1
EXHIBIT 10.2
CREDIT AGREEMENT
DATED AS OF OCTOBER 30, 2000
AMONG
▇▇▇▇▇▇ PETROLEUM COMPANY
AS BORROWER,
FIRST UNION NATIONAL BANK,
AS ADMINISTRATIVE AGENT,
UNION BANK OF CALIFORNIA, N.A.,
AS DOCUMENTATION AGENT,
AND
THE LENDERS SIGNATORY HERETO
$75,000,000 SENIOR SECURED CREDIT FACILITY
----------
FIRST UNION SECURITIES, INC,
AS LEAD ARRANGER
2
TABLE OF CONTENTS
Page
----
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.......................................................17
ARTICLE II COMMITMENTS
Section 2.01 Loans and Letters of Credit...............................................................17
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit..............................18
Section 2.03 Changes of Commitments....................................................................20
Section 2.04 Fees......................................................................................21
Section 2.05 Several Obligations.......................................................................22
Section 2.06 Notes.....................................................................................22
Section 2.07 Prepayments...............................................................................22
Section 2.08 Borrowing Base............................................................................23
Section 2.09 Assumption of Risks.......................................................................25
Section 2.10 Obligation to Reimburse and to Prepay.....................................................26
Section 2.11 Lending Offices...........................................................................27
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans........................................................................28
Section 3.02 Interest..................................................................................28
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments..................................................................................29
Section 4.02 Pro Rata Treatment........................................................................29
Section 4.03 Computations..............................................................................30
Section 4.04 Non-receipt of Funds by the Administrative Agent..........................................30
Section 4.05 Set-off, Sharing of Payments, Etc.........................................................30
Section 4.06 Taxes.....................................................................................32
Section 4.07 Disposition of Proceeds...................................................................35
ARTICLE V CAPITAL ADEQUACY AND YIELD PROTECTION
Section 5.01 Additional Costs..........................................................................35
Section 5.02 Limitation on LIBOR Loans.................................................................37
Section 5.03 Illegality................................................................................37
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03..................................37
Section 5.05 Compensation..............................................................................38
Section 5.06 Time Limit; Etc...........................................................................38
Section 5.07 Replacement Lenders.......................................................................39
i
3
ARTICLE VI CONDITIONS PRECEDENT
Section 6.01 Initial Funding...........................................................................40
Section 6.02 Initial and Subsequent Loans and Letters of Credit........................................42
Section 6.03 Conditions Precedent for the Benefit of Lenders...........................................42
Section 6.04 No Waiver.................................................................................42
ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence.......................................................................43
Section 7.02 Financial Condition.......................................................................43
Section 7.03 Litigation................................................................................43
Section 7.04 No Breach.................................................................................44
Section 7.05 Authority.................................................................................44
Section 7.06 Approvals.................................................................................44
Section 7.07 Use of Loans..............................................................................44
Section 7.08 ERISA.....................................................................................44
Section 7.09 Taxes.....................................................................................46
Section 7.10 Titles, etc...............................................................................46
Section 7.11 No Material Misstatements.................................................................46
Section 7.12 Investment Company Act....................................................................47
Section 7.13 Public Utility Holding Company Act........................................................47
Section 7.14 Subsidiaries..............................................................................47
Section 7.15 Location of Business and Offices..........................................................47
Section 7.16 Defaults..................................................................................47
Section 7.17 Environmental Matters.....................................................................47
Section 7.18 Compliance with the Law...................................................................48
Section 7.19 Insurance.................................................................................49
Section 7.20 Hedging Agreements........................................................................49
Section 7.21 Restriction on Liens......................................................................50
Section 7.22 Material Agreements.......................................................................50
Section 7.23 Gas Imbalances............................................................................50
ARTICLE VIII AFFIRMATIVE COVENANTS
Section 8.01 Reporting Requirements....................................................................50
Section 8.02 Litigation................................................................................52
Section 8.03 Maintenance, Etc..........................................................................53
Section 8.04 Environmental Matters.....................................................................54
Section 8.05 Further Assurances........................................................................55
Section 8.06 Performance of Obligations................................................................55
Section 8.07 Engineering Reports.......................................................................55
Section 8.08 Title Information.........................................................................56
Section 8.09 Collateral................................................................................57
Section 8.10 ERISA Information and Compliance..........................................................58
ii
4
ARTICLE IX NEGATIVE COVENANTS
Section 9.01 Debt......................................................................................59
Section 9.02 Liens.....................................................................................60
Section 9.03 Investments, Loans and Advances...........................................................60
Section 9.04 Dividends, Distributions and Redemptions..................................................62
Section 9.05 Sales and Leasebacks......................................................................62
Section 9.06 Nature of Business........................................................................62
Section 9.07 Limitation on Leases......................................................................62
Section 9.08 Mergers, Etc..............................................................................62
Section 9.09 Proceeds of Notes; Letters of Credit......................................................62
Section 9.10 ERISA Compliance..........................................................................63
Section 9.11 Sale or Discount of Receivables...........................................................64
Section 9.12 Current Ratio.............................................................................64
Section 9.13 Tangible Net Worth........................................................................64
Section 9.14 Financial Charge Coverage Ratio...........................................................64
Section 9.15 Interest Coverage Ratio...................................................................65
Section 9.16 Sale of Oil and Gas Properties............................................................65
Section 9.17 Environmental Matters.....................................................................65
Section 9.18 Transactions with Affiliates..............................................................65
Section 9.20 Subsidiaries..............................................................................65
Section 9.21 Negative Pledge Agreements................................................................66
Section 9.22 Gas Imbalances, Take-or-Pay or Other Prepayments..........................................66
Section 9.23 Subordinated Debt.........................................................................66
ARTICLE X EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default........................................................................66
Section 10.02 Remedies.................................................................................68
ARTICLE XI THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities.......................................................70
Section 11.02 Reliance by Administrative Agent.........................................................70
Section 11.03 Defaults.................................................................................70
Section 11.04 Rights as a Lender.......................................................................71
Section 11.05 INDEMNIFICATION..........................................................................71
Section 11.06 Non-Reliance on Administrative Agent and other Lenders...................................71
Section 11.07 Action by Administrative Agent...........................................................72
Section 11.08 Resignation or Removal of Administrative Agent...........................................72
ARTICLE XII MISCELLANEOUS
Section 12.01 Waiver...................................................................................73
Section 12.02 Notices..................................................................................73
Section 12.03 Payment of Expenses, Indemnities, etc....................................................73
iii
5
Section 12.04 Amendments, Etc..........................................................................76
Section 12.05 Successors and Assigns...................................................................76
Section 12.06 Assignments and Participations...........................................................76
Section 12.07 Invalidity...............................................................................78
Section 12.08 Counterparts.............................................................................78
Section 12.09 References; Use of Word "Including"......................................................78
Section 12.10 Survival.................................................................................78
Section 12.11 Captions.................................................................................79
Section 12.12 NO ORAL AGREEMENTS.......................................................................79
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION................................................79
Section 12.14 Interest.................................................................................80
Section 12.15 Confidentiality..........................................................................81
Section 12.16 EXCULPATION PROVISIONS...................................................................82
Section 12.17 Hedging Agreement Substitution of Collateral.............................................82
Section 12.18 Amendment, Restatement and Rearrangement of Prior Debt...................................82
iv
6
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and 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 - List of Security Instruments
Exhibit E - 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 and Partnerships
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
7
THIS CREDIT AGREEMENT dated as of October 30, 2000 is among
▇▇▇▇▇▇ PETROLEUM COMPANY, a corporation formed under the laws of the State of
Delaware (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"); FIRST UNION NATIONAL BANK, a national banking association (in its
individual capacity, "First Union"), as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Administrative Agent") and UNION BANK OF CALIFORNIA, N.A., as documentation
agent.
RECITALS
A. The Borrower has requested that the Lenders provide certain loans to
and extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
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 as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement,
the terms "Administrative Agent," "Borrower," "First Union", "Lender," and
"Lenders" 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 Agreement in the singular to have
equivalent meanings when used in the plural and vice versa):
"2001 Subordinated Notes" shall mean the 10% Senior Subordinated Notes
due December 15, 2001 issued pursuant to that certain prospectus dated November
25, 1996 and offered by ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., as underwriter.
"2002 Subordinated Notes" shall mean the 10.125% Senior Subordinated
Notes due September 15, 2002 issued pursuant to that certain offering memorandum
dated July 28, 1997 and offered by ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., as initial
purchaser.
1
8
"2004 Subordinated Notes" shall mean the 10.25% Senior Subordinated
Notes due September 15, 2004 issued by Borrower under that certain indenture
dated July 20, 1999 between Borrower and American Stock Transfer & Trust
Company, as trustee.
"2005 Subordinated Notes" shall mean the Senior Subordinated Notes due
2005 issued or to be issued by Borrower pursuant to that certain Prospectus
Supplement dated September 27, 2000, and offered by ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company,
Inc. and ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. as underwriters in the maximum amount not to
exceed $40,000,000.
"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 20% 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 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.
"Aggregate Maximum Credit Amount" at any time shall equal the sum of
the Maximum Credit Amounts of the Lenders, as the same may be reduced pursuant
to Section 2.03(b). The Aggregate Maximum Credit Amount on the Closing Date
shall be $75,000,000.
"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 Administrative Agent and the Borrower as the
office by which its Loans of such Type are to be made and maintained.
2
9
"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 as in effect from time to time:
BORROWING BASE UTILIZATION APPLICABLE MARGIN
-------------------------- ---------------------------------------
LIBOR LOANS BASE RATE LOANS
----------- ---------------
Less than 50% 1.50% 0.00%
Greater than or equal to 50%, 1.75% 0.00%
but less than 80%
Greater than or equal to 80% 2.00% 0.25%
Each change in the Applicable Margin resulting from a change in the Borrowing
Base Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs. Notwithstanding the foregoing, during the period beginning
on the Closing Date and ending on April 30, 2001, the Applicable Margin shall be
(a) 0.25% for Base Rate Loans and (b) 2.00% for LIBOR Loans.
"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.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Beneficiaries" shall mean the Administrative Agent, the Lenders, each
Issuing Bank and each Affiliate of a Lender that is a party to a Hedge Agreement
with the Borrower or any Guarantor.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Deficiency" shall occur and be continuing at any time
that, and relate to the amount by which, the sum of the aggregate outstanding
principal amount of the Loans, plus the LC Exposure, exceeds the Borrowing Base.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas or Charlotte, North
Carolina 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 LIBOR Loan or a notice by the Borrower with respect to any such
borrowing or
3
10
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" means the occurrence of any of the following
events: (a) any Person or two or more Persons, other than the Borrower or any
Affiliate of the Borrower, acting as a group shall acquire beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Exchange Act, and including holding proxies to vote for the election
of directors other than proxies held by the Borrower's management or their
designees to be voted in favor of persons nominated by the Borrower's Board of
Directors) of 40% or more of the outstanding voting securities of the Borrower,
measured by voting power (including both ordinary shares and any preferred stock
or other equity securities entitling the holders thereof to vote with the
holders of common stock in elections for directors of the Borrower), (b) the
Borrower shall fail beneficially to own, directly or indirectly, 100% of the
outstanding shares of voting capital stock of any of the Guarantors on a
fully-diluted basis, or (c) 50% or more of the directors of the Borrower shall
consist of Persons not nominated by the Borrower's Board of Directors (not
including as Board nominees any directors which the Board is obligated to
nominate pursuant to shareholders agreements, voting trust arrangements or
similar arrangements).
"Closing Date" shall mean October 30, 2000.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Collateral" shall mean the Property owned by the Borrower and the
Guarantors which is subject to the Liens existing and to exist under the terms
of the Security Instruments.
"Commitment" shall mean, for any Lender, its obligation to make Loans
as provided in Section 2.01(a) 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.
"Consolidated Net Income" shall mean with respect to the Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net income
(or loss) of the Borrower and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to the Borrower
or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but
not loss) of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the
4
11
terms of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (iii) the net income
(or loss) of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (iv) any extraordinary gains or
losses, including gains or losses attributable to Property sales not in the
ordinary course of business; and (v) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or write
downs of assets.
"Consolidated Subsidiaries" shall mean each Subsidiary of a Person
(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 such Person in accordance with GAAP. Unless otherwise indicated,
each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary
consolidated with the Borrower.
"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 of such Person under leases treated as operating leases under GAAP
and as a loan or financing for U.S. income tax purposes; (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 9.22 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, but
excluding, in the case of the Borrower, mandatory obligations to redeem such
stock after September 15, 2004; (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.
5
12
"Deferred Compensation Plan" shall mean the ▇▇▇▇▇▇ Petroleum Operating
Company Deferred Compensation Plan dated as of December 1, 1996 and the letter
to employees dated December 13, 1996 relating thereto.
"Deficiency Payment" shall mean, in respect of any Borrowing Base
Deficiency, any payments made by the Borrower during a Deficiency Period for
such Borrowing Base Deficiency equal to either (a) in the case of each such
payment the amount of the Borrowing Base Deficiency on the first day of such
Deficiency Period divided by six (6) or (b) such other amount as the Majority
Lenders may approve, which when aggregated with the other such payments for such
Deficiency Period, are sufficient to reduce the Borrowing Base Deficiency to
zero on or before the final day of such Deficiency Period.
"Deficiency Period" shall mean any period of time commencing on the
date that the Administrative Agent notifies the Borrower of the existence of a
Borrowing Base Deficiency and ending on the date which is six (6) months
thereafter.
"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 and any other non-cash charges or expenses.
"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
6
13
"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.
"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 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
7
14
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; and (vii) Liens permitted by the Security Instruments.
"Existing Subordinated Debt" shall mean the 2001 Subordinated Notes,
the 2002 Subordinated Notes, the 2004 Subordinated Notes and the 2005
Subordinated Notes.
"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 Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
"Fee Letter" shall mean that certain letter agreement from First Union
and First Union Securities, Inc. to the Borrower dated as of October 27, 2000
concerning certain fees in connection with this Agreement and any agreements or
instruments executed in connection therewith, 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, its Subsidiaries or any of their Property or the Administrative Agent,
any Lender, any Affiliate of Lender or any Applicable Lending Office.
8
15
"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.
"Guarantor" shall mean ▇▇▇▇▇▇ Petroleum Operating Company, a Delaware
corporation and ▇▇▇▇▇▇ Offshore Production, Inc., a Mississippi corporation.
"Guaranty Agreement" shall mean an agreement executed by the Guarantor
in form and substance satisfactory to the Administrative Agent guarantying,
unconditionally, payment of the Obligations, as the same may be amended,
modified or supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement (for a term in excess of
thirty days) 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 Obligations under laws applicable to such Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
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.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(a)(ii).
"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.
9
16
"Initial Funding" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit upon satisfaction of the conditions
set forth in Sections 6.01 and 6.02.
"Initial Reserve Report" shall mean the report of the Borrower, dated
[September 29, 2000] with respect to the Oil and Gas Properties of the Borrower
as of October 1, 2000, a copy of which has been delivered to the Administrative
Agent.
"Interest Period" shall mean, with respect to any LIBOR Loan, the
period commencing on the date such LIBOR 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 other 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 may end after the
Revolving Credit Termination Date; (ii) each Interest Period which would
otherwise end on 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 LIBOR Loans would otherwise be for a shorter period,
such Loans shall not be available hereunder.
"Issuing Bank" shall mean First Union or any other Lender agreed to
among the Borrower, such Lender and the Administrative Agent to issue Letters of
Credit.
"LC Commitment" at any time shall mean $10,000,000.
"LC Exposure" at any time shall mean the difference between (i) the
aggregate face amount of all undrawn and uncancelled Letters of Credit plus the
aggregate of all amounts drawn under all Letters of Credit and not yet
reimbursed, minus (ii) the aggregate amount of all cash securing outstanding
Letters of Credit pursuant to Section 2.10(b).
"Letter of Credit Agreements" shall mean the written agreements with
the Issuing Bank, as issuing lender for any Letter of Credit, executed in
connection with the issuance by the Issuing Bank of the Letters of Credit, such
agreements to be on the Issuing Bank'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 Issuing Bank.
"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.
10
17
"LIBOR" shall mean the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to the applicable Interest
Period commencing on the first day of such Interest Period appearing on Dow
▇▇▇▇▇ Market Service Page 3750 as of 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. In the event that
such rate does not appear on Dow ▇▇▇▇▇ Market Service Page 3750, "LIBOR" shall
be determined by the Administrative Agent to be the rate per annum at which
deposits in Dollars are offered by leading reference banks in the London
interbank market to First Union at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period and in an amount substantially equal to the
amount of the applicable Loan.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBOR Rate".
"LIBOR Rate" shall mean, with respect to any LIBOR Loan, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Administrative Agent to be equal to the quotient of (i) LIBOR for such Loan
for the Interest Period for such Loan divided by (ii) 1 minus the Reserve
Requirement for such Loan for such Interest Period.
"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, all Letters of
Credit, all Letter of Credit Agreements, the Fee Letter 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 sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Commitments and, at any time while Loans are outstanding,
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) 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)).
11
18
"Material Adverse Effect" shall mean any set of circumstances or events
that (i) has or could reasonably be expected to have any material and adverse
effect upon, or result in or reasonably be expected to result in a material
adverse change in, (A) the assets, liabilities, prospects, financial condition,
business, operations or affairs of the Borrower and its Subsidiaries taken as a
whole different from those reflected in the Financial Statements or the
financial statements most recently furnished pursuant to Section 8.01(a) or from
the facts represented or warranted in any Loan Document, or (B) the ability of
the Borrower and its 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
to duly and punctually pay and perform their obligations under any of the Loan
Documents, or (C) the validity, binding effect or enforceability of this
Agreement or any of the other Loan Documents or (ii) impairs materially or could
reasonably be expected to impair materially the ability of the Administrative
Agent or any of the Lenders, to the extent permitted, to enforce its legal
remedies pursuant to the Loan Documents or otherwise available at law or in
equity.
"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(b) 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).
"Mortgaged Oil and Gas Property" shall mean any Oil and Gas Property
that is Collateral.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Notes" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Obligations" shall mean all indebtedness, obligations and liabilities
of the Borrower to any of the Lenders, any of the Lenders' Affiliates or the
Administrative Agent, individually or collectively, existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising or incurred under any Hedge Agreement, under this Agreement
or any of the other Loan Documents or in respect of any of the Loans made or
reimbursement obligations incurred or any of the Notes, Letters of Credit or
other instruments at any time evidencing any thereof, including interest
accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceedings, and all renewals, extensions,
refinancings and replacements for the foregoing.
"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
12
19
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 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 hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working 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 similar 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 other
Loan Document, a rate per annum during the period commencing on the date of
occurrence 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 however, for a LIBOR Loan, the
"Post-Default Rate" for such
13
20
principal shall be, for the period commencing on the date of occurrence of an
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(a)(ii), but in no event to exceed the Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Administrative Agent at the Principal Office as its
prime commercial lending rate. Such rate is set by the Administrative Agent as a
general reference rate of interest, taking into account such factors as the
Administrative Agent may deem appropriate, it being understood that many of the
Administrative 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 Administrative 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
Administrative Agent, presently located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Prior Credit Agreement" shall mean that certain Amended and Restated
Credit Agreement dated as of October 31, 1996 among The Chase Manhattan Bank, as
agent for the lenders parties thereto, such lenders, ▇▇▇▇▇▇ Petroleum Company,
▇▇▇▇▇▇ Petroleum Operating Company and ▇▇▇▇▇▇ Offshore Production, Inc., as
amended, supplemented or otherwise modified.
"Prior Debt" shall mean the outstanding Debt under the Prior Credit
Agreement.
"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 December
31,2000; 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 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.
"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
14
21
not having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"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 Administrative Agent, setting forth, as of each January 1
(or such other date in the event of an unscheduled redetermination); (i) the oil
and gas reserves attributable to the Borrower's Oil and Gas Properties together
with a projection of the rate of production and future net income, taxes,
operating expenses and capital expenditures with respect thereto as of such
date, based upon the pricing assumptions consistent with SEC reporting
requirements at the time and (ii) such other information as the Administrative
Agent may reasonably request. The term "Reserve Report" shall also include the
information to be provided by the Borrower as of July 1 of each year pursuant to
Section 8.07(a).
"Reserve Requirement" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which LIBOR is to be determined as provided in the
definition of "LIBOR" or (ii) any category of extensions of credit or other
assets which include a LIBOR Loan.
"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 or the Treasurer of such Person. Unless otherwise specified,
all references to a Responsible Officer herein shall mean a Responsible Officer
of the Borrower.
"Revolving Credit Termination Date" shall mean the earlier to occur of
(i) October 31, 2001 or (ii) the date that the Commitments are sooner terminated
pursuant to Sections 2.03(b) or 10.02; provided; however, if on or before
October 31, 2001, the Borrower has indefeasibly redeemed in full the 2001
Subordinated Notes, no Default exists and by written notice to the
Administrative Agent (who shall promptly notify the Lenders) the Borrower has
elected to extend the term of this Agreement, the "Revolving Credit Termination
Date" shall mean the earlier to occur of (i) July 31, 2002 or (ii) the date that
the Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02; and
further provided; however, if the term of this Agreement has been extended
pursuant to the immediately preceding proviso and if on or before July 31, 2002,
the Borrower has indefeasibly redeemed in full the 2002 Subordinated Notes, no
Default exists and by written notice to the Administrative Agent (who shall
promptly notify the Lenders) the Borrower has elected to extend the term of this
Agreement, the "Revolving Credit Termination Date" shall mean the earlier to
occur
15
22
of (i) July 31, 2004 or (ii) the date that the Commitments are sooner terminated
pursuant to Sections 2.03(b) or 10.02.
"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 agreements or instruments
described or referred to in Exhibit D, 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 Obligations 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 a Person 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).
"Subordinated Debt" shall mean any Debt of the Borrower expressly
subordinated to the Obligations, on terms specifically including, without
limitation, that payments on such Debt shall be prohibited if a Default exists
or would result from such payment, and other terms and conditions and pursuant
to documentation, all in form and substance satisfactory to the Majority
Lenders.
"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 another Person or one or more of such Person's Subsidiaries or by
such Person and one or more of its Subsidiaries and (ii) any Special Entity of
which at least a majority of the equity interests are owned, directly or
indirectly or controlled by such Person. Unless otherwise indicated herein, each
reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower.
16
23
"Tangible Net Worth" shall mean, as at any date, the sum of the
following for the Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the
amount of surplus of the Borrower, plus
(ii) the retained earnings (or, in the case of retained earnings
deficit, minus the amount of such deficit), minus
(iii) the sum of the following: cost of treasury shares and the book
value of all assets of the Borrower and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained earnings),
excluding intangibles arising directly from oil and gas drilling, but in any
event including as such intangibles the following: goodwill, research and
development costs, trademarks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, all reserves and any writeup in the book
value of assets resulting from a revaluation thereof or resulting from any
changes in GAAP subsequent to June 30, 2000; plus
(iv) any writedown in the book value of assets resulting from a
revaluation thereof (including any SEC ceiling test writedowns of the value of
Oil and Gas Properties) or resulting from any changes in GAAP subsequent to June
30, 2000.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Transfer" shall have the meaning assigned such term in Section 9.16.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
LIBOR Loan.
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 Administrative 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 and
conditions of this Agreement, to make loans to the Borrower during the
period from and including (i) the
17
24
Closing Date or (ii) such later date that such Lender becomes a party
to this Agreement as provided in Section 12.06(b), to and up to, but
excluding, the Revolving Credit 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, plus the LC Exposure
shall not exceed the Aggregate Commitments. Subject to the terms of
this Agreement, during the period from the Closing Date to and up to,
but excluding, the Revolving Credit Termination Date, the Borrower may
borrow, repay and reborrow the amount described in this Section
2.01(a).
(b) Letters of Credit. During the period from and including
the Closing Date to, but excluding, the Revolving Credit Termination
Date, the Issuing Bank, as issuing bank for the Lenders, agrees to
extend credit for the account of the Borrower or any Guarantor 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 and the LC Exposure then outstanding. The
Lenders shall participate in such Letters of Credit according to their
respective Percentage Shares. No more than five Letters of Credit shall
be outstanding at any one time. Each of the Letters of Credit shall (i)
be issued by the Issuing Bank, (ii) contain such terms and provisions
as are reasonably required by the Issuing Bank, (iii) be for the
account of the Borrower and (iv) expire not later than the earlier to
occur of (A) one year after the date of its issuance and (B) two (2)
days before the Revolving Credit Termination Date.
(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 LIBOR Loans; provided that, without the
prior written consent of the Majority Lenders, no more than [six (6)]
LIBOR Loans may be outstanding at any time.
Section 2.02 Borrowings, Continuations and Conversions,
Letters of Credit.
(a) Borrowings. The Borrower shall give the Administrative
Agent (which shall promptly notify the Lenders) advance notice as
hereinafter provided of each borrowing hereunder, which shall specify
(i) the aggregate amount of such borrowing, (ii) the Type and (iii) the
date (which shall be a Business Day) of the Loans to be borrowed, and
(iv) (in the case of LIBOR Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $100,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $50,000 in excess
thereof, and all LIBOR Loans shall be in amounts of at least $500,000
or any whole multiple of $100,000 in excess thereof.
18
25
(c) Notices. All borrowings, continuations and conversions
shall require advance written notice to the Administrative Agent (which
shall promptly notify the Lenders) in the form of Exhibit B (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 Administrative Agent not later than (i) 11:00 a.m. on the date of
each Base Rate Loan borrowing and (ii) 12:00 noon Charlotte, North
Carolina time three Business Days prior to the date of each LIBOR Loan
borrowing, continuation or conversion. Without in any way limiting the
Borrower's obligation to confirm in writing any telephonic notice, the
Administrative Agent may act without liability upon the basis of
telephonic notice believed by the Administrative 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
Administrative Agent's record of the terms of such telephonic notice
except in the case of gross negligence or willful misconduct by the
Administrative 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 LIBOR 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 Administrative Agent (which shall promptly
notify the Lenders) of such election, specifying the amount of such
Loan to be continued and the Interest Period therefor. In the absence
of such a timely and proper election, the Borrower shall be deemed to
have elected to convert such LIBOR Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any LIBOR 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
$100,000 in excess thereof and (ii) no Default shall have occurred and
be continuing. If a Default shall have occurred and be continuing, each
LIBOR 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 LIBOR Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Administrative 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 LIBOR Loan by
giving advance notice as provided in Section 2.02(c) to the
Administrative 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 LIBOR 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 $100,000 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 LIBOR Loan.
19
26
(f) Advances. Not later than 2:00 p.m. Charlotte, North
Carolina 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 Administrative Agent, to an account which the
Administrative Agent shall specify, in immediately available funds, for
the account of the Borrower. The amounts so received by the
Administrative 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 Issuing
Bank (which shall promptly notify the Lenders of such request and their
Percentage Share of such Letter of Credit) advance notice to be
received by the Issuing Bank not later than 11:00 a.m. Charlotte, North
Carolina time not less than three (3) Business Days prior thereto of
each request for the issuance, and at least three (3) Business Days
prior to the date of the renewal or extension, of a Letter of Credit
hereunder which request shall specify (i) the amount of such Letter of
Credit which shall be at least $50,000, (ii) the date (which shall be a
Business Day) such Letter of Credit is to be issued, renewed or
extended, (iii) the duration thereof, (iv) the name and address of the
beneficiary thereof, (v) the type of the Letter of Credit and (vi) such
other information as the Administrative Agent may reasonably request,
all of which shall be reasonably satisfactory to the Administrative
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 Administrative Agent shall issue, renew or extend such
Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower and the applicable Guarantor, if the account party, shall
execute a Letter of Credit Agreement. In the event of any conflict
between any provision of a Letter of Credit Agreement and this
Agreement, the Borrower, the Issuing Bank, the Administrative Agent and
the Lenders hereby agree that the provisions of this Agreement shall
govern.
The Issuing Bank will send to the Borrower and each Lender,
immediately 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 after
adjustments resulting from reductions pursuant to Section 2.03(b) 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 Administrative Agent (which shall promptly
20
27
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 $1,000,000 or any whole
multiple of $1,000,000 in excess thereof) and shall be irrevocable and
effective only upon receipt by the Administrative Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fee. The Borrower shall pay to the
Administrative 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
Revolving Credit Termination Date at a rate per annum equal to the rate
set forth at the appropriate intersection in the table set forth below:
BORROWING BASE UTILIZATION RATE
-------------------------- ----
Less than 50% 0.250%
Greater than or equal to 50% 0.375%
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 Revolving Credit Termination Date.
(b) Letter of Credit Fees.
(i) The Borrower agrees to pay the Administrative
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 Issuing Bank existing from time to time under such
Letters of Credit (calculated separately for each Letter of Credit) at
the per annum rate equal to the then effective Applicable Margin for
LIBOR Loans, provided that each Letter of Credit shall bear a minimum
commission of $500. Each Letter of Credit shall be deemed to be
outstanding up to the full face amount of the Letter of Credit until
the Issuing Bank 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 Issuing
Bank, or for 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
21
28
payable quarterly in arrears on each Quarterly Date and upon
cancellation or expiration of each such Letter of Credit.
(ii) The Issuing Bank, for its own account, shall
receive 0.125% of the face amount of each Letter of Credit as an
issuing fee.
(c) Fee Letter. The Borrower shall pay to the Administrative
Agent such other fees as are set forth in the Fee Letter on the dates
and in the amounts specified therein.
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, 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 originally in effect
and otherwise duly completed and such substitute Notes as required by Section
12.06(b). The date, amount, 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 Note, and, prior to any
transfer may be endorsed by such Lender on the schedule attached to such Note 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 Note.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. The Borrower may prepay the Base
Rate Loans upon not less than one (1) Business Day's prior notice to
the Administrative 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
$100,000 or the remaining aggregate principal balance outstanding on
the Notes) and shall be irrevocable and effective only upon receipt by
the Administrative Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the
prepayment date. The Borrower may prepay LIBOR Loans on the same
conditions as for Base Rate Loans (except that prior notice to the
Administrative Agent shall be not less than three (3) Business Days for
LIBOR Loans) and in addition such prepayments of LIBOR Loans shall be
subject to the terms of Section 5.05 and shall be in an amount equal to
all of the LIBOR Loans for the Interest Period prepaid.
22
29
(b) Mandatory Prepayments.
(i) If, after giving effect to any termination or
reduction of the Aggregate Maximum Credit Amounts pursuant to Section
2.03(b), 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 because of LC Exposure, pay to the Administrative 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.
(ii) Upon any redetermination of the amount of the
Borrowing Base in accordance with Section 2.08, if the redetermined
Borrowing Base results in a Borrowing Base Deficiency, then the
Borrower shall within thirty (30) days of receipt of written notice
thereof either: (A) prepay the Loans in an aggregate principal amount
equal to the Borrowing Base Deficiency, together with interest on the
principal amount paid accrued to the date of such prepayment and if a
Borrowing Base Deficiency remains after prepaying all of the Loans
because of LC Exposure, the Borrower shall pay to the Administrative
Agent on behalf of the Lenders an amount equal to such remaining
Borrowing Base Deficiency to be held as cash collateral as provided in
Section 2.10(b); or (B) the Borrower shall notify the Administrative
Agent (which will promptly notify the Lenders) in writing of the
Borrower's election to initiate a Deficiency Period during which it
will eliminate such Borrowing Base Deficiency by making six (6)
consecutive monthly Deficiency Payments, the first of such payments
being due and payable with the delivery to the Administrative Agent of
such notice and each of the remaining payments due and payable on the
same day of each month thereafter during the Deficiency Period;
provided however, in the event of an acceleration of the maturity of
the Notes pursuant to Section 10.02 hereof, such acceleration shall
also accelerate the maturity of all outstanding and unpaid Deficiency
Payments.
(c) Generally. 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 LIBOR Loans. Any prepayments on
the Loans may be reborrowed subject to the then effective Aggregate
Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with
Section 2.08(b) by the Administrative Agent with the concurrence of the
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. So long as any of the Commitments are in effect
or any LC Exposure or Loans are outstanding hereunder, this facility
shall be governed by the then effective Borrowing Base. During the
period from and after the Closing Date until the first
23
30
redetermination pursuant to Section 2.08(d) or adjusted pursuant to
Section 8.08(c), the amount of the Borrowing Base shall be $50,000,000.
(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 Administrative Agent (the
"Engineering Reports"), the Administrative 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
Administrative Agent, in its sole discretion, may make adjustments to
the rates, volumes and prices and other assumptions set forth therein
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 Administrative Agent shall propose to the Lenders
a new Borrowing Base within 14 days following receipt by the
Administrative Agent and the Lenders of the Engineering Reports in a
timely and complete manner. After having received notice of such
proposal by the Administrative Agent, the Lenders shall have 14 days to
agree or disagree with such proposal. Any Lenders that have not
communicated their approval or disapproval at the end of the 14 days
shall be deemed to have approved the Administrative Agent's proposal of
the redetermined Borrowing Base. To the extent that within such 14 days
the Administrative Agent has not received the requisite number of
approvals from the Lenders of the redetermined Borrowing Base, the
requisite number of Lenders shall, within a reasonable period of time,
agree on a new Borrowing Base. Any increase in the Borrowing Base must
be approved by the Administrative Agent and all of the Lenders and any
decrease in or reaffirmation of the existing Borrowing Base must be
approved by the Majority Lenders.
(c) The Administrative 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
Collateral 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 December, 2000 and thereafter on or around the first Business
Day of each April and October, commencing April, 2001 (each being a
"Scheduled Redetermination Date"), the Lenders shall redetermine the
amount of the Borrowing Base in accordance with Section 2.08(b). In
addition, (i) the Borrower may initiate a redetermination of the
Borrowing Base at any other time as it so elects by specifying in
writing to the Administrative Agent (who will promptly notify the
Lenders) the date by which the Borrower will furnish to the
Administrative Agent and the Lenders a Reserve Report in accordance
with Section 8.07(b) and the date by which such redetermination is
requested to occur; provided, however, that the Borrower may initiate
only one such unscheduled redetermination between Scheduled
Redetermination Dates during the first twelve (12) months after the
Closing Date and thereafter, may initiate only one such unscheduled
redetermination per year and (ii) the Majority Lenders may initiate a
24
31
redetermination of the Borrowing Base at any other time as they so
elect by specifying in writing to the Borrower the date by 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;
provided, however, that the Majority Lenders may initiate only one such
unscheduled redetermination between Scheduled Redetermination Dates
during the first twelve (12) months after the Closing Date and
thereafter, may initiate only one such unscheduled redetermination per
year.
(e) The Administrative Agent shall promptly notify in writing
the Borrower and the Lenders of the new Borrowing Base. Any
redetermination of the Borrowing Base shall not be in effect until
written notice is received by the Borrower.
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
Issuing Bank (except in the case of gross negligence or willful misconduct on
the part of the Issuing Bank 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 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 Issuing
Bank's control or the control of the Issuing Bank's correspondents. In addition,
neither the Issuing Bank, the Administrative Agent nor any Lender shall be
responsible for any error, neglect, or default of any of the Issuing Bank's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Issuing Bank's, the Administrative Agent's or any Lender's
rights or powers hereunder or under the Letter of Credit Agreements, all of
which rights shall be cumulative. The Issuing Bank 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 Issuing Bank or by any
correspondent for the Issuing Bank 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 Issuing Bank or its
correspondents under any resulting liability to the Borrower.
25
32
Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Issuing Bank is made under any
Letter of Credit, the Borrower shall pay to the Administrative 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 Issuing Bank 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
Issuing Bank, the Administrative 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 Issuing Bank 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 Issuing Bank,
except where the Borrower or any Subsidiary actually recovers the
proceeds for itself or the Issuing Bank of any payment made by the
Issuing Bank in connection with such gross negligence or willful
misconduct.
(b) In the event of a payment or prepayment pursuant to
Section 2.07(b) 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 Issuing Bank, the Administrative Agent and the
Lenders as of the date of any such occurrence; and the Borrower's
obligation to pay such amount shall
26
33
be absolute and unconditional, without regard to whether any
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 Issuing Bank, the Administrative Agent, the
Lenders or any other Person for any reason whatsoever. Such payments
shall be held by the Issuing Bank 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 Administrative Agent grants to the Administrative 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
Administrative 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 Issuing Bank an amount equal to such
Lender's Percentage Share of any disbursement made by the Issuing Bank
under any Letter of Credit that is not reimbursed according to this
Section 2.10.
(d) Notwithstanding anything to the contrary contained herein,
if no Default exists and subject to availability under the Aggregate
Revolving Credit Commitments (after reduction for LC Exposure), to the
extent the Borrower has not reimbursed the Issuing Bank for any drawn
upon Letter of Credit within one (1) Business Day after notice of such
disbursement has been received by the Borrower, the amount of such
Letter of Credit reimbursement obligation shall automatically be funded
by the Lenders as a Revolving Credit Loan hereunder and used by the
Lenders to pay such Letter of Credit reimbursement obligation. If an
Event of Default has occurred and is continuing, or if the funding of
such Letter of Credit reimbursement obligation as a Revolving Credit
Loan would cause the aggregate amount of all Revolving Credit Loans
outstanding to exceed the Aggregate Revolving Credit Commitments (after
reduction for LC Exposure), such Letter of Credit reimbursement
obligation shall not be funded as a Revolving Credit Loan, but instead
shall accrue interest as provided in Section 2.10(a).
Section 2.11 Lending Offices. The 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.
27
34
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans.
(a) Revolving Credit Loans. On the Revolving Credit Termination Date
the Borrower shall repay the outstanding aggregate principal of the Notes.
(b) Generally. The Borrower will pay to the Administrative Agent, for
the account of each Lender, the principal payments required by this Section
3.01.
Section 3.02 Interest.
(a) Interest Rates. The Borrower will pay to the
Administrative 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:
(i) 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
(ii) if such a Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Rate for such Loan plus the
Applicable Margin (as in effect from time to time), but in no event to
exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the
Borrower will pay to the Administrative 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.
(c) Due Dates. Accrued interest on Base Rate Loans shall be
payable on each Quarterly Date commencing on December 31, 2000, and
accrued interest on each LIBOR 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
LIBOR 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). Any accrued and unpaid interest on the Loans on
the Revolving Credit Termination Date shall be paid on such date.
(d) Determination of Rates. Promptly after the determination
of any interest rate provided for herein or any change therein, the
Administrative Agent shall notify the Lenders to which such interest is
payable and the Borrower thereof. Each determination by the
28
35
Administrative 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 this Agreement, the Notes and the Letter of Credit Agreements
shall be made in Dollars, in immediately available funds, to the Administrative
Agent at such account as the Administrative Agent shall specify by notice to the
Borrower from time to time, not later than 12:00 noon Charlotte, North Carolina
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 Administrative 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 otherwise provided in 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 Administrative Agent of any principal of or interest on any
borrowing, the Borrower shall notify the Administrative Agent of the Loans to
which such payment shall apply. In the absence of such notice the Administrative
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 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 under Section 2.04(a) 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(b) 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 Issuing Bank 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.
29
36
Section 4.03 Computations. Interest on LIBOR 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. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Administrative Agent.
Unless the Administrative 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 Administrative 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 Administrative 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 Administrative Agent, the
Administrative 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 Administrative Agent, the recipient(s) of such payment shall, on demand,
repay to the Administrative 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 Administrative Agent until, but
excluding, the date the Administrative 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.
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 Administrative Agent), at its
option, to offset balances held by it or by any of its Affiliates for
account of the Borrower or any Guarantor 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 after the passage of any
applicable grace periods (regardless of whether such balances are then
due to the Borrower), in which case it shall promptly notify the
Borrower and the Administrative 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
30
37
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 Administrative 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.
31
38
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 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, the Issuing Bank and the Administrative 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
Administrative Agent, the Issuing Bank 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 Administrative Agent, the Issuing Bank or such
Lender is organized, or (iii) any jurisdiction (or political
subdivision thereof) in which such Lender, the Issuing Bank or the
Administrative Agent is presently doing business 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, the Issuing Bank
or the Administrative 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, the Issuing Bank or the Administrative 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 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 ISSUING
BANK AND THE ADMINISTRATIVE 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, THE ISSUING BANK OR THE
ADMINISTRATIVE 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
32
39
TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE
DATE ANY LENDER, THE ISSUING BANK OR THE ADMINISTRATIVE AGENT, AS THE
CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER, THE ISSUING
BANK OR THE ADMINISTRATIVE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT
OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR THE
ADMINISTRATIVE 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
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED),
PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE
ISSUING BANK OR THE ADMINISTRATIVE AGENT, AGREES TO RETURN SUCH REFUND
OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR
THE ADMINISTRATIVE AGENT IN THE EVENT SUCH LENDER OR THE ADMINISTRATIVE
AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a
banking association or corporation 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 banking
association or corporation organized under the laws of the
United States of America or any state thereof agrees to
provide to the Borrower and the Administrative 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
Administrative Agent shall reasonably request, two accurate
and complete original signed copies of either (A) Internal
Revenue Service Form W-8ECI (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 W-8ECI Certification") or (B) Internal Revenue
Service Form W-8BEN (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 W-8BEN Certification"). In
addition, each Lender agrees that if it previously filed a
Form W-8ECI Certification, it will deliver to the Borrower and
the Administrative Agent a new Form W-8ECI Certification prior
to the first payment date occurring in each of its subsequent
taxable years; and if it
33
40
previously filed a Form W-8BEN Certification, it will deliver
to the Borrower and the Administrative 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 Administrative 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
Administrative 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 Administrative Agent have
received a Form W-8BEN Certification or Form W-8ECI
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 Administrative Agent, as applicable, from any United States
taxes, penalties, interest and other expenses, costs and
losses incurred or payable by (i) the Administrative 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 Administrative 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 if 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 Administrative Agent or to change the jurisdiction of its
Applicable Lending Office
34
41
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. Certain of the Security
Instruments contain an assignment by the Borrower and the Guarantors, as the
case may be, unto and in favor of the Agent for the benefit of the Lenders of
all Hydrocarbon production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged Oil and Gas Properties, and further
provides in general for the application of such proceeds to the satisfaction of
the Obligations and any 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 and the Guarantors, as
the case may be.
ARTICLE V
CAPITAL ADEQUACY AND YIELD PROTECTION
Section 5.01 Additional Costs.
(a) LIBOR 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 LIBOR
Loans or issuing or participating in Letters of Credit hereunder or its
obligation to make any LIBOR 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 LIBOR 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 LIBOR 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 LIBOR 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 London 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 Administrative Agent and the
Borrower of any event occurring after the Closing Date
35
42
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 at any time (by reason
of any Regulatory Change or any other circumstances arising after the
Closing Date affecting (A) any Lender, (B) the London interbank market
or (C) such Lender's position in such market), the LIBOR Rate, as
determined in good faith by such Lender, will not adequately and fairly
reflect the cost to such Lender of funding its LIBOR Loans, then, if
such Lender so elects, by notice to the Borrower and the Administrative
Agent, the obligation of such Lender to make additional LIBOR 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).
(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 Note,
or 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 Administrative 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
36
43
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 LIBOR Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any LIBOR Rate
for any Interest Period:
(i) the Administrative 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 "LIBOR
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 LIBOR Loans as provided herein; or
(ii) the Administrative Agent determines (which determination
shall be conclusive, absent manifest error) that the relevant rates of
interest referred to in the definition of "LIBOR Rate" in Section 1.02
upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined are not sufficient to adequately
cover the cost to the Lenders of making or maintaining LIBOR Loans;
then the Administrative 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 LIBOR Loans.
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 LIBOR
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make LIBOR Loans shall be suspended until such time
as such Lender may again make and maintain LIBOR 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 LIBOR 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
37
44
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 LIBOR Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.01) 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 LIBOR 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 principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Time Limit; Etc.
(a) Time Limited. Notwithstanding anything to the contrary
contained in Sections 5.01 through 5.05, the Borrower shall not be
required to reimburse or pay any costs or expenses to any Lender as
required by such sections which have accrued more than 180 days prior
to such Lender's giving notice to the Borrower that such Lender has
suffered or incurred such costs or expenses.
(b) Non-Discriminatory Basis. None of the Lenders shall be
permitted to pass through to the Borrower costs and expenses under
Sections 5.01 through 5.05 which are not also passed through by such
Lender to other customers of such Lender similarly situated
38
45
when such customer is subject to documents containing similar
provisions as those contained in such Sections.
Section 5.07 Replacement Lenders.
(a) Terminated Lenders. If any Lender has notified the
Borrower and the Administrative Agent of its incurring Additional Costs
under Section 5.01 or has required the Borrower to make payments for
Taxes under Section 4.06 or it is unable to make LIBOR Loans under
Section 5.03, then the Borrower may, unless such Lender has notified
the Borrower and the Administrative 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 Administrative
Agent) (the "Terminated Lender") at any time upon five (5) Business
Days' prior written notice to the Terminated Lender and the
Administrative Agent (such notice referred to herein as a "Notice of
Termination").
(b) Replacement Lenders. 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 Administrative 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) Content of Notice of Termination. The Notice of
Termination shall include the name of the Terminated Lender, the date
the termination will occur (the "Lender 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) Effecting Termination. On the Lender 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 Note, payable without
recourse, representation or warranty to the order of the Replacement
Lender or Replacement Lenders
39
46
(pro rata as aforesaid), (iii) the Replacement Lender or Replacement
Lenders shall purchase the Note 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
Lender Termination Date, and (iv) the Replacement Lender or Replacement
Lenders will thereupon (pro rata as aforesaid) succeed to and be
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 Administrative 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 and
Replacement Lenders, 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 Administrative Agent and the Lenders of all fees
due and payable pursuant to Section 2.04 on or before the Closing Date and the
receipt by the Administrative Agent of the following documents (in sufficient
original counterparts, other than the Notes, for each Lender) and satisfaction
of the other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Administrative 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
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
Administrative Agent and the Lenders may conclusively rely on such
certificate until the Administrative Agent receives notice in writing
from the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary
of each of the Guarantors setting forth (i) resolutions of its board of
directors with respect to the
40
47
authorization of such Guarantor 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 such Guarantor
(y) who are authorized to sign the Loan Documents to which such
Guarantor 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 such Guarantor, certified as being true and
complete. The Administrative Agent and the Lenders may conclusively
rely on such certificate until they receive notice in writing from such
Guarantor to the contrary.
(c) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of the
Borrower and each of the Guarantors.
(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on
Exhibit D, duly completed and executed in sufficient number of
counterparts for recording, if necessary.
(f) An opinion of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, counsel to the
Borrower and the Guarantors, in form and substance satisfactory to the
Administrative Agent, as to such matters incident to the transactions
herein contemplated as the Administrative Agent may reasonably request.
(g) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19.
(h) Title information satisfactory to the Administrative Agent
setting forth a status of title acceptable to the Administrative Agent
to at least 70% of the value of the Oil and Gas Properties included in
the Initial Reserve Report.
(i) Appropriate UCC search certificates reflecting no prior
Liens other than those permitted pursuant to Section 9.02.
(j) Environmental assessment reports relating to the Oil and
Gas Properties of the Borrower and the Subsidiaries as may be requested
by the Administrative Agent, including environmental audits, phase I
reports or other environmental reports of any nature whatsoever
(whether prepared internally or by third party consultants); and the
Administrative Agent must be satisfied with the results of the review
of such reports and environmental condition of such Oil and Gas
Properties.
(k) Letters in lieu, in form and substance satisfactory to the
Administrative Agent, executed by the Borrower and each Subsidiary, as
appropriate, to each of the
41
48
purchasers of the Hydrocarbons of the Borrower and each such Guarantor
produced from the Borrower's and such Guarantors' Mortgaged Oil and Gas
Properties.
(l) Such other documents as the Administrative Agent or any
Lender or special counsel to the Administrative 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:
(a) no Default shall exist;
(b) no Material Adverse Effect shall have occurred; and
(c) 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 Section 6.02(c) (both
as of the date of such notice and, unless the Borrower otherwise notifies the
Administrative 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 Precedent for the Benefit of Lenders.
All conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.04 No Waiver. No waiver of any condition precedent
shall preclude the Administrative Agent or the Lenders from requiring such
condition to be met prior to making any subsequent Loan or preclude the Lenders
from thereafter declaring that the failure of the Borrower to satisfy such
condition precedent constitutes a Default.
42
49
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Administrative 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 Guarantor: (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, 1999 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, with the opinion thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
heretofore furnished to the Administrative Agent and the unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at June 30,
2000 and their related consolidated statements of income, stockholders' equity
and cash flow of the Borrower and its Consolidated Subsidiaries for the six
month period ended on such date heretofore furnished to the Administrative
Agent, are complete and correct in all material respects 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 six month period on said dates, all in accordance with GAAP, as
applied on a consistent basis (subject, in the case of the interim financial
statements, to normal year-end 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. As of
the Closing Date, since December 31, 1999, there has been no change or event
having a Material Adverse Effect.
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), and which would have a Material
Adverse Effect.
43
50
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 Guarantor 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 Guarantor 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 Guarantor, 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
Guarantor 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 for (i) the acquisition of Oil and Gas Properties, (ii) exploration and
development of Oil and Gas Properties, (iii) working capital and (iv) general
corporate purposes, excluding any principal payments on Subordinated Debt or
stock or other equity interest repurchase; provided, however, the Borrower may
use proceeds of the Loans to redeem Subordinated Debt in the form of corporate
bonds, provided that any such Loans shall be repaid with the proceeds of a
subsequent issuance of Subordinated Debt in the form of a corporate bond
offering or issuance of equity by the Borrower (x) within 30 days after the
redemption described in the preceding clause or (y) as soon thereafter as
reasonably possible so long as the Borrower is diligently pursuing such
subsequent bond offering or issuance of equity in good faith. 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 T, 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.
(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.
44
51
(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.
45
52
Section 7.09 Taxes. Except as set out in Schedule 7.09, each
of the Borrower and its 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 its 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 Guarantors 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 material leases and agreements necessary for the
conduct of the business of the Borrower and the Guarantors 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
agreement, which would affect in any material respect the conduct of
the business of the Borrower and the Guarantors.
(c) The rights, Properties and other assets presently owned,
leased or licensed by the Borrower and the Guarantors including,
without limitation, all easements and rights of way, include all
rights, Properties and other assets reasonably necessary to permit the
Borrower and the Guarantors 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
Guarantors which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance
with customary industry standards.
Section 7.11 No Material Misstatements. No written
information, statement, exhibit, certificate, document or report furnished to
the Administrative 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
46
53
to make the statement contained therein not materially misleading in the light
of the circumstances in which made and with respect to the Borrower and its
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 disclosed in writing to the Administrative 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, as of the Closing Date 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
47
54
proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
(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
48
55
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 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 material
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 customarily 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 its 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 (for terms in
excess of thirty days) 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
49
56
agreements relating thereto (including any margin required or supplied), and the
counter party to each such agreement.
Section 7.21 Restriction on Liens. Neither the Borrower nor
any of the Guarantors 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 or
Properties.
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 and agreements
relating to Debt of the type described in clause (iii) in the definition of Debt
or clause (vii) in the definition of Debt to the extent relating to primary
obligations of the type described in clause (iii) in the definition of Debt)
providing for, evidencing, securing or otherwise relating to any Debt of the
Borrower or any of its Subsidiaries, and all obligations of the Borrower or any
of its 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. The Borrower has heretofore
delivered to the Administrative Agent a complete and correct copy of all such
material credit agreements, indentures, purchase agreements, contracts, letters
of credit, guarantees, joint venture agreements, or other instruments, including
any modifications or supplements thereto, as in effect on the Closing Date,
which the Administrative Agent has requested.
Section 7.23 Gas Imbalances. 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, in the aggregate, five percent (5%) or more of the
quarterly production from Hydrocarbons produced from the Borrower's Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor.
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 Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 Reporting Requirements. The Borrower shall
deliver, or shall cause to be delivered, to the Administrative Agent with
sufficient copies of each for the Lenders:
50
57
(a) Annual Financial Statements. As soon as available and in
any event within 90 days after the end of each fiscal year of the
Borrower, the audited consolidated statement of income, stockholders'
equity, changes in financial position and cash flows of the Borrower
and its Consolidated Subsidiaries for such fiscal year, and the related
consolidated balance sheet 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 Administrative 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) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the end of each of the first three
fiscal quarterly periods of each fiscal year of the Borrower,
consolidated statements of income, changes in financial position and
cash flows 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 balance sheet 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 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) Notice of Default, Etc. 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) Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other material 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 its 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.
51
58
(e) SEC Filings, Etc. 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 material 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) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished
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) Other Matters. 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 Administrative Agent may
reasonably request.
(h) Hedging Agreements. As soon as available and in any event
within forty-five days after the last day of each calendar quarter, a
report, in form and substance satisfactory to the Administrative 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 with terms in excess of
thirty days 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 counter
party to each such agreement.
The Borrower will furnish to the Administrative 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 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, 9.13, 9.14 and 9.15 as of the end of the
respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to
the Administrative Agent notice of: (i) 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, could not
reasonably be expected to have a Material Adverse Effect, and (ii) of any
litigation or proceeding against or adversely affecting in any material respect
the Borrower
52
59
or any Subsidiary in which the amount involved is not covered in full by
insurance (subject to normal and customary deductibles and for which the insurer
has not assumed the defense) or injunctive or similar relief is sought. The
Borrower will, and will cause each of its Subsidiaries to, promptly notify the
Administrative Agent and each of the Lenders of any claim, judgment, Lien (other
than those permitted under Section 9.02) or other encumbrance 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) Generally. 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 Administrative 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 Administrative 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. The Borrower shall promptly obtain
endorsements to such insurance policies naming "First Union National
Bank, as Administrative Agent for the Beneficiaries" as joint loss
payee and containing provisions that such policies will not be canceled
without 30 days prior written notice having been given by the insurance
company to the Administrative Agent.
(b) Proof of Insurance. 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 Administrative Agent and the Lenders a certificate of insurance
coverage from the insurer in form and substance satisfactory to the
Administrative Agent and, if requested, will furnish the Administrative
Agent and the Lenders copies of the applicable policies.
(c) Oil and Gas Properties. The Borrower will and will cause
each Subsidiary to, at its own expense, (i) 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
53
60
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 preserved and maintained in accordance with
customary industry standards, except to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts and (ii) maintain good and defensible
title to its material (individually and in the aggregate) Properties,
free and clear of all Liens, except Liens permitted by Section 9.02.
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 material leases or other agreements
affecting or pertaining to its Oil and Gas Properties, (ii) perform or
make reasonable and customary efforts to cause to be performed, in
accordance with customary industry standards, the material obligations
required by each and all of the material assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its Oil
and Gas Properties and other material Properties, (iii) will and will
cause each Subsidiary to do all other things reasonably necessary to
keep unimpaired, except for Liens described in Section 9.02, its rights
with respect to its Oil and Gas Properties and other material
Properties and prevent any material forfeiture thereof or default
thereunder, except to the extent a portion of such Properties is no
longer capable of producing Hydrocarbons in economically reasonable
amounts and except for dispositions permitted by Section 9.16. The
Borrower will and will cause each Subsidiary to operate its Oil and Gas
Properties and other material Properties or cause or make reasonable
and customary efforts to cause such Oil and Gas Properties and other
material Properties to be operated in a reasonably prudent manner in
accordance with the customary practices of the industry and in
compliance in all material respects with all applicable contracts and
agreements and in compliance in all material respects with all
Governmental Requirements.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. 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 could not reasonably be expected to have a
Material Adverse Effect: (i) all Property of the Borrower and its
Subsidiaries and the operations conducted thereon and other activities
of the Borrower and its 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.
54
61
(b) Notice of Action. The Borrower will promptly notify the
Administrative 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, monitoring and corrective action.
(c) Future Acquisitions. The Borrower will and will cause each
Subsidiary to provide environmental audits and tests as reasonably
requested by the Administrative Agent or the Lenders (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by
any Governmental Authority) in connection with any future acquisitions
of material Oil and Gas Properties or other material Properties.
Section 8.05 Further Assurances. The Borrower will and will
cause each Guarantor 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 Guarantor to
promptly execute and deliver to the Administrative Agent upon request all such
other documents, agreements and instruments to comply with or accomplish the
covenants and agreements of the Borrower or any Guarantor, 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 December 1, 2000, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report. The Reserve
Report for the December 1, 2000 redetermination shall be dated as of
November 1, 2000 and 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 all material respects in
accordance with the procedures (other than forecasted product prices)
used in the Initial Reserve Report. The January 1 Reserve Report of
each year shall be prepared by certified independent petroleum
engineers or other independent petroleum consultant(s) acceptable to
the Administrative Agent and the July 1 Reserve Report 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 all
55
62
material respects in accordance with the procedures (other than
forecasted product prices) used in the immediately proceeding January 1
Reserve Report.
(b) In the event of an unscheduled redetermination, the
Borrower shall furnish to the Administrative 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 to have been prepared in all material respects in
accordance with the procedures (other than forecasted product prices)
used in the immediately preceding Reserve Report. For any unscheduled
redetermination requested by the Majority 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 Majority Lenders as soon
as possible, but in any event no later than 30 days following the
receipt of the request by the Administrative Agent.
(c) With the delivery of each Reserve Report, the Borrower
shall provide to the Administrative 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 the 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 gas imbalances,
take or pay or other 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 its Oil and Gas Properties listed
in the immediately prior Reserve Report as having proved reserves have
been sold since the date of the last Borrowing Base determination
except as set forth on an exhibit to the certificate, which certificate
shall list all of such Oil and Gas Properties sold and in such detail
as reasonably required by the Majority Lenders, (v) attached to the
certificate is a list of all Persons disbursing proceeds to the
Borrower from its Mortgaged Oil and Gas Properties and (vi) except as
set forth on a schedule attached to the certificate all of the Oil and
Gas Properties evaluated by such Reserve Report are Mortgaged Oil and
Gas Properties.
Section 8.08 Title Information.
(a) Delivery. On or before the delivery to the Administrative
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 Administrative Agent covering enough of the
Mortgaged Oil and Gas Properties evaluated by such Reserve Report that
were not included in the immediately preceding Reserve Report, so that
the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent,
satisfactory title information on at least seventy percent (70%) of the
value of the Mortgaged Oil and Gas Properties evaluated by such Reserve
Report.
56
63
(b) Cure of Title Defects. The Borrower shall cure any title
defects or exceptions which are not Excepted Liens raised by such
information, or substitute acceptable Oil and Gas Properties of an
equivalent value, with no title defects or exceptions except for
Excepted Liens, within 60 days after a request by the Administrative
Agent or the Lenders to cure such defects or exceptions.
(c) Failure to Cure Title Defects. If the Borrower is unable
to cure any title defect requested by the Administrative Agent or the
Lenders to be cured within the 60- day period or the Borrower does not
comply with the requirements to provide acceptable title information
covering seventy percent (70%) of the value of the Oil and Gas
Properties evaluated in the most recent Reserve Report and included in
the determination of the then current Borrowing Base, such default
shall not be a Default or an Event of Default, but instead the
Administrative 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 Administrative Agent
or the Lenders. To the extent that the Administrative Agent or the
Lenders are not satisfied with title to any Mortgaged Oil and Gas
Property after the time period in Section 8.08(b) has elapsed, such
unacceptable Mortgaged Oil and Gas Property shall not count towards the
seventy percent (70%) requirement, and the Administrative 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 seventy percent
(70%) of the value of the Mortgaged Oil and Gas Properties included in
the determination of the Borrowing Base. This new Borrowing Base shall
become effective immediately after receipt of such notice.
Section 8.09 Collateral.
(a) Collateral. The Obligations shall be secured by a
perfected first priority Lien (subject only to Liens permitted under
Section 9.02 entitled to priority under applicable law or under Section
9.02) granted to the Administrative Agent for the benefit of the
Beneficiaries in (i) the Oil and Gas Properties of the Borrower and the
Guarantors, whether now owned or hereafter acquired, pursuant to the
terms of the Security Instruments to which they are parties, and which
compose at least 90% of the loan value of the Oil and Gas Properties
described in the most recent Reserve Report and (ii) all of the
accounts receivable, inventory, equipment, contract rights and general
intangibles of the Borrower and each Guarantor pursuant to the terms of
the Security Instruments to which they are parties.
(b) Lien in Acquired Oil and Gas Properties. Subject to the
provisions of Section 8.09(a), should the Borrower acquire any
additional Oil and Gas Properties or additional interests in its
existing Oil and Gas Properties, the Borrower will grant to the
Administrative Agent as security for the Obligations a first-priority
Lien interest (subject only to Excepted
57
64
Liens) on the Borrower's interest in any 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 Administrative Agent in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
(c) Title Information. Subject to the provisions of Section
8.08, concurrently with the granting of the Lien or other action
referred to in Section 8.09(a) above, the Borrower will provide to the
Administrative Agent title information in form and substance
satisfactory to the Administrative Agent in its sole discretion with
respect to the Borrower's interests in such Oil and Gas Properties.
(d) Legal Opinions. Also, promptly after the filing of any new
Security Instrument in any state, upon the reasonable request of the
Administrative Agent, the Borrower will provide to the Administrative
Agent an opinion addressed to the Administrative Agent for the benefit
of the Lenders in form and substance satisfactory to the Administrative
Agent in its sole discretion from counsel acceptable to Administrative
Agent, stating that the Security Instrument is valid, binding and
enforceable in accordance with its terms in legally sufficient form for
such jurisdiction, and the means by which such Security Instrument will
perfect the Lien created thereby.
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 Administrative 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.
58
65
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 permit to exist any Debt, except:
(a) the Notes or other Obligations or any guaranty of or
suretyship arrangement for the Notes or other Obligations;
(b) Debt, excluding Subordinated Debt, of the Borrower and its
Subsidiaries 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;
(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 120 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) in addition
to any obligations that are Debt as permitted under Section 9.07, not
to exceed $500,000;
(e) Debt in addition to any Debt not otherwise permitted this
Section 9.01 that is unsecured and not to exceed $5,000,000 in the
aggregate outstanding at one time;
(f) Subordinated Debt (including any increases of Existing
Subordinated Debt in connection with any refinacings thereof or
otherwise) in an amount not to exceed $20,000,000 in the aggregate
outstanding at any one time and with final maturity after September 15,
2004 and no sinking fund payments or mandatory redemption obligations
prior to September 15, 2004;
(g) Existing Subordinated Debt and any refinancings, renewals
or extensions (but not increases except as provided in Section 9.01(f))
of such Subordinated Debt, provided that any such refinancing provides
for a final maturity on or after September 15, 2004 and no sinking fund
payments or mandatory redemption obligations prior to September 15,
2004 and is otherwise pursuant to terms and conditions satisfactory to
the Lenders.
59
66
(h) Debt associated with bonds or surety obligations required
by Governmental Requirements in connection with the operation of the
Oil and Gas Properties of the Borrower and its Subsidiaries.
(i) Hedging Agreements covering (A) oil and gas production of
proved developed producing Oil and Gas Properties of the Borrower or
any Guarantor; provided, however, that such Hedging Agreements related
to oil or gas production shall not, either individually or in the
aggregate, cover more than eighty percent (80%) of estimated production
of oil or gas of the Borrower and the Guarantors for each individual
period covered by the Hedging Agreements and (B) fluctuations in
interest rates for notional principal amounts not to exceed at any time
outstanding 80% of the Debt for borrowed money of the Borrower and its
Consolidated Subsidiaries.
(j) Debt arising out of the Deferred Compensation Plan to the
extent such Debt can be satisfied out of the investments permitted by
Section 9.03(k) and the proceeds thereof.
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 Obligations;
(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 or any
Subsidiary securing the Debt described in Section 9.01(h) and 9.01(i);
provided that the aggregate amount of cash or securities which may
secure Debt described in Section 9.01(i) shall not exceed $2,500,000.
Section 9.03 Investments, Loans and Advances. Neither the
Borrower nor any Guarantor 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;
60
67
(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 one of the two highest grades by Standard &
Poor's 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 $500,000,000 (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 & Poor's 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 Guarantors or by any Guarantor in or to Borrower or another
Guarantor;
(h) investments by the Borrower in direct ownership interests
in additional Oil and Gas Properties and gas gathering systems related
thereto, and investments, loans or advances in connection with or
related to farm-out agreements, farm-in agreements, joint operating
agreements, joint venture or area of mutual interest agreements,
processing facilities, pipelines or other similar or customary
arrangements made in the ordinary course of business only insofar as
they do not (i) reduce the net revenue interest of the Borrower or any
Guarantor in any Oil and Gas Property for which value was given in the
most recent Borrowing Base redetermination below the undivided net
revenue interest specified for the Borrower or such Guarantor in the
most recent Reserve Report utilized by the Administrative Agent and the
Lenders in determining the then effective Borrowing Base and/or (ii)
increase the undivided working interest in any such Oil and Gas
Property without a corresponding increase in the net revenue interest
specified for the Borrower or such Guarantor in the most recent Reserve
Report utilized by the Administrative Agent and the Lenders in
determining the then effective Borrowing Base;
(i) loans or advances to employees of the Borrower and the
Guarantors in the ordinary course of business not to exceed an amount
equal to $500,000 in the aggregate at any time outstanding.
61
68
(j) other investments, loans or advances not to exceed, in the
aggregate at any time outstanding, an amount equal to $5,000,000.
(k) investments made pursuant to the Deferred Compensation
Plan.
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, except that, if no Default exists or would result therefrom, the
Borrower may (i) pay dividends on preferred stock issued and outstanding prior
to June 30,2000, (ii) redeem preferred stock with the proceeds of or in
connection with the issuance of equity securities, and (iii) dividends paid in
common stock of the Borrower.
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 Subsidiary shall sell or transfer any of its
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 permit 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 for terms in excess of, or are noncancellable by the
Borrower or such Subsidiary within, twelve months which would cause the
aggregate amount of all payments made by the Borrower and its Subsidiaries
pursuant to all such leases or lease agreements to exceed $1,000,000 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, except that, provided no Default exists or would result therefrom, (i)
any Subsidiary may merge into the Borrower or with any other Guarantor and (ii)
the Borrower or any Subsidiary may merge with another Person if the Borrower or
such Subsidiary is the surviving entity. The Borrower shall provide the
Administrative Agent with at least 30 days prior written notice of any merger or
consolidation permitted by this Section 9.08.
Section 9.09 Proceeds of Notes; Letters of Credit. The
Borrower will not permit the proceeds of the Notes or Letters of Credit to be
used for any purpose other than those permitted by
62
69
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 T, 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 material 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;
(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
63
70
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 (other than in settlement of any
past due accounts in the ordinary course of business and in accordance with
prudent commercial practices).
Section 9.12 Current Ratio. The Borrower will not permit its
ratio of (i) consolidated current assets, plus the amount equal to the
difference between (A) the Borrowing Base and (B) the sum of all Loans
outstanding, plus LC Exposure to (ii) consolidated current liabilities
(excluding current maturities of the Notes, the Existing Subordinated Debt and
the undischarged balance of any production payments existing on the Closing
Date) to be less than 1.0 to 1.0 at any time. For purposes of this Section 9.12,
"consolidated current assets" shall mean assets which would, in accordance with
GAAP, be included as current assets on a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries and "consolidated current
liabilities" shall mean liabilities which would, in accordance with GAAP, be
included as current liabilities on a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries.
Section 9.13 Tangible Net Worth. The Borrower will not permit
its Tangible Net Worth at any time to be less than $80,000,000, plus 50% of the
sum of the Borrower's after tax Consolidated Net Income for each fiscal quarter
for which Consolidated Net Income is greater than $0.00, beginning with the
fiscal quarter ending December 31, 2000.
Section 9.14 Financial Charge Coverage Ratio. The Borrower
will not permit its Financial Charge Coverage Ratio as of the end of any fiscal
quarter of the Borrower (calculated quarterly at the end of each fiscal quarter,
commencing December 31, 2000) to be less than 1.75 to 1.00. For purposes of this
Section 9.14, "Financial Charge Coverage Ratio" shall mean the ratio of
64
71
(i) EBITDA for the immediately preceding four fiscal quarters of the Borrower
and its Consolidated Subsidiaries to (ii) interest expense, plus preferred
dividends paid in cash by the Borrower and its Consolidated Subsidiaries during
such four fiscal quarters.
Section 9.15 Interest Coverage Ratio. The Borrower will not
permit its Interest Coverage Ratio as of the end of any fiscal quarter of the
Borrower (calculated quarterly at the end of each fiscal quarter, commencing
December 31, 2000) to be less than 2.50 to 1.00. For the purposes of this
Section 9.15, "Interest Coverage Ratio" shall mean the ratio of (i) EBITDA for
the immediately preceding four fiscal quarters of the Borrower and its
Consolidated Subsidiaries to (ii) interest expense of the Borrower and its
Consolidated Subsidiaries for such four fiscal quarters.
Section 9.16 Sale of Oil and Gas Properties. The Borrower will
not, and will not permit any Guarantor to, sell, assign, farm-out, convey or
otherwise transfer any Oil and Gas Property or any interest in any Oil and Gas
Property (a "Transfer") except for (i) the sale of Hydrocarbons in the ordinary
course of business; (ii) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (iii) the sale or transfer of equipment that is
no longer necessary for the business of the Borrower or such Guarantor or is
contemporaneously replaced by equipment of at least comparable value and use and
(iv) during any consecutive 12 month period, sales in the ordinary course of
business of Oil and Gas Properties which shall not exceed $5,000,000 in the
aggregate in any fiscal year; provided, however, that upon any such Transfer of
Oil and Gas Properties comprising a portion of the Collateral the Lenders may
reduce the Borrowing Base by an amount equal to 100% of the loan value of such
Collateral and if a Borrowing Base Deficiency results therefrom, the Borrower
shall, concurrent with completing such Transfer, pay to the Agent the proceeds
from such Transfer equal to the amount of the Borrowing Base Deficiency.
Section 9.17 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 9.18 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 9.20 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 or any Guarantor and except in compliance
with Section 9.03.
65
72
Section 9.21 Negative Pledge Agreements. Neither the Borrower
nor any Guarantor will create, incur, assume or permit to exist any contract,
agreement or understanding (other than this Agreement and the Security
Instruments, and the agreements and instruments creating Liens otherwise
permitted under Section 9.02 with respect to the Property covered by such Liens
only) which in any way prohibits or restricts the granting, conveying, creation
or imposition of any Lien on any of its Property or restricts any Guarantor from
paying dividends to the Borrower, or which requires the consent of or notice to
other Persons in connection therewith.
Section 9.22 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 or any Guarantor
which would require the Borrower or any Guarantor to deliver in the aggregate
five percent (5%) or more of their Hydrocarbons produced on a quarterly basis
from such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.
Section 9.23 Subordinated Debt. If a Default exists or would
result therefrom, neither the Borrower nor any Guarantor shall make any payment
in respect of any Subordinated Debt or the Existing Subordinated Debt. The
Borrower will not amend, supplement or otherwise modify any instruments
evidencing, or agreements relating to or executed in connection with, any
Existing Subordinated Debt, in any manner which would have the effect of (i)
accelerating the timing or amount of any scheduled payments of principal or
interest thereon, (ii) increasing the rate of interest payable thereon or (iii)
resulting in a Material Adverse Effect.
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
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 three 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
66
73
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
Administrative 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
(d) the Borrower shall default in the performance of any of
its obligations under Article IX, Section 8.01(c) or any other Article
of this Agreement other than under Article VIII (excluding Section
8.01(c)); 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 Administrative Agent or any Lender (through the
Administrative 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 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 60 days; or (iv) an order for relief against the
Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
67
74
(h) a judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate 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 thirty (30) days from the date of
entry thereof and the Borrower or such Subsidiary shall not, within
said period of 30 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, except to the extent permitted by the
terms of this Agreement, or the Borrower shall so state in writing; or
(j) a Change of Control occurs; or
(k) Any Guarantor takes, suffers or permits to exist any of
the events or conditions referred to in paragraphs (e), (f), (g) or (h)
or if any provision of any guaranty agreement related thereto shall for
any reason cease to be valid and binding on such Guarantor or if such
Guarantor shall so state in writing;
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 (k) to the
extent it relates to clauses (e), (f) or (g), the Administrative Agent,
upon request of the Majority Lenders, shall, by notice to the Borrower,
cancel the Commitments (in whole or part) 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)) 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
(k) to the extent it relates to clauses (e), (f) or (g), the
Commitments shall be automatically canceled 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)) shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate,
68
75
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
Obligations; fifth to serve as cash collateral to be held by the
Administrative Agent to secure the LC Exposure; and any excess shall be
paid to the Borrower or as otherwise required by any Governmental
Requirement.
69
76
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Administrative Agent to act as
its agent hereunder and under the Security Instruments with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the Security Instruments, together with such other powers as are
reasonably incidental thereto. The Administrative 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
Administrative 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, its 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
Administrative 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 Administrative 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 Administrative Agent. The
Administrative 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 Administrative Agent. The
Administrative 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 Administrative Agent.
Section 11.03 Defaults. The Administrative 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
70
77
Loans or of fees or failure to reimburse for Letter of Credit drawings) unless
the Administrative 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 Administrative Agent receives such a notice of the
occurrence of a Default, the Administrative Agent shall give prompt notice
thereof to the Lenders. In the event of a payment Default, the Administrative
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, First Union (and any successor acting as Administrative
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 Administrative Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Administrative Agent
in its individual capacity. First Union (and any successor acting as
Administrative 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 Administrative Agent, and First
Union 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 ADMINISTRATIVE AGENT AND THE ISSUING BANK 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
ADMINISTRATIVE AGENT OR THE ISSUING BANK 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 ADMINISTRATIVE AGENT OR THE ISSUING BANK, 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 ADMINISTRATIVE AGENT.
Section 11.06 Non-Reliance on Administrative Agent and other
Lenders. Each Lender acknowledges and agrees that it has, independently and
without reliance on the Administrative Agent or any other Lender, and based on
such documents and information as it has
71
78
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 Administrative 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 Administrative 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 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 Administrative Agent hereunder,
the Administrative 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 Administrative Agent or any of its
Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C. is acting in this transaction as special counsel to the
Administrative 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 Administrative Agent. Except for
action or other matters expressly required of the Administrative Agent
hereunder, the Administrative 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 Administrative Agent shall be binding on all of the
Lenders. If a Default has occurred and is continuing, the Administrative 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 Administrative Agent shall have received
such directions, the Administrative 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 Administrative Agent be required to take any action
which exposes the Administrative 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 Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower, and the Administrative 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 Administrative Agent with the consent of the Borrower (such consent
not to be unreasonably withheld). If no successor Administrative Agent shall
have been so appointed by
72
79
the Majority Lenders and shall have accepted such appointment within thirty (30)
days after the retiring Administrative Agent's giving of notice of resignation
or the Majority Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent with the consent of the Borrower (such consent not to be
unreasonably withheld). Upon the acceptance of such appointment hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative 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 Administrative Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the
Administrative 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 in writing by telex,
telecopy, courier or U.S. Mail 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.
(a) The Borrower agrees:
73
80
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Administrative Agent
in the administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the
Administrative Agent and the Lenders with respect thereto) of, and in
connection with the negotiation, syndication, 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 Administrative Agent, the cost of environmental
audits, surveys and appraisals at reasonable intervals, the reasonable
fees and disbursements of counsel and other outside consultants for the
Administrative Agent and, in the case of enforcement, the reasonable
fees and disbursements of counsel for the Administrative Agent and any
of the Lenders); and promptly reimburse the Administrative Agent for
all amounts expended, advanced or incurred by the Administrative 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;
(ii) TO INDEMNIFY THE ADMINISTRATIVE 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, 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 ITS 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 OR ANY
GUARANTOR 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
74
81
OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING
SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE
ADMINISTRATIVE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE
ADMINISTRATIVE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES 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(a)(iii) IN RESPECT OF ANY PROPERTY
FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE
ADMINISTRATIVE 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).
(b) 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.
(c) In the case of any indemnification hereunder, the
Administrative 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.
75
82
(d) 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.
(e) 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.
(f) 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,
increases the Aggregate Maximum Credit Amounts, increases the Borrowing Base,
forgives the principal amount of any Obligations outstanding under this
Agreement, releases any guarantor of the Obligations or releases all or
substantially all of the collateral, reduces the interest rate applicable to the
Loans or the fees payable to the Lenders generally, affects Section 2.03(a),
this Section 12.04 or Section 12.06(a) or modifies the definition of "Majority
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
Administrative Agent shall be effective without the consent of the
Administrative 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 Administrative Agent.
76
83
(b) Any Lender may, upon the written consent of the
Administrative Agent and, if no Event of Default has occurred and is
continuing, 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 E (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
Administrative Agent a processing and recordation fee of $3,500 for
each assignment. Any such assignment will become effective upon the
execution and delivery to the Administrative Agent of the Assignment
and the consent of the Administrative Agent and, if applicable, the
Borrower. Promptly after receipt of an executed Assignment, the
Administrative 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 Administrative 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 Obligations or extend the final
maturity of the Loans, (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 Obligations 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
77
84
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 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.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any 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 other Loan Document.
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.
Section 12.09 References; Use of Word "Including". 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 or Article
shall be deemed to refer to the applicable Section or Article of this Agreement
unless otherwise stated herein. Any reference herein to an exhibit, schedule, or
other attachment shall be deemed to refer to the applicable exhibit, schedule,
or other attachment attached hereto unless otherwise stated herein. The word
"including", "includes" and words of similar import means "including, without
limitation".
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 Obligations or proceeds of any collateral are
78
85
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 Obligations so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Administrative 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
Administrative 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. CH. 346 OF THE 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 OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND,
BY EXECUTION AND DELIVERY OF 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 ADMINISTRATIVE
79
86
AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE BORROWER IN
ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS, SUCH
SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY
LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER OR ITS PROPERTIES IN ANY OTHER JURISDICTION.
(d) THE BORROWER, THE ADMINISTRATIVE AGENT 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 LOAN DOCUMENT 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, AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGE THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS 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
Obligations (or, to the extent that the principal amount of the Obligations
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
80
87
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 amount of the Obligations (or, to the
extent that the principal amount of the Obligations 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 Chapter by the indicated weekly rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower
or any Subsidiary provides to the Administrative Agent or the Lenders
confidential information belonging to the Borrower or such Subsidiary, which the
Borrower or any Subsidiary shall designate in writing as "confidential", the
Administrative 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. 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
Administrative Agent or the Lenders breaching their obligation of confidence to
the Borrower, (iii) are previously known by the Administrative Agent or the
Lenders from some source other than the Borrower, (iv) are hereafter developed
by the Administrative Agent or the Lenders without using the Borrower's
information, (v) are hereafter obtained by or available to the Administrative
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 Administrative 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 Administrative 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
81
88
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 Administrative 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 Administrative 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 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 year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Administrative Agent and the Lenders arising by contract, agreement,
statute or law except as expressly stated in this Section 12.15.
Section 12.16 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."
Section 12.17 Hedging Agreement Substitution of Collateral. If
the Obligations are paid in full and this Agreement is terminated, the
Administrative Agent and the Lenders shall execute and deliver or cause to be
executed and delivered such instruments of satisfaction and reassignment as may
be appropriate in order to release all liens and security interests created by
the Security Instruments, provided, however, that in lieu of paying off any such
Obligations arising under any Hedging Agreement with any Lender or Affiliate of
any Lender, the Borrower may provide substitute credit support under a standard
form ISDA Credit Support Annex acceptable to such Lender (or its Affiliate) in
the form of a letter of credit or cash equivalents in an amount equal to 110% of
the then current exposure under such Hedging Agreement.
Section 12.18 Amendment, Restatement and Rearrangement of
Prior Debt. The parties hereto agree that to the extent the Prior Debt is
refinanced with proceeds of Loans hereunder,
82
89
this Agreement amends, restates and rearranges such Prior Debt pursuant to the
terms and conditions of this Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
83
90
The parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
BORROWER: ▇▇▇▇▇▇ PETROLEUM COMPANY
By:
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President and Chief
Financial Officer
Address for Notices:
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇; or
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Treasurer
S-1
91
ADMINISTRATIVE AGENT
and LENDER: FIRST UNION NATIONAL BANK, individually and
as Administrative Agent
By:
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Lending Office for Base Rate Loans and
LIBOR Loans:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Syndication Agency Services
With copy to:
First Union Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
S-2
92
LENDERS: UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
By:
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
Lending Office for Base Rate Loans and
LIBOR Loans:
Energy Capital Services - Monterey Park Office
601 Potrero Grande Drive, #▇-▇▇▇-▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices:
Energy Capital Services - Dallas ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
With copy to:
Energy Capital Services - Dallas ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
S-3
93
ANNEX I
LIST OF PERCENTAGE SHARES AND MAXIMUM REVOLVING CREDIT AMOUNTS
MAXIMUM REVOLVING
NAME OF LENDER PERCENTAGE SHARE CREDIT AMOUNT
-------------- ---------------- -----------------
First Union National Bank 50% $37,500,000
Union Bank of California, N.A. 50% $37,500,000
TOTAL 100% $75,000,000
Annex I-1
94
EXHIBIT A
FORM OF NOTE
$_____________________________ ___________________, 200__
FOR VALUE RECEIVED, ▇▇▇▇▇▇ PETROLEUM COMPANY, a Delaware corporation
(the "Borrower") hereby promises to pay to the order of
______________________________ (the "Lender"), at the Principal Office of First
Union National Bank (the "Administrative Agent"), at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal sum of _____________ Dollars
($____________) (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, endorsed by the Lender on the schedules
attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Credit Agreement dated
as of October 30, 2000 among the Borrower, the Lenders which are or become
parties thereto (including the Lender) and the Administrative Agent (as the same
may be amended or supplemented from time to time, the "Credit Agreement"), and
evidences Loans made by the Lender thereunder. 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.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
▇▇▇▇▇▇ PETROLEUM COMPANY
By:
Name:
Title:
Exhibit A-1
95
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, 200__
▇▇▇▇▇▇ PETROLEUM COMPANY, a Delaware corporation (the "Borrower"),
pursuant to the Credit Agreement dated as of October 30, 2000 among the
Borrower, FIRST UNION NATIONAL BANK, as Administrative Agent for the lenders
(the "Lenders") which are or become parties thereto, and such Lenders (together
with all amendments or supplements thereto, the "Credit Agreement"), 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 _________________, 200__;
(c) $_____________________ of such borrowings are to be LIBOR
Loans;
$_____________________ of such borrowings are to be Base Rate
Loans; and
(d) Length of Interest Period for LIBOR Loans is:
________________________.
[ ] 2. LIBOR Loan Continuation for LIBOR Loans maturing on
_____________________:
(a) Aggregate amount to be continued as LIBOR Loans is
$____________________;
(b) Aggregate amount to be converted to Base Rate Loans is
$____________________;
(c) Length of Interest Period for continued LIBOR Loans is
________________________.
[ ] 3. Conversion of Outstanding Base Rate Loans to LIBOR Loans:
Exhibit B-1
96
Convert $__________________ of the outstanding Base Rate Loans
to LIBOR Loans on ____________________ with an Interest Period
of ______________________.
[ ] 4. Conversion of outstanding LIBOR Loans to Base Rate Loans:
Convert $__________________ of the outstanding LIBOR Loans
with Interest Period maturing on ______________________, 200_,
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.
▇▇▇▇▇▇ PETROLEUM COMPANY
By:_________________________________
Name:
Title:
Exhibit B-2
97
Schedule 9.03-1