EXHIBIT 10.9
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 31, 1996
AMONG
▇▇▇▇▇▇ PETROLEUM COMPANY
AS BORROWER
AND
▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY
▇▇▇▇▇▇ OFFSHORE PRODUCTION COMPANY
AS SUBSIDIARY GUARANTORS
AND
THE CHASE MANHATTAN BANK, AS AGENT
AND
THE BANKS NAMED THEREIN
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 31, 1996, among
▇▇▇▇▇▇ Petroleum Company, a Delaware corporation (the "BORROWER"), ▇▇▇▇▇▇
Petroleum Operating Company, a Delaware corporation and a wholly-owned
subsidiary of the Borrower ("OPERATING"), ▇▇▇▇▇▇ Offshore Production, Inc., a
Mississippi corporation, a wholly-owned subsidiary of Operating ("OFFSHORE"),
the several banks and other financial institutions from time to time parties to
this Amended and Restated Credit Agreement (the "BANKS") and The Chase Manhattan
Bank, a New York banking corporation ("CHASE"), acting as agent for the Banks
hereunder (in such capacity, the "AGENT").
WHEREAS, pursuant to an Assignment of Note and Liens dated as of the
Closing Date, as that term is hereinafter defined, (the "ASSIGNMENT"), Chase
will purchase and assume all of the rights and interests of Internationale
Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("INCC") under
that certain Credit Agreement dated as of October 14, 1994, among Operating as
"Borrower", Borrower as "Parent", and INCC as "Lender", as said Credit Agreement
has been amended by First Amendment to Credit Agreement dated June 29, 1995, by
Second Amendment to Credit Agreement dated November 22, 1995, and by Third
Amendment to Credit Agreement dated February 22, 1996 (as so amended, the "INCC
CREDIT AGREEMENT"); and
WHEREAS, immediately after giving effect to the Assignment, but subject to
the conditions precedent set forth herein, the Borrower, Operating, Offshore,
Chase as the sole Bank, and Chase as agent for the benefit of the Banks desire
to amend and restate the INCC Credit Agreement in its entirety in order, among
other things, to increase the commitments thereunder, to extend the maturity of
the "Commitment Period", and to modify certain other provisions of the INCC
Credit Agreement.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants, and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, Operating, Offshore, the Agent and the Banks agree
that upon satisfaction of each condition precedent set forth in ARTICLE IV
HEREOF, the INCC Credit Agreement shall be amended and restated in its entirety
on the terms and conditions set forth herein. It is the intention of the
Borrower, Operating, Offshore, the Agent, and the Banks that upon satisfaction
of such conditions precedent, this Amended and Restated Credit Agreement shall
amend, restate, supersede and replace the INCC Credit Agreement in its entirety;
provided, that (a) the foregoing shall operate to increase, renew, extend, amend
and modify the outstanding indebtedness, commitments and other rights and
obligations of the parties under the INCC Credit Agreement, but shall not effect
a novation thereof, and (b) all Liens securing the "Obligations" under and as
defined in the INCC Credit Agreement shall not be extinguished, but shall be
carried forward and shall secure such Obligations as defined herein and as
renewed, extended, increased, amended and modified hereby.
The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
SECTION 1.1. DEFINED TERMS. As used in this Credit Agreement, each of the
following terms has the meaning given it in this SECTION 1.1 or in the sections
and subsections referred to below:
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"AGENT" means Chase, as agent for the Banks hereunder and under the other
Loan Documents, and each successor Agent.
"APPLICABLE MARGIN" means, (a) with respect to each Base Rate Borrowing:
(i) on each day on which the Utilized Percentage of Borrowing Base
is less than fifty percent (50%), zero percent (0%) per annum;
and
(ii) on each day of which the Utilized Percentage of Borrowing Base
is equal to or greater than fifty percent (50%), one half of
one percent (0.50%) per annum; and
(b) with respect to each Eurodollar Borrowing:
(i) on each day on which the Utilized Percentage of Borrowing Base
is less than fifty percent (50%), one percent (1.00%) per
annum; and
(ii) on each day of which the Utilized Percentage of Borrowing Base
is equal to or greater than fifty percent (50%), one and
three-eighths of one percent (1.375%) per annum.
"ASSIGNMENT" means the Assignment of Note and Liens dated as of the
Closing Date from INCC in favor of the Agent for the benefit of the Banks and
delivered to the Agent pursuant to SECTION 4.1(O).
"BANK" means each of the financial institutions whose name appears on the
signature pages to this Credit Agreement and the Persons which from time to time
become a party hereto in accordance with SECTION 11.4.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978 as codified
under 11 U.S.C. ss.101, et seq.
"BASE RATE" means for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1% and (b) the Prime Rate in
effect on such day. For purposes hereof: "PRIME RATE" means, as of a particular
date, the rate of interest from time to time announced by Chase at the Principal
Office as its prime rate; which Prime Rate may not necessarily represent Chase's
lowest or best rate actually charged to a customer; "PRINCIPAL OFFICE" means the
principal office of Chase, presently located at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Agent from three federal funds brokers of recognized standing selected by it. If
for any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms thereof, the
Base Rate shall be determined without
-2-
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective on the effective day of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"BASE RATE BORROWING" means a Borrowing comprised of Base Rate Loans.
"BASE RATE LOANS" means Loans bearing interest at a rate determined by
reference to the Base Rate in accordance with the provisions of ARTICLE II.
"BORROWER" means ▇▇▇▇▇▇ Petroleum Company, a Delaware corporation.
"BORROWING" means a borrowing comprised of simultaneous Loans or a single
Loan of the same Type made to the Borrower on the same date by the Banks, or a
single Bank, (or resulting from conversions or continuations on a given date
pursuant to SECTION 2.4), having the same Interest Period distributed ratably
among the Banks in the manner described in ARTICLE II, PROVIDED, HOWEVER, that
if there is only one (1) Bank party to this Credit Agreement, a borrowing shall
be comprised of a single Loan of the same Type made to the Borrower on the same
date by such Bank.
"BORROWING BASE" has the meaning set forth in SECTION 3.2 hereof;
provided, however, that in no event shall the Borrowing Base ever exceed the
Total Commitment, and PROVIDED, FURTHER, that the Borrowing Base shall not be
less than $15,000,000 during the period from and including the Effective Date to
but excluding May 15, 1997.
"BORROWING BASE DEFICIENCY" means a condition wherein the Utilized Credit
at any time exceeds the Borrowing Base in effect at such time.
"BORROWING BASE NOTICE" means a written notice sent to the Borrower by the
Agent addressed as specified in SECTION 11.3, notifying the Borrower of the
Borrowing Base determined by the Banks in accordance with ARTICLE III for the
upcoming Determination Date.
"BORROWING BASE PROPERTIES" means (a) all of the Oil and Gas Interests of
the Loan Parties, or any one such Loan Party, set forth in the Initial
Engineering Report, and (b) all other Oil and Gas Interests of the Loan Parties,
either now owned or hereafter acquired, which (i) have Proved Reserves
attributable thereto, (ii) are the subject of an Engineering Report prepared by
an independent petroleum engineer acceptable to the Required Banks and delivered
to the Banks by the Loan Parties, (iii) are subject to no Liens except as
permitted by SECTION 7.2, and (iv) are the subject of an environmental
assessment and a title review satisfactory to the Required Banks.
"BORROWING DATE" means any Business Day specified in a notice pursuant to
SECTION 2.2 as a date on which the Borrower requests the Banks to make Loans
hereunder.
"BORROWING REQUEST" means, with respect to each Borrowing, a request made
pursuant to SECTION 2.2 which request shall be in the form of EXHIBIT A.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in New York, New York.
Any Business Day in any way relating to any Eurodollar Borrowings (such as the
day on which an Interest Period begins or ends) must also be a
-3-
day on which, in the judgment of the Agent, significant transactions in dollars
are carried out in the interbank eurocurrency market.
"CAPITAL LEASE" means, when used with respect to any Person, any lease in
respect of which the obligations of such Person constitute Capitalized Lease
Obligations.
"CAPITALIZED LEASE OBLIGATIONS" means, when used with respect to any
Person, without duplication, all obligations of such Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations shall
have been or should be, in accordance with GAAP, capitalized on the books of
such Person.
"CHANGE OF CONTROL" means the occurrence of either of the following events
at any time after the execution and delivery of this Credit Agreement: (i) any
Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, and including
holding proxies to vote for the election of directors) of fifteen percent (15%)
or more of the outstanding common stock of the Borrower or (ii) fifteen percent
(15%) or more of the board of directors of the Borrower shall consist of Persons
not nominated by the Borrower.
"CHASE" means The Chase Manhattan Bank.
"CHANDELEUR CONTRACT" means that certain Gas Gathering Agreement dated as
of February 10, 1995 among the Borrower, Operating and Chevron Natural Gas Pipe
Line Company, formerly known as Chandeleur Pipe Line Company, pursuant to which
Chevron Natural Gas Pipe Line Company has purchased, and Borrower and Operating
have sold, gas gathering capacity and services as more particularly set forth in
the Chandeleur Contract.
"CLOSING DATE" means October 31, 1996.
"CODE" means Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated thereunder.
"COLLATERAL" means all Property which is subject to a Lien in favor of the
Agent for the benefit of the Banks or which, under the terms of any Security
Document, is purported to be subject to such a Lien.
"COMMITMENT" means, when used with reference to any Bank at the time any
determination thereof is to be made, the amount of such Bank's Commitment
hereunder to extend credit to the Borrower by means of Loans or participations
in Letters of Credit, which, subject to SECTIONS 2.6 and 9.1, shall be an amount
equal to the amount set forth opposite the name of such Bank under the heading
"Amount of Commitment" on SCHEDULE 1.1 to this Credit Agreement.
"COMMITMENT FEE RATE" shall have the meaning specified in SECTION 2.5(A)
hereof.
"COMMITMENT PERCENTAGE" means, as to any Bank, a fraction (expressed as a
percentage), the numerator of which shall be the amount of such Bank's
Commitment set forth on the signature pages hereto, and the denominator of which
shall be the Total Commitment.
-4-
"COMMITMENT TRANSFER SUPPLEMENT" shall have the meaning assigned to that
term in SECTION 11.4(C).
"COMMODITY HEDGE TRANSACTION" means with respect to any Person, a
transaction pursuant to which such Person or any of its Subsidiaries hedge the
price to be received by them for future production of Hydrocarbons, including
price swap agreements under which such Person or its Subsidiaries agree to pay a
price for a specified amount of Hydrocarbons determined by reference to a
recognized market on a specified future date and the contracting counterparty
agrees to pay such Person or its Subsidiaries a fixed price for the same or
similar amount of Hydrocarbons.
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to that term in
SECTION 6.2(B).
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated Subsidiaries. References herein to a
Person's Consolidated financial statements, financial positions, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial positions, financial condition, liabilities, etc. of such Person and
its properly consolidated Subsidiaries.
"CONSOLIDATED ASSETS" means, when used with respect to the Borrower, all
items which should be classified as assets on the Consolidated financial
statements of the Borrower and its Subsidiaries, all as determined in conformity
with GAAP.
"CONSOLIDATED EQUITY" means, with respect to the Borrower, at anytime, the
Consolidated Assets of the Borrower and its Subsidiaries LESS the Consolidated
Liabilities of the Borrower and its Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Borrower and
its Subsidiaries, for any fiscal period, the aggregate amount of all costs, fees
and expenses paid by the Borrower and its Subsidiaries in such fiscal period
which are classified as interest expense on the Consolidated financial
statements of the Borrower and its Subsidiaries, all as determined in conformity
with GAAP.
"CONSOLIDATED LIABILITIES" means, when used with respect to the Borrower
and its Subsidiaries, all items which should be classified as liabilities on the
Consolidated financial statements of the Borrower and its Subsidiaries, all as
determined in conformity with GAAP.
"CONSOLIDATED NET INCOME" means, for any fiscal period, without
duplication, the net earnings (or loss) after taxes from all operations of
Borrower and its Subsidiaries on a Consolidated basis for such period determined
in conformity with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means, with respect to the Borrower, at
any time, the Consolidated Equity of Borrower and its Subsidiaries, at such
time, less the Consolidated Intangible Assets of Borrower and its Subsidiaries
at such time. For purposes of this definition, "Intangible Assets" means the
amount (to the extent reflected in determining Consolidated Equity) of all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights and organization
expenses.
"CONTRACTUAL OBLIGATION" as applied to any Person, means any provision of
any stock or other securities issued by that Person or any indenture, mortgage,
deed of trust, contract, undertaking, document, instrument or other agreement or
instrument to which that Person is a party or by which it or
-5-
any of its Properties is bound, or to which it or any of its Properties is
subject (including, without limitation, any restrictive covenant affecting such
Person or any of its Properties).
"CREDIT AGREEMENT" means this Amended and Restated Credit Agreement, as
amended, supplemented, restated or otherwise modified from time to time.
"DEBT" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP. Debt
includes, without limiting the foregoing, (a) indebtedness of such Person for
borrowed money or for the deferred purchase price of Property or services or
which is evidenced by a note, bond, debenture or similar instrument, (including
Environmental Liabilities and liabilities to the PBGC), (b) all obligations of
such Person under Capitalized Lease Obligations, (c) all obligations of such
Person in respect of letters of credit and acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any Property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, (e) all Guarantee Obligations of such Person,
(f) indebtedness with respect to payments received in consideration of
Hydrocarbons yet to be produced from the Oil and Gas Interests at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment), (g) indebtedness with respect
to other obligations to deliver goods or services in consideration of advance
payments therefor, and (h) all net payments or amounts due and payable by
Borrower or any Subsidiary of Borrower in respect of Interest Hedge Agreements
and/or Commodity Hedge Transactions. The Debt of a Person shall also include all
liabilities of such Person as a general or venture partner of a partnership or
joint venture for the obligations of such partnership or joint venture of the
nature described in subclauses (a) through (h) above. The Debt of a Person shall
NOT include (i) trade payables and expense accruals incurred or assumed in the
ordinary course of such Person's business, PROVIDED such payables have been
outstanding for one hundred twenty (120) days or less since the date that such
payable was incurred on ordinary trade terms and is owed by the Person incurring
the same to vendors, suppliers, or other Persons providing goods and services
for use by such Person in the ordinary course of its business or (ii) bonds,
letters of credit or deposits posted in favor of the United States of America or
any state securing obligations to plug abandoned ▇▇▇▇▇ or obligations to clean
up and restore the land on which such ▇▇▇▇▇ are located.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium, readjustment
of debt, compromise, rearrangement, receivership, insolvency, reorganization, or
similar debtor relief laws from time to time in effect affecting the rights of
creditors generally.
"DEFAULT" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"DEFAULT RATE" means, at the time in question, two percent (2.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Borrowings with an Interest Period extending beyond the date such
Eurodollar Borrowing becomes due and payable, "Default Rate" means two percent
(2.0%) per annum plus the related Eurodollar Rate. The Default Rate shall in no
event, however, exceed the Highest Lawful Rate.
-6-
"DESIGNATED CONTRACTS": means the following agreements (whether one or
more) relating to the Borrowing Base Properties, as the same may, subject to
SECTION 7.10, be amended, supplemented, restated or otherwise modified from time
to time:
(i) All material Production Sales Contracts;
(ii) The Chandeleur Contract;
(iii) All organizational documents, including without limitation,
all articles/certificates of incorporation, bylaws, partnership
agreements, limited liability company agreements, joint venture documents
or management agreements, governing the Borrower or any Subsidiary
Guarantor;
(iv) All operating agreements, agency agreements, and joint
operating agreements and other similar agreements customary in the oil and
gas industry and entered into in the ordinary course of business which are
material to the Borrowing Base Properties;
(v) All fee leases, area of mutual interests agreements, joint
development/drilling agreements, farm out agreements, and farm in
agreements and other similar arrangements customary in the oil and gas
industry and entered into in the ordinary course of business which are
material to the Borrowing Base Properties;
(vi) All transportation, processing agreements, product sale
agreements, tolling agreements and throughput agreements which are
material to the Borrowing Base Properties; and
(vii) All pipeline, gas gathering, water disposal and other
easements, rights of way, surface damage, water disposal and surface use
agreements which are material to the Borrowing Base Properties.
"DETERMINATION" means any Periodic or Special Determination.
"DETERMINATION DATE" means (a) each May 15 and November 15, and (b) with
respect to any Special Determination, forty-five (45) Business Days following
the date of a request for a Special Determination.
"DISCLOSURE SCHEDULE" means (a) SCHEDULE 1.2 hereto and (b) any documents
listed on such schedule and expressly incorporated therein by reference, so long
as the Borrower has heretofore delivered true, correct and complete copies of
such document to the Banks. Insofar as any representations and warranties made
herein are incorporated by reference or otherwise remade in Loan Documents
delivered as of a date after the date hereof, the term "DISCLOSURE SCHEDULE"
shall in such representations and warranties be deemed to refer as well to all
other documents, PROVIDED, that the Borrower has at the time in question
delivered true, correct and complete copies of all such documents to the Banks.
"DISTRIBUTION" means (i) any dividend or distribution payable in cash,
obligations or Property with respect to any shares of capital stock of the
Borrower or any Subsidiary of the Borrower (other than dividends payable in
shares of the same class of common, preferred or other capital stock as the
shares upon which the dividend is being paid), any other distribution made with
respect to any shares of capital stock of the Borrower or any Subsidiary of the
Borrower, or any purchase, redemption or retirement of,
-7-
or other payment with respect to, any shares of capital stock of the Borrower or
any Subsidiary of the Borrower and/or (ii) (A) any payment or prepayment of
principal, premium, or penalty on any Subordinated Obligations or any
defeasance, redemption, purchase, repurchase or other acquisition or retirement
for value, in whole or in part, of any Subordinated Obligations (including,
without limitation, the setting aside of assets or the deposit of funds
therefor) and (B) prepayment of interest on any of the Subordinated Obligations.
"DOLLARS" and the symbol "$" shall mean the lawful currency of the United
States.
"EBITDA" means, with respect to the Borrower on a Consolidated basis for
any fiscal period, without duplication, Consolidated Net Income of Borrower PLUS
(ii) Borrower's Consolidated depreciation, depletion, amortization and other
non-cash items reducing Consolidated Net Income PLUS (iii) Consolidated Interest
Expense PLUS (iv) Consolidated income tax expense, all determined in accordance
with GAAP.
"EFFECTIVE DATE" means the date on which all of the conditions precedent
to the making of the Loans set forth in ARTICLE IV are first satisfied or waived
by the Banks and the initial Loans are made.
"ENGINEERING REPORT" means the Initial Engineering Report and each
engineering report delivered pursuant to SECTION 6.2(D).
"ENVIRONMENTAL LAWS" means any federal, state, local or tribal statute,
law, rule, regulation, ordinance, code, permit, consent, approval, license,
written policy or rule of common law now or hereafter in effect and in each case
as amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, injunction, consent decree or judgment, or
other authorization or requirement whenever promulgated, issued or modified,
including the requirement to register underground storage tanks, well plugging
and abandonment requirements, and oil and gas waste disposal requirements
relating to:
(i) emissions, discharges, spills, migration, movement, releases or
threatened releases of pollutants, contaminants, Hazardous Materials, or
hazardous or toxic materials or wastes into or onto soil, land, ambient
air, surface water, ground water, watercourses, publicly owned treatment
works, drains, sewer systems, wetlands or septic systems;
(ii) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Materials or hazardous and/or
toxic wastes, material, products or by-products containing Hazardous
Materials (or of equipment or apparatus containing Hazardous Materials);
or
(iii) otherwise relating to pollution or the protection of human
health or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. ▇▇.▇▇. 9601 ET SEQ., as amended, the Resource Conservation
and Recovery Act, 42 U.S.C. ▇▇.▇▇. 6901 ET SEQ., as amended, the Hazardous
Materials Transportation Act, 49 U.S.C. ▇▇.▇▇. 1801 ET SEQ., as amended,
the Clean Water Act, 33 U.S.C. ▇▇.▇▇. 1251 ET SEQ., as amended, the Toxic
Substances Control Act, 15 U.S.C. ▇▇.▇▇. 2601 ET SEQ., as amended,; the
Clean Air Act, 42 U.S.C. ▇▇.▇▇. 7401 ET SEQ., as amended, the federal
WatER Pollution Control Act, 33 U.S.C. ss.1251 et seq., as amended, the
Safe Drinking Water Act, 42 U.S.C. ▇▇.▇▇. 300f ET SEQ., as amended, the
Atomic Energy Act, 42 U.S.C. ▇▇.▇▇. 2011 ET SEQ., as amended, the Natural
Gas Pipeline Safety Act of 1968, 49 U.S.C. ss.1671 ET SEQ., as amended,
-8-
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ▇▇.▇▇.
136 ET SEQ., as amended, and the Occupational Safety and Health Act, 29
U.S.C. ▇▇.▇▇. 651 ET SEQ., as amended, and all comparable statutes of the
States of Alabama, Colorado, Louisiana, Mississippi, Oklahoma, Texas and
Utah, and all comparable local Requirements of Law in such states, and
other environmental, conservation or protection laws in effect in any
jurisdiction where any real Property of the Borrower or any Subsidiary of
the Borrower is located.
"ENVIRONMENTAL LIABILITIES" means with respect to any Person, any and all
liabilities, responsibilities, losses, sums paid in settlement of claims,
obligations, charges, actions (formal or informal), claims (including, without
limitation, claims for personal injury or for Property damage), liens,
administrative proceedings, damages (including, without limitation, loss or
damage resulting from the occurrence of an Event of Default), punitive damages,
consequential damages, treble damages, penalties, fines, monetary sanctions,
interest, court costs, response and remediation costs, stabilization costs,
encapsulation costs, treatment, storage, or disposal costs, groundwater
monitoring or environmental sampling costs, other causes of action and any other
costs and expenses (including, without limitation, reasonable attorneys',
experts', and consultants' fees, costs of investigation and feasibility studies
and disbursements in connection with any investigative, administrative or
judicial proceeding) , whether direct or indirect, known or unknown, absolute or
contingent, past, present or future arising under, pursuant to or in connection
with any Environmental Law, or any other binding obligation of such Person
requiring abatement of pollution or protection of human health and the
environment.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental Authority
for (i) any liability under Environmental Laws or (ii) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Hazardous Materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA PLAN" means any pension benefit plan subject to Title IV of ERISA
maintained by any Loan Party or any Affiliate thereof with respect to which any
Loan Party has a fixed or contingent liability.
"EURODOLLAR BORROWING" means a Borrowing comprised of Eurodollar Loans.
"EURODOLLAR LOANS" means Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to each particular Eurodollar
Borrowing and the associated Eurodollar Unadjusted Rate and Reserve Percentage,
the rate per annum calculated by the Agent (rounded upwards, if necessary, to
the next higher 0.01%) determined on a daily basis pursuant to the following
formula:
(EURODOLLAR UNADJUSTED RATE + APPLICABLE MARGIN)
------------------------------------------------
(100.0% - Reserve Percentage)
If the Reserve Percentage changes during the Interest Period for a Eurodollar
Borrowing, the Banks may, at their option, either change the Eurodollar Rate for
such Eurodollar Borrowing or leave it unchanged
-9-
for the duration of such Interest Period. The Eurodollar Rate shall in no event,
however, exceed the Highest Lawful Rate.
"EURODOLLAR UNADJUSTED RATE" means, with respect to each Eurodollar
Borrowing comprised of Eurodollar Loans and the related Interest Period, the
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
reported, on the date two Business Days prior to the first day of such Interest
Period, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for dollar deposits having
a term comparable to such Interest Period and in an amount of $1,000,000 or more
(or, if such Page shall cease to be publicly available or if the information
contained on such Page, in Agent's sole judgment, shall cease to accurately
reflect such London Interbank Offered Rate, as reported by any publicly
available source of similar market data selected by the Agent that, in the
Agent's sole judgment, accurately reflects such London Interbank Offered Rate).
"EVENT OF DEFAULT" has the meaning given it in SECTION 9.1.
"EXISTING LITIGATION" means all material actions, suits, proceedings,
governmental investigations or arbitrations pending or, to the best knowledge of
the Borrower after due inquiry, threatened against the Borrower or any
Subsidiary of the Borrower, which Existing Litigation is disclosed in the
DISCLOSURE SCHEDULE hereto.
"FEDERAL FUNDS EFFECTIVE RATE" shall have the meaning specified in the
definition of the term "BASE RATE".
"FISCAL QUARTER" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"FISCAL YEAR" means a twelve-month period ending on December 31 of any
year.
"FUNDED DEBT" means, at any time, without duplication and with respect to
the Borrower and its Subsidiaries on a Consolidated basis, Debt in any of the
following categories:
(a) Debt of such Person for borrowed money or for the deferred purchase
price of Property or services;
(b) Debt of such Person which is evidenced by a note, bond, debenture or
similar instrument, but excluding bonds or deposits posted in favor
of the United States of America or any state securing obligations to
plug abandoned ▇▇▇▇▇ or obligations to clean up and restore the land
on which such ▇▇▇▇▇ are located;
(c) Debt of such Person in respect of Capitalized Lease Obligations;
(d) Debt of such Person in respect of letters of credit and acceptances
issued or created for the account of such Person, except letters of
credit in favor of the United States of America or any state
securing obligations to plug abandoned ▇▇▇▇▇ or obligations to clean
up and restore the land on which such ▇▇▇▇▇ are located;
-10-
(e) all liabilities of such Person as a general partner of a partnership
or joint venture for the obligations of such partnership or joint
venture of the nature described in subclauses (a) through (d) above;
and
(f) all Guarantee Obligations of such Person with respect to Debt
described in subclauses (a) through (e) above.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of the Borrower and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the Initial Financial Statements. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board
(or any such successor) in order for such principle or practice to continue as a
generally accepted accounting principle or practice, all reports and financial
statements required hereunder with respect to the Borrower, any Subsidiary of
the Borrower or the Borrower and its Consolidated Subsidiaries taken as a whole,
may be prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance with such change
only after notice of such change is given to the Required Banks and the Required
Banks agree to such change insofar as it affects the accounting of the Borrower,
any Subsidiary of the Borrower or of the Borrower and its Consolidated
Subsidiaries taken as a whole.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof (including, without limitation, the Tribe)
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTEE OBLIGATION" means, as applied to Borrower or any of its
Subsidiaries, any Contractual Obligation, contingent or otherwise, of Borrower
or such Subsidiary of Borrower with respect to any Debt or other obligation or
liability of another, including, without limitation, any such Debt, obligation
or liability directly or indirectly guarantied, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by Borrower or such Subsidiary of Borrower, or in respect
of which Borrower or such Subsidiary of Borrower is otherwise directly or
indirectly liable, including Contractual Obligations (contingent or otherwise)
arising through any agreement to purchase, repurchase, or otherwise acquire such
Debt, obligation or liability or any security therefor, or to provide funds for
the payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or any "keep well,"
"take-or-pay," "throughput" or other similar arrangement or to make payment
other than for value received. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by such guaranteeing person in good faith.
"HAZARDOUS MATERIALS" means (1) hazardous materials, hazardous wastes, and
hazardous substances including, but not limited to, those substances, materials
and wastes listed in the United States Department of Transportation Hazardous
Materials Table, 49 C.F.R.. ss.172.101, as amended, or listed by the federal
Environmental Protection Agency as hazardous substances under or pursuant to 40
C.F.R. Part 302, as amended, or substances, materials, contaminants or wastes
which are or become regulated
-11-
under any Environmental Law, including without limitation, those substances,
materials, contaminants or wastes as defined in the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
ss.1801 et seq., as amended, the Resource Conservation and Recovery Act, 42
U.S.C. ss.6901 et seq., as amended, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., as amended; the Toxic
Substances Control Act, 15 U.S.C. ss.2601 et seq., as amended; the Clean Air
Act, 42 U.S.C. ss.7401 et seq., as amended, the federal Water Pollution Control
Act, 33 U.S.C. ss.1251 et seq., as amended, the Occupational Safety and Health
Act, 2 U.S.C. ss.651 et seq., as amended, the Safe Drinking Water Act, 42 U.S.C.
ss.300f et seq., as amended and the Natural Gas Pipeline Safety Act of 1968, 49
U.S.C. ss.1671 et seq., as amended; (2) all substances, materials, contaminants
or wastes listed in all comparable statutes of the States of Alabama, Colorado,
Louisiana, Mississippi, Oklahoma, Texas and Utah and in comparable local
Requirements of Law in such states; (3) acid gas, sour water streams or sour
water vapor streams containing hydrogen sulfide or other forms of sulphur,
sodium hydrosulfide and ammonia; (4) Hydrocarbons; (5) natural gas, synthetic
gas, and any mixtures thereof; (6) asbestos and/or any material which contains
1% or more, by weight, of any hydrated mineral silicate, including but not
limited to chrysotile, amosite, crocidolite, tremolite, anthophylite and/or
actinolite, whether friable or non-friable; (7) PCB's, or PCB containing
materials or fluids; (8) radon; (9) naturally occurring radioactive material,
radioactive substances or waste; (10) salt water and other oil and gas wastes
and (11) any other hazardous or noxious substance, material, pollutant,
emission, or solid, liquid or gaseous waste.
"HIGHEST LAWFUL RATE" means, as of a particular date and as to any Bank,
the maximum nonusurious interest rate that may under applicable law then be
contracted for, charged or received by such Bank in connection with its Loans.
"HYDROCARBONS" means oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons and all products separated, settled
and dehydrated therefrom and all products refined therefrom, including, without
limitation, kerosene, liquified petroleum gas, refined lubricating oils, diesel
fuel, drip gasoline, natural gasoline, helium, sulphur and all other minerals.
"INCC" means Internationale Nederlanden (U.S.) Capital Corporation, a
Delaware corporation.
"INCC CREDIT AGREEMENT" shall have the meaning assigned to that term in
the first Recital to this Credit Agreement.
"INITIAL ENGINEERING REPORTS" means, collectively, (i) the engineering
report concerning certain Oil and Gas Interests of the Loan Parties prepared by
▇▇▇▇▇▇▇▇▇▇ & Co., Inc. as of December 31, 1995, and (ii) the engineering report
concerning certain Oil and Gas Interests of the Loan Parties prepared by the
personnel of Borrower as of June 30, 1996.
"INITIAL FINANCIAL STATEMENTS" means the audited annual Consolidated
financial statements of the Borrower dated as of December 31, 1995 and the
quarterly Consolidated financial statements of the Borrower dated as of June 30,
1996.
"INTERCOMPANY LOAN DOCUMENTS" means (a) the Intercompany Notes, (b) any
other promissory notes executed by a Subsidiary Guarantor and payable to the
order of the Borrower to evidence Intercompany Loans, and (c) all other
documents, instruments and agreements which evidence secure or otherwise pertain
to the Intercompany Loans.
-12-
"INTERCOMPANY LOANS" means revolving loans made by the Borrower to the
Subsidiary Guarantors in a maximum principal amount not to exceed the Total
Commitment, evidenced by the Intercompany Loan Documents.
"INTERCOMPANY NOTES" means collectively (a) that certain promissory note
dated October 31, 1996, in the original principal sum of $50,000,000 executed by
Operating and payable to the order of the Borrower; and (b) that certain
promissory note dated October 31, 1996, in the original principal sum of
$50,000,000 executed by Offshore and payable to the order of the Borrower.
"INTERCOMPANY OBLIGATIONS" means any obligation held by the Borrower with
respect to which the obligor is a Subsidiary Guarantor, whether evidenced by a
promissory note or other instrument, by open account or otherwise.
"INTEREST HEDGE AGREEMENTS" means any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap, swap or
collar protection agreements, and forward rate currency or interest rate
options, as the same may be amended or modified and in effect from time to time
and any and all cancellations, buy backs, reversals, terminations or assignments
of any of the foregoing.
"INTEREST PAYMENT DATE" means (a) as to any Base Rate Borrowing or Base
Rate Loan, the last day of each March, June, September and December to occur
while such Base Rate Borrowing or Base Rate Loan is outstanding, (b) as to any
Eurodollar Borrowing or Eurodollar Loan having an Interest Period of three
months or less, the last day of such Interest Period, and (c) as to any
Eurodollar Borrowing or Eurodollar Loan having an Interest Period longer than
three months, each day which is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such Interest Period.
"INTEREST PERIOD" means with respect to any Eurodollar Borrowing or
Eurodollar Loan:
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such Eurodollar
Borrowing or Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its Borrowing Request or Notice
of Conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Borrowing or
Eurodollar Loan and ending one, two, three or six months thereafter, as
selected by the Borrower in its Notice of Continuance given with respect
thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Borrowing or
Eurodollar Loan would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the immediately
preceding Business Day;
-13-
(2) any Interest Period that would otherwise extend beyond the Maturity
Date shall end on the Maturity Date; and
(3) any Interest Period pertaining to a Eurodollar Borrowing or Eurodollar
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of a calendar month.
"INVESTMENT" means as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock, partnership interest or
other equity interest, or of a beneficial interest therein, of any other Person,
and any direct or indirect extension of credit, loan, advance (other than
deposits with financial institutions available for withdrawal on demand, prepaid
expenses, advances to employees and similar items made or incurred in the
ordinary course of business), or capital contribution by such Person to any
other Person, including all Debt and accounts owed by that other Person which
are not current assets or did not arise from sales of goods or services to such
Person in the ordinary course of business. The amount of any Investment shall be
determined in conformity with GAAP.
"IRS" means the Internal Revenue Service or any successor agency.
"ISSUING BANK" means Chase.
"LC APPLICATION" means an application or agreement for a standby Letter of
Credit in the form of EXHIBIT B hereto with appropriate insertions or in such
other form as shall be acceptable to the Issuing Bank in its sole discretion,
duly executed by the Borrower pursuant to SECTION 2.11(A).
"LC COLLATERAL" means any amounts held by the Agent as security for LC
Obligations of the Borrower.
"LC OBLIGATIONS" means, at the time in question, the sum of the Matured LC
Obligations PLUS the aggregate face amount of all Letters of Credit then
outstanding.
"LENDING OFFICE" means with respect to each Bank, the branch or branches
(or Affiliate or Affiliates) from which such Bank's Eurodollar Loans or Base
Rate Loans, as the case may be, are made or maintained and for the account of
which payments of principal of, and interest on, such Bank's Eurodollar Loans or
Base Rate Loans are made.
"LETTER OF CREDIT" means any stand-by letter of credit issued by the
Issuing Bank pursuant to this Credit Agreement and upon an LC Application.
"LIEN" means, with respect to any Property, any right or interest therein
of a creditor to secure Debt owed to him or any other arrangement with such
creditor which provides for the payment of such Debt out of such Property or
which allows him to have such Debt satisfied out of such Property prior to the
general creditors of any owner thereof, including any lien, mortgage, security
interest, pledge, deposit, production payment, rights of a vendor under any
title retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of unregistered
securities), or any other arrangement or action which would serve to perfect a
Lien described in the
-14-
preceding sentence, regardless of whether such financing statement is filed,
such registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"LOANS" means the loans provided for by SECTION 2.1(A) hereof.
"LOAN DOCUMENTS" means this Credit Agreement, the Notes, any Letters of
Credit, any LC Applications and reimbursement agreements executed in connection
therewith, the Subsidiary Guaranty, the Security Documents, any Interest Hedge
Agreements entered into with any Bank, any Commodity Hedge Transactions entered
into with any Bank, each Borrowing Request, each Notice of Conversion or
Continuance, all Engineering Reports, all legal opinions, and all other
agreements, certificates, instruments and documents at any time delivered in
connection with this Credit Agreement or any of the other foregoing documents,
as the same may be amended, modified, supplemented or extended from time to
time.
"LOAN PARTIES" means any of the Borrower, Operating, Offshore and their
respective Subsidiaries.
"MARGIN STOCK" shall have the meaning given to such term under Regulation
U and Regulation X.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the
business, Properties, operations or condition (financial or otherwise) of the
Borrower, or of the Borrower and its Subsidiaries taken as a whole, or of any
Subsidiary Guarantor, (b) material impairment of the ability of any Loan Party
to perform its obligations under any Loan Document to which such Loan Party is a
party, or (c) a material adverse effect on the validity or enforceability of
this Credit Agreement, any of the Notes or any of the other Loan Documents or a
material impairment of the rights or remedies of the Agent or any of the Banks
hereunder or thereunder.
"MATERIAL CONTRACT" means any Contractual Obligation to which the Borrower
or any of its Subsidiaries is a party (i) which calls for payments to or from
the Borrower or any Subsidiary of the Borrower of an amount in excess of
$500,000 during any twelve month period or (ii) pursuant to which the Borrower
or any Subsidiary of the Borrower acquires any right to an interest in real or
personal Property or a right to obtain services if the Borrower or such
Subsidiary's inability to obtain any such right could reasonably be expected to
result in a Material Adverse Effect.
"MATURED LC OBLIGATIONS" means the aggregate amount of payments
theretofore made by the Issuing Bank in respect to Letters of Credit and not
theretofore reimbursed by the Borrower to the Issuing Bank or deemed Loans
pursuant to SECTION 2.11(D).
"MATURITY DATE" means October 31, 2000, or the earlier termination in
whole of the Commitments pursuant to the provisions of SECTIONS 2.6 OR 9.1
hereof.
"MORTGAGE AMENDMENTS" means those three (3) certain Amendments to
Mortgage, each dated as of the Effective Date from the Loan Parties in favor of
the Agent for the benefit of the Banks amending the mortgage instruments listed
in the Mortgage Schedule and delivered to the Agent pursuant to SECTION 4.1(O).
"MORTGAGE SCHEDULE" means SCHEDULE 1.3 hereto.
"MORTGAGED PROPERTIES" means all of the Borrowing Base Properties which
are subject to a Lien in favor of the Agent for the benefit of the Banks or
which, under the terms of any Mortgage, are purported to be subject to such a
Lien.
-15-
"MORTGAGES" means the instruments listed in the MORTGAGE SCHEDULE, as the
same have been assigned to the Agent for the benefit of the Banks pursuant to
the Assignment and amended pursuant to the Mortgage Amendments.
"NOTES" means the promissory notes of the Borrower evidencing Loans, in
the form of EXHIBIT C attached hereto.
"NOTICE OF CONVERSION OR CONTINUATION" means a Notice of Conversion or
Continuation in the form of EXHIBIT D signed by a Responsible Officer of the
Borrower.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of any of the Loan Parties or any of their respective Subsidiaries from
time to time owing to any Bank under any Loan Document to which such Loan Party
or such Subsidiary of such Loan Party is a party, including, without limitation,
(a) the due and punctual payment of (y) the principal of and interest on the
Loans, Letters of Credit and reimbursement obligations under LC Applications,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, including, to the extent permitted by
applicable law, interest that accrues after the commencement of any proceeding
by or against any of the Loan Parties or any of their respective Subsidiaries
under the Bankruptcy Code and all other applicable Debtor Relief Laws, (and) all
other monetary obligations of any of the Loan Parties or any of their respective
Subsidiaries to any Bank under this Credit Agreement and each of the other Loan
Documents to which such Loan Party or such Subsidiary is a party, including any
and all fees, costs, expenses and indemnities, (b) the due and punctual
performance of all other obligations of any of the Loan Parties or any of their
respective Subsidiaries under this Credit Agreement and each other Loan Document
to which such Loan Party or such Subsidiary is a party, (c) the due and punctual
payment and performance of any and all present or future obligations of any Loan
Party according to the terms of any Commodity Hedge Transaction now existing or
hereafter entered into between such Loan Party, on the one hand, and a Bank (or
an Affiliate of such Bank) on the other, and (d) the due and punctual payment
and performance of any and all present or future obligations of any Loan Party
according to the terms of any present or future Interest Hedge Agreements
permitted by the terms of this Credit Agreement to be entered into between such
Loan Party, on the one hand, and a Bank (or an Affiliate of such Bank) on the
other. "Obligation" means any part of the Obligations.
"OFFSHORE" means ▇▇▇▇▇▇ Offshore Production, Inc., a Mississippi
corporation, a wholly-owned Subsidiary of Operating.
"OIL AND GAS INTERESTS" means with respect to any Person, any and all
rights, estates, titles and interests in any oil ▇▇▇▇▇, gas ▇▇▇▇▇, oil and gas
▇▇▇▇▇, Hydrocarbons, and other mineral leaseholds and fee interests, all
overriding royalty interests, mineral interests, royalty interests, net profits
interests, oil payments, production payments, carried interests and any and all
other interests in Hydrocarbons, whether any of the same be real or personal,
now owned or hereafter acquired by such Person, directly or indirectly, of
record or beneficially, including Oil and Gas Interests owned, acquired or held
through a joint venture, partnership or other entity of which such Person or any
of its Subsidiaries is a partner or owner, together with rights, titles and
interests created by or arising under the terms of any unitization,
communitization, and pooling agreements or arrangements, and all Properties
covered thereby, whether arising by contract, by order, or by operation of laws,
which now or hereafter include all or any part of the foregoing.
"OPERATING" means ▇▇▇▇▇▇ Petroleum Operating Company, a Delaware
corporation.
"PERMITTED INVESTMENTS" means Investments:
-16-
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc;
(b) in marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United
States of America or an instrumentality or agency thereof and entitled to
the full faith and credit of the United States of America ("GOVERNMENT
SECURITIES");
(c) Certificates of deposit issued by, money market deposit accounts
with, eurodollar deposits through, bankers' acceptances of, and repurchase
and reverse repurchase agreements covering Government Securities executed
by, (i) any Bank, (ii) any other domestic commercial bank of recognized
standing whose deposits are insured through the FDIC, or any successor
thereto, and having (either itself or its holding company) on the date of
such Investment capital and surplus in excess of $250,000,000 and whose
certificates of deposit have at least the third highest credit rating
given by either Standard & Poor's Corporation or Moody's Investor's
Service, Inc. or (iii) any other foreign commercial bank of recognized
international standing having capital and surplus in excess of
$450,000,000, and long-term obligations rated AA or Aa2 or better,
respectively, by Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Services, Inc. (or a successor credit rating agency), in each case
maturing within one year from the date of acquisition thereof; and
(d) "Money-market mutual funds" investing at least 95% of the mutual
fund assets in instruments of the types described in subparagraphs (a)
through (c) above.
"PERIODIC DETERMINATION" means any determination of the Borrowing Base
pursuant to SECTION 3.2.
"PERSON" means an individual, corporation, partnership, association, joint
stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"PREFERRED STOCK" means the 1,315,500 shares of $2.125 Convertible
Exchangeable Preferred Stock, Series A issued by ▇▇▇▇▇▇ Petroleum Company
pursuant to the prospectus dated November 21, 1995.
"PRODUCTION SALES CONTRACTS" means all Hydrocarbon sales agreements and
Hydrocarbon or water gathering, treatment and/or transportation agreements now
existing or hereafter entered into by or on behalf of any Loan Party covering
the Borrowing Base Properties of the Loan Parties.
"PROHIBITED LIEN" means any Lien not expressly allowed under SECTION 7.2.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PROVED DEVELOPED BEHIND PIPE HYDROCARBON RESERVES" means Proved
Hydrocarbon Reserves which are recoverable from zones behind casing in existing
▇▇▇▇▇, which will require additional completion work or a future recompletion
prior to the start of production.
-17-
"PROVED DEVELOPED HYDROCARBON RESERVES" means collectively, the Proved
Developed Producing Hydrocarbon Reserves and the Proved Developed Non-Producing
Hydrocarbon Reserves.
"PROVED DEVELOPED NON-PRODUCING HYDROCARBON RESERVES" means the summation
of Proved Developed Behind Pipe Hydrocarbon Reserves and Proved Developed
Shut-in Hydrocarbon Reserves.
"PROVED DEVELOPED PRODUCING HYDROCARBON RESERVES" means those Proved
Hydrocarbon Reserves which are recoverable from completion intervals currently
open and producing to market. Improved recovery reserves are considered to be
producing only after an improved recovery project has been installed and is in
operation.
"PROVED DEVELOPED SHUT-IN HYDROCARBON RESERVES" means Proved Hydrocarbon
Reserves that are recoverable from completion intervals open as of the date of
estimation, but which are not producing as of such date.
"PROVED HYDROCARBON RESERVES" means, with respect to the Oil and Gas
Interests of each of the Loan Parties, those recoverable Hydrocarbons which have
been proved to a high degree of certainty by reason of existing production,
adequate testing, or in certain cases by adequate core data and other
engineering and geologic information on zones which are present in existing
▇▇▇▇▇ or in known reservoirs. Reserves that can be produced economically through
the application of established improved recovery techniques are included in the
proved classification when (a) successful testing by a pilot project or the
operation of any installed program in that reservoir or one in the immediate
area with similar rock and fluid properties provides support for the engineering
analysis on which the project or program was based, and (b) it is reasonably
certain the project will proceed. Reserves to be recovered by improved recovery
techniques that have yet to be established through repeated economically
successful applications are included in the proved category only after
successful testing by a pilot project or after the operation of an installed
program in the reservoir provides support for the engineering analysis on which
the project or program was based. Improved recovery includes all methods for
supplement natural reservoir including (1) pressure maintenance, (2) cycling and
(3) secondary recovery in its original sense. Improved recovery also includes
the enhanced recovery methods of thermal, chemical flooding, and the use of
miscible and immiscible displacement fluids.
"PROVED RESERVES" means collectively the Proved Developed Hydrocarbon
Reserves and the Proved Undeveloped Hydrocarbon Reserves.
"PROVED UNDEVELOPED HYDROCARBON RESERVES" means Proved Hydrocarbon
Reserves that are recoverable (i) by new ▇▇▇▇▇ on undrilled acreage, (ii) by
replacement ▇▇▇▇▇ on previously drilled and producing acreage or (iii) from
existing ▇▇▇▇▇ where a relatively large expenditure is required for recompletion
and from acreage where the application of an improved recovery technique is
planned and the costs required to place the project in operation are relatively
large. Proved Undeveloped Hydrocarbon Reserves on undrilled acreage shall be
limited to those drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved Hydrocarbon Reserves for other
undrilled units are Proved Undeveloped Hydrocarbon Reserves only where it can be
demonstrated with certainty that there is continuity of production from the
existing productive formation.
"PURCHASING BANKS" means as defined in SECTION 11.4(C).
"REGISTER" shall have the meaning assigned to that term in SECTION 11.4(F)
hereof.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
-18-
"REGULATION G" means Regulation G of the Board (respecting margin credit
extended by Persons other than banks, brokers and dealers), as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"REGULATION U" means Regulation U of the Board (respecting margin credit
extended by banks), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"REGULATION X" means Regulation X of the Board (respecting borrowers who
obtain margin credit), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"REIMBURSABLE TAXES" shall have the meaning assigned to that term in
SECTION 2.15 hereof.
"RELEASE" means any release, spill, emission, leak, injection, deposit,
disposal, discharge, dispersal, leaching or migration of any Hazardous Materials
into the environment or into or out of any real Property of any Loan Party or
any Subsidiary of any Loan Party, including the movement of Hazardous Materials
through or in the air, soil, surface water, groundwater and/or land which could
reasonably be expected to form the basis of an Environmental Liability against
any of the Loan Parties or any Subsidiary of any of the Loan Parties.
"REMEDIAL ACTION" means any action to (i) clean up, remove, treat or in
any other way address Hazardous Materials in the environment, (ii) prevent the
Release or threat of Release or minimize the further Release of Hazardous
Materials so they do not migrate or endanger or threaten to endanger public
health or welfare or the environment or (iii) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 or
Section 4068(f) of ERISA for which the thirty day notice requirement of 29
C.F.R. ss.2615.3 has not been waived.
"REQUIRED BANKS" means, at any time, Banks holding at least sixty-six and
two-thirds percent (662/3%) of the Utilized Credit or, if there is no Utilized
Credit outstanding hereunder, Banks holding at least sixty-six and two-thirds
percent (662/3%) of the Total Commitment.
"REQUIREMENT OF LAW" means as to any Person, the certificate of
incorporation, by-laws, partnership agreement, or other organizational or
governing documents of such Person, and any federal, state or local law, treaty,
rule or regulation, permit or other binding determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its Property or to which such Person or any of its
Property is subject.
"RESPONSIBLE OFFICER" means with respect to any Loan Party, the chief
executive officer, the president, any vice president or the chief financial
officer of such Loan Party.
"RESERVE PERCENTAGE" means, on any day with respect to each particular
Eurodollar Borrowing or Eurodollar Loan, as the case may be, the maximum reserve
requirement, as determined by the Agent (including without limitation any basic,
supplemental, marginal, emergency or similar reserves), expressed as a
percentage and rounded to the next higher 0.01%, which would then apply to the
Agent under Regulation D with respect to "Eurocurrency liabilities" (as such
term is defined in Regulation D) equal in amount to such Eurodollar Borrowing,
were the Agent to have any such "Eurocurrency Liabilities". If such reserve
requirement shall change after the date hereof, the Reserve Percentage shall
-19-
be automatically increased or decreased, as the case may be, from time to time
as of the effective time of each such change in such reserve requirement.
"RECOGNIZED RESERVE VALUE" means, with respect to all Borrowing Base
Properties of the Loan Parties, the pre-tax value of such properties determined
in all material respects in accordance with Financial Accounting Standards Board
Statement 69, generally known as the "standardized measure of discounted cash
flow" and the rules and regulations of the Securities and Exchange Commission.
"SECURITY AGREEMENT - INTERCOMPANY OBLIGATIONS" means that certain
Security Agreement Intercompany Obligations of even date herewith, executed by
the Borrower in favor of the Agent for the benefit of the Banks to secure the
Obligations substantially in the form of EXHIBIT E, either as originally
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended or supplanted.
"SECURITY DOCUMENTS" means the Security Agreement - Intercompany
Obligations, the Mortgages and all other security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, financing statements, continuation
statements, extension agreements and other agreements or instruments now,
heretofore, or hereafter delivered by any Loan Party to the Agent for the
benefit of the Banks in connection with this Credit Agreement or any transaction
contemplated hereby to secure the payment of any part of the Obligations or the
performance of any Loan Parties's other duties and obligations under the Loan
Documents to which such Loan Party is a party.
"SPECIAL DETERMINATION" means any determination of the Borrowing Base
pursuant to SECTION 3.3.
"SUBORDINATED OBLIGATIONS" shall have the meaning specified in SECTION
7.1(I) hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"SUBSIDIARY GUARANTORS" means Operating, Offshore and such other Persons
who has guaranteed some or all of the Obligations, including any Subsidiary of
the Borrower which, with the concurrence of the Required Banks, now or hereafter
executes and delivers an Instrument of Joinder of the Subsidiary Guaranty in the
form of Exhibit A to the Subsidiary Guaranty pursuant to the provisions of
SECTION 8.5.
"SUBSIDIARY GUARANTY" means the guaranty of the Obligations executed by
each Subsidiary of the Borrower, now or hereafter existing, in favor of the
Agent for the benefit of the Banks to secure the Obligations substantially in
the form of EXHIBIT F, either as originally executed or as the same may from
time to time be supplemented, modified, amended, renewed, extended or
supplanted.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any Loan Party or of
any Affiliate of any Loan Party from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERlSA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA,
-20-
or (e) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
"TOTAL COMMITMENT" means $50,000,000, as the same may be reduced from time
to time pursuant to SECTION 2.6, PROVIDED, HOWEVER, that so long as Chase is the
sole Bank party to this Credit Agreement, the Total Commitment shall not exceed
$30,000,000.
"TYPE" means shall have the meaning assigned to such term in SECTION 1.6
hereof.
"UNITED STATES" and "U.S." means the United States of America.
"UNUSED AVAILABILITY" means, at any time, an amount equal to (i) the
Borrowing Base in effect at that time, MINUS (ii) the Utilized Credit.
"UTILIZED PERCENTAGE OF BORROWING BASE" means on any date, (i) the amount
of Utilized Credit on such day divided by (ii) the Borrowing Base in effect on
such day.
"UTILIZED CREDIT" means, at the time in question, without duplication, an
amount equal to the sum of (i) the aggregate principal amount then outstanding
on Loans PLUS (ii) the aggregate LC Obligations then outstanding.
SECTION 1.2. EXHIBITS AND SCHEDULES: ADDITIONAL DEFINITIONS. All Exhibits
and Schedules attached to this Credit Agreement are a part hereof for all
purposes. Reference is hereby made to the MORTGAGE SCHEDULE for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
SECTION 1.3. AMENDMENT OF DEFINED INSTRUMENTS. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Credit Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
SECTION 1.4. REFERENCES AND TITLES. All references in this Credit
Agreement to Exhibits, Schedules, articles, sections, subsections and other
subdivisions refer to the Exhibits, Schedules, articles, sections, subsections
and other subdivisions of this Credit Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any subdivisions are for
convenience only and do not constitute any part of such subdivisions and shall
be disregarded in construing the language contained in such subdivisions. The
words "this Credit Agreement", "this instrument", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Credit Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this section" and "this subsection" and similar phrases refer only to
the sections or subsections hereof in which such phrases occur. The word "or" is
not exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
SECTION 1.5. CALCULATIONS AND DETERMINATIONS. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans shall be
made on the basis of actual day elapsed (including the first day but excluding
the last) and a year of 360 days. All other calculations of fees and
-21-
of interest made under the Loan Documents shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Unless the Required Banks otherwise consent in
writing all financial statements and reports furnished to the Banks hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP.
SECTION 1.6. TYPES OF BORROWINGS. Borrowings hereunder are distinguished
by "Type". The "Type" of a Borrowing refers to the determination whether such
Borrowing is comprised of Eurodollar Loans or Base Rate Loans based on the
method by which the accrued interest on such Borrowing is calculated.
ARTICLE II
COMMITMENTS
SECTION 2.1. REVOLVING LOANS AND LETTERS OF CREDIT.
(a) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein and in the other Loan Documents,
each Bank agrees, severally and not jointly, to make its Commitment Percentage
of advances to the Borrower (collectively, the "LOANS"), at any time and from
time to time on and after the Effective Date and up to, but excluding, the
Maturity Date, in an aggregate principal amount at any one time outstanding not
to exceed such Bank's Commitment Percentage of an amount equal to the Borrowing
Base then in effect. Notwithstanding the foregoing, Borrower shall not be
entitled to obtain a Loan(s) from a Bank and no Bank shall be permitted to make
Loans to Borrower in an amount which, after giving effect to such Loan(s), would
cause the Utilized Credit to exceed the Borrowing Base then in effect. Except as
otherwise provided in this Credit Agreement, the Loans shall mature and be due
and payable in full on the Maturity Date. Until the Maturity Date, the
Commitments of the Banks are revolving in nature and, within the limits set
forth above and subject to the terms and provisions of this Credit Agreement,
the Borrower may borrow, repay and reborrow hereunder. Each Borrowing comprised
of Loans shall be made in accordance with the procedures set forth in SECTION
2.2 and shall be in an aggregate principal amount (x) in the case of a Base Rate
Borrowing, $500,000 or a whole multiple of $100,000 in excess thereof (or, if
the then Unused Availability is less than $500,000, such lesser amount) and (y)
in the case of a Eurodollar Borrowing, $500,000 or a whole multiple of $500,000
in excess thereof. The Loans may from time to time be (i) Eurodollar Loans, (ii)
Base Rate Loans or (iii) a combination thereof, as determined by the Borrower
and notified to the Agent in accordance with SECTIONS 2.2 AND 2.4.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, the Issuing Bank agrees to
issue Letters of Credit upon the request of the Borrower for the account of any
Loan Party at any time and from time to time on and after the Effective Date and
up to, but excluding, the Maturity Date. Each Bank (other than the Issuing Bank)
severally agrees, on the terms and conditions hereinafter set forth, to purchase
participations in the Letters of Credit issued by the Issuing Bank pursuant to
SECTION 2.11 in an aggregate amount not to exceed such Bank's Commitment
Percentage of an amount equal to the Borrowing Base then in effect reduced by
the aggregate principal amount then outstanding on Loans. No Letter of Credit
will be issued, and the Issuing Bank shall have no obligation to issue any
Letter of Credit, in a face amount which, after giving effect to the issuance of
such Letter of Credit, would cause the Utilized Credit to exceed the Borrowing
Base then in effect. On
-22-
each day during the period commencing with the issuance by the Issuing Bank of
any Letter of Credit and until such Letter of Credit shall have expired or been
terminated, and, irrespective of whether such Letter of Credit has expired or
terminated, if same has been drawn upon prior to its expiration or lawful
termination and the amount so drawn has not been reimbursed to the Issuing Bank,
the Commitment of each Bank shall be deemed to be utilized for all purposes
hereof in an amount equal to such Bank's Commitment Percentage of the LC
Obligations.
SECTION 2.2. BORROWING PROCEDURE FOR LOANS.
(a) In order to effect a Borrowing(s), the Borrower shall submit a
Borrowing Request in writing or by telecopy (or telephone notice promptly
confirmed in writing or by telecopy) to the Agent, (i) in the case of a
Eurodollar Borrowing, not later than 12:00 noon, New York time, three (3)
Business Days before the Borrowing Date specified in the Borrowing Request for
such proposed Eurodollar Borrowing(s) and (ii) in the case of a Base Rate
Borrowing, not later than 1:00 p.m., New York time, on the Borrowing Date
specified in the Borrowing Request for such proposed Base Rate Borrowing. Such
Borrowing Request shall be irrevocable and shall in each case refer to this
Credit Agreement and specify (w) whether the Borrowing(s) then being requested
are to be Eurodollar Borrowing(s), or Base Rate Borrowing(s), or a combination
thereof, (x) the Borrowing Date of such Borrowing(s) (which shall be a Business
Day), (y) the aggregate principal amount of such Borrowing(s) and (z) in the
case of Eurodollar Borrowings, the Interest Periods with respect thereto. If no
Interest Period with respect to any Eurodollar Borrowing(s) is specified in any
such Borrowing Request, then the Borrower shall be deemed to have selected an
Interest Period of one (1) month's duration. The Agent shall promptly advise the
Banks of any Borrowing Request given pursuant to this SECTION 2.2 and of each
Bank's Commitment Percentage of the requested Borrowing(s) by telecopy (or
telephone notice promptly confirmed in writing or by telecopy).
(b) Each Bank may at its option make any Eurodollar Loan by causing any
Lending Office of such Bank to make such Eurodollar Loan; PROVIDED, HOWEVER,
that any exercise of such option shall not affect the obligation of the Borrower
to repay such Eurodollar Loan in accordance with the terms of this Credit
Agreement and the applicable Notes.
(c) No later than 2:00 p.m., New York time, on the Borrowing Date
specified in each Borrowing Request, each Bank will make available to the Agent
its Commitment Percentage of the Loans comprising the Borrowing(s) requested to
be made on such date, in Dollars and immediately available funds. Upon
fulfillment of the applicable conditions set forth in ARTICLE IV, the Agent will
make the proceeds of each Borrowing so requested available to the Borrower on
the Borrowing Date or, if a Borrowing shall not occur on such Borrowing Date
because any condition precedent specified in ARTICLE IV to this Credit Agreement
shall not have been met, the Agent will return the amounts so received to the
respective Banks as soon as practicable. All Borrowings shall be made by the
Banks pro rata in accordance with such Bank's Commitment Percentage of the Loans
comprising such Borrowing. Unless the Agent shall have received notice from a
Bank prior to any proposed Borrowing Date that such Bank will not make available
to the Agent such Bank's Commitment Percentage of such Borrowing, the Agent may
assume that such Bank has made its Commitment Percentage available to the Agent
on such Borrowing Date in accordance with this paragraph (c) and the Agent, in
reliance upon such assumption, may, (but under no circumstances shall the Agent
be obligated to) make available to the Borrower on such Borrowing Date a
corresponding amount. Each of such Bank and the Borrower agrees to repay to the
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent (i) in the case of
the Borrower, the interest rate applicable to the Loans comprising such
Borrowing(s) and (ii) in the case of such Bank, at the Federal Funds Effective
Rate. Upon such Bank's repayment to
-23-
the Agent of such corresponding amount, such amount shall constitute such Bank's
Commitment Percentage of such Borrowing for purposes of this Credit Agreement.
SECTION 2.3. USE OF PROCEEDS. The Borrower shall use all funds from Loans
to (a) refinance and extend the existing indebtedness and letters of credit of
the Borrower and its Subsidiaries to INCC under the INCC Credit Agreement, (b)
fund the general corporate needs of the Loan Parties, and (c) to fund Letters of
Credit issued for the account of any Loan Party hereunder drawn upon before the
Maturity Date. In no event shall the funds from any Loan be used directly or
indirectly by any Person for personal, family, household or agricultural
purposes or for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any Margin Stock) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any such
Margin Stock. The Borrower represents and warrants to the Agent and each Bank
that the Borrower is not engaged principally, or as one of the Borrower's
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such Margin Stock.
SECTION 2.4. CONVERSIONS OR CONTINUATION OF BORROWINGS.
(a) Subject to the other provisions of this Credit Agreement, the Borrower
may elect from time to time to convert (i) all or any part of Eurodollar Loans
which comprise part of the same Eurodollar Borrowing to a Borrowing comprised of
Base Rate Loans and (ii) all or any part of Base Rate Loans which comprise part
of the same Borrowing to a Borrowing comprised of Eurodollar Loans, PROVIDED,
HOWEVER, in each case that any such conversion of Eurodollar Loans comprising a
Eurodollar Borrowing shall only be made on the last day of the applicable
Interest Period with respect thereto. All or any part of a Borrowing may be
converted as provided herein, PROVIDED that no Borrowing may be converted into a
Eurodollar Borrowing when any Default or Event of Default has occurred and is
continuing.
(b) Any Eurodollar Borrowing may be continued as such effective upon the
expiration of the applicable Interest Period with respect thereto; PROVIDED,
that no Eurodollar Borrowing may be continued as such when any Default or Event
of Default has occurred and is continuing, but in such event shall be
automatically converted to a Borrowing comprised of Base Rate Loans on the last
day of the then current Interest Period with respect thereto.
(c) In order to elect to convert or continue an Eurodollar Borrowing, or
any portion thereof, under this SECTION 2.4, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Agent not later than
12:00 p.m., New York time, at least three (3) Business Days in advance of the
proposed conversion or continuation date in the case of a conversion to, or
continuation of, an Eurodollar Borrowing. Each such Notice of Conversion or
Continuation shall be by telecopy (confirmed thereafter by a delivery of the
original of such Notice of Conversion or Continuation by United States mail or a
reputable courier) and shall specify (v) the date of the requested conversion or
continuation (which shall be a Business Day), (w) the amount and the Borrowing
to be converted or continued, (y) whether a conversion or continuation is
requested, and, if a conversion, into what Type of Borrowing and (z) in the case
of a conversion to, or a continuation of, an Eurodollar Borrowing, the requested
Interest Period. Promptly after receipt of a Notice of Conversion or
Continuation under this SECTION 2.4, the Agent shall provide each Bank with a
copy thereof.
(d) No Borrowing, or any portion thereof, may be converted into an
Eurodollar Borrowing if, after giving effect to such conversion, there would be
more than eight (8) Eurodollar Borrowings outstanding at such time.
-24-
(e) If the Borrower shall fail to deliver a timely Notice of Conversion or
Continuation with respect to any Eurodollar Borrowing, the Borrower shall be
deemed to have elected to convert such Eurodollar Borrowing to a Base Rate
Borrowing on the last day of the Interest Period with respect to such Eurodollar
Borrowing.
(f) For purposes of this SECTION 2.4, Eurodollar Borrowings having
different Interest Periods, regardless of whether they commence on the same date
or are of the same Type shall be considered Eurodollar Borrowings of different
Types.
SECTION 2.5. FEES.
(a) In consideration of each Bank's Commitment to make Loans, the Borrower
will pay to Agent for the account of each Bank a commitment fee determined on a
daily basis by applying the applicable Commitment Fee Rate to such Bank's
Commitment Percentage of the Unused Availability on each day from the Effective
Date up to, but excluding, the Maturity Date, determined for such day by
deducting from the amount of the Borrowing Base at the end of such day the
Utilized Credit at the end of such day. This commitment fee shall be due and
payable in arrears on or before the fifteenth day of the next succeeding Fiscal
Quarter, on the date of each reduction in the Total Commitment and at maturity
(by acceleration or otherwise). The applicable "COMMITMENT FEE RATE" shall be
based on the Utilized Percentage of Borrowing Base in effect on each such day
and calculated pursuant to the following table:
UTILIZED PERCENTAGE OF BORROWING BASE APPLICABLE COMMITMENT FEE RATE
Less than fifty percent (50%) one-fourth of one percent (0.25%)
per annum
Greater than or equal to three-eighths of one percent
fifty percent (50%) (0.375%) per annum
(b) The Borrower agrees to pay (i) to the Agent for the account of the
Banks a Letter of Credit fee for the issuance and maintenance of each Letter of
Credit, in an amount equal to the greater of (x) $500.00 and (y) one percent
(1.00%) per annum of the face amount of each Letter of Credit from the date of
issuance thereof to the date on which such Letter of Credit expires or is
terminated (such fees shall be prorated for any period less than a full year)
and (ii) to the Issuing Bank as a fronting fee for the issuance of each Letter
of Credit, in an amount equal to one-eighth of one percent (.125%) per annum of
the face amount of each Letter of Credit from the date of issuance thereof to
the date on which such Letter of Credit expires or is terminated (such fees
shall be prorated for any period less than a full year). The Agent shall pay to
each Bank its Commitment Percentage of the Letter of Credit fees paid pursuant
to SECTION 2.5(B)(I). The Agent shall pay to the Issuing Bank the Letter of
Credit fees paid pursuant to SECTION 2.5(B)(II).
(c) In the event the Borrower (i) requests an increase in the Borrowing
Base pursuant to SECTION 3.3 to finance the acquisition of oil and gas
properties having a value of $2,000,000 or more, and the Banks, in their sole
discretion, determine that it is necessary to include value attributable to the
oil and gas properties to be acquired in the Borrowing Base to grant such
increase, or (ii) requests more than one (1) increase in the Borrowing Base
pursuant to SECTION 3.3 in any twelve month period commencing November 15, 1996,
the Banks may condition such increase on the payment by Borrower to Agent, for
the ratable benefit of each Bank of a fee in an amount which the Banks determine
reasonably compensates them for the time and expense associated with the
evaluation of the oil and gas properties to be acquired; provided that such fee
shall not exceed one-half of one percent (0.50%) of the amount of the increase.
The right of the Banks to require the payment of the fee contemplated by this
SECTION 2.5(C) shall not limit or impair the discretion of the Banks to
determine the Borrowing Base pursuant to SECTIONS 3.2 and
-25-
3.3, including the right of the Banks to condition any increase in the Borrowing
Base on such other conditions precedent as they shall deem necessary or
appropriate under the circumstances.
(d) The Borrower shall pay when due to the Agent such other fees as shall
have been separately agreed by the Agent and the Borrower in writing.
SECTION 2.6. TERMINATION OR REDUCTION OF TOTAL COMMITMENT. The Borrower
shall have the right upon not less than three (3) Business Days' prior written
notice to the Agent, to terminate the Total Commitment or, from time to time, to
reduce the amount of the Total Commitment, PROVIDED that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Loans made on the effective date thereof, the aggregate
principal amount of (i) the Utilized Credit would exceed the Borrowing Base in
effect at that time. Any such reduction shall be in an amount equal to
$2,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Total Commitment is less than $2,000,000, such lesser amount) and shall reduce
permanently and ratably the Commitments of the Banks then in effect.
SECTION 2.7. OPTIONAL PREPAYMENTS. The Borrower may upon one (1) Business
Day's notice to the Agent, from time to time prepay the Notes, in whole or in
part, so long as each partial prepayment of principal on the Notes is greater
than or equal to $100,000, and so long as the Borrower does not make any
prepayments which would reduce the unpaid principal balance of the Loans to less
than $100,000 without first either (a) terminating this Credit Agreement and the
Total Commitment or (b) providing assurance satisfactory to Banks in their sole
discretion that the legal rights of the Agent and/or the Banks under the Loan
Documents are in no way impaired by such reduction. Each prepayment of principal
under this section shall be accompanied by all interest then accrued and unpaid
on the principal so prepaid. Any principal or interest prepaid pursuant to this
section shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Loan Documents at the time of such prepayment. All
prepayments under this SECTION 2.7 shall be subject to SECTION 2.16 (as to
prepayments of Eurodollar Loans), but otherwise without premium or penalty.
SECTION 2.8. MANDATORY PREPAYMENTS.
(a) If at any time there shall exist a Borrowing Base Deficiency, the
Borrower shall, at its election, within thirty (30) Business Days after the
Agent gives notice of such Borrowing Base Deficiency to the Borrower, either (1)
prepay the principal outstanding on the Loans to the Agent in an amount at least
equal to such excess, and, if the prepayment of the Loans is less than such
excess, the Borrower shall prepay to the Agent an additional amount equal to
such remaining excess, to be applied as the Agent elects to any of the various
LC Obligations; PROVIDED, HOWEVER, that all such amounts applied by the Agent to
the LC Obligations shall be applied (i) first to the Matured LC Obligations, and
(ii) second as LC Collateral, to be held by the Agent for the benefit of the
Banks until such other LC Obligations have either (A) become Matured LC
Obligations, at which time LC Collateral in the amount of such Matured LC
Obligations shall be applied to such Matured LC Obligations, or (B) expired
undrawn, at which time an amount of such LC Collateral equal to such expired and
undrawn LC Obligations shall be promptly returned to the Borrower, or (2)
provide to the Agent for the benefit of the Banks as Collateral, additional Oil
and Gas Interests satisfying the requirements set forth in subclause (b) of the
definition of "Borrowing Base Properties" and having collateral value
(determined by the Banks in the exercise of their sole discretion and in
accordance with their respective customary practices and standards for oil and
gas loans, which may vary from Bank to Bank) in an amount which is at least
equal to the amount of the Borrowing Base Deficiency or (3) any combination of
(1) and (2). The Borrower shall give written notice to the Agent of each
election made by it pursuant to this SECTION 2.8(A) within ten (10) Business
Days following receipt of the Borrowing Base Deficiency Notice from the Agent.
If the Borrower shall fail to give notice
-26-
to the Agent as aforesaid, the Borrower shall be deemed to have elected to
prepay the Loans in accordance with subclause (1) of this SECTION 2.8(A). Each
prepayment of principal under this section shall be accompanied by all interest
then acquired and unpaid on the principal so prepaid.
(b) If at any time the aggregate amount of the Utilized Credit exceeds the
Total Commitment, the Borrower shall, within thirty (30) Business Days following
receipt of notice from the Agent of such event, prepay the Loans in an amount
equal to such excess, and, if the prepayment of the Loans is less than such
excess, the Borrower shall prepay an additional amount equal to such remaining
excess, to be applied as the Agent elects to any of the various LC Obligations
then due and payable; PROVIDED, HOWEVER, that all such amounts applied by the
Agent to the LC Obligations shall be applied (i) first to the Matured LC
Obligations, and (ii) second as LC Collateral, to be held by the Agent for the
benefit of the Banks until such other LC Obligations have either (A) become
Matured LC Obligations, at which time LC Collateral in the amount of such
Matured LC Obligations shall be applied to such Matured LC Obligations, or (B)
expired undrawn, at which time an amount of such LC Collateral equal to such
expired and undrawn LC Obligations shall be promptly returned to the Borrower.
(c) Any principal or interest prepaid pursuant to this SECTION 2.8 shall
be in addition to, and not in lieu of, all payments otherwise required to be
paid under the Loan Documents at the time of such prepayment. In the event the
Borrower fails to make such prepayment within the time period set forth above,
such failure shall constitute an Event of Default hereunder without any further
notice to the Borrower or the availability of any grace period with respect
thereto.
SECTION 2.9. INTEREST RATES AND PAYMENT DATES.
(a) Subject to the provisions of subsection (c) of this SECTION 2.9, each
Loan comprising a Eurodollar Borrowing shall bear interest for each day during
the Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such Interest Period.
(b) Subject to the provisions of subsection (c) of this SECTION 2.9, each
Loan comprising a Base Rate Borrowing shall bear interest at a rate per annum
equal to the Base Rate for such day plus the Applicable Margin for such day.
(c) If all or a portion of (i) the principal amount of any Loan or (ii)
any interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at the Default Rate.
(d) Interest shall be payable in arrears on each Interest Payment Date,
PROVIDED that interest accruing pursuant to paragraph (c) of this SECTION 2.9
shall be payable on demand.
SECTION 2.10. DETERMINATION OF INTEREST RATE.
(a) The Agent shall as soon as practicable notify the Loan Parties and the
Banks of each determination of a Eurodollar Rate. Any change in the interest
rate on a Borrowing resulting from a change in the Base Rate shall become
effective as of the opening of business on the day on which such change in the
Base Rate is announced. The Agent shall as soon as practicable notify the
Borrower and the Banks of the effective date and the amount of each such change
in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Credit Agreement shall be conclusive and binding on the
Borrower and the Banks in the absence of
-27-
manifest error. The Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Agent in determining any
interest rate pursuant to SECTION 2.9(A).
SECTION 2.11. ISSUING THE LETTERS OF CREDIT.
(a) In order to effect the issuance of a Letter of Credit, the Borrower
shall submit a Borrowing Request and a LC Application in writing by telecopy to
the Agent (who shall promptly notify the Issuing Bank) not later than 1:00 p.m.,
New York time, two (2) Business Days before the requested date of issuance of
such Letter of Credit. Each such Borrowing Request and LC Application shall be
signed by the Borrower, specify the Business Day on which such Letter of Credit
is to be issued, and specify the availability for Letters of Credit under the
Borrowing Base as of the date of issuance of such Letter of Credit and the
expiry date thereof which shall not be later than the earlier of (i) twelve (12)
months from the date of issuance of such Letter of Credit and (ii) the Maturity
Date.
(b) Upon satisfaction of the applicable terms and conditions set forth in
ARTICLE IV, the Issuing Bank shall issue such Letter of Credit to the specified
beneficiary not later than the close of business, New York time, on the date so
specified. The Agent shall provide the Borrower and each Bank with a copy of
each Letter of Credit so issued. Each such Letter of Credit shall (i) provide
for the payment of drafts, presented for honor thereunder by the beneficiary in
accordance with the terms thereon, at sight when accompanied by the documents
described therein and (ii) BE SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500, (AND ANY SUBSEQUENT REVISIONS THEREOF APPROVED BY A
CONGRESS OF THE INTERNATIONAL CHAMBER OF COMMERCE) (THE "UCP") AND SHALL, AS TO
MATTERS NOT GOVERNED BY THE UCP, BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(c) Upon the issuance date of each Letter of Credit, the Issuing Bank
shall be deemed, without further action by any party hereto, to have sold to
each other Bank, and each other Bank shall be deemed, without further action by
any party hereto, to have purchased from the Issuing Bank, a participation, to
the extent of such Bank's Commitment Percentage, in such Letter of Credit, the
obligations thereunder and in the reimbursement obligations of the Borrower due
in respect of drawings made under such Letter of Credit. If requested by the
Issuing Bank, the other Banks will execute any other documents reasonably
requested by the Issuing Bank to evidence the purchase of such participation.
(d) Upon the presentment of any draft for honor under any Letter of Credit
by the beneficiary thereof which the Issuing Bank determines is in compliance
with the conditions for payment thereunder, the Issuing Bank shall promptly
notify the Borrower, the Agent and each Bank of the intended date of honor of
such draft and the Borrower hereby promises and agrees, at the Borrower's
option, to either (i) pay to the Agent for the account of the Issuing Bank, by
2:00 p.m., New York time, on the date payment is due as specified in such
notice, the full amount of such draft in immediately available funds or (ii)
request a Loan pursuant to the provisions of SECTIONS 2.1(A) AND 2.2 of this
Credit Agreement in the full amount of such draft, which request shall specify
that the Borrowing Date is to be the date payment is due under the Letter of
Credit as specified in the Issuing Bank's notice. If the Borrower fails timely
to make such payment because a Loan cannot be made pursuant to SECTION 2.1(A)
and/or SECTION 4.2, each Bank shall, notwithstanding any other provision of this
Credit Agreement (including the occurrence and continuance of a Default or an
Event of Default), make available to the Agent for the benefit of the Issuing
Bank an amount equal to its Commitment Percentage of the presented draft on the
day the Issuing Bank is required to honor such draft. If such amount is not in
fact made available to the Agent by such Bank on such date, such Bank shall pay
to the Agent for the account of the Issuing Bank, on demand made by the Issuing
Bank, in addition to such amount, an amount equal to the product of (i) the
average
-28-
daily Federal Funds Effective Rate per annum during the period referred to in
clause (iii) of this sentence TIMES (ii) the amount of such Bank's Commitment
Percentage of the presented draft TIMES (iii) the number of days that elapse
from the day the Issuing Bank honors such draft to the date on which the amount
equal to such Bank's Commitment Percentage of the presented draft becomes
immediately available to the Issuing Bank DIVIDED by 360. Upon receipt by the
Agent from the Banks of the full amount of such draft, notwithstanding any other
provision of this Credit Agreement (including the occurrence and continuance of
a Default or an Event of Default) the full amount of such draft shall
automatically and without any action by the Borrower, be deemed to have been a
Base Rate Borrowing as of the date of payment of such draft. Nothing in this
paragraph (d) or elsewhere in this Credit Agreement shall diminish the
Borrower's obligation under this Credit Agreement to provide the funds for the
payment of, or on demand to reimburse the Issuing Bank for payment of, any draft
presented to, and duly honored by, the Issuing Bank under any Letter of Credit,
and the automatic funding of a Loan as in this paragraph provided shall not
constitute a cure or waiver of the Event of Default for failure to provide
timely such funds as in this paragraph agreed.
(e) In order to induce the issuance of Letters of Credit by the Issuing
Bank and the purchase of participations therein by the other Banks, the Borrower
agrees with the Agent, the Issuing Bank and the other Banks that neither the
Agent nor any Bank (including the Issuing Bank) shall be responsible or liable
(except as provided in the following sentence) for, and the Borrower's
unconditional obligation to reimburse the Issuing Bank through the Agent for
amounts paid by the Issuing Bank, as provided in SUBSECTION 2.11(D) ABOVE, on
account of drafts so honored under the Letters of Credit shall not be affected
by, any circumstance, act or omission whatsoever (whether or not known to the
Agent or any Bank (including the Issuing Bank) other than a circumstance, act or
omission resulting from the gross negligence or willful misconduct of the Agent
or any Bank, including the Issuing Bank). The Borrower agrees that any action
taken or omitted to be taken by the Agent or any Bank (including the Issuing
Bank) under or in connection with any Letter of Credit or any related draft,
document or Property shall be binding on the Borrower and shall not put the
Agent or any Bank (including the Issuing Bank) under any resulting liability to
the Borrower, unless such action or omission is the result of the gross
negligence or willful misconduct of the Agent or any such Bank (including the
Issuing Bank). The Borrower hereby waives presentment for payment (except the
presentment required by the terms of any Letter of Credit) and notice of
dishonor, protest and notice of protest with respect to drafts honored under the
Letters of Credit. The Issuing Bank agrees promptly to notify the Borrower
whenever a draft is presented under any Letter of Credit, but failure to so
notify the Borrower shall not in any way affect the Borrower's obligations
hereunder. Subject to SECTIONS 2.19 AND 2.20, if while any Letter of Credit is
outstanding, any law, executive order or regulation is enforced, adopted or
interpreted by any public body, governmental agency or court of competent
jurisdiction so as to affect any of the Borrower's obligations or the
compensation to any Bank in respect of the Letters of Credit or the cost to such
Bank of establishing and/or maintaining the Letters of Credit (or any
participation therein), such Bank shall promptly notify the Borrower thereof in
writing and within ten (10) Business Days after receipt by the Borrower of such
Bank's request (through the Agent) for reimbursement or indemnification or
within thirty (30) days after receipt of a notice in respect of Reimbursable
Taxes, the Borrower shall reimburse or indemnify such Bank, as the case may be,
with respect thereto so that such Bank shall be in the same position as if there
had been no such enforcement, adoption or interpretation, unless the Borrower
notifies the Agent of its good faith contest to, and dispute of, the requested
amount. The foregoing agreement of the Borrower to reimburse or indemnify the
Banks shall apply in (but shall not be limited to) the following situations: an
imposition of or change in reserve, capital maintenance or other similar
requirements or in excise or similar taxes or monetary restraints, except a
change in franchise taxes imposed on such Bank or in tax on the net income of
such Bank.
-29-
(f) In the event that any provision of a Letter of Credit Application is
inconsistent with, or in conflict of, any provision of this Credit Agreement,
including provisions for the rate of interest applicable to drawings thereunder
or rights of setoff or any representations, warranties, covenants or any events
of default set forth therein, the provisions of this Credit Agreement shall
govern.
(g) If the Obligations, or any part thereof, become immediately due and
payable pursuant to ARTICLE VIII of this Credit Agreement, then all LC
Obligations shall become immediately due and payable without regard for actual
drawings or payments on the Letters of Credit, and the Borrower shall be
obligated to pay to the Agent immediately an amount equal to the LC Obligations.
All amounts made due and payable by the Borrower under this SECTION 2.11(G) may
be applied as the Issuing Bank and the Banks elect to any of the various LC
Obligations; PROVIDED, HOWEVER, that an such amounts applied by the Issuing Bank
and the Banks to the LC Obligations shall be (a) first applied to the Matured LC
Obligations, and (b) second held by the Agent for the benefit of the Issuing
Bank and the Banks as LC Collateral until such remaining LC Obligations have
either (i) become Matured LC Obligations, at which time such LC Collateral paid
to the Agent shall be applied to such Matured LC Obligations, or (ii) have
expired undrawn, at which time an amount of such LC Collateral equal to such
expired and undrawn LC Obligation shall be promptly returned to the Borrower.
This SECTION 2.11(G) shall not limit or impair any rights which the Agent, the
Issuing Bank or any of the Banks may have under any other document or agreement
relating to any Letter of Credit or LC Obligation, including without limitation,
any LC Application.
SECTION 2.12. CAPITAL REIMBURSEMENT. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation, or (b) the introduction or
implementation of or the compliance with any request, directive or guideline
from any central bank or other Governmental Authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by any Bank or any corporation controlling such Bank, then,
upon demand by such Bank, the Borrower will pay to such Bank, from time to time
as specified by such Bank, such additional amount or amounts which such Bank
shall determine to be appropriate to compensate such Bank or any corporation
controlling such Bank in light of such circumstances, to the extent that such
Bank reasonably determines that the amount of any such capital would be
increased or the rate of return on any such capital would be reduced by or in
whole or in part based on the existence of the face amount of such Bank's
Commitment under this Credit Agreement.
SECTION 2.13. INCREASED COSTS. If any applicable domestic or foreign law,
treaty, rule or regulation (whether now in effect or hereinafter enacted or
promulgated, including Regulation D) or any interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law):
(i) shall change the basis of taxation of payments to any Bank of any
principal, interest, or other amounts attributable to any Eurodollar
Loan of such Bank or otherwise due under this Credit Agreement in
respect of any Eurodollar Loan of such Bank (other than taxes imposed
on the overall net income of such Bank or any Lending Office of such
Bank by any jurisdiction in which such Bank or any such Lending Office
is located); or
(ii) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
Eurodollar Loan of any Bank (excluding those for which such Bank is
fully compensated pursuant to adjustments made in the definition of
Eurodollar Rate) or against assets of, deposits with or for the
account of, or credit extended by, such Bank; or
-30-
(iii) shall impose on any Bank or the interbank eurocurrency deposit
market any other condition affecting any Eurodollar Loan of such Bank,
the result of which is to increase the cost to such Bank of funding or
maintaining any Eurodollar Loan(s) of such Bank or to reduce the
amount of any sum receivable by such Bank in respect of any Eurodollar
Loan(s) by an amount deemed by such Bank to be material,
then the affected Bank shall promptly notify the Agent and the Borrower in
writing of the happening of such event and (x) the Borrower shall upon demand
pay to the affected Bank such additional amount or amounts as will compensate
such Bank for such event (on an after-tax basis) and (y) the Borrower may elect,
by giving to the Agent and the Borrower not less than three (3) Business Days'
prior written notice, to convert all (but not less than all) of the Eurodollar
Loans of such Bank into Base Rate Loans.
SECTION 2.14. AVAILABILITY. If (a) any change in applicable laws, treaties,
rules or regulations or in the interpretation or administration thereof of or in
any jurisdiction whatsoever, domestic or foreign, shall make it unlawful or
impracticable for any Bank to fund or maintain Eurodollar Loans, or shall
materially restrict the authority of any Bank to purchase or take offshore
deposits of dollars (i.e., "eurodollars") or of the Issuing Bank to issue
Letters of Credit, or (b) any Bank determines that matching deposits appropriate
to fund or maintain its Eurodollar Loans are not available to it, or (c) any
Bank determines that the formula for calculating the Eurodollar Rate does not
fairly reflect the cost to such Bank of making or maintaining Loans based on
such rate, then the Borrower's right to borrow Eurodollar Loans or to apply for
Letters of Credit shall be suspended to the extent and for the duration of such
illegality, impracticability or restriction and all Eurodollar Borrowings (or
portions thereof) or Letters of Credit which are then outstanding or are then
the subject of any Borrowing Request or Notice of Conversion or Continuance and
which cannot lawfully or practicably be maintained or funded by such Bank shall
immediately become or remain Base Rate Loans. The Borrower agrees to indemnify
each Bank and hold each Bank harmless against all costs, expenses, claims,
penalties, liabilities and damages which may result from any such change in law,
treaty, rule, regulation, interpretation or administration as described in
clause (a) of this SECTION 2.14.
SECTION 2.15. REIMBURSABLE TAXES. The Borrower covenants and agrees that:
(a) The Borrower will indemnify each Bank against and reimburse each
Bank for all present and future income, stamp and other taxes, levies,
costs and charges whatsoever imposed, assessed, levied or collected on or
in respect of this Credit Agreement or any Eurodollar Loans (whether or not
legally or correctly imposed, assessed, levied or collected), excluding,
however, any taxes imposed on or measured by the overall net income of such
Bank or any applicable Lending Office of such Bank by any jurisdiction in
which such Bank or any such Banks's applicable Lending Office is located
(all such non-excluded taxes, levies, costs and charges being collectively
called "REIMBURSABLE TAXES" in this SECTION 2.15). Such indemnification
shall be on an aftertax basis, taking into account any income taxes imposed
on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, the
Loans and the Notes, and all other amounts payable by the Borrower to the
Banks hereunder, shall be made in full without set-off or counterclaim and
shall be made free and clear of and without deductions or withholdings of
any nature by reason of any Reimbursable Taxes (except as required by
applicable law), all of which will be for the account of the Borrower. In
the event of the Borrower being compelled by any Requirement of Law to make
any such deduction or withholding from any payment to any Bank, the
Borrower shall pay on the due date of such payment, by way of additional
interest, such additional amounts as are needed to cause the amount
receivable by such Bank after such deduction or withholding to equal the
amount which would have been receivable in the absence of such deduction or
withholding. If the Borrower should make any deduction or
-31-
withholding as aforesaid, the Borrower shall within 60 days thereafter
forward to such Bank an official receipt or other official document
evidencing payment of such deduction or withholding.
(c) If the Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loans, the Borrower may elect, by giving to the
Banks not less than three (3) Business Days' notice, to convert all (but
not less than all) of any such Eurodollar Loans into Base Rate Loans, but
such election shall not diminish the Borrower's obligation to pay all
Reimbursable Taxes.
(d) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof (including each Purchasing Bank that
becomes a party to this Credit Agreement pursuant to SECTION 11.4) that is
entitled to receive payments under this Credit Agreement and the Notes
without deduction or withholding of any United States federal income taxes
or is entitled to an exemption from backup withholding tax agrees that,
prior to the first date on which any payment is due to it hereunder, it
will deliver to the Borrower and the Agent, as the case may be, (i) two
duly completed copies of United States IRS Forms 1001 or 4224 or successor
applicable form, as the case may be, certifying in each case that such Bank
is entitled to receive payments under this Credit Agreement and the Notes
payable to it, without deduction or withholding of any United States
federal income taxes, and (ii) an IRS Forms W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax. Each Bank which delivers to the Borrower and
the Agent a Forms 1001 or 4224 and Forms W-8 or W-9 pursuant to the
preceding sentence further undertakes to deliver to the Borrower and the
Agent two further copies of the said Forms 1001 or 4224 and Forms W-8 or
W-9, or successor applicable forms, or other manner of certification, as
the case may be, on or before the date that any such form expires or
becomes obsolete or after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the Borrower, and such
extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying in the case of a Forms 1001 or 4224 that such Bank is
entitled to receive payments under this Credit Agreement without deduction
or withholding of any United States federal income taxes, unless in any
such case an event (including, without limitation, any change in any
Requirement of Law) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the
Borrower that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax, and in the case of a
Forms W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(e) Each Bank (including each Purchasing Bank that becomes a party to
this Credit Agreement pursuant to SECTION 11.4) represents and warrants to
the Borrower that each Lending Office of such Bank hereunder will be
entitled to receive payments of principal of, and interest on, the Loans
made by such Bank from such Lending Office without withholding or deduction
for or on account of any United States federal income taxes.
SECTION 2.16. FUNDING LOSSES. Without duplication of other provisions
contained herein, the Borrower shall indemnify each Bank against any loss or
reasonable expense which such Bank may sustain or incur as a consequence of (i)
any failure by the Borrower to fulfill on the Borrowing Date for any Borrowing
hereunder the applicable conditions set forth in ARTICLE IV, (ii) any failure by
the Borrower to borrow hereunder after a Borrowing Request pursuant to this
ARTICLE II has been given, (iii) any failure by the Borrower to convert or
continue a Borrowing hereunder after a Notice of Conversion or Continuation
pursuant to this ARTICLE II has been given, (iv) any payment, prepayment,
continuance or
-32-
conversion of a Eurodollar Borrowing required or permitted by any other
provision of this Credit Agreement including, without limitation, payments made
due to the acceleration of the maturity of the Notes pursuant to SECTION 9.1, or
otherwise made on a date other than the last day of the applicable Interest
Period, (v) any default in the payment or prepayment of the principal amount of
any Eurodollar Borrowing or any part thereof or interest accrued thereon, as and
when due and payable (at the due date thereof, by notice of prepayment or
otherwise) including, but not limited to, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or employing
deposits from third parties acquired to effect or maintain such Bank's
Commitment Percentage of any Eurodollar Borrowing or any part thereof as a
Eurodollar Borrowing. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, as reasonably determined by
such Bank of (i) its cost of obtaining the funds for its Commitment Percentage
of the Eurodollar Borrowing being paid, prepaid or converted or not borrowed
(based on the Eurodollar Rate applicable thereto) for the period from the date
of such payment, prepayment, continuance or conversion or failure to borrow to
the last day of the applicable Interest Period for such Eurodollar Borrowing
(or, in the case of a failure to borrow, the applicable Interest Period for the
Eurodollar Borrowing which would have commenced on the date of such failure to
borrow) over (ii) the amount of interest (as reasonably determined by such Bank)
that would be realized by such Bank in reemploying the funds so paid, prepaid,
continued or converted or not borrowed for such period or applicable Interest
Period, as the case may be, provided that such Bank will use its best efforts to
reemploy funds in investments of similar quality. A certificate of such Bank
signed by an officer setting forth in reasonable detail any amount or amounts
which such Bank is entitled to receive pursuant to this SECTION 2.16 shall be
delivered to the Borrower. The Borrower shall pay to such Bank the amount shown
as due on any certificate within thirty (30) Business Days after its receipt of
the same. Notwithstanding the foregoing, in no event shall any Bank be permitted
to receive any compensation hereunder constituting interest in excess of the
Highest Lawful Rate.
SECTION 2.17. SHARING OF PAYMENTS AND SETOFFS. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff to the extent
not prohibited under SECTION 8.4, or counterclaim against the Borrower,
including, but not limited to, a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Bank under any applicable Debtor Relief
Law or otherwise, or by similar means, obtain payment (voluntary or involuntary)
in respect of any Loan or Loans (other than pursuant to SECTIONS 2.12, 2.13,
2.15, or 2.16) as a result of which the unpaid principal portion of its Loans
shall be proportionately less than the unpaid principal portion of the Loans of
any other Bank, it shall simultaneously purchase from such other Banks at face
value a participation in the Loans of such other Banks, so that the aggregate
unpaid principal amount of Loans and participations in Loans held by each Bank
shall be in the same proportion to the aggregate unpaid principal amount of all
Loans then outstanding as the principal amount of its Loans prior to such
exercise of banker's lien, setoff, counterclaim or other event was to the
principal amount of all Loans outstanding prior to such exercise of banker's
lien, setoff pursuant to SECTION 8.4, counterclaim or other event; PROVIDED,
HOWEVER, that if any such purchase or purchases or adjustments shall be made
pursuant to this SECTION 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Bank holding a participation in any
Note deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Bank as fully as if such Bank had made a Loan directly
to such the Borrower in the amount of such participation.
SECTION 2.18. METHOD OF PAYMENTS PRO RATA TREATMENT.
-33-
(a) The Borrower shall make each payment hereunder and under the Notes
delivered hereunder not later than 2:00 p.m., New York time, on the day when due
in lawful money of the United States (in freely transferable Dollars) to the
Agent for the account of the Banks entitled thereto at the Agent's address
referred to in SECTION 11.3 in immediately available funds and any funds
received by the Agent after such time shall, for all purposes hereof (including
the following sentence), be deemed to have been paid on the next succeeding
Business Day. Except as otherwise specifically provided herein, the Agent shall
thereafter cause to be distributed on the date of receipt thereof to each Bank
in like funds its Commitment Percentage (or, if the Loan of such Bank with
respect to which such payment is being made is not of the same Type as the Loans
of the other Banks with respect to which such payment is being made, such Bank's
appropriate share) of the payments so received for the account of such Bank's
Lending Office for such Loans in respect of which such payment is made.
(b) Except as otherwise provided herein, (i) each Borrowing hereunder shall
be obtained from the Banks, each payment of fees shall be paid for the account
of the Banks and each partial reduction of the Total Commitment under SECTION
2.6 shall be applied to the Commitments of the Banks, in each case
simultaneously and PRO RATA in accordance with each Bank's Commitment
Percentage, (ii) each conversion of a Borrowing comprised of Loans of a
particular Type shall be made PRO RATA among the Banks according to their
respective Commitment Percentage of such Borrowing and (iii) each payment and
prepayment of principal of or interest on any Loans will be made to the Agent
for the account of each of the Banks simultaneously and PRO RATA in accordance
with their respective Commitment Percentage of unpaid principal amounts of such
Loans made by the Banks.
(c) Whenever any payment hereunder or under the Notes (including principal
of or interest on any Loan or any fees or other amounts), shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, fee or other amount, as the
case may be; PROVIDED, HOWEVER, if such extension would cause payment of
interest on or principal of a Eurodollar Loan to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
When the Agent collects or receives money on account of the Obligations, the
Banks may apply such money as they elect to the various Obligations then due and
payable.
SECTION 2.19. LIMITATION ON REIMBURSEMENT; MITIGATION.
(a) If any Bank fails to give notice to the Borrower of any event that
would obligate the Borrower to pay any amount owing pursuant to SECTIONS 2.12,
2.13 OR 2.15, within thirty (30) days after such Bank obtains knowledge of such
event, and subsequently gives notice to the Borrower of such event, the Borrower
shall pay only such amounts for costs incurred for the one hundred eighty (180)
day period immediately prior to the date of such notice.
(b) Any Bank claiming any additional amounts payable pursuant to SECTIONS
2.12, 2.13, OR 2.15 or any Bank subject to SECTION 2.14 shall use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to change the jurisdiction of its lending office for the Loans, if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue under SECTIONS 2.12,
2.13 OR 2.15 or would avoid the unavailability of Eurodollar Loans under SECTION
2.14 and would not, in any such case, in the judgment of such Bank, be otherwise
disadvantageous to such Bank.
SECTION 2.20. REPLACEMENT OF BANKS. If any Bank (an "AFFECTED BANK") shall
have (i) failed to fund any Loan that such Bank is obligated to fund hereunder
and such failure has not been cured, or (ii) requested compensation from the
Borrower under SECTIONS 2.12, 2.13 OR 2.15 to recover costs or
-34-
taxes incurred by such Bank which are not being incurred generally by the other
Banks, (iii) given notice pursuant to SECTION 2.14 that such Bank has suspended
the Borrower's right to elect Eurodollar Loans from such Bank for reasons not
generally applicable to the other Banks, then the Borrower may give written
notice to such Affected Bank of the occurrence of an event set forth in
subsections (i), (ii) or (iii), of this SECTION 2.20, and during the thirty (30)
day period following such notice, the Borrower may make written demand on such
Affected Bank (with a copy to Agent and each other Bank), for such Affected Bank
to assign to one or more financial institutions acceptable to the Required Banks
(a "REPLACEMENT BANK"), all of such Affected Bank's rights and obligations under
this Credit Agreement and the other Loan Documents (including such Affected
Bank's Commitment, LC Obligations and Loans owing to such Affected Bank),
PROVIDED, such assignment shall be consummated in accordance with and shall be
subject to the terms of SECTION 11.4). Pursuant to SECTION 11.4, upon any such
assignment, such Affected Bank shall cease to be a party hereto, provided,
HOWEVER, such Affected Bank shall continue to be entitled to the benefits of
SECTIONS 2.12, 2.13, 2.15 AND 9.3 accruing with respect to such Affected Bank
prior to such assignment, as well as any fees accrued for its account and not
yet paid. If an Eligible Assignee cannot be obtained within the thirty (30) day
period following said notice to the Affected Bank, to assume the Commitment of
such Affected Bank, and provided that no Default or Event of Default shall have
occurred and be continuing, then the Borrower may prepay immediately all Loans
and Matured LC Obligations, if any, of such Affected Bank and terminate such
Affected Bank's entire Commitment (including its Commitment to participate in
Letters of Credit) hereunder PROVIDED, HOWEVER, that in the event the Borrower
makes any prepayment pursuant to this sentence, then on the date of such
prepayment, the Total Commitment of the Banks shall be permanently reduced by
the amount of such Affected Bank's Commitments and the Commitment Percentage
(including each non-affected Bank's Commitment Percentage of outstanding Letters
of Credit) of each other Bank shall be redetermined based upon the amount each
such other Bank's Commitment is of the Total Commitment as so reduced.
ARTICLE III
BORROWING BASE
SECTION 3.1. ENGINEERING REPORT; PROPOSED BORROWING BASE. As soon as
available and in any event by March 31 and September 30 of each year, but
effective as of the preceding December 31 and June 30, respectively, commencing
March 31, 1997, the Borrower shall furnish to the Agent all information, reports
and data which the Banks have then requested concerning the Borrower's
businesses and Properties (including all Borrowing Base Properties of the Loan
Parties, and the Proved Reserves and production relating thereto), together with
the Engineering Reports described in SECTION 6.2(D). On or before each April 25
and October 25 of each year, the Agent shall discuss with the Borrower the
Agent's recommendation as to the Borrowing Base amount which the Agent has
determined should be available to Borrower pursuant to the Total Commitment as
of the next Determination Date and the Borrower shall advise the Agent in
writing of the Borrowing Base the Borrower is requesting for the period
commencing on the next Determination Date.
SECTION 3.2. DETERMINATION OF BORROWING BASE. Based in part on the
Engineering Report delivered pursuant to SECTION 6.2(D), additional information
delivered to the Agent pursuant to SECTION 6.2(E), the Agent shall submit to the
Banks in writing on or before April 30 or October 31, as the case may be, the
Agent's recommendation as to the maximum aggregate amount of credit to be
available to the Borrower pursuant to the terms and provisions of this Credit
Agreement (the "Borrowing Base") to be in effect on the next succeeding
Determination Date, which shall in no event, exceed the Borrowing Base requested
by the Borrower pursuant to SECTION 3.1. The Banks shall approve or disapprove
of the
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇. Such determination by the Agent and approval or disapproval by
the Banks shall be made in good faith by all the Banks and the Agent, in the
exercise of their sole discretion and in accordance with their respective
customary practices and standards for oil and gas loans, which may include
varying (from Bank to Bank) (A) assumptions regarding appropriate existing and
projected pricing, (B) assumptions modifying projected rates of future
production and/or quantities of future production, (C) considerations related to
the projected cash requirements of the Loan Parties and their respective
Subsidiaries assumed to be provided from production of the Borrowing Base
Properties, including present and future debt service of the Loan Parties and/or
such Subsidiaries of the Loan Parties, general and administrative expenses and
Distributions in respect of equity, and (D) such other considerations as each
Bank deems appropriate, it being recognized that the ultimate determination to
be reached is more predicated upon the aggregate amount of credit available
hereunder which, at the time of the determination, each Bank determines should
be available as reasonably expected to be repayable by the Loan Parties,
considering all then existing and projected other items which are expected to be
payable or repayable, without undue risk of failure to timely repay. Each Bank
shall submit to the Agent in writing on or before May 5 or November 5, as the
case may be, such Bank's approval or disapproval of the Agent's recommended
Borrowing Base and any such disapproval shall state the maximum Borrowing Base
acceptable to such Bank. If the Agent has not received such notice from a Bank
on or before the close of business on May 5 or November 5, as the case may be,
such Bank shall be deemed to have approved the Agent's recommended Borrowing
Base. Thereafter, the Banks shall consult with each other in order to agree on
the Borrowing Base to be effective on such Determination Date. In the event the
Banks agree on such Borrowing Base on or before the expiration of such ten (10)
day period, the Borrowing Base agreed to by the Banks shall become effective on
the next succeeding Determination Date and shall remain in effect until the next
Determination. In the event the Banks are unable to agree on the Borrowing Base,
the Borrowing Base which becomes effective on the next Determination Date shall
be the lowest determination agreed to by the Required Banks. The Agent shall
notify the Borrower of the Borrowing Base to become effective on each
Determination Date no later than 2:00 p.m., New York time on such Determination
Date; provided that if, due to any failure by the Borrower to submit in a timely
manner any Engineering Report or other information required to be submitted by
the Borrower or any Subsidiary Guarantor hereunder or, if requested in writing
by the Agent, any additional information or data needed in connection with a
determination of the Borrowing Base or due to any other reason beyond the
control of the Agent, the Agent does not provide a Borrowing Base Notice at the
time described above, then, unless the Agent gives notice to the Loan Parties of
a new Borrowing Base, the Borrowing Base from the previous period shall be
carried over into the new period until a Borrowing Base Notice is sent to the
Loan Parties by the Agent; which Borrowing Base Notice shall be sent to the Loan
Parties by the Agent within thirty (30) days after the cessation or cure of the
circumstances causing the Borrowing Base Notice to not be previously delivered
in a timely manner, and the remainder of the procedures described in this
SECTION 3.2 have been completed.
SECTION 3.3. SPECIAL DETERMINATION OF TOTAL BORROWING BASE.
(a) In addition to the Periodic Determinations of the Borrowing Base
pursuant to SECTION 3.2 above, the Borrower may request one redetermination of
the Borrowing Base during each six month period commencing on May 15 and
November 15 of each year. In the event Borrower requests a Special
Determination, the Borrower shall deliver written notice of such request to the
Banks which shall include (i) an Engineering Report prepared as of a date not
more than thirty (30) days prior to the date of such request, (ii) additional
information required pursuant to SECTION 6.2(E), and (iii) the amount of the
Borrowing Base requested by Borrower to become effective on the Determination
Date applicable to such Special Determination. Upon receipt of such Engineering
Report and additional information, the Agent and the Banks shall redetermine the
Borrowing Base in accordance with the procedure set forth in SECTION
-36-
3.2 which Borrowing Base shall become effective on the Determination Date
applicable to such Special Determination and shall remain in effect until the
next Determination.
(b) In addition to the Periodic Determinations of the Borrowing Base
pursuant to SECTION 3.2 and SECTION 3.3(A), the Banks shall have the right to
request one (1) redetermination of the Borrowing Base during any twelve month
period commencing on November 15 of each year. In the event the Required Banks
request such a Special Determination, the Agent shall promptly deliver notice of
such request to the Borrower and the Borrower shall, within thirty (30) calendar
days of such request, deliver to the Banks an Engineering Report and such other
information regarding the Borrowing Base Properties as the Agent shall
reasonably request prepared as of the last day of the calendar month preceding
the date of such request. Upon receipt of such Engineering Report and additional
information, the Agent and the Banks shall redetermine the Borrowing Base in
accordance with the procedure set forth in SECTION 3.2 which Borrowing Base
shall become effective on the Determination Date applicable to such Special
Determination and shall remain in effect until the next Determination.
SECTION 3.4. INITIAL BORROWING BASE. Notwithstanding anything to the
contrary contained herein, the Borrowing Base in effect during the period
commencing on the Effective Date and continuing until the first Determination
after the date hereof shall be $30,000,000, PROVIDED, HOWEVER, that the
Borrowing Base shall not be less than $15,000,000 at any time during the period
from and including the Effective Date to but excluding May 15, 1997.
ARTICLE IV
CONDITIONS PRECEDENT TO LENDING
SECTION 4.1. DOCUMENTS TO BE DELIVERED. The Banks have no obligation to
make their initial Loans or issue Letters of Credit unless the Banks shall have
received all of the following, duly executed and delivered and in form,
substance and date satisfactory to the Banks:
(a) This Credit Agreement;
(b) The Notes;
(c) The Subsidiary Guaranty;
(d) The Security Agreement - Intercompany Obligations, together with the
Intercompany Notes evidencing the Intercompany Loans duly endorsed to the Agent,
and UCC-1 financing statement perfecting the Liens created by the Security
Agreement - Intercompany Obligations;
(e) An "Omnibus Certificate" of the Secretary and of the Senior Vice
President, Chief Financial Officer and Treasurer of the Borrower, which shall
contain the names and signatures of the officers of the Borrower authorized to
execute Loan Documents on behalf of the Borrower and which shall certify to the
truth, correctness and completeness of the following exhibits attached thereto:
(i) a copy of resolutions duly adopted by the Board of Directors of the Borrower
and in full force and effect at the time this Credit Agreement is entered into,
authorizing the execution of this Credit Agreement and the other Loan Documents
delivered or to be delivered by the Borrower in connection herewith and the
consummation of the transactions contemplated herein and therein, (ii) a copy of
the charter documents
-37-
of the Borrower and all amendments thereto, certified by the appropriate
official of the Borrower's state of organization, and (iii) a copy of any bylaws
of the Borrower;
(f) An "Omnibus Certificate" of the Secretary and of the Senior Vice
President, Chief Financial Officer and Treasurer of Operating, which shall
contain the names and signatures of the officers of Operating authorized to
execute Loan Documents on behalf of Operating and which shall certify to the
truth, correctness and completeness of the following exhibits attached thereto:
(i) a copy of resolutions duly adopted by the Board of Directors of Operating
and in full force and effect at the time this Credit Agreement is entered into,
authorizing the execution of this Credit Agreement and the other Loan Documents
delivered or to be delivered by Operating in connection herewith and the
consummation of the transactions contemplated herein and therein, (ii) a copy of
the charter documents of Operating and all amendments thereto, certified by the
appropriate official of Operating's state of organization, and (iii) a copy of
any bylaws of Operating;
(g) An "Omnibus Certificate" of the Secretary and of the Vice President,
Chief Financial Officer and Treasurer of Offshore, which shall contain the names
and signatures of the officers of Offshore authorized to execute Loan Documents
on behalf of Offshore and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy of
resolutions duly adopted by the Board of Directors of Offshore and in full force
and effect at the time this Credit Agreement is entered into, authorizing the
execution of this Credit Agreement and the other Loan Documents delivered or to
be delivered by Offshore in connection herewith and the consummation of the
transactions contemplated herein and therein, (ii) a copy of the charter
documents of Offshore and all amendments thereto, certified by the appropriate
official of Offshore's state of organization, and (iii) a copy of any bylaws of
Offshore;
(h) with respect to the Borrower, a certificate of existence and good
standing from the Secretary of State of the State of Delaware dated no more than
fifteen (15) calendar days prior to the Effective Date and certificates of
authorization to do business and good standing in the States of Alabama,
Louisiana, and Mississippi;
(i) with respect to Operating, a certificate of existence and good standing
from the Secretary of State of Delaware dated no more than fifteen (15) calendar
days prior to the Effective Date and certificates of authorization to do
business and good standing in the States of Alabama, Louisiana, and Mississippi;
(j) with respect to Offshore, a certificate of existence and good standing
from the Secretary of State of Mississippi dated no more than fifteen (15)
calendar days prior to the Effective Date and certificates of authorization to
do business and good standing in the States of Alabama and Louisiana;
(k) A "Compliance Certificate" signed by the Senior Vice President, Chief
Financial Officer and Treasurer of each Loan Party dated as of the Borrowing
Date, in which such officer certifies to the satisfaction of the conditions set
out in SECTION 4.2;
(l) A favorable opinion of Messrs. ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Loan
Parties, substantially in the form set forth in EXHIBIT G hereto;
(m) A favorable opinion of local counsel for the Agent (as reasonably
acceptable to the Borrower) in Alabama, substantially in the form of EXHIBIT H;
-38-
(n) A favorable opinion of local counsel for the Agent (as reasonably
acceptable to the Borrower) in Louisiana, substantially in the form of EXHIBIT
I;
(o) In sufficient executed counterparts for recording purposes when
applicable, as security for the Notes, the Subsidiary Guaranty, the Security
Agreement - Intercompany Obligations and other Obligations of the Loan Parties
under the Loan Documents, the Assignment covering each Mortgage listed in the
MORTGAGE SCHEDULE and the Mortgage Amendments covering each Mortgage listed in
the MORTGAGE SCHEDULE;
(p) Updated title opinions addressed to the Agent on behalf of the Banks
that verify the Loan Parties' title as of the Closing Date to the Borrowing Base
Properties set forth on SCHEDULE 5.10, free and clear of all Liens other than as
permitted under SECTION 7.2 and (ii) reliance letters dated as of the Closing
Date, entitling the Banks to rely on the "Title Opinions" covering such
Borrowing Base Properties rendered to INCC under the INCC Credit Agreement;
(q) The Agent shall have received copies of all environmental assessments
with respect to the Loan Parties and their Properties rendered to INCC under the
INCC Credit Agreement and any supplements thereto or additional assessments in
the possession of the Loan Parties;
(r) Each of the Banks shall be satisfied that sufficient documentation
exists to (i) verify the working interests and net revenue interests of the Loan
Parties in the Borrowing Base Properties; (ii) verify the satisfactory
compliance of the Loan Parties with Environmental Laws; (iii) verify that
Designated Contracts, including the Production Sales Contracts, have been duly
executed and delivered which permit the Hydrocarbons to be produced and marketed
from the Borrowing Base Properties of the Loan Parties at economic levels
consistent with accepted engineering practices; (iv) verify that one or more of
the Designated Contracts are gas gathering, treatment, processing and
transportation agreements containing terms satisfactory to the Banks;
(s) Insurance certificates, in form and substance reasonably satisfactory
to the Agent, with respect to all the insurance policies required under SECTION
6.8 hereof including any necessary endorsements to reflect the Agent for the
ratable benefit of the Banks as loss payee;
(t) Favorable results of a recent search of the Uniform Commercial Code
filings central filings wherein the Borrowing Base Properties are located and/or
the principal place of business of each of the Loan Parties are located
reflecting the absence of Liens thereof except as permitted pursuant to SECTION
7.2 of this Credit Agreement;
(u) The Borrower shall have repaid, or shall concurrently repay, the
indebtedness described in SECTION 2.3(A);
(v) The Agent shall have received payment in full of all fees due and
payable pursuant to the provisions of SECTION 2.5(D) hereof;
(w) The Agent shall have received each additional document, instrument, or
item of information reasonably requested by it, including, without limitation,
copies of any debt instruments, security agreements or other material contracts
to which any of the Loan Parties are a party, and copies of documents evidencing
governmental authorizations, consents, approvals, licenses and exemptions; and
(x) The consummation of the transactions contemplated hereby shall not
contravene, violate or conflict with, nor involve the Agent or any Bank in any
violation of, any Requirement of Law;
-39-
SECTION 4.2. ADDITIONAL CONDITIONS PRECEDENT. The Banks shall have no
obligation to make any Loans and the Issuing Bank has no obligation to issue any
Letter of Credit (including the initial Loans and Letter of Credit) unless the
following conditions precedent have been satisfied:
(a) The Agent shall have received, with a copy for each Bank, a Borrowing
Request requesting a Borrowing on such date, duly completed and executed by a
Responsible Officer of the Borrower, which Borrowing Request shall affirmatively
certify that:
(i) All representations and warranties made by any Loan Party in any
Loan Document shall be true on and as of the Borrowing Date (except to
the extent that the facts upon which such representations are based
have been changed by the extension of credit hereunder) as if such
representations and warranties have been made as of the Borrowing Date
(ii) No Borrowing Base Deficiency would exist after giving effect to
the Loans requested to be made, or Letters of Credit requested to be
issued, on such date;
(iii) No Default or Event of Default then exists either before or
after giving effect to the making of such Loan or the issuing of such
Letter of Credit;
(iv) No material litigation (other than Existing Litigation) is
pending or, to the best knowledge of the Borrower after due inquiry,
threatened against the Borrower or any Subsidiary of the Borrower and
no material adverse development has occurred in any Existing
Litigation; and
(v) No event or state of affairs which could reasonably be expected to
result in a Material Adverse Effect has occurred since December 31,
1995.
(b) Each Loan Party shall have performed and complied with all agreements
and other conditions required in the Loan Documents to be performed or complied
with by it on or prior to the Borrowing Date.
(c) The making of such Loans or the issuance of such Letter of Credit shall
not be prohibited by any Requirement of Law and shall not subject the Agent, the
Issuing Bank or any Bank to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
(d) The Maturity Date shall not have occurred.
Each Borrowing hereunder shall constitute a representation and warranty by the
Loan Parties as of the of the Borrowing Date that all of the conditions
contained in this SECTION 4.2 have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To confirm the Banks' understanding concerning each of the Loan Parties
and the business, Properties and obligations of each of the Loan Parties and to
induce the Banks to enter into this Credit Agreement and to make the Loans and
to induce the Issuing Bank(s) to issue Letters of Credit, each Loan
-40-
Party represents and warrants as to itself and the Borrower represents and
warrants as to each of its Subsidiaries, to the Agent and each Bank that the
following statements are true, correct, and complete.
SECTION 5.1. NO DEFAULT.
(a) No Loan Party nor any Subsidiary of a Loan Party is a party to any
Material Contract that has resulted or could reasonably be expected to result in
a Material Adverse Effect.
(b) No Loan Party nor any Subsidiary of a Loan Party is in default in any
material respect under any Material Contract.
(c) No Loan Party nor any Subsidiary of a Loan Party is in default in the
performance of any of the covenants and agreements contained herein. No event
has occurred and is continuing which constitutes a Default.
SECTION 5.2. ORGANIZATION AND GOOD STANDING. Each Loan Party that is a
corporation or partnership is duly organized, validly existing and in good
standing under the laws of its state of organization, having all corporate or
partnership powers required to carry on its business and enter into and carry
out the transactions contemplated hereby. Each such Person is duly qualified, in
good standing, and authorized to do business in all other jurisdictions within
the United States wherein the character of the Properties owned or held by it or
the nature of the business transacted by it makes such qualification necessary
(except only for jurisdictions in which the failure to be so qualified or in
good standing would not, individually or in the aggregate, result in a Material
Adverse Effect). Each such Person has taken all actions and procedures
customarily taken in order to enter, for the purpose of conducting business or
owning Property, each jurisdiction outside the United States wherein the
character of the Properties owned or held by it or the nature of the business
transacted by it makes such actions and procedures desirable.
SECTION 5.3. AUTHORIZATION. Each Loan Party that is a corporation or
partnership has duly taken all corporate or partnership action necessary to
authorize the execution and delivery by it of the Loan Documents to which it is
a party and to authorize the consummation of the transactions contemplated
thereby and the performance of its obligations thereunder. The Borrower is duly
authorized to borrow funds hereunder. No consent or authorization of, filing
with or other act by or in respect of, any Governmental Authority or any other
Person is required in connection with the Borrowings hereunder by the Borrower
or with the execution, delivery, performance, validity or enforceability of this
Credit Agreement, the Notes or the other Loan Documents to which any Loan Party
is a party.
SECTION 5.4. ENFORCEABLE OBLIGATIONS. This Credit Agreement has been, and
each Note of the Borrower and each other Loan Document to which the Borrower is
a party will be, duly executed and delivered on behalf of the Borrower. This
Credit Agreement has been, and each other Loan Document to which any Loan Party
(other than the Borrower) is a party will be, duly executed and delivered on
behalf of such Loan Party. This Credit Agreement constitutes, and each Note of
the Borrower and each other Loan Document to which the Borrower is a party when
executed and delivered will constitute, a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law). This Credit Agreement
constitutes, and each other Loan Document to which any Loan Party (other than
the Borrower) is a party when executed and delivered will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms, except as
-41-
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
SECTION 5.5. FINANCIAL CONDITION. The Consolidated balance sheet of the
Borrower and its Subsidiaries as of December 31, 1995 and the related
Consolidated statements of income, of cash flows and of changes in owners'
equity of the Borrower and its Subsidiaries for the fiscal year ended on such
date, reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., copies of which have heretofore been
furnished to each Bank, are complete and correct and present fairly the
financial condition of the Borrower and its Subsidiaries as of such date, and
the results of its Consolidated operations and changes in cash flows and changes
in owners' equity for the fiscal year then ended. The unaudited Consolidated
balance sheet of the Borrower and its Subsidiaries as of June 30, 1996 and the
related unaudited Consolidated statements of income, and of cash flows of the
Borrower and its Subsidiaries for the six-month period ended on such date,
certified by a Responsible Officer of the Borrower, copies of which have
heretofore been furnished to each Bank are complete and correct and present
fairly the Consolidated financial condition of the Borrower and its Subsidiaries
as of such date, and the results of its operations and changes in cash flows for
the six-month period then ended (subject to normal year-end audit adjustment).
All such financial statements, including the related schedules and notes
thereto, have been prepared according to GAAP. Neither the Borrower nor any
Subsidiary of the Borrower has, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any Commodity Hedge Transaction, any
Interest Hedge Agreement, or any Investment in any Person which is not reflected
in the foregoing statements or in the notes thereto.
SECTION 5.6. NO CHANGE. Except as disclosed in the Initial Financial
Statements or in the DISCLOSURE SCHEDULE, since December 31, 1995 to and
including the date hereof, (a) there has been no sale, transfer or other
disposition by any Loan Party of any material part of its business or Property
and no purchase or other acquisition of any business or Property material in
relation to the Consolidated financial condition of the Borrower at December 31,
1995, (b) there has been no development or event nor any prospective development
or event, which has had or has any reasonable likelihood of having a Material
Adverse Effect, and (c) other than those Distributions paid with respect to the
Preferred Stock disclosed in the DISCLOSURE SCHEDULE, no Distributions have been
declared, paid or made by the Borrower or any of its Subsidiaries to any
stockholder, partner or other equity owner of the Borrower or any of its
Affiliates.
SECTION 5.7. NO CONFLICT. The execution, delivery and performance by each
Loan Party of the Loan Documents to which such Loan Party is a party, the
compliance by such Loan Party with the terms and provisions thereof and the
consummation of each of the transactions contemplated thereby, do not and will
not (i) require any consent or approval of the stockholders of such Loan Party,
or any authorization, consent or approval by any Governmental Authority or (ii)
by the lapse of time, the giving of notice or otherwise, (a) constitute a
violation of any Requirement of Law binding on such Loan Party or a breach of
any provision contained in the articles or certificate of incorporation or
bylaws of such Loan Party, (b) constitute a breach of any Material Contract of
such Loan Party or by which any Property of such Loan Party is bound, or (c)
result in or require the creation or imposition of any Lien whatsoever upon any
of the Properties of such Loan Parties (other than Liens permitted pursuant to
SECTION 7.2 and Liens in favor of INCC which are being assigned to the Agent and
the Banks concurrently with the closing of this Credit Agreement).
SECTION 5.8. FULL DISCLOSURE. No certificate, statement or other
information delivered herewith or heretofore by any Loan Party to the Agent or
the Banks in connection with the negotiation of this
-42-
Credit Agreement or in connection with any transaction contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact known to any Loan Party (other than industry-wide risks normally associated
with the types of businesses conducted by such Loan Party) necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made. There is no fact known to any Loan Party that has not been
disclosed to the Banks in writing which could materially and adversely affect
any Loan Party's Properties, business, prospects or conditions (financial or
otherwise) or any Loan Party's Consolidated Properties, business, prospects or
condition (financial or otherwise). There are no statements or conclusions in
any Engineering Report which are based upon or include any material misstatement
of information or fail to take into account or omit to state a material
information regarding the matters reported therein, it being understood that
each Engineering Report is necessarily based upon professional opinions,
estimates and projections and that the Loan Parties do not warrant that such
opinions, estimates and projections will ultimately prove to have been accurate.
The Borrower has heretofore delivered to the Banks true, correct and complete
copies of the Initial Financial Statements and the Initial Engineering Reports.
SECTION 5.9. LITIGATION. Except as disclosed in the Initial Financial
Statements or in the DISCLOSURE SCHEDULE: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Loan Party threatened, against any Loan Party before any
Governmental Authority, which could reasonably be expected to result in a
Material Adverse Effect and (ii) there are no outstanding judgments,
injunctions, writs, rulings or orders by any such Governmental Authority against
any Loan Party or any such Loan Party's stockholders, partners, directors or
officers which have or could reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.10. OIL AND GAS INTERESTS; PROPERTIES GENERALLY.
(a) Each Loan Party owns not less than the undivided working and net
revenue interests in the Borrowing Base Properties of such Loan Party set forth
in the Initial Engineering Reports. Each of the oil and gas leases covering the
Borrowing Base Properties is in full force and effect, free and clear of
defaults thereunder by such Loan Party, except such defaults which would not be
regarded as material by a prudent oil and gas operator and which could not
reasonably be expected to result in a Material Adverse Effect. No Loan Party has
received any notices or claims of default by such Loan Party under any of such
oil and gas leases which are outstanding and unresolved. Each Loan Party has
good and defensible title to all Borrowing Base Properties of such Loan Party
described in the most recent Engineering Report delivered to the Banks, free and
clear of (a) all Liens except the Liens permitted by SECTION 7.2 and (b) all
other title defects or rights or claims of third Persons, except such title
defects, rights or claims which would not be regarded as material by a prudent
oil and gas operator and which will not have a Material Adverse Effect. The
Borrowing Base Properties may be subjected to the Liens contemplated by the
Security Documents without violation of the terms of any oil and gas lease or
any other agreement pertaining thereto, and upon any foreclosure or other
realization of rights by the secured party under any Security Document, the
Borrowing Base Properties subject thereto may be transferred to the secured
party, or its assignee, in accordance with the terms of such Security Document.
(b) With respect to all other Properties of Borrower and its Subsidiaries
not covered by SECTION 5.10(A) above, Borrower and each of its Subsidiaries have
good and valid fee simple or leasehold title to all material Properties
purported to be owned by them, including, without limitation, all assets
reflected in the balance sheets referred to in SECTION 5.5(A) and all assets
which are used by Borrower and its Subsidiaries in the operation of their
respective businesses, and none of such Properties is subject to any Lien other
than Liens permitted by SECTION 7.2.
-43-
SECTION 5.11. TAXES. Each of the Loan Parties and each of its Subsidiaries
has filed or caused to be filed all tax returns which, to the knowledge of such
Loan Party or its Subsidiary, as the case may be, are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against such Loan Party, any Subsidiary of such Loan Party or
any of such Loan Party's Property or the Property of any Subsidiary of such Loan
Party and all other taxes, fees or other charges imposed on such Loan Party, any
Subsidiary of such Loan Party or any Property of such Loan Party or Subsidiary
of such Loan Party by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which adequate reserves (based on such Loan
Party's good faith estimate of the contested liability) have been provided on
the books of such Loan Party or Subsidiary of such Loan Party); no tax Lien has
been filed, and, to the knowledge of such Loan Party, no claim is being
asserted, with respect to any such tax, fee or other charge.
SECTION 5.12. ERISA LIABILITIES. All currently existing ERISA Plans are
listed in the DISCLOSURE SCHEDULE. Except as disclosed in the Initial Financial
Statements or in the DISCLOSURE SCHEDULE, no Termination Event has occurred with
respect to any ERISA Plan and each Loan Party is in compliance with ERISA in all
material respects. No Loan Party is required to contribute to, or has any other
absolute or contingent liability in respect of, any "multiemployer plan" as
defined in Section 4001 of ERISA. Except as set forth in the DISCLOSURE
SCHEDULE: (i) no "accumulated funding deficiency" (as defined in Section 412(a)
of the Internal Revenue Code of 1986, as amended) exists with respect to any
ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, and (ii) the current value of each ERISA Plan's benefits does not
exceed the current value of such ERISA Plan's assets available for the payment
of such benefits by more than $500,000.
SECTION 5.13. NAMES AND PLACES OF BUSINESS. No Loan Party has, since
formation, had, been known by, or used any other partnership, trade or
fictitious name, except as disclosed in the DISCLOSURE SCHEDULE. Except as
otherwise indicated in the DISCLOSURE SCHEDULE, the chief executive office and
principal place of business of each Loan Party are (and since formation have
been) located at the address of the Borrower set out in SECTION 11.3. Except as
indicated in the DISCLOSURE SCHEDULE, no Loan Party has any other office or
place of business.
SECTION 5.14. LOAN PARTIES' SUBSIDIARIES. No Loan Party presently has any
Subsidiary or own any stock in any other corporation or association except those
listed in the DISCLOSURE SCHEDULE. No Loan Party is a member of any general or
limited partnership, joint venture or association of any type whatsoever except
those listed in the DISCLOSURE SCHEDULE. As of the date hereof each Loan Party
owns, directly or indirectly, the equity interest in each of its Subsidiaries
which is indicated in the DISCLOSURE SCHEDULE.
SECTION 5.15. GOVERNMENT REGULATION. No Loan Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 (as any of the preceding acts have been amended)
or any other statute, law, regulation or decree which regulates the incurring by
such Person of Debt, including statutes, laws, regulations or decrees relating
to common contract carriers or the sale of electricity, gas, steam, water or
other public utility services.
SECTION 5.16. INSIDER. No Loan Party nor any Person having "control" (as
that term is defined in 12 U.S.C. ss. 375(b)(5) or in regulations promulgated
pursuant thereto) of any Loan Party is an "executive officer", "director" or
"principal shareholder" (as those terms are defined in 12 U.S.C. ss. 375(b) or
in regulations promulgated pursuant thereto) of any Bank, of a bank holding
company of which any Bank is a Subsidiary or of any Subsidiary of a bank holding
company of which any Bank is a Subsidiary.
-44-
SECTION 5.17. PROCEEDS OF LOANS; REGULATION U. The proceeds of the Loans
shall be used as set forth in SECTION 2.3. The Borrower is not engaged
principally, or as one of the Borrower's important activities, in the business
of extending credit to others for the purpose of purchasing or carrying such
Margin Stock, and no part of the proceeds of any Loans will be used to purchase
or carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock. No more than 25% of the assets of the
Borrower and its Subsidiaries are Margin Stock. None of the Borrower and its
Subsidiaries nor any agent acting on their behalf, have taken or will knowingly
take any action which would cause this Credit Agreement or any other Loan
Document to violate Regulation U or Regulation X or to violate the Securities
Exchange Act of 1934, as amended.
SECTION 5.18. ENVIRONMENTAL MATTERS. Except as disclosed on the DISCLOSURE
SCHEDULE or as could not reasonably be expected to result in a Material Adverse
Effect:
(a) Each Loan Party and each of its Subsidiaries is in compliance with all
applicable Environmental Laws;
(b) Each Loan Party and each of its Subsidiaries has obtained all consents
and permits required under all applicable Environmental Laws to operate its
business as presently conducted or as proposed to be conducted and all such
consents and permits are in full force and effect and such Loan Party and its
Subsidiaries are in compliance with all terms and conditions of such approvals;
(c) No Loan Party nor any of its Subsidiaries or any of the present
Property or operations or the past Property or operations of such Loan Party or
any Subsidiary of such Loan Party is subject to any order from or agreement with
any Governmental Authority or private party respecting (i) failure to comply
with any Environmental Law or any Remedial Action or (ii) any Environmental
Liabilities arising from the Release or threatened Release except those orders
and agreements with which such Loan Party or such Subsidiary of such Loan Party
has complied;
(d) None of the operations of such Loan Party or any Subsidiary of such
Loan Party is subject to any judicial or administrative proceeding alleging a
violation of, or liability under, any Environmental Law;
(e) None of the operations of such Loan Party or any Subsidiary of such
Loan Party, to its best knowledge after due inquiry, is the subject of any
investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to a Release or threatened Release;
(f) Neither such Loan Party nor any Subsidiary of such Loan Party has been
required to file any notice under any Environmental Law indicating past or
present treatment, storage or disposal of a hazardous waste as defined by 40 CFR
Part 261 or any state or local equivalent;
(g) Neither such Loan Party nor any Subsidiary of such Loan Party has been
required to file any notice under any applicable Environmental Law reporting a
Release (other than minor or DE MINIMIS Releases);
(h) There is not now, nor, to the best knowledge of such Loan Party, has
there ever been, on or in any Property of such Loan Party or of any Subsidiary
of such Loan Party:
(i) any unauthorized generation, treatment, recycling, storage or
disposal of any hazardous waste as defined by 40 CFR Part 261 or
any state or local equivalent,
-45-
(ii) any underground storage tanks or surface impoundments without
proper permits,
(iii)any asbestos-containing material, or
(iv) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment;
(i) There have been no written commitments or agreements involving such
Loan Party or any Subsidiary of such Loan Party from or with any Governmental
Authority or any private entity (including, without limitation, the owner of the
Property or any portion thereof) relating to the generation, storage, treatment,
presence, Release, or threatened Release on or into any of the Properties of
such Loan Party or any Subsidiary of such Loan Party or the environment
(including off-site disposal of Hazardous Materials) or any Remedial Action with
respect thereto in non-compliance or violation of any Environmental Law;
(j) No Loan Party nor any Subsidiary of such Loan Party has received any
written notice or claim to the effect that it is or may be liable to any Person
as a result of the Release or threatened Release;
(k) No Loan Party nor any Subsidiary of such Loan Party has any known
liability in connection with any material Release or material threatened
Release; and
(l) After due inquiry, no Environmental Lien has attached to any Properties
of such Loan Party or any Subsidiary of such Loan Party.
(m) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
any Loan Party in relation to any Properties or facility now or previously owned
or leased by any Loan Party which have not been made available to the Banks.
SECTION 5.19. REGULATORY CONTROLS. Except as disclosed on the DISCLOSURE
SCHEDULE, no Loan Party has received any notices concerning, and there are no
existing orders of, proceedings pending before or other requirements of any
Governmental Authority, expressly including the Bureau of Land Management,
Minerals Management Service, or the Federal Energy Regulatory Commission and the
comparable Governmental Authority for the States of Alabama, Colorado,
Louisiana, Mississippi, Oklahoma, Texas and Utah, other than as may affect the
oil and gas industry in general, which (a) could or will materially interfere
with such Loan Party's development, production, operation, transportation and/or
marketing of the such Loan Party's Oil and Gas Interests or (b) could or will
require such Loan Party to refund any portion of the proceeds received or to be
received from the sale of Hydrocarbons from such Loan Party's Oil and Gas
Interests.
SECTION 5.20. ENGINEERING REPORT. The Initial Engineering Reports are based
upon the working and net revenue interests of the Loan Parties in the Borrowing
Base Properties which are identified in SCHEDULE 5.10 and represent an estimate
of the value of the Proved Reserves of the Borrowing Base Properties. No Loan
Party is aware of any misstatement of fact in the statement of assumptions
underlying the preparation of the Initial Engineering Reports. There have been
no changes (other than projected production declines disclosed in the Initial
Engineering Reports) in the Borrowing Base Properties that would result in a
Material Adverse Effect since the effective date of the Initial Engineering
Reports.
-46-
SECTION 5.21. DESIGNATED CONTRACTS. None of the Designated Contracts
contain any unusual or burdensome provisions that will materially affect or
impair the operation of the Borrower or any of its Subsidiaries. None of the
Designated Contracts have been terminated or modified (other than modifications
made prior to the date hereof and disclosed to the Banks, or as permitted under
this Credit Agreement) and each such Designated Contract is in full force and
effect as of the date hereof. As of the date hereof such Designated Contracts
constitute all material agreements with respect to the Borrowing Base Properties
of the Borrower and the Subsidiary Guarantors. Neither the Borrower nor any
Subsidiary of the Borrower is a partner or joint venturer in any other
partnership or joint venture covering or affecting the Borrowing Base Properties
not covered by the Designated Contracts. Neither the Borrower nor any Subsidiary
or Affiliate of the Borrower is in default in any material respect under any
Designated Contract to which it is a party, and the Borrower has no knowledge
that any other party to any Designated Contract is in default in any material
respect thereof.
SECTION 5.22. SOLVENCY. No Loan Party nor any Subsidiary of a Loan Party
(i) is "insolvent" (within the meaning of Section 101(32) of the Bankruptcy
Code, Section 2 of the Uniform Fraudulent Conveyance Act or Section 2 of the
Uniform Fraudulent Transfer Act) or will become insolvent as a result of the
incurrence of any obligation under any Loan Document to which it is a party;
(ii) has unreasonably small capital (after giving effect to the transactions
contemplated in any Loan Document to which it is a party) for the conduct of its
existing and contemplated business and (iii) is unable to perform its contingent
obligations and other commitments as they mature in the normal course of
business.
SECTION 5.23. BUSINESS. No Loan Party nor any Subsidiary of any Loan Party
has conducted or is conducting any business other than business relating to the
acquisition, exploration, development, financing, ownership, operation,
maintenance, storage, trading, transporting and marketing of its Oil and Gas
Interests as currently conducted.
SECTION 5.24. MORTGAGED PROPERTY. As of the Effective Date, the Borrowing
Base Properties described on SCHEDULE 5.10 hereto are (i) subject to and covered
by the Lien of the Mortgages, (ii) the subject of updated title opinions
satisfactory to the Required Banks, and (iii) have an aggregate Recognized
Reserve Value of at least $30,000,000.
SECTION 5.25. CONSOLIDATED BUSINESS ENTITY. The Borrower and its
Subsidiaries are operated as a part of one consolidated business entity and are
directly or indirectly dependent upon each other for and in connection with
their respective business activities.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as this Credit Agreement shall remain in effect or the principal of
or interest on any Loan, or any Letter of Credit, or any reimbursement
obligation with respect to any Letter of Credit, or any commitment or other fee,
expense, compensation or any other amount payable under any Loan Document shall
remain unpaid or outstanding or the Banks shall have any Commitments hereunder
unless the Required Banks shall otherwise consent in writing, the Borrower
warrants, covenants and agrees that:
SECTION 6.1. PAYMENT AND PERFORMANCE. The Borrower will pay all amounts due
under each Loan Document to which it is a party in accordance with the terms
thereof and will observe, perform and
-47-
comply with every covenant, term and condition expressed or implied therein. The
Borrower will cause each other Loan Party to pay all amounts due under each Loan
Document to which such Loan Party is a party in accordance with the terms
thereof and to observe, perform and comply with every such term, covenant and
condition expressed or implied therein.
SECTION 6.2. BOOKS, FINANCIAL STATEMENTS AND REPORTS. The Borrower will at
all times maintain, and will cause each other Loan Party to at all times
maintain, full and accurate books of account and records. The Borrower will
maintain, and will cause each other Loan Party to maintain, a standard system of
accounting and the Borrower will furnish, or cause to be furnished, the
following statements and reports to the Banks at the Borrower's expense:
(a) As soon as available, and in any event within ninety (90) days after
the end of each Fiscal Year, complete Consolidated financial statements of the
Borrower and its Subsidiaries together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an opinion, based on an
audit using generally accepted auditing standards, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., or
other independent certified public accountants selected by the Borrower and
acceptable to the Required Banks, stating that such Consolidated financial
statements have been so prepared. These financial statements shall contain a
Consolidated balance sheet as of the end of such Fiscal Year and Consolidated
statements of earnings, of cash flows, and of changes in owners' equity for such
Fiscal Year, each setting forth in comparative form the corresponding figures
for the preceding Fiscal Year. In addition, within ninety (90) days after the
end of each Fiscal Year the Borrower will furnish a report signed by such
accountants stating that they have read this Credit Agreement, containing
calculations showing compliance (or non-compliance) at the end of such Fiscal
Year with the requirements of SECTION 7.14 and further stating that in making
the examination and reporting on the Consolidated financial statements described
above they did not conclude that any Default existed at the end of such Fiscal
Year or at the time of their report, or, if they did conclude that a Default
existed, specifying its nature and period of existence.
(b) As soon as available, and in any event within forty-five (45) days
after the end of each Fiscal Quarter, the Borrower's Consolidated balance sheet
as of the end of such Fiscal Quarter and Consolidated statements of the
Borrower's earnings and cash flows for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail
and prepared in accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition, the Borrower will, together with each such
set of financial statements and each set of financial statements furnished under
subsection (b)(i) of this section, furnish a certificate in the form of EXHIBIT
J (the "COMPLIANCE CERTIFICATE") (i) signed by the chief financial officer of
the Borrower stating that such financial statements are accurate and complete,
stating that he has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with the
requirements of SECTION 7.14 and stating that no Default exists at the end of
such Fiscal Quarter or at the time of such certificate or specifying the nature
and period of existence of any such Default and (ii) signed by the Responsible
Officer of the Borrower in charge of environmental compliance stating that the
Borrower and its Subsidiaries are in substantial compliance with all
Environmental Laws and permits.
(c) Promptly upon their becoming available, copies of all financial
statements, reports and notices sent by any Loan Party to its joint venturers,
partners or shareholders, and all registration statements, periodic reports and
other statements and schedules filed by any Loan Party with any securities
exchange, the Securities and Exchange Commission or any similar Governmental
Authority.
(d) By March 31 of each year, an Engineering Report effective as of
December 31 of such year prepared by ▇▇▇▇▇▇▇▇▇▇ & Co., Inc., or other
independent petroleum engineers chosen by the Loan Parties and acceptable to the
Banks, and by September 30 of each year, an Engineering Report effective as of
June 30 of such year prepared by personnel of the Loan Parties. Each Engineering
Report shall
-48-
be in form and substance reasonably satisfactory to each Bank covering all of
the Borrowing Base Properties, shall set forth the Proved Reserves attributable
to such Borrowing Base Properties and a projection of the rate of production and
net income with respect to the Proved Reserves as of the date of such
Engineering Report, all in accordance with the guidelines published by the
Securities and Exchange Commission. If requested by the Banks, the Loan Parties
shall permit and cooperate with, at the Borrower's cost and expense, an annual
review on or about June 30 of each year of the changes since the preparation of
the most recent Engineering Reports prepared by the independent petroleum
engineer which review shall be conducted by an independent consulting engineer
selected by the Banks. Each report shall take into account any "over-produced"
status under gas balancing arrangements, and, if applicable, shall contain
information and analysis comparable in scope to that contained in the Initial
Engineering Reports. Each report concerning all Borrowing Base Properties of the
Loan Parties shall distinguish (or shall be delivered together with a
certificate from an appropriate officer of such Loan Party which distinguishes)
those Properties treated in the report which are Collateral from those
Properties treated in the report which are not Collateral.
(e) As soon as available, and in any event within forty-five (45) days
after the end of each month, a report describing by lease or reporting unit the
gross volume of production and sales attributable to production during such
month from the Borrowing Base Properties described in SECTION 6.2(D) above and
describing the related severance taxes, other taxes, leasehold operating
expenses and capital costs attributable thereto and incurred during such month.
(f) If requested by the Agent, each Loan Party shall permit and cooperate
with an environmental and safety review made in connection with any of the Loan
Party's Borrowing Base Properties acquired after the Closing Date. Such review
shall be made no more than one time during each Fiscal Year beginning with the
Fiscal Year 1997, by Pilko & Associates or other consultants selected by the
Required Banks.
(g) Concurrently with the annual renewal of the insurance policies of each
Loan Party, the Borrower shall, if requested by the Agent in writing, cause a
certificate or report to be issued by ▇.▇. ▇▇▇▇▇▇ & Associates or other
insurance consultants satisfactory to the Required Banks certifying that each
Loan Party's insurance for the next succeeding year after such renewal (or for
such longer period for which such insurance is in effect) complies with the
provisions of this Credit Agreement and the Security Documents.
SECTION 6.3. OTHER INFORMATION AND INSPECTIONS. Each Loan Party will
furnish to the Agent any information which the Banks may from time to time
reasonably request through the Agent concerning any covenant, provision or
condition of the Loan Documents or any matter in connection with such Persons'
businesses and operations, including without limitation business plans,
environmental compliance matters, budgets, forecasts and sales reports. Subject
to SECTION 6.2(F), each Loan Party will permit representatives appointed by the
Agent (including independent accountants, agents, attorneys, appraisers and any
other Persons) to visit during normal business hours at their sole risk and
inspect any of such Person's Property, including its books of account, other
books and records, and any facilities or other business assets, and to make
extra copies therefrom and photocopies and photographs thereof, and to write
down and record any information such representatives obtain, and each Loan Party
shall permit the Agent or its representatives to investigate and verify the
accuracy of the information furnished to the Agent in connection with the Loan
Documents and to discuss all such matters with its officers, employees and
representatives. Each of the Agent, the Issuing Bank and each Bank agrees that
it will take all reasonable steps to keep confidential any proprietary
information given to it by any Loan Party, provided, however, that this
restriction shall not apply to information which (i) has at the time in question
entered the public domain, (ii) is required to be disclosed by any Requirement
of Law (whether valid or invalid)
-49-
of any Governmental Authority, (iii) is disclosed to any Affiliate of the Agent,
the Issuing Bank or any Bank, auditors, attorneys, or agents, or (iv) is
furnished to any purchaser or prospective purchaser of participations or other
interests in the Loans or the Notes or the Letters of Credit. Notwithstanding
anything to the contrary contained herein, none of the Agent, the Issuing Bank
nor any Bank nor any of their respective representatives shall be entitled to
view or copy any information in any Loan Party's possession which is subject to
any confidentiality agreement with any third party without having first entered
into and agreeing to be bound by such confidentiality agreement.
SECTION 6.4. NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. The Borrower
shall deliver, or cause to be delivered, to the Agent:
(a) promptly and in any event within five (5) Business Days after any
Responsible Officer of the Borrower obtains knowledge thereof, notice of
any event or change which could reasonably be expected to result in a
Material Adverse Change,
(b) promptly (but in all events within five (5) Business Days) after
any Responsible Officer obtains knowledge thereof, notice of the occurrence
of any event which constitutes a Default or Event of Default, such notice
to specify the nature and period of existence of such Default or Event of
Default, and what action the Borrower has taken, are taking or propose to
take with respect thereto,
(c) promptly and in any event within five (5) Business Days after any
Responsible Officer of the Borrower obtains knowledge thereof, notice of
the occurrence of any Termination Event,
(d) promptly and in any event within five (5) Business Days after any
Responsible Officer of the Borrower obtains knowledge thereof, notice of
the institution of or threat in writing of, any material action, suit,
proceeding, governmental investigation or arbitration against or affecting
any Loan Party or any Subsidiary of a Loan Party not previously disclosed
in writing to the Banks, which if adversely determined, is likely to result
in a material judgment or liability in excess of $500,000 in the aggregate
and/or could reasonably be expected to result in a Material Adverse Effect,
or any material adverse development in any Existing Litigation,
Upon the occurrence of any of the foregoing each Loan Party, as relevant,
will take all necessary or appropriate steps to remedy promptly any such
material adverse change, Default, or Termination Event, to protect against any
such adverse claim or to defend any such suit or proceeding, and to resolve all
controversies on account of any of the foregoing. The Borrower will also notify
the Agent, the Issuing Bank, each Bank and the Agent's counsel in writing at
least twenty Business Days prior to the date that any Loan Party changes its
name or the location of its chief executive office or principal place of
business or the place where it keeps its books and records concerning the
Collateral, furnishing with such notice any necessary financing statement
amendments or requesting the Agent and its counsel to prepare the same.
SECTION 6.5. MAINTENANCE OF OWNERSHIP; PROPERTIES.
(a) Except as expressly permitted by the terms of this Credit Agreement,
each Loan Party shall maintain at all times (i) a net revenue interest in the
Borrowing Base Properties of such Loan Party not less than the net revenue
interest set forth in the most recent Engineering Report utilized by the Banks
in determining the then effective Borrowing Base, and (ii) a working interest in
the Borrowing Base Properties of such Loan Party not greater than the working
interest set forth in the most recent Engineering Report utilized by the Banks
in determining the then effective Borrowing Base.
-50-
(b) Each Loan Party will comply, and will cause each of its Subsidiaries to
comply, in all material respects with all Material Contracts applicable to or
relating to the Borrowing Base Properties.
(c) Each Loan Party will maintain, preserve, protect, and keep all
Collateral and all other material Property necessary in the conduct of its
business in good condition and in compliance with all applicable laws, rules and
regulations, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be properly and advantageously conducted at all times.
SECTION 6.6. MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Each Loan Party
which is a corporation or partnership will maintain and preserve its corporate
or partnership existence and its rights and franchises in full force and effect
and will qualify to do business as a foreign corporation or partnership in all
states or jurisdictions where required by applicable law, except where the
failure so to qualify could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 6.7. PAYMENT OF TRADE DEBT, TAXES, ETC. Each Loan Party will (i)
timely file all required tax returns; (ii) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or Property; (iii) within ninety (90) days after the same becomes due
pay all Debt owed by it on ordinary trade terms to vendors, suppliers and other
Persons providing goods and services used by it in the ordinary course of its
business; (iv) pay and discharge when due all other Debt now or hereafter owed
by it; and (v) maintain appropriate accruals and reserves for all of the
foregoing Debt in accordance with GAAP. Each Loan Party may, however, delay
paying or discharging any such Debt so long as it is in good faith contesting
the validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
SECTION 6.8. INSURANCE. Each Loan Party will maintain or cause to be
maintained, and will cause each Subsidiary of such Loan Party to maintain or
cause to be maintained (and will use all reasonable and necessary efforts to
cause all operators of Borrowing Base Properties to maintain or cause to be
maintained) at all times, insurance covering such risks as are customarily
carried by businesses similarly situated. Each Loan Party will maintain the
additional insurance coverage as described in the respective Security Documents.
Each Loan Party shall cause any insurance policies covering Collateral to be
endorsed (i) to provide for payment of losses to the Agent for the benefit of
the Banks as loss payee as its interests may appear, (ii) to provide that such
policies may not be canceled or reduced or affected in any material manner for
any reason without fifteen days prior notice to the Banks, (iii) to provide for
any other matters specified in any applicable Security Document or which
Required Banks may reasonably require; and (iv) to provide for insurance against
fire, casualty and any other hazards normally insured against, in the amount of
the full value (less a reasonable deductible not to exceed amounts customary in
the industry for similarly situated businesses and Properties) of the Property
insured. Each Loan Party shall at all times maintain insurance against its
liability for injury to Persons or Property with financially sound and reputable
insurers, and shall cause the Agent for the benefit of the Banks to be named as
additional insured on any such policies.
SECTION 6.9. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated by this Credit Agreement are consummated, the Loan Parties will
promptly (and in any event, within thirty (30) calendar days after any invoice
or other statement or notice) pay (i) all reasonable costs and expenses incurred
by or on behalf of the Agent (including reasonable attorneys' fees, consultants
fees and engineering fees and out-of-pocket expenses) in connection with (1) the
negotiation, preparation, execution and delivery of the Loan Documents, and any
and all consents, waivers or other documents or instruments relating thereto
(other than any costs or expenses incurred in connection with an assignment
under SECTION 11.4, including the preparation, execution and delivery of any
assignment
-51-
documents or new Notes), (2) the filing, recording, refiling and re-recording of
any Loan Documents and any other documents or instruments or further assurances
required to be filed or recorded or refiled or re-recorded by the terms of any
Loan Document, (3) the borrowings hereunder and other action reasonably required
in the course of administration hereof, (4) monitoring or confirming (or
preparation or negotiation of any document related to) any Loan Party's
compliance with any covenants or conditions contained in this Credit Agreement
or in any Loan Document, and (5) Upon and during the continuance of a Default,
the defense or enforcement of the Loan Documents (including this section) or the
defense of the Agent's, the Issuing Bank's or any Bank's exercise of its
respective rights under any of the Loan Documents; and (ii) all transfer, stamp,
mortgage, documentary or other similar taxes, assessments or charges levied by
any Governmental Authority in respect of this Credit Agreement or any of the
other Loan Documents or any other document referred to herein or therein. In
addition to the foregoing, until all Obligations have been paid in full, the
Loan Parties will also pay or reimburse the Agent for all reasonable
out-of-pocket costs and expenses of the Agent and its respective agents or
employees in connection with the continuing administration of the Loans, the
Letters of Credit and the related due diligence of the Agent.
SECTION 6.10. PERFORMANCE ON LOAN PARTIES' BEHALF. If any Loan Party fails
to pay any taxes, insurance premiums, expenses, attorneys' fees or other amounts
it is required to pay under any Loan Document, the Agent and/or the Banks may
pay the same. The Borrower shall immediately reimburse the Banks and/or the
Agent for any such payments and each amount paid by Banks and/or the Agent shall
constitute an Obligation owed hereunder which is due and payable on the date
such amount is paid by the Banks and/or the Agent.
SECTION 6.11. INTEREST. Each of the Loan Parties hereby promises to pay
interest to the Banks and/or the Agent, as the case may be, at the Default Rate
on all Obligations which such Loan Party has in this Credit Agreement or the
other Loan Documents promised to pay (including Obligations to pay fees or to
reimburse or indemnify the Banks and/or the Agent) and which are not paid when
due.
SECTION 6.12. COMPLIANCE WITH AGREEMENTS AND LAW. Each Loan Party will
perform all material obligations it is required to perform under the terms of
each Material Contract to which it is a party or by which it or any of its
Properties is bound. Each Loan Party will conduct its business and affairs in
compliance with all laws, regulations, and order applicable thereto.
SECTION 6.13. ENVIRONMENTAL MATTERS.
(a) Each Loan Party will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Loan Party and shall
obtain, at or prior to the time required by applicable Environmental Laws, all
environmental, health and safety permits, licenses and other authorizations
necessary for its operations and will maintain such authorizations in full force
and effect.
(b) Each Loan Party will promptly furnish to the Agent all written notices
of violation, orders, claims, citations, complaints, penalty assessments, suits
or other proceedings received by any Loan Party, or of which it has notice,
pending or threatened against any Loan Party, by any Governmental Authority with
respect to any alleged violation of or non-compliance with any Environmental
Laws or any permits, licenses or authorizations in connection with its ownership
or use of its Properties or the operation of its business, except where any such
alleged violations or incidents of non-compliance would not, individually or in
the aggregate, result in a penalty, assessment, fine or other cost or liability
exceeding $500,000.
(c) Each Loan Party will promptly furnish to the Agent all requests for
information, notices of claim, demand letters, and other notifications, received
by any Loan Party in connection with its
-52-
ownership or use of its Properties or the conduct of its business, relating to
potential responsibility with respect to any investigation or clean-up of
Hazardous Materials at any location, except where any such alleged
responsibility would not, individually or in the aggregate, result in a penalty,
assessment, fine or other cost or liability exceeding $500,000.
SECTION 6.14. EVIDENCE OF COMPLIANCE. Each Loan Party will furnish to the
Agent at such Loan Party's expense all evidence which the Agent from time to
time reasonably request on behalf of the Banks, or any Bank, as to the accuracy
and validity of or compliance with all representations, warranties and covenants
made by any Loan Party in the Loan Documents, the satisfaction of all conditions
contained therein, and all other matters pertaining thereto.
ARTICLE VII
NEGATIVE COVENANTS
So long as this Credit Agreement shall remain in effect or the principal of
or interest on any Loan, or any Letter of Credit, or any reimbursement
obligation with respect to any Letter of Credit, or any commitment or other fee,
expense, compensation or any other amount payable under any Loan Document shall
remain unpaid or outstanding or the Banks shall have any Commitments hereunder
unless the Required Banks shall otherwise consent in writing, the Borrower
warrants, covenants, and agrees that:
SECTION 7.1. LIMITATIONS ON DEBT. The Borrower shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or otherwise become or
remain liable with respect to, any Debt, except for:
(a) Debt arising hereunder and under the other Loan Documents;
(b) Debt outstanding on the Effective Date and described in the DISCLOSURE
SCHEDULE, in each case in a principal amount at any one time outstanding not to
exceed the amount set forth in the DISCLOSURE SCHEDULE hereof and secured only
by the Property described in the DISCLOSURE SCHEDULE;
(c) Endorsements of negotiable instruments for collection in the ordinary
course of business;
(d) Current liabilities (exclusive of Funded Debt) for accounts payable and
expense accruals incurred or assumed in the ordinary course of business,
PROVIDED such accounts payable have not remained unpaid for a period of one
hundred twenty (120) days after the same were incurred unless currently being
contested in good faith or by appropriate proceedings;
(e) Liabilities for taxes, assessments, governmental charges or levies not
yet due and payable;
(f) Liabilities incurred under Commodity Hedge Transactions permitted
pursuant to SECTION 7.3 hereof;
(g) Debt of the Subsidiary Guarantors owing to the Borrower evidenced by
the Intercompany Loan Documents, PROVIDED, that the aggregate amount of all Debt
incurred by the Subsidiary Guarantors pursuant to this SUBSECTION 7.1(G) shall
not exceed the Total Commitment at any one time outstanding;
-53-
(h) Debt of the Loan Parties which is also an Investment to the extent
permitted by SUBSECTION 7.7(D), (E) ,(F) OR (G) hereof;
(i) Unsecured Debt of Borrower issued subsequent to the Closing Date (a) in
a principal sum that is acceptable to the Required Banks in their sole and
absolute discretion, (b) that is expressly subordinated to the Obligations on
terms acceptable to the Required Banks in their sole and absolute discretion,
(c) that does not provide for payment of any principal (including sinking fund
payments) prior to the October 31, 2000, other than redemptions or prepayments,
if any, which may be required in the event of the death of a holder of such
Subordinated Obligations, PROVIDED, that such prepayments or redemptions shall
not exceed $300,000 in any Fiscal Year, and (d) that contains such affirmative
and negative covenants and events of default as may be acceptable to the
Required Banks in their sole and absolute discretion ("Subordinated
Obligations"); and
(j) Additional Debt not permitted by SUBSECTIONS 7.1(A) THROUGH (I) above,
PROVIDED, HOWEVER, that the aggregate amount of all Debt incurred by the
Borrower and its Subsidiaries pursuant to SECTIONS 7.1(J), 7.7(F) AND 7.11 shall
not exceed $5,500,000 at any one time outstanding.
SECTION 7.2. LIMITATIONS ON LIENS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, create, assume or permit to exist any Lien
upon any of the Properties which it now owns or hereafter acquires, except, to
the extent not otherwise forbidden by the Security Documents:
(a) Liens which secure Obligations only;
(b) Statutory Liens for taxes, statutory mechanics' and materialmen's Liens
incurred in the ordinary course of business, and other similar Liens incurred in
the ordinary course of business, provided such Liens do not secure Funded Debt
and secure only Debt which is not delinquent or which is being contested as
provided in SECTION 6.7;
(c) Production Sales Contracts, division orders, operating agreements and
other agreements customary in the oil and gas business for processing and
selling Hydrocarbons, PROVIDED that no Debt which is secured by any Liens
created thereunder is overdue, or if overdue, such Debt is being contested in
good faith by appropriate proceedings and adequate reserves are maintained on
the books of such Person with respect thereto (based on the Borrower's good
faith estimate of the contested Debt) and only insofar as they do not (i) reduce
the net revenue interest of any Loan Party in any Borrowing Base Property below
the undivided net revenue interest specified for such Loan Party in the most
recent Engineering Report utilized by the Banks in determining the then
effective Borrowing Base and/or (ii) increase the undivided working interest
specified for such Loan Party in the most recent Engineering Report utilized by
the Banks in determining the then effective Borrowing Base; and
(d) Liens on the Property located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ securing the Debt described in SECTION 7.1(B) above.
(e) Liens consisting of pledges or deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(f) Liens consisting of deposits of Property to secure the performance of
bids, trade contracts (other than for Debt), leases (other than Capitalized
Lease Obligations), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business;
-54-
(g) Liens in respect of margin deposits permitted under SUBSECTION 7.7(F)
securing Debt permitted under SUBSECTION 7.1(F);
(g) Purchase money Liens upon or in any Property acquired by a Loan Party
or any of its Subsidiaries in the ordinary course of business to secure the
deferred portion of the purchase price of such Property or any indebtedness
incurred to finance the acquisition of such Property PROVIDED, HOWEVER, that (i)
no such Lien shall be extended to cover Property other than the Property being
acquired, and (ii) the Debt secured thereby is permitted pursuant to SUBSECTION
7.1(J); and
(h) All other non-consensual Liens arising in the ordinary course of any
Loan Party's or such Subsidiary's business or incidental to the ownership of
their respective Properties;
PROVIDED, that no such Lien shall secure the payment of Debt that is delinquent
and PROVIDED, FURTHER, that no Permitted Lien referred to in subclauses (b)
through (h) above shall in the aggregate materially detract from the value or
marketability of the Property subject thereto or materially impair the use or
operation thereof in the operation of the business of the Borrower or such
Subsidiary.
SECTION 7.3. HEDGE TRANSACTIONS. The Borrower will not enter into, and the
Borrower will not permit any of its Subsidiaries to enter into, any Commodity
Hedge Transaction or Interest Hedge Transactions, or in any manner be liable on
any Commodity Hedge Transaction or Interest Hedge Agreement, except:
(a) Commodity Hedge Transactions entered into with the purpose and effect
of fixing pricing on oil and/or gas expected to be produced by any Loan Party,
provided that at all times: (1) no such contract fixes a price for a term of
more than twenty-four (24) months unless approved in writing by the Required
Banks not to be unreasonably withheld; (2) the aggregate monthly production
covered by all such contracts (determined, in the case of contracts that are not
settled on a monthly basis, by a monthly proration acceptable to the Required
Banks) for any single month does not in the aggregate exceed seventy-five
percent (75%) of Loan Parties' aggregate projected oil and gas production from
Proved Developed Producing Hydrocarbon Reserves anticipated to be sold in the
ordinary course of the Loan Parties' businesses for such month, (3) no such
contract requires any Loan Party to put up any security against the event of its
nonperformance other than letters of credit or deposits of money prior to actual
default by such Loan Party in performing its obligations thereunder permitted by
SECTION 7.7(F) and (4) each such contract shall be either in existence as of the
Closing Date or with a Bank or any Affiliate of such Bank, Enron Risk Management
Services Corp. (so long as Enron Corporation, its corporate parent, has
investment grade-rated long-term obligations by Standard & Poor's Corporation or
▇▇▇▇▇'▇ Investors Services), or with a counterparty or have a guarantor of the
obligation of the counterparty who, at the time the contract is made, has
long-term obligations rated AA or Aa2 or better, respectively, by Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investors Services, Inc. (or a successor credit
rating agency) or approved in writing by the Required Banks.
(b) Interest Hedge Agreements entered into with the purpose and effect of
fixing interest rates on a principal amount of indebtedness of the Borrower that
is accruing interest at a variable rate, provided that (1) the aggregate
notional amount of such contracts never exceeds eighty percent (80%) of the
anticipated outstanding principal balance of the indebtedness of the Borrower to
be hedged by such contracts or an average of such principal balances calculated
using a generally accepted method of matching interest swap contracts to
declining principal balances, (2) the floating rate index of each such contract
generally matches the index used to determine the floating rates of interest on
the corresponding indebtedness of the Borrower to be hedged by such contract and
(3) each such contract shall be with a Bank or an Affiliate of such Bank or with
a counterparty or have a guarantor of the obligation of the counterparty who, at
the time the contract is made, has long-term obligations rated AA or Aa2 or
better,
-55-
respectively, by Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Services,
Inc. (or a successor credit rating agency).
SECTION 7.4. LIMITATION ON CONSOLIDATION, MERGERS AND ACQUISITIONS;
FUNDAMENTAL CHANGES. The Borrower shall not, and shall not permit any of its
Subsidiaries to, merge or acquire substantially all of the outstanding capital
stock or assets of any other Person or liquidate, wind up or dissolve (or suffer
any liquidation or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or any substantial
part of its business, property or assets, whether now or hereafter acquired,
except for transactions in the nature of a consolidation and/or merger (i)
involving the Borrower in which the Borrower is the surviving entity, or (ii)
involving a Subsidiary Guarantor in which the surviving entity is a wholly owned
Subsidiary of the Borrower and has duly executed and delivered a joinder to the
Subsidiary Guaranty pursuant to SECTION 8.5, or (iii) involving any other wholly
owned Subsidiary of the Borrower in which such wholly owned Subsidiary is the
surviving entity, subject in each case to the condition that immediately after
such merger or consolidation and after giving effect and PRO FORMA effect
thereto for the immediately preceding twelve-month period, no Event of Default
or Default shall have occurred, exist or be continuing. No Subsidiary Guarantor
will issue any additional units of ownership or shares of capital stock or other
securities or any options, warrants or other rights to acquire such additional
units, shares or other securities unless such additional units of ownership or
shares of capital stock or other securities or any options, warrants or other
rights to acquire such additional units, shares or other securities are owned by
the Borrower or a Subsidiary Guarantor. No Subsidiary of a Loan Party which is a
partnership or joint venture will allow any diminution of such Loan Party's
interest (direct or indirect) therein.
SECTION 7.5. LIMITATION ON SALES OF PROPERTY. The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign, transfer, lease,
convey or otherwise dispose of any of any of its material Properties or any
material interest therein except, to the extent not otherwise forbidden under
the Security Documents:
(a) sales of equipment which is worthless or obsolete or which is replaced
by equipment of equal suitability and value;
(b) sales of inventory (including Hydrocarbons sold as produced and seismic
data) which is sold in the ordinary course of business on ordinary trade terms;
or
(c) sales of Properties for fair market value on an arm's length basis in
an aggregate amount for Borrower and its Subsidiaries not to exceed $1,000,000
during any six month period between Periodic Determinations.
No Loan Party will sell, transfer or otherwise dispose of units of
ownership or capital stock of any other Loan Party, except to the Borrower or
another Loan Party. No Loan Party will discount, sell, pledge or assign any
notes payable to it, accounts receivable or future income except to the extent
expressly permitted under the Loan Documents.
SECTION 7.6. LIMITATION ON DISTRIBUTIONS. The Borrower will not directly or
indirectly declare or pay or incur any liability to pay, and the Borrower will
not permit any of its Subsidiaries to directly or indirectly declare or pay, or
incur any liability to pay any Distributions, except that:
(a) any Subsidiary of the Borrower may make unlimited Distributions to the
Borrower or any Subsidiary Guarantor; and
-56-
(b) the Borrower may pay regularly scheduled Distributions to the holders
of Preferred Stock from funds legally available for such purpose; and
(c) the Borrower may make payments of Subordinated Obligations permitted in
accordance with SECTION 7.1(I)(C) above.
It shall be a condition to each Distribution permitted by the provisions of
SECTION 7.6(B) that at the time such Distribution is made: (i) no payment of
principal, interest, fees or other amount required hereunder or under the Loan
Documents has become due and has not been paid, (ii) no Default or Event of
Default has occurred, is continuing and has not been waived by the Banks or
would occur as a result of the making of such Distribution, (iii) no Borrowing
Base Deficiency exists or is reasonably expected to exist as of the next
Determination Date, and (iv) after giving effect to the proposed Distribution
the Borrower is in compliance with covenants contained in SECTION 7.14 as of
(and as if the most recently ended Fiscal Quarter of the Borrower had ended on)
the date such Distribution is made.
SECTION 7.7. LIMITATION ON INVESTMENTS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, make, directly or indirectly, any
Investments, except:
(a) Investments existing on the date hereof and disclosed on the DISCLOSURE
SCHEDULE;
(b) Permitted Investments;
(c) Customary and prudent extensions of credit to customers buying goods
and services in the ordinary course of business;
(d) Intercompany Loans made by the Borrower to a Subsidiary Guarantor
pursuant to the Intercompany Loan Documents;
(e) Investments in the Borrower made in the ordinary course of business;
(f) Margin deposits or Letters of Credit posted in connection with any
Hedge Transaction permitted pursuant to SECTION 7.3, PROVIDED such margin
deposits and Letters of Credit do not exceed, in the aggregate for all such
margin deposits and Letters of Credit at any one time outstanding, the sum of
$2,500,000;
(g) Acquisitions permitted under SECTION 7.4 hereof; and
(h) Investments in connection with or related to farm-out, farm-in, joint
operating, joint venture or area of mutual interest agreements, gathering
systems, pipelines or other similar or customary arrangements entered into in
the ordinary course of business only insofar as they do not (i) reduce the net
revenue interest of the Loan Parties in any Borrowing Base Property below the
undivided net revenue interest specified for such Loan Parties in the most
recent Engineering Report utilized by the Banks in determining the then
effective Borrowing Base and/or (ii) increase the undivided working interest
without a corresponding increase in the net revenue interest specified for such
Loan Parties in the most recent Engineering Report utilized by the Banks in
determining the then effective Borrowing Base.
SECTION 7.8. LIMITATION ON NEW BUSINESSES. No Loan Party will (i) make any
expenditure or commitment or incur any obligation or enter into or engage in any
transaction except in the ordinary course of business, (ii) engage directly or
indirectly in any business or conduct any operations except in connection with
or incidental to its present businesses and operations, or (iii) make any
significant
-57-
acquisitions or investments in any Properties other than Oil and Gas Interests
and related Properties, including without limitation, mineral leases and related
facilities, located in, or offshore of, the United States or as otherwise
approved in writing by the Required Banks.
SECTION 7.9. TRANSACTIONS WITH AFFILIATES. Except for transactions
disclosed in the DISCLOSURE SCHEDULE, no Loan Party will engage in any material
transaction with any of its Affiliates on terms which are less favorable to it
than those which would have been obtainable at the time in arm's-length dealing
with Persons other than such Affiliates.
SECTION 7.10. CERTAIN CONTRACTS; AMENDMENTS; MULTIEMPLOYER ERISA PLANS.
(a) Except as expressly provided for in the Loan Documents, no Loan Party
will, directly or indirectly, enter into, create, or otherwise allow to exist
any contract or other consensual restriction on the ability of any Person to:
(i) make Distributions to the Loan Parties, (ii) to redeem equity interests held
in it by any Loan Party, (iii) repay loans and other indebtedness owing by it to
any Loan Party, (iv) transfer any of its assets to any Loan Party, or (v)
create, incur, assume or suffer to exist any Lien in favor of Agent for the
benefit of the Banks on any of the Borrower's or any of its Subsidiaries'
assets. No Loan Party will enter into any "take-or-pay" contract or other
contract or arrangement for the purchase of goods or services which is a
Material Contract and which obligates it to pay for such goods or service
regardless of whether they are delivered or furnished to it. No Loan Party will
amend or permit any amendment to any Material Contract which releases,
qualifies, limits, makes contingent or otherwise detrimentally affects any
material right or benefit of the Agent, the Issuing Bank or any Bank under or
acquired pursuant to any Security Documents. No Loan Party will incur any
obligation to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
(b) Neither the Borrower nor any Subsidiary of Borrower, shall enter into
or permit any modification or amendment of, or waive any material right or
obligation of any Person under, or terminate any Material Contract other than
amendments, modifications and waivers which could not have, in the reasonable
judgment of the Borrower, individually or in the aggregate, (a) a detrimental
effect on the Borrower or any of its material assets or (b) a detrimental effect
on the Agent or the Banks or any of their rights, remedies and interests under
the Loan Documents.
SECTION 7.11. SALES AND LEASEBACKS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or by way of
Guaranteed Obligation, with respect to any lease or any property (whether real
or personal or mixed) whether now owned or hereafter acquired, (i) which the
Borrower or such Subsidiary of the Borrower has sold or transferred or is to
sell or transfer to any other Person or (ii) which the Borrower or such
Subsidiary of the Borrower intends to use for substantially the same purposes as
any other property which has been or is to be sold or transferred by the
Borrower or such Subsidiary of the Borrower to any other Person in connection
with such lease, except that the Borrower and its Subsidiaries may enter into
such sale and leaseback arrangements with respect to compressors, PROVIDED,
HOWEVER, that the aggregate obligations of the Borrower and its Subsidiaries on
a Consolidated basis for the payment of rent or hire of any such property (real
or personal) under all such sale and leaseback arrangements shall not exceed
$2,000,000 in any period of twelve consecutive calendar months.
SECTION 7.12. MARGIN REGULATION. The Borrower shall not use or permit any
other Person to use any portion of the proceeds of any credit extended under
this Credit Agreement in any manner which might cause the extension of credit or
the application of such proceeds to violate the Securities Act of 1933 or
Securities Exchange Act of 1934 (each as amended to the date hereof and from
time to time hereafter, and any successor statute) or to violate Regulation G,
Regulation U, or Regulation X, or any
-58-
other regulation of the Federal Reserve Board, in each case as in effect on the
date or dates of such extension of credit and such use of proceeds.
SECTION 7.13. FISCAL YEAR. No Loan Party will change its Fiscal Year.
SECTION 7.14. FINANCIAL COVENANTS. From and after the Effective Date, the
Borrower on a Consolidated basis shall not:
(a) Permit its Consolidated Tangible Net Worth at any time to be LESS than
the sum of (i) $60,000,000 PLUS, if any, (ii) fifty percent (50%) of the net
proceeds from the sale of equity securities of the Borrower and its Subsidiaries
for the period from and after the Effective Date; or
(b) Permit the ratio of the Borrower's Consolidated current assets to the
Borrower's Consolidated current liabilities to be less than 1.0 to 1.0. For
purposes of this subsection, "the Borrower's Consolidated current liabilities"
will be calculated without including any payments of principal on the Notes
which are required to be repaid within one year from the time of calculation.
(c) Permit the ratio, at the end of any Fiscal Quarter, of (i) EBITDA to
(ii) Consolidated Interest Expense to be less than 2.5 to 1.0, to be calculated
at the end of each Fiscal Quarter, for the four-Fiscal Quarter period ending
with such Fiscal Quarter.
SECTION 7.15. AMENDMENTS AND WAIVERS OF SUBORDINATED OBLIGATIONS. The
Borrower shall not, and shall not permit any Subsidiary to, change or amend (or
take any action or fail to take any action the result of which is an effective
amendment or change) or accept any waiver or consent with respect to, any
document, instrument or agreement relating to any Subordinated Obligations that
would result in (a) an increase in the principal, interest, overdue interest,
fees or other amounts payable under the Subordinated Obligations (including,
without limitation, as a result of any redemption), (c) a change in any
financial covenant under the Subordinated Obligations making such financial
covenants more restrictive, (d) a change in any default or event of default
(however designated) under the Subordinated Obligations which makes such default
or event of default more restrictive, (e) a change in any of the subordination
provisions of the Subordinated Obligations, (f) a change in any covenant, term
or provision in the Subordinated Obligations which would result in such term or
provision being more restrictive than the terms of this Credit Agreement and the
other Loan Documents, or (g) a change in any term or provision of the
Subordinated Obligations that could have, in any material respect, an adverse
effect on the interest of the Banks.
ARTICLE VIII
SECURITY
SECTION 8.1. THE SECURITY. The Obligations will be secured by the Security
Documents listed in the MORTGAGE SCHEDULE and any additional Security Documents
hereafter delivered by any Loan Party and accepted by the Banks.
SECTION 8.2. MORTGAGED PROPERTIES. The Loan Parties shall at all times (i)
cause to be subjected to the Lien of the Mortgages, Borrowing Base Properties
having an aggregate Recognized Reserve Value, as determined by reference to the
most recent Engineering Report utilized by the Banks in determining the then
effective Borrowing Base, equal to at least eighty percent (80%) of the
aggregate Recognized
-59-
Reserve Value for all of the Borrowing Base Properties and (ii) provide, or
cause to be provided, to the Agent title opinions or other indicia of ownership
satisfactory the Banks covering the Mortgaged Properties. Each Loan Party agrees
that it shall, upon the request of the Agent, prepare a schedule of its
Borrowing Base Properties in decreasing order of Recognized Reserve Value. Each
Loan Party shall within ninety (90) calendar days from the receipt of such
request from the Agent cause to be subjected to the Lien of the Mortgages,
Borrowing Base Properties, in decreasing order of value, having an aggregate
Recognized Reserve Value equal to at least eighty percent (80%) of the aggregate
Recognized Reserve Value for all of the Borrowing Base Properties.
SECTION 8.3. FURTHER ASSURANCES; ADDITIONAL COLLATERAL. Subject to SECTION
8.2 above, each Loan Party agrees to deliver and to cause its Subsidiaries to
deliver, to further secure the Obligations whenever requested by the Agent in
its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security Documents in form
and substance satisfactory to the Banks for the purpose of granting, confirming,
and perfecting first and prior liens or security interests in any Property now
owned or hereafter acquired by any Loan Party. Each Loan Party will from time to
time deliver to the Agent any financing statements, continuation statements,
extension agreements and other documents, properly completed and executed (and
acknowledged when required) by any Loan Party in form and substance satisfactory
to the Banks, which the Agent reasonably requests for the purpose of perfecting,
confirming, or protecting any Liens or other rights in Collateral securing any
Obligations.
SECTION 8.4. OFFSET. To secure the repayment of the Obligations each Loan
Party hereby grants to the Agent for the benefit of the Secured Parties a
security interest, a lien, and a right of offset, each of which shall be in
addition to all other interests, liens, and rights of the Agent, the Issuing
Bank or any Bank at common law, under the Loan Documents, or otherwise, and each
of which shall be upon and against (a) any and all moneys, securities or other
Property (and the proceeds therefrom) of such Loan Party now or hereafter held
or received by or in transit to Agent from or for the account of such Loan
Party, whether for safekeeping, custody, pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of such Loan Party with the any Bank, and (c) any other
credits and claims of such Loan Party at any time existing against the Agent,
the Issuing Bank or any Bank, including claims under certificates of deposit.
Upon the occurrence of any Default, the Agent, the Issuing Bank and each Bank is
hereby authorized to foreclose upon, offset, appropriate, and apply, at any time
and from time to time, without notice to such Loan Party, any and all items
hereinabove referred to against the Obligations then due and payable.
SECTION 8.5. GUARANTIES OF THE BORROWER'S SUBSIDIARIES. Each Subsidiary of
the Borrower now existing or created, acquired or coming into existence after
the date hereof shall execute and deliver to the Agent an Instrument of Joinder
of the Subsidiary Guaranty in the form of Exhibit A to the Subsidiary Guaranty.
The Borrower will (i) cause each of its Subsidiaries to deliver to the Agent,
simultaneously with its delivery of such a Instrument of Joinder, written
evidence satisfactory to the Agent's counsel that such Subsidiary has taken all
corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance of the Subsidiary Guaranty and any other
documents which it is required to execute.
SECTION 8.6. PRODUCTION PROCEEDS. Notwithstanding that, by the terms of the
various Security Documents, the Loan Parties are and will be assigning to the
Agent for the benefit of the Secured Parties all of the "Production Proceeds"
(as defined therein) accruing to the Mortgaged Property covered thereby, so long
as no Default has occurred and is continuing, such Loan Parties shall be
entitled to receive from the purchasers of production all such Production
Proceeds, subject, however, to the liens created under the Security Documents,
which liens are hereby affirmed and ratified. Upon the occurrence and during the
continuance of a Default, the Agent may exercise all rights and remedies granted
under the Security
-60-
Documents, including the right to obtain possession of all Production Proceeds
then held by any Loan Party or to receive directly from the purchaser of
production all other Production Proceeds. In no case shall any failure, whether
purposed or inadvertent, by the Agent to collect directly any such Production
Proceeds constitute in any way a waiver, remission or release of any of its
rights under the Security Documents, nor shall any release of any Production
Proceeds by the Agent to any Loan Party constitute a waiver, remission, or
release of any other Production Proceeds or of any rights of the Agent to
collect other Production Proceeds thereafter. Each Loan Party will, upon the
instructions of the Required Banks (which such instructions may be given only
after the occurrence of an Event of Default, as herein defined, but the giving
of such instructions shall as to all such parties be conclusive as to the
occurrence of an Event of Default), join with the Banks in notifying the
purchaser or purchasers of Hydrocarbons produced from the Mortgaged Properties
of the existence of the Security Documents, such notification to be in writing
and accompanied (if necessary) by certified copies of the Security Documents.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1. EVENTS OF DEFAULT. Each of the following events constitutes an
Event of Default under this Credit Agreement:
(a) The Borrower shall fail to pay when due any payment of any principal of
the Loans; or
(b) (i) The Borrower shall fail to pay when due the payment of any accrued
interest on the Loans and such failure shall continue for two (2) Business Days;
or (ii) any Loan Party shall fail to pay when due the payment of any fee,
expense, compensation, reimbursement or other amount when due under this Credit
Agreement, the Notes or any other Loan Document to which such Loan Party is a
party or other agreement or document contemplated by or delivered pursuant to or
in connection with this Credit Agreement or such Loan Document or any material
document executed in connection therewith and, in any event, such failure shall
continue for fifteen (15) calendar days after the earlier of (x) notice thereof
from the Agent or any Bank to such Loan Party and (y) discovery thereof by such
Loan Party; or
(c) Any "default" or "event of default" occurs under any Loan Document
which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document; or
(d) Any Loan Party fails to duly observe, perform or comply with any
covenant, agreement, condition or provision contained in SECTION 6.4 or ARTICLE
VII of this Credit Agreement; or
(e) Any Loan Party fails (other than as referred to in subsections (a),
(b), (c) and (d) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of any Loan Document, and such failure is not
remedied within thirty (30) calendar days after written notice thereof is given
by the Agent to such Loan Party, provided that such grace period shall not apply
to any such failure if Borrower or such Loan Party has not given notice thereof
to the Banks as required in SECTION 6.4(II); or
(f) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Loan Party in connection with any Loan
Document shall prove to have been false or
-61-
incorrect in any material respect on any date on or as of which made, or any
Loan Document at any time ceases to be valid, binding and enforceable as
warranted in SECTION 5.4 for any reason other than its release, termination, or
subordination by the Banks; or
(g) Any Loan Party, shall (i) fail to pay any Debt (including principal,
interest or premium thereon) in excess of $500,000 (other than the amounts
referred to in subsections (a) and (b) of this SECTION 9.1) owing by such
Person, when due (or, if permitted by the terms of the relevant document, within
any applicable grace period), whether such Debt shall become due by scheduled
maturity, by required prepayment, by acceleration, by demand or otherwise unless
such failure to pay such Debt shall be effectively waived or consented to by the
holder or holders of such Debt in accordance with the documents evidencing such
Debt or (ii) fail to observe or perform any material term, covenant or condition
on its respective part to be performed under any agreement or instrument
evidencing, securing or relating to any such Debt, when required to be performed
unless such failure is effectively waived or consented to by the holder or
holders of such Debt, and such failure shall continue after the applicable grace
period, if any, specified in such agreement or instrument if the effect of any
failure is to cause, or to permit the holder or holders of such Debt or a
trustee on its or their behalf to cause such Debt to become due prior to its
stated maturity; or (iii) fails to duly observe, perform or comply with any
agreement with any Person or any term or condition of any instrument, if such
agreement or instrument is materially significant to any Loan Party or to any
Loan Party and its Subsidiaries on a Consolidated basis, and such failure is not
remedied within the applicable period of grace (if any) provided in such
agreement or instrument, PROVIDED, none of the foregoing shall constitute an
Event of Default hereunder if such Loan Party contests in good faith the
validity of such Debt or obligation by appropriate proceedings and with respect
to which adequate reserves (based upon such Loan Party's good faith estimate of
the contested liability) have been provided; or
(h) Either (i) any "accumulated funding deficiency (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $500,000
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, or (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets available
for the payment of such benefit liabilities by more than $500,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer's proportionate share of such excess exceeds such
amount); or
(i) Any Loan Party:
(i) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable Debtor Relief Law of any jurisdiction now or
hereafter in effect, or has any such proceeding commenced against it which
remains undismissed for a period of sixty days; or
(ii) commences a voluntary case under any applicable Debtor Relief Law
now or hereafter in effect; or applies for or consents to the entry of an
order for relief in an involuntary case under any such Debtor Relief Law,
or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such appointment or
-62-
taking possession is neither made ineffective nor discharged within sixty
days after the making thereof, or such appointment or taking possession is
at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the payment
of money in excess of $500,000, unless the same is either paid in
accordance with such judgment, discharged within sixty days after the date
of entry thereof, or an appeal or appropriate proceeding for review thereof
is taken within such period and a stay of execution pending such appeal is
obtained; or
(v) suffers a writ or warrant of attachment or any similar process to
be issued by any court against all or any substantial part of its assets or
any part of the Collateral, and such writ or warrant of attachment or any
similar process is not stayed or released within sixty days after the entry
or levy thereof or after any stay is vacated or set aside; or
(j) a Change of Control shall occur; or
(k) (i) Any Environmental Liability shall have been asserted against any
Loan Party or any Subsidiary of a Loan Party which could reasonably be expected
to have a Material Adverse Effect or (ii) any Release shall have occurred, and
such event could form the basis of an Environmental Liability against such Loan
Party or such Subsidiary of such Loan Party which could reasonably be expected
to result in a Material Adverse Effect; or
(l) Any Loan Document shall, at any time after its execution and delivery
and for any reason, cease to be in full force and effect or shall be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Person party thereto (other than the Agent or any Bank) or any such
Person party thereto (other than the Agent or any Bank) shall deny that it has
any or further liability or obligation thereunder, or the Obligations shall be
subordinated for any reason (other than by the consent of the Banks); or
THEN, (x) upon the occurrence of any Event of Default described in SECTION 9.1
(I)(I), (I)(II) OR (I)(III) with respect to any Loan Party or any Subsidiary of
any Loan Party (i) all of the Commitments shall automatically terminate, and
Borrower shall deposit with the Agent cash equal to the outstanding LC
Obligations in accordance with SECTION 2.11(G) and (ii) the entire unpaid amount
of all Obligations shall automatically become immediately due and payable,
without presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration or further notice of any kind, all of which
are hereby expressly waived by each Loan Party and every Subsidiary Guarantor
who at any time ratifies or approves this Credit Agreement and the obligation of
each Bank to make any Loan, and of the Issuing Bank(s) to issue any Letters of
Credit, hereunder shall thereupon terminate and (y) upon the occurrence of any
other Event of Default, the Agent shall at the request, or may with the consent,
of the Required Banks, (i) by written notice to Borrower declare all of the
Commitments to be terminated, whereupon all of the Commitments and the
obligations of each Bank to make any Loan hereunder, and of the Issuing Bank(s)
to issue any Letter of Credit, shall forthwith terminate, and Borrower shall
deposit with the Agent cash equal to the outstanding LC Obligations in
accordance with SECTION 2.11(G) and (ii) by written notice to Borrower declare
the entire unpaid amount of all Obligations to be forthwith due and payable,
whereupon all Obligations shall become and be forthwith due and payable, without
presentment for payment, demand, protest, notice of intent to accelerate, notice
of acceleration or further notice of any kind, all of which are hereby expressly
waived by each Loan Party and every Subsidiary Guarantor who at any time
ratifies or approves this Credit Agreement. Borrower hereby grants to the Agent
for the ratable benefit of the Banks a security interest in, and Lien on, any
Dollars delivered to the Agent pursuant to this SECTION 9.1, as security for the
Obligations.
-63-
SECTION 9.2. REMEDIES. If any Default shall occur and be continuing, the
Agent may, and at the request of the Required Banks, shall protect and enforce
the rights and remedies of the Secured Parties under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and may enforce the
payment of any Obligations due or enforce any other legal or equitable right.
All rights, remedies and powers conferred upon the Agent for the benefit of the
Secured Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at law or in equity.
SECTION 9.3. INDEMNITY. EACH LOAN PARTY, JOINTLY AND INDIVIDUALLY, AGREES
TO INDEMNIFY EACH SECURED PARTY, UPON DEMAND, FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS,
JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS (INCLUDING
REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR
NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES AND COSTS")
WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST SUCH SECURED PARTY GROWING OUT OF, RESULTING FROM OR IN ANY
OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN DOCUMENTS, OR THE
TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF) AT ANY
TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (INCLUDING ANY VIOLATION OR
NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY LOAN PARTY OR ANY LIABILITIES
OR DUTIES OF ANY LOAN PARTY OR OF THE SECURED PARTIES WITH RESPECT TO HAZARDOUS
MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT). THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ANY OF THE SECURED PARTIES, PROVIDED ONLY THAT NO
SECURED PARTY SHALL BE ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION
FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY
CAUSED BY ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS
DETERMINED IN A FINAL JUDGMENT. AS USED IN THIS SECTION THE TERM "SECURED
PARTIES" SHALL REFER NOT ONLY THE PERSON DESIGNATED AS SUCH IN SECTION 1.1 BUT
ALSO TO EACH DIRECTOR, OFFICER, AGENT, ATTORNEY, EMPLOYEE, REPRESENTATIVE AND
AFFILIATE OF SUCH PERSON.
ARTICLE X
THE AGENT
SECTION 10.1. APPOINTMENT. Each Bank hereby irrevocably designates and
appoints Chase as the Agent of such Bank under this Credit Agreement and the
other Loan Documents, and each such Bank irrevocably authorizes Chase, as the
Agent for such Bank, to take such action on its behalf under the provisions of
this Credit Agreement and the other Loan Documents and to exercise such powers
and perform such duties as are expressly delegated to the Agent by the terms of
this Credit Agreement and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Credit Agreement, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Credit Agreement or any other Loan Document
or otherwise exist against the Agent. The duties of the Agent are mechanical and
administrative in nature. The Agent shall have no fiduciary relationship in
respect of any Bank by reason of this Credit Agreement or any other Loan
Document.
SECTION 10.2. DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Credit Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled
-64-
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 10.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Credit Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by any Loan Party or
any officer of any Loan Party in this Credit Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Credit Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Credit
Agreement or the Notes or any other Loan Document or for any failure of any of
the Loan Parties to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Credit Agreement or any other Loan Document, or to inspect
the Properties, books or records of any of the Loan Parties.
SECTION 10.4. RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
content, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Loan Parties), independent accountants,
engineers and other experts selected by the Agent. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been filed with
the Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Credit
Agreement, the Notes and the other Loan Documents in accordance with a request
of the Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks and all future holders of
the Notes.
SECTION 10.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or any Loan Party
referring to this Credit Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give notice thereof to the Banks.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; PROVIDED that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
SECTION 10.6. NON-RELIANCE OF AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of any Loan Party shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without
-65-
reliance upon the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, Property, financial and other
condition and creditworthiness of each Loan Party and made its own decision to
make its Loans hereunder and enter into this Credit Agreement. Each Bank also
represents that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement and the
other Loan Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, Property, financial and other
condition and creditworthiness of each Loan Party. Except for notices, reports
and other documents expressly required to be furnished to the Banks by the Agent
hereunder the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, operations,
Property, condition (financial or otherwise), prospects or creditworthiness of
any Loan Party which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 10.7. INDEMNIFICATION. Each Bank hereby indemnifies the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Credit Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; PROVIDED that no Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. It is
the express intention of the parties hereto that the Agent shall be indemnified
and held harmless against any and all losses, liabilities, claims, damages,
expenses, penalties, actions, judgments, suits, costs or disbursements arising
out of or from the ordinary negligence of the Agent. The agreements in this
SECTION 10.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
SECTION 10.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Loan Parties, or any Loan Party, as though the Agent
were not the agent hereunder and under the other Loan Documents. With respect to
the Loans made or renewed by it and any Note issued to it, the Agent shall have
the same rights and powers under this Credit Agreement and the other Loan
Documents as any Bank and may exercise the same as though it were not the Agent,
and the terms "Bank" and "Banks" shall include the Agent in its individual
capacity.
SECTION 10.9. SUCCESSOR AGENT. The Agent may resign as Agent upon ten (10)
calendar days' notice to the Banks. If the Agent shall resign as Agent under
this Credit Agreement and the other Loan Documents, then the Required Banks
shall appoint from among the Banks a successor agent for the Banks, which
successor agent shall be approved by the Borrower, whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Credit Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this SECTION 10.9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Credit Agreement and the other Loan Documents.
-66-
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. WAIVERS AND AMENDMENTS; ACKNOWLEDGEMENTS.
(a) WAIVERS AND AMENDMENTS. Neither this Credit Agreement nor any other
Loan Document to which the Borrower or any other Loan Party is a party nor any
terms hereof or thereof may be amended, supplemented, waived or otherwise
modified except in accordance with the provisions of this subsection. Any
provision of this Credit Agreement or any other Loan Document may be amended,
supplemented, waived, or otherwise modified if and only if such amendment,
supplement, waiver or other modification (x) is in writing, (y) is signed by
each other party thereto except that in the case of a waiver, the party whose
performance is being waived need not be a signatory, and (z) with respect to the
Banks, is signed by the Required Banks (if the Banks are a party thereto) or by
the Agent with the consent of the Required Banks (if the Agent is a party
thereto and the Banks are not); PROVIDED no such amendment, supplement, waiver
or other modification shall do any of the following unless signed by all of the
Banks (if the Banks are a party thereto) and by the Agent with the consent of
all of the Banks (if the Agent is a party thereto and the Banks are not):
(i) extend the Maturity Date, the date of payment of any principal,
interest or fees, or the date of payment of any required principal
prepayment;
(ii) reduce the amount of any principal, interest or fees, the rate of
interest paid with respect to any unpaid principal, interest or fees,
or the amount of any fee payable to the Banks hereunder;
(iii) change the amount of any Commitment of any Bank;
(iv) amend, modify, or waive any of the conditions set forth in ARTICLE IV
(other than any condition which refers therein to the Required Banks);
(v) amend, modify or waive any provision which calls for the consent of,
the approval of, or direction from all of the Banks;
(vi) amend, modify or waive any provision of this SECTION 11.1 or the
definition of Required Banks;
(vii) consent to or permit the assignment or transfer by the Borrower of any
of its rights and obligations under this Credit Agreement or any other
Loan Document; or
(viii) release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty to which such Subsidiary Guarantor is a party or
under any Security Document to which such Subsidiary Guarantor is a
party;
and PROVIDED, FURTHER, without the prior written consent of the Agent, no such
amendment, supplement, waiver or modification shall amend, supplement, waive or
otherwise modify any provision of ARTICLE X or any other provision of any Loan
Document if the effect thereof is to affect the rights or duties of the Agent;
and PROVIDED, FURTHER, that no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank(s) in addition to the Banks required
above to take such action, affect the rights and
-67-
duties of the Issuing Bank(s) with respect to the Letters of Credit and the
Letter of Credit Applications, if any, outstanding under this Credit Agreement.
Any such amendment, supplement, modification or waiver shall apply to each of
the Banks equally and shall be binding upon the Banks, the Agent, all future
holders of the Notes and Obligations, and all parties to the Loan Document so
amended, supplemented, waived or otherwise modified.
(b) ACKNOWLEDGEMENTS AND ADMISSIONS. Each Loan Party hereby represent,
warrant, acknowledge and admit that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Credit
Agreement and the other Loan Documents to which it is a party, without reliance
on any representation, warranty, covenant or undertaking by the Agent, the
Issuing Bank or any Bank, whether written, oral or implicit, other than as
expressly set out in this Credit Agreement or in another Loan Document delivered
on or after the date hereof, (iii) there are no representations, warranties,
covenants, undertakings or agreements by the Agent, the Issuing Bank or any Bank
as to the Loan Documents except as expressly set out in this Credit Agreement or
in another Loan Document delivered on or after the date hereof, (iv) None of the
Agent, the Issuing Bank nor any Bank owes a fiduciary duty to any Loan Party
with respect to any Loan Document or the transactions contemplated thereby, and
no Loan Party owes a fiduciary duty to the Agent, the Issuing Bank and the Bank
with respect to any Loan Document or the transactions contemplated thereby, (v)
the relationship pursuant to the Loan Documents between Loan Parties, on one
hand, and the Agent, the Issuing Bank and the Banks, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any Loan
Party and the Agent, the Issuing Banks and the Banks, (vii) should an Event of
Default or Default occur or exist the Agent, the Issuing Bank and the Banks will
determine in their sole discretion and for their own reasons what remedies and
actions they will or will not exercise or take at that time, (viii) without
limiting any of the foregoing, no Loan Party is relying upon any representation
or covenant by the Agent, the Issuing Bank, or any Bank, or any representative
thereof, and no such representation or covenant has been made, that each of the
Agent, the Issuing Bank and each Bank will, at the time of an Event of Default
or Default, or at any other time, waive, negotiate, discuss, or take or refrain
from taking any action permitted under the Loan Documents with respect to any
such Event of Default or Default or any other provision of the Loan Documents,
and (ix) the Agent, the Issuing Bank and each Bank has relied upon the
truthfulness of the acknowledgements in this section in deciding to execute and
deliver this Credit Agreement and to make the Loans and issue the Letters of
Credit.
SECTION 11.2. REPRESENTATION BY THE BANKS. Each Bank hereby represents that
it will acquire its Notes for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Bank's Property
shall at all times be and remain within such Bank's control and, in particular
and without limitation, such Bank may sell or otherwise transfer its Notes, any
participation interests or other interests in its Notes, or any of its other
rights and obligations under the Loan Documents.
SECTION 11.3. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or five
(5) calendar days after being deposited in the mail, postage prepaid, or, in the
case of telecopy notice, when received, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telex notice, when
sent, answerback received, addressed as follows, and as set forth in SCHEDULE
1.1 in the case of the other parties hereto, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes:
-68-
The Borrower: ▇▇▇▇▇▇ Petroleum Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Subsidiary c/o Callon Petroleum Company
Guarantors: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
The Agent & The Chase Manhattan Bank
Issuing Bank: c/o Texas Commerce Bank National Association
Global Oil and Gas
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇ ▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
If such notice to the Agent relates to fundings or payments, with a copy
to:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
If to any Bank, as specified on the signature pages hereto or in the
appropriate Commitment Transfer Supplement pursuant to SECTION 11.4; PROVIDED
that any notice, request or demand to or upon the Agent or the Banks pursuant to
SECTIONS 2.2, 2.4, 2.6, 2.7, 2.8, 2.11(A), OR 2.15(C) shall not be effective
until received.
SECTION 11.4. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) Whenever in this Credit Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and permitted
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrower, the Agent or the Banks that are contained in this Credit
Agreement shall bind and inure to the benefit of their respective successors and
permitted assigns. No Loan Party may assign or transfer any of its rights or
obligations hereunder or under any other Loan Document without the written
consent of all of the Banks.
(b) Each of the Banks may, without the consent of the Borrower or the
Agent, sell participation to one or more banks or other financial institutions
in all or a portion of its rights and obligations under this Credit Agreement
and the other Loan Documents, including, without limitation, all or a portion of
its Commitment, the Loans owing to it, the LC Obligations owing to it, its
participation interests in Letters of Credit and the Notes held by it (in
respect of any such Bank, the "CREDIT EXPOSURE"); PROVIDED,
-69-
HOWEVER, that (i) such Bank's obligations under this Credit Agreement and the
other Loan Documents shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the Borrower, the Agent and the other Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; PROVIDED,
HOWEVER, that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower relating to the Loans including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Credit Agreement or any other Loan Document; and PROVIDED,
FURTHER, such Bank may grant participant rights, as between such Bank and its
participant(s), with respect to amendments, modifications or waivers with
respect of any fees payable hereunder (including, without limitation, the amount
and the dates fixed for the payment of any such fees) or the amount of
principal, or the rate of interest payable on, or the dates fixed for any
payment of principal of or interest on the Loans or the release of any
Subsidiary under the Subsidiary Guaranty and (iv) such Bank shall disclose in
writing to the Agent the number of participating banks or other entities and the
dollar amount of each such participation. Each Bank also agrees that it shall
retain the right (but shall have no obligation) to buy back any participating
interest sold by it from the holder thereof if such holder refuses to consent to
any proposed amendment, modification, supplement or waiver of this Credit
Agreement or any other Loan Document.
(c) With the prior written consent of the Agent and the Borrower, which
consents shall not be unreasonably withheld, each of the Banks may assign to one
or more additional banks or financial institutions ("PURCHASING BANKS"), and
without the consent of the Agent and the Borrower, each of the Banks may assign
to a Bank, all or a portion of its Credit Exposure; PROVIDED, HOWEVER, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
the assigning Bank's Credit Exposure, i.e., any such assignment shall include a
constant percentage of, INTER ALIA the rights and obligations of such assigning
Bank with respect to the Commitment, the Loans, (ii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance and
recording in the Register, a Commitment Transfer Supplement, substantially in
the form of EXHIBIT K, together with the Notes subject to such assignment, (iii)
the amount of each such assignment (determined as of the date the Commitment
Transfer Supplement with respect to such assignment is delivered to the Agent)
shall be in a minimum principal amount of $5,000,000 and (iv) if the assigning
Bank has retained any Commitment hereunder, such assigning Bank's remaining
Commitment shall be at least $10,000,000 after giving effect to such assignment.
Upon (i) the execution and delivery to the Agent of such Commitment Transfer
Supplement by the assigning Bank, the purchasing bank or other entity and the
Borrower, (ii) the payment by the assigning Bank or the purchasing bank or other
entity to the Agent of a processing and recordation fee of $2,500 and (iii) the
acceptance and recording of such Commitment Transfer Supplement in the Register
by the Agent, from and after the effective date specified in each Commitment
Transfer Supplement, which effective date shall be (unless otherwise agreed
among the Agent, the assigning Bank and the purchasing Bank or entity) at least
five Business Days after the date of acceptance and recording by the Agent, (x)
the Purchasing Bank thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement have the rights and obligations
of a Bank hereunder and (y) the assigning Bank thereunder shall, to the extent
provided in such Commitment Transfer Supplement, be released from its
obligations under this Credit Agreement and the other Loan Documents (and, in
the case of an assignment covering all of the remaining portion of an assigning
Bank's rights and obligations under this Credit Agreement and the other Loan
Documents, such assigning Bank shall cease to be a party hereto).
(d) Any Bank may, in the ordinary course of its business and in accordance
with applicable law, at any time assign to any other Bank all or any part of its
Credit Exposure. The Borrower, the Agent and the Banks agree that to the extent
of any assignment the assignee Bank shall be deemed to have the same rights and
benefits under the Loan Documents and the same rights of setoff and obligation
to share
-70-
pursuant to SECTIONS 2.17 AND 8.4 as it would have had if it were a Bank
hereunder; PROVIDED that the Borrower and the Agent shall be entitled to
continue to deal solely and directly with the assignor Bank in connection with
the interests so assigned to the assignee Bank unless and until such assignee
Bank becomes a purchasing Bank pursuant to clause (c) above.
(e) By executing and delivering a Commitment Transfer Supplement, the
assigning Bank thereunder and the Purchasing Bank thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim known to such assigning Bank, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Credit Agreement and the other Loan Documents of the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Credit
Agreement or any other instrument or document furnished pursuant hereto or
thereto; (ii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any Subsidiary of the Borrower, the performance or observance of
their respective obligations under this Credit Agreement, any Loan Document, any
other instrument or document furnished pursuant hereto or thereto; (iii) such
Purchasing Bank confirms that it has received a copy of this Credit Agreement
together with copies of the most recent financial statements delivered pursuant
to SECTION 5.5 or SECTION 6.2 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Commitment Transfer Supplement; (iv) such Purchasing Bank will,
independently and without reliance upon the Agent, such assigning Bank or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement and the other Loan Documents; (v)
such Purchasing Bank appoints and authorizes the Agent to take such action on
behalf of such Purchasing Bank and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
(vi) such Purchasing Bank agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Credit Agreement and the
other Loan Documents are required to be performed by it as a Bank and (vii) such
Purchasing Bank confirms that it is an Purchasing Bank as defined herein.
(f) The Agent shall maintain at its office a copy of each Commitment
Transfer Supplement delivered to it and a register for the recordation of the
names and addresses of the Banks and the Commitments of, and principal amount of
the Loans owing to, each Bank pursuant to the terms hereof from time to time
(the "REGISTER"). The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(g) Upon its receipt of a Commitment Transfer Supplement executed by an
assigning Bank and an Purchasing Bank together with any Note subject to such
Commitment Transfer Supplement, the Agent shall (i) accept such Commitment
Transfer Supplement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Banks and the Borrower.
Within five (5) Business Days after receipt of such notice, the Borrower, the
Assigning Bank and the Agent shall make the appropriate arrangements for the
execution and delivery by the Borrower to the Agent in exchange for the
surrendered Notes, replacement Notes payable to the order of such Purchasing
Bank in an aggregate amount equal to the Commitment assumed by it pursuant to
such Commitment Transfer Supplement and, if the assigning Bank has retained any
of its Commitment hereunder, replacement Notes payable to the order of the
assigning Bank in an aggregate amount equal to the Commitment retained by it.
Such
-71-
replacement Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Notes and shall be dated the date
of the surrendered Notes which they replace and shall otherwise be in
substantially the form of EXHIBIT C hereto, as appropriate and shall contain
specific language stating that such replacement Notes is given in exchange for
and substitution of the surrendered Notes and that the indebtedness evidenced by
the surrendered Notes constitutes the same indebtedness evidenced by the
replacement Notes. Canceled Notes shall be returned as soon as practical to the
Borrower marked "Replaced."
(h) Notwithstanding any other language in this Credit Agreement, any Bank
may at any time assign all or any portion of its rights under this Credit
Agreement and the Notes to a Federal Reserve Bank as collateral in accordance
with Regulation A and the applicable operating circular of such Federal Reserve
Bank.
(i) Notwithstanding any other provision herein, any Bank may, in connection
with any assignment or participation or proposed assignment or participation
pursuant to this SECTION 11.4 disclose to the assignee or participant or
proposed assignee or participant, any information relating to the Borrower or
any Subsidiary of the Borrower furnished to such Bank by or on behalf of the
Borrower or by or on behalf of the Borrower or any Subsidiary of the Borrower;
PROVIDED, that prior to any such disclosure, each such assignee or participant
or proposed assignee or participant shall agree to preserve the confidentiality
of any confidential information relating to the Borrower or any Subsidiary of
the Borrower received from such Bank.
SECTION 11.5. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law. No failure or delay (whether by course of
conduct or otherwise) by any Secured Party in exercising any right, power or
remedy which such Secured Party may have under any of the Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by such Secured Party of any such right, power or
remedy preclude any other or further exercise thereof or of any other right,
power or remedy. No waiver of any provision of any Loan Document and no consent
to any departure therefrom shall ever be effective unless it is in writing and
signed by the Agent, the Required Banks, or all of the Banks, as required by
such Loan Document, and then such waiver or consent shall be effective only in
the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Loan Party shall in any
case of itself entitle any Loan Party to any other or further notice or demand
in similar or other circumstances. This Credit Agreement and the other Loan
Documents set forth the entire understanding and agreement of the parties hereto
and thereto with respect to the transactions contemplated herein and therein and
supersede all prior discussions and understandings with respect to the subject
matter hereof and thereof, and no modification or amendment of or supplement to
this Credit Agreement or the other Loan Documents shall be valid or effective
unless the same is in writing and signed by the party against whom it is sought
to be enforced.
SECTION 11.6. SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of any Loan
Party's various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Credit Agreement
and the other Loan Documents and the performance hereof and thereof, including
the making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full and all of the
-72-
Commitments to extend credit to the Borrower under this Credit Agreement are
terminated. All statements and agreements contained in any certificate or other
instrument delivered by any Loan Party to the Agent and/or the Banks under any
Loan Document shall be deemed representations and warranties by each Loan Party
or agreements and covenants of each Loan Party under this Credit Agreement. The
representations, warranties, and covenants made by any Loan Party in the Loan
Documents, and the rights, powers and privileges granted to the Agent and the
Secured Parties in the Loan Documents, are cumulative, and, except for expressly
specified waivers or consents contained herein, in the other Loan Documents or
granted in writing pursuant to SECTION 11.1, no Loan Document shall be construed
in the context of another to diminish, nullify, or otherwise reduce the benefit
to the Agent, the Issuing Bank or to any Bank of any such representation,
warranty, covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Credit Agreement to any representation,
warranty or covenant herein contained shall apply to any similar representation,
warranty or covenant contained in any other Loan Document, and each such similar
representation, warranty or covenant shall be subject only to those exceptions
which are expressly made applicable to it by the terms of the various Loan
Documents.
SECTION 11.7. JOINT AND SEVERAL LIABILITY; PARTIES IN INTEREST. All
Obligations which are incurred by two or more Loan Parties shall be their joint
and several obligations and liabilities. All grants, covenants and agreements
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Loan Party may assign or transfer any of its rights or delegate any of
its duties or obligations under any Loan Document without the prior consent of
the Banks.
SECTION 11.8. GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE EXTENT
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE
BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST THE BORROWER
WITH RESPECT TO THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT MAY ELECT, AND, BY
EXECUTION AND DELIVERY HEREOF, THE BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND
IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY IT
AGAINST THE BANKS AND ANY QUESTIONS RELATING TO USURY. EACH LOAN PARTY AGREES
THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO
DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF
FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, EACH LOAN PARTY HEREBY
IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, AS ITS AGENT TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST
IT WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY IT TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY
LAW, BE SENT BY REGISTERED MAIL TO EACH LOAN
-73-
PARTY AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE OF ANY LOAN PARTY TO
RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS
AFORESAID. EACH LOAN PARTY SHALL FURNISH TO THE AGENT A CONSENT OF CT
CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS
CREDIT AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE
COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CT CORPORATION SYSTEM SHALL
RESIGN OR OTHERWISE CEASE TO ACT AS AGENT, EACH LOAN PARTY HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO THE
AGENT AND THE BANKS TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT
SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES
HEREOF AND (B) PROMPTLY DELIVER TO THE AGENT AND THE BANKS THE WRITTEN CONSENT
(IN FORM AND SUBSTANCE SATISFACTORY TO THE BANKS) OF SUCH NEW AGENT AGREEING TO
SERVE IN SUCH CAPACITY.
If and to the extent Texas law applies, the Agent, the Banks and the
Borrower further agree that insofar as the provisions of Article 1.04, Subtitle
1, Title 79, of the Revised Civil Statutes of Texas, 1925, as amended, are
applicable to the determination of the Highest Lawful Rate with respect to the
Notes, the indicated rate ceiling computed from time to time pursuant to Section
(a) of such Article shall apply to the Notes; PROVIDED, HOWEVER, that to the
extent permitted by such Article, the Agent may from time to time by notice from
the Agent to the Borrower revise the election of such interest rate ceiling as
such ceiling affects then current or future balances of the Loans outstanding
under the Notes. The provisions of Chapter 15 of Subtitle 3 of the said Title 79
do not apply to this Credit Agreement or the Notes issued hereunder.
SECTION 11.9. INTEREST. Each provision in this Credit Agreement and each
other Loan Document is expressly limited so that in no event whatsoever shall
the amount paid, or otherwise agreed to be paid, to the Agent or any Bank for
the use, forbearance or detention of the money to be loaned under this Credit
Agreement or any Loan Document or otherwise (including any sums paid as required
by any covenant or obligation contained herein or in any other Loan Document
which is for the use, forbearance or detention of such money), exceed that
amount of money which would cause the effective rate of interest to exceed the
Highest Lawful Rate, and all amounts owed under this Credit Agreement and each
other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Credit Agreement or such Loan Document shall in no
event exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate. Anything in this Credit Agreement,
any Note or any other Loan Document to the contrary notwithstanding, with
respect to each Note, the maker of such Note shall never be required to pay
unearned interest on such Note or ever be required to pay interest on such Note
at a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest which would otherwise be payable with respect to such Note would exceed
the Highest Lawful Rate, or if the holder of such Note shall receive any
unearned interest or shall receive monies that are deemed to constitute interest
which would increase the effective rate of interest payable by the maker of such
Note to a rate in excess of the Highest Lawful Rate, then (i) the amount of
interest which would otherwise be payable by the maker of such Note shall be
reduced to the amount allowed under applicable law and (ii) any unearned
interest paid by the maker of such Note or any interest paid by the maker of
such Note in excess of the Highest Lawful Rate shall be in the first instance
credited on the principal of such Note with the excess thereof, if any, refunded
to the maker thereof. It is further agreed that, without limitation of
-74-
the foregoing, all calculations of the rate of interest contracted for, charged
or received by any Bank under the Note held by it, or under this Credit
Agreement or the other Loan Documents, are made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate applicable to such Bank (such
Highest Lawful Rate being the Bank's "MAXIMUM PERMISSIBLE RATE"), shall be made,
to the extent permitted by usury laws applicable to such Bank (now or hereafter
enacted), by (a) characterizing any non-principal payment as an expense, fee or
premium rather than as interest and (b) amortizing, prorating and spreading in
equal parts during the period of the full stated term of the Loans evidenced by
said Note all interest at any time contracted for, charged or received by such
Bank in connection therewith.
SECTION 11.10. SEVERABILITY. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
SECTION 11.11. COUNTERPARTS. This Credit Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement.
SECTION 11.12. WAIVER OF JURY TRIAL, DAMAGES, ETC. TO THE EXTENT PERMITTED
BY LAW, EACH LOAN PARTY, EACH BANK AND THE AGENT HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF SUCH PERSONS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT'S
AND THE BANKS' ENTERING INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS.
EACH LOAN PARTY, EACH BANK AND THE AGENT HEREBY FURTHER (a) IRREVOCABLY WAIVES,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES,
OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (b) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (c)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION.
-75-
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
written above.
THE BORROWER:
▇▇▇▇▇▇ PETROLEUM COMPANY
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President,
Chief Financial Officer and Treasurer
THE SUBSIDIARY GUARANTORS
▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President, Chief Financial
Officer and Treasurer
▇▇▇▇▇▇ OFFSHORE PRODUCTION, INC.
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President, Chief Financial
Officer and Treasurer
Address of the Borrower and each Subsidiary Guarantor:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: 601/▇▇▇-▇▇▇▇
Telecopy: 601/446-1410
-76-
THE AGENT
THE CHASE MANHATTAN BANK
By:
Name:
Title:
Address of the Agent:
The Chase Manhattan Bank
c/o Texas Commerce Bank National Association
707 ▇▇▇▇▇▇, 5 TCB-N 86
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: 713/▇▇▇-▇▇▇▇
Telecopy: 713/216-4117
THE BANKS:
THE CHASE MANHATTAN BANK
By:
Name:
Title:
-77-
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND REFERENCES....................... 1
SECTION 1.1. Defined Terms.......................................... 1
SECTION 1.2. Exhibits and Schedules: Additional Definitions......... 21
SECTION 1.3. Amendment of Defined Instruments....................... 21
SECTION 1.4. References and Titles.................................. 21
SECTION 1.5. Calculations and Determinations........................ 22
SECTION 1.6. Types of Borrowings.................................... 22
ARTICLE II
COMMITMENTS.............................. 22
SECTION 2.1. Revolving Loans and Letters of Credit.................. 22
SECTION 2.2. Borrowing Procedure for Loans.......................... 23
SECTION 2.3. Use of Proceeds........................................ 24
SECTION 2.4. Conversions or Continuation of Borrowings.............. 24
SECTION 2.5. Fees................................................... 25
SECTION 2.6. Termination or Reduction of Total Commitment........... 26
SECTION 2.7. Optional Prepayments................................... 26
SECTION 2.8. Mandatory Prepayments.................................. 26
SECTION 2.9. Interest Rates and Payment Dates....................... 27
SECTION 2.10. Determination of Interest Rate......................... 27
SECTION 2.11. Issuing the Letters of Credit.......................... 28
SECTION 2.12. Capital Reimbursement.................................. 30
SECTION 2.13. Increased Costs........................................ 30
SECTION 2.14. Availability........................................... 31
SECTION 2.15. Reimbursable Taxes..................................... 31
SECTION 2.16. Funding Losses......................................... 32
SECTION 2.17. Sharing of Payments and Setoffs........................ 33
SECTION 2.18. Method of Payments Pro Rata Treatment.................. 34
SECTION 2.19. Limitation on Reimbursement; Mitigation................ 34
SECTION 2.20. Replacement of Banks................................... 35
ARTICLE III
BORROWING BASE............................. 35
SECTION 3.1. Engineering Report; Proposed Borrowing Base............ 35
SECTION 3.2. Determination of Borrowing Base........................ 35
SECTION 3.3. Special Determination of Total Borrowing Base.......... 36
SECTION 3.4. Initial Borrowing Base................................. 37
-i-
ARTICLE IV
CONDITIONS PRECEDENT TO LENDING.................... 37
SECTION 4.1. Documents to be Delivered.............................. 37
SECTION 4.2. Additional Conditions Precedent........................ 40
ARTICLE V
REPRESENTATIONS AND WARRANTIES..................... 40
SECTION 5.1. No Default............................................. 41
SECTION 5.2. Organization and Good Standing......................... 41
SECTION 5.3. Authorization.......................................... 41
SECTION 5.4. Enforceable Obligations................................ 41
SECTION 5.5. Financial Condition.................................... 42
SECTION 5.6. No Change.............................................. 42
SECTION 5.7. No Conflict............................................ 42
SECTION 5.8. Full Disclosure........................................ 42
SECTION 5.9. Litigation............................................. 43
SECTION 5.10. Oil and Gas Interests; Properties Generally............ 43
SECTION 5.11. Taxes.................................................. 44
SECTION 5.12. ERISA Liabilities...................................... 44
SECTION 5.13. Names and Places of Business........................... 44
SECTION 5.14. Loan Parties' Subsidiaries............................. 44
SECTION 5.15. Government Regulation.................................. 44
SECTION 5.16. Insider................................................ 44
SECTION 5.17. Proceeds of Loans; Regulation U........................ 45
SECTION 5.18. Environmental Matters.................................. 45
SECTION 5.19. Regulatory Controls.................................... 46
SECTION 5.20. Engineering Report..................................... 46
SECTION 5.21. Designated Contracts................................... 47
SECTION 5.22. Solvency............................................... 47
SECTION 5.23. Business............................................... 47
SECTION 5.24. Mortgaged Property..................................... 47
SECTION 5.25. Consolidated Business Entity........................... 47
ARTICLE VI
AFFIRMATIVE COVENANTS......................... 47
SECTION 6.1. Payment and Performance................................ 47
SECTION 6.2. Books, Financial Statements and Reports................ 48
SECTION 6.3. Other Information and Inspections...................... 49
SECTION 6.4. Notice of Material Events and Change of Address........ 50
SECTION 6.5. Maintenance of Ownership; Properties................... 50
SECTION 6.6. Maintenance of Existence and Qualifications............ 51
SECTION 6.7. Payment of Trade Debt, Taxes, etc...................... 51
SECTION 6.8. Insurance.............................................. 51
SECTION 6.9. Payment of Expenses.................................... 51
SECTION 6.10. Performance on Loan Parties' Behalf.................... 52
-ii-
SECTION 6.11. Interest............................................... 52
SECTION 6.12. Compliance with Agreements and Law..................... 52
SECTION 6.13. Environmental Matters.................................. 52
SECTION 6.14. Evidence of Compliance................................. 53
ARTICLE VII
NEGATIVE COVENANTS........................... 53
SECTION 7.1. Limitations on Debt.................................... 53
SECTION 7.2. Limitations on Liens................................... 54
SECTION 7.3. Hedge Transactions..................................... 55
SECTION 7.4. Limitation on Consolidation, Mergers and Acquisitions;
Fundamental Changes....................................... 56
SECTION 7.5. Limitation on Sales of Property........................ 56
SECTION 7.6. Limitation on Distributions............................ 56
SECTION 7.7. Limitation on Investments.............................. 57
SECTION 7.8. Limitation on New Businesses........................... 57
SECTION 7.9. Transactions with Affiliates........................... 58
SECTION 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans 58
SECTION 7.11. Sales and Leasebacks................................... 58
SECTION 7.12. Margin Regulation...................................... 58
SECTION 7.13. Fiscal Year............................................ 59
SECTION 7.14. Financial Covenants.................................... 59
SECTION 7.15. Amendments and Waivers of Subordinated Obligations..... 59
ARTICLE VIII
SECURITY................................ 59
SECTION 8.1. The Security........................................... 59
SECTION 8.2. Mortgaged Properties................................... 59
SECTION 8.3. Further Assurances; Additional Collateral.............. 60
SECTION 8.4. Offset................................................. 60
SECTION 8.5. Guaranties of the Borrower's Subsidiaries.............. 60
SECTION 8.6. Production Proceeds.................................... 60
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES..................... 61
SECTION 9.1. Events of Default...................................... 61
SECTION 9.2. Remedies............................................... 64
SECTION 9.3. Indemnity.............................................. 64
ARTICLE X
THE AGENT............................... 64
SECTION 10.1. Appointment............................................ 64
-iii-
SECTION 10.2. Delegation of Duties................................... 65
SECTION 10.3. Exculpatory Provisions................................. 65
SECTION 10.4. Reliance by Agent...................................... 65
SECTION 10.5. Notice of Default...................................... 65
SECTION 10.6. Non-Reliance of Agent and Other Banks.................. 66
SECTION 10.7. Indemnification........................................ 66
SECTION 10.8. Agent in Its Individual Capacity....................... 66
SECTION 10.9. Successor Agent........................................ 66
ARTICLE XI
MISCELLANEOUS............................. 67
SECTION 11.1. Waivers and Amendments; Acknowledgements............... 67
SECTION 11.2. Representation by the Banks............................ 68
SECTION 11.3. Notices................................................ 69
SECTION 11.4. Successors and Assigns; Participations................. 69
SECTION 11.5. No Waiver; Cumulative Remedies......................... 72
SECTION 11.6. Survival of Agreements; Cumulative Nature.............. 73
SECTION 11.7. Joint and Several Liability; Parties in Interest....... 73
SECTION 11.8. GOVERNING LAW; SUBMISSION TO PROCESS................... 73
SECTION 11.9. Interest............................................... 74
SECTION 11.10. Severability........................................... 75
SECTION 11.11. Counterparts........................................... 75
SECTION 11.12. WAIVER OF JURY TRIAL, DAMAGES, ETC..................... 75
-iv-
SCHEDULES
Schedule 1.1 - Names, Addresses and Commitments of the Banks
Schedule 1.2 - Disclosure Schedule
Schedule 1.3 - Mortgage Schedule
Schedule 5.10 - Description of Material Borrowing Base Properties of the Loan
Parties
EXHIBITS
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Letter of Credit Application
Exhibit C - Form of Promissory Note
Exhibit D - Form of Notice of Conversion or Continuation
Exhibit E - Form of Security Agreement - Intercompany Obligations
Exhibit F - Form of Subsidiary Guaranty
Exhibit G - Form of Opinion of Borrower's Counsel
Exhibit H - Form of Opinion of Alabama Counsel
Exhibit I - Form of Opinion of Louisiana Counsel
Exhibit J - Form of Compliance Certificate
Exhibit K - Form of Commitment Transfer Supplement
-v-