EXHIBIT 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 21, 1999
Among
ATP OIL & GAS CORPORATION,
AS BORROWER,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
AS AGENT,
and
THE LENDERS SIGNATORY HERETO
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above............................................ 1
Section 1.02 Certain Defined Terms.......................................... 1
Section 1.03 Accounting Terms and Determinations............................ 14
ARTICLE II COMMITMENTS
Section 2.01 Loans and Letters of Credit.................................... 14
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit... 15
Section 2.03 Changes of Commitments......................................... 17
Section 2.04 Fees........................................................... 17
Section 2.05 Several Obligations............................................ 18
Section 2.06 Notes.......................................................... 18
Section 2.07 Prepayments.................................................... 19
Section 2.08 Borrowing Base................................................. 20
Section 2.09 Assumption of Risks............................................ 22
Section 2.10 Obligation to Reimburse and to Prepay.......................... 22
Section 2.11 Lending Offices................................................ 24
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans............................................. 24
Section 3.02 Interest....................................................... 24
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments....................................................... 25
Section 4.02 Pro Rata Treatment............................................. 25
Section 4.03 Computations................................................... 26
Section 4.04 Non-receipt of Funds by the Agent.............................. 26
Section 4.05 Set-off, Sharing of Payments, Etc.............................. 26
Section 4.06 Taxes.......................................................... 27
Section 4.07 Disposition of Proceeds........................................ 30
ARTICLE V CAPITAL ADEQUACY
Section 5.01 Additional Costs............................................... 30
Section 5.02 Limitation on Eurodollar Loans................................. 32
Section 5.03 Illegality..................................................... 32
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03....... 32
Section 5.05 Compensation................................................... 33
Section 5.06 Replacement Lenders............................................ 33
ARTICLE VI CONDITIONS PRECEDENT
Section 6.01 Initial Funding................................................ 35
Section 6.02 Initial and Subsequent Loans and Letters of Credit............. 36
i
Section 6.03 Conditions Relating to Letters of Credit....................... 36
ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence............................................ 37
Section 7.02 Financial Condition............................................ 37
Section 7.03 Litigation..................................................... 37
Section 7.04 No Breach...................................................... 38
Section 7.05 Authority...................................................... 38
Section 7.06 Approvals...................................................... 38
Section 7.07 Use of Loans................................................... 38
Section 7.08 ERISA.......................................................... 38
Section 7.09 Taxes.......................................................... 39
Section 7.10 Titles, etc.................................................... 40
Section 7.11 No Material Misstatements...................................... 40
Section 7.12 Investment Company Act......................................... 41
Section 7.13 Public Utility Holding Company Act............................. 41
Section 7.14 Subsidiaries................................................... 41
Section 7.15 Location of Business and Offices............................... 41
Section 7.16 Defaults....................................................... 41
Section 7.17 Environmental Matters.......................................... 41
Section 7.18 Compliance with the Law........................................ 42
Section 7.19 Insurance...................................................... 43
Section 7.20 Hedging Agreements............................................. 43
Section 7.21 Restriction on Liens........................................... 43
Section 7.22 Material Agreements............................................ 43
Section 7.23 Gas Imbalances................................................. 44
Section 7.24 Year 2000...................................................... 44
ARTICLE VIII AFFIRMATIVE COVENANTS
Section 8.01 Financial Statements; Other Reports............................ 44
Section 8.02 Litigation..................................................... 47
Section 8.03 Maintenance, Etc............................................... 47
Section 8.04 Environmental Matters.......................................... 48
Section 8.05 Further Assurances............................................. 49
Section 8.06 Performance of Obligations..................................... 49
Section 8.07 Engineering Reports............................................ 49
Section 8.08 Title Information.............................................. 50
Section 8.09 Additional Collateral.......................................... 51
Section 8.10 ERISA Information and Compliance............................... 52
ARTICLE IX NEGATIVE COVENANTS
Section 9.01 Debt........................................................... 52
Section 9.02 Liens.......................................................... 53
Section 9.03 Investments, Loans and Advances................................ 53
Section 9.04 Dividends, Distributions and Redemptions....................... 54
Section 9.05 Sales and Leasebacks........................................... 54
ii
Section 9.06 Nature of Business............................................. 55
Section 9.07 Limitation on Leases........................................... 55
Section 9.08 Mergers, Etc................................................... 55
Section 9.09 Proceeds of Notes.............................................. 55
Section 9.10 ERISA Compliance............................................... 55
Section 9.11 Sale or Discount of Receivables................................ 56
Section 9.12 Ratio of Debt to EBITDA........................................ 56
Section 9.13 Interest Coverage Ratio........................................ 57
Section 9.14 Current Ratio.................................................. 57
Section 9.15 Sale of Certain Oil and Gas Properties......................... 57
Section 9.16 Environmental Matters.......................................... 57
Section 9.17 Transactions with Affiliates................................... 57
Section 9.18 Subsidiaries................................................... 57
Section 9.19 Negative Pledge Agreements..................................... 57
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments............... 58
ARTICLE X EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default............................................. 58
Section 10.02 Remedies...................................................... 60
ARTICLE XI THE AGENT
Section 11.01 Appointment, Powers and Immunities............................ 61
Section 11.02 Reliance by Agent............................................. 61
Section 11.03 Defaults...................................................... 61
Section 11.04 Rights as a Lender............................................ 62
Section 11.05 INDEMNIFICATION............................................... 62
Section 11.06 Non-Reliance on Agent and other Lenders....................... 62
Section 11.07 Action by Agent............................................... 63
Section 11.08 Resignation or Removal of Agent............................... 63
ARTICLE XII MISCELLANEOUS
Section 12.01 Waiver........................................................ 64
Section 12.02 Notices....................................................... 64
Section 12.03 Payment of Expenses, Indemnities, etc......................... 64
Section 12.04 Amendments, Etc............................................... 66
Section 12.05 Successors and Assigns........................................ 67
Section 12.06 Assignments and Participations................................ 67
Section 12.07 Invalidity.................................................... 68
Section 12.08 Counterparts.................................................. 69
Section 12.09 References.................................................... 69
Section 12.10 Survival...................................................... 69
Section 12.11 Captions...................................................... 69
Section 12.12 NO ORAL AGREEMENTS............................................ 69
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION..................... 69
Section 12.14 Interest...................................................... 70
Section 12.15 Confidentiality............................................... 71
iii
Section 12.16 Effectiveness................................................. 72
Section 12.17 EXCULPATION PROVISIONS........................................ 72
iv
Annex I - List of Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Legal Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
Exhibit E - List of Security Instruments
Exhibit F - Form of Assignment Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
v
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 21,
1999 is among: ATP OIL & GAS CORPORATION, a corporation formed under the laws of
the State of Texas (the "Borrower"); each of the lenders that is a signatory
hereto or which becomes a signatory hereto as provided in Section 12.06
(individually, together with its successors and assigns, a "Lender" and,
collectively, the "Lenders"); and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a
national banking association (in its individual capacity, "Chase"), as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Agent").
R E C I T A L S
A. The Borrower, the Agent and the Lenders entered into that certain
Credit Agreement dated as of September 18, 1998 (as heretofore amended,
supplemented and/or modified from time to time, the "Prior Credit Agreement",
whereby, pursuant to the terms and conditions contained therein, the Lenders
agreed to provide certain loans to and extend certain credit on behalf of the
Borrower as evidenced, in part, by the "Facility A Notes" and "Facility B Notes"
(as defined in the Prior Credit Agreement and herein called the "Prior Notes").
B. The Borrower, the Agent and the Lenders mutually desire to amend and
restate the Prior Credit Agreement in its entirety.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree that the Prior Credit Agreement is hereby
amended and restated in its entirety to read herein and as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Amended and
Restated Credit Agreement, the terms "Agent," "Borrower," "Chase," "Lender,"
"Lenders," "Prior Credit Agreement," and "Prior Notes" shall have the meanings
indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Article I or
in other provisions of this Amended and Restated Credit Agreement in the
singular to have the same meanings when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an
individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "control" (including, with its correlative meanings, "controlled by"
and "under common control with") such corporation or other Person.
"Agreement" shall mean this Amended and Restated Credit Agreement, as the
same may from time to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount calculated in
accordance with Section 2.03 hereof.
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of the
Maximum Credit Amounts of the Lenders ($40,000,000), as the same may be reduced
pursuant to Section 2.03(c).
"Applicable Lending Office" shall mean, for each Lender and for each Type
of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Agent and the Borrower as the office by which
its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Borrowing Base Utilization Percentage as in effect from time to time:
Borrowing Base Utilization Percentage Eurodollar Rate Base Rate
------------------------------------- --------------- ---------
Less than or equal to 33% 2.375% .625%
Greater than 33% but less than
or equal to 67% 2.625% .875%
Greater than 67% 3.00% 1.25%
"Assignment" shall have the meaning assigned such term in Section 12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
2
"Base Rate Loans" shall mean Loans that bear interest at rates based upon
the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Deficiency" shall have the meaning assigned such term in
Section 2.07(d).
"Borrowing Base Utilization Percentage" shall mean, as of any day, the
fraction expressed as a percentage, the numerator of which is the aggregate
balance of all Loans and the LC Exposure outstanding on such day, and the
denominator of which is the Aggregate Commitment as of such day.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas and, where such term
is used in the definition of "Quarterly Date" or if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Borrower with respect to any such borrowing
or continuation, payment, prepayment, conversion or Interest Period, any day
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Change of Control" shall mean the occurrence of any of the following:
(i) the acquisition by any Person (or group of Persons acting
together) of a direct or indirect interest in more than 30% of the voting
power of the voting stock of the Borrower, by way of merger or
consolidation or otherwise, or
(ii) the first day on which a majority of the current members of the
board of directors of the Borrower are not continuing directors. For
purposes of this definition, any transfer of an equity interest of an
entity that was formed for the purpose of acquiring voting stock of the
Borrower will be deemed to be a transfer of such portion of such voting
stock as corresponds to the portion of the equity of such entity that has
been so transferred, and the acquisition of voting power of the voting
stock of the Borrower by any Subsidiary of the Borrower shall be
disregarded.
"Closing Date" shall mean the date the conditions precedent set forth in
Section 6.01 have been delivered or satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and any successor statute.
"Commitment" shall mean, for any Lender, its obligation to make Loans and
to participate in the Letters of Credit as provided in Section 2.01(b) up to the
lesser of (i) such Lender's Maximum Credit Amount and (ii) the Lender's
Percentage Share of the amount equal to the then effective Borrowing Base.
3
"Consolidated Subsidiaries" shall mean each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Borrower in accordance with GAAP.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination, which
are substantially equal to at least eighty percent (80%) of the purchase price
of the Property subject to such lease plus interest at an imputed rate of
interest; (vi) all Debt (as described in the other clauses of this definition)
and other obligations of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person; (vii) all Debt (as described
in the other clauses of this definition) and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the debtor or obligations of others; (viii) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(ix) obligations to deliver goods or services including Hydrocarbons in
consideration of advance payments except as permitted by Section 9.20 and
disclosed by Section 8.07(c); (x) obligations to pay for goods or services
whether or not such goods or services are actually received or utilized by such
Person; (xi) any capital stock of such Person in which such Person has a
mandatory obligation to redeem such stock; (xii) any Debt of a Special Entity
for which such Person is liable either by agreement or because of a Governmental
Requirement; (xiii) the undischarged balance of any production payment created
by such Person or for the creation of which such Person directly or indirectly
received payment; and (xiv) all obligations of such Person under Hedging
Agreements.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, for any period, the sum of consolidated net income for
such period plus the following expenses or charges to the extent deducted from
consolidated net income in such period: interest, taxes, depreciation,
depletion and amortization. As used herein, "consolidated net income" shall
mean, for any period, the amount which, in conformity with GAAP, would be set
forth opposite the caption "net income or loss" (or any like caption) on a
consolidated income statement of the Borrower and its Consolidated Subsidiaries,
minus the applicable percentage of net income from Properties supporting Non-
Recourse Debt which will be used to service such Non-Recourse Debt.
"Effective Date" shall have the meaning assigned such term in Section
12.16.
4
"E. I. - 30" shall mean oil and gas lease USA OCS G-9574, covering all of
Block 30, ▇▇▇▇▇▇ Island Area, as shown on OCS Leasing Map, Louisiana Map 4,
containing 5,000 acres, more or less, Offshore Louisiana.
"Engineering Reports" shall have the meaning assigned such term in
Section 2.08.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) 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 Plan.
5
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan, the rate
per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by
the Agent at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) two (2) Business Days prior to the first day of the Interest Period
for such Loan for the offering by the Agent to leading banks in the London
interbank market of Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the Eurodollar
Loan to be made by the Lenders for such Interest Period.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (v) encumbrances (other than to secure
the payment of borrowed money or the deferred purchase price of Property or
services), easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any rights of way or other Property of the
Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use of
such rights of way or other Property for the purposes of which such rights of
way and other Property are held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (vi) deposits of cash or
securities to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business; (vii) Liens on Properties (other than Properties included in
the determination of the Borrowing Base or upon which a Lien has been granted in
favor of the Agent) securing Debt permitted by Section 9.01(f); and (viii) Liens
permitted by the Security Instruments.
6
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with a member of the
Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the date 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 (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Fee Letter" shall mean that certain letter agreement from Chase Bank of
Texas, National Association to the Borrower dated of even date herewith,
concerning certain fees in connection with this Agreement and any agreements or
instruments executed in connection herewith, as the same may be amended or
replaced from time to time.
"Financial Statements" shall mean the financial statement or statements of
the Borrower and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county, city
and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, the Subsidiaries or any of their Property or the Agent, any Lender or
any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may
7
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be owing by the
Borrower or any Subsidiary to the Agent and/or the Lenders in connection with
the Loan Documents and the Letter of Credit Agreements, and any Hedging
Agreements now or hereafter arising between the Borrower or any Subsidiary and
any Lender and permitted by the terms of this Agreement and all renewals,
extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in Section
12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or issuance
of the initial Letters of Credit pursuant to Section 6.01 hereof.
"Initial Reserve Report" shall mean the report of ▇▇▇▇▇ ▇▇▇▇▇ Company,
dated March 31, 1999, with respect to the Oil and Gas Properties of the Borrower
as of December 31, 1998, a copy of which has been delivered to the Agent.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.02 (or
such longer period as may be requested by the Borrower and agreed to by the
Majority Lenders), except that each Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period for a Eurodollar
Loan may commence before and end after the Termination Date; (ii) each Interest
Period which would otherwise end on
8
a day which is not a Business Day shall end on the next succeeding Business Day
(or, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) no Interest Period shall
have a duration of less than one month and, if the Interest Period for any
Eurodollar Loans would otherwise be for a shorter period, such Loans shall not
be available hereunder.
"LC Commitment" at any time shall mean $500,000.
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts drawn
under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written agreements with the
Agent, as issuing lender for any Letter of Credit, executed or hereafter
executed in connection with the issuance by the Agent of the Letters of Credit,
such agreements to be on the Agent's customary form for letters of credit of
comparable amount and purpose as from time to time in effect or as otherwise
agreed to by the Borrower and the Agent.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes and the Security
Instruments.
"Loans" shall mean the loans as provided for by Section 2.01(a).
"Majority Lenders" shall mean, at any time while no Loans are outstanding,
Lenders having at least fifty-one percent (51%) of the Aggregate Commitments
and, at any time while Loans are outstanding, Lenders holding at least fifty-one
percent (51%) of the outstanding aggregate principal amount of the Loans
(without regard to any sale by a Lender of a participation in any Loan under
Section 12.06(c)).
9
"Material Adverse Effect" shall mean any material and adverse effect on (i)
the assets, liabilities, financial condition, business, operations or affairs of
the Borrower and the Subsidiaries taken as a whole or from the facts represented
or warranted in any Loan Document, or (ii) the ability of the Borrower and the
Subsidiaries taken as a whole to carry out their business as at the Closing Date
or as proposed as of the Closing Date to be conducted or meet their obligations
under the Loan Documents on a timely basis.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set forth
opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" (as the same may be reduced pursuant to Section 2.03(c) hereof pro rata
to each Lender based on its Percentage Share) as modified from time to time to
reflect any assignments permitted by Section 12.06(b).
"Monthly Date" shall mean the first day of each calendar month; provided,
however, that if any such day is not a Business Day, such Monthly Date shall be
the next succeeding Business Day.
"Mortgaged Property" shall mean the Property owned by the Borrower and
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.
"Non-Recourse Debt" shall mean Debt as to which neither the Borrower nor
any of its Subsidiaries (a) provides any guarantee or credit support (other than
Liens against its Property not in violation of any provision of this Agreement)
of any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Debt), or (b) is directly or indirectly liable
(as guarantor or otherwise); provided, however, that, if upon review of the
documents and/or instruments evidencing such Non-Recourse Debt provided to the
Agent pursuant to Section 8.01(j), the Agent has determined such Debt does not
qualify as Non-Recourse Debt and has given written notice of such determination
to the Borrower then such Debt shall not be treated as Non-Recourse Debt for
purposes of this Agreement.
"Notes" shall mean the promissory note or notes (whether one or more) of
the Borrower described in Section 2.06 hereof and being in the form of Exhibit A
hereto, together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof. To the
extent of $3,400,000, the Notes represent a renewal, extension, rearrangement
and modification of the outstanding principal balance of the Prior Notes.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the Properties
now or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon
10
Interests, including all oil in tanks, the lands covered thereby and all rents,
issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired and situated upon,
used, held for use or useful in connection with the operation, production or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other temporary uses) and
including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section 4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate Commitments
to be provided by a Lender under this Agreement as indicated on Annex I hereto,
as modified from time to time to reflect any assignments permitted by Section
12.06(b).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in Section
3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount payable by the Borrower under this Agreement or any Note, a
rate per annum during the period commencing on the date of an Event of Default
until such amount is paid in full or all Events of Default are cured or waived
equal to 2% per annum above the Base Rate as in effect from time to time plus
the Applicable Margin (if any), but in no event to exceed the Highest Lawful
Rate provided that, for a Eurodollar Loan, the "Post-Default Rate" for such
principal shall be, for the period commencing on the date of the Event of
Default and ending on the earlier to occur of the last day of the Interest
Period therefor or the date all Events of Default are cured or waived, 2% per
annum above the interest rate for such Loan as provided in Section 3.02(ii), but
in no event to exceed the Highest Lawful Rate.
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"Prime Rate" shall mean the rate of interest from time to time announced
publicly by the Agent at the Principal Office as its prime commercial lending
rate. Such rate is set by the Agent as a general reference rate of interest,
taking into account such factors as the Agent may deem appropriate, it being
understood that many of the Agent's commercial or other loans are priced in
relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer and that the Agent may make various commercial
or other loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Agent, presently
located at ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or such other location as
designated by the Agent from time to time.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Quarterly Dates" shall mean the last day of each March, June, September
and December, in each year, the first of which shall be September 30, 1999;
provided, however, that if any such day is not a Business Day, such Quarterly
Date shall be the next succeeding Business Day.
"Redetermination Date" shall have the meaning assigned such term in Section
2.08(a).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Release Event" shall have the meaning assigned such term in Section 9.14.
"Required Lenders" shall mean, at any time while no Loans are outstanding,
Lenders having at least eighty-five percent (85%) of the Aggregate Commitments
and, at any time while Loans are outstanding, Lenders holding at least eighty-
five percent (85%) of the aggregate principal amount of the Loans (without
regard to any sale by a Lender of a participation in any Loan under Section
12.06(c)).
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance satisfactory to
the Agent, to be delivered prior to June 1 of each year, setting forth as of
prior year-end: (i) the oil and gas reserves attributable to the Mortgaged
Properties and any Oil and Gas Property of the Borrower in or proposed to be
included in the Borrowing Base, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of
12
such date, based upon the pricing assumptions consistent with SEC reporting
requirements at the time, and (ii) such other information as the Agent may
reasonably request. The term "Reserve Report" shall also include the information
to be provided by the Borrower pursuant to Section 8.07(a) prior to December 1
of each year, setting forth, as of July 1 of such year, the information required
in clauses (i) and (ii) of the preceding sentence.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of the Borrower.
"Scheduled Borrowing Base Reductions" shall have the meaning assigned such
term in Section 2.08(f).
"Scheduled Redetermination Date" shall have the meaning assigned such term
in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" shall mean the Letters of Credit, the Letter of
Credit Agreements, the Fee Letter, the agreements or instruments described or
referred to in Exhibit E, and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower or any other Person (other than
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the Notes,
this Agreement, or reimbursement obligations under the Letters of Credit, as
such agreements may be amended, supplemented or restated from time to time.
"Special Entity" shall mean any joint venture, limited liability company or
partnership, general or limited partnership or any other type of partnership or
company other than a corporation in which the Borrower or one or more of its
other Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified
as partnerships under state law. For purposes of this definition, any Person
which owns directly or indirectly an equity investment in another Person which
allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"Subsidiary" shall mean (i) any corporation of which at least a majority of
the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Borrower or one or more of its Subsidiaries or by the Borrower
and one or more of its Subsidiaries and (ii) any Special Entity.
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Unless otherwise indicated herein, each reference to the term "Subsidiary" shall
mean a Subsidiary of the Borrower.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Termination Date" shall mean, unless the Commitments are sooner terminated
pursuant to Sections 2.03(b) or 10.02 hereof, September 18, 2001.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
"Unused Amount of the Aggregate Commitments" shall mean the Aggregate
Commitments minus the sum of the outstanding Loans and the LC Exposure.
"Wholly-Owned Subsidiary" shall mean, as to the Borrower, any Subsidiary of
which all of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect the board of directors of such corporation, other
than directors' qualifying shares, are owned or controlled by the Borrower or
one or more of the Wholly-Owned Subsidiaries or by the Borrower and one or more
of the Wholly-Owned Subsidiaries.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.02 (except
for changes concurred with by the Borrower's independent public accountants).
ARTICLE II
Commitments
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the period from and
including (i) the Closing Date or (ii) such later date that such Lender
becomes a party to this Agreement as provided in Section 12.06(b), to but
excluding, the Termination Date in an aggregate principal amount at any one
time outstanding up to but not exceeding the amount of such Lender's
Commitment as then in effect; provided, however, that the aggregate
principal amount of all such Loans by all Lenders hereunder at any one time
outstanding together with the LC Exposure shall not exceed the Aggregate
Commitments. Subject to the terms of this Agreement, during the period
from the Closing Date to but excluding the Termination Date, the Borrower
may borrow, repay and reborrow the amount described in this Section
2.01(a).
14
(b) Letters of Credit. During the period from and including the
Closing Date to but excluding the Termination Date, the Agent, as issuing
bank for the Lenders, agrees to extend credit for the account of the
Borrower at any time and from time to time by issuing, renewing, extending
or reissuing Letters of Credit; provided, however, the LC Exposure at any
one time outstanding shall not exceed the lesser of (i) the LC Commitment
or (ii) the Aggregate Commitments, as then in effect, minus the aggregate
principal amount of all Loans then outstanding. The Lenders shall
participate in such Letters of Credit according to their respective
Percentage Shares.
(c) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans may
be Base Rate Loans or Eurodollar Loans; provided that, without the prior
written consent of the Majority Lenders, no more than six (6) Eurodollar
Loans may be outstanding at any time to any Lender.
Section 2.02 Borrowings, Continuations and Conversions, Letters of
Credit.
(a) Borrowings. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such
borrowing, the date (which shall be a Business Day) of the Loans to be
borrowed, the Type of the Loans to be borrowed and, in the case of
Eurodollar Loans, the duration of the Interest Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $500,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $500,000 in excess thereof,
and all Eurodollar Loans shall be in amounts of at least $500,000 or any
whole multiple of $500,000 in excess thereof.
(c) Notices. The initial borrowing and all borrowings, continuations
and conversions shall require advance written notice to the Agent (which
shall promptly notify the Lenders) in the form of Exhibit B hereto (or
telephonic notice promptly confirmed by such a written notice), which in
each case shall be irrevocable, from the Borrower to be received by the
Agent not later than 11:00 a.m. Houston, Texas time at least one (1)
Business Day prior to the date of each Base Rate Loan borrowing and three
(3) Business Days prior to the date of each Eurodollar Loan borrowing,
continuation or conversion. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice, the Agent may act
without liability upon the basis of telephonic notice believed by the Agent
in good faith to be from the Borrower prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right to
dispute the Agent's record of the terms of such telephonic notice except in
the case of gross negligence or willful misconduct by the Agent.
(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to
the Agent (which shall promptly notify the Lenders) of such election,
specifying the amount of such Loan to be continued and the Interest Period
therefor.
15
In the absence of such a timely and proper election, the Borrower shall be
deemed to have elected to convert such Eurodollar Loan to a Base Rate Loan
pursuant to Section 2.02(e). All or any part of any Eurodollar Loan may be
continued as provided, herein, provided that (i) any continuation of any
such Loan shall be (as to each Loan as continued for an applicable Interest
Period) in amounts of at least $500,000 or any whole multiple of $500,000
in excess thereof and (ii) no Default shall have occurred and be
continuing. If a Default shall have occurred and be continuing, each
Eurodollar Loan shall be converted to a Base Rate Loan on the last day of
the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all or any
part of any Eurodollar Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice to the
Agent (which shall promptly notify the Lenders) of such election. Subject
to the provisions made in this Section 2.02(e), the Borrower may elect to
convert all or any part of any Base Rate Loan at any time and from time to
time to a Eurodollar Loan by giving advance notice as provided in Section
2.02(c) to the Agent (which shall promptly notify the Lenders) of such
election. All or any part of any outstanding Loan may be converted as
provided herein, provided that (i) any conversion of any Base Rate Loan
into a Eurodollar Loan shall be (as to each such Loan into which there is a
conversion for an applicable Interest Period) in amounts of at least
$500,000 or any whole multiple of $500,000 in excess thereof and (ii) no
Default shall have occurred and be continuing. If a Default shall have
occurred and be continuing, no Base Rate Loan may be converted into a
Eurodollar Loan.
(f) Advances. Not later than 11:00 a.m. Houston, Texas time on the
date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the
Agent, to an account which the Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so received
by the Agent shall, subject to the terms and conditions of this Agreement,
be made available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower, designated by the Borrower
and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Agent (which shall
promptly notify the Lenders of such request) advance notice to be received
by the Agent not later than 11:00 a.m. Houston, Texas time not less than
three (3) Business Days prior thereto of each request for the issuance and
at least thirty (30) Business Days prior to the date of the renewal or
extension of a Letter of Credit hereunder which request shall specify the
amount of such Letter of Credit, the date (which shall be a Business Day)
such Letter of Credit is to be issued, renewed or extended, the duration
thereof, the name and address of the beneficiary thereof, the form of the
Letter of Credit and such other information as the Agent may reasonably
request all of which shall be reasonably satisfactory to the Agent.
Subject to the terms and conditions of this Agreement, on the date
specified for the issuance, renewal or extension of a Letter of Credit, the
Agent shall issue such Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower shall execute a Letter of Credit Agreement. In the event of any
conflict between any provision of a Letter
16
of Credit Agreement and this Agreement, the Borrower, the Agent and the
Lenders hereby agree that the provisions of this Agreement shall govern.
The Agent will send to the Borrower and each Lender, upon issuance of
any Letter of Credit, or an amendment thereto, a true and complete copy of
such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to the
lesser of (i) the Aggregate Maximum Credit Amounts or (ii) the Borrowing
Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to reduce the
amount of the Aggregate Maximum Credit Amounts at any time or from time to
time upon not less than three (3) Business Days' prior notice to the Agent
(which shall promptly notify the Lenders) of each such termination or
reduction, which notice shall specify the effective date thereof and the
amount of any such reduction (which shall not be less than $500,000 or any
whole multiple of $500,000 in excess thereof) and shall be irrevocable and
effective only upon receipt by the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or reduced
may be reinstated.
Section 2.04 Fees.
(a) The Borrower shall pay to the Agent for the account of each Lender
a commitment fee on the daily average Unused Amount of the Aggregate
Commitments for the period from and including the Closing Date up to but
excluding the earlier of the date the Aggregate Commitments are terminated
or the Termination Date at a rate per annum equal to one-half of one
percent (1/2%).
Accrued commitment fees shall be payable quarterly in arrears on each
Quarterly Date and on the earlier of the date the Aggregate Commitments are
terminated or the Termination Date.
(b) The Borrower agrees to pay the Agent, for the account of each
Lender, commissions for issuing the Letters of Credit on the daily average
outstanding of the maximum liability of the Agent existing from time to
time under such Letter of Credit (calculated separately for each Letter of
Credit) at the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, provided that each Letter of Credit
shall bear a minimum commission of $300.00. Each Letter of Credit shall be
deemed to be outstanding up to the full face amount of the Letter of Credit
until the Agent has received the canceled Letter of Credit or a written
cancellation of the Letter of Credit from the beneficiary of such Letter of
Credit in form and substance acceptable to the Agent, or for
17
any reductions in the amount of the Letter of Credit (other than from a
drawing), written notification from the beneficiary of such Letter of
Credit. Such commissions are payable in advance at issuance of the Letter
of Credit.
Borrowing Base Utilization Percentage Letter of Credit Fee
------------------------------------- --------------------
Less than or equal to 33% 2.375%
Greater than 33% but less than 2.625%
or equal to 66%
Greater than 66% 3.00%
(c) The Agent, for its own account, shall retain 0.125% of the Letter
of Credit fee (as described in subsection (c) above) as an issuing fee and
shall pay the balance of such Letter of Credit fee to the Lenders pro rata.
(d) The Borrower shall pay to the Agent for its account such other
fees as are set forth in the Fee Letter on the dates specified therein to
the extent not paid prior to the Closing Date.
(e) If the Borrower exercises its option to cause the Lenders to
redetermine the Borrowing Base pursuant to Section 2.08(d), then for each
exercise of such option, the Borrower shall pay a fee to the Agent in the
amount of $1,500 to be shared by the Lenders pro rata in proportion to
their Percentage Share. Such fee shall be due and payable at the time the
Borrower gives notice of its election to exercise such option.
Section 2.05 Several Obligations. The failure of any Lender to make
any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide funds on
such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender or to provide funds to be
provided by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit
A hereto, dated (i) the Closing Date or (ii) the effective date of an Assignment
pursuant to Section 12.06(b), payable to the order of such Lender in a principal
amount equal to its Maximum Credit Amount as in effect and otherwise duly
completed and such substitute Notes as required by Section 12.06(b). The date
and amount of each Loan made by each Lender and the Type, interest rate and
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Notes, and, prior to any transfer, may be endorsed by such Lender on a
schedule attached to such Notes or any continuation thereof or on any separate
record maintained by such Lender. Failure to make any such notation or to
attach a schedule shall not affect any Lender's or the Borrower's rights or
obligations in respect of such Loans or affect the validity of such transfer by
any Lender of its Notes.
18
Section 2.07 Prepayments.
(a) The Borrower may prepay Base Rate Loans upon not less than one (1)
Business Day's prior notice to the Agent (which shall promptly notify the
Lenders), which notice shall specify the prepayment date (which shall be a
Business Day) and the amount of the prepayment (which shall be at least
$500,000 or the remaining aggregate principal balance outstanding on the
relevant Note) and shall be irrevocable and effective only upon receipt by
the Agent, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Borrower may
prepay Eurodollar Loans on the same condition as for Base Rate Loans (but
with three (3) days advance notice) and in addition such prepayments of
Eurodollar Loans shall be subject to the terms of Section 5.05 and shall be
in an amount equal to all of the Eurodollar Loans for the Interest Period
prepaid.
(b) If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.03(c), the
outstanding aggregate principal amount of the Loans plus the LC Exposure
exceeds the Aggregate Maximum Credit Amounts, the Borrower shall (i) prepay
the Loans on the date of such termination or reduction in an aggregate
principal amount equal to the excess, together with interest on the
principal amount paid accrued to the date of such prepayment and (ii) if
any excess remains after prepaying all of the Loans, pay to the Agent on
behalf of the Lenders an amount equal to the excess to be held as cash
collateral as provided in Section 2.10(b) hereof.
(c) Upon any adjustment or redetermination of the amount of the
Borrowing Base (but not Scheduled Borrowing Base Reductions) in accordance
with Sections 2.07(d), 2.08, 8.08(c) or 9.14 or otherwise, if the adjusted
or redetermined Borrowing Base is less than the sum of the aggregate
outstanding principal amount of the Loans and the LC Exposure (a "Borrowing
Base Deficiency"), then the Borrower shall within 45 days of receipt of
written notice thereof cure such Borrowing Base Deficiency by either
prepaying the Loans in an aggregate principal amount equal to such excess,
together with interest on the principal amount paid accrued to the date of
such prepayment or provide additional Collateral to secure the Indebtedness
to the reasonable satisfaction of the Lenders.
(d) Following a casualty loss to all or any part of the Oil and Gas
Properties constituting the Borrowing Base, all insurance proceeds payable
to the Borrower and not used by the Borrower to repair or replace such
Properties shall be used by the Borrower to prepay the Loans. The
Borrowing Base shall be reduced by an amount reasonably determined at the
time by the Agent to reflect the contribution to the Borrowing Base of such
Oil and Gas Properties not repaired or replaced.
(e) Prepayments permitted or required under this Section 2.07 shall be
without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Loans. Any prepayments on the Loans may be
reborrowed subject to the then effective Aggregate Commitments.
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Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with Section
2.08(b) by the Agent with the concurrence of the Required Lenders and is
subject to redetermination in accordance with Section 2.08(d). Upon any
redetermination of the Borrowing Base, such redetermination shall remain in
effect until the next successive Redetermination Date. "Redetermination
Date" shall mean the date that the redetermined Borrowing Base becomes
effective subject to the notice requirements specified in Section 2.08(e)
both for scheduled redeterminations and unscheduled redeterminations.
During the period from and after the Closing Date until the first
redetermination pursuant to Section 2.08(d) or adjustment pursuant to
Sections 8.08(c) or 9.15, the amount of the Borrowing Base shall be
$24,200,000.
(b) Upon receipt of the reports required by Section 8.07 and such
other reports, data and supplemental information as may from time to time
be reasonably requested by the Agent (the "Engineering Reports"), the Agent
will redetermine the Borrowing Base. Such redetermination will be in
accordance with its normal and customary procedures for evaluating oil and
gas reserves and other related assets as such exist at that particular
time. The Agent, in its sole discretion, may make adjustments to the
rates, volumes and prices and other assumptions set forth in the
Engineering Reports in accordance with its normal and customary procedures
for evaluating oil and gas reserves and other related assets as such exist
at that particular time. The Agent shall propose to the Lenders a new
Borrowing Base within 45 days following receipt by the Agent and the
Lenders of the Engineering Reports in a timely and complete manner.
(c) The Agent may exclude any Oil and Gas Property or portion of
production therefrom or any income from any other Property from the
Borrowing Base, at any time, because title information is not reasonably
satisfactory, such Property is not Mortgaged Property or such Property is
not assignable.
(d) So long as any of the Commitments are in effect and until payment
in full of all Loans hereunder, on or around the first Business Day of each
January and July, commencing January 1, 2000 (each being a "Scheduled
Redetermination Date"), the Required Lenders shall redetermine the amount
of the Borrowing Base in accordance with Section 2.08(b), and the Scheduled
Borrowing Base Reductions pursuant to Section 2.08(f). In addition, the
Required Lenders or the Borrower may each initiate a redetermination of the
Borrowing Base at any other time as they so elect; provided, however, only
one such unscheduled redetermination may be elected between each Scheduled
Redetermination Date. If such redetermination is initiated by the Required
Lenders, the Agent shall specify in writing to the Borrower the date on
which the Borrower is to furnish a Reserve Report in accordance with
Section 8.07(b) and the date on which such redetermination is to occur.
(e) The Agent shall promptly notify in writing the Borrower and the
Lenders of the new Borrowing Base and the Scheduled Borrowing Base
Reduction to be in effect. Any redetermination of the Borrowing Base and
the Scheduled Borrowing Base Reductions, shall
20
not be in effect until written notice is received by the Borrower;
provided, however, the Scheduled Borrowing Base Reductions stated in such
written notice shall commence on the first Monthly Date following the
Borrower's receipt of such written notice (it is hereby understood and
agreed that the provisions of Section 2.07(c) shall not apply to Scheduled
Borrowing Base Reductions).
(f) In addition to the scheduled and unscheduled redeterminations of
the Borrowing Base pursuant to this Section 2.08, the Borrowing Base in
effect from time to time is subject to the following:
(i) the adjustments made in accordance with Sections 2.07(d) and
9.15; and
(ii) automatic Borrowing Base reductions on each Monthly Date by
the following amounts ("Scheduled Borrowing Base Reductions"):
(A) $1,000,000 for the November 1, 1999 Monthly Date;
(B) $1,000,000 for the December 1, 1999 Monthly Date;
(C) $2,000,000 for the January 1, 2000 Monthly Date; and
(D) $1,000,000 for each Monthly Date thereafter;
provided, however, the foregoing Scheduled Borrowing Base Reductions
shall be redetermined in conjunction with each redetermination of the
Borrowing Base pursuant to this Section 2.08 and notice thereof will
be given to the Borrower in accordance with Section 2.08(e).
(g) At the time of each scheduled or unscheduled Borrowing Base
redetermination, the Required Lenders shall have the right to require the
Borrower to grant to the Agent a first-priority Lien (subject only to Excepted
Liens) on the Borrower's interest in all or any portion of the Oil and Gas
Properties included in the determination of the Borrowing Base not already
subject to a Lien of the Security Instruments, which Lien will be created and
perfected by and in accordance with the provisions of Security Instruments, all
in form and substance satisfactory to the Agent in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes. If the Borrower fails to deliver such
Security Instruments on or before 15 days after such request by the Required
Lenders, the Required Lenders shall have the right to redetermine the Borrowing
Base in accordance with this Section 2.08 excluding the values given to such Oil
and Gas Properties for which no Security Instrument has been delivered.
Section 2.09 Assumption of Risks. The Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither
the Agent (except in the case of willful misconduct or bad faith on the part of
the Agent or any of its employees), its correspondents nor any Lender shall be
responsible for the validity, sufficiency or genuineness of certificates or
other documents or any endorsements
21
thereon, even if such certificates or other documents should in fact prove to be
invalid, insufficient, fraudulent or forged; for errors, omissions,
interruptions or delays in transmissions or delivery of any messages by mail,
telex, or otherwise, whether or not they be in code; for errors in translation
or for errors in interpretation of technical terms; the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; the failure of any beneficiary or any transferee of any Letter of Credit
to comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Agent's
control or the control of the Agent's correspondents unless, as to any of the
foregoing, constituting gross negligence or willful misconduct on the part of
the Agent or any Lender. In addition, neither the Agent nor any Lender shall be
responsible for any error, neglect, or default of any of the Agent's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Agent's or any Lender's rights or powers hereunder or
under the Letter of Credit Agreements, all of which rights shall be cumulative
unless, as to any of the foregoing, constituting gross negligence or willful
misconduct on the part of the Agent or any Lender. The Agent and its
correspondents may accept certificates or other documents that appear on their
face to be in order, without responsibility for further investigation of any
matter contained therein regardless of any notice or information to the
contrary. In furtherance and not in limitation of the foregoing provisions, the
Borrower agrees that any action, inaction or omission taken or not taken by the
Agent or by any correspondent for the Agent in good faith in connection with any
Letter of Credit, or any related drafts, certificates, documents or instruments,
shall be binding on the Borrower and shall not put the Agent or its
correspondents under any resulting liability to the Borrower.
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Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Agent is made under any Letter of Credit,
the Borrower shall pay to the Agent within two (2) Business Days after
notice of any such disbursement is received by the Borrower, the amount of
each such disbursement made by the Agent under the Letter of Credit (if
such payment is not sooner effected as may be required under this Section
2.10 or under other provisions of the Letter of Credit), together with
interest on the amount disbursed from and including the date of
disbursement until payment in full of such disbursed amount at a varying
rate per annum equal to (i) the then applicable interest rate for Base Rate
Loans through the second Business Day after notice of such disbursement is
received by the Borrower and (ii) thereafter, the Post-Default Rate for
Base Rate Loans (but in no event to exceed the Highest Lawful Rate) for the
period from and including the third Business Day following the date of such
disbursement to and including the date of repayment in full of such
disbursed amount. The obligations of the Borrower under this Agreement
with respect to each Letter of Credit shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, including,
without limitation, but only to the fullest extent permitted by applicable
law, the following circumstances: (i) any lack of validity or
enforceability of this Agreement, any Letter of Credit or any of the
Security Instruments; (ii) any amendment or waiver of (including any
default), or any consent to departure from this Agreement (except to the
extent permitted by any amendment or waiver), any Letter of Credit or any
of the Security Instruments; (iii) the existence of any claim, set-off,
defense or other rights which the Borrower may have at any time against the
beneficiary of any Letter of Credit or any transferee of any Letter of
Credit (or any Persons for whom any such beneficiary or any such transferee
may be acting), the Agent, any Lender or any other Person, whether in
connection with this Agreement, any Letter of Credit, the Security
Instruments, the transactions contemplated hereby or any unrelated
transaction; (iv) any statement, certificate, draft, notice or any other
document presented under any Letter of Credit proves to have been forged,
fraudulent, insufficient or invalid in any respect or any statement therein
proves to have been untrue or inaccurate in any respect whatsoever; (v)
payment by the Agent under any Letter of Credit against presentation of a
draft or certificate which appears on its face to comply, but does not
comply, with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Agent, except (i) where the
Borrower or any Subsidiary actually recovers the proceeds for itself or the
Agent of any payment made by the Agent in connection with such gross
negligence or willful misconduct or (ii) in cases where the Agent makes
payment to the named beneficiary of a Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a payment
or prepayment pursuant to Sections 2.07(b) and (c) hereof or the maturity
of the Notes, whether by acceleration or otherwise, an amount equal to the
LC Exposure (or the excess in the case of Section 2.07(b)) shall be deemed
to be forthwith due and owing by the Borrower to the Agent and the Lenders
as of the date of any such occurrence; and the Borrower's obligation to pay
such amount shall be absolute and unconditional, without regard to whether
any
23
beneficiary of any such Letter of Credit has attempted to draw down all or
a portion of such amount under the terms of a Letter of Credit, and, to the
fullest extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or recoupment
which the Borrower may now or hereafter have against any such beneficiary,
the Agent, the Lenders or any other Person for any reason whatsoever. Such
payments shall be held by the Agent on behalf of the Lenders as cash
collateral securing the LC Exposure in an account or accounts at the
Principal Office; and the Borrower hereby grants to and by its deposit with
the Agent grants to the Agent a security interest in such cash collateral.
In the event of any such payment by the Borrower of amounts contingently
owing under outstanding Letters of Credit and in the event that thereafter
drafts or other demands for payment complying with the terms of such
Letters of Credit are not made prior to the respective expiration dates
thereof, the Agent agrees, if no Event of Default has occurred and is
continuing or if no other amounts are outstanding under this Agreement, the
Notes or the Security Instruments, to remit to the Borrower amounts for
which the contingent obligations evidenced by the Letters of Credit have
ceased.
(c) Each Lender severally and unconditionally agrees that it shall
promptly reimburse the Agent an amount equal to such Lender's Percentage
Share of any disbursement made by the Agent under any Letter of Credit that
is not reimbursed according to this Section 2.10.
Section 2.11 Lending Offices. Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
ARTICLE III
Payments of Principal and Interest
Section 3.01 Repayment of Loans. The Borrower will pay to the Agent,
for the account of each Lender, the principal payments required by this Section
3.01. On the Termination Date the Borrower shall repay the outstanding
aggregate principal and accrued and unpaid interest under the Notes.
Section 3.02 Interest. The Borrower will pay to the Agent, for the
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to
but excluding the date such Loan shall be paid in full, at the following rates
per annum:
(a) if such a Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate; and
(b) if such a Loan is a Eurodollar Loan, for each Interest Period
relating thereto, the Eurodollar Rate for such Loan plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate.
24
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender interest at the applicable Post-Default Rate on any
principal of any Loan made by such Lender, and (to the fullest extent permitted
by law) on any other amount payable by the Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of such Lender,
for the period commencing on the date of an Event of Default until the same is
paid in full or all Events of Default are cured or waived.
Accrued interest on Base Rate Loans shall be payable on each Quarterly Date
commencing on September 30, 1999, and accrued interest on each Eurodollar Loan
shall be payable on the last day of the Interest Period therefor and, if such
Interest Period is longer than three months at three-month intervals following
the first day of such Interest Period, except that interest payable at the Post-
Default Rate shall be payable from time to time on demand and interest on any
Eurodollar Loan that is converted into a Base Rate Loan (pursuant to Section
5.04) shall be payable on the date of conversion (but only to the extent so
converted).
Promptly after the determination of any interest rate provided for herein
or any change therein, the Agent shall notify the Lenders to which such interest
is payable and the Borrower thereof. Each determination by the Agent of an
interest rate or fee hereunder shall, except in cases of manifest error, be
final, conclusive and binding on the parties.
ARTICLE IV
Payments; Pro Rata Treatment; Computations; Etc.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under the Loan Documents shall be made in Dollars, in immediately
available funds, to the Agent at such account as the Agent shall specify by
notice to the Borrower from time to time, not later than 11:00 a.m. Houston,
Texas time on the date on which such payments shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). Such payments shall be made without (to the
fullest extent permitted by applicable law) defense, set-off or counterclaim.
Each payment received by the Agent under this Agreement or any Note for account
of a Lender shall be paid promptly to such Lender in immediately available
funds. Except as provided in clause (iii) of the definition of "Interest
Period", if the due date of any payment under this Agreement or any Note would
otherwise fall on a day which is not a Business Day such date shall be extended
to the next succeeding Business Day and interest shall be payable for any
principal so extended for the period of such extension. At the time of each
payment to the Agent of any principal of or interest on any borrowing, the
Borrower shall notify the Agent of the Loans to which such payment shall apply.
In the absence of such notice the Agent may specify the Loans to which such
payment shall apply, but to the extent possible such payment or prepayment will
be applied first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 and each
25
continuation and conversion under Section 2.02 shall be made from the Lenders
pro rata in accordance with their Percentage Share, each payment of commitment
fee or other fees under Sections 2.04(a), (b) and (c) shall be made for account
of the Lenders pro rata in accordance with their Percentage Share, and each
termination or reduction of the amount of the Aggregate Maximum Credit Amounts
under Section 2.03(d) shall be applied to the Commitment of each Lender, pro
rata according to the amounts of its respective Commitment; (ii) each payment of
principal of Loans by the Borrower shall be made for account of the Lenders pro
rata in accordance with the respective unpaid principal amount of the Loans held
by the Lenders; and (iii) each payment of interest on Loans by the Borrower
shall be made for account of the Lenders pro rata in accordance with the amounts
of interest due and payable to the respective Lenders; and (iv) each
reimbursement by the Borrower of disbursements under Letters of Credit shall be
made for account of the Agent or, if funded by the Lenders, pro rata for the
account of the Lenders, in accordance with the amounts of reimbursement
obligations due and payable to each respective Lender.
Section 4.03 Computations. Interest on Eurodollar Loans and fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be.
Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Lender or the Borrower prior to the date on which
such notifying party is scheduled to make payment to the Agent (in the case of a
Lender) of the proceeds of a Loan or a payment under a Letter of Credit to be
made by it hereunder or (in the case of the Borrower) a payment to the Agent for
account of one or more of the Lenders hereunder (such payment being herein
called the "Required Payment"), which notice shall be effective upon receipt,
that it does not intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date and, if such Lender or the Borrower (as
the case may be) has not in fact made the Required Payment to the Agent, the
recipient(s) of such payment shall, on demand, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until but excluding the date the Agent recovers such amount at a rate per annum
which, for any Lender as recipient, will be equal to the Federal Funds Rate, and
for the Borrower as recipient, will be equal to the Base Rate plus the
Applicable Margin.
26
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after
consultation with the Agent), at its option, to offset balances held by it
or by any of its Affiliates for account of the Borrower at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Lender's Loans, or any other amount payable to such
Lender hereunder, which is not paid when due (regardless of whether such
balances are then due to the Borrower), in which case it shall promptly
notify the Borrower and the Agent thereof, provided that such Lender's
failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or interest
on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any right
of set-off, banker's lien or counterclaim or similar right or otherwise,
and, as a result of such payment, such Lender shall have received a greater
percentage of the principal or interest (or reimbursement) then due
hereunder by the Borrower to such Lender than the percentage received by
any other Lenders, it shall promptly (i) notify the Agent and each other
Lender thereof and (ii) purchase from such other Lenders participations in
(or, if and to the extent specified by such Lender, direct interests in)
the Loans (or participations in Letters of Credit) made by such other
Lenders (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to
the end that all the Lenders shall share the benefit of such excess payment
(net of any expenses which may be incurred by such Lender in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal and/or interest on the Loans held by each of the Lenders (or
reimbursements of Letters of Credit). To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the Loans made by other Lenders (or
in interest due thereon, as the case may be) may exercise all rights of
set-off, banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans (or
Letters of Credit) in the amount of such participation. Nothing contained
herein shall require any Lender to exercise any such right or shall affect
the right of any Lender to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a set-off to which this
Section 4.05 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section 4.05 to share
the benefits of any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear of
and without deduction for
27
any and all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Agent, taxes imposed on its income, and
franchise or similar taxes imposed on it, by (i) any jurisdiction (or
political subdivision thereof) of which the Agent or such Lender, as the
case may be, is a citizen or resident or in which such Lender has an
Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Agent or such Lender is organized, or
(iii) any jurisdiction (or political subdivision thereof) in which such
Lender or the Agent is presently doing business in which taxes are imposed
solely as a result of doing business in such jurisdiction (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Agent (i) the sum payable shall be
increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 4.06) such Lender or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxing authority or other Governmental Authority in accordance with
applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement,
any Assignment or any Security Instrument (hereinafter referred to as
"Other Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE FULL
AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE
UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS
THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT
PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF
SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS
CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE
BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL
TO SUCH REFUND OR CREDIT TO THE BORROWER
28
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED
THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE AGENT, AGREES TO
RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO
SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED
TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
29
(i) Each Lender represents that it is either (1) a corporation or
banking association organized under the laws of the United States of
America or any state thereof or (2) it is entitled to complete
exemption from United States withholding tax imposed on or with
respect to any payments, including fees, to be made to it pursuant to
this Agreement (A) under an applicable provision of a tax convention
to which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America.
Each Lender that is not a corporation or banking association organized
under the laws of the United States of America or any state thereof
agrees to provide to the Borrower and the Agent on the Closing Date,
or on the date of its delivery of the Assignment pursuant to which it
becomes a Lender, and at such other times as required by United States
law or as the Borrower or the Agent shall reasonably request, two
accurate and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying that all
payments to be made to it hereunder will be effectively connected to a
United States trade or business (the "Form 4224 Certification") or (B)
Internal Revenue Service Form 1001 (or successor form) certifying that
it is entitled to the benefit of a provision of a tax convention to
which the United States of America is a party which completely exempts
from United States withholding tax all payments to be made to it
hereunder (the "Form 1001 Certification"). In addition, each Lender
agrees that if it previously filed a Form 4224 Certification, it will
deliver to the Borrower and the Agent a new Form 4224 Certification
prior to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form 1001 Certification,
it will deliver to the Borrower and the Agent a new certification
prior to the first payment date falling in the third year following
the previous filing of such certification. Each Lender also agrees to
deliver to the Borrower and the Agent such other or supplemental forms
as may at any time be required as a result of changes in applicable
law or regulation in order to confirm or maintain in effect its
entitlement to exemption from United States withholding tax on any
payments hereunder, provided that the circumstances of such Lender at
the relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Borrower and the Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America,
unless the Borrower and the Agent have received a Form 1001
Certification or Form 4224 Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Borrower shall
withhold taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless the Borrower or
Agent, as applicable, from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by
(i) the Agent as a result of such Lender's failure to submit any form
or certificate that it is required to provide pursuant to this Section
4.06 or (ii) the Borrower or the
30
Agent as a result of their reliance on any such form or certificate
which such Lender has provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; provided, however, that
should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax becomes subject to taxes because of
its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender shall reasonably request to assist such
Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Agent or to change the
jurisdiction of its Applicable Lending Office or to contest any tax
imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to
such Lender.
Section 4.07 Disposition of Proceeds. The Security Instruments
contain an assignment by the Borrower unto and in favor of the Agent for the
benefit of the Lenders of all production and all proceeds attributable thereto
which may be produced from or allocated to the Mortgaged Property, and the
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, the Lenders
agree that they will neither notify the purchaser or purchasers of such
production nor take any other action to cause such proceeds to be remitted to
the Lenders, but the Lenders will instead permit such proceeds to be paid to the
Borrower.
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ARTICLE V
Capital Adequacy
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. The Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine to
be necessary to compensate such Lender for any costs which it determines
are attributable to its making or maintaining of any Eurodollar Loans or
issuing or participating in Letters of Credit hereunder or its obligation
to make any Eurodollar Loans or issue or participate in any Letters of
Credit hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Eurodollar Loans, Letters of Credit or
such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or any Note in respect of any
of such Eurodollar Loans or Letters of Credit (other than taxes imposed on
the overall net income of such Lender or of its Applicable Lending Office
for any of such Eurodollar Loans by the jurisdiction in which such Lender
has its principal office or Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of such Lender, or the
Commitment or Loans of such Lender or the Eurodollar interbank market; or
(iii) imposes any other condition affecting this Agreement or any Note (or
any of such extensions of credit or liabilities) or such Lender's
Commitment or Loans. Each Lender will notify the Agent and the Borrower of
any event occurring after the Closing Date which will entitle such Lender
to compensation pursuant to this Section 5.01(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation, and will designate a different Applicable Lending Office for
the Loans of such Lender affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the sole opinion of such Lender, be disadvantageous to such Lender,
provided that such Lender shall have no obligation to so designate an
Applicable Lending Office located in the United States. If any Lender
requests compensation from the Borrower under this Section 5.01(a), the
Borrower may, by notice to such Lender, suspend the obligation of such
Lender to make additional Loans of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of Section
5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the provisions
of Section 5.01(a), in the event that, by reason of any Regulatory Change
or any other circumstances arising after the Closing Date affecting such
Lender, the Eurodollar interbank market or such Lender's position in such
market, any Lender either (i) incurs Additional Costs based on or measured
by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on Eurodollar Loans is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Lender which includes Eurodollar Loans or (ii) becomes
subject to restrictions on the amount of such a category of liabilities or
assets which it may hold, then, if such Lender so elects by notice to the
Borrower, the obligation of such Lender to make additional Eurodollar Loans
shall be suspended until such Regulatory Change or other circumstances
ceases to be in effect (in which case the provisions of Section 5.04 shall
be applicable).
32
(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower
shall pay directly to any Lender from time to time on request such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender or its parent or holding company for any costs which it determines
are attributable to the maintenance by such Lender or its parent or holding
company (or any Applicable Lending Office), pursuant to any Governmental
Requirement following any Regulatory Change, of capital in respect of its
Commitment, its Notes, its Loans or any interest held by it in any Letter
of Credit, such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of such
Lender or its parent or holding company (or any Applicable Lending Office)
to a level below that which such Lender or its parent or holding company
(or any Applicable Lending Office) could have achieved but for such
Governmental Requirement. Such Lender will notify the Borrower that it is
entitled to compensation pursuant to this Section 5.01(c) as promptly as
practicable after it determines to request such compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower of the
incurrence of additional costs under this Section 5.01 shall in such notice
to the Borrower and the Agent set forth in reasonable detail the basis and
amount of its request for compensation. Determinations and allocations by
each Lender for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to Section 5.01(a) or (b), or of the effect of
capital maintained pursuant to Section 5.01(c), on its costs or rate of
return of maintaining Loans or its obligation to make Loans or issue
Letters of Credit, or on amounts receivable by it in respect of Loans or
Letters of Credit, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive and binding for all purposes,
provided that such determinations and allocations are made on a reasonable
basis. Any request for additional compensation under this Section 5.01
shall be paid by the Borrower within thirty (30) days of the receipt by the
Borrower of the notice described in this Section 5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate for any Interest Period:
(i) the Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Rate" in Section 1.02
are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(ii) the Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" in Section 1.02 upon the basis of which
the rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not sufficient to adequately cover the cost to the Lenders
of making or maintaining Eurodollar Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans.
33
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make Eurodollar Loans shall be suspended until such
time as such Lender may again make and maintain Eurodollar Loans (in which case
the provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and
5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Lender shall be made
instead as Base Rate Loans (and, if an event referred to in Section 5.01(b) or
Section 5.03 has occurred and such Lender so requests by notice to the Borrower,
all Affected Loans of such Lender then outstanding shall be automatically
converted into Base Rate Loans on the date specified by such Lender in such
notice) and, to the extent that Affected Loans are so made as (or converted
into) Base Rate Loans, all payments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender
within thirty (30) days of receipt of written request of such Lender (which
request shall set forth, in reasonable detail, the basis for requesting such
amounts and which shall be conclusive and binding for all purposes provided that
such determinations are made on a reasonable basis), such amount or amounts as
shall compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.02) on a date other than the last day of the Interest Period for such
Loan; or
(ii) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a Eurodollar
Loan from such Lender on the date for such borrowing, continuation or
conversion specified in the relevant notice given pursuant to Section
2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such
34
principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower and the Agent of its
incurring additional costs under Section 5.01 hereof or has required the
Borrower to make payments for Taxes under Section 4.06 hereof, then the
Borrower may, unless such Lender has notified the Borrower and the Agent
that the circumstances giving rise to such notice no longer apply,
terminate, in whole but not in part, the Commitment of any Lender (other
than the Agent) (the "Terminated Lender") at any time upon five (5)
Business Days' prior written notice to the Terminated Lender and the Agent
(such notice referred to herein as a "Notice of Termination").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with one or
more Lenders to increase their Commitment or Commitments and/or (ii)
request any one or more other banking institutions to become parties to
this Agreement in place and instead of such Terminated Lender and agree to
accept a Commitment or Commitments; provided, however, that such one or
more other banking institutions are reasonably acceptable to the Agent and
become parties by executing an Assignment (the Lenders or other banking
institutions that agree to accept in whole or in part the Commitment of the
Terminated Lender being referred to herein as the "Replacement Lenders"),
such that the aggregate increased and/or accepted Commitments of the
Replacement Lenders under clauses (i) and (ii) above equal the Commitment
of the Terminated Lender.
(c) The Notice of Termination shall include the name of the Terminated
Lender, the date the termination will occur (the "Termination Date"), and
the Replacement Lender or Replacement Lenders to which the Terminated
Lender will assign its Commitment and, if there will be more than one
Replacement Lender, the portion of the Terminated Lender's Commitment to be
assigned to each Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall by
execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or Replacement Lenders (pro rata, if there is more than
one Replacement Lender, in proportion to the portion of the Terminated
Lender's Commitment to be assigned to each Replacement Lender) indicated in
the Notice of Termination and shall assign to the Replacement Lender or
Replacement Lenders each of its Loans (if any) then outstanding and
participation interests in Letters of Credit (if any) then outstanding pro
rata as aforesaid), (ii) the Terminated Lender shall endorse its Notes,
payable without recourse, representation or warranty to the order of the
Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iii)
the Replacement Lender or Replacement Lenders shall purchase the Notes held
by the Terminated Lender (pro rata as aforesaid) at a price equal to the
unpaid principal amount thereof plus interest and facility and other fees
accrued and unpaid to the Termination Date, and (iv) the Replacement Lender
or Replacement Lenders will thereupon (pro rata as aforesaid) succeed to
and be
35
substituted in all respects for the Terminated Lender with like effect as
if becoming a Lender pursuant to the terms of Section 12.06(b), and the
Terminated Lender will have the rights and benefits of an assignor under
Section 12.06(b). To the extent not in conflict, the terms of Section
12.06(b) shall supplement the provisions of this Section 5.06(d). For each
assignment made under this Section 5.06, the Replacement Lender shall pay
to the Agent the processing fee provided for in Section 12.06(b). The
Borrower will be responsible for the payment of any breakage costs
associated with termination of the Terminated Lender, as set forth in
Section 5.05.
ARTICLE VI
Conditions Precedent
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject
to the receipt by the Agent and the Lenders of all fees payable pursuant to
Section 2.04 on or before the Closing Date and the receipt by the Agent of the
following documents and satisfaction of the other conditions provided in this
Section 6.01, each of which shall be satisfactory to the Agent in form and
substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the
Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower (y) who
are authorized to sign the Loan Documents to which the Borrower is a party
and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection
with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of the authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of the Borrower, certified as being
true and complete. The Agent and the Lenders may conclusively rely on such
certificate until the Agent receives notice in writing from the Borrower to
the contrary.
(b) Certificates of the appropriate state agencies with respect to the
existence, qualification and good standing of the Borrower.
(c) A compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated
as of the date of the Initial Funding.
(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on Exhibit E,
duly completed and executed in sufficient number of counterparts for
recording, if necessary.
36
(f) An opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P., special counsel to the
Borrower, substantially in the form of Exhibit D hereto.
(g) A certificate of insurance coverage of the Borrower evidencing
that the Borrower is carrying insurance in accordance with Section 7.19
hereof.
(h) Title information as the Agent may require from attorneys
satisfactory to the Agent, setting forth the status of title to at least
100% of the value of the Oil and Gas Properties included in the Initial
Reserve Report.
(i) The Agent shall have been furnished with appropriate UCC search
certificates reflecting no prior liens or security interests.
(j) Such other documents as the Agent or any Lender or special counsel
to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans and Letters of Credit. The
obligation of the Lenders to make Loans to the Borrower upon the occasion of
each borrowing hereunder and to issue, renew, extend or reissue Letters of
Credit for the account of the Borrower (including the Initial Funding) is
subject to the further conditions precedent that, as of the date of such Loans
and after giving effect thereto: (i) no Default shall have occurred and be
continuing; (ii) no Material Adverse Effect shall have occurred; and (iii) the
representations and warranties made by the Borrower in Article VII and in the
Security Instruments shall be true on and as of the date of the making of such
Loans or issuance, renewal, extension or reissuance of a Letter of Credit with
the same force and effect as if made on and as of such date and following such
new borrowing, except to the extent such representations and warranties are
expressly limited to an earlier date or the Majority Lenders may expressly
consent in writing to the contrary. Each request for a borrowing or issuance,
renewal, extension or reissuance of a Letter of Credit by the Borrower hereunder
shall constitute a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such notice and, unless the Borrower
otherwise notifies the Agent prior to the date of and immediately following such
borrowing or issuance, renewal, extension or reissuance of a Letter of Credit as
of the date thereof).
Section 6.03 Conditions Relating to Letters of Credit. In addition to
the satisfaction of all other conditions precedent set forth in this Article VI,
the issuance, renewal, extension or reissuance of the Letters of Credit referred
to in Section 2.01(b) hereof is subject to the following conditions precedent:
(a) At least three (3) Business Days prior to the date of the issuance
and at least thirty (30) Business Days prior to the date of the renewal,
extension or reissuance of each Letter of Credit, the Agent shall have
received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by the Agent,
(ii) contain such terms and provisions as are reasonably required by the
Agent, (iii) be for the account of the
37
Borrower and (iv) expire not later than the earlier of one (1) year from
the date of issuance, renewal, extension or reissuance or two (2) days
before the Termination Date.
(c) The Borrower shall have duly and validly executed and delivered to
the Agent a Letter of Credit Agreement pertaining to the Letter of Credit.
ARTICLE VII
Representations and Warranties
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing and
issuance, renewal, extension or reissuance of a Letter of Credit as provided in
Section 6.02):
Section 7.01 Corporate Existence. Each of the Borrower and each
Subsidiary: (i) is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) has all
requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at December 31, 1998
and the related consolidated statement of income, stockholders' equity and cash
flow of the Borrower and its Consolidated Subsidiaries for the fiscal year ended
on said date, and the unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at June 30, 1999 and their related consolidated
statements of income, stockholders' equity and cash flow of the Borrower and its
Consolidated Subsidiaries for the three-month period ended on such date
heretofore furnished to the Agent, are complete and correct and fairly present
the consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as at said dates and the results of its operations for the fiscal
year and the three-month period on said dates, all in accordance with GAAP, as
applied on a consistent basis (subject, in each case, to normal audit
adjustments). Neither the Borrower nor any Subsidiary has on the Closing Date
any material Debt, contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements or in Schedule 7.02. Since June 30, 1999, there has
been no change or event having a Material Adverse Effect. Since the date of the
Financial Statements, neither the business nor the Properties of the Borrower or
any Subsidiary have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public enemy.
38
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower or any Subsidiary which involves the possibility of any
judgment or liability against the Borrower or any Subsidiary not fully covered
by insurance (except for normal deductibles).
Section 7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the respective charter or by-laws of
the Borrower or any Subsidiary, or any Governmental Requirement or any agreement
or instrument to which the Borrower or any Subsidiary is a party or by which it
is bound or to which it or its Properties are subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Borrower or any Subsidiary
pursuant to the terms of any such agreement or instrument other than the Liens
created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Subsidiary have all
necessary corporate power and authority to execute, deliver and perform its
obligations under the Loan Documents to which it is a party; and the execution,
delivery and performance by the Borrower and each Subsidiary of the Loan
Documents to which it is a party, have been duly authorized by all necessary
corporate action on its part; and the Loan Documents constitute the legal, valid
and binding obligations of the Borrower and each Subsidiary, enforceable in
accordance with their terms.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Borrower or any Subsidiary of
the Loan Documents or for the validity or enforceability thereof, except for the
recording and filing of the Security Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used
(a) to refinance all amounts outstanding under the Prior Credit Agreement, (b)
to finance the acquisition of E. I.-30 for approximately $17,500,000, (c) to
finance development costs for E.I.-30 of between $4,500,000 to $4,800,000, (d)
to develop the Borrower's proven reserves from its Oil and Gas Properties, and
(e) for general corporate purposes. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan hereunder will
be used to buy or carry any margin stock.
Section 7.08 ERISA. Borrower and/or Subsidiary does not and do not
have any Plans. In the event either adopts or assumes any Plan then, as
applicable, they shall each represent as follows:
39
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974.
No liability to the PBGC (other than for the payment of current premiums
which are not past due) by the Borrower, any Subsidiary or any ERISA
Affiliate has been or is expected by the Borrower, any Subsidiary or any
ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event
with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan,
and no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to
any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such
plan maintained to provide benefits to former employees of such entities,
that may not be terminated by the Borrower, a Subsidiary or any ERISA
Affiliate in its sole discretion at any time without any material
liability.
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
40
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Borrower and the Subsidiaries has filed all United States Federal income tax
returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary. The charges, accruals
and reserves on the books of the Borrower and the Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrower,
adequate. No tax lien has been filed and, to the knowledge of the Borrower, no
claim is being asserted with respect to any such tax, fee or other charge.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Borrower and the
Subsidiaries has good and defensible title to its material (individually or
in the aggregate) Properties, free and clear of all Liens except Liens
permitted by Section 9.02. Except as set forth in Schedule 7.10, after
giving full effect to the Excepted Liens, the Borrower owns the net
interests in production attributable to the Hydrocarbon Interests reflected
in the most recently delivered Reserve Report and the ownership of such
Properties shall not in any material respect obligate the Borrower to bear
the costs and expenses relating to the maintenance, development and
operations of each such Property in an amount in excess of the working
interest of each Property set forth in the most recently delivered Reserve
Report. All information contained in the most recently delivered Reserve
Report is true and correct in all material respects as of the date thereof.
(b) All leases and agreements necessary for the conduct of the
business of the Borrower and the Subsidiaries are valid and subsisting, in
full force and effect and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give
rise to a default under any such lease or leases, which would affect in any
material respect the conduct of the business of the Borrower and the
Subsidiaries.
(c) The rights, Properties and other assets presently owned, leased or
licensed by the Borrower and the Subsidiaries including, without
limitation, all easements and rights of way, include all rights, Properties
and other assets necessary to permit the Borrower and the Subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the assets and Properties of the Borrower and the
Subsidiaries which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance
with prudent business standards.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the Agent and
the Lenders (or any of them) by the Borrower or any Subsidiary in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading in the light of the
circumstances in which made
41
and with respect to the Borrower and the Subsidiaries taken as a whole. There is
no fact peculiar to the Borrower or any Subsidiary which has a Material Adverse
Effect or in the future is reasonably likely to have (so far as the Borrower can
now foresee) a Material Adverse Effect and which has not been set forth in this
Agreement or the other documents, certificates and statements furnished to the
Agent by or on behalf of the Borrower or any Subsidiary prior to, or on, the
Closing Date in connection with the transactions contemplated hereby.
Section 7.12 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14, the
Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 7.14.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary
is bound which default would have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in
Schedule 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower or any Subsidiary nor the operations currently conducted thereon
or, to the best knowledge of the Borrower, by any prior owner or operator
of such Property or operation, are in violation of or subject to any
existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
42
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of
any and all Property of the Borrower and each Subsidiary, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly
obtained or filed, and the Borrower and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits, licenses and
similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all Property of the
Borrower or any Subsidiary have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Borrower, all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment,
and are not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection with
any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property of the Borrower or any Subsidiary except
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment;
(f) To the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Borrower does not
have any reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other
43
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties; specifically in this
connection, (i) after the Closing Date, no Oil and Gas Property is subject to
having allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any overproduction
(whether or not the same was permissible at the time) prior to the Closing Date
and (ii) none of the ▇▇▇▇▇ comprising a part of the Oil and Gas Properties (or
properties unitized therewith) are deviated from the vertical more than the
maximum permitted by applicable laws, regulations, rules and orders, and such
▇▇▇▇▇ are, in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of ▇▇▇▇▇ located
on properties unitized therewith, such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower and each Subsidiary. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date of the closing have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are sufficient
for compliance with all requirements of law and of all agreements to which the
Borrower or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business for the assets and operations of the Borrower and
each Subsidiary; will remain in full force and effect through the respective
dates set forth in Schedule 7.19 without the payment of additional premiums; and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Schedule 7.19 identifies all
material risks, if any, which the Borrower and the Subsidiaries and their
respective Board of Directors or officers have designated as being self insured.
Neither the Borrower nor any Subsidiary has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited below
usual and customary policy limits, by an insurance carrier to which it has
applied for any such insurance or with which it has carried insurance during the
last three years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the
counterparty to each such agreement.
Section 7.21 Restriction on Liens. Neither the Borrower nor any of
the Subsidiaries is a party to any agreement or arrangement (other than this
Agreement and the Security Instruments), or subject to any order, judgment, writ
or decree, which either restricts or purports to restrict its ability to grant
Liens to other Persons on or in respect of their respective assets of
Properties, except for instances where the applicable restriction has been
waived in writing by the Person entitled to enforce such restriction.
44
Section 7.22 Material Agreements. Set forth on Schedule 7.22 hereto
is a complete and correct list of all material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements) providing for, evidencing,
securing or otherwise relating to any Debt of the Borrower or any of the
Subsidiaries, and all obligations of the Borrower or any of the Subsidiaries to
issuers of surety or appeal bonds issued for account of the Borrower or any such
Subsidiary, and such list correctly sets forth the names of the debtor or lessee
and creditor or lessor with respect to the Debt or lease obligations outstanding
or to be outstanding and the property subject to any Lien securing such Debt or
lease obligation. Also set forth on Schedule 7.22 hereto is a complete and
correct list of all material agreements and other instruments of the Borrower
and the Subsidiaries relating to the purchase, transportation by pipeline, gas
processing, marketing, sale and supply of natural gas and other Hydrocarbons,
but in any event, any such agreement or other instrument that will account for
more than 20% of the sales of the Borrower and the Subsidiaries during the
Borrower's current fiscal year.
Section 7.23 Gas Imbalances. As of the Closing Date, except as set
forth on Schedule 7.23 or on the most recent certificate delivered pursuant to
Section 8.07(c), on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to the Borrower's Oil and Gas Properties which
would require the Borrower to deliver Hydrocarbons produced from the Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor exceeding 300,000,000 cubic feet of gas in the aggregate.
Section 7.24 Year 2000. Any reprogramming required to permit the
proper functioning in and following the year 2000 of (i) the Borrower's and its
Subsidiaries' computer systems and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or by vendors and suppliers
with which Borrower's or its Subsidiaries' systems interface) and the testing of
all such systems and equipment, as so reprogrammed, has been completed. The
cost to the Borrower and its Subsidiaries of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of others' systems or equipment) will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in
the preceding sentence as may be necessary, the computer and management
information systems of the Borrower and its Subsidiaries are and, with ordinary
course upgrading and maintenance, will continue to be, sufficient to permit the
Borrower to conduct its business without Material Adverse Effect.
ARTICLE VIII
Affirmative Covenants
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Indebtedness hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder:
45
Section 8.01 Financial Statements; Other Reports. The Borrower shall
deliver, or shall cause to be delivered, to the Agent with sufficient copies of
each for the Lenders:
(a) As soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, the audited consolidated and unaudited
consolidating statements of income, stockholders' equity, changes in
financial position and cash flow of the Borrower and its Consolidated
Subsidiaries for each fiscal year (commencing with the 1999 fiscal year),
and the related consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, and setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year and accompanied by the related
opinion of independent public accountants of recognized national standing
acceptable to the Agent which opinion shall state that said financial
statements fairly present the consolidated and consolidating financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP except for
such changes in such principles with which the independent public
accountants shall have concurred and such opinion shall not contain a
"going concern" or like qualification or exception, and a certificate of
such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any Default.
(b) As soon as available and in any event within 60 days after the end
of each of the first three fiscal quarterly periods of each fiscal year of
the Borrower, consolidated and consolidating statements of income,
stockholders' equity, changes in financial position and cash flow of the
Borrower and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets as at
the end of such period, and setting forth in each case in comparative form
the corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries in accordance
with GAAP, as at the end of, and for, such period (subject to normal year-
end audit adjustments).
(c) Promptly after the Borrower knows that any Default or any Material
Adverse Effect has occurred, a notice of such Default or Material Adverse
Effect, describing the same in reasonable detail and the action the
Borrower proposes to take with respect thereto.
(d) Promptly upon receipt thereof, a copy of each other report or
letter submitted to the Borrower or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Borrower and the Subsidiaries, and a copy of any
response by the Borrower or any Subsidiary of the Borrower, or the Board of
Directors of the Borrower or any Subsidiary of the Borrower, to such letter
or report.
46
(e) Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders
generally and each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Borrower with or received by the
Borrower in connection therewith from any securities exchange or the SEC or
any successor agency.
(f) Promptly after the furnishing thereof, copies of any statement,
report or notice furnished by the Borrower to any Person pursuant to the
terms of any indenture, loan or credit or other similar agreement, other
than this Agreement and not otherwise required to be furnished to the
Lenders pursuant to any other provision of this Section 8.01.
(g) From time to time such other information regarding the business,
affairs or financial condition of the Borrower or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any
Lender or the Agent may reasonably request.
(h) As soon as available and in any event within ten (10) Business
Days after the last day of each calendar quarter, a report, in form and
substance satisfactory to the Agent, setting forth as of the last Business
Day of such calendar quarter a true and complete list of all Hedging
Agreements (including commodity price swap agreements, forward agreements
or contracts of sale which provide for prepayment for deferred shipment or
delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net ▇▇▇▇ to
market value therefor, any new credit support agreements relating thereto
not listed on Schedule 7.20, any margin required or supplied under any
credit support document, and the counterparty to each such agreement.
(i) As soon as available, and in any event within ten (10) Business
Days after the last day of each calendar quarter, a report, in form and
substance satisfactory to the Agent, setting forth as of the last Business
Day of each such calendar quarter a true and complete list of all
Properties included in the then current Borrowing Base, setting forth which
Properties are subject to a Lien in favor of the Agent and which are
subject to the negative pledge pursuant to Section 9.02, and the net
revenue interest attributable to each such Property.
(j) As soon as available, and in any event within ten (10) Business
Days after the last day of each calendar quarter, a report, in form and
substance satisfactory to the Agent, setting forth as of the last Business
Day of each such calendar quarter a true and complete list of all Non-
Recourse Debt (including, without limitation, the outstanding amount
thereof and payment schedule relating thereto) and the Properties
supporting same, together with copies of the non-recourse provisions
contained in the documents and/or instruments evidencing such Non-Recourse
Debt not previously delivered to the Agent.
The Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C hereto
47
executed by a Responsible Officer (i) certifying as to the matters set forth
therein and stating that no Default has occurred and is continuing (or, if any
Default has occurred and is continuing, describing the same in reasonable
detail), and (ii) setting forth in reasonable detail the computations necessary
to determine whether the Borrower is in compliance with Sections 9.12 and 9.13
as of the end of the respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to the
Agent notice of all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority affecting the Borrower or any Subsidiary, except
proceedings which, if adversely determined, would not have a Material Adverse
Effect. The Borrower will, and will cause each of the Subsidiaries to, promptly
notify the Agent and each of the Lenders of any claim, judgment, Lien or other
encumbrance (other than an Excepted Lien) affecting any Property of the Borrower
or any Subsidiary if the value of the claim, judgment, Lien, or other
encumbrance affecting such Property shall exceed $500,000.
Section 8.03 Maintenance, Etc.
(a) The Borrower shall and shall cause each Subsidiary to: preserve
and maintain its corporate existence and all of its material rights,
privileges and franchises; keep books of record and account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and activities; comply with all Governmental
Requirements if failure to comply with such requirements will have a
Material Adverse Effect; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or
on any of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of the Agent or any Lender, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect
its Properties, and to discuss its business and affairs with its officers,
all to the extent reasonably requested by such Lender or the Agent (as the
case may be); and keep, or cause to be kept, insured by financially sound
and reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against
by such Persons and carry such other insurance as is usually carried by
such Persons including, without limitation, environmental risk insurance to
the extent reasonably available.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Borrower
will furnish or cause to be furnished to the Agent and the Lenders a
certificate of insurance coverage from the insurer in form and substance
satisfactory to the Agent and, if requested, will furnish the Agent and the
Lenders copies of the applicable policies.
(c) The Borrower will and will cause each Subsidiary to operate its
Properties or cause such Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and in
compliance with all applicable contracts and agreements and in compliance
in all material respects with all Governmental Requirements.
48
(d) The Borrower will and will cause each Subsidiary to, at its own
expense, do or cause to be done all things reasonably necessary to preserve
and keep in good repair, working order and efficiency all of its Oil and
Gas Properties and other material Properties including, without limitation,
all equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so that at
all times the state and condition of its Oil and Gas Properties and other
material Properties will be fully preserved and maintained, except to the
extent a portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except as would not
create a Material Adverse Effect. The Borrower will and will cause each
Subsidiary to promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the leases or other
agreements affecting or pertaining to the Mortgaged Properties and its Oil
and Gas Properties except as would not create a Material Adverse Effect,
(ii) perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required
by each and all of the assignments, deeds, leases, sub-leases, contracts
and agreements affecting its interests in the Mortgaged Properties and in
its Oil and Gas Properties and other material Properties except as would
not create a Material Adverse Effect, (iii) will and will cause each
Subsidiary to do all other things necessary to keep unimpaired, except for
Liens described in Section 9.02, its rights with respect to its material
Oil and Gas Properties and other material Properties and prevent any
forfeiture thereof or a default thereunder, except to the extent a portion
of such Properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts. The Borrower will and will cause each
Subsidiary to operate the Mortgaged Properties and its other material Oil
and Gas Properties and other material Properties or cause or make
reasonable and customary efforts to cause such Oil and Gas Properties and
other material Properties to be operated in a careful and efficient manner
in accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance in all material
respects with all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) The Borrower will and will cause each Subsidiary to establish and
implement such procedures as may be reasonably necessary to continuously
determine and assure that any failure of the following does not have a
Material Adverse Effect: (i) all Property of the Borrower and the
Subsidiaries and the operations conducted thereon and other activities of
the Borrower and the Subsidiaries are in compliance with and do not violate
the requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or to
any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or to
any such Property in a quantity equal to or exceeding that quantity which
requires reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil
and gas exploration and production wastes or hazardous substance is
released on or to any such Property so as to pose an imminent and
substantial endangerment to public health or welfare or the environment.
49
(b) The Borrower will promptly notify the Agent and the Lenders in
writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in connection
with any Environmental Laws, excluding routine testing and corrective
action.
(c) As to any "on shore" acquisitions, the Borrower will and will
cause each Subsidiary to provide environmental audits and tests in
accordance with American Society for Testing and Materials standards as
reasonably requested by the Agent and the Lenders (or as otherwise required
to be obtained by the Agent or the Lenders by any Governmental Authority)
in connection with any future acquisitions of Oil and Gas Properties or
other material Properties.
Section 8.05 Further Assurances. The Borrower will and will cause
each Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Security Instruments and this
Agreement. The Borrower at its expense will and will cause each Subsidiary to
promptly execute and deliver to the Agent upon request all such other documents,
agreements and instruments to comply with or accomplish the covenants and
agreements of the Borrower or any Subsidiary, as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more fully
describe the collateral intended as security for the Notes, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the
Notes according to the reading, tenor and effect thereof; and the Borrower will
and will cause each Subsidiary to do and perform every act and discharge all of
the obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
Section 8.07 Engineering Reports.
(a) Not less than 30 days prior to each Scheduled Redetermination
Date, commencing with the Scheduled Redetermination Date to occur on
January 1, 1999, the Borrower shall furnish to the Agent and the Lenders a
Reserve Report. The Reserve Report to be delivered by June 1 of each year
shall be prepared by certified independent petroleum engineers or other
independent petroleum consultant(s) acceptable to the Agent, and the
Reserve Report to be delivered by December 1 of each year shall be prepared
by or under the supervision of the chief engineer of the Borrower who shall
certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately
proceeding June 1 Reserve Report.
(b) In the event of an unscheduled redetermination, the Borrower shall
furnish to the Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and
50
to have been prepared in accordance with the procedures used in the
immediately preceding Reserve Report. For any unscheduled redetermination
requested by the Required Lenders or the Borrower pursuant to Section
2.08(d), the Borrower shall provide such Reserve Report with an "as of"
date as required by the Required Lenders as soon as possible, but in any
event no later than 30 days following the receipt of the request by the
Agent on behalf of the Required Lenders.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Agent and the Lenders, a certificate from a Responsible
Officer certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Borrower owns good and defensible title to its Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.02, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no material gas
imbalances, material take or pay or other material prepayments with respect
to its Oil and Gas Properties evaluated in such Reserve Report which would
require the Borrower to deliver Hydrocarbons produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full
payment therefor, (iv) none of the Oil and Gas Properties subject to the
relevant Reserve Report have been sold since the date of the Reserve Report
except as set forth on an exhibit to the certificate, which certificate
shall list all of any such Oil and Gas Properties sold and in such detail
as reasonably required by the Required Lenders, (v) attached to the
certificate is a list of its Oil and Gas Properties added to the
immediately prior Reserve Report and a list showing any change in working
interest or net revenue interest in its Oil and Gas Properties subject to
the relevant Reserve Report occurring and the reason for such change, (vi)
attached to the certificate is a list of all Persons disbursing proceeds to
the Borrower from its Oil and Gas Properties subject to the relevant
Reserve Report and (vii) Schedule B attached to such Reserve Report is a
listing of its Oil and Gas Properties to be considered in the determination
of the Borrowing Base.
(d) As soon as available and in any event within 60 days after the end
of each month, the Borrower shall provide production reports and lease
operating summaries by lease for the Mortgaged Properties and its other
material Oil and Gas Properties, which reports shall include quantities or
volume of production, revenue, realized product prices, operating expenses,
taxes, capital expenditures and lease operating costs which have accrued to
the Borrower's accounts in such period, and such other information with
respect thereto as the Agent may require.
Section 8.08 Title Information.
(a) On or before the delivery to the Agent and the Lenders of each
Reserve Report required by Section 8.07(a), the Borrower will deliver title
information in form and substance acceptable to the Agent covering enough
of the Oil and Gas Properties evaluated by such Reserve Report that were
not included in the immediately preceding Reserve Report, so that the Agent
shall have received, together with title information previously delivered
to
51
the Agent, satisfactory title information on 100% of the value of the Oil
and Gas Properties evaluated by such Reserve Report.
(b) The Borrower shall cure any material title defects or exceptions
which are not Excepted Liens raised by such information, or substitute
acceptable Mortgaged Properties with no material title defects or
exceptions except for Excepted Liens covering Mortgaged Properties of an
equivalent value, within 30 days after a request by the Agent or the
Lenders to cure such defects or exceptions.
(c) If the Borrower is unable to cure any material title defect
requested by the Agent or the Lenders to be cured within the 30-day period
or the Borrower does not comply with the requirements to provide acceptable
title information covering 100% of the value of the Oil and Gas Properties
evaluated in the most recent Reserve Report, such default shall not be a
Default or an Event of Default, but instead the Agent and the Lenders shall
have the right to exercise the following remedy in their sole discretion
from time to time, and any failure to so exercise this remedy at any time
shall not be a waiver as to future exercise of the remedy by the Agent or
the Lenders. To the extent that the Agent or the Lenders are not satisfied
with title to any Mortgaged Property after the time period in Section
8.08(b) has elapsed, such unacceptable Mortgaged Property shall not count
towards the 100% requirement, and the Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by all of the Lenders to cause the
Borrower to be in compliance with the requirement to provide acceptable
title information on 100% of the value of the Oil and Gas Properties. This
new Borrowing Base shall become effective immediately after receipt of such
notice.
Section 8.09 Additional Collateral.
(a) Should the Borrower acquire any additional Oil and Gas Properties
which will be part of the Oil and Gas Properties included in the Borrowing
Base, the Borrower will grant to the Agent as security for the Indebtedness
a first-priority Lien interest (subject only to Excepted Liens) on the
Borrower's interest in any such Oil and Gas Properties not already subject
to a Lien of the Security Instruments, which Lien will be created and
perfected by and in accordance with the provisions of mortgages, deeds of
trust, security agreements and financing statements, or other Security
Instruments, all in form and substance satisfactory to the Agent in its
sole discretion and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 8.07(a) above, the Borrower will provide to the
Agent title information in form and substance satisfactory to the Agent in
its sole discretion with respect to the Borrower's interests in such Oil
and Gas Properties.
(c) Also, promptly after the filing of any new Security Instrument in
any state, upon the reasonable request of the Agent, the Borrower will
provide to the Agent an opinion addressed to the Agent for the benefit of
the Lenders in form and substance satisfactory to
52
the Agent in its sole discretion from counsel acceptable to Agent, stating
that the Security Instrument is valid, binding and enforceable in
accordance with its terms and in legally sufficient form for such
jurisdiction.
Section 8.10 ERISA Information and Compliance. The Borrower will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies to the Lenders (i) promptly
after the filing thereof with the United States Secretary of Labor, the Internal
Revenue Service or the PBGC, copies of each annual and other report with respect
to each Plan or any trust created thereunder, (ii) immediately upon becoming
aware of the occurrence of any ERISA Event or of any "prohibited transaction,"
as described in section 406 of ERISA or in section 4975 of the Code, in
connection with any Plan or any trust created thereunder, a written notice
signed by a Responsible Officer specifying the nature thereof, what action the
Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take
with respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
ARTICLE IX
Negative Covenants
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans hereunder, all interest thereon
and all other amounts payable by the Borrower hereunder, without the prior
written consent of the Majority Lenders:
Section 9.01 Debt. Neither the Borrower nor any Subsidiary will
incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other
Indebtedness arising under the Loan Documents;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in Schedule 9.01, and
any renewals or extensions (but not increases) thereof;
53
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business
which, if greater than 90 days past the invoice or billing date, are being
contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of the Borrower pursuant to GAAP) not to exceed
$250,000;
(e) Debt associated with guaranties, sureties and bonds issued by the
Borrower or any Subsidiary, in the ordinary course of its business, of
obligations of others (other than for borrowed money) incurred in
Hydrocarbon transportation, Hydrocarbon purchasing or other similar
programs or operations, provided that such operations are disclosed to the
Agent and the costs of the financing related to such operations are
incorporated into the Engineering Reports provided to the Agent;
(f) Non-Recourse Debt arrangements on any Property of the Borrower or
any Subsidiary which is not included in the determination of the Borrowing
Base; and
(g) Debt of the Borrower under Hedging Agreements with a Lender or
another investment grade counterparty rated A or higher by Standard & Poors
Corporation or P2 or higher by ▇▇▇▇▇'▇ Investors Service, Inc., the
notional amounts of which do not exceed 80% of Borrower's anticipated oil
and/or gas production from producing ▇▇▇▇▇ to be produced for a period of
24 months, entered into as a part of its normal business operations as a
risk management strategy and/or hedge against changes resulting from market
conditions related to the Borrower's and its Subsidiaries' operations; and
(h) Debt consisting of sureties or bonds provided to any Governmental
Authority or other Person and assuring payment of contingent liabilities of
the Borrower or any of its Subsidiaries with respect to plugging, facility
removal and abandonment of its Oil and Gas Properties.
Section 9.02 Liens. Neither the Borrower nor any Subsidiary will
create, incur, assume or permit to exist any Lien on any of its Properties (now
owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d) but only on
the Property under lease;
(d) Liens disclosed on Schedule 9.02; and
(e) Liens on cash or securities of the Borrower securing the Debt
described in Section 9.01(e).
54
Section 9.03 Investments, Loans and Advances. Neither the Borrower
nor any Subsidiary will make or permit to remain outstanding any loans or
advances to or investments in any Person, except that the foregoing restriction
shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poors Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000.00 (as of the date of such Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no
lower than A2 or P2, as such rating is set forth from time to time, by
Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made by the Borrower in or to the
Subsidiaries, not to exceed at any one time outstanding $100,000 in the
aggregate;
(h) other investments, loans or advances not to exceed $100,000 in the
aggregate at any time; and
(i) investments by the Borrower in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related
thereto.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its stockholders.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any
55
Subsidiary shall sell or transfer any of its material Property, whether now
owned or hereafter acquired, and whereby the Borrower or any Subsidiary shall
then or thereafter rent or lease as lessee such Property or any part thereof or
other Property which the Borrower or any Subsidiary intends to use for
substantially the same purpose or purposes as the Property sold or transferred.
Section 9.06 Nature of Business. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.
Section 9.07 Limitation on Leases. Neither the Borrower nor any
Subsidiary will create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal
including capital leases but excluding leases of Hydrocarbon Interests), under
leases or lease agreements which would cause the aggregate amount of all
payments made by the Borrower and the Subsidiaries pursuant to all such leases
or lease agreements to exceed $500,000 in any period of twelve consecutive
calendar months during the life of such leases.
Section 9.08 Mergers, Etc. Neither the Borrower nor any Subsidiary
will merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person.
Section 9.09 Proceeds of Notes. The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage
in, any transaction in connection with which the Borrower, any Subsidiary
or any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect to
any Plan, which could result in any liability to the Borrower, any
Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail
to make, full payment when due of all amounts which, under the provisions
of any Plan, agreement relating thereto or applicable law, the Borrower, a
Subsidiary or any ERISA Affiliate is required to pay as contributions
thereto;
56
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to
permit to exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code, whether or not waived,
with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan
maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA)
of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified
in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire,
an interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Borrower, any Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other
Plan that is subject to Title IV of ERISA under which the actuarial present
value of the benefit liabilities under such Plan exceeds the current value
of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064,
4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any employee welfare benefit plan, as defined in section
3(1) of ERISA, including, without limitation, any such plan maintained to
provide benefits to former employees of such entities, that may not be
terminated by such entities in their sole discretion at any time without
any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Borrower, any
Subsidiary or any ERISA Affiliate is required to provide security to such
Plan under section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Neither the Borrower
nor any Subsidiary will discount or sell (with or without recourse) any of its
notes receivable or accounts receivable.
Section 9.12 Ratio of Debt to EBITDA. The Borrower will not permit
the ratio of Debt (exclusive of Non-Recourse Debt and Debt permitted under
Sections 9.01(c) and 9.01(h)) to
57
EBITDA as of the end of any fiscal quarter of the Borrower (calculated on a
rolling four quarter basis) to be greater than 3.00 to 1.00.
As used in this Agreement, "rolling four quarter basis" shall mean, as to any
fiscal quarter, such quarter and the three preceding fiscal quarters.
Section 9.13 Interest Coverage Ratio. The Borrower will not permit
its Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower
(calculated on a rolling four quarter basis) to be less than 2.50 to 1.00. For
the purposes of this Section 9.13, "Interest Coverage Ratio" shall mean the
ratio of (i) EBITDA for the four fiscal quarters ending on such date to (ii)
cash interest payments made for such four fiscal quarters of the Borrower and
its Consolidated Subsidiaries (excluding cash payments made by the Borrower in
respect of Non-Recourse Debt and reflected as interest expense on the Financial
Statements of the Borrower).
Section 9.14 Current Ratio. The Borrower will not permit its ratio
of (i) consolidated current assets to (ii) consolidated current liabilities
(excluding current maturities of the Notes) to be less than 1.0 to 1.0 at any
time. As used in this Section 9.14 "current assets" shall mean all assets of a
Person which under GAAP would be classified as current assets, and "current
liabilities" shall mean all liabilities of a Person which under GAAP would be
classified as current liabilities.
Section 9.15 Sale of Certain Oil and Gas Properties. The Borrower
will not, and will not permit any Subsidiary to, sell, assign, farm-out, convey
or otherwise transfer any Oil and Gas Property included in the Borrowing Base
without notice to the Agent and adjustment of the Borrowing Base as required by
the Agent to give effect to such sale; provided, however the consent of the
Agent and the Lenders shall be necessary for all of the foregoing in excess of
$300,000 in the aggregate in any one calendar year.
Section 9.16 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.17 Transactions with Affiliates. Neither the Borrower nor
any Subsidiary will enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of Property or the rendering of any
service, with any Affiliate unless such transactions are otherwise permitted
under this Agreement, are in the ordinary course of its business and are upon
fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
Section 9.18 Subsidiaries. Except as permitted by Section 9.03(g),
the Borrower shall not, and shall not permit any Subsidiary to, create any
additional Subsidiaries. The Borrower shall not and shall not permit any
Subsidiary to sell or to issue any stock or ownership interest of a Subsidiary
except to the Borrower and except in compliance with Section 9.03.
58
Section 9.19 Negative Pledge Agreements. Neither the Borrower nor
any Subsidiary will create, incur, assume or suffer to exist any contract,
agreement or understanding (other than this Agreement and the Security
Instruments) which in any way prohibits or restricts the granting, conveying,
creation or imposition of any Lien on any of its Property or restricts any
Subsidiary from paying dividends to the Borrower, or which requires the consent
of or notice to other Persons in connection therewith, except for instances
where the applicable restriction has been waived in writing by the Person
entitled to enforce such restriction.
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower which would require the
Borrower to deliver Hydrocarbons produced on Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor to exceed
300,000,000 cubic feet of gas in the aggregate on a net basis for the Borrower.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment
(including, without limitation, prepayments resulting from a Borrowing Base
Deficiency) when due of any principal of or interest on any Loan, or any
reimbursement obligation for a disbursement made under any Letter of
Credit, or any fees or other amount payable by it hereunder or under any
Security Instrument and such default, other than a default of a payment or
prepayment of principal (which shall have no cure period), shall continue
unremedied for a period of 3 Business Days; or
(b) the Borrower or any Subsidiary shall default in the payment when
due of any principal of or interest on any of its other Debt aggregating
$500,000 or more, or any event specified in any note, agreement, indenture
or other document evidencing or relating to any such Debt shall occur if
the effect of such event is to cause, or (with the giving of any notice or
the lapse of time or both) to permit the holder or holders of such Debt (or
a trustee or agent on behalf of such holder or holders) to cause, such Debt
to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by the Borrower or any Subsidiary, or
any certificate furnished to any Lender or the Agent pursuant to the
provisions hereof or any Security Instrument, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or
59
(d) the Borrower shall default in the performance of any of its
obligations under Article IX or any other Article of this Agreement other
than under Article VIII; or the Borrower shall default in the performance
of any of its obligations under Article VIII or any Security Instrument
(other than the payment of amounts due which shall be governed by Section
10.01(a)) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to the Borrower
by the Agent or any Lender (through the Agent), or (ii) the Borrower
otherwise becoming aware of such default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, liquidation
or composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of all
or any substantial part of its assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and any
such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 90 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$500,000 in the aggregate and not covered by insurance shall be rendered by
a court against the Borrower or any Subsidiary and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within sixty (60) days from the
date of entry thereof and the Borrower or such Subsidiary shall not, within
said period of sixty (60) days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal; or
(i) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby,
60
except to the extent permitted by the terms of this Agreement, or the
Borrower shall so state in writing; or
(j) any Letter of Credit becomes the subject matter of any order,
judgment, injunction or any other such determination, or if the Borrower or
any other Person shall petition or apply for or obtain any order
restricting payment by the Agent under any Letter of Credit or extending
the Lenders' liability under any Letter of Credit beyond the expiration
date stated therein or otherwise agreed to by the Agent; or
(k) the Borrower discontinues its usual business or suffers to exist
any material change in its management or a Change of Control occurs; or
(l) any Subsidiary takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (e), (f), (g) or (h) hereof;
or
(m) a Borrowing Base Deficiency shall remain after the expiration of
the cure period provided for in Section 2.07(d).
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (l) to the extent it
relates to clauses (e), (f) or (g), the Agent, upon request of the Majority
Lenders, shall, by notice to the Borrower, cancel the Commitments and/or
declare the principal amount then outstanding of, and the accrued interest
on, the Loans and all other amounts payable by the Borrower hereunder and
under the Notes (including without limitation the payment of cash
collateral to secure the LC Exposure as provided in Section 2.10(b) hereof)
to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01 or in clause (l) to the extent
it relates to clauses (e), (f) or (g), the Commitments shall be
automatically cancelled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Notes (including without limitation the
payment of cash collateral to secure the LC Exposure as provided in Section
2.10(b) hereof) shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second to accrued interest on the Notes; third to fees; fourth
pro rata to principal outstanding on the Notes and other Indebtedness;
fifth to
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serve as cash collateral to be held by the Agent to secure the LC Exposure;
and any excess shall be paid to the Borrower or as otherwise required by
any Governmental Requirement.
ARTICLE XI
The Agent
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the Security Instruments with such powers as are specifically delegated to
the Agent by the terms of this Agreement and the Security Instruments, together
with such other powers as are reasonably incidental thereto. The Agent (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to its Affiliates and its and its
Affiliates' officers, directors, employees, attorneys, accountants, experts and
agents): (i) shall have no duties or responsibilities except those expressly
set forth in the Loan Documents, and shall not by reason of the Loan Documents
be a trustee or fiduciary for any Lender; (ii) makes no representation or
warranty to any Lender and shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement, or for the value, validity,
effectiveness, genuineness, execution, effectiveness, legality, enforceability
or sufficiency of this Agreement, any Note or any other document referred to or
provided for herein or for any failure by the Borrower or any other Person
(other than the Agent) to perform any of its obligations hereunder or thereunder
or for the existence, value, perfection or priority of any collateral security
or the financial or other condition of the Borrower, the Subsidiaries or any
other obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Agent may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted
to be taken in good faith by it in accordance with the advice of such agents,
accountants, attorneys or experts. The Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Agent. The Agent is authorized to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents.
Section 11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees
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or failure to reimburse for Letter of Credit drawings) unless the Agent has
received notice from a Lender or the Borrower specifying such Default and
stating that such notice is a "Notice of Default." In the event that the Agent
receives such a notice of the occurrence of a Default, the Agent shall give
prompt notice thereof to the Lenders. In the event of a payment Default, the
Agent shall give each Lender prompt notice of each such payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments
and the Loans made by it and its participation in the issuance of Letters of
Credit, Chase (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 the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. Chase (and any successor acting
as Agent) and its Affiliates may (without having to account therefor to any
Lender) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrower (and any of its Affiliates)
as if it were not acting as the Agent, and Chase and its Affiliates may accept
fees and other consideration from the Borrower for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE
AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED
HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE 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 AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
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
decision to enter into this Agreement, and that it will, independently and
without reliance upon the 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 this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of this Agreement, the Notes, the Security
Instruments or any other document referred to or provided for herein or to
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inspect the properties or books of the Borrower. Except for notices, reports
and other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder, the 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 the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P. is acting in this transaction as special counsel to the Agent only,
except to the extent otherwise expressly stated in any legal opinion or any Loan
Document. Each Lender will consult with its own legal counsel to the extent
that it deems necessary in connection with the Loan Documents and the matters
contemplated therein.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action. The instructions of the Majority Lenders (or all of the
Lenders as expressly required by Section 12.04) and any action taken or failure
to act pursuant thereto by the Agent shall be binding on all of the Lenders. If
a Default has occurred and is continuing, the Agent shall take such action with
respect to such Default as shall be directed by the Majority Lenders (or all of
the Lenders as required by Section 12.04) in the written instructions (with
indemnities) described in this Section 11.07, provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Agent be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
and the Security Instruments or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been
so appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon
the acceptance of such appointment hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article XI and Section 12.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
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ARTICLE XII
Miscellaneous
Section 12.01 Waiver. No failure on the part of the Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day) by telex or telecopier and evidence or confirmation of
receipt is obtained, or personally delivered or, in the case of a mailed notice,
three (3) Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Agent and the Lenders
with respect thereto) of, and in connection with the negotiation,
investigation, preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,
waiver or consent relating thereto (including, without limitation, travel,
photocopy, mailing, courier, telephone and other similar expenses of the
Agent, the cost of environmental audits, surveys and appraisals obtained
pursuant to authority to do so granted herein, the reasonable fees and
disbursements of counsel and other outside consultants for the Agent and,
in the case of enforcement, the reasonable fees and disbursements of
counsel for the Agent and any of the Lenders); and promptly reimburse the
Agent for all amounts expended, advanced or incurred by the Agent or the
Lenders to satisfy any obligation of the Borrower under this Agreement or
any Security Instrument, including without limitation, all costs and
expenses of foreclosure;
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM,
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HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR
REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY
OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS
DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY
RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS
OF ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION, DELIVERY AND
PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF
THE BORROWER AND THE SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH IN
ANY OF THE LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY OR
TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT, OR
(VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING
THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE
MANUALLY EXECUTED DRAFT(S) AND CERTIFICATION(S), (VIII) ANY ASSERTION THAT
THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO
THE SECURITY INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS
ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND
THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY
REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE
INDEMNIFIED PARTY;
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY
SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING
WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE
BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER
OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME,
COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY
OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS
SECTION 12.03(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM
THE ACTS OR OMISSIONS OF THE
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AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY
(WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-
POSSESSION OR OTHERWISE);
(d) no Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the maximum
potential claims against the Indemnified Party to be indemnified pursuant
to this Section 12.03;
(e) in the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such claim
or demand being made against the Indemnified Party and the Borrower shall
have the non-exclusive right to join in the defense against any such claim
or demand provided that if the Borrower provides a defense, the Indemnified
Party shall bear its own cost of defense unless there is a conflict between
the Borrower and such Indemnified Party;
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY;
(g) the Borrower's obligations under this Section 12.03 shall survive
any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect; and
(h) the Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or
any Security Instrument may be amended, modified or waived with the Borrower's
and the Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, modifies
the Borrowing Base, forgives the principal amount of any Indebtedness
outstanding under this Agreement, releases any guarantor of the Indebtedness or
releases all or substantially all of the collateral, reduces the interest rate
applicable to the Loans or
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the fees payable to the Lenders generally, affects Sections 2.03(a) or (b), this
Section 12.04 or Section 12.06(a) or modifies the definition of "Majority
Lenders" or "Required Lenders" shall be effective without consent of all
Lenders; (ii) no amendment, modification or waiver which increases the Maximum
Credit Amount of any Lender shall be effective without the consent of such
Lender; and (iii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Agent shall be effective without the
consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder or
under the Notes or any Letters of Credit without the prior consent of all
of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent and the
Borrower (which consent will not be unreasonably withheld), assign to one
or more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit F (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of at least $5,000,000 or such lesser amount to
which the Borrower has consented and (ii) the assignee or assignor shall
pay to the Agent a processing and recordation fee of $2,500 for each
assignment. Any such assignment will become effective upon the execution
and delivery to the Agent of the Assignment and the consent of the Agent.
Promptly after receipt of an executed Assignment, the Agent shall send to
the Borrower a copy of such executed Assignment. Upon receipt of such
executed Assignment, the Borrower, will, at its own expense, execute and
deliver new Notes to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 12.06(b), the
assignee will become a "Lender," if not already a "Lender," for all
purposes of this Agreement and the Security Instruments. The assignor
shall be relieved of its obligations hereunder to the extent of such
assignment (and if the assigning Lender no longer holds any rights or
obligations under this Agreement, such assigning Lender shall cease to be a
"Lender" hereunder except that its rights under Sections 4.06, 5.01, 5.05
and 12.03 shall not be affected). The Agent will prepare on the last
Business Day of each month during which an assignment has become effective
pursuant to this Section 12.06(b), a new Annex I giving effect to all such
assignments effected during such month, and will promptly provide the same
to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all or
any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Lender shall remain a
"Lender" for all purposes of this Agreement and the transferee of such
participation shall not constitute a "Lender" hereunder; and (ii) no
participant under any such participation shall have rights to approve any
amendment to or waiver of any of the Loan Documents except to the extent
such amendment or waiver would (x) forgive any principal owing on any
Indebtedness or extend the final maturity of the Loans,
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(y) reduce the interest rate (other than as a result of waiving the
applicability of any post-default increases in interest rates) or fees
applicable to any of the Commitments or Loans or Letters of Credit in which
such participant is participating, or postpone the payment of any thereof,
or (z) release any guarantor of the Indebtedness or release all or
substantially all of the collateral (except as provided in the Loan
Documents) supporting any of the Commitments or Loans or Letters of Credit
in which such participant is participating. In the case of any such
participation, the participant shall not have any rights under this
Agreement or any of the Security Instruments (the participant's rights
against the granting Lender in respect of such participation to be those
set forth in the agreement with such Lender creating such participation),
and all amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation, provided that such participant
shall be entitled to receive additional amounts under Article V on the same
basis as if it were a Lender (and subject to the right of the Borrower
pursuant to Section 5.06 to replace any Lender or participant seeking
additional compensation from the Borrower) and be indemnified under Section
12.03 as if it were a Lender. In addition, each agreement creating any
participation must include an agreement by the participant to be bound by
the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the Borrower in
the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound by the provisions of Section 12.15
hereof.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge all or any of its Notes to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and
any operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of
any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or the Letters of Credit, the
Letter of Credit Agreements shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any
Security Instrument.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
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Section 12.09 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the
Loans and the termination of the Commitments. To the extent that any payments
on the Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Indebtedness so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent's and the Lenders' Liens, security interests,
rights, powers and remedies under this Agreement and each Security Instrument
shall continue in full force and effect. In such event, each Security
Instrument shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Agent and the Lenders to effect
such reinstatement.
Section 12.11 Captions. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE 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 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT THE
RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.
CHAPTER 346, TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS
AGREEMENT OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS DOMICILED IN HOUSTON,
▇▇▇▇▇▇ COUNTY, TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF TEXAS, HOUSTON DIVISION AND, BY EXECUTION AND DELIVERY OF
70
THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER
FROM OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(c) EACH OF THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OF 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 (IV) ACKNOWLEDGE THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal
71
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14. To the extent that Chapter 303 of the Texas
Finance Code is relevant for the purpose of determining the Highest Lawful Rate,
such Lender elects to determine the applicable rate ceiling under such Article
by the "weekly" rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Agent or the Lenders written confidential information belonging
to the Borrower, if the Borrower shall denominate such information in writing as
"confidential", the Agent and the Lenders shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information; provided,
however, Engineering Reports and Financial Reports do not need to be so marked
and shall be kept confidential. This obligation of confidence shall not apply
to such portions of the information which (i) are in the public domain, (ii)
hereafter become part of the public domain without the Agent or the Lenders
breaching their obligation of confidence to the Borrower, (iii) are previously
known by the Agent or the Lenders from some source other than the Borrower, (iv)
are hereafter developed by the Agent or the Lenders without using the Borrower's
information, (v) are hereafter obtained by or available to the Agent or the
Lenders from a third party who owes no obligation of confidence to the Borrower
with respect to such information or through any other means other than through
disclosure by the Borrower, (vi) are disclosed with the Borrower's consent,
(vii) must be disclosed either pursuant to any Governmental Requirement or to
Persons regulating the activities of the Agent or the Lenders, or (viii) as may
be required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding. Further, the Agent or a
Lender may disclose any such information to any other Lender, any independent
petroleum engineers or consultants, any independent certified public
accountants, any legal counsel employed by such Person in connection with this
Agreement or any Security Instrument, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee
or participant (including prospective assignees and participants) in the Loans;
provided, however, that the Agent or the Lenders shall receive a confidentiality
agreement from the Person to whom such information is disclosed such that said
Person shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Agent or the Lenders hereunder.
Notwithstanding anything to the contrary provided herein, this obligation of
confidence shall cease three (3) years from the date the information
72
was furnished, unless the Borrower requests in writing at least thirty (30) days
prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three (3) year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Agent and the Lenders arising by contract, agreement, statute or law
except as expressly stated in this Section 12.15.
Section 12.16 Effectiveness. This Agreement shall be effective on
the Closing Date (the "Effective Date").
Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE SECURITY
INSTRUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE SECURITY
INSTRUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE SECURITY INSTRUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
73
The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
BORROWER: ATP OIL & GAS CORPORATION
By:_____________________________
Name: T. ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Address for Notices:
Attention: T. ▇▇▇▇ ▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
74
LENDER AND AGENT: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:_____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Managing Director
Lending Office for Base Rate Loans
and Eurodollar Loans and Address for
Notice:
Chase Bank of Texas, N.A.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. 713/216-4117
Telephone No. 713/▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
with copies to:
Chase Bank of Texas, N.A.
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Manager, Loan Agreements Division
and
Chase Bank of Texas, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Manager, Syndications
75
ANNEX 1
LIST OF MAXIMUM CREDIT AMOUNTS
Name of Lender Percentage Share Maximum Credit Amount
Chase Bank of Texas,
National Association 100% $40,000,000
EXHIBIT A
FORM OF NOTE
$_____________________________ ___________________, 199__
FOR VALUE RECEIVED, ATP OIL & GAS CORPORATION, a Texas corporation (the
"Borrower") hereby promises to pay to the order of
______________________________ (the "Lender"), at the Principal Office of CHASE
BANK OF TEXAS, NATIONAL ASSOCIATION, as Agent (in such capacity, the "Agent"),
at ____________________________________________, the principal sum of
_____________ Dollars ($____________) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Credit Agreement, as hereinafter defined), in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender.
This Note is one of the Notes referred to in the Amended and Restated Credit
Agreement dated as of September 21, 1999 among the Borrower, the Lenders which
are or become parties thereto (including the Lender) and the Agent, and
evidences Loans made by the Lender thereunder (such Credit Agreement as the same
may be amended or supplemented from time to time, the "Credit Agreement").
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled to the
benefits provided for in the Credit Agreement and the Security Instruments. The
Credit Agreement provides for the acceleration of the maturity of this Note upon
the occurrence of certain events, for prepayments of Loans upon the terms and
conditions specified therein and other provisions relevant to this Note.
A-1-1
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF TEXAS.
ATP OIL & GAS CORPORATION
By:
----------------------------
T. ▇▇▇▇ ▇▇▇▇▇▇▇
President
A-1-2
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, 199__
ATP OIL & GAS CORPORATION, a Texas corporation (the "Borrower"), pursuant to
the Amended and Restated Credit Agreement dated as of September 21, 1999
(together with all amendments or supplements thereto, the "Credit Agreement")
among the Borrower, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Agent and the
lenders (the "Lenders") which are or become parties thereto, and such Lenders,
hereby makes the requests indicated below (unless otherwise defined herein,
capitalized terms are defined in the Credit Agreement):
1. Loans:
(a) Aggregate amount of new Loans to be $______________________;
(b) Requested funding date is _________________, 199__;
(c) $_____________________ of such borrowings are to be Eurodollar Loans;
$_____________________ of such borrowings are to be Base Rate Loans;
and
(d) Length of Interest Period for Eurodollar Loans is:
_________________________.
2. Eurodollar Loan Continuation for Eurodollar Loans maturing on
_____________________:
(a) Aggregate amount to be continued as Eurodollar Loans is
$____________________;
(b) Aggregate amount to be converted to Base Rate Loans is
$____________________;
(c) Length of Interest Period for continued Eurodollar Loans is
________________________.
3. Conversion of Outstanding Base Rate Loans to Eurodollar Loans:
Convert $__________________ of the outstanding Base Rate Loans to
Eurodollar Loans on ____________________ with an Interest Period of
______________________.
4. Conversion of outstanding Eurodollar Loans to Base Rate Loans:
B-1
Convert $__________________ of the outstanding Eurodollar Loans with
Interest Period maturing on ______________________, 199_, to Base
Rate Loans.
The undersigned certifies that he is the _____________________ of the
Borrower, and that as such he is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive the
requested borrowing, continuation or conversion under the terms and conditions
of the Credit Agreement.
ATP OIL & GAS CORPORATION
By:_________________________________
T. ▇▇▇▇ ▇▇▇▇▇▇▇
President
B-2
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the ________________ of ATP OIL
& GAS CORPORATION, a Texas corporation (the "Borrower") and that as such he is
authorized to execute this certificate on behalf of the Borrower. With
reference to the Amended and Restated Credit Agreement dated as of September 21,
1999 (together with all amendments or supplements thereto being the "Agreement")
among the Borrower, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Agent for the
lenders (the "Lenders") which are or become a party thereto, and such Lenders,
the undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified):
(a) The representations and warranties of the Borrower contained in
Article VII of the Agreement and in the Security Instruments and otherwise
made in writing by or on behalf of the Borrower pursuant to the Agreement
and the Security Instruments were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct
at and as of the time of delivery hereof, except to the extent such
representations and warranties are expressly limited to an earlier date or
the Majority Lenders have expressly consented in writing to the contrary.
(b) The Borrower has performed and complied with all agreements and
conditions contained in the Agreement and in the Security Instruments
required to be performed or complied with by it prior to or at the time of
delivery hereof.
(c) Since __________________, no change has occurred, either in any
case or in the aggregate, in the condition, financial or otherwise, of the
Borrower or any Subsidiary which would have a Material Adverse Effect.
(d) There exists, and, after giving effect to the loan or loans with
respect to which this certificate is being delivered, will exist, no Default
under the Agreement or any event or circumstance which constitutes, or with
notice or lapse of time (or both) would constitute, an event of default
under any loan or credit agreement, indenture, deed of trust, security
agreement or other agreement or instrument evidencing or pertaining to any
Debt of the Borrower or any Subsidiary, or under any material agreement or
instrument to which the Borrower or any Subsidiary is a party or by which
the Borrower or any Subsidiary is bound.
(e) Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Sections 9.12, 9.13 and
9.14 as of the end of the [fiscal quarter][fiscal year] ending____________.
C-1
EXECUTED AND DELIVERED this ____ day of ______________.
ATP OIL & GAS CORPORATION
By:
---------------------------
T. ▇▇▇▇ ▇▇▇▇▇▇▇
President
C-2
EXHIBIT D
to Amended and Restated Credit Agreement
[▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P. LETTERHEAD]
September 21, 1999
Chase Bank of Texas,
National Association,
as Agent and as a Lender
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
As special counsel for ATP Oil & Gas Corporation, a Texas corporation
(the "Borrower"), we furnish this opinion in connection with that certain
Amended and Restated Credit Agreement dated September 21, 1999, by and among the
Borrower, Chase Bank of Texas, National Association ("Chase"), as a Lender and
as Agent, and the other Lenders which are parties thereto (the "Agreement"). For
convenience, unless otherwise defined herein, capitalized terms used herein have
the meanings assigned to such terms in the Agreement.
In connection with issuing this opinion, we have examined counterparts
of the following documents (the "Transaction Documents") executed and delivered
by the Borrower, all of which are dated September 21, 1999:
(i) the Agreement;
(ii) the Note payable to Chase;
(iii) First Supplement to Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement; and
(iv) Act of Supplement and Amendment to Act of Mortgage, Assignment of
Production, Security Agreement and Financing Statement.
In addition, we have examined unexecuted execution counterparts of the
following documents (the "E.I. 30 Security Documents"), the first of which is to
be dated and executed on the date of the closing of the acquisition by the
Borrower of E.I. 30, which acquisition is to be financed with funds advanced
under the Agreement:
(i) Act of Mortgage, Assignment of Production, Security Agreement and
Financing Statement; and
(ii) UCC-1 Financing Statements executed pursuant to the document listed
above as (i) immediately above.
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 2
We have also examined (a) originals or copies, certified by the
Secretary of the Borrower as being true and correct, of the Articles of
Incorporation and Bylaws of the Borrower and resolutions adopted by the Board of
Directors of the Borrower in connection with the transactions contemplated in
the Agreement and (b) such certificates of public officials and other documents
and records as we have deemed necessary as the basis for the opinions expressed
herein. As to various questions of fact material to our opinions, we have
relied, to the extent we have deemed appropriate and to the extent that we do
not have knowledge of contrary facts, upon representations in the Transaction
Documents and the E.I. 30 Security Documents made by the parties thereto,
certificates of officers of the Borrower delivered to the Agent in connection
with the execution of the Transaction Documents and certificates of officers of
the Borrower delivered to us in the connection with the issuance of this
opinion.
In our examinations, we have, with your permission, assumed that:
(a) all signatures, other than the signatures of the officers of the
Borrower, on all executed documents submitted to us are genuine;
(b) all executed documents submitted to us as originals are authentic
and complete;
(c) all documents submitted to us as copies are true, correct, and
complete copies of the originals thereof;
(d) each of the Agent and Lenders has the corporate power, authority,
and legal right to execute and deliver those of the Transaction Documents and
the E.I. 30 Security Documents to which it is a party and to perform its
obligations thereunder;
(e) all requisite corporate action on the part of each of the Agent and
the Lenders in connection with the execution and delivery of those of the
Transaction Documents and the E.I. 30 Security Documents to which any of them is
a party has been accomplished;
(f) those of the Transaction Documents to which the Agent or any of the
Lenders is a party represent legal, valid and binding obligations of such party
enforceable in accordance with their respective terms;
2
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 3
(g) counterparts of the E.I. 30 Security Documents will be executed and
exchanged by the parties thereto in the forms reviewed by us;
(h) those of the E.I. Security Documents to which the Agent or any of
the Lenders is a party will, when executed and delivered, represent legal, valid
and binding obligations of such party enforceable in accordance with their
respective terms;
(i) the Lenders have advanced and/or will advance loan proceeds in
conformity with and as contemplated by the Agreement; and
(j) the Agent and the Lenders will, in each and every instance, strictly
observe and comply with the terms and provisions of the various usury clauses
contained in the Transaction Documents; there have been no fees, charges, points
or other forms of payment to or for the benefit of the Agent and the Lenders
other than those referred to in the Transaction Documents which have been paid
or are payable by or on behalf of the Borrower; each and every usury savings
clause contained in the Transaction Documents will be held to be valid, binding
and enforceable in accordance with its terms by the applicable judicial
authority; no interest will be charged, received or contracted for by the Agent
and the Lenders except as expressly provided in the Transaction Documents; each
relevant provision of the Texas Finance Code (the "Texas Act") is constitutional
and applicable to the transactions evidenced by the Agreement; the Texas Act and
the Depository Institutions Deregulation and Monetary Control Act of 1980, as
amended (the "Federal Act") will be enforced as written by the courts of the
State of Texas and the courts of the United States of America; and each
provision of Title V of the Federal Act is constitutional, although we note that
there are, to our knowledge, presently no Texas or federal cases which have
rendered an opinion that either the Texas Act or the Federal Act is
unconstitutional.
Based solely upon examination of the documents described above and the
assumptions set forth above and having regard for such legal considerations as
we have deemed relevant, we are of the opinion, subject to the qualifications
and limitations set forth below, that;
1. The Borrower is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Texas and is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction wherein it owns or leases property or conducts business and wherein
the failure so to qualify would have a Material Adverse Effect.
3
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 4
2. The Borrower has all necessary corporate power and authority to enter into
and perform its obligations under those of the Transaction Documents and the E.
I. 30 Security Documents to which it is or is to be a party and to own its
properties and to transact its business as currently conducted.
3. The execution, delivery and performance by the Borrower of those of the
Transaction Documents and the E. I. 30 Security Documents to which it is or is
to be a party have been duly authorized by all necessary corporate action on the
part of the Borrower and the Borrower has duly executed and delivered each of
the Transaction Documents to which it is a party.
4. The execution, delivery and performance by the Borrower of those of the
Transaction Documents and the E. I. 30 Security Documents to which it is or is
to be a party do not, to our knowledge, require the consent of any regulatory
authority or governmental body, and do not (a) contravene, conflict with or
violate, or necessitate any filing (other than routine filings of certain of
the Security Instruments) or registration under, (i) any provision of
applicable law (including, without limitation, Regulation U and Regulation X of
the Board of Governors of the Federal Reserve System) or any order, writ,
judgment, injunction, decree, determination or award known to us, as to each
case above, to be applicable to the Borrower or its property, or (ii) any
provision of the Articles of Incorporation or Bylaws of the Borrower, (b)
contravene or conflict with any indenture, instrument or other agreement known
to us to which the Borrower is a party or by which its property may be bound or
affected, or (c) result in or require the creation or imposition of any
mortgage, lien, pledge, security interest, charge or other encumbrance in or
upon any of the properties of the Borrower under any such indenture, instrument
or other agreement known to us, other than as created by certain of the
Transaction Documents and the E. I. 30 Security Documents.
5. No authorization, consent, approval, exemption, franchise, permit or license
of or filing (other than routine filings of certain of the Security
Instruments) with any governmental or public authority or, to our knowledge, any
third party is required to authorized or is otherwise required in connection
with the valid execution, delivery or performance by the Borrower of or under
the Transaction Documents or the E. I. 30 Security Documents.
4
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 5
6. Each of the Transaction Documents to which the Borrower is a party
constitutes the legal, valid and binding agreement and obligation of the
Borrower enforceable against the Borrower in accordance with the terms of
the relevant Transaction Document and each of the E. I. 30 Security
Documents will, when executed and delivered, constitute the legal, valid
and binding agreement and obligation of the Borrower enforceable against
the Borrower in accordance with the terms of the relevant E. I. 30 Security
Documents.
7. The Borrower is not a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate of a "holding company" as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
8. The Borrower is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
The opinions expressed herein are subject to the following qualifications
and limitations:
A. As to questions of fact material to this opinion, we have made
no independent investigation with regard to such matters, including,
without limitation, the truthfulness of the warranties and representations
made by the Borrower in the Transaction Documents and the E. I. 30 Security
Documents. Further in this regard, we have made no examination or
investigation to verify the accuracy or completeness of any financial,
accounting or statistical information furnished to the Agent or any of the
Lenders in connection with the transactions which are the subject of the
Transaction Documents and the E. I. 30 Security Documents, nor have we
reviewed the basis on which the Lenders have elected to extend credit to
the Borrower.
B. We have not made any examination of title or investigation of
the location or physical condition of any of the property or collateral
described in the Security Instruments (including, but not limited to, the
E. I. 30 Security Documents), or of the rank or priority of any
assignments, pledges, liens or security interests purported to be created
under the Security Instruments (including, but not limited to, the E. I. 30
Security Documents), and, accordingly, we express no opinion herein on such
matters.
5
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 6
C. The enforceability of the Transaction Document is, and the
enforceability of the E. I. 30 Security Documents will be, limited by (i)
applicable bankruptcy, insolvency, fraudulent or preferential conveyance or
transfer, moratorium, reorganization and other similar laws affecting
generally the enforcement of rights of creditors, (ii) general principles of
equity (regardless of whether considered in a proceeding in equity or at
law), (iii) redemption rights and other rights of the United States of
America under the Federal Tax Lien Act of 1966, as amended, (iv) limitations
resulting from the application of a standard of good faith or commercial
reasonableness, such as established under Section 1.203 of the Uniform
Commercial Code as adopted and in effect in the State of Texas, and (v)
public policy. We note, however, that the foregoing limitations are
generally applicable to documents similar in character to the Transaction
Documents and the E. I. 30 Security Documents and do not result from
particular provisions or deficiencies of any of the Transaction Documents or
the E. I. 30 Security Documents.
D. We express no opinion herein as to whether a court would grant
specific performance or any other equitable remedy with respect to
enforcement of any provision of any of the Transaction Documents or the
E. I. 30 Security Documents or whether a court would grant a particular
remedy as opposed to another remedy provided therein or available at law or
in equity.
E. We express no opinion herein as to the effect on certain of the
remedial or procedural provisions of the Transaction Documents and the E. I.
30 Security Documents of present federal or state constitutional and
statutory limitations and court decisions relating to due process or
otherwise limiting or rendering unenforceable such provisions, although we
note that the limitations and other effects of such statutes or rules of law
upon the validity and binding effect of the Transaction Documents and the
E. I. 30 Security Documents should not differ materially from the
limitations and other effects of such statutes or rules of law generally
upon the validity and binding effect of documents similar in character to
the Transaction Documents and the E. I. 30 Security Documents, and that such
limitations and other effects would not, in our opinion, render the remedies
and procedures that are afforded to the Agent and the Lenders inadequate for
the practical realization of the substantive benefits purported to be
provided to the Agent and the Lenders by the Transaction Documents and the
E. I. 30 Security Documents, except for the consequences of procedural
delay .
6
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 7
F. Except as expressly stated in the opinion numbered 5 hereinabove, we
express no opinion herein with respect to the need for licenses, permits,
authorizations or approvals required in the operation of the business of the
Borrower; provided that, to our knowledge, the Borrower does not lack any
such license, permit, authorization or approval the absence of which would
have a Material Adverse Effect.
G. To the extent any opinion expressed herein relates to the issue of
usury, such opinion is expressly limited to an analysis of whether the
Transaction Documents and the E. I. 30 Security Documents, as written, will
be subject to a defense, claim or setoff as a result of the contracting by
the Agent or the Lenders for a usurious rate of interest. Furthermore, any
opinion given herein on such issue is expressly limited to the contracting
for, as opposed to the charging or receiving of, usurious amounts of
interest.
H. Our representation of the Borrower has been limited to specific
matters referred to us for substantive legal attention. Factual matters or
agreements pertaining to the Borrower or the transactions contemplated by
the Transaction Documents or the E. I. 30 Security Documents may exist of
which we have no knowledge or information. We have no current actual
knowledge of any facts or circumstances which would make any opinion
expressed herein incorrect or subject to question or require further
investigation of any laws, facts, or circumstances. In this regard, in
rendering the opinions with respect to matters that are qualified by the use
of the words "to our knowledge" or "known to us", we have made no
independent investigation and have relied solely upon a review of our files
with respect to matters of the Borrower referred to us by the Borrower for
substantive legal attention and on certificates of officers of the Borrower.
I. Members of our firm are licensed to practice law only in the States
of Texas and Louisiana and in other jurisdictions the laws of which are not
applicable to the opinions expressed herein. Accordingly, the opinions
expressed herein are limited to the extent that the relevant issues are
governed by applicable federal law of the United States of America and the
laws of the States of Texas and Louisiana.
The opinions expressed herein are as of the date hereof. We assume no, and
expressly disclaim any, obligation to update or supplement such opinions to
reflect any facts or circumstances which may hereafter come to our attention or
any changes in laws which may hereafter occur.
7
Chase Bank of Texas,
National Association,
as Agent and as a Lender
September 21, 1999
Page 8
The scope of this opinion is limited to those issues specifically
considered herein, and no further or more expansive opinion is to be implied
from any opinion expressed herein. Any variation or difference in the facts upon
which this opinion is based might affect our conclusions in an adverse manner
and make them inaccurate.
The opinions expressed herein are solely for the benefit of the Agent and
the Lenders in connection with the transactions contemplated by the Transaction
Documents and the E. I. 30 Security Documents and may not be relied upon in any
manner by any other person or entity or by the Agent or any Lender for any other
purpose; provided that the Agent and any Lender may provide this opinion (i) to
bank examiners and other regulatory authorities, should they so request or in
connection with their normal examinations, (ii) to their independent auditors
and attorneys, (iii) pursuant to order or legal process of any court or
governmental agency, (iv) in connection with any legal action to which the Agent
or any Lender is a party arising out of the transactions which are the subject
of the Transaction Documents or the E. I. 30 Security Documents, or (v) to any
permitted prospective transferee of rights or obligations of the Agent or any
Lender under the Agreement, any of the other Transaction Documents or the E. I.
30 Security Documents.
Very truly yours,
8
EXHIBIT E
LIST OF SECURITY INSTRUMENTS
1. Act of Mortgage, Assignment of Production, Security Agreement and
Financing Statement from the Borrower for the benefit of the Agent,
covering E. I. - 30.
2. UCC-1 Financing Statement naming the Borrower, as Debtor, and the Agent, as
Secured Party, relating to Document No. 1 above.
3. Supplement and Amendment to Mortgage, Deed of Trust , Assignment of
Production, Security Agreement and Financing Statement.
4. Supplement and Amendment to Act of Mortgage, Assignment of Production,
Security Agreement and Financing Statement.
E-1
EXHIBIT F
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT ("Agreement") dated as of ________________,
199___ is between: _________________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
A. The Assignor is a party to the Amended and Restated Credit Agreement
dated as of September 21, 1999 (as amended and supplemented and in effect from
time to time, the "Credit Agreement") among ATP OIL & GAS CORPORATION, a Texas
corporation (the "Borrower"), each of the lenders that is or becomes a party
thereto as provided in Section 12.06 of the Credit Agreement (individually,
together with its successors and assigns, a "Lender", and collectively, together
with their successors and assigns, the "Lenders"), and CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, in its individual capacity, "Chase") and as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").
B. The Assignor proposes to sell, assign and transfer to the Assignee, and
the Assignee proposes to purchase and assume from the Assignor, [all][a portion]
of the Assignor's Maximum Credit Amount outstanding Loans and its Percentage
Share of the outstanding LC Exposure, all on the terms and conditions of this
Agreement.
C. In consideration of the foregoing and the mutual agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Definitions.
Section 1.01 Definitions. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
Section 1.02 Other Definitions. As used herein, the following terms have
the following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its capacity as a
"Lender") rights and obligations (i) under the Credit Agreement and the
other Security Instruments in respect of the Maximum Credit Amount of the
Assignor in the principal amount equal to $____________________, including,
without limitation, any obligation to participate pro rata in any LC
Exposure, and (ii) to make Loans under the Maximum Credit Amount and any
right to receive payments for the Loans outstanding under the Maximum
Credit Amount assigned hereby of $____________________.
F-1
(the "Loan Balance"), plus the interest and fees which will accrue from and
after the Assignment Date.
"Assignment Date" shall mean _____________________, 199___.
ARTICLE II
Sale and Assignment.
Section 2.01 Sale and Assignment. On the terms and conditions set forth
herein, effective on and as of the Assignment Date, the Assignor hereby sells,
assigns and transfers to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, all of the right, title and interest of the Assignor
in and to, and all of the obligations of the Assignor in respect of, the
Assigned Interest. Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.
Section 2.02 Assumption of Obligations. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and the Borrower) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Security Instruments in respect of the Assigned
Interest.
Section 2.03 Consent by Agent. By executing this Agreement as provided
below, in accordance with Section 12.06(b) of the Credit Agreement, the Agent
hereby acknowledges notice of the transactions contemplated by this Agreement
and consents to such transactions.
ARTICLE III
Payments.
Section 3.01 Payments. As consideration for the sale, assignment and
transfer contemplated by Section 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any.
An amount equal to all accrued and unpaid interest and fees shall be paid to the
Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided
in this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or counterclaim.
Section 3.02 Allocation of Payments. The Assignor and the Assignee agree
that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned
F-2
Interest accrued prior to the Assignment Date, (ii) the Assignee shall be
entitled to any payments of principal with respect to the Assigned Interest made
from and after the Assignment Date, together with any and all interest and fees
with respect to the Assigned Interest accruing from and after the Assignment
Date, and (iii) the Agent is authorized and instructed to allocate payments
received by it for account of the Assignor and the Assignee as provided in the
foregoing clauses. Each party hereto agrees that it will hold any interest, fees
or other amounts that it may receive to which the other party hereto shall be
entitled pursuant to the preceding sentence for account of such other party and
pay, in like money and funds, any such amounts that it may receive to such other
party promptly upon receipt.
Section 3.03 Delivery of Notes. Promptly following the receipt by the
Assignor of the consideration required to be paid under Section 3.01 hereof, the
Assignor shall, in the manner contemplated by Section 12.06(b) of the Credit
Agreement, (i) deliver to the Agent (or its counsel) the Notes held by the
Assignor and (ii) notify the Agent to request that the Borrower execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the
Assignee, dated the date of this Agreement in respective principal amounts equal
to the respective Maximum Credit Amount of the Assignor (if appropriate) and the
Assignee after giving effect to the sale, assignment and transfer contemplated
hereby.
Section 3.04 Further Assurances. The Assignor and the Assignee hereby
agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
Conditions Precedent.
Section 4.01 Conditions Precedent. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the Assignor and
the Assignee;
(b) the receipt by the Assignor of the payment required to be made by
the Assignee under Section 3.01 hereof; and
(c) the acknowledgment and consent by the Agent contemplated by
Section 2.03 hereof.
F-3
ARTICLE V
Representations and Warranties.
Section 5.01 Representations and Warranties of the Assignor. The Assignor
represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
Assignor and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Governmental Requirement
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all Liens,
claims, participations or other charges of any nature whatsoever; and
(f) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignor.
Section 5.02 Disclaimer. Except as expressly provided in Section 5.01
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any certificate or other document referred to or provided for
in, or received by any Lender under, the Credit Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of the Credit Agreement, the Notes or any other
document referred to or provided for therein or for any failure by the Borrower
or any other Person (other than Assignor) to perform any of its obligations
thereunder or for the existence, value, perfection or priority of any collateral
security or the financial or other condition of the Borrower or the Subsidiaries
[or any other obligor or guarantor], or any other matter relating to the Credit
Agreement or any other Security Instrument or any extension of credit
thereunder.
Section 5.03 Representations and Warranties of the Assignee. The Assignee
represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
F-4
(b) the execution, delivery and compliance with the terms hereof by
Assignee and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Governmental Requirement
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignee has fully reviewed the terms of the Credit Agreement
and the other Security Instruments and has independently and without
reliance upon the Assignor, and based on such information as the Assignee
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement;
(f) the Assignee hereby affirms that the representations contained in
Section 4.06(d)(i)(1) of the Credit Agreement are true and accurate as to
Assignee. If Section 4.06(d)(i)(2) is applicable to the Assignee, Assignee
shall promptly deliver to the Agent and the Borrower such certifications as
are required thereby to avoid the withholding taxes referred to in Section
4.06; and
(g) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignee.
ARTICLE VI
Miscellaneous.
Section 6.01 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
Section 6.02 Amendment, Modification or Waiver. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee, and consented to by the Agent.
Section 6.03 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Agent and the Borrower, and the
Assignee agrees that the Agent and the Borrower are entitled to rely upon such
representations and warranties.
F-5
Section 6.04 Assignments. Neither party hereto may assign any of its
rights or obligations hereunder except in accordance with the terms of the
Credit Agreement.
Section 6.05 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 6.06 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.
Section 6.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of ________________.
Section 6.08 Expenses. To the extent not paid by the Borrower pursuant to
the terms of the Credit Agreement, each party hereto shall bear its own expenses
in connection with the execution, delivery and performance of this Agreement.
Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
By:
--------------------------------------
Name:
Title:
Address for Notices:
-------------------------------------
-------------------------------------
-------------------------------------
Telecopier No.:
----------------------
Telephone No.:
----------------------
Attention:
---------------------------
F-6
ASSIGNEE
By:
--------------------------------------
Name:
Title:
Address for Notices:
-------------------------------------
-------------------------------------
-------------------------------------
Telecopier No.:
----------------------
Telephone No.:
----------------------
Attention:
---------------------------
ACKNOWLEDGED AND CONSENTED TO:
______________________________________,
as Agent
By:
-----------------------------------
Name:
Title:
