. Limitation on Types of Loans. If on or prior to the first
----------------------------
day of any Interest Period for any Eurodollar Loan:
(a) Agent determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate, as the case may be, for
such Interest Period; or
(b) the Majority Lenders determine (which determination shall be
conclusive) and notify Agent that the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding Eurodollar
Loans or for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
amounts or periods, and so long as such condition remains in effect, the Lender
Parties shall be under no obligation to make additional Loans, continue
Eurodollar Loans or convert Base Rate Loans into Eurodollar Loans, and Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or convert such Loans
into Base Rate Loans in accordance with the terms of this Agreement.
Section 3.6. Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender Party or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder,
then such Lender Party shall promptly notify Borrower thereof and such Lender
Party's obligation to make or continue Eurodollar Loans and to convert Base Rate
Loans into Eurodollar Loans shall be suspended until such time as such Lender
Party may again make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 1.5 shall be applicable).
Section 3.7. Treatment of Affected Loans. If the obligation of any
---------------------------
Lender Party to make a particular Type of Loan or to continue, or to convert
Loans of any other Type into, Loans of a particular Type shall be suspended
pursuant to Section 3.4, 3.5, or 3.6 hereof (Loans of such Type being herein
called "Affected Loans" and such Type being herein called the "Affected Type"),
-------------- -------------
such Lender Party's Affected Loans shall be automatically converted into Base
Rate Loans on the last day(s) of the then current Interest Period(s) for
Affected Loans (or, in the case of a Conversion required by Section 3.4 hereof,
on such earlier date as such Lender Party may specify to Borrower with a copy to
Agent) and, unless and until such Lender Party gives notice as provided below
that the circumstances specified in Section 3.4 or 3.5 hereof that gave rise to
such Conversion no longer exist:
31
(a) to the extent that such Lender Party's Affected Loans have been so
converted, all payments and prepayments of principal that would otherwise be
applied to such Lender Party's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such Lender
Party as Loans of the Affected Type shall be made or continued instead as Base
Rate Loans, and all Loans of such Lender Party that would otherwise be converted
into Loans of the Affected Type shall be converted instead into (or shall remain
as) Base Rate Loans.
If such Lender Party gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.4 or 3.5 hereof that gave rise to the
Conversion of such Lender Party's Affected Loans pursuant to this Section 3.7 no
longer exist (which such Lender Party agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type made
by other Lender Parties are outstanding, such Lender Party's Base Rate Loans
shall be automatically converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Loans of the Affected Type, to the
extent necessary so that, after giving effect thereto, all Loans held by the
Lender Parties holding Loans of the Affected Type and by such Lender Party are
held pro rata (as to principal amounts, Types, and Interest Periods) in
accordance with their Percentage Shares of the Maximum Credit Amount.
Section 3.8. Compensation. Upon the request of any Lender Party,
------------
Borrower shall pay to such Lender Party such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender Party) to compensate it for
any loss, cost, or expense (including loss of anticipated profits) incurred by
it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 8.2) on a date other than the last day of the Interest Period for such
Loan;
(b) any failure by Borrower for any reason (including, without limitation,
the failure of any condition precedent specified in Article IV to be satisfied)
to borrow, convert, continue, or prepay a Eurodollar Loan on the date for such
borrowing, Conversion, Continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement; or
(c) the replacement of such Lender Party under Section 3.3.
Section 3.9. Taxes.
-----
(a) Any and all payments by Borrower to or for the account of any Lender
Party, Agent or LC Issuer hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender Party,
---------
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Lender Party (or its Applicable
Lending Office) is organized or any
32
political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings, and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by Law to deduct any
-----
Taxes from or in respect of any sum payable under this Agreement or any other
Loan Document to any Lender Party, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this section) such Lender Party
receives an amount equal to the sum it would have received had no such
deductions been made, (ii Borrower shall make such deductions, and (ii Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Law.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
-----------
(c) Borrower agrees to indemnify each Lender Party, Agent and LC Issuer
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this section) paid by such Lender Party or Agent (as the case may be) and
any liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Lender Party organized under the Laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender Party listed on the signature pages hereof
and on or prior to the date on which it becomes a Lender Party in the case of
each other Lender Party, and from time to time thereafter if requested in
writing by Borrower or Agent (but only so long as such Lender Party remains
lawfully able to do so), shall provide Borrower and Agent with a properly
executed (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Lender Party is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States, (ii Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (ii any other
form or certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender Party is entitled to an exemption from or a reduced rate of tax
on payments pursuant to this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender Party has failed to
provide Borrower and Agent with the appropriate form pursuant to Section 3.9(d)
(unless such failure is due to a change in treaty, Law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender Party shall not be entitled to indemnification under Section 3.9(a)
or 3.9(b) with respect to Taxes imposed by the United States; provided, however,
-------- -------
that should a Lender Party, which is otherwise exempt from or subject to a
reduced rate
33
of withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, Borrower shall take such steps as such Lender Party
shall reasonably request to assist such Lender Party to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender Party pursuant to this Section, then such Lender Party
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender Party, is not otherwise disadvantageous to such Lender Party and in the
event Lender Party is reimbursed for an amount paid by Borrower pursuant to this
Section 3.9, it shall promptly return such amount to Borrower.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Agent the original or a certified copy of a receipt
evidencing such payment.
(h) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this section
shall survive the termination of the Commitment Period and the payment in full
of the Notes.
ARTICLE IV - Conditions Precedent to Lending
-------------------------------
Section 4.1. Documents to be Delivered. No Lender has any obligation to
-------------------------
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit, unless Agent shall have received all of the following, at Agent's
office in Dallas, Texas, duly executed and delivered and in form, substance and
date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to execute in
connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of the Chairman of
the Board or President of Borrower, which shall contain the names and
signatures of the officers of Borrower authorized to execute Loan Documents
and which shall certify to the truth, correctness and completeness of the
following exhibits attached thereto: (1) a copy of resolutions duly
adopted by the Board of Directors of Borrower and in full force and effect
at the time this Agreement is entered into, authorizing the execution of
this Agreement and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions contemplated
herein and therein, (2) a copy of the charter documents of Borrower and all
amendments thereto, certified by the
34
appropriate official of Borrower's state of organization, and (3) a copy of
any bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the Board or
President and of the chief financial officer of Borrower, of even date with
such Loan or such Letter of Credit, in which such officers certify to the
satisfaction of the conditions set out in subsections (a), (b), (c) and (d)
of Section 4.2.
(e) Certificate (or certificates) of the due formation, valid existence
and good standing of Borrower in its state of organization, issued by the
appropriate authorities of such jurisdiction, and certificates of Borrower's
good standing and due qualification to do business, issued by appropriate
officials in any states in which Borrower owns property subject to Security
Documents.
(f) Documents similar to those specified in subsections (d)(i) and (e) of
this section with respect to each Guarantor and the execution by it of its
guaranty of Borrower's Obligations.
(g) A favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, general counsel of Borrower,
substantially in the form set forth in Exhibit E.
(h) The Initial Financial Statements.
(i) Certificates or binders evidencing Restricted Persons' insurance in
effect on the date hereof.
(j) The Initial Engineering Report.
(k) Title opinions in form, substance and authorship satisfactory to
Agent, concerning the properties listed on Part A of Schedule 4.
(l) Payment of all commitment, facility, agency, legal and other fees
required to be paid to or on behalf of Agent or any Lender pursuant to any Loan
Documents or any commitment agreement heretofore entered into.
Section 4.2. Additional Conditions Precedent. No Lender has any
-------------------------------
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person in
any Loan Document shall be true on and as of the date of such Loan or the date
of issuance of such Letter of Credit (except to the extent that the facts upon
which such representations are based have been changed by the extension of
credit hereunder) as if such representations and warranties had been made as of
the date of such Loan or the date of issuance of such Letter of Credit.
35
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) No Material Adverse Change shall have occurred since the date of the
audited annual Initial Financial Statements.
(d) Each Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or the date of issuance
of such Letter of Credit.
(e) The making of such Loan or the issuance of such Letter of Credit shall
not be prohibited by any Law and shall not subject any Lender or any LC Issuer
to any penalty or other onerous condition under or pursuant to any such Law.
(f) Agent shall have received all documents and instruments which Agent
has then requested, in addition to those described in Section 4.1 (including
opinions of legal counsel for Restricted Persons and Agent; corporate documents
and records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials and of
officers and representatives of Borrower and other Persons), as to (i) the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any Restricted Person in this Agreement and the other Loan
Documents, (ii the satisfaction of all conditions contained herein or therein,
and (ii all other matters pertaining hereto and thereto. All such additional
documents and instruments shall be satisfactory to Agent in form, substance and
date.
(g) Borrower shall, prior to the making of the first Loan (or using the
proceeds thereof), have deposited $27,500 with ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel
for Agent, to be held by such counsel and applied toward payment of costs and
expenses for recordation of the Security Documents and payment of mortgage
taxes, as provided pursuant to Section 10.4(a). If such deposit exceeds the
amount of such costs and expenses, the excess shall be returned to Borrower. If
such deposit is less than such costs and expenses, the deficit shall be paid by
Borrower pursuant to Section 10.4(a).
ARTICLE V - Representations and Warranties
------------------------------
To confirm each Lender's understanding concerning Restricted Persons and
Restricted Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Borrower
represents and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is continuing which
----------
constitutes a Default.
36
Section 5.2. Organization and Good Standing. Each Restricted Person is
------------------------------
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary. Each Restricted Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction outside the
United States wherein the character of the properties owned or held by it or the
nature of the business transacted by it makes such actions and procedures
desirable.
Section 5.3. Authorization. Each Restricted Person has duly taken all
-------------
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by the
------------------------
various Restricted Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (a) conflict with any provision of (i) any Law, (ii the
organizational documents of any Restricted Person, or (ii any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person; (b) result in the acceleration of any Indebtedness owed by any
Restricted Person; or (c) result in or require the creation of any Lien upon any
assets or properties of any Restricted Person except as expressly contemplated
or permitted in the Loan Documents. Except as expressly contemplated in the
Loan Documents no consent, approval, authorization or order of, and no notice to
or filing with, any Tribunal or third party is required in connection with the
execution, delivery or performance by any Restricted Person of any Loan Document
or to consummate any transactions contemplated by the Loan Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
-----------------------
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Borrower has heretofore
----------------------------
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present
Borrower's Consolidated financial position at the respective dates thereof and
the Consolidated results of Borrower's operations and Borrower's Consolidated
cash flows for the respective periods thereof. Since the date of the audited
annual Initial Financial Statements no Material Adverse Change has occurred,
except as reflected in Section 5.6 of the Disclosure Schedule. All Initial
Financial Statements were prepared in accordance with GAAP.
37
Section 5.7. Other Obligations and Restrictions. No Restricted Person
----------------------------------
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to Borrower or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in Section 5.7 of the Disclosure Schedule or a
Disclosure Report. Except as shown in the Initial Financial Statements or
disclosed in Section 5.7 of the Disclosure Schedule or a Disclosure Report, no
Restricted Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which could cause a
Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
---------------
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact known to any Restricted Person
(other than industry-wide risks normally associated with the types of businesses
conducted by Restricted Persons) necessary to make the statements contained
herein or therein not misleading as of the date made or deemed made. There is
no fact known to any Restricted Person (other than industry-wide risks normally
associated with the types of businesses conducted by Restricted Persons) that
has not been disclosed to each Lender in writing which could cause a Material
Adverse Change. There are no statements or conclusions in any Engineering
Report which are based upon or include misleading information or fail to take
into account material information regarding the matters reported therein, it
being understood that each Engineering Report is necessarily based upon
professional opinions, estimates and projections and that Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate. Borrower has heretofore delivered to each Lender true,
correct and complete copies of the Initial Engineering Report.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
----------
Statements or in Section 5.9 of the Disclosure Schedule: (a) there are no
actions, suits or legal, equitable, arbitrative or administrative proceedings
pending, or to the knowledge of any Restricted Person threatened, against any
Restricted Person before any Tribunal which could cause a Material Adverse
Change, and (b) there are no outstanding judgments, injunctions, writs, rulings
or orders by any such Tribunal against any Restricted Person or any Restricted
Person's stockholders, partners, directors or officers which could cause a
Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in
------------------------------
Section 5.10 of the Disclosure Schedule or a Disclosure Report, neither the
business nor the properties of any Restricted Person has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could cause a Material
Adverse Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
---------------------------
Plans are listed in Section 5.11 of the Disclosure Schedule or a Disclosure
Report. Except as disclosed in the Initial Financial Statements or in Section
5.11 of the Disclosure Schedule or a Disclosure Report, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are
38
in compliance with ERISA in all material respects. No ERISA Affiliate is
required to contribute to, or has any other absolute or contingent liability in
respect of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except
as set forth in Section 5.11 of the Disclosure Schedule or a Disclosure Report:
(a) no "accumulated funding deficiency" (as defined in Section 412(a) of the
Internal Revenue Code) exists with respect to any ERISA Plan, whether or not
waived by the Secretary of the Treasury or his delegate, and (b) the current
value of each ERISA Plan's benefits does not exceed the current value of such
ERISA Plan's assets available for the payment of such benefits by more than
$500,000.
Section 5.12. Environmental and Other Laws. Except as disclosed in
----------------------------
Section 5.12 of the Disclosure Schedule or a Disclosure Report: (a) Restricted
Persons are conducting their businesses in material compliance with all
applicable Laws, including Environmental Laws, and have and are in compliance
with all licenses and permits required under any such Laws; (b) none of the
operations or properties of any Restricted Person is the subject of federal,
state or local investigation evaluating whether any material remedial action is
needed to respond to a release of any Hazardous Materials into the environment
or to the improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) no Restricted Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any Law
indicating that any Restricted Person is responsible within the last five years
for the improper release into the environment, or the improper storage or
disposal, of any material amount of any Hazardous Materials or that any
Hazardous Materials have been improperly released, or are improperly stored or
disposed of, upon any property of any Restricted Person within the last five
years; (d) no Restricted Person has transported or arranged for the
transportation of any Hazardous Material to any location which is (i) listed on
the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, listed for possible
inclusion on such National Priorities List by the Environmental Protection
Agency in its Comprehensive Environmental Response, Compensation and Liability
Information System List, or listed on any similar state list or (ii the subject
of federal, state or local enforcement actions or other investigations which may
lead to claims against any Restricted Person for clean-up costs, remedial work,
damages to natural resources or for personal injury claims (whether under
Environmental Laws or otherwise); and (e) no Restricted Person otherwise has any
known material contingent liability under any Environmental Laws or in
connection with the release into the environment, or the storage or disposal, of
any Hazardous Materials.
Section 5.13. Names and Places of Business. No Restricted Person has,
----------------------------
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in Section 5.13 of the Disclosure Schedule.
Except as otherwise indicated in Section 5.13 of the Disclosure Schedule or a
Disclosure Report, the chief executive office and principal place of business of
each Restricted Person are (and for the preceding five years have been) located
at the address of Borrower set out on the signature pages hereto. Except as
indicated in Section 5.13 of the Disclosure Schedule or a Disclosure Report, no
Restricted Person has any other office or place of business.
39
Section 5.14. Borrower's Subsidiaries. Borrower does not presently have
-----------------------
any Subsidiary or own any stock in any other corporation or association except
in ▇▇▇▇▇ and in those listed in Section 5.14 of the Disclosure Schedule or a
Disclosure Report. Neither Borrower nor any Restricted Person is a member of
any general or limited partnership, joint venture or association of any type
whatsoever except those listed in Section 5.14 of the Disclosure Schedule or a
Disclosure Report and associations, joint ventures or other relationships (a)
which are established pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of federal income taxation
only, (b) which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state Law, and (c) whose businesses are
---
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships. Except as otherwise revealed in a Disclosure
Report, Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in Section 5.14 of the Disclosure Schedule.
Borrower owns one hundred percent (100%) of the issued and outstanding capital
stock of ▇▇▇▇▇.
Section 5.15. Title to Properties; Licenses. The Restricted Persons'
-----------------------------
representations and warranties regarding title to the Mortgaged Properties owned
by it are set forth in the Security Documents. With respect to all other
material assets and properties owned by the Restricted Persons, Borrower hereby
represents and warrants that each Restricted Person has good and defensible
title to all such properties and assets, free and clear of all Liens other than
Permitted Liens and of all impediments to the use of such properties and assets
in such Restricted Person's business, except that no representation or warranty
is made with respect to any oil, gas or mineral property or interest to which no
proved oil or gas reserves are properly attributed. All information contained
in the Initial Engineering Reports is true and correct in all material respects
as of the date thereof and as of the date of the first Loan hereunder. Each
Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property.
Section 5.16. Government Regulation. Neither Borrower nor any other
---------------------
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.17. Insider. No Restricted Person, nor any Person having
-------
"control" (as that term is defined in 12 U.S.C. (S) 375b(9) or in regulations
promulgated pursuant thereto) of any Restricted Person, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined in 12
U.S.C. (S) 375b(8) or (9) or in regulations promulgated pursuant thereto)
40
of any Lender, of a bank holding company of which any Lender is a Subsidiary or
of any Subsidiary of a bank holding company of which any Lender is a Subsidiary.
Section 5.18. Solvency. Upon giving effect to the issuance of the Notes,
--------
the execution of the Loan Documents by Restricted Persons to the extent a party
thereto, and the consummation of the transactions contemplated hereby, each
Restricted Person will be solvent (as such term is used in applicable
bankruptcy, liquidation, receivership, insolvency or similar Laws).
Section 5.19. Year 2000 Compliance. Borrower has conducted an assessment
--------------------
identifying date-sensitive software applications used by Restricted Persons to
record, process, and track information that could fail, create erroneous
results, or could be adversely affected by the "Year 2000 Problem" (that is, the
risk that date-sensitive software applications used by Restricted Persons may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Borrower
reasonably believes that all computer applications (including those of
Restricted Persons' suppliers and vendors) that are material to any of
Restricted Persons' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
-------------------
to do so could not reasonably be expected to materially and adversely affect
Restricted Persons on a Consolidated basis.
Section 5.20. Mortgaged Properties. The Mortgaged Properties constitute
--------------------
at least eighty percent (80%) of the total value of the oil and gas properties
of Restricted Persons.
ARTICLE VI - Affirmative Covenants of Borrower
---------------------------------
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Borrower warrants, covenants and
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise:
Section 6.1. Payment and Performance. Borrower will pay all amounts due
-----------------------
under the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents. Borrower will cause each other Restricted Person to
observe, perform and comply with every such term, covenant and condition in any
Loan Document.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
---------------------------------------
Person will at all times maintain full and accurate books of account and
records. Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender Party at Borrower's expense:
41
(a) As soon as available, and in any event within one hundred (100) days
after the end of each Fiscal Year, complete Consolidated financial statements of
Borrower together with all notes thereto, prepared in reasonable detail in
accordance with GAAP, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, or other
independent certified public accountants selected by Borrower and acceptable to
Majority Lenders, stating that such Consolidated financial statements have been
so prepared. These financial statements shall contain a Consolidated balance
sheet as of the end of such Fiscal Year and Consolidated statements of earnings,
of cash flows, and of changes in owners' equity for such Fiscal Year, each
setting forth in comparative form the corresponding figures for the preceding
Fiscal Year. In addition, within one hundred (100) days after the end of each
Fiscal Year Borrower will furnish a report signed by such accountants (i)
stating that they have read this Agreement, (ii containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Year with the
requirements of Sections 7.11 and 7.12, and (ii further stating that in making
their examination and reporting on the Consolidated financial statements
described above they did not conclude that any Default existed at the end of
such Fiscal Year or at the time of their report, or, if they did conclude that a
Default existed, specifying its nature and period of existence.
(b) As soon as available, and in any event within fifty-five (55) days
after the end of each Fiscal Quarter, Borrower's Consolidated balance sheet as
of the end of such Fiscal Quarter and Consolidated statements of Borrower's
earnings and cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with GAAP, subject to changes resulting from normal year-
end adjustments. In addition Borrower will, together with each such set of
financial statements and each set of financial statements furnished under
subsection (a) of this section, furnish a certificate in the form of Exhibit D
signed by the chief financial officer of Borrower stating that such financial
statements are accurate and complete (subject to normal year-end adjustments),
stating that he has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with the
requirements of Sections 7.11 and 7.12 and stating that no Default exists at the
end of such Fiscal Quarter or at the time of such certificate or specifying the
nature and period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by any Restricted Person
to its stockholders and all registration statements, periodic reports and other
statements and schedules filed by any Restricted Person with any securities
exchange, the Securities and Exchange Commission or any similar governmental
authority.
(d) By April 1 of each year, an Engineering Report prepared as of the
preceding January 1, by petroleum engineers who are employees of Borrower and
audited by ▇▇▇▇▇ ▇▇▇▇▇ Company, or other independent petroleum engineers chosen
by Borrower and acceptable to Majority Lenders, concerning all oil and gas
properties and interests owned by any Restricted Person which are located in or
offshore of the United States and which have attributable to them proved oil or
gas reserves. This report shall be in form and substance satisfactory to Agent,
shall contain sufficient information to enable Borrower to meet the reporting
requirements concerning
42
oil and gas reserves contained in Regulations S-K and S-X promulgated by the
Securities and Exchange Commission, shall take into account any "over-produced"
status under gas balancing arrangements, and shall contain information and
analysis comparable in scope to that contained in the Initial Engineering
Report. This report shall distinguish (or shall be delivered together with a
certificate from an appropriate officer of Borrower which distinguishes) those
properties treated in the report which are Collateral from those properties
treated in the report which are not Collateral.
(e) By October 1 of each year, and promptly following notice of an
additional Borrowing Base redetermination under Section 2.10(a), an Engineering
Report prepared as of the preceding July 1 (or the first day of the preceding
calendar month in the case of an additional redetermination) by petroleum
engineers who are employees of Borrower together with an accompanying report on
property sales, property purchases and changes in categories, both in the same
form and scope as the reports in (d) above.
(f) With the delivery of each Engineering Report, Borrower shall provide
to Agent a certificate from the president or chief financial officer of Borrower
in the form of Exhibit H certifying that, to the best of his knowledge and in
all material respects: (i) the information contained in such Engineering Report
and any other information delivered in connection therewith is true and correct,
(ii) each Restricted Person owns good and defensible title to the oil and gas
properties and other assets evaluated in such Engineering Report (herein called
the "Covered Properties") and are free of all Liens except for Permitted Liens,
------------------
(iii) none of the Covered Properties has been sold since the date of the last
Borrowing Base determination except as set forth on an exhibit to the
certificate, which certificate shall list all of such properties sold and in
such detail as reasonably required by Agent, and (iv) oil and gas properties
which comprise at least eighty percent (80%) of the total value of the oil and
gas properties which are included within the Covered Properties and which are
owned either directly by any Restricted Person or by partnerships in which any
Restricted Person has an interest are part of the Mortgaged Properties (either
by virtue of a mortgage on the oil and gas properties or a security interest
encumbering the interests owned by such Restricted Person in such partnerships).
Section 6.3. Other Information and Inspections. Each Restricted Person
---------------------------------
will furnish to each Lender any information which Agent may from time to time
request concerning any covenant, provision, representation or condition of the
Loan Documents or any matter in connection with Restricted Persons' businesses,
properties, financial condition and operations and statements and schedules
identifying and describing the Collateral and all other reports and information
requested in connection with the Collateral, all in reasonable detail. Each
Restricted Person will permit representatives appointed by Agent (including
independent accountants, auditors, agents, attorneys, appraisers and any other
Persons) to visit and inspect during normal business hours any of such
Restricted Person's property, including its books of account, other books and
records, and any facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down and record
any information such representatives obtain, and each Restricted Person shall
permit Agent or its representatives to investigate and verify the accuracy of
the information furnished to Agent or any Lender in connection with the Loan
Documents and to discuss all such matters with its officers, employees and
representatives. Each Restricted Person will keep adequate records concerning
the Collateral.
43
Section 6.4. Notice of Material Events and Change of Address. Borrower
-----------------------------------------------
will promptly notify each Lender in writing, stating that such notice is being
given pursuant to this Agreement, of:
(a) occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any
Restricted Person or of any default by any Restricted Person 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 acceleration or default could cause a Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) any claim of $500,000 or more, any notice of potential liability under
any Environmental Laws which might exceed such amount, or any other material
adverse claim asserted against any Restricted Person or with respect to any
Restricted Person's properties, and
(f) the filing of any suit or proceeding against any Restricted Person in
which an adverse decision could cause a Material Adverse Change.
Upon the occurrence of any of the foregoing Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent's counsel in writing at least twenty Business Days prior to the
date that any Restricted Person changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Agent and its counsel to
prepare the same.
Section 6.5. Maintenance of Properties. Each Restricted Person will
-------------------------
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition (normal wear and tear
excepted) and in compliance with all applicable Laws, and will from time to time
make all repairs, renewals and replacements needed to enable the business and
operations carried on in connection therewith to be promptly and advantageously
conducted at all times.
Section 6.6. Maintenance of Existence and Qualifications. Each
-------------------------------------------
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.
44
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
-----------------------------------------
Person will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; (c) within ninety (90) days past the original
invoice billing date therefor pay all Liabilities owed by it on ordinary trade
terms to vendors, suppliers and other Persons providing goods and services used
by it in the ordinary course of its business; (d) pay and discharge when due all
other Liabilities now or hereafter owed by it; and (e) maintain appropriate
accruals and reserves for all of the foregoing in accordance with GAAP. Each
Restricted Person may, however, delay paying or discharging any of the foregoing
so long as it is in good faith contesting the validity thereof by appropriate
proceedings and has set aside on its books adequate reserves therefor.
Section 6.8. Insurance.
---------
(a) Each Restricted Person shall at all times maintain (at its own
expense) insurance for its property in accordance with the Insurance Schedule
and insurance with respect to all Collateral which constitutes goods in such
amounts, against such risks, in such form and which such financially sound and
reputable insurers as shall be satisfactory to Agent from time to time. Upon
demand by Agent any insurance policies covering Collateral shall be endorsed (a)
to provide for payment of losses to Agent as its interests may appear, and (b)
to provide that such policies may not be canceled or reduced or affected in any
material manner for any reason without fifteen days prior notice to Agent, and
(c) to provide for any other matters specified in any applicable Security
Document or which Agent may reasonably require; provided that Borrower shall
self insure against fire, casualty, and other hazards normally insured against.
Each Restricted Person shall at all times maintain insurance against its
liability for injury to persons or property in accordance with the Insurance
Schedule, which insurance shall be by financially sound and reputable insurers.
Without limiting the foregoing, each Restricted Person shall at all time
maintain liability insurance in accordance with Insurance Schedule.
(b) Each insurance policy of Restricted Persons shall be indorsed to
provide for all losses to be paid on behalf of Agent (for the benefit of
Lenders) and Restricted Persons as their respective interests may appear. Each
such policy shall in addition (i) name the appropriate Restricted Person and
Agent as insured parties thereunder (without any representation or warranty by
or obligation upon Agent) as their interests may appear, (ii) contain the
agreement by the insurer that any loss thereunder shall be payable to Agent
notwithstanding any action, inaction or breach of representation or warranty by
such Restricted Person, (iii) provide that there shall be no recourse against
Agent for payment of premiums or other amounts with respect thereto and (iv)
provide that at least thirty (30) days prior written notice of cancellation or
of lapse shall be given to Agent by the insurer. Each Restricted Person will,
if so requested by Agent, deliver to Agent original or duplicate policies of
such insurance and, as often as Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Each Restricted
Person will also, at the request of Agent, duly execute and deliver instruments
of assignment of such insurance policies and cause the respective insurers to
acknowledge notice of such assignment.
(c) Reimbursement under any liability insurance maintained by Restricted
Persons pursuant to this Section 6.8 may be paid directly to the Person who has
incurred the liability
45
covered by such insurance. With respect to any loss involving damage to
Collateral which constitutes goods as to which subsection (d) of this Section
6.8 is not applicable, each Restricted Person will make or cause to be made the
necessary repairs to or replacements of such Collateral, and any proceeds of
insurance maintained by each Restricted Person pursuant to this Section 6.8
shall be paid to such Restricted Person by Agent as reimbursement for the costs
of such repairs or replacements as such repairs or replacements are made or
acquired.
(d) Upon the occurrence and during the continuance of an Event of Default,
all insurance payments in respect of such Collateral shall be paid to Agent and
applied as specified in Section 4.3 of the Security Agreement.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
--------------------------------
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each amount
paid by Agent shall constitute an Obligation owed hereunder which is due and
payable on the date such amount is paid by Agent.
Section 6.10. Interest. Borrower hereby promises to each Lender Party to
--------
pay interest at the Default Rate applicable to Base Rate Loans on all
Obligations (including Obligations to pay fees or to reimburse or indemnify any
Lender) which Borrower has in this Agreement promised to pay to such Lender
Party and which are not paid when due. Such interest shall accrue from the date
such Obligations become due until they are paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted Person
----------------------------------
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound. Each Restricted
Person will conduct its business and affairs in compliance with all Laws
applicable thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
--------------------------------------------
(a) Each Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person, as
well as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental, health and
safety permits, licenses and other authorizations necessary for its operations
and will maintain such authorizations in full force and effect. Borrower will
take all reasonable action available to it to prevent the disposal or other
release of any Hazardous Materials at, into, upon or under the Mortgaged
Properties (except such use, and temporary storage in anticipation of use, as is
required in the ordinary course of business, all while in compliance with
Environmental Laws).
(b) Borrower will promptly furnish to Agent all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by Borrower, or of which it has notice, pending or
threatened against any Restricted Person, by any
46
governmental authority with respect to any alleged violation of or non-
compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business which involve a potential liability or claim in excess
of $200,000.
(c) Borrower will promptly furnish to Agent all requests for information,
notices of claim, demand letters, and other notifications, received by Borrower
in connection with each Restricted Person's ownership or use of its properties
or the conduct of its business, relating to potential responsibility with
respect to any investigation or clean-up of Hazardous Material at any location
which involve a potential liability or claim in excess of $200,000.
(d) Upon Agent's request during the existence of an Event of Default,
Borrower will provide at Borrower's sole expense an inspection or audit of the
Mortgaged Properties from an engineering or consulting firm approved by Agent,
indicating the presence or absence of Hazardous Materials on the Mortgaged
Properties and compliance with Environmental Laws.
Section 6.13. Evidence of Compliance. Each Restricted Person will furnish
----------------------
to each Lender at such Restricted Person's or Borrower's expense all evidence
which Agent from time to time reasonably requests in writing as to the accuracy
and validity of or compliance with all representations, warranties and covenants
made by any Restricted Person in the Loan Documents, the satisfaction of all
conditions contained therein, and all other matters pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Borrower agrees to
---------------------------------------
deliver and to cause each other Restricted Person to deliver, to further secure
the Obligations whenever requested by Agent in its sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in any real or personal property which is at such
time Collateral or which was intended to be Collateral pursuant to any Security
Document previously executed and not then released by Agent. Borrower also
agrees to deliver, whenever reasonably requested by Agent in its sole and
absolute discretion, favorable title opinions from legal counsel acceptable to
Agent with respect to any Restricted Person's properties and interests
designated by Agent, based upon abstract or record examinations to dates
acceptable to Agent and (a) stating that such Restricted Person has good and
defensible title to such properties and interests, free and clear of all Liens
other than Permitted Liens, (b) confirming that such properties and interests
are subject to Security Documents securing the Obligations that constitute and
create legal, valid and duly perfected first deed of trust or mortgage liens in
such properties and interests and first priority assignments of and security
interests in the oil and gas attributable to such properties and interests and
the proceeds thereof, and (c) covering such other matters as Agent may
reasonably request. Borrower will deliver title opinions in form, substance and
authorship satisfactory to Agent concerning the properties listed on Part B of
Schedule 4 on or before December 31, 1999. On or before April 1, 2000, Borrower
will deliver to Agent such supplemental and curative materials as Agent shall
reasonably request with respect to the title opinions referenced in Section
4.1(k) and the title opinions referenced in the immediately preceding sentence.
Notwithstanding the foregoing, if any request by Agent for the aforementioned
supplemental and curative materials for any
47
particular property or properties is delivered to Borrower less than 75 days
prior to April 1, 2000, then the deadline for the delivery by Borrower of such
supplemental and curative materials for such property or properties to Agent
shall be extended so that Borrower shall have 75 days from the receipt of such
request from Agent to deliver such supplemental and curative materials to Agent.
Section 6.15. Perfection and Protection of Security Interests and Liens.
---------------------------------------------------------
Borrower will from time to time deliver, and will cause each other Restricted
Person from time to time to deliver, to Agent any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Restricted Persons in
form and substance satisfactory to Agent, which Agent requests for the purpose
of perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
---------------------
Obligations Borrower hereby grants to each Lender a security interest, a lien,
and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of any Lender at common Law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any and
all moneys, securities or other property (and the proceeds therefrom) of
Borrower now or hereafter held or received by or in transit to any Lender from
or for the account of Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower with any Lender, and
(c) any other credits and claims of Borrower at any time existing against any
Lender, including claims under certificates of deposit. At any time and from
time to time after the occurrence of any Default, each Lender is hereby
authorized to foreclose upon, or to offset against the Obligations then due and
payable (in either case without notice to Borrower), any and all items
hereinabove referred to. The remedies of foreclosure and offset are separate
and cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.17. Guaranties of Borrower's Subsidiaries. Each Subsidiary of
-------------------------------------
Borrower now existing or created, acquired or coming into existence after the
date hereof shall, promptly upon request by Agent, execute and deliver to Agent
an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Borrower
hereunder, which guaranty shall be satisfactory to Agent in form and substance.
Each Subsidiary of Borrower existing on the date hereof shall duly execute and
deliver such a guaranty prior to the making of any Loan hereunder. Borrower
will cause each of its Subsidiaries to deliver to Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to Agent and its
counsel that such Subsidiary has taken all corporate or partnership action
necessary to duly approve and authorize its execution, delivery and performance
of such guaranty and any other documents which it is required to execute.
Section 6.18. Production Proceeds. Notwithstanding that, by the terms of
-------------------
the various Security Documents, Restricted Persons are and will be assigning to
Agent and Lenders all of the "Production Proceeds" (as defined therein) accruing
to the property covered thereby, so long as no
48
Default has occurred Restricted Persons may continue to receive from the
purchasers of production all such Production Proceeds, subject, however, to the
Liens created under the Security Documents, which Liens are hereby affirmed and
ratified. At the written request of Borrower Agent shall prepare a letter to a
purchaser of production confirming the foregoing. Upon the occurrence of a
Default, Agent and Lenders may exercise all rights and remedies granted under
the Security Documents, including the right to obtain possession of all
Production Proceeds then held by Restricted Persons or to receive directly from
the purchasers of production all other Production Proceeds. In no case shall any
failure, whether purposed or inadvertent, by Agent or Lenders to collect
directly any such Production Proceeds constitute in any way a waiver, remission
or release of any of their rights under the Security Documents, nor shall any
release of any Production Proceeds by Agent or Lenders to Restricted Persons
constitute a waiver, remission, or release of any other Production Proceeds or
of any rights of Agent or Lenders to collect other Production Proceeds
thereafter.
Section 6.19. Year 2000 Compliance. Borrower will promptly notify Agent
--------------------
in the event Borrower discovers or determines that any computer application
(including those of its suppliers and vendors) that is material to any of
Restricted Persons' business and operations will not be Year 2000 compliant (as
defined in Section 5.19) on a timely basis, except to the extent that such
failure would not present a material probability of causing a Material Adverse
Change.
Section 6.20. Maintenance of Liens on Eighty Percent of Properties. The
----------------------------------------------------
Mortgaged Properties shall constitute at least eighty percent (80%) of the total
value of the oil and gas properties of Restricted Persons. Within thirty (30)
days following each Determination Date, Restricted Persons will execute and
deliver documentation in form and substance satisfactory to Agent, granting to
Agent first perfected Liens on and in oil and gas properties that are not then
part of the Mortgaged Properties, sufficient to cause the Mortgaged Properties
to constitute eighty percent (80%) of the total value of the oil and gas
properties directly owned by Restricted Persons and partnership interests that
are not then part of the Mortgaged Properties, sufficient to cause the Mortgaged
Properties to constitute eighty percent (80%) of the total value of the oil and
gas properties directly owned by Restricted Persons and the oil and gas
properties interests held by partnerships in which any Restricted Person owns an
interest. In addition, Borrower will furnish to Agent title due diligence in
form and substance satisfactory to Agent and will furnish all other documents
and information relating to such properties as Agent may reasonably request.
ARTICLE VII - Negative Covenants of Borrower
------------------------------
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and make the Loans, Borrower warrants, covenants and agrees that
until the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders have previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
------------
or be liable for Indebtedness except:
49
(a) the Obligations.
(b) Indebtedness arising under Hedging Contracts permitted under Section
7.3; and
(c) miscellaneous items of Indebtedness not described in subsections (a)
and (b) which do not in the aggregate (taking into account all such
Indebtedness of all Restricted Persons) exceed $1,000,000 at any one
time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted Liens, no
-------------------
Restricted Person will create, assume or permit to exist any Lien upon any of
the properties or assets which it now owns or hereafter acquires.
Section 7.3. Hedging Contracts. No Restricted Person will be a party to
-----------------
or in any manner be liable on any Hedging Contract except:
(a) contracts entered into with the purpose and effect of fixing prices on
oil or gas expected to be produced by Restricted Persons, provided that at all
times: (i) no such contract fixes a price for a term of more than twelve (12)
months; (ii the aggregate monthly production covered by all such contracts
(determined, in the case of contracts that are not settled on a monthly basis,
by a monthly proration acceptable to Agent) for any single month does not in the
aggregate exceed seventy-five percent (75%) of Restricted Persons' aggregate
Projected Oil and Gas Production anticipated to be sold in the ordinary course
of Restricted Persons' businesses for such month, (ii no such contract requires
any Restricted Person to put up money, assets, letters of credit or other
security against the event of its nonperformance prior to actual default by such
Restricted Person in performing its obligations thereunder, and (iv each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Lender or one of its Affiliates)
at the time the contract is made has long-term obligations rated AA or Aa2 or
better, respectively, by either Rating Agency or is an investment grade-rated
industry participant. As used in this subsection, the term "Projected Oil and
-----------------
Gas Production" means the projected production of oil or gas (measured by volume
--------------
unit or BTU equivalent, not sales price) for the term of the contracts or a
particular month, as applicable, from properties and interests owned by any
Restricted Person which are located in or offshore of the United States and
which have attributable to them proved oil or gas reserves, as such production
is projected in the most recent report delivered pursuant to Section 6.2(e) or
6.2(f), after deducting projected production from any properties or interests
sold or under contract for sale that had been included in such report and after
adding projected production from any properties or interests that had not been
reflected in such report but that are reflected in a separate or supplemental
reports meeting the requirements of such Section 6.2(e) or 6.2(f) above and
otherwise are satisfactory to Agent; and
(b) contracts entered into by a Restricted Person with the purpose and
effect of fixing interest rates on a principal amount of indebtedness of such
Restricted Person that is accruing interest at a variable rate in accordance
with Borrower's hedging policy which has been approved by Majority Lenders.
50
Section 7.4. Limitation on Mergers, Issuances of Securities. No
----------------------------------------------
Restricted Person will merge or consolidate with or into any other Person except
that any Subsidiary of Borrower may be merged into or consolidated with (a)
another Subsidiary of Borrower, so long as a Guarantor is the surviving business
entity, or (b) Borrower, so long as Borrower is the surviving business entity,
and, in either case, provided that Borrower (i) has given Agent at least thirty
(30) days prior written notice of such merger or consolidation, and (ii) such
surviving Person executes and delivers to Agent all documents and instruments as
may be requested by Agent to protect Lenders' rights under the Loan Documents.
Borrower will not issue any securities other than shares of its common stock and
any options or warrants giving the holders thereof only the right to acquire
such shares. No Subsidiary of Borrower will issue any additional shares of its
capital stock or other securities or any options, warrants or other rights to
acquire such additional shares or other securities except to Borrower and only
to the extent not otherwise forbidden under the terms hereof. No Subsidiary of
Borrower which is a partnership will allow any diminution of Borrower's interest
(direct or indirect) therein.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
-------------------------------
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein, or discount, sell, pledge
or assign any notes payable to it, accounts receivable or future income, except,
to the extent not otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including oil and gas sold as produced and seismic data)
which is sold in the ordinary course of business on ordinary trade terms;
(c) interests in oil and gas properties, or portions thereof, to which no
proved reserves of oil, gas or other liquid or gaseous hydrocarbons are properly
attributed and which are not included in any Engineering Report; and
(d) sales by Borrower or its Subsidiaries, during any period from one
Determination Date to the next succeeding Determination Date, of oil and gas
properties included in any Engineering Report, whether producing or non-
producing, and related equipment (including without limitation any property
constituting Collateral) provided that:
(i) the Aggregate Value of such properties can be determined as of
the time of sale by reference to the Engineering Report (or supplement
thereto) then most recently furnished to Agent;
(ii) such properties are sold for fair consideration in arms'-length
transactions to parties that are not Affiliates of Borrower;
(iii) the sale of such properties will not materially impair or
diminish Borrower's Consolidated financial condition, business or
operations;
51
(iv) no Default or Event of Default exists;
(v) Borrower provides to Agent prior written notice of any single
proposed sale affecting oil and gas properties with an Aggregate Value in
excess of $350,000; provided, however, that no Restricted Person shall sell
any oil and gas properties included in any Engineering Report (whether
producing or non-producing) if the Aggregate Value thereof exceeds $350,000
but cannot otherwise be determined as of the time of sale by reference to
the Engineering Report (or supplement thereto) then most recently furnished
to Agent except with the prior written consent of Majority Lenders; and
(vi) if the Aggregate Value of such properties exceeds two percent
(2%) of the Aggregate Value of the oil and gas properties of Borrower and
its Subsidiaries (including without limitation any property constituting
Collateral), Majority Lenders will redetermine the Borrowing Base
immediately in accordance with Section 2.10.
Neither Borrower nor any of its Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Borrower's Subsidiaries. Neither
Borrower nor any of its Subsidiaries will discount, sell, pledge or assign any
notes payable to it, accounts receivable or future income except to the extent
expressly permitted under the Loan Documents.
Section 7.6. Limitation on Distributions. No Restricted Person will
---------------------------
declare or make any Distribution except as permitted in this Section 7.6.
Restricted Persons will not declare or make Distributions during any Fiscal
Year, which, individually or in the aggregate, exceed $500,000; provided,
however, that Subsidiaries of Borrower shall not be prohibited from declaring or
making Distributions to Borrower.
Section 7.7. Limitation on Investments and New Businesses. No Restricted
--------------------------------------------
Person will (a) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (b) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, or (c) make any acquisitions of or capital contributions to or other
Investments in any Person or property, other than Permitted Investments.
Section 7.8. Limitation on Credit Extensions. Except for Permitted
-------------------------------
Investments, no Restricted Person will extend credit, make advances or make
loans other than (a) normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated in
a normal and prudent manner, and (b) loans to Borrower.
Section 7.9. Transactions with Affiliates. Neither Borrower nor any of
----------------------------
its Subsidiaries nor any Guarantor will engage in any material transaction with
any of its Affiliates on terms which are less favorable to it than those which
would have been obtainable at the time in arm's-length dealing with Persons
other than such Affiliates, provided that such restriction shall not apply to
transactions among Borrower and its Subsidiaries.
52
Section 7.10. Prohibited Contracts;. Except as expressly provided for in
---------------------
the Loan Documents, no Restricted Person will, directly or indirectly, enter
into, create, or otherwise allow to exist any contract or other consensual
restriction on the ability of any Subsidiary of Borrower to: (a) pay dividends
or make other distributions to Borrower, (b) to redeem equity interests held in
it by Borrower, (c) to repay loans and other indebtedness owing by it to
Borrower, or (d) to transfer any of its assets to Borrower. No Restricted
Person will enter into any "take-or-pay" contract or other contract or
arrangement for the purchase of goods or services which obligates it to pay for
such goods or service regardless of whether they are delivered or furnished to
it. No Restricted Person will amend or permit any amendment to any contract or
lease which releases, qualifies, limits, makes contingent or otherwise
detrimentally affects the rights and benefits of Agent or any Lender under or
acquired pursuant to any Security Documents. No ERISA Affiliate will incur any
obligation to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
Section 7.11. Current Ratio. The ratio of Borrower's Consolidated current
-------------
assets to Borrower's Consolidated current liabilities will never be less than 1
to 1. For purposes of this Section 7.11, Borrower's Consolidated current
liabilities will be calculated without including any payments of principal on
the Notes which are required to be repaid within one year from the time of
calculation, and Borrower's Consolidated current assets will include up to
$5,000,000 of the Unused Borrowing Base.
Section 7.12. Tangible Net Worth. Borrower's Consolidated Tangible Net
------------------
Worth will never be less than the sum of (a) $55,000,000 plus (b) fifty percent
----
(50%) of Borrower's Adjusted Consolidated Net Income for each Fiscal Quarter, if
positive, and zero percent (0%) if negative, determined on a cumulative basis,
for the period beginning January 1, 1999 and ending on the last day of the most
recent Fiscal Quarter as of the time in question plus (c) seventy five percent
----
(75%) of the net proceeds of any issuance of common stock by Borrower issued
after January 1, 1999. As used in this subsection, "Consolidated Tangible Net
-------------------------
Worth" means an amount equal to (I) all Consolidated assets of Borrower, other
-----
than intangible assets (including without limitation as intangible assets such
assets as patents, copyrights, licenses, franchises, goodwill, trade names,
trade secrets and leases other than oil, gas or mineral leases or leases
required to be capitalized under GAAP), minus (II) Borrower's Consolidated Debt
-----
and "Consolidated Debt" means all Consolidated liabilities and similar balance
-----------------
sheet items of Borrower calculated in accordance with GAAP, which for purposes
of this subsection shall be treated as equity), together with all other
Indebtedness of Borrower or any of its Subsidiaries.
ARTICLE VIII - Events of Default and Remedies
------------------------------
Section 8.1. Events of Default. Each of the following events constitutes
-----------------
an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal component of any
Obligation when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise;
53
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in subsection (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within three
Business Days after the same becomes due;
(c) Any "default" or "event of default" occurs under any Loan Document
which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person fails (other than as referred to in subsections
(a), (b), (c) or (d) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of such
failure is given by Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Restricted Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 5.5 for any reason other
than its release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Borrower or to
Borrower and its Subsidiaries on a Consolidated basis or materially significant
to any Guarantor, and such failure is not remedied within the applicable period
of grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person (i) fails to pay any portion, when such portion
is due, of any of its Indebtedness in excess of $500,000, or (ii breaches or
defaults in the performance of any agreement or instrument by which any such
Indebtedness is issued, evidenced, governed, or secured, and any such failure,
breach or default continues beyond any applicable period of grace provided
therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code) in excess of $500,000 exists with respect
to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, or (ii any Termination Event occurs with respect to any ERISA Plan and
the then current value of such ERISA Plan's benefit liabilities exceeds the then
current value of such ERISA Plan's assets available for the payment of such
benefit liabilities by more than $500,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing employer's
proportionate share of such excess exceeds such amount);
(j) Any Restricted Person:
54
(i) suffers the entry against it of a judgment, decree or order for
relief by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of thirty days;
or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
Law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged within thirty
days after the making thereof, or such appointment or taking possession is
at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $500,000 (not covered by insurance
satisfactory to Agent in its discretion), unless the same is discharged
within thirty days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and a
stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process
to be issued by any Tribunal against all or any substantial part of its
assets or any part of the Collateral, and such writ or warrant of
attachment or any similar process is not stayed or released within thirty
days after the entry or levy thereof or after any stay is vacated or set
aside;
(k) Any Change of Control occurs;
(l) Any Material Adverse Change occurs; and
(m) Both ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ cease to be officers
of Borrower actually involved in the management of Borrower.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such
55
acceleration, any obligation of any Lender and any obligation of LC Issuer to
issue Letters of Credit hereunder to make any further Loans shall be permanently
terminated. During the continuance of any other Event of Default, Agent at any
time and from time to time may (and upon written instructions from Majority
Lenders, Agent shall), without notice to Borrower or any other Restricted
Person, do either or both of the following: (1) terminate any obligation of
Lenders to make Loans hereunder, and any obligation of LC Issuer to issue
Letters of Credit hereunder, and (2) declare any or all of the Obligations
immediately due and payable, and all such Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each Restricted Person who at any time ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
--------
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
ARTICLE IX - Agent
-----
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby
-----------------------------------
irrevocably appoints and authorizes Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Agent (which term as used in this sentence and in Section 9.5 and the
first sentence of Section 9.6 hereof shall include its Affiliates and its own
and its Affiliates' officers, directors, employees, and agents): (a) shall not
have any duties or responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not
be responsible to the Lenders for any recital, statement, representation, or
warranty (whether written or oral) made in or in connection with any Loan
Document or any certificate or other document referred to or provided for in, or
received by any of them under, any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of any Loan Document,
or any other document referred to or provided for therein or for any failure by
any Restricted Person or any other Person to perform any of its obligations
thereunder; (c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants or
agreements by any Restricted Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any Restricted Person
or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to be taken by it
under or in connection with any Loan Document, except for its own gross
56
negligence or willful misconduct. Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care.
Section 9.2. Reliance by Agent. Agent shall be entitled to rely upon any
-----------------
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Restricted Person), independent accountants, and
other experts selected by Agent. Agent may deem and treat the payee of any Note
as the holder thereof for all purposes hereof unless and until Agent receives
and accepts an Assignment and Acceptance executed in accordance with Section
10.6 hereof. As to any matters not expressly provided for by this Agreement,
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of Majority
Lenders, and such instructions shall be binding on all of the Lenders; provided,
--------
however, that Agent shall not be required to take any action that exposes Agent
-------
to personal liability or that is contrary to any Loan Document or applicable Law
or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
Section 9.3. Defaults. Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Default or Event of Default unless Agent has
received written notice from a Lender or Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that Agent receives such a notice of the occurrence of a Default or Event
of Default, Agent shall give prompt notice thereof to the Lenders. Agent shall
(subject to Section 9.2 hereof) take such action with respect to such Default or
Event of Default as shall reasonably be directed by Majority Lenders, provided
--------
that, unless and until Agent shall have received such directions, Agent may (but
----
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of
----------------
the Maximum Credit Amount and the Loans made by it, Agent (and any successor
acting as Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include Agent in its individual
capacity. Agent (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make Investments in, provide services to, and generally engage in any
kind of lending, trust, or other business with any Restricted Person or any of
its Subsidiaries or Affiliates as if it were not acting as Agent, and Agent (and
any successor acting as Agent) and its Affiliates may accept fees and other
consideration from any Restricted Person or any of its Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
57
Section 9.5. Indemnification. The Lenders agree to indemnify Agent (to
---------------
the extent not reimbursed under Section 10.4 hereof, but without limiting the
obligations of Borrower under such section) ratably in accordance with their
respective Percentage Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against Agent (including by any Lender) in
any way relating to or arising out of any Loan Document or the transactions
contemplated thereby or any action taken or omitted by Agent under any Loan
Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AGENT);
provided that no Lender shall be liable for any of the foregoing to the extent
--------
they arise from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any costs or
expenses payable by Borrower under Section 10.4, to the extent that Agent is not
promptly reimbursed for such costs and expenses by Borrower. The agreements
contained in this section shall survive payment in full of the Loans and all
other amounts payable under this Agreement.
Section 9.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
---------------------------------------
that it has, independently and without reliance on Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and its Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon Agent or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by Agent hereunder, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition, or business of any Restricted
Person or any of its Subsidiaries or Affiliates that may come into the
possession of Agent or any of its Affiliates.
Section 9.7. Rights as Lender. In its capacity as a Lender, Agent shall
----------------
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with any Restricted Person or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 9.8. Sharing of Set-Offs and Other Payments. Each Lender Party
--------------------------------------
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 3.1,
causes such Lender Party to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lender Parties share all payments of Obligations as
provided in Section
58
3.1; provided, however, that nothing herein contained shall in any way affect
the right of any Lender Party to obtain payment (whether by exercise of rights
of banker's lien, set-off or counterclaim or otherwise) of indebtedness other
than the Obligations. Borrower expressly consents to the foregoing arrangements
and agrees that any holder of any such interest or other participation in the
Obligations, whether or not acquired pursuant to the foregoing arrangements, may
to the fullest extent permitted by Law exercise any and all rights of banker's
lien, set-off, or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or any
part of any funds transferred pursuant to this section is thereafter recovered
from the seller under this section which received the same, the purchase
provided for in this section shall be deemed to have been rescinded to the
extent of such recovery, together with interest, if any, if interest is required
pursuant to the order of a Tribunal order to be paid on account of the
possession of such funds prior to such recovery.
Section 9.9. Investments. Whenever Agent in good faith determines that
-----------
it is uncertain about how to distribute to Lender Parties any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lender Parties about how such funds should be distributed, Agent may
choose to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Agent in good faith believes that the uncertainty or
dispute will not be promptly resolved, or if Agent is otherwise required to
invest funds pending distribution to Lender Parties, Agent shall invest such
funds pending distribution; all interest on any such Investment shall be
distributed upon the distribution of such Investment and in the same proportion
and to the same Persons as such Investment. All moneys received by Agent for
distribution to Lender Parties (other than to the Person who is Agent in its
separate capacity as a Lender Party) shall be held by Agent pending such
distribution solely as Agent for such Lender Parties, and Agent shall have no
equitable title to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of this Article
---------------------
(other than the following Section 9.11) are intended solely for the benefit of
Lender Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire without any
notice to or consent of Borrower or any Restricted Person.
Section 9.11. Resignation. Agent may resign at any time by giving written
-----------
notice thereof to Lenders and Borrower. Each such notice shall set forth the
date of such resignation. Upon any such resignation Borrower may, with the
written concurrence of Lenders whose aggregate Percentage Shares exceed fifty
percent (50%), designate a successor Agent. If within fifteen days after the
date of such resignation Borrower makes no such designation or such written
concurrence is not given, Majority Lenders shall have the right to appoint a
successor Agent. A successor must be appointed for any retiring Agent, and such
Agent's resignation shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the retiring Agent's
resignation, no successor Agent has been appointed and has accepted such
appointment, then the retiring Agent may appoint a successor Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the Laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
the retiring Agent shall be discharged from its duties and
59
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder the provisions of this Article IX shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under the Loan Documents.
Section 9.12. Documentation Agent. The Lender identified on the facing
-------------------
page of this Agreement as "Documentation Agent" has no right, power, obligation,
liability, responsibility, or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, the Lender
so identified as "Documentation Agent" shall not have and shall not be deemed to
have any fiduciary relationship with any Lender. Each Lender acknowledges that
it has not relied, and will not rely, on the Lender so identified as
"Documentation Agent" in taking or not taking action hereunder.
ARTICLE X - Miscellaneous
-------------
Section 10.1. Waivers and Amendments; Acknowledgments.
---------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by course of
----------------------
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Agent or LC Issuer, by such party, and (iii) if such party is a
Lender, by such Lender or by Agent on behalf of Lenders with the written consent
of Majority Lenders (which consent has already been given as to the termination
of the Loan Documents as provided in Section 10.10). Notwithstanding the
foregoing or anything to the contrary herein, Agent shall not, without the prior
consent of each individual Lender, execute and deliver on behalf of such Lender
any waiver or amendment which would: (1) waive any of the conditions specified
in Article IV (provided that Agent may in its discretion withdraw any request it
has made under Section 4.2(f)), (2) increase the maximum amount which such
Lender is committed hereunder to lend, (3) reduce any fees payable to such
Lender hereunder, or the principal of, or interest on, such Lender's Note, (4)
postpone any date fixed for any payment of any such fees, principal or interest,
(5) amend the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is required for Agent, Lenders or
any of them to take any particular action under the Loan Documents, (6) release
60
Borrower from its obligation to pay such Lender's Note or any Guarantor from its
guaranty of such payment, (7) release any material part of the Collateral,
except such releases relating to sales of property as permitted under Section
7.5, or (8) amend this Section 10.1(a).
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
------------------------------
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent or any Lender,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Lender as to the Loan Documents except as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Lender has any fiduciary obligation toward Borrower with respect
to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower and the other
Restricted Persons, on one hand, and each Lender, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any
Restricted Person and any Lender, (vii) Agent is not Borrower's Agent, but Agent
for Lenders, (viii) should an Event of Default or Default occur or exist, each
Lender will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time, (ix)
without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender, or any representative thereof, and no
such representation or covenant has been made, that any Lender will, at the time
of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (x) all Lender Parties have relied upon the
truthfulness of the acknowledgments in this section in deciding to execute and
deliver this Agreement and to become obligated hereunder.
(c) Joint Acknowledgment. This written Agreement and the other Loan
--------------------
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties.
There are no unwritten oral agreements between the parties.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
-----------------------------------------
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any
61
Restricted Person to any Lender Party under any Loan Document shall be deemed
representations and warranties by Borrower or agreements and covenants of
Borrower under this Agreement. The representations, warranties, indemnities, and
covenants made by Restricted Persons in the Loan Documents, and the rights,
powers, and privileges granted to Lender Parties in the Loan Documents, are
cumulative, and, except for expressly specified waivers and consents, no Loan
Document shall be construed in the context of another to diminish, nullify, or
otherwise reduce the benefit to any Lender Party of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar representation, warranty, indemnity, or covenant contained in any
other Loan Document, and each such similar representation, warranty, indemnity,
or covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and other
-------
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lender Parties), and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
facsimile or other electronic transmission, by delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, to
Borrower and Restricted Persons at the address of Borrower specified on the
Lender Schedule and to each Lender Party at its address specified on the Lender
Schedule (unless changed by similar notice in writing given by the particular
Person whose address is to be changed). Any such notice or communication shall
be deemed to have been given (a) in the case of personal delivery or delivery
service, as of the date of first attempted delivery during normal business hours
at the address provided herein, (b) in the case of facsimile or other electronic
transmission, upon receipt, or (c) in the case of registered or certified United
States mail, three days after deposit in the mail; provided, however, that no
Borrowing Notice shall become effective until actually received by Agent.
Section 10.4. Payment of Expenses; Indemnity.
------------------------------
(a) Payment of Expenses. Whether or not the transactions contemplated by
-------------------
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay: (i) all transfer,
stamp, mortgage, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Loan Documents or any other document referred to herein or
therein, (ii) all reasonable costs and expenses incurred by or on behalf of
Agent (including without limitation attorneys' fees, consultants' fees and
engineering fees, travel costs and miscellaneous expenses) in connection with
(1) the negotiation, preparation, execution and delivery of the Loan Documents,
and any and all consents, waivers or other documents or instruments relating
thereto, (2) the filing, recording, refiling and re-recording of any Loan
Documents and any other documents or instruments or further assurances required
to be filed or recorded or refiled or re-recorded by the terms of any Loan
Document, (3) the borrowings hereunder and other action reasonably required in
the course of administration hereof, (4) monitoring or confirming (or
preparation or negotiation of any document related to) Borrower's compliance
with any covenants or conditions contained in this Agreement or in any Loan
Document, and (iii) all reasonable costs
62
and expenses incurred by or on behalf of any Lender Party (including without
limitation attorneys' fees, consultants' fees and accounting fees) in connection
with the defense or enforcement of any of the Loan Documents (including this
Section) or the defense of any Lender Party's exercise of its rights thereunder.
In addition to the foregoing, until all Obligations have been paid in full,
Borrower will also pay or reimburse Agent for all reasonable out-of-pocket costs
and expenses of Agent or its agents or employees in connection with the
continuing administration of the Loans and the related due diligence of Agent,
including travel and miscellaneous expenses and fees and expenses of Agent's
outside counsel, reserve engineers and consultants engaged in connection with
the Loan Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party , upon
---------
demand, from and against any and all liabilities, obligations, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against such Lender Party
growing out of, resulting from or in any other way associated with any of the
Collateral, the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein (whether arising in contract or in tort or otherwise and including any
violation or noncompliance with any Environmental Laws by any Lender Party or
any other Person or any liabilities or duties of any Lender Party or any other
Person with respect to Hazardous Materials found in or released into the
environment).
The foregoing indemnification shall apply whether or not such liabilities and
costs are in any way or to any extent owed, in whole or in part, under any claim
or theory of strict liability or caused, in whole or in part by any negligent
act or omission of any kind by any Lender Party,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender Party" shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Person.
63
Section 10.5. Joint and Several Liability; Parties in Interest. All
------------------------------------------------
Obligations which are incurred by two or more Restricted Persons shall be their
joint and several obligations and liabilities. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Restricted Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior consent of Majority Lenders. Neither Borrower nor any Affiliates of
Borrower shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If Borrower or any
Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to all Lender Parties, such purchaser shall not be entitled to
any rights of any Lender under the Loan Documents unless and until Borrower or
its Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
------------------------------
(a) Each Lender may assign to one or more Eligible Transferees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Note, and its Percentage Share of
the Maximum Credit Amount); provided, however, that
-------- -------
(i) each such assignment shall be to an Eligible Transferee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least equal
to $10,000,000 or an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant, and not
varying, percentage of all of its rights and obligations under the Loan
Documents; and
(iv) the parties to such assignment shall execute and deliver to
Agent for its acceptance an Assignment and Acceptance in the form of
Exhibit F hereto, together with any Note subject to such assignment and a
processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this section, the assignor, Agent and
Borrower shall make appropriate arrangements so that, if required, new Notes are
issued to the assignor and the assignee. If the assignee is not incorporated
under the Laws of the United States of America or a state thereof, it shall
deliver to Borrower and Agent certification as to exemption from deduction or
withholding of Taxes in accordance with Section 3.9(d).
64
(b) Agent shall maintain at its address referred to on the Lender Schedule
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and their
Percentage Share of the Maximum Credit Amount of, and principal amount of the
Loans owing to, each Lender from time to time (the "Register"). The entries in
--------
the Register shall be conclusive and binding for all purposes, absent manifest
error, and Borrower, Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit F hereto, (i) accept such
Assignment and Acceptance, (ii record the information contained therein in the
Register and (ii give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Maximum Credit Amount and its Loans); provided, however, that
-------- -------
(i) such Lender's obligations under this Agreement shall remain unchanged, (ii
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (ii the participant shall be entitled to the
benefit of the yield protection provisions contained in Article III and the
right of offset contained in Section 6.16, and (iv Borrower shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of Borrower relating to its Loans and its
Note and to approve any amendment, modification, or waiver of any provision of
this Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans or
Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Note, or increasing its Commitment Amount.
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning Borrower or any of
its Subsidiaries in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants), subject,
however, to the provisions of Section 10.7 hereof.
Section 10.7. Confidentiality. Agent and each Lender (each, a "Lending
--------------- -------
Party") agrees to keep confidential any information furnished or made available
-----
to it by Borrower pursuant to this Agreement that is marked confidential;
provided that nothing herein shall prevent any Lending Party from disclosing
--------
such information (a) to any other Lending Party or any Affiliate of any
65
Lending Party, or any officer, director, employee, agent, or advisor of any
Lending Party or Affiliate of any Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any Law, rule, or regulation, (d) upon the order of
any court or administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available to the public
or that is or becomes available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Agreement, (g) in connection
with any litigation to which such Lending Party or any of its Affiliates may be
a party, (h) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Loan Document, and (i) subject to
provisions substantially similar to those contained in this section, to any
actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. Except to the extent
------------------------------------
that the law of another jurisdiction is expressly elected in a Loan Document,
the Loan Documents shall be deemed contracts and instruments made under the laws
of the State of Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the United States of
America, without regard to principles of conflicts of law. Chapter 346 of the
Texas Finance Code (which regulates certain revolving credit loan accounts and
revolving tri-party accounts) does not apply to this Agreement or to the Notes.
Borrower hereby irrevocably submits itself to the non-exclusive jurisdiction of
the state and federal courts sitting in the State of Texas and agrees and
consents that service of process may be made upon it or any Restricted Person in
any legal proceeding relating to the Loan Documents or the Obligations by any
means allowed under Texas or federal law.
Section 10.9. Limitation on Interest. Lender Parties, Restricted Persons
----------------------
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
Law from time to time in effect. Neither any Restricted Person nor any present
or future guarantors, endorsers, or other Persons hereafter becoming liable for
payment of any Obligation shall ever be liable for unearned interest thereon or
shall ever be required to pay interest thereon in excess of the maximum amount
that may be lawfully contracted for, charged, or received under applicable Law
from time to time in effect, and the provisions of this section shall control
over all other provisions of the Loan Documents which may be in conflict or
apparent conflict herewith. Lender Parties expressly disavow any intention to
contract for, charge, or collect excessive unearned interest or finance charges
in the event the maturity of any Obligation is accelerated. If (a) the maturity
of any Obligation is accelerated for any reason, (b) any Obligation is prepaid
and as a result any amounts held to constitute interest are determined to be in
excess of the legal maximum, or (c) any Lender or any other holder of any or all
of the Obligations shall otherwise collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all of
the Obligations to an amount in excess of that permitted to be charged by
applicable Law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then outstanding principal of the related Obligations or, at such
Lender's or holder's option, promptly returned to Borrower or the other payor
thereof upon such determination. In
66
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any non-
principal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully contract for, charge, or receive the maximum amount of interest
permitted under applicable Law. In the event applicable Law provides for an
interest ceiling under Chapter 303 of the Texas Finance Code (the "Texas Finance
Code") as amended, for that day, the ceiling shall be the "weekly ceiling" as
defined in the Texas Finance Code, provided that if any applicable Law permits
greater interest, the Law permitting the greatest interest shall apply. As used
in this section the term "applicable Law" means the Laws of the State of Texas
or the Laws of the United States of America, whichever Laws allow the greater
interest, as such Laws now exist or may be changed or amended or come into
effect in the future.
Section 10.10. Termination; Limited Survival. In its sole and absolute
-----------------------------
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Lenders, without the joinder of or further
action by any Lender.
Section 10.11. Severability. If any term or provision of any Loan
-----------
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.12. Counterparts; Fax. This Agreement may be separately
-----------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement. This Agreement and the Loan Documents
may be validly executed and delivered by facsimile or other electronic
transmission.
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc. Borrower
--------------------------------------------
and each Lender Party hereby knowingly, voluntarily, intentionally, and
irrevocably (a) waives, to the maximum extent not prohibited by Law, any right
it may have to a trial by jury in respect of any litigation based hereon, or
directly or indirectly at any time arising out of, under or
67
in connection with the Loan Documents or any transaction contemplated thereby or
associated therewith, before or after maturity; (b) waives, to the maximum
extent not prohibited by Law, any right it may have to claim or recover in any
such litigation any "Special Damages", as defined below, (c) certifies that no
party hereto nor any representative or agent or counsel for any party hereto has
represented, expressly or otherwise, or implied that such party would not, in
the event of litigation, seek to enforce the foregoing waivers, and (d)
acknowledges that it has been induced to enter into this Agreement, the other
Loan Documents and the transactions contemplated hereby and thereby by, among
other things, the mutual waivers and certifications contained in this section.
As used in this section, "Special Damages" includes all special, consequential,
exemplary, or punitive damages (regardless of how named), but does not include
any payments or funds which any party hereto has expressly promised to pay or
deliver to any other party hereto.
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
KEY PRODUCTION COMPANY, INC.
By:__________________________________________
▇▇▇▇ ▇▇▇▇▇
Vice President and Chief Financial Officer
Address:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President and Chief Financial
Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
BANK OF AMERICA, N.A., as
Administrative Agent, LC Issuer, and Lender
By:____________________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
By:____________________________________________
Name:
Title:
CIBC, INC.
By:___________________________________________
Name:
Title:
BANK OF OKLAHOMA, N.A.
By:___________________________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
PARIBAS
By:_______________________________________
Name:
Title:
BANK ONE, NA
By:___________________________
Name:
Title:
SCHEDULE 1
DISCLOSURE SCHEDULE
-------------------
To supplement the following sections of the Agreement of which this
Schedule is a part, Borrower hereby makes the following disclosures:
Section 5.13. Names and Places of Business:
----------------------------
Key Production Company, Inc. does business in the State of South Dakota as
Key Production Company of Colorado, Inc. Key Production Company, Inc. does
business in the State of Texas as Key Energy Company of Colorado, Inc.
Prior to March, 1996, the chief executive office and principal place of
business of ▇▇▇▇▇ Exploration Corporation, ▇▇▇▇▇ Oil and Gas Corporation, and
▇▇▇▇▇ Gas Systems and Equipment, Inc. was located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
Restricted Persons maintain regional offices at the following locations:
California Region: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Mid-Continent Region: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Gulf Coast Region: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
North Texas Office
(Part of Mid-Continent
Region): ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Section 5.14. Borrower's Subsidiaries:
------------------------
Key Production Company, Inc. owns 100% of the issued and outstanding capital
stock of ▇▇▇▇▇ Exploration Corporation. ▇▇▇▇▇ Exploration Corporation owns 100%
of the issued and outstanding capital stock of ▇▇▇▇▇ Oil and Gas Corporation and
of ▇▇▇▇▇ Gas Systems and Equipment, Inc.
SCHEDULE 2
SECURITY SCHEDULE
-----------------
1. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement of even date with the Agreement by Borrower
2. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement of even date with the Agreement by ▇▇▇▇▇ Oil and
Gas Corporation
3. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement of even date with the Agreement by ▇▇▇▇▇ Gas
Systems and Equipment, Inc.
4. Guaranty of ▇▇▇▇▇ Exploration Corporation of even date with the
Agreement
5. Guaranty of ▇▇▇▇▇ Oil and Gas Corporation of even date with the
Agreement
6. Guaranty of ▇▇▇▇▇ Gas Systems and Equipment, Inc. of even date with
the Agreement
7. Stock Pledge by Borrower of even date with the Agreement
8. Stock Pledge by ▇▇▇▇▇ of even date with the Agreement
SCHEDULE 3
INSURANCE SCHEDULE
SCHEDULE 4
TITLE OPINION PROPERTIES SCHEDULE
SCHEDULE 5
LENDER SCHEDULE
Bank of America, N.A.
Applicable Lending Office for Base Rate Loans: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 20.00000000000%
Commitment Amount: $30,000,000
SCHEDULE 5
LENDER SCHEDULE
U.S. Bank National Association
Applicable Lending Office for Base Rate Loans: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 12.94117647059%
Commitment Amount: $19,411,764.71
SCHEDULE 5
LENDER SCHEDULE
CIBC, Inc.
Applicable Lending Office for Base Rate Loans: 2 Paces West
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: 2 Paces West
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices: 2 Paces West
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 12.94117647059%
Commitment Amount: $19,411,764.71
SCHEDULE 5
LENDER SCHEDULE
Bank of Oklahoma, N.A.
Applicable Lending Office for Base Rate Loans: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 12.94117647059%
Commitment Amount: $19,411,764.71
SCHEDULE 5
LENDER SCHEDULE
Union Bank of California, N.A.
Applicable Lending Office for Base Rate Loans: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 12.94117647059%
Commitment Amount: $19,411,764.71
SCHEDULE 5
LENDER SCHEDULE
Paribas
Applicable Lending Office for Base Rate Loans: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 12.94117647059%
Commitment Amount: $19,411,764.71
SCHEDULE 5
LENDER SCHEDULE
Bank One, NA
Applicable Lending Office for Base Rate Loans: ▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Applicable Lending Office for Eurodollar Loans: ▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Address for Notices: ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax. (▇▇▇) ▇▇▇-▇▇▇▇
Percentage Share: 15.29411764705%
Commitment Amount: $22,941,176.45
EXHIBIT A
PROMISSORY NOTE
---------------
$_________________ Dallas, Texas November 12, 1999
FOR VALUE RECEIVED, the undersigned, Key Production Company, Inc., a
Delaware corporation (herein called "Borrower"), hereby promises to pay to the
order of ____________________________________________, (herein called "Lender"),
the principal sum of ___________________________________________________________
Dollars ($ __________), or, if greater or less, the aggregate unpaid principal
amount of the Loan made under this Note by Lender to Borrower pursuant to the
terms of the Credit Agreement (as hereinafter defined), together with interest
on the unpaid principal balance thereof as hereinafter set forth, both principal
and interest payable as herein provided in lawful money of the United States of
America at the offices of Agent under the Credit Agreement, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or at such other place within Dallas County, Texas, as from
time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
of even date herewith among Borrower, Bank of America, N.A., as Administrative
Agent, and the lenders (including Lender) referred to therein (herein, as from
time to time supplemented, amended or restated, called the "Credit Agreement"),
and is a "Note" as defined therein, (b) is subject to the terms and provisions
of the Credit Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of certain
stated events, and (c) is secured by and entitled to the benefits of certain
Security Documents (as identified and defined in the Credit Agreement). Payments
on this Note shall be made and applied as provided herein and in the Credit
Agreement. Reference is hereby made to the Credit Agreement for a description of
certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Security Documents for a description of the nature and extent of the
security thereby provided and the rights of the parties thereto.
Payments of the principal of this Note shall be due and payable on the
dates and in the amounts set forth in the Credit Agreement. The entire
principal balance of this Note, together with all interest accrued hereon, shall
be due and payable in full on the Maturity Date.
So long as no Event of Default has occurred and is continuing, all Base
Rate Loans (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Adjusted Base
Rate in effect on such day. If an Event of Default has occurred and is
continuing, all Base Rate Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the applicable Default Rate in effect on such day. On each
Interest Payment Date Borrower shall pay to the holder
hereof all unpaid interest which has accrued on the Base Rate Loans to but not
including such Interest Payment Date.
So long as no Event of Default has occurred and is continuing, each
Eurodollar Loan (exclusive of any past due principal or interest) shall bear
interest on each day during the related Interest Period at the related Adjusted
Eurodollar Rate in effect on such day. If an Event of Default has occurred and
is continuing, all Eurodollar Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the applicable Default Rate in effect on such day. On each
Interest Payment Date relating to such Eurodollar Loan, Borrower shall pay to
the holder hereof all unpaid interest which has accrued on such Eurodollar Loan
to but not including such Interest Payment Date.
All past due principal of and past due interest on the Loans shall bear
interest on each day outstanding at the applicable Default Rate in effect on
such day, and such interest shall be due and payable daily as it accrues.
Notwithstanding the foregoing provisions of this Note: (a) this Note shall
never bear interest in excess of the Highest Lawful Rate, and (b) if at any time
the rate at which interest is payable on this Note is limited by the Highest
Lawful Rate (by the foregoing subsection (a) or by reference to the Highest
Lawful Rate in the definitions of Adjusted Base Rate, Adjusted Eurodollar Rate,
and Default Rate), this Note shall bear interest at the Highest Lawful Rate and
shall continue to bear interest at the Highest Lawful Rate until such time as
the total amount of interest accrued hereon equals (but does not exceed) the
total amount of interest which would have accrued hereon had there been no
Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable Law, may
be contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Credit Agreement which more fully set out
the limitations on how interest accrues hereon. In the event applicable Law
provides for an interest ceiling under Chapter 303 of the Texas Finance Code
(the "Texas Finance Code") as amended, for that day, the ceiling shall be the
"weekly ceiling" as defined in the Texas Finance Code and shall be used in this
Note for calculating the Highest Lawful Rate and for all other purposes. The
term "applicable law" as used in this Note shall mean the laws of the State of
Texas or the laws of the United States, whichever laws allow the greater
interest, as such laws now exist or may be changed or amended or come into
effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
2
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
KEY PRODUCTION COMPANY, INC.
By:_____________________________________
▇▇▇▇ ▇▇▇▇▇
Vice President and Chief Financial
Officer
3
EXHIBIT B
BORROWING NOTICE
----------------
Reference is made to that certain Credit Agreement dated as of November 12,
1999 (as from time to time amended, the "Agreement"), by and among Key
Production Company, Inc. ("Borrower"), Bank of America, N.A., as Administrative
Agent, and certain financial institutions ("Lenders"). Terms which are defined
in the Agreement are used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Borrower hereby requests a Borrowing of
new Loans to be advanced pursuant to Section 2.2(a) of the Agreement as follows:
Aggregate amount of Borrowing: $__________________
Type of Loans in Borrowing: __________________
Date on which Loans are to
be advanced: __________________
Length of Interest Period for
Eurodollar Loans (1, 2, 3 or 6 months): ___________ months
If combined with existing Loans
see attached Continuation/Conversion Notice.
To induce Lenders to make such Loans, Borrower hereby represents, warrants,
acknowledges, and agrees to and with Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth in the
Agreement and the other Loan Documents are true and correct on and as of
the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension
of credit under the Agreement), with the same effect as though such
representations and warranties had been made on and as of the date hereof.
(c) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 10.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Loans requested
hereby. Borrower will use the Loans hereby requested in compliance with
Section 2.4 of the Agreement*[.] *[for the following purposes:]
(d) Except to the extent waived in writing as provided in Section
10.1(a) of the Agreement, Borrower has performed and complied with all
agreements and conditions in the Agreement required to be performed or
complied with by Borrower on or prior to the date hereof, and each of the
conditions precedent to Loans contained in the Agreement remains satisfied.
(e) The Facility Usage, after the making of the Loans requested
hereby, will not be in excess of the Borrowing Base on the date requested
for the making of such Loans.
(f) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 10.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
KEY PRODUCTION COMPANY, INC.
By: ___________________________________
Name:
Title:
2
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
------------------------------
Reference is made to that certain Credit Agreement dated as of November 12,
1999 (as from time to time amended, the "Agreement"), by and among Key
Production Company, Inc. ("Borrower"), Bank of America, N.A., as Administrative
Agent, and the lenders referred to therein ("Lenders"). Terms which are defined
in the Agreement are used herein with the meanings given them in the Agreement.
Borrower hereby requests a Conversion or Continuation of existing Loans
into a new Borrowing pursuant to Section 2.3 of the Agreement as follows:
Existing Borrowing(s) to be continued or converted:
$____________ of Eurodollar Loans with Interest Period ending
_____________
$____________ of Base Rate Loans
If being combined with new Loans, $____________ of new Loans to be
advanced on ____________
Aggregate amount of new Borrowing: $__________________
Type of Loans in new Borrowing: __________________
Date of Continuation or Conversion: __________________
Length of Interest Period for Eurodollar Loans
(1, 2, 3 or 6 months): ___________ months
To meet the conditions set out in the Agreement for such
conversion/continuation, Borrower hereby represents, warrants, acknowledges, and
agrees to and with Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 10.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 10.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF this instrument is executed as of __________________.
KEY PRODUCTION COMPANY, INC.
By: ___________________________________
Name:
Title:
2
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
--------------------
Reference is made to that certain Credit Agreement dated as of November 12,
1999 (as from time to time amended, the "Agreement"), by and among Key
Production Company, Inc. ("Borrower"), Bank of America, N.A., as Administrative
Agent, and certain financial institutions ("Lenders"), which Agreement is in
full force and effect on the date hereof. Terms which are defined in the
Agreement are used herein with the meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 6.1(b) of the Agreement.
Together herewith Borrower is furnishing to Agent and each Lender Borrower's
*[audited/unaudited] financial statements (the "Financial Statements") as at
____________ (the "Reporting Date"). Borrower hereby represents, warrants, and
acknowledges to Agent and each Lender that:
(a) the officer of Borrower signing this instrument is the duly
elected, qualified and acting ____________ of Borrower and as such is
Borrower's chief financial officer;
(b) the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing Borrower's
compliance as of the Reporting Date with the requirements of Sections
____________ of the Agreement *[and Borrower's non-compliance as of such
date with the requirements of Section(s) ____________ of the Agreement];
(d) on the Reporting Date Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements of Section
6.4 of the Agreement, and no Default otherwise existed on the Reporting
Date or otherwise exists on the date of this instrument *[except for
Default(s) under Section(s) ____________ of the Agreement, which *[is/are]
more fully described on a schedule attached hereto].
(e) *[Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower set forth in the Agreement and
the other Loan Documents are true and correct on and as of the date hereof
(except to the extent that the facts on which such representations and
warranties are based have been changed by the extension of credit under the
Agreement), with the same effect as though such representations and
warranties had been made on and as of the date hereof.
The officer of Borrower signing this instrument hereby certifies that he
has reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above
representations, warranties and acknowledgments of Borrower and, to the best of
his knowledge, such representations, warranties, and acknowledgments are true,
correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
KEY PRODUCTION COMPANY, INC.
By: ______________________________
Name:
Title:
2
EXHIBIT E
OPINION OF COUNSEL FOR RESTRICTED PERSONS
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
-------------------------
Reference is made to the Credit Agreement dated as of November 12, 1999
(the "Credit Agreement") among Key Production Company, Inc., a Delaware
----------------
corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement)
--------
and Bank of America, N.A., as Administrative Agent for the Lenders (the
"Agent"). Terms defined in the Credit Agreement are used herein with the same
-----
meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (ii makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Restricted Person
or the performance or observance by any Restricted Person of any of its
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv attaches the Note held by the Assignor and
requests that Agent exchange such Note for new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and to the Assignor in an amount equal to the Commitment retained by the
Assignor, if any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (ii confirms that it is an Eligible Assignee; (iv appoints and
authorizes Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement as are delegated
to Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi attaches any
U.S. Internal Revenue Service or other forms required under Section 3.9.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to Agent for acceptance and recording by Agent. The effective date for
this Assignment and Acceptance (the "Effective Date") shall be the date of
--------------
acceptance hereof by Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by Agent, as of the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Upon such acceptance and recording by Agent, from and after the
Effective Date, Agent shall make all payments under the Credit Agreement and the
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the Laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
2
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
Assignee's Commitment Amount: $_______
Aggregate outstanding principal amount
of Loans assigned: $_______
Principal amount of Note payable to Assignee: $_______
Principal amount of Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): *_______, 19__
[NAME OF ASSIGNOR], as Assignor
By:________________________________
Title:
Dated:_______, 19__
[NAME OF ASSIGNEE], as Assignee
By:________________________________
Title:
Domestic Lending Office:
Eurodollar Lending Office:
* This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to Agent.
Accepted [and Approved] **
this ___ day of ___________, 19__
BANK OF AMERICA, N.A.
By:______________________________
Title:
[Approved this ____ day
of ____________, 19__
KEY PRODUCTION COMPANY, INC.
By:______________________________]**
Title:
** Required if the Assignee is an Eligible Assignee solely by reason of
subsection (iii) of the definition of "Eligible Assignee".
EXHIBIT G
LETTER OF CREDIT APPLICATION AND AGREEMENT
Bank of America [LOGO]
Application and Agreement
for Standby Letter of Credit
--------------------------------------------------------------------------------
For Bank Use Only
TO: Bank of America, N.A. ("Bank of America")
L/C No. _________________
--------------------------------------------------------------------------------
A. Application.
_____________________________________ ("Applicant") requests Bank of
America to issue an irrevocable standby letter of credit ("Letter of
Credit") as follows:
Full text teletransmission [X] Airmail with brief preliminary teletransmission advice
[X] Airmail [X] Courier
1. Applicant Address: 2. For Account of (Name and address, if different from Applicant):
___________________________________________________________ ___________________________________________________________________
___________________________________________________________ ___________________________________________________________________
___________________________________________________________ ___________________________________________________________________
3. Advising Bank: 4. In favor of (Beneficiary Name and Address):
___________________________________________________________ ___________________________________________________________________
___________________________________________________________ ___________________________________________________________________
___________________________________________________________ ___________________________________________________________________
5. Amount _________________________________________________ 6. Expiration Date. Drafts to be drawn on and presented at Bank
_______(_________________________________________) of America's address set forth in the Letter of Credit on or
(in words and figures) before: _____________________________________________________.
Currency __________________________________________________
[_] If this box is marked, Applicant authorizes Bank of America to effect
payment of any sums due under this Application and Agreement by means of
debiting Applicant's account with Bank of America set forth below. This
authorization does not affect the obligation of Applicant to pay such sums
when due, if there are insufficient funds in such account to make such
payment when due, or if Bank of America fails to debit the account, and this
authorization does not affect any setoff rights of Bank of America at law or
in equity. Applicant's account number with Bank of America is
_________________.
169968.06Available by drafts drawn at sight on Bank of America when accompanied
by the following documentation:
1. The original Letter of Credit.
2. The signed statement of the Beneficiary worded as follows (state wording
that is to appear in the statement accompanying the draft; specify if such
wording must be exact):
Special instructions:___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
B. Agreement.
In consideration of Bank of America's issuing the Letter of Credit at the
request of Applicant, Applicant agrees to the following:
1. Applicant Payments.
(a) Applicant shall pay Bank of America, on demand, all amounts paid by
Bank of America under or in respect of the Letter of Credit.
(b) On each fee payment date, so long as any undrawn amount of the Letter
of Credit remains available, Applicant shall pay Bank of America a Letter of
Credit fee. The fee payment date(s) shall be the date(s) as Applicant and Bank
of America may agree, or in the absence of such agreement, the fee payment date
shall be the date on which the Bank of America issues the Letter of Credit. The
fee shall be at such rate per annum as Applicant and Bank of America may agree,
or in the absence of such agreement, at the rate customarily charged by Bank of
America at the time such fee is payable, based upon Applicant's
creditworthiness, as determined by Bank of America in its sole discretion. The
applicable Letter of Credit fee shall be calculated and payable on the undrawn
amount of the Letter of Credit as of each fee payment date, and shall be for the
period commencing on such fee payment date and ending on the day preceding the
next fee payment date (or the expiration date of the Letter of Credit, as the
case may be), both dates inclusive. The Letter of Credit fee will be computed on
the basis of a 360-day year and actual days elapsed. Bank of America shall not
be required to refund any portion of the Letter of Credit fee paid for any
period during which (a) the Letter of Credit expires or otherwise terminates, or
(b) the undrawn amount of the Letter of Credit is reduced by drawings or by
amendment.
(c) Applicant shall pay Bank of America, on demand, commissions and fees
for amendments to, payments under, extensions of or cancellation of the Letter
of Credit, and other services in the amounts Applicant and Bank of America may
agree, or, in the absence of such agreement, in the amounts customarily charged
by Bank of America on the date of Bank of America's demand.
(d) All payments and deposits by Applicant under this Application and
Agreement shall be made at the banking center or office Bank of America may
designate from time to time. Bank of America shall have no obligation to pay
Applicant interest on any deposit made by Applicant under this Application and
Agreement.
(e) (i) All payments and deposits by Applicant under this Application and
Agreement shall be in the currency in which the Letter of Credit is payable,
except that Bank of America may, at its option, require payments and deposits by
Applicant under this Application and Agreement to be made in U.S. Dollars if the
Letter of Credit is payable in a foreign currency.
(ii) The amount of each payment and each deposit by Applicant under
this Application and Agreement in U.S. Dollars for a Letter of Credit payable in
a foreign currency shall be determined by converting the relevant amount to U.S.
Dollars at the Conversion Rate in effect:
(A) with respect to each payment under Section 1(a) of this
Agreement, on the date the payment is made by Bank of America under or in
respect of the Letter of Credit; and
(B) with respect to each payment not falling under the preceding
clause (A) and each deposit, on the date of Bank of America's demand for such
payment or deposit.
(iii) If a U.S. Dollar deposit by Applicant under this Application and
Agreement for a Letter of Credit payable in a foreign currency becomes less than
the U.S. Dollar equivalent of the undrawn amount of the Letter of Credit because
of any variation in rates of exchange, Applicant shall deposit with Bank of
America, on demand, additional amounts in U.S. Dollars so that the total amount
deposited by Applicant under this Application and Agreement is not less than the
U.S. Dollar equivalent of the undrawn amount of the Letter of Credit, determined
by using the Conversion Rate on the date of Bank of America's latest demand.
(iv) "Conversion Rate" means the rate quoted by Bank of America for
the purchase from Bank of America of the relevant foreign currency with U.S.
Dollars.
(f) Applicant shall reimburse or compensate Bank of America, on demand,
for all costs incurred, losses suffered and payments made by Bank of America
which are applied or allocated by Bank of America to the Letter of Credit (as
determined by Bank of America) by reason of any and all present or future
reserve, capital, deposit, assessment or similar requirements against (or
against any class of or change in or in the amount of) assets or liabilities of,
or commitments or extensions of credit by, Bank of America.
(g) Applicant shall pay interest, on demand, on any amount not paid when
due under this Application and Agreement from the due date until payment in full
at a rate per annum equal to the rate of interest publicly announced from time
to time by Bank of America as its prime rate, plus three percentage points (not
to exceed the maximum rate permitted by applicable law). The prime rate is set
by Bank of America based on various factors, including Bank of America's costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some credits. Bank of America may price credit
at, above or below the prime rate. Any change in Bank of America's prime rate
shall take effect at the opening of business on the day specified in Bank of
America's public announcement of a change in Bank of America's prime rate.
Interest will be computed on the basis of a 360-day year and actual days
elapsed.
2. Deposit Events. Upon the occurrence of any of the following events,
Applicant shall deposit with Bank of America, on demand (except that such demand
shall not be required in the event of an occurrence described in (b) below) and
as cash security for Applicant's obligations to Bank of America under this
Application and Agreement, an amount equal to the undrawn amount of the Letter
of Credit:
(a) Applicant defaults under any provision of this Application and
Agreement;
(b) Any bankruptcy or similar proceeding is commenced with respect to
Applicant;
(c) Any default occurs under any other agreement involving the borrowing
of money or the extension of credit under which Applicant may be obligated as
borrower, installment purchaser or guarantor, if such default consists of the
failure to pay any indebtedness when due or if such default permits or causes
the acceleration of any indebtedness or the termination of any commitment to
lend or to extend credit;
(d) Applicant or any of its affiliates defaults on any other obligation to
Bank of America;
(e) In the opinion of Bank of America, any material adverse change occurs
in Applicant's business, operations, financial condition or ability to perform
its obligations under this Application and Agreement;
(f) Any guarantee of Applicant's obligations under this Application and
Agreement terminates, is revoked or its validity is contested by the guarantor,
or any of the events set forth in (b) through (e) above occur with respect to
the guarantor rather than the Applicant; or
(g) Any court order, injunction or other legal process is issued
restraining or seeking to restrain drawing or payment under the Letter of
Credit.
3. Charge to Accounts. If Bank of America is unable to debit the account, if
any, specified on the Application, Applicant authorizes Bank of America to
charge any of Applicant's accounts with Bank of America, or any affiliate of
Bank of America, for all amounts then due and payable to Bank of America under
this Application and Agreement.
4. Indemnities.
(a) Applicant will indemnify and hold Bank of America (such term to
include for purposes of this Section 4 affiliates of Bank of America and its and
its affiliates' officers, directors, employees and agents) harmless from and
against (i) all loss or damage arising out of the issuance by Bank of America
of, or any other action taken by any such indemnified party in connection with,
the Letter of Credit including any loss or damage arising in whole or in part
from the negligence of the party seeking indemnification, but excluding any loss
or damage resulting from the gross negligence or willful misconduct of the party
seeking indemnification, and (ii) all costs and expenses (including reasonable
attorneys' fees and allocated costs of in-house counsel and legal expenses) of
all claims or legal proceedings arising out of the issuance by Bank of America
of the Letter of Credit or incident to the collection of amounts owed by
Applicant hereunder or the enforcement of the rights of Bank of America
hereunder, including, without limitation, legal proceedings related to any court
order, injunction, or other process or decree restraining or seeking to restrain
Bank of America from paying any amount under the Letter of Credit. Additionally,
Applicant will indemnify and hold Bank of America harmless from and against all
claims, losses, damages, suits, costs or expenses (including reasonable
attorneys' fees and allocated costs of in-house counsel, and legal expenses)
arising out of Applicant's failure to timely procure licenses or comply with
applicable laws, regulations or rules, or any other conduct or failure of
Applicant relating to or affecting the Letter of Credit.
(b) If any award, judgment or order is given or made for the payment of
any amount due under this Application and Agreement and such award, judgment or
order is expressed in a currency other than the currency required under this
Application and Agreement, Applicant shall indemnify Bank of America against and
hold Bank of America harmless from all loss and damage incurred by Bank of
America as a result of any variation in rates of exchange between the date of
such award, judgment or order and the date of payment (or, in the case of
partial payments, the date of each partial payment thereof) in the required
currency
(c) Each of these indemnities shall constitute an obligation separate and
independent from the other obligations contained in this Application and
Agreement, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by Bank of America from time to
time, and shall continue in full force and effect notwithstanding any award,
judgment or order for a liquidated sum in respect of an amount due under this
Application and Agreement.
5. Governing Law and Rules. The Letter of Credit will be subject to, and
performance under the Letter of Credit by Bank of America, its correspondents,
and the beneficiary will be governed by, the rules of the "International Standby
Practices 1998" ("ISP98") or such later revision as may be published by the
Institute of International Banking Law & Practice, subject to applicable laws.
The Letter of Credit and this Application and Agreement shall be governed by and
construed under the laws of the state in the United States where Bank of America
issues the Letter of Credit, without reference to that state's provisions
regarding conflicts of laws, to the jurisdiction of which the parties hereto
submit. If the Letter of Credit is not issued in any state, the law of the State
of California will govern.
6. Applicant Status.
The word "Applicant" in this Application and Agreement refers to each
signer (other than Bank of America) of this Application and Agreement. If this
Application and Agreement is signed by more than one Applicant, their
obligations under this Application and Agreement shall be joint and several.
7. Representations and Warranties.
Applicant represents and warrants to Bank of America that it has the
authority to enter into this Application and Agreement and it will not violate
or conflict with any of the provisions of its constituent documents or any other
agreement or undertaking to which it is a party or to which it is bound.
8. Miscellaneous.
(a) No delay, extension of time, renewal, compromise or other indulgence
which may occur or be granted by Bank of America shall impair the rights and
powers of Bank of America hereunder. Bank of America shall not be deemed to have
waived any of its rights hereunder, unless Bank of America shall have signed
such waiver in writing.
(b) Any notice from Bank of America to Applicant shall be sent to the
address of Applicant set forth on the Application and shall be effective upon
receipt by Applicant. Any notice from Applicant to Bank of America shall be sent
to the address of Bank of America specified by Bank of America to Applicant and
shall be effective upon receipt by Bank of America.
(c) Each provision of this Application and Agreement shall be interpreted
in such manner as to be effective and valid under applicable law but if any
provision of this Application and Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Application and Agreement.
(d) Any and all payments made to Bank of America hereunder shall be made
free and clear of and without deduction for any present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding income or franchise taxes imposed by the United States and
any political subdivisions thereof (such nonexcluded taxes being herein called
"Taxes"). If Applicant shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 8(d)), Bank
of America shall receive an
amount equal to the sum Bank of America would have received had no such
deductions been made, (ii) Applicant shall make such deductions, and (iii)
Applicant shall pay the full amount deducted to the relevant authority in
accordance with applicable law. Applicant will indemnify Bank of America for the
full amount of Taxes (including, without limitation, any Taxes imposed by any
jurisdiction on amounts payable under this Section 8(d)) paid by Bank of America
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days from the date Bank
of America makes written demand therefor. Within 30 days after the date of any
payment of Taxes, Applicant will furnish to Bank of America the original or a
certified copy of a receipt evidencing payment thereof.
(e) This Application and Agreement shall be binding upon Applicant, its
successors and assigns, and shall inure to the benefit of Bank of America, its
successors, transferees and assigns; provided that any assignment by Applicant
of any of its rights or obligations under this Application and Agreement without
the prior written consent of Bank of America shall be void.
(f) Unless the Applicant has specified in the Application that the wording
of the Letter of Credit must be exact, Applicant understands that the final form
of the Letter of Credit may vary from the wording specified in the Application,
and Applicant authorizes Bank of America to make such changes, not materially
inconsistent with the Application, which Bank of America deems necessary or
appropriate. Applicant understands that the risk to Applicant is greater if
Applicant requests a standby letter of credit which requires only a draft,
rather than a standby letter of credit which requires supporting documentation.
(g) In the event of any change or modification, with the consent of
Applicant, which consent may be given by any means of submission acceptable to
Bank of America, including, without limitation, computer, facsimile or telex,
relative to the Letter of Credit or any instrument called for hereunder,
including any waiver made or in good faith believed by Bank of America to have
been made by Applicant of any term hereof or the noncompliance of any such
instruments with the terms of the Letter of Credit, this Application and
Agreement shall be binding upon Applicant with regard to the Letter of Credit as
so changed or modified, and to any action taken by Bank of America or any of its
correspondents relative thereto. No term or provision of this Application and
Agreement can be changed orally, but only in a writing and signed by Applicant
and Bank of America.
(h) Bank of America assumes no liability or responsibility for the
consequences arising out of delay and/or loss in transit of any message, letter
or documentation, or for delay, mutilation or other error arising in the
transmission of any teletransmission. In no event shall Bank of America be
liable for any special, indirect, consequential or exemplary damages.
(i) If Applicant includes in the Application any language describing
events or conditions that would not be possible for Bank of America to verify
solely from the documents required to be presented under the Letter of Credit,
Applicant acknowledges and agrees that Bank of America has no obligation to
verify compliance with such requirements.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IF THERE IS A CONFLICT BETWEEN
THE PROVISIONS OF THIS LETTER OF CREDIT APPLICATION AND THE CREDIT AGREEMENT
DATED AS OF ___________, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, AS AGENT, AND
CERTAIN FINANCIAL INSTITUTIONS, AS LENDERS, THE PROVISIONS OF SUCH CREDIT
AGREEMENT SHALL CONTROL.
This Application and Agreement is executed by Applicant on ______________, 19__.
________________________________
Name of Applicant
By:_____________________________ Title___________________________
By:_____________________________ Title___________________________
--------------------------------------------------------------------------------
FOR OFFICE USE ONLY
--------------------------------------------------------------------------------
FX- 169968.06 TO: [X] Trade Operations ___________________Mail
Code# Trade Operations _________________
--------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
COMMISSION [X] Per Standard Fee Schedule [X] Other [X] Charge Banking Center
[X] Charge Directly [X] Commissions and Charges only
[X] Drawings, Commissions and Charges
----------------------------------------------------------------------------------------------------------------------
Approving Bank Officer - Printed Name Officer Telephone # DDA APPLICANT A/C #
Officer Phone Number ________________________ Officer Fax #
----------------------------------------------------------------------------------------------------------------------
Approving Bank Officer - Signature Officer - Interoffice address Officer Number and Cost Center Number
----------------------------------------------------------------------------------------------------------------------
3
EXHIBIT H
CERTIFICATE ACCOMPANYING
ENGINEERING REPORTS
-------------------
Reference is made to that certain Credit Agreement dated as of November 12,
1999 (as from time to time amended, the "Agreement"), by and among Key
Production Company, Inc. ("Borrower"), Bank of America, N.A., as Administrative
Agent ("Agent"), and certain financial institutions ("Lenders"), which Agreement
is in full force and effect on the date hereof. Terms which are defined in the
Agreement are used herein with the meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 6.1(f) of the Agreement.
Together herewith Borrower is furnishing to Agent and each Lender Borrower's
Engineering Report as of ____________ (the "Reporting Date") dated as of
____________. (the "Engineering Report"). The undersigned,
_____________________, is the duly elected, qualified and acting
[president][chief financial officer] of Borrower. Borrower, hereby represents,
warrants, and acknowledges to Agent and each Lender that to the best of
Borrower's knowledge and in all material respects at and as of the Reporting
Date:
(i) the information contained in the Engineering Report and any
other information delivered in connection therewith is true and correct;
(ii) each Restricted Person owns good and defensible title to the
oil and gas properties and other assets evaluated in the Engineering Report
(herein called the "Covered Properties") and are free of all Liens except
------------------
for Permitted Liens;
(iii) none of the Covered Properties has been sold since the date of
the last Borrowing Base determination *[except as set forth on Exhibt 1 to
this certificate]; and
(iv) oil and gas properties which comprise at least eighty percent
(80%) of the total value of the oil and gas properties which are included
within the Covered Properties and which are owned either directly by any
Restricted Person or by partnerships in which any Restricted Person has an
interest are part of the Mortgaged Properties (either by virtue of a
mortgage on the oil and gas properties or a security interest encumbering
the interests owned by such Restricted Person in such partnerships).
The officer of Borrower signing this instrument hereby certifies that he
has reviewed the Loan Documents and the Engineering Report and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above representations, warranties and
acknowledgments of Borrower and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
KEY PRODUCTION COMPANY, INC.
By: ________________________________________
Name:
Title: