EXHIBIT 10
CREDIT AGREEMENT
DATED AS OF JUNE 26, 1997
AMONG
PETROCORP INCORPORATED
AS U.S. BORROWER,
AND
PCC ENERGY LIMITED
AND
PCC ENERGY CORP.,
AS CANADIAN BORROWERS
TORONTO DOMINION (TEXAS), INC.
AS U.S. AGENT,
THE TORONTO-DOMINION BANK,
AS CANADIAN AGENT,
AND
THE LENDERS SIGNATORY HERETO
U.S. $50,000,000 REVOLVING CREDIT FACILITY
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above.......................................... 1
Section 1.02 Certain Defined Terms........................................ 1
Section 1.03 Accounting Terms and Determinations.......................... 20
ARTICLE II
COMMITMENTS
Section 2.01 Loans, Letters of Credit and Bankers' Acceptances............ 20
Section 2.02 Borrowings, Continuations and Conversions;
Letters of Credit; Bankers' Acceptances..................... 22
Section 2.03 Changes of Commitments....................................... 25
Section 2.04 Fees......................................................... 25
Section 2.05 Several Obligations.......................................... 27
Section 2.06 Notes........................................................ 27
Section 2.07 Prepayments.................................................. 28
Section 2.08 Borrowing Base............................................... 29
Section 2.09 Assumption of Risks.......................................... 31
Section 2.10 Obligation to Reimburse and to Prepay........................ 32
Section 2.11 Lending Offices.............................................. 34
Section 2.12 Acceptance Date Procedure.................................... 34
Section 2.13 Purchase of Bankers' Acceptances............................. 35
Section 2.14 Payment of Bankers' Acceptances.............................. 35
Section 2.16 Miscellaneous Bankers' Acceptance Provisions................. 36
Section 2.17 Exchange Rate................................................ 36
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans........................................... 37
Section 3.02 Interest..................................................... 37
-i-
Section 3.03 Obligations of Canadian Borrowers to U.S. Borrower........... 38
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments..................................................... 38
Section 4.02 Pro Rata Treatment........................................... 39
Section 4.03 Computations................................................. 39
Section 4.04 Non-receipt of Funds by the Agents........................... 39
Section 4.05 Set-off, Sharing of Payments, Etc............................ 40
Section 4.06 Taxes........................................................ 41
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 Additional Costs............................................. 44
Section 5.02 Limitation on Eurodollar Loans............................... 46
Section 5.03 Illegality................................................... 46
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03..... 46
Section 5.05 Compensation................................................. 47
Section 5.06 Replacement Lenders.......................................... 47
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.............................................. 49
Section 6.02 Initial and Subsequent Loans, Bankers' Acceptances
and Letters of Credit....................................... 50
Section 6.03 Initial Funding to PEL and PEC............................... 51
Section 6.04 Conditions Precedent for the Benefit of Lenders.............. 51
Section 6.05 No Waiver.................................................... 51
-ii-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence.......................................... 52
Section 7.02 Financial Condition.......................................... 52
Section 7.03 Litigation................................................... 52
Section 7.04 No Breach.................................................... 53
Section 7.05 Authority.................................................... 53
Section 7.06 Approvals.................................................... 53
Section 7.07 Use of Loans................................................. 53
Section 7.08 ERISA........................................................ 54
Section 7.09 Taxes........................................................ 55
Section 7.10 Titles, etc.................................................. 55
Section 7.11 No Material Misstatements.................................... 56
Section 7.12 Investment Company Act....................................... 56
Section 7.13 Public Utility Holding Company Act........................... 56
Section 7.14 Subsidiaries and Partnership................................. 56
Section 7.15 Location of Business and Offices............................. 56
Section 7.16 Defaults..................................................... 56
Section 7.17 Environmental Matters........................................ 56
Section 7.18 Compliance with the Law...................................... 58
Section 7.19 Insurance.................................................... 58
Section 7.20 Hedging Agreements........................................... 59
Section 7.21 Intentionally Deleted........................................ 59
Section 7.22 Material Agreements.......................................... 59
Section 7.23 Gas Imbalances............................................... 59
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Reporting Requirements....................................... 59
Section 8.02 Litigation................................................... 62
Section 8.03 Maintenance, Etc............................................. 62
Section 8.04 Environmental Matters........................................ 63
Section 8.05 Further Assurances........................................... 64
Section 8.06 Performance of Obligations................................... 64
Section 8.07 Engineering Reports.......................................... 64
Section 8.08 Title Information............................................ 65
Section 8.09 ERISA Information and Compliance............................. 66
Section 8.10 Payment of Series A Debt and Series B Debt................... 66
-iii-
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt......................................................... 67
Section 9.02 Liens........................................................ 68
Section 9.03 Investments, Loans and Advances.............................. 68
Section 9.04 Dividends, Distributions and Redemptions..................... 69
Section 9.05 Sales and Leasebacks......................................... 69
Section 9.06 Nature of Business........................................... 70
Section 9.07 Limitation on Leases......................................... 70
Section 9.08 Mergers, Etc................................................. 70
Section 9.09 Proceeds of Notes; Letters of Credit......................... 70
Section 9.10 ERISA Compliance............................................. 71
Section 9.11 Sale or Discount of Receivables.............................. 72
Section 9.12 Current Ratio................................................ 72
Section 9.13 Tangible Net Worth........................................... 72
Section 9.14 Interest Coverage Ratio...................................... 72
Section 9.15 Sale of Oil and Gas Properties to PEC and PEL................ 72
Section 9.16 Environmental Matters........................................ 73
Section 9.17 Transactions with Affiliates................................. 73
Section 9.18 Subsidiaries and Partnerships................................ 73
Section 9.19 Negative Pledge Agreements................................... 73
Section 9.20 Note Purchase Agreement...................................... 73
Section 9.21 UBS Agreement................................................ 73
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default........................................... 74
Section 10.02 Remedies.................................................... 76
ARTICLE XI
THE AGENTS
Section 11.01 Appointment, Powers and Immunities.......................... 77
Section 11.02 Reliance by Agents.......................................... 77
Section 11.03 Defaults.................................................... 78
-iv-
Section 11.04 Rights as a Lender.......................................... 78
Section 11.05 Indemnification............................................. 78
Section 11.06 Non-Reliance on Agents and other Lenders.................... 79
Section 11.07 Action by Agents............................................ 79
Section 11.08 Resignation or Removal of Agents............................ 80
Section 11.09 Applicable Parties.......................................... 80
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver...................................................... 80
Section 12.02 Notices..................................................... 80
Section 12.03 Payment of Expenses, Indemnities, etc....................... 81
Section 12.04 Amendments, Etc............................................. 83
Section 12.05 Successors and Assigns...................................... 84
Section 12.06 Assignments and Participations.............................. 84
Section 12.07 Invalidity.................................................. 86
Section 12.08 Counterparts................................................ 86
Section 12.09 References.................................................. 86
Section 12.10 Survival.................................................... 86
Section 12.11 Captions.................................................... 86
SECTION 12.12 NO ORAL AGREEMENTS.......................................... 86
SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION................... 86
Section 12.14 Interest.................................................... 88
Section 12.15 Confidentiality............................................. 89
SECTION 12.16 EXCULPATION PROVISIONS...................................... 90
-v-
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Maximum Credit Amounts
Exhibit A-1 - Form of U.S. Note
Exhibit A-2 - Form of Canadian Note
Exhibit B - Form of Borrowing, Continuation, Conversion
and Bankers' Acceptances Notice
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Assignment Agreement
Schedule 2.08 - Automatic Borrowing Base Reductions
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
-vi-
THIS CREDIT AGREEMENT dated as of June 26, 1997 is among: PETROCORP
INCORPORATED, a corporation formed under the laws of the State of Texas (the
"U.S. Borrower"); PCC ENERGY LIMITED, a corporation formed under the laws of
Alberta, Canada ("PEL") and PCC ENERGY CORP., a corporation formed under the
laws of Alberta, Canada ("PEC"; PEL and PEC, each a "Canadian Borrower" and
collectively the "Canadian Borrowers"), each of the lenders that is a signatory
hereto or which becomes a signatory hereto as provided in Section 12.06
(individually, together with its successors and such assigns, a "Lender" and,
collectively, the "Lenders"); and TORONTO DOMINION (TEXAS), INC. , a Delaware
corporation, as agent for the Lenders in the United States (in such capacity,
together with its successors in such capacity, the "U.S. Agent") and THE
TORONTO-DOMINION BANK, acting through its Calgary Agency, as agent for the
Lenders in Canada (in such capacity, together with its successors in such
capacity, the "Canadian Agent"; the U.S. Agent and the Canadian Agent
collectively, the "Agents").
R E C I T A L S
---------------
A. The Obligors (as defined in Section 1.02) have requested that the
Lenders provide certain loans to and extensions of credit on behalf of the
Obligors; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
"U.S. Agent," "Canadian Agent," "Agents," "U.S. Borrower," "Canadian Borrower,"
"Canadian Borrowers," "Lender," "Lenders," "PEL", and "PEC", shall have the
meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Acceptance Date" shall mean any Business Day on which a Bankers'
Acceptance is issued and accepted by an Accepting Lender.
"Acceptance Exposure" means, at any time, the aggregate face amount of all
Bankers' Acceptances outstanding at such time for which the Canadian Borrowers
have not yet reimbursed the Accepting Lenders.
"Accepting Lender" shall mean, as to any Bankers' Acceptance, any Canadian
Lender which has accepted such Bankers' Acceptance pursuant to the terms of this
Agreement.
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including parents, spouse and children) of
such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person which
owns directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from time to
time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount calculated in
accordance with Section 2.03.
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of the
Maximum Credit Amounts of the Lenders (U.S. $50,000,000), as the same may be
reduced pursuant to Sections 2.03(b) or (c).
"Alberta Credit Agreement" shall mean that certain Credit Agreement dated
December 30, 1996 among 702056 Alberta Ltd., Millarville Oil & Gas Ltd.,
Millarville Oil & Gas (1991) Ltd. and Royal Bank of Canada, providing for a Can.
$5,000,000 non-revolver extendible term credit facility, as amended,
supplemented, restated or otherwise modified.
"Applicable Exchange Rate" shall mean, on any day, (a) with respect to Can.
Dollars, the spot rate at which U.S. Dollars are offered on such day by The
Toronto-Dominion Bank for such Can. Dollars at approximately 11:00 a.m. (Toronto
time) and (b) with respect to U.S. Dollars, the spot rate at which Can. Dollars
are offered on such day by The Toronto-Dominion Bank for U.S. Dollars at
approximately 11:00 a.m. (Toronto time). For purposes of determining the
Applicable Exchange
-2-
Rate in connection with any borrowing, such Applicable Exchange Rate shall be
determined as of the date of such borrowing with respect to transactions in the
relevant currency that will settle on the date of such borrowing.
"Applicable Lending Office" shall mean, for each Lender and for each Type
of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Agents and the Obligors as the office by which
its Loans of such Type are to be made and maintained and Bankers' Acceptances
are to be accepted.
"Applicable Margin" the applicable per annum percentage set forth at the
appropriate intersection in the table shown below, based on the Borrowing Base
Utilization as in effect from time to time:
Applicable Margin
-----------------
Borrowing Base Utilization Eurodollar/Bankers' Acceptance Base Rate
-------------------------- ------------------------------ ---------
Less than 50% 0.625% 0.000%
Greater than or equal to 50%,
but less than 70% 0.750% 0.000%
Greater than or equal to 70%,
but less than 80% 0.875% 0.000%
Greater than or equal to 80%,
but less than 90% 1.125% 0.125%
Greater than or equal to 90% 1.250% 0.250%
Each change in the Applicable Margin resulting from a change in the Borrowing
Base Utilization shall take effect at the time of such change in the Borrowing
Base Utilization.
"Assignment" shall have the meaning assigned such term in Section 12.06(b).
"Available Proceeds" shall mean the face amount of the Bankers' Acceptance
less the applicable Discount Amount and the Stamping Fee.
"BA Interest Period" shall mean, with respect to any Bankers' Acceptances,
the period (which shall be 30 days, 60 days, 90 days, or subject to
availability, 180 days, or such other period longer
-3-
than 90 days requested by any Canadian Borrower and agreed to by all the
Lenders) commencing on the date such Bankers' Acceptance is issued, accepted and
purchased.
Notwithstanding the foregoing (unless otherwise agreed to by the Canadian
Borrowers and all of the Lenders), each BA Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day.
"Bankers' Acceptance" shall mean a ▇▇▇▇ of exchange drawn by any Canadian
Borrower, duly completed and accepted by a Canadian Lender, in a form
customarily used by the Canadian Lenders in creating bankers' acceptances and
which otherwise meets any reasonable requirements of the Canadian Lenders.
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean, with respect to U.S. Loans, Loans that bear
interest at rates based upon the Base Rate; with respect to Canadian Loans
denominated in U.S. Dollars, Loans that bear interest at rates based on the U.S.
Base Rate; and with respect to Canadian Loans denominated in Can. Dollars, Loans
that bear interest at rates based on the Canadian Prime Rate.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Deficiency" shall occur and be continuing at any time that,
and relate to the amount by which, the sum of the aggregate outstanding
principal amount of the Loans, plus the LC Exposure, plus Acceptance Exposure
exceeds the Borrowing Base.
"Borrowing Base Utilization" shall mean the amount equal to the quotient of
(i) the sum of the aggregate amount outstanding of (A) Series A Debt, plus (B)
Series B Debt, plus (C) Indebtedness, divided by (ii) the Loan Value.
"Business Day" shall mean, with respect to U.S. Loans and Letters of
Credit, any day other than a day on which commercial banks are authorized or
required to close in Houston, Texas; with respect to Canadian Loans and Bankers'
Acceptances, any day other than a day on which Commercial Banks are authorized
or required to close in Calgary, Alberta or Toronto, Ontario; and, where such
term is used in the definition of "Quarterly Date" or if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by an Obligor with respect to any such borrowing or
continuation, payment, prepayment, conversion or Interest Period, any day which
is also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
-4-
"Can. Dollars" and "Can. $" shall mean lawful money of Canada.
"Canadian Lender" shall mean a Lender the Applicable Lending Office of
which is located in Canada.
"Canadian Loans" shall mean Loans made by a Canadian Lender.
"Canadian Notes" shall mean the promissory notes provided for by Section
2.06(b) and being substantially in the form of Exhibit A-2, together with any
and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Canadian Prime Rate" shall mean on any day the variable rate of interest
quoted by the Canadian Agent from time to time as the reference rate of interest
which it employs to determine the interest rate it will charge for demand loans
in Can. Dollars to its customers in Canada and which it designates as its prime
rate, provided that, if such rate of interest is less than the then applicable
average rate for 30 day Can. Dollar bankers' acceptances which appears on the
Reuters CDOR Page at 10:00 a.m. Toronto time on such day plus 3/4 of 1% per
annum (the "floor rate"), then the Canadian Prime Rate shall equal the floor
rate.
"CDOR Rate" shall mean, on any day, the per annum rate of interest which is
the rate determined as being the arithmetic average of the rates applicable to
Can. Dollar bankers' acceptances having identical issue and comparable maturity
dates as the Bankers' Acceptances proposed to be issued by any Canadian Borrower
displayed and identified as such on the display referred to as the "CDOR Page"
(or any display substituted therefor) of ▇▇▇▇▇▇ Monitor Money Rates Service as
at approximately 8:00 a.m. (Calgary time) on such day, or if such day is not a
Business Day, then on the immediately preceding Business Day (as adjusted by the
Canadian Agent in good faith after 8:00 a.m. (Calgary time) to reflect any error
in a posted rate of interest or in the posted average annual rate of interest);
provided, however, if such a rate does not appear on such CDOR Page, then the
CDOR Rate, on any day, shall be the discount rate quoted by the Canadian Agent
(determined as of 8:00 a.m. (Calgary time) on such day) which would be
applicable in respect of an issue of bankers' acceptances in a comparable amount
and with comparable maturity dates to the Bankers' Acceptances proposed to be
issued by such Canadian Borrower on such day, or if such day is not a Business
Day, then on the immediately preceding Business Day.
"Closing Date" shall mean June 26, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and any successor statute.
"Commitment" shall mean, for any Lender, its obligation to make Loans and
to participate in the Letters of Credit as provided in Section 2.01(a)(ii) and
to accept and purchase Bankers' Acceptances as provided in Section 2.01(b)(ii)
up to the lesser of such Lender's Maximum Credit Amount or the Lender's
Percentage Share of the amount equal to the then effective Borrowing Base.
-5-
"Consolidated Net Income" shall mean with respect to the U.S. Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net income
(or loss) of the U.S. Borrower and its Consolidated Subsidiaries after
allowances for taxes for such period, determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (i) the net income of
any Person in which the U.S. Borrower or any Consolidated Subsidiary has an
interest (which interest does not cause the net income of such other Person to
be consolidated with the net income of the U.S. Borrower and its Consolidated
Subsidiaries in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in such period by such other Person to
the U.S. Borrower or to a Consolidated Subsidiary, as the case may be; (ii) the
net income (but not loss) of any Consolidated Subsidiary to the extent that the
declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Subsidiary is not at the time permitted by operation
of the terms of its charter or any consensual agreement (other than the Guaranty
Agreement), instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (iv) any extraordinary gains or losses, including gains or
losses attributable to Property sales not in the ordinary course of business;
and (v) the cumulative effect of a change in accounting principles and any gains
or losses attributable to writeups or write downs of assets.
"Consolidated Subsidiaries" shall mean, at any time, each Subsidiary of the
U.S. Borrower (whether now existing or hereafter created or acquired), the
financial statements of which are (or should have been at such time)
consolidated with the financial statements of the U.S. Borrower in accordance
with GAAP.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person directly, or indirectly
through its Affiliate, to make payments over the term of such lease, including
payments at termination, which are substantially equal to at least eighty
percent (80%) of the purchase price of the Property subject to such lease plus
interest as an imputed rate of interest; (vi) all Debt (as described in the
other clauses of this definition) and other obligations of others to the extent
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person; (vii) all Debt (as described in the other clauses of
this definition) and other obligations of others to the extent guaranteed by
such Person or to the extent such Person otherwise assures a creditor against
loss of the debtor or obligations of others; (viii) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants
-6-
of others including by way of the purchase of Debt or Property of others; (ix)
obligations to deliver goods or services including Hydrocarbons in consideration
of advance payments, except as permitted by Section 9.15 and disclosed by
Section 8.07(c); (x) obligations to pay for goods or services whether or not
such goods or services are actually received or utilized by such Person; (xi)
any capital stock of such Person in which such Person has a mandatory obligation
to redeem such stock; (xii) any Debt of a Special Entity for which such Person
is liable either by agreement or because of a Governmental Requirement; (xiii)
the undischarged balance of any production payment created by such Person or for
the creation of which such Person directly or indirectly received payment; and
(xiv) all obligations of such Person under Hedging Agreements.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Deficiency Payment" shall mean, in respect of any Borrowing Base
Deficiency, any payments made by an Obligor during a Deficiency Period for such
Borrowing Base Deficiency equal to either (a) in the case of each such payment
the amount of the Borrowing Base Deficiency on the date the U.S. Borrower
notifies the U.S. Agent of its intent to initiate a Deficiency Period divided by
five (5) or (b) such other amount as the Majority Lenders may approve, which
when aggregated with the other such payments for such Deficiency Period, are
sufficient to satisfy the Borrowing Base Deficiency on or before the final day
of such Deficiency Period.
"Deficiency Period" shall mean any five (5) month period during which the
sum of the aggregate principal balance outstanding under the Notes, plus the LC
Exposure, plus the Acceptance Exposure exceeds the Borrowing Base.
"Discount Amount" shall mean, with respect to any Bankers' Acceptance, an
amount equal to the face amount thereof multiplied by the Discount Rate.
"Discount Rate" shall mean:
(a) with respect to an issue of Bankers' Acceptances issued by a Canadian
Lender that is a bank listed on Schedule I to the Bank Act (Canada), the CDOR
Rate; and
(b) with respect to an issue of Bankers' Acceptances issued by a Canadian
Lender that is a bank listed on Schedule II to the Bank Act (Canada), the CDOR
Rate plus .10%.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, taxes, depreciation, depletion
and amortization.
"Engineering Reports" shall have the meaning assigned such term in
Section 2.08.
-7-
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Obligors or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Obligors or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Obligors or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder, (ii) the withdrawal of the U.S.
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for any
Interest Period, (i) the interest rate per annum for deposits for a maturity
most nearly comparable to such Interest Period in the currency in which such
borrowing is denominated which appears on page 3740 or 3750,
-8-
as applicable, of the Dow ▇▇▇▇▇ Telerate Screen as of 11:00 a.m., London time,
on the day that is two Business Days prior to the first day of such Interest
Period or, (ii) if such a rate does not appear on page 3740 or 3750, as
applicable, of the Dow ▇▇▇▇▇ Telerate Screen, an interest rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the rate at
which deposits in the currency in which such borrowing is denominated
approximately equal in principal amount to the Percentage Share of the
applicable Agent in its capacity as a Lender of such Eurodollar Loan and for a
maturity comparable to such Interest Period are offered to the principal London
office of such Lender in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, on the day that is two Business
Days prior to the first day of such Interest Period.
"Event of Default" shall have the meaning assigned such term in
Section 10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
or the payment of which is not otherwise required under Section 8.03(a); (ii)
Liens in connection with workmen's compensation, unemployment insurance or other
social security, old age pension or public liability obligations not yet due or
which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP; (iii)
operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
workmen's, materialmen's, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties or statutory or
consensual landlord's liens for rent, each of which is in respect of obligations
that have not been outstanding more than 90 days or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP; (iv) Liens customarily reserved in
instruments utilized in oil and gas operations, including, without limitation,
leases, farmout agreements, farmin agreements, operating agreements,
assignments, and production sales agreements, to the extent that any such Lien
referred to in this clause does not materially impair the use of the Property
covered by such Lien for the purposes for which such Property is held by the
Obligors or any Subsidiary; (v) encumbrances (other than to secure the payment
of borrowed money or the deferred purchase price of Property or services),
easements, surface leases, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any rights of way or other Property of
the Obligors or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use of
such rights of way or other Property for the purposes for which such rights of
way and other Property are held by the Obligors or any Subsidiary or materially
impair the value of such Property subject thereto; and (vi) deposits of cash or
securities to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business.
-9-
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with a member of the
Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the date for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the U.S. Agent on such day on such transactions as determined by
the U.S. Agent.
"Fee Letters" shall mean those two certain letter agreements between the
Agents and the U.S. Borrower, each dated June 23, 1997, concerning certain fees
in connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.
"Financial Statements" shall mean the financial statement or statements of
the U.S. Borrower and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" shall include, with respect to any Person, the
country, the state, county, city and political subdivisions in which such Person
or such Person's Property is located or which exercises valid jurisdiction over
any such Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including monetary
authorities which exercises valid jurisdiction over any such Person or such
Person's Property. Unless otherwise specified, all references to Governmental
Authority herein shall mean a Governmental Authority having jurisdiction over,
where applicable, the Obligors, Subsidiaries or any of their Property or the
Agents, any Lender or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"Guaranty Agreement" shall mean an agreement executed by the U.S. Borrower
in form and substance satisfactory to the Agents guarantying, unconditionally,
payment of the Indebtedness of the Canadian Borrowers, as the same may be
amended, modified or supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option with respect to any such transaction.
-10-
"Highest Lawful Rate" shall mean, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts then owing or (in respect of
Letters of Credit and Bankers' Acceptances that have been accepted) to be owing
by the Obligors to the Agents, the Issuing Bank and/or Lenders in connection
with the Loan Documents, and all renewals, extensions and/or rearrangements of
any of the foregoing.
"Indemnified Parties" shall have the meaning assigned such term in Section
12.03(a)(ii).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans, issuance of
the initial Letters of Credit, or issuance, acceptance and purchase of the
initial Bankers' Acceptances upon satisfaction of the conditions set forth in
Sections 6.01 and 6.02.
"Initial Reserve Report" shall mean the report of ▇▇▇▇▇▇▇▇▇▇ & Co., Inc.,
dated February 28, 1997 with respect to the Oil and Gas Properties of the
Obligors as of January 1, 1997, a copy of which has been delivered to the U.S.
Agent.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as an Obligor may select as provided in Section 2.02 (or such
longer period as may be requested by an Obligor and agreed to by the Majority
Lenders), except that each Interest Period which commences on the last Business
Day of a calendar
-11-
month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Termination Date; (ii) each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) no Interest Period shall
have a duration of less than one month and, if the Interest Period for any
Eurodollar Loans would otherwise be for a shorter period, such Loans shall not
be available hereunder.
"Investment Fund" shall mean (i) any single customer account, pooled
separate account or general account of an insurance company, or any other
account, the assets of which could be considered "plan assets" under any of
▇▇▇▇▇▇▇▇ ▇, ▇▇▇, ▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇, (▇▇) any individual trust or common,
collective or group trust maintained by any bank, or any other trust, the assets
of which could be considered "plan assets" under any of Sections 3, 401 or 403
of ERISA, or (iii) any entity or fund not previously mentioned whose underlying
assets include "plan assets" by reason of the investment in the entity or fund
by an "employee benefit plan" (within the meaning of Section 3(3) of ERISA) or a
"plan" (within the meaning of Section 4975(e)(1) of the Code) and the
application of the U.S. Department of Labor's "plan asset regulation." 29
C.F.R. (S)2510.3-101 (November 13, 1986).
"Issuing Bank" shall mean The Toronto-Dominion Bank or any other Lender
agreed to among the Obligors and the U.S. Agent.
"LC Commitment" at any time shall mean $5,000,000.
"LC Exposure" at any time shall mean the difference between (i) aggregate
face amount of all undrawn and uncancelled Letters of Credit and the aggregate
of all amounts drawn under all Letters of Credit and not yet reimbursed (but
excluding all amounts that are advanced as Loans pursuant to 2.10(d)), minus
(ii) the aggregate amount of all cash securing outstanding Letters of Credit
pursuant to Section 2.10(b).
"Letter of Credit Agreements" shall mean the written applications and
agreements with the Issuing Bank, as issuing lender for any Letter of Credit
executed in connection with the issuance by the Issuing Bank of the Letters of
Credit, such agreements to be on the Issuing Bank's customary form for letters
of credit of comparable amount and purpose as from time to time in effect or as
otherwise agreed to by the Obligors and the Issuing Bank.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(a)(ii) and all reimbursement obligations pertaining to any such
letters of credit, and "Letter of Credit" shall mean any one of the Letters of
Credit and the reimbursement obligations pertaining thereto.
-12-
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including, but not limited to
(i) the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments, net profits
interests, overriding royalties and carried interests or other payments carved
out of or measured by production of Hydrocarbons from Oil and Gas Properties.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purposes of this
Agreement, each Obligor or any Subsidiary shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, Letters of Credit,
Letter of Credit Agreements, Bankers' Acceptances, the Guaranty Agreement and
any and all other agreements or instruments now or hereafter executed and
delivered by any Obligor or any of their Affiliates in connection with, or as
security for the payment or performance of the Notes, this Agreement, or
reimbursement obligations under the Letters of Credit or Bankers' Acceptances,
as such agreements may be amended, supplemented or restated from time to time.
"Loan Value" shall mean, at each Redetermination Date, an amount equal to
the Borrowing Base prior to subtracting the Series A Debt and Series B Debt.
"Loans" shall mean the loans as provided for by Sections 2.01(a)(i),
2.01(b)(i), 2.10(d) and 2.14(b).
"Louisiana Acquisition" shall mean the acquisition by the U.S. Borrower
from Great River Oil & Gas Corp. (a subsidiary of Georgia Gulf Corp.) of Oil and
Gas Properties located in the Riceville Field in Vermilion Parish, Louisiana and
certain other Oil and Gas Properties in Plaquemines and LaFourche Parishes,
Louisiana and Conecuh and Escambia Counties, Alabama pursuant to that certain
Agreement for Purchase and Sale dated June 5, 1997.
"Majority Lenders" shall mean, at any time while no Loans are outstanding,
Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the
Aggregate Commitments and, at any time while Loans are outstanding, Lenders
holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding
aggregate principal amount of the Loans (without regard to any sale by a Lender
of a participation in any Loan under Section 12.06(c)).
"Material Adverse Effect" shall mean any material and adverse effect on (i)
the assets, liabilities, financial condition, business, operations or affairs of
the Obligors and their Subsidiaries taken as a whole different from those
reflected in the Financial Statements or from the facts represented or warranted
in any Loan Document, or (ii) the ability of the Obligors and their
-13-
Subsidiaries taken as a whole to carry out their business as at the Closing Date
or meet their obligations under the Loan Documents on a timely basis.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set forth
opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" (as the same may be reduced pursuant to Sections 2.03(b) or (c) pro
rata to each Lender based on its Percentage Share), as modified from time to
time to reflect any assignments permitted by Section 12.06(b). "Maximum Credit
Amount" shall at all times be expressed in terms of "U.S. Dollars" and for all
calculations with respect to determinations involving the Maximum Credit Amount
including, without limitation, Lender's Commitments and Aggregate Commitment
Amounts, any Can. Dollar Loans or Bankers' Acceptances or other Can. Dollar
liabilities shall be converted to U.S. Dollars at the then Applicable Exchange
Rate.
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.
"Note Purchase Agreement" shall mean that certain Note Purchase Agreement
dated as of July 29, 1993 among the U.S. Borrower and the insurance companies
parties thereto, for the issuance and sale of Senior Adjustable Rate Notes,
Series A, due June 30, 1999 in the aggregate principal amount of U.S.
$10,000,000 and 7.55% Senior Notes, Series B, due June 30, 2008 in the aggregate
principal amount of U.S. $30,000,000 as the same may be amended, modified,
restated or supplemented from time to time.
"Notes" shall mean the U.S. Notes and the Canadian Notes.
"Obligors" shall mean collectively, the U.S. Borrower and the Canadian
Borrowers.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the Properties
now or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for
-14-
the purpose of drilling a well or for other similar temporary uses) and
including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section 4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"PEI" shall mean PCC Energy Inc., a corporation formed under the laws of
Alberta, Canada.
"Percentage Share" shall mean the percentage of the Aggregate Commitments
to be provided by a Lender under this Agreement as indicated on Annex I hereto,
as modified from time to time to reflect any assignments permitted by Section
12.06(b).
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in Section
3(2) of ERISA (excluding any Multiemployer Plan), which (i) is currently or
hereafter sponsored, maintained or contributed to by the U.S. Borrower, any
Subsidiary or an ERISA Affiliate or (ii) was at any time during the preceding
six calendar years sponsored, maintained or contributed to, by the U.S.
Borrower, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount payable by an Obligor under this Agreement or any other Loan
Document , a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to 2% per annum above the Base Rate
as in effect from time to time plus the Applicable Margin (if any), but in no
event to exceed the Highest Lawful Rate; provided however, for a Eurodollar
Loan, the "Post-Default Rate" for such principal shall be, for the period
commencing on the date of occurrence of an Event of Default and ending on the
earlier to occur of the last day of the Interest Period therefor or the date all
Events of Default are cured or waived, 2% per annum above the interest rate for
such Loan as provided in Section 3.02(ii), but in no event to exceed the Highest
Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time announced
publicly by the U.S. Agent at its Principal Office as its prime commercial
lending rate. Such rate is set by the U.S. Agent as a general reference rate of
interest, taking into account such factors as the U.S. Agent may deem
-15-
appropriate, it being understood that many of the U.S. Agent's commercial or
other loans are priced in relation to such rate, that it is not necessarily the
lowest or best rate actually charged to any customer and that the U.S. Agent may
make various commercial or other loans at rates of interest having no
relationship to such rate.
"Principal Office" shall mean, as applicable, the principal office of the
U.S. Agent, presently located at ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or
the principal office of the Canadian Agent, presently located at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ PZP2Z2.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Quarterly Dates" shall mean the last day of each March, June, September
and December in each year commencing September 30, 1997; provided, however,
that if any such day is not a Business Day, such Quarterly Date shall be the
next succeeding Business Day.
"Redetermination Date" shall have the meaning assigned such term in
Section 2.08(a).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Required Payment" shall have the meaning assigned such term in
Section 4.04.
"Reserve Report" shall mean a report, in form and substance reasonably
satisfactory to the U.S. Agent, setting forth, as of each January 1 (or such
other date in the event of an unscheduled redetermination), (i) the oil and gas
reserves attributable to substantially all of the Obligors' and their
Subsidiaries' Oil and Gas Properties, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, based upon the pricing
assumptions consistent with SEC reporting requirements at the time and (ii) such
other information as the U.S. Agent may reasonably request.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President and Chief Financial Officer of such
Person. Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the relevant Obligor.
-16-
"Scheduled Redetermination Date" shall have the meaning assigned such term
in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"Series A Debt" shall mean the Debt outstanding at any time under the
Senior Adjustable Rate Notes, Series A, due June 30, 1999, in the aggregate
original principal amount of U.S. $10,000,000, issued under the Note Purchase
Agreement.
"Series B Debt" shall mean the Debt outstanding at any time under the 7.55%
Senior Notes, Series B, due June 30, 2008, in the aggregate original principal
amount of U.S. $30,000,000, issued under the Note Purchase Agreement.
"Special Entity" shall mean any joint venture, limited liability company or
partnership, general or limited partnership or any other type of partnership or
company other than a corporation in which an Obligor or one or more of its other
Subsidiaries is a member, owner, partner or joint venturer and owns, directly or
indirectly, at least a majority of the equity of such entity or controls such
entity, but excluding any tax partnerships that are not classified as
partnerships under state law. For purposes of this definition, any Person which
owns directly or indirectly an equity investment in another Person which allows
the first Person to manage or elect managers who manage the normal activities of
such second Person will be deemed to "control" such second Person (e.g. a sole
general partner controls a limited partnership).
"Stamping Fee" shall mean, with respect to any Bankers' Acceptance, an
amount equal to the face amount thereof multiplied by the Applicable Margin for
Bankers' Acceptances.
"Subsidiary" shall mean (i) any corporation of which at least a majority of
the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by an Obligor or one or more of its Subsidiaries or by an Obligor and
one or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Obligors.
"Tangible Net Worth" shall mean, as at any date, the sum of the following
for the U.S. Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the amount
of surplus of the U.S. Borrower and its Consolidated Subsidiaries, plus
-17-
(ii) the retained earnings (or, in the case of retained earnings deficit,
minus the amount of such deficit), minus
(iii) the sum of the following: cost of treasury shares and the book
value of all assets of the U.S. Borrower and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained earnings),
but in any event including as such intangibles the following: goodwill,
research and development costs, trademarks, trade names, copyrights, patents and
franchises, unamortized debt discount and expense, all reserves and any writeup
in the book value of assets resulting from a revaluation thereof or resulting
from any changes in GAAP subsequent to March 31, 1997, plus
(iv) any negative currency translation adjustments for the value of the
Obligor's Canadian Properties (or, in the case of any positive currency
translation and adjustments, minus the amount of such currency translation
adjustment).
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Termination Date" shall mean the earlier to occur of (i) July 1, 2002 and
(ii) the date that the Commitments are terminated pursuant to Sections 2.03(b)
or 10.02.
"Transfer" shall mean any sale, assignment, farm-out, conveyance or other
transfer of any Oil and Gas Property or any interest in any Oil and Gas Property
(including, without limitation, any working interest, overriding royalty
interest, production payments, net profits interest, royalty interest, or
mineral fee interest), excluding (i) the sale of Hydrocarbons in the ordinary
course of business and (ii) the sale of equipment that is no longer necessary
for the business of the Obligors or any Subsidiary or is replaced by equipment
of at least comparable value and use.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
"UBS Agreement" shall mean collectively, each of the following documents:
(i) Sale Agreement dated December 12, 1991 ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Ltd., purchaser and UBS Asset Management;
(ii) Debenture dated December 12, 1991 from PEI to 507317 Alberta Ltd. in
the maximum amount of $200,000,000.00 (Canadian);
(iii) Royalty Agreement dated December 12, 1991 from PEI to 507317
Alberta Ltd.;
(iv) Overriding Royalties Conveyance dated December 12, 1991 from PEI to
507317 Alberta Ltd.;
-18-
(v) Gas Sales Agreement dated December 12, 1991 between PEI and 507317
Alberta Ltd.;
(vi) Purchase Agreement dated July 22, 1994 between PEI and UBS Asset
Management (New York) Inc., et al.;
(vii) Redemption Agreement dated July 22, 1994 between PEI and UBS
Asset Management (New York) Inc., et al.;
(viii) PetroCorp Assurances Agreement dated July 22, 1994 between PEI
and UBS Asset Management (New York) Inc., et al.;
(ix) Fixed Charge Debenture dated August 9, 1994 from PEI to 507317
Alberta Ltd. (maximum amount of $40,000,000); and
(x) General Assignment of Accounts dated August 9, 1994 from PEI to
507317 Alberta Ltd.
and any other documents, contracts, agreements or instruments executed in
connection therewith, as any of the foregoing may be amended, supplemented,
restated or otherwise modified from time to time.
"U.S. Dollars", "U.S. $" and "$" shall mean lawful money of the United
States of America.
"U.S. Base Rate" shall mean the variable rate of interest quoted by the
Canadian Agent from time to time as the reference rate of interest which it
employs to determine the interest it will charge for demand loans in U.S.
Dollars made in Canada and which it designates as its U.S. base rate, provided
that if such rate of interest is less than the Federal Funds Rate plus 3/4 of 1%
per annum (the "U.S. Floor Rate"), then the U.S. Base Rate shall equal the U.S.
Floor Rate.
"U.S. Lender" shall mean a Lender the Applicable Lending Office of which is
located in the United States.
"U.S. Loans" shall mean Loans made in by a U.S. Lender.
"U.S. Notes" shall mean the promissory notes provided for by Section
2.06(a) and being substantially in the form of Exhibit A-1, together with any
and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Wholly-Owned Subsidiary" shall mean, as to the U.S. Borrower, any
Subsidiary of which all of the outstanding shares of capital stock or other
equity interests, on a fully-diluted basis, are owned by the Borrower or one or
more of the Wholly-Owned Subsidiaries or by the Borrower and one or more of the
Wholly-Owned Subsidiaries.
-19-
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the U.S. Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the U.S. Borrower referred to in Section 7.02
(except for changes concurred with by the U.S. Borrower's independent public
accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans, Letters of Credit and Bankers' Acceptances.
(a) U.S. Loans and Letters of Credit.
(i) U.S. Loans. Each U.S. Lender severally agrees, on the terms and
conditions of this Agreement, to make revolving credit loans in U.S.
Dollars to the U.S. Borrower during the period from and including (i) the
Closing Date or (ii) such later date that such Lender becomes a party to
this Agreement as provided in Section 12.06(b), to, but excluding, the
Termination Date in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the amount of such Lender's
Commitment as then in effect; provided, however, that the sum of (w) the
aggregate principal amount of all such U.S. Loans by all U.S. Lenders
hereunder at any one time outstanding, plus (x) the aggregate principal
amount of all Canadian Loans by all Canadian Lenders hereunder at any one
time outstanding, plus (y) the LC Exposure, plus (z) the Acceptance
Exposure shall not exceed the Aggregate Commitments. Subject to the terms
of this Agreement, during the period from the Closing Date to, but
excluding, the Termination Date, the U.S. Borrower may borrow, repay and
reborrow the amount described in this Section 2.01(a)(i).
(ii) Letters of Credit. During the period from and including the
Closing Date to, but excluding, the Termination Date, the Issuing Bank, as
issuing bank for the U.S. Lenders, agrees to extend credit for the account
of the U.S. Borrower at any time and from time to time by issuing,
renewing, extending or reissuing Letters of Credit; provided however, the
LC Exposure at any one time outstanding shall not exceed the lesser of (i)
the Aggregate Commitments, as then in effect, minus the aggregate principal
amount of all Loans then outstanding, minus the Acceptance Exposure and
(ii) the LC Commitment. The U.S. Lenders shall participate in such Letters
of Credit according to their respective Percentage Shares. Each of the
Letters of Credit shall (i) be issued by the Issuing Bank, (ii) contain
such terms and provisions as are reasonably required by the Issuing Bank,
(iii) be for the account of the U.S. Borrower and (iv) expire on the
earlier to occur of (x) one (1) year after the issuance date and (y) the
Termination Date.
-20-
(b) Canadian Loans and Bankers' Acceptances.
(i) Canadian Loans. Each Canadian Lender severally agrees, on the
terms and conditions of this Agreement, to make revolving credit loans in
Can. Dollars or U.S. Dollars to the Canadian Borrowers during the period
from and including (i) the Closing Date or (ii) such later date that such
Lender becomes a party to this Agreement as provided in Section 12.06(b),
to, but excluding, the Termination Date in an aggregate principal amount at
any one time outstanding up to, but not exceeding, the amount of such
Lender's Commitment as then in effect; provided, however, that the sum of
(x) the aggregate principal amount of all such Canadian Loans and all U.S.
Loans by all Lenders hereunder at any one time outstanding, plus (y) the LC
Exposure, plus (z) the Acceptance Exposure shall not exceed the Aggregate
Commitments. Subject to the terms of this Agreement, during the period
from the Closing Date to, but excluding, the Termination Date, the Canadian
Borrowers may borrow, repay and reborrow the amount described in this
Section 2.01(b)(i).
(ii) Bankers' Acceptances. Each Canadian Lender severally agrees, on
the terms and conditions of this Agreement, to accept and, immediately
thereafter, purchase Bankers' Acceptances from any of the Canadian
Borrowers from and after the Closing Date, with a maturity or BA Interest
Period not beyond the Termination Date, and in an aggregate amount at any
one time outstanding up to, but not exceeding, the amount of such Lenders'
Commitment as then in effect; provided, that the Acceptance Exposure at any
one time outstanding shall not exceed the Aggregate Commitments, as then in
effect, minus the aggregate principal amount of all Loans then outstanding,
minus the LC Exposure at such time.
(c) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Obligors, the Loans may
be Base Rate Loans or Eurodollar Loans; provided that, without the prior
written consent of the Majority Lenders, no more than eight (8) Eurodollar
Loans may be outstanding at any time.
(d) Additional Limitations on Issuance of Letters of Credit, Bankers'
Acceptances and Loans to Canadian Borrowers. Notwithstanding anything
herein to the contrary, no Letters of Credit shall be issued hereunder, no
Bankers' Acceptances shall be accepted and purchased hereunder, and no
Loans shall be made to any Canadian Borrowers, unless and until the Agents
and the Lenders shall have received evidence satisfactory to them (which
evidence may include appropriate opinions of counsel) that issuance of such
Letters of Credit and the collaterization thereof as provided herein, the
acceptance and purchase of such Bankers' Acceptances and the
collateralization thereof as provided herein, or the making of such Loans
to such Canadian Borrower, as applicable, does not violate the UBS
Agreement, the Note Purchase Agreement or any other material agreements to
which the Borrower or the Canadian Subsidiaries or their respective
Properties are subject.
-21-
Section 2.02 Borrowings, Continuations and Conversions; Letters of
Credit; Bankers' Acceptances.
(a) Borrowings. An Obligor desiring to request a borrowing shall give
the applicable Agent (which shall promptly notify the Lenders) advance
notice as hereinafter provided of each borrowing hereunder, which shall
specify (i) the aggregate amount of such borrowing, (ii) the Type and (iii)
the date (which shall be a Business Day) of the Loans to be borrowed, and
(iv) (in the case of Eurodollar Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least U.S. or Can. $100,000, as applicable, or the remaining
balance of the Aggregate Commitments, if less, or any whole multiple of
U.S. or Can. $100,000, as applicable, in excess thereof, and all Eurodollar
Loans shall be in amounts of at least U.S. or Can. $500,000, as applicable,
or any whole multiple of U.S. or Can. $100,000, as applicable, in excess
thereof.
(c) Notices. Except as provided in Section 2.10(d), all borrowings,
continuations and conversions relating to U.S. Loans shall require advance
written notice to the U.S. Agent (which shall promptly notify the U.S.
Lenders) in the form of Exhibit B (or telephonic notice promptly confirmed
by such a written notice), which in each case shall be irrevocable, from an
Obligor to be received by the U.S. Agent (i) not later than 10:00 a.m.
Houston, Texas time on the date of each Base Rate Loan borrowing and (ii)
not later than 11:00 a.m., Houston, Texas time at least three Business Days
prior to the date of each Eurodollar Loan borrowing, continuation or
conversion. Except as provided in Section 2.14(b), all borrowings,
continuations and conversions relating to Canadian Loans shall require
advance written notice to the Canadian Agent (which shall promptly notify
the Canadian Lenders) in the form of Exhibit B (or telephonic notice
promptly confirmed by such a written notice), which in each case shall be
irrevocable, from an Obligor to be received by the Canadian Agent (i) not
later than 11:00 a.m. Houston, Texas time on the date of each Base Rate
Loan borrowing and (ii) not later than 11:00 a.m., Houston, Texas time at
least three Business Days prior to the date of each Eurodollar Loan
borrowing, continuation or conversion. Without in any way limiting an
Obligor's obligation to confirm in writing any telephonic notice, an Agent
may act without liability upon the basis of telephonic notice believed by
such Agent in good faith to be from an Obligor prior to receipt of written
confirmation. In each such case, the Obligors hereby waive the right to
dispute such Agent's record of the terms of such telephonic notice except
in the case of gross negligence or willful misconduct by such Agent.
(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), an Obligor may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to
the applicable Agent (which shall promptly notify the
-22-
Lenders) of such election, specifying the amount of such Loan to be
continued and the Interest Period therefor. In the absence of such a timely
and proper election, an Obligor shall be deemed to have elected to convert
such Eurodollar Loan to a Base Rate Loan pursuant to Section 2.02(e). All
or any part of any Eurodollar Loan may be continued as provided herein,
provided that (i) any continuation of any such Loan shall be (as to each
Loan as continued for an applicable Interest Period) in amounts of at least
U.S. or Can. $500,000, as applicable, or any whole multiple of U.S. or Can.
$100,000, as applicable, in excess thereof and (ii) no Default shall have
occurred and be continuing. If a Default shall have occurred and be
continuing, each Eurodollar Loan shall be converted to a Base Rate Loan on
the last day of the Interest Period applicable thereto.
(e) Conversion Options. An Obligor may elect to convert all or any
part of any Eurodollar Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice to the
applicable Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), an
Obligor may elect to convert all or any part of any Base Rate Loan at any
time and from time to time to a Eurodollar Loan by giving advance notice as
provided in Section 2.02(c) to the applicable Agent (which shall promptly
notify the Lenders) of such election. All or any part of any outstanding
Loan may be converted as provided herein, provided that (i) any conversion
of any Base Rate Loan into a Eurodollar Loan shall be (as to each such Loan
into which there is a conversion for an applicable Interest Period) in
amounts of at least U.S. or Can. $100,000, as applicable, or any whole
multiple of U.S. or Can. $100,000, as applicable, in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default shall
have occurred and be continuing, no Base Rate Loan may be converted into a
Eurodollar Loan.
(f) Advances. Not later than 12:00 p.m. (noon) Houston, Texas time
on the date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the U.S.
Agent for U.S. Loans or the Canadian Agent for Canadian Loans, to an
account which the U.S. Agent for U.S. Loans or the Canadian Agent for
Canadian Loans shall specify, in immediately available funds, for the
account of the applicable Obligor. The amounts so received by the U.S.
Agent for U.S. Loans or the Canadian Agent for Canadian Loans shall,
subject to the terms and conditions of this Agreement, be made available to
such Obligor by depositing the same, in immediately available funds, in an
account of such Obligor, designated from time to time by such Obligor.
(g) Letters of Credit. The U.S. Borrower shall give the Issuing Bank
(which shall promptly notify the U.S. Lenders of such request and their
Percentage Share of such Letter of Credit) advance notice to be received by
the Issuing Bank not later than 11:00 a.m. Houston, Texas time not less
than three (3) Business Days prior thereto of each request for the
issuance, and at least ten (10) Business Days prior to the date of the
renewal or extension, of a Letter of Credit hereunder which request shall
specify (i) the amount of such Letter of Credit, (ii) the date (which shall
be a Business Day) such Letter of Credit is to be issued,
-23-
renewed or extended, (iii) the duration thereof, (iv) the name and address
of the beneficiary thereof, (v) the form of the Letter of Credit and (vi)
such other information as the U.S. Agent may reasonably request, all of
which shall be reasonably satisfactory to the U.S. Agent. Subject to the
terms and conditions of this Agreement, on the date specified for the
issuance, renewal or extension of a Letter of Credit, the U.S. Agent shall
issue, renew or extend such Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the U.S.
Borrower shall execute a Letter of Credit Agreement. In the event of any
conflict between any provision of a Letter of Credit Agreement and this
Agreement, the U.S. Borrower, the Issuing Bank and the Lenders hereby agree
that the provisions of this Agreement shall govern.
The Issuing Bank will send to the U.S. Borrower and each Lender,
immediately upon issuance of any Letter of Credit, or an amendment thereto,
a true and complete copy of such Letter of Credit, or such amendment
thereto.
(h) Bankers' Acceptances. Any Canadian Borrower requesting issuance
of a Bankers' Acceptance shall give the Canadian Agent (which shall
promptly notify the Canadian Lenders of such request) advance notice, in
the form of Exhibit B, to be received by the Canadian Agent not later than
11:00 a.m. Houston, Texas time one (1) Business Day prior thereto of each
request, which request shall specify (i) the aggregate amount of Bankers'
Acceptances to be accepted and purchased by the Canadian Lenders and (ii)
the duration of the BA Interest Period therefor. Promptly following such
notice the Canadian Agent will notify such Canadian Borrower and the
Canadian Lenders of the Discount Rate for the specified Acceptance Date.
All Bankers' Acceptances (as part of the same borrowing) shall be in
aggregate amounts among all Canadian Lenders of not less than Can.$500,000
and in whole multiples of Can.$100,000. Any Canadian Lender may at any
time and from time to time hold, sell, rediscount or otherwise dispose of
any or all Bankers' Acceptances purchased by it.
(i) Replacement/Renewal/Conversion of Bankers' Acceptances. Subject
to the terms of this Agreement, a Canadian Borrower may elect to cause a
new replacement Bankers' Acceptance to be issued, accepted and purchased to
replace all or any part of any Bankers' Acceptance at the maturity thereof
by giving advance notice, in the form of Exhibit B, of such election to be
received by the Canadian Agent not later than 11:00 a.m. Houston, Texas
time one (1) Business Day prior thereto, specifying the amount of such new
Bankers' Acceptance and the BA Interest Period therefor. In the absence of
such a timely and proper election for renewal, such Canadian Borrower shall
be deemed to have elected to convert such Bankers' Acceptance to a Base
Rate Loan as provided in Section 2.14(b). All or any part of any Bankers'
Acceptance may be renewed as provided herein, provided that (i) any renewal
Bankers' Acceptance shall meet all requirements for Bankers' Acceptances
hereunder, (ii) no Default shall have occurred and be continuing and (iii)
such Canadian Borrower shall have paid to the Canadian Agent for the
account of the Canadian Lenders an
-24-
amount equal to the difference between the amount due on the maturing
Bankers' Acceptance and the Available Proceeds of the new Bankers'
Acceptance. If a Default shall have occurred and be continuing, each
Bankers' Acceptance shall be converted to a Base Rate Loan on the last day
of the BA Interest Period applicable thereto unless the Termination Date
has occurred in which event all sums due thereon shall be immediately due
and payable. A Canadian Borrower may elect to convert any Bankers'
Acceptance on the last day of the then current BA Interest Period relating
thereto to a Base Rate Loan by giving advance notice to the Canadian Agent
of such election. If no Default shall have occurred and be continuing,
subject to the terms of this Agreement, such Canadian Borrower may elect to
convert all or any part of a Base Rate Loan at any time and from time to
time to a Bankers' Acceptance by giving one (1) Business Day's advance
notice to the Canadian Agent of such election; provided that any conversion
of any Base Rate Loan into a Bankers' Acceptance shall be in the amount not
less than Can.$500,000 in the aggregate for all Lenders and in whole
multiples of Can.$100,000.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to the
lesser of (i) the Aggregate Maximum Credit Amounts after adjustments
resulting from reductions pursuant to Sections 2.03(b) or (c) and (ii) the
Borrowing Base as determined from time to time.
(b) The U.S. Borrower shall have the right to terminate or to reduce
the amount of the Aggregate Maximum Credit Amounts at any time, or from
time to time, upon not less than three (3) Business Days' prior notice to
the U.S. Agent (which shall promptly notify the Lenders) of each such
termination or reduction, which notice shall specify the effective date
thereof and the amount of any such reduction (which shall not be less than
$1,000,000 or any whole multiple of $250,000 in excess thereof) and shall
be irrevocable and effective only upon receipt by the U.S. Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fee. The U.S. Borrower shall pay to the U.S. Agent for
the account of each Lender a commitment fee on the daily average unused
amount of the Aggregate Commitments for the period from and including the
Closing Date up to, but excluding, the Termination Date at a rate per annum
equal to the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the Borrowing Base
Utilization as in effect from time to time:
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Utilization Commitment Fee Percentage
-------------------------- -------------------------
Less than 50% 0.250%
Greater than or equal to 50%,
but less than 70% 0.275%
Greater than or equal to 70%,
but less than 80% 0.350%
Greater than or equal to 80%,
but less than 90% 0.425%
Greater than or equal to 90% 0.500%
Accrued commitment fees shall be payable quarterly in arrears on each
Quarterly Date and on the Termination Date.
(b) Letter of Credit Fees.
(i) The U.S. Borrower agrees to pay the U.S. Agent, for the account
of each U.S. Lender, commissions for issuing the Letters of Credit on the
daily average outstanding of the maximum liability of the Issuing Bank
existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at the rate per annum equal to the
Applicable Margin in effect from time to time for Eurodollar Loans,
provided that each Letter of Credit shall bear a minimum aggregate
commission (over the life of such Letter of Credit) of $500 and that each
Letter of Credit shall be deemed to be outstanding up to the full undrawn
face amount of the Letter of Credit until the Issuing Bank has received the
canceled Letter of Credit or a written cancellation of the Letter of Credit
from the beneficiary of such Letter of Credit in form and substance
acceptable to the Issuing Bank, or, for any reductions in the amount of the
Letter of Credit (other than from a drawing), written notification from the
U.S. Borrower. Such commissions are payable quarterly in arrears on each
Quarterly Date and on the Termination Date.
(ii) The U.S. Borrower agrees to pay the U.S. Agent, for the account
of the Issuing Bank, commissions for issuing the Letters of Credit
(calculated separately for each Letter of Credit) equal to .125% of the
face amount of each Letter of Credit, payable upon issuance of such Letter
of Credit.
(c) Facility Fee. The U.S. Borrower shall pay to the U.S. Agent, for
the account of each Lender, a facility fee equal to .15% of the amount of
any incremental increase in the Borrowing Base after the Closing Date;
provided, however, such fee shall apply only to incremental increases in
the Borrowing Base above the highest Borrowing Base previously determined.
Such fee shall be due and payable on the date such increase is effective.
-26-
(c) Agent Fees. The U.S. Borrower shall pay to each Agent for its
account such other fees as are set forth in the Fee Letters on the dates
specified therein to the extent not paid prior to the Closing Date.
Section 2.05 Several Obligations. The failure of any Lender to make any
Loan to be made by it or to provide funds for the acceptance and purchase of
Bankers' Acceptances or disbursements or reimbursements under Letters of Credit
on the date specified therefor shall not relieve any other Lender of its
obligation to make its Loan or provide funds on such date, but no Lender shall
be responsible for the failure of any other Lender to make a Loan to be made by
such other Lender or to provide funds to be provided by such other Lender.
Section 2.06 Notes.
(a) U.S. Notes. The U.S. Loans made by each U.S. Lender shall be
evidenced by a single promissory note of each Obligor in substantially the
form of Exhibit A-1, dated (i) the Closing Date or (ii) the effective date
of an Assignment pursuant to Section 12.06(b), payable to the order of such
U.S. Lender in a principal amount equal to its Maximum Credit Amount as
originally in effect and otherwise duly completed and such substitute Notes
as required by Section 12.06(b).
(b) Canadian Notes. The Canadian Loans made by each Canadian Lender
shall be evidenced by a single promissory note of each Canadian Borrower in
substantially the form of Exhibit A-2, dated (i) the Closing Date or (ii)
the effective date of an Assignment pursuant to Section 12.06(b), payable
to the order of such Canadian Lender in a principal amount equal to its
Maximum Credit Amount as originally in effect and otherwise duly completed
and such substitute Notes as required by Section 12.06(b) and otherwise
duly completed.
(c) Generally. The date, amount, Type, interest rate and Interest
Period of each Loan made by each Lender, and all payments made on account
of the principal thereof, shall be recorded by such Lender on its books for
its Notes, and, prior to any transfer may be endorsed by such Lender on the
schedule attached to such Notes or any continuation thereof or on any
separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender's or the
Obligor's rights or obligations in respect of such Loans or affect the
validity of such transfer by any Lender of its Notes.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. The Obligors may prepay their respective
Base Rate Loans upon not less than one (1) Business Day's prior notice to
the U.S. Agent for U.S. Loans or the Canadian Agent for Canadian Loans
(which Agent shall promptly notify the Lenders), which notice shall specify
the prepayment date (which shall be a Business Day) and the amount of the
prepayment (which shall be at least U.S. or Can. $100,000, as
-27-
applicable, or the remaining aggregate principal balance outstanding on the
Notes) and shall be irrevocable and effective only upon receipt by such
Agent, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. Each Obligor may
prepay its Eurodollar Loans on the same conditions as for Base Rate Loans
(except that prior notice to the U.S. Agent or Canadian Agent, as
applicable, shall be not less than three (3) Business Days for Eurodollar
Loans) and in addition such prepayments of Eurodollar Loans shall be
subject to the terms of Section 5.05 and shall be in an amount equal to all
of the Eurodollar Loans for the Interest Period prepaid. A Bankers'
Acceptance may only be repaid on its maturity date.
(b) Mandatory Prepayments.
(i) If, after giving effect to any termination or reduction of
the Aggregate Maximum Credit Amounts pursuant to Section 2.03(b), the
outstanding aggregate principal amount of the Loans, plus the LC Exposure,
plus the Acceptance Exposure exceeds the Aggregate Maximum Credit Amounts,
the Obligors shall (i) prepay their Loans on the date of such termination
or reduction in an aggregate principal amount equal to the excess, together
with interest on the principal amount paid accrued and unpaid to the date
of such prepayment, and (ii) if any excess remains after prepaying all of
their Loans because of LC Exposure or Acceptance Exposure, pay to the
applicable Agent on behalf of the Lenders an amount equal to the excess to
be held as cash collateral (for either LC Exposure or Acceptance Exposure
or both, as the Agents shall elect) as provided in Sections 2.10(b) and
2.15 hereof.
(ii) Upon any redetermination or reduction of the amount of the
Borrowing Base in accordance with Section 2.08, if the redetermined or
reduced Borrowing Base results in a Borrowing Base Deficiency, then the
Obligors shall within thirty (30) days of receipt of written notice thereof
from the U.S. Agent either: (A) prepay their Loans in an aggregate
principal amount equal to the Borrowing Base Deficiency, together with
interest on the principal amount paid accrued and unpaid to the date of
such prepayment and if a Borrowing Base Deficiency remains thereafter,
because of LC Exposure or Acceptance Exposure, pay to the U.S. Agent on
behalf of the Lenders an amount equal to such remaining Borrowing Base
Deficiency to be held as cash collateral (for either LC Exposure or
Acceptance Exposure or both, as the Agents shall elect) as provided in
Sections 2.10(b) and 2.15 hereof; or (B) the U.S. Borrower shall notify the
U.S. Agent (which will promptly notify the Lenders) in writing of the
Obligors' election to initiate a Deficiency Period during which it will
eliminate such Borrowing Base Deficiency by making five (5) consecutive
monthly Deficiency Payments, the first of such payments being due and
payable with the delivery to the U.S. Agent of such notice and each of the
remaining payments due and payable on the same day of each month thereafter
during the Deficiency Period; provided however, in the event of an
acceleration of the maturity of the Notes pursuant to Section 10.01 hereof,
such acceleration shall also accelerate the maturity of all outstanding and
unpaid Deficiency Payments.
-28-
(iii) If, after a Transfer of any Oil and Gas Properties and the
reduction in the Borrowing Base pursuant to Section 2.08(d) or Section
9.15, a Borrowing Base Deficiency exists, then the Obligors shall
immediately upon such Transfer prepay their Loans in an aggregate principal
amount equal to such Borrowing Base Deficiency, and if a Borrowing Base
Deficiency remains thereafter, because of LC Exposure or Acceptance
Exposure, pay to the applicable Agent on behalf of the Lenders an amount
equal to such remaining Borrowing Base Deficiency to be held as cash
collateral (for either LC Exposure or Acceptance Exposure or both, as the
Agents shall elect) as provided in Sections 2.10(b) and 2.15 hereof.
(iv) If the U.S. Borrower obtains funds by the sale of capital
stock or any other equity offering or by the issuance of subordinated
unsecured Debt to the extent permitted by the terms of this Agreement, and
if at such time there exists a Borrowing Base Deficiency, the proceeds
obtained by such capital stock or other equity offering or issuance of such
Debt shall first be used to pay such Borrowing Base Deficiency.
(c) Generally. Prepayments permitted or required under this Section
2.07 shall be without premium or penalty, except as required under Section
5.05 for prepayment of Eurodollar Loans. Any prepayments on the Loans may
be reborrowed subject to the then effective Aggregate Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with Section
2.08(b) by the U.S. Agent with the concurrence of the Lenders and is
subject to redetermination in accordance with Section 2.08(d). Upon any
redetermination of the Borrowing Base, such redetermination shall remain in
effect until the next successive Redetermination Date. "Redetermination
Date" shall mean the date that the redetermined Borrowing Base becomes
effective subject to the notice requirements specified in Section 2.08(f)
both for scheduled redeterminations and unscheduled redeterminations. So
long as any of the Commitments are in effect or any LC Exposure, Acceptance
Exposure or Loans are outstanding hereunder, this facility shall be
governed by the then effective Borrowing Base. During the period from and
after the Closing Date until the first redetermination pursuant to Section
2.08(d) or adjustment pursuant to Section 8.08(c), the amount of the
Borrowing Base shall be $22,150,000; provided, however, (i) upon payment of
the scheduled June 30, 1997 payments under the Note Purchase Agreement, the
Borrowing Base shall automatically increase to $24,500,000 and (ii) if the
Louisiana Acquisition occurs prior to the next redetermination of the
Borrowing Base, the Borrowing Base shall automatically increase to
$25,000,000 upon the occurrence of the Louisiana Acquisition.
(b) Upon receipt of the reports required by Section 8.07 and such
other reports, data and supplemental information as may from time to time
be reasonably requested by the U.S. Agent (the "Engineering Reports"), the
U.S. Agent will redetermine the Borrowing
-29-
Base. Such redetermination will be in accordance with its normal and
customary procedures for determining the Loan Value of oil and gas reserves
and other related assets as such exist at that particular time for
borrowers similarly situated with the Obligors. The U.S. Agent, in its sole
discretion, may make adjustments to the rates, volumes and prices and other
assumptions set forth therein in accordance with its normal and customary
procedures for determining the Loan Value of oil and gas reserves and other
related assets as such exist at that particular time for borrowers
similarly situated with the Obligors and further, in redetermining the Loan
Value, the U.S. Agent shall, using its normal and customary procedures (i)
consider the Debt of the Obligors outstanding at the time of such
redetermination other than the Series A Debt and Series B Debt and (ii) no
Loan Value shall be attributed to the Oil and Gas Properties of PEL and PEC
so long as any Debt remains outstanding under the Alberta Credit Agreement.
In redetermining the Borrowing Base, the Agent shall subtract the
outstanding Series A Debt and Series B Debt. The U.S. Agent shall propose
to the Lenders a new Borrowing Base within 14 days following receipt by the
U.S. Agent and the Lenders of the Engineering Reports in a timely and
complete manner. After having received notice of such proposal by the U.S.
Agent, the Lenders shall have 14 days to agree or disagree with such
proposal. If the Lenders notify the U.S. Agent within such 14 days of their
disapproval or if at the end of such 14 days, the Lenders have not
communicated their approval or disapproval, such silence shall be deemed
disapproval and, in either case, the Lenders shall, within a reasonable
period of time, agree on a new Borrowing Base, each using its normal and
customary procedures for determining the Loan Value of oil and gas reserves
and other related assets as such exist at that particular time for
borrowers similarly with the Obligors. The U.S. Agent and all of the
Lenders must approve a new Borrowing Base.
(c) The U.S. Agent may exclude any Oil and Gas Property or portion of
production therefrom or any income from any other Property from the
Borrowing Base, at any time, because title is not good and defensible,
subject only to the Liens permitted by Section 9.02.
(d) So long as any of the Commitments are in effect and until payment
in full of all Loans hereunder, on or around the first Business Day of each
May, commencing May 1, 1998 (each being a "Scheduled Redetermination
Date"), the U.S. Agent and the Lenders shall redetermine the amount of the
Borrowing Base in accordance with Section 2.08(b). In addition, (i) the
Majority Lenders may initiate a redetermination of the Borrowing Base at
any other time as they so elect by specifying in writing to the Obligors
the date (not earlier than 30 days after receipt of such notice by the
Obligors) on which the Obligors are to furnish a Reserve Report in
accordance with Section 8.07(b) and the date on which such redetermination
is to occur; provided, however, that the Majority Lenders may initiate only
one such unscheduled redetermination during any consecutive twelve (12)
month period, and (ii) the Obligors may, from time to time, initiate a
redetermination of the Borrowing Base at any other time as they so elect by
specifying in writing to the U.S. Agent (who will promptly notify the
Lenders) the date on which the Obligors will furnish a Reserve Report in
-30-
accordance with Section 8.07(b) and the date on which such redetermination
is requested to occur. Any such unscheduled Borrowing Base
redeterminations shall be made in accordance with the procedures described
in Section 2.08(b). Further, if between Scheduled Redetermination Dates,
any Obligor or Subsidiary Transfers (in one or more Transfers) Oil and Gas
Properties (other than among and between Obligors and Wholly-Owned
Subsidiaries, except to the extent limited by Section 9.15 with respect to
PEC and PEL) which were given Loan Value in the most recent Borrowing Base
determination for sales prices (net of customary purchase price
adjustments) aggregating in excess of U.S. $5,000,000, the Borrowing Base
shall be automatically reduced by an amount equal to the Loan Value
attributed to the Oil and Gas Properties that were the subject of such
Transfers.
(e) In addition to any reduction in the Borrowing Base that may occur
upon a redetermination thereof, the Borrowing Base shall automatically
reduce by the amounts and at the times set forth on Schedule 2.08 and, to
the extent such reduction results in a Borrowing Base Deficiency, such
Borrowing Base Deficiency shall be paid in accordance with clause A of
Section 2.07(b)(ii).
(f) The U.S. Agent shall promptly notify in writing the Obligors and
the Lenders of any new Borrowing Base. Any redetermination of the
Borrowing Base shall not be in effect until written notice is received by
the Obligors.
Section 2.09 Assumption of Risks. The U.S. Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither
the Issuing Bank (except in the case of willful misconduct or gross negligence
on the part of the Issuing Bank or any of its employees), its correspondents nor
any Lender shall be responsible for the validity or genuineness of certificates
or other documents or any endorsements thereon, even if such certificates or
other documents should in fact prove to be invalid, fraudulent or forged; for
errors, omissions, interruptions or delays in transmissions or delivery of any
messages by mail, telex, or otherwise, whether or not they be in code; for
errors in translation or for errors in interpretation of technical terms; the
validity of any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; the failure of any beneficiary or any transferee of any Letter of
Credit to comply fully with conditions required in order to draw upon any Letter
of Credit; or for any other consequences arising from causes beyond the Issuing
Bank's control or the control of the Issuing Bank's correspondents. In
addition, neither the Issuing Bank, the U.S. Agent nor any Lender shall be
responsible for any error, neglect, or default of any of the Issuing Bank's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Issuing Bank's, the U.S. Agent's or any Lender's rights or
powers hereunder or under the Letter of Credit Agreements, all of which rights
shall be cumulative. The Issuing Bank and its correspondents may accept
certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary. In furtherance and not
in limitation of the foregoing provisions, the U.S. Borrower agrees that any
action, inaction or omission taken or not
-31-
taken by the Issuing Bank or by any correspondent for the Issuing Bank in good
faith in connection with any Letter of Credit, or any related drafts,
certificates, documents or instruments, shall be binding on the U.S. Borrower
and shall not put the Issuing Bank or its correspondents under any resulting
liability to the U.S. Borrower.
Section 2.10 Obligation to Reimburse and to Prepay.
(a) Subject to Section 2.10(d) hereof, if a disbursement by the
Issuing Bank is made under any Letter of Credit, the U.S. Borrower shall
pay to the U.S. Agent within two (2) Business Days after notice of any such
disbursement is received by the U.S. Borrower, the amount of each such
disbursement made by the Issuing Bank under the Letter of Credit (if such
payment is not sooner effected as may be required under this Section 2.10),
together with interest on the amount disbursed from and including the date
of disbursement until payment in full of such disbursed amount at a varying
rate per annum equal to (i) the then applicable interest rate for Base Rate
Loans through the second Business Day after notice of such disbursement is
received by the U.S. Borrower and (ii) thereafter, the Post-Default Rate
for Base Rate Loans (but in no event to exceed the Highest Lawful Rate) for
the period from and including the third Business Day following the date of
such disbursement to and including the date of repayment in full of such
disbursed amount. The obligations of the U.S. Borrower under this
Agreement with respect to each Letter of Credit shall be absolute,
unconditional and irrevocable and shall be paid or performed strictly in
accordance with the terms of this Agreement under all circumstances
whatsoever, including, without limitation, but only to the fullest extent
permitted by applicable law, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit or any
other Loan Document; (ii) any amendment or waiver of (including any
default), or any consent to departure from this Agreement (except to the
extent permitted by any amendment or waiver), any Letter of Credit or any
other Loan Document; (iii) the existence of any claim, set-off, defense or
other rights which the U.S. Borrower may have at any time against the
beneficiary of any Letter of Credit or any transferee of any Letter of
Credit (or any Persons for whom any such beneficiary or any such transferee
may be acting), the Issuing Bank, the U.S. Agent, any Lender or any other
Person, whether in connection with this Agreement, any Letter of Credit,
any other Loan Document, the transactions contemplated hereby or any
unrelated transaction; (iv) any statement, certificate, draft, notice or
any other document presented under any Letter of Credit proves to have been
forged, fraudulent or invalid in any respect or any statement therein
proves to have been untrue or inaccurate in any respect whatsoever; (v)
payment by the Issuing Bank under any Letter of Credit against presentation
of a draft or certificate which appears on its face to comply, but does not
comply, with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing, except to the extent any document presented is sufficient on its
face and is rejected as being insufficient..
Notwithstanding anything in this Agreement to the contrary, the U.S.
Borrower will not be liable for payment or performance that results from
the gross negligence or willful
-32-
misconduct of the Issuing Bank, except to the extent the U.S. Borrower
actually recovers the proceeds for itself or the Issuing Bank of any
payment made by the Issuing Bank in connection with such gross negligence
or willful misconduct.
(b) In the event of the occurrence of any Event of Default, a payment
or prepayment pursuant to Section 2.07(b) or the maturity of the Notes,
whether by acceleration or otherwise, an amount equal to the LC Exposure
(or the excess in the case of Section 2.07(b)) shall be deemed to be
forthwith due and owing as cash collateral by the U.S. Borrower to the
Issuing Bank and the Lenders as of the date of any such occurrence; and the
U.S. Borrower's obligation to pay such amount shall be absolute and
unconditional, without regard to whether any beneficiary of any such Letter
of Credit has attempted to draw down all or a portion of such amount under
the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a
right of set-off, counterclaim or recoupment which the U.S. Borrower may
now or hereafter have against any such beneficiary, the Issuing Bank, the
U.S. Agent, the Lenders or any other Person for any reason whatsoever.
Such payments shall be held by the U.S. Agent on behalf of the Issuing Bank
and the Lenders as cash collateral securing the LC Exposure in an account
or accounts at the Principal Office; and the U.S. Borrower hereby, and by
its deposit with the U.S. Agent, grants to the U.S. Agent a security
interest in such cash collateral. In the event of any such payment by the
U.S. Borrower of amounts contingently owing under outstanding Letters of
Credit and in the event that thereafter drafts or other demands for payment
complying with the terms of such Letters of Credit are not made prior to
the respective expiration dates thereof, the U.S. Agent agrees, if no Event
of Default has occurred and is continuing or if no other amounts are then
due and payable under this Agreement, the Notes or any other Loan Document
to remit to the U.S. Borrower amounts for which the contingent obligations
evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it shall
promptly reimburse the Issuing Bank an amount equal to such Lender's
Percentage Share of any disbursement made by the Issuing Bank under any
Letter of Credit that is not reimbursed according to this Section 2.10.
(d) Notwithstanding anything to the contrary contained herein, if no
Event of Default has occurred and is continuing and subject to availability
under the Aggregate Commitments (after reduction for LC Exposure), to the
extent the U.S. Borrower has not reimbursed the Issuing Bank for any drawn
upon Letter of Credit within one (1) Business Day after notice of such
disbursement has been received by the U.S. Borrower, the amount of such
Letter of Credit reimbursement obligation shall automatically be funded by
the Lenders as a Loan hereunder and used by the Lenders to pay such Letter
of Credit reimbursement obligation. If an Event of Default has occurred
and is continuing, or if the funding of such Letter of Credit reimbursement
obligation as a Loan would cause the aggregate amount of all Loans
outstanding to exceed the Aggregate Commitments (after reduction for LC
Exposure and Acceptance Exposure), such Letter of Credit reimbursement
-33-
obligation shall not be funded as a Loan, but instead shall accrue interest
as provided in Section 2.10(a).
Section 2.11 Lending Offices. The Loans of each Type made, Letters of
Credit issued, and Bankers' Acceptances accepted by each Lender shall be made,
issued, accepted, renewed, continued and maintained at such Lender's Applicable
Lending Office for Loans of such Type, Letters of Credit, and Bankers'
Acceptances.
Section 2.12 Acceptance Date Procedure. On the Acceptance Date, the
following provisions shall apply:
(a) On or before 11:00 a.m. Houston, Texas time on the Acceptance
Date, the Canadian Agent shall promptly determine the Discount Rate and notify
each Canadian Lender as to:
(i) the Discount Rate;
(ii) the face amount of the Bankers' Acceptances to be purchased
by the any Canadian Lender on such Acceptance Date (which amount shall
be such Lender's Percentage Share of the total amount of Bankers'
Acceptances to be issued by the Canadian Lenders on such Acceptance
Date);
(iii) the amount of the Stamping Fee applicable to those Bankers'
Acceptances to be accepted and purchased by such Lender on such
Acceptance Date, such Lender being authorized by the Canadian
Borrowers to collect the Discount Amount and the Stamping Fee out of
the proceeds of the Bankers' Acceptances upon such Lender's acceptance
and purchase thereof;
(iv) the Available Proceeds by subtracting the Discount Amount
and the Stamping Fee mentioned in subsection (iii) from the face
amount mentioned in subsection (ii).
(b) Not later than 12:00 p.m. (noon) Houston, Texas time that same
day, each Lender shall make available to the Canadian Agent the Available
Proceeds of its Bankers' Acceptance and the Canadian Agent shall make the
Available Proceeds of all Lenders' Bankers' Acceptances available to the
Canadian Borrower requesting issuance of such Banker's Acceptance at an account
designated by such Canadian Borrower.
Section 2.13 Purchase of Bankers' Acceptances. The Canadian Lenders
shall, on the Acceptance Date, accept the Bankers' Acceptances, by inserting the
appropriate face amount, Acceptance Date and maturity date thereof in accordance
with the requesting Canadian Borrower's notice relating thereto and affixing
their acceptance stamps thereto, and shall purchase same as provided in
Section 2.12.
-34-
Section 2.14 Payment of Bankers' Acceptances. The Bankers' Acceptances
shall be payable in accordance with the following provisions:
(a) If such Bankers' Acceptances are held by or presented to the
Accepting Lender or the Canadian Agent, the relevant Canadian Borrower shall pay
to the Canadian Agent for the account of each Canadian Lender an amount equal to
the face amount of the Bankers' Acceptances of such Lender on their respective
maturity dates. In the event that any Bankers' Acceptance is presented to the
relevant Canadian Borrower, rather than the Accepting Lender thereof or the
Canadian Agent, for payment on its respective maturity date and such Canadian
Borrower shall have made payments to the holders thereof, then such Canadian
Borrower shall give notice to the Canadian Agent to such effect together with
the original cancelled Bankers' Acceptance and the Canadian Agent shall promptly
notify the Canadian Lenders.
(b) In the event such Canadian Borrower fails to notify the Canadian
Agent in writing, not later than 11:00 a.m. Houston, Texas time, one (1)
Business Day prior to any maturity date of a Bankers' Acceptance, that such
Canadian Borrower intends to pay with its own funds the amount of the Bankers'
Acceptances due on such maturity date, such Canadian Borrower shall be deemed,
for all purposes, to have given the Canadian Agent notice to convert the amount
of such Bankers' Acceptances into a Base Rate Loan and the provisions of Section
2.02(i) shall apply, except that:
(i) such maturity date shall be considered to be the borrowing
date of such Base Rate Loan;
(ii) the proceeds of such Base Rate Loan shall be used to pay
the amount of the Bankers' Acceptance due on such maturity date; and
(iii) on such maturity date, each Canadian Lender, instead of
making its funds available to the Canadian Agent to fund such Base
Rate Loan, shall first directly apply its pro rata share of such Loan
in payment of its pro rata share in the amount of its Bankers'
Acceptances due on such date.
Section 2.15 Acceptance Exposure. In the event of the occurrence of any
Event of Default, a payment or prepayment pursuant to Section 2.07(b) or the
maturity of the Notes, whether by acceleration or otherwise, an amount equal to
the Acceptance Exposure attributable to each Canadian Borrower (or the excess in
the case of Section 2.07(b)) shall be deemed to be forthwith due and owing as
cash collateral by each such Canadian Borrower to the Canadian Lenders as of the
date of any such occurrence; and the Canadian Borrowers' obligation to pay such
amount shall be absolute and unconditional, without regard to maturity dates of
the outstanding Bankers' Acceptances, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Canadian Borrowers may now or
hereafter have against the Canadian Agent, the Canadian Lenders or any other
Person for any reason whatsoever. Such payments shall be held by the U.S. Agent
on behalf of the Canadian Agent and the Canadian Lenders as cash collateral
securing the Acceptance Exposure in an account or accounts
-35-
at the Principal Office of the Canadian Agent; and each Canadian Borrower
hereby, and by its deposit with the U.S. Agent, grants to the Canadian Agent a
security interest in such cash collateral. In the event of any payments by any
Canadian Borrower of amounts owing under any Bankers' Acceptances, the Canadian
Agent agrees, if no Event of Default has occurred and is continuing or if no
other amounts are then due and payable under this Agreement, the Notes or any
other Loan Document to remit to such Canadian Borrower amounts for which the
contingent obligations evidenced by the Bankers' Acceptance have ceased.
Section 2.16 Miscellaneous Bankers' Acceptance Provisions.
(a) Waiver of Presentment and Other Conditions. Each Canadian
Borrower waives presentment for payment and, except to the extent of the
gross negligence or wilful misconduct of any Lender, any other defense to
payment of any amounts due to any Lender in respect of a Bankers'
Acceptance accepted and, if applicable, purchased by it pursuant to this
Agreement which might exist solely by reason of such Bankers' Acceptance
being held, at the maturity thereof, by such Lender in its own right and
each Canadian Borrower agrees not to claim any days of grace if the Lender
as holder sues such Canadian Borrower on the Bankers' Acceptance for
payment of the amount payable by such Canadian Borrower thereunder. On the
specified maturity date of a Bankers' Acceptance, or such earlier date as
may be required or permitted pursuant to the provisions of this Agreement,
the Borrower shall pay the Lender the full face amount of such Bankers'
Acceptance.
(b) Unlawful Issue of Use. Each Canadian Borrower shall pay on demand
to such Canadian Lenders at the face amount of any banker's acceptance form
presented to such Lenders for payment and paid by such Lenders that has
been unlawfully issued or used or put into circulation fraudulently or
without authority, and shall indemnify such Lenders against any loss, cost,
damage, expense or claim regardless of by whomsoever made that the Lender
may suffer or incur by reason of any fraudulent, unauthorized or unlawful
issue or use of any such banker's acceptance form, other than as is caused
by the gross negligence or wilful act or omission of any Lender or any of
its officers, employees, agents or representatives failing to use the same
standard of care in the custody of such banker's acceptance forms as it
uses in the custody of its own property of a similar nature.
Section 2.17 Exchange Rate. If an exchange rate is required for any
reason hereunder by which Can. Dollars will be converted into U.S. Dollars, or
by which U.S. Dollars will be converted into Can. Dollars, then the exchange
rate used shall be the Applicable Exchange Rate.
-36-
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. On the Termination Date each Obligor
shall pay to (i) the U.S. Agent, for the account of each Lender, the outstanding
aggregate principal and accrued and unpaid interest under its U.S. Notes and to
(ii) the Canadian Agent, for the account of each Lender, the outstanding
aggregate principal and accrued and unpaid interest under its Canadian Notes and
the amount of its Acceptance Exposure.
Section 3.02 Interest.
(a) Interest Rates. Each Obligor will pay to the U.S. Agent for U.S.
Loans or the Canadian Agent for Canadian Loans, for the account of each
Lender, interest on the unpaid principal amount of each of its Loans made
by such Lender to it for the period commencing on the date such Loan is
made to, but excluding, the date such Loan shall be paid in full, at the
following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin, but in no event to
exceed the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan, for each Interest
Period relating thereto, the Eurodollar Rate for such Loan plus the
Applicable Margin (as in effect from time to time), but in no event to
exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, each Obligor
will pay to the U.S. Agent or the Canadian Agent, as applicable, for the
account of each Lender interest at the applicable Post-Default Rate on any
principal of its Loans made by such Lender, and (to the fullest extent
permitted by law) on any other amount payable by such Obligor hereunder,
under any Loan Document or under any Note of such Obligor held by such
Lender to or for account of such Lender, for the period commencing on the
date of an Event of Default until the same is paid in full or all Events of
Default are cured or waived and during any Deficiency Period.
(c) Due Dates. Accrued and unpaid interest on Base Rate Loans shall
be payable on each Quarterly Date commencing on September 30, 1997, and
accrued and unpaid interest on each Eurodollar Loan shall be payable on the
last day of the Interest Period therefor and, if such Interest Period is
longer than three months at three-month intervals following the first day
of such Interest Period, except that interest payable at the Post-Default
Rate shall be payable from time to time on demand and interest on any
Eurodollar Loan that is converted into a Base Rate Loan (pursuant to
Section 5.04) shall be payable on the date of conversion (but only to the
extent so converted).
-37-
(d) Determination of Rates. Promptly after the determination of any
interest rate provided for herein or any change therein, the appropriate
Agent shall notify the Lenders to which such interest is payable and the
Obligors thereof. Each determination by an Agent of an interest rate or
fee hereunder shall, except in cases of manifest error, be final,
conclusive and binding on the parties.
Section 3.03 Obligations of Canadian Borrowers to U.S. Borrower.
Notwithstanding anything to the contrary contained herein or in any other Loan
Document except the Guaranty Agreement, (i) no Obligor shall be required to pay
or be obligated with respect to any obligations in respect of any Loan, Letter
of Credit or Bankers Acceptance of any other Obligor (including any principal
of, or interest on, any such Loan, Letter of Credit or Bankers Acceptance; any
increased costs, breakage costs or taxes payable in respect of any such Loan,
Letter of Credit or Bankers Acceptance; and (ii) no Canadian Borrower shall be
required to pay or be obligated with respect to any obligations, such as
indemnification, the fees under Section 2.04, and expenses provided in this
Agreement to be the obligations of the U.S. Borrower, except that in all events
each Canadian Borrower shall be obligated in respects of principal of and
interest on, and breakage costs and taxes payable in respect of each Loan or
Bankers' Acceptance of such Canadian Borrower.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the Obligors
under this Agreement with respect to U.S. Loans, the U.S. Notes and the Letter
of Credit Agreements shall be made in U.S. Dollars and all payments of
principal, interest and other amounts to be made by the Canadian Borrowers under
this Agreement with respect to Canadian Loans, the Canadian Notes and the
Bankers' Acceptances shall be made in Can. Dollars, all in immediately available
funds, to the U.S. Agent or Canadian Agent, as applicable, at such accounts as
the Agents shall specify by notice to the Obligors from time to time, not later
than 12:00 p.m. (noon) Houston, Texas time on the date on which such payments
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Such payments
shall be made without (to the fullest extent permitted by applicable law)
defense, set-off or counterclaim. Each payment received by the Agents under
this Agreement or any Note for account of a Lender shall be paid promptly to
such Lender in immediately available funds. Except as otherwise provided in the
definition of "Interest Period", if the due date of any payment under this
Agreement or any Note would otherwise fall on a day which is not a Business Day
such date shall be extended to the next succeeding Business Day and interest
shall be payable for any principal so extended for the period of such extension.
At the time of each payment to the Agents of any principal of or interest on any
borrowing, the paying Obligor shall notify the U.S. Agent or Canadian Agent, as
applicable, of the Loans or Bankers' Acceptances to which such payment shall
apply. In the absence of such notice the U.S. Agent or Canadian Agent, as
applicable, may specify the Loans or Bankers' Acceptances
-38-
to which such payment shall apply, but to the extent possible such payment or
prepayment will be applied first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein each Lender agrees that: (i) each borrowing from the Lenders under
Section 2.01, each continuation and conversion under Section 2.02 and each
issuance of a Bankers' Acceptance shall be made from the Lenders pro rata in
accordance with their Percentage Share, each payment of fees under Section 2.04
shall be made for account of the Lenders pro rata in accordance with their
Percentage Share, and each termination or reduction of the amount of the
Aggregate Maximum Credit Amounts under Sections 2.03(b) and (c) shall be applied
to the Commitment of each Lender, pro rata according to the amounts of its
respective Commitment; (ii) each payment of Bankers' Acceptances and principal
of Loans by an Obligor shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amount of the Loans and face
amount of Bankers' Acceptances of such Obligor held by the Lenders; and (iii)
each payment of interest on Loans by an Obligor shall be made for account of the
Lenders pro rata in accordance with the amounts of interest due and payable from
such Obligor to the respective Lenders; and (iv) each reimbursement by U.S.
Borrower of disbursements under Letters of Credit shall be made for account of
the Issuing Bank or, if funded by the Lenders, pro rata for the account of the
Lenders, in accordance with the amounts of reimbursement obligations due and
payable to each respective Lender.
Section 4.03 Computations. Interest on Eurodollar Loans and fees shall
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable. The Applicable
Margin for determining the Stamping Fee for Bankers' Acceptances shall be
computed on the basis of a year of 365 days.
Section 4.04 Non-receipt of Funds by the Agents. Unless the U.S. Agent,
with respect to U.S. Loans and Letters of Credit, or the Canadian Agent, with
respect to Canadian Loans and Bankers' Acceptances, shall have been notified by
a Lender or an Obligor prior to the date on which such notifying party is
scheduled to make payment to such Agent (in the case of a Lender) of the
proceeds of a Loan or a payment under a Letter of Credit or Bankers' Acceptance
to be made by it hereunder or (in the case of an Obligor) a payment to such
Agent for account of one or more of the Lenders hereunder (such payment being
herein called the "Required Payment"), which notice shall be effective upon
receipt, that it does not intend to make the Required Payment to such Agent,
such Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or such Obligor (as the case may be) has not in fact made the Required Payment
to such Agent, the recipient(s) of such payment shall, on demand, repay to such
Agent the amount so made available together with interest thereon in respect of
each day
-39-
during the period commencing on the date such amount was so made available by
such Agent until, but excluding, the date such Agent recovers such amount at a
rate per annum which, for any Lender as recipient, will be equal to the Federal
Funds Rate, and for any Obligor as recipient, will be equal to the Base Rate
plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after
consultation with the Agents), at its option, to offset balances held by it
or by any of its Affiliates for account of such Obligors at any of its
offices, in U.S. Dollars, Can. Dollars, or in any other currency, against
any principal of or interest on any of such Lender's Loans to, or Bankers'
Acceptances for the account of such Obligor, or any other amount payable to
such Lender hereunder by such Obligor, which is not paid when due
(regardless of whether such balances are then due to such Obligor), in
which case it shall promptly notify such Obligor and the appropriate Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Obligors under this Agreement (or
reimbursement as to any Letter of Credit) or reimbursement on any Bankers'
Acceptance made available to any Canadian Borrower under this Agreement
through the exercise of any right of set-off, banker's lien or counterclaim
or similar right or otherwise, and, as a result of such payment, such
Lender shall have received a greater percentage of the principal or
interest (or reimbursement) then due hereunder by the Obligors to such
Lender than the percentage received by any other Lenders, it shall promptly
(i) notify the appropriate Agent and each other Lender thereof and (ii)
purchase from such other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Loans or Bankers'
Acceptances (or participations in Letters of Credit) made by such other
Lenders (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to
the end that all the Lenders shall share the benefit of such excess payment
(net of any expenses which may be incurred by such Lender in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal and/or interest on the Loans and reimbursement Obligations on the
Bankers' Acceptances and Letters of Credit held by each of the Lenders. To
such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Obligors agree that
any Lender so purchasing a participation (or direct interest) in the Loans,
Letters of Credit or, Bankers' Acceptances made by other Lenders (or in
interest due thereon, as the case may be) may exercise all rights of set-
off, banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or
Letters of Credit or acceptor of Bankers' Acceptances in the amount of such
participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to
-40-
exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Obligors. If under
any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a set-off to which this Section 4.05
applies, such Lender shall, to the extent practicable, exercise its rights
in respect of such secured claim in a manner consistent with the rights of
the Lenders entitled under this Section 4.05 to share the benefits of any
recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by each Obligor
hereunder shall be made, in accordance with Section 4.01, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender, the Issuing Bank
and the Agents, taxes imposed on its income, and franchise or similar taxes
imposed on it ("Excluded Taxes"), by (i) the United States or Canada (or
any political subdivision thereof), (ii) any jurisdiction (or political
subdivision thereof) of which either of the Agents, the Issuing Bank or
such Lender, as the case may be, is a citizen or resident or in which such
Lender has an Applicable Lending Office, (iii) the jurisdiction (or any
political subdivision thereof) in which either of the Agents, the Issuing
Bank or such Lender is organized, or (iv) any jurisdiction (or political
subdivision thereof) in which such Lender, the Issuing Bank or either of
the Agents is presently doing business which taxes are imposed solely as a
result of doing business in such jurisdiction (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Obligor shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to
the Lenders, the Issuing Bank or either of the Agents, (i) the sum payable
shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 4.06) such Lender, the Issuing Bank or either of
the Agents (as the case may be) shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) such Obligor
shall make such deductions and (iii) such Obligor shall pay the full amount
deducted to the relevant taxing authority or other Governmental Authority
in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, each Obligor agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder by such Obligor or from
the execution, delivery or registration of, or otherwise with respect to,
this Agreement, any Assignment or any other Loan Document (hereinafter
referred to as "Other Taxes").
(C) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OBLIGOR WILL INDEMNIFY EACH LENDER, THE ISSUING BANK AND THE
AGENTS FOR THE FULL AMOUNT OF ITS TAXES AND OTHER TAXES (INCLUDING, BUT NOT
-41-
LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY
ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH LENDER, THE
ISSUING BANK OR THE AGENTS (ON THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS
THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND
EXPENSES, WHICH EXPENSES SHALL BE REASONABLE TO THE EXTENT WITHIN THE
LENDERS' CONTROL) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT
SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE
PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH
LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY
LENDER, THE ISSUING BANK OR EITHER OF THE AGENTS, AS THE CASE MAY BE,
MAKES WRITTEN DEMAND THEREFOR, WHICH DEMAND SHALL BE MADE WITHIN 90 DAYS
AFTER SUCH PAYMENT OF TAXES OR OTHER TAXES BY SUCH AGENT, SUCH LENDER OR
THE ISSUING BANK AND SHALL SET FORTH IN REASONABLE DETAIL THE BASIS AND THE
AMOUNT OF ITS REQUEST FOR COMPENSATION. IF ANY LENDER, THE ISSUING BANK OR
EITHER OF THE AGENTS RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR
OTHER TAXES FOR WHICH SUCH LENDER, THE ISSUING BANK OR SUCH AGENT HAS
RECEIVED PAYMENT FROM AN OBLIGOR IT SHALL PROMPTLY NOTIFY SUCH OBLIGOR OF
SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS
CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY AN
OBLIGOR (OR PROMPTLY UPON RECEIPT, IF SUCH OBLIGOR HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL
TO SUCH REFUND OR CREDIT TO SUCH OBLIGOR WITHOUT INTEREST (BUT WITH ANY
INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT SUCH OBLIGOR, UPON THE
REQUEST OF SUCH LENDER, THE ISSUING BANK OR SUCH AGENT, AGREES TO RETURN
SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH
LENDER, THE ISSUING BANK OR SUCH AGENT IN THE EVENT SUCH LENDER OR SUCH
AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Notwithstanding anything to the contrary contained herein, no
Lender shall be indemnified pursuant to Section 4.06(c) for Taxes to the
extent such Taxes are incurred solely by reason of it making U.S. Loans
from an Applicable Lending office located in Canada or it making Canadian
Loans from an Applicable Lending Office located in the United States.
(e) Lender Representations.
(i) Each Lender represents that it is either (1) a banking
association or corporation organized under the laws of the United
States of America or any state thereof or (2) it is entitled to
complete exemption from United States withholding tax imposed on or
with respect to any payments, including fees, to be made to it
pursuant to this Agreement (A) under an applicable provision of a tax
convention to which the United States of America is a party or (B)
because it is acting through a branch,
-42-
agency or office in the United States of America and any payment to be
received by it hereunder is effectively connected with a trade or
business in the United States of America. Each Lender that is not a
banking association or corporation organized under the laws of the
United States of America or any state thereof agrees to provide to the
Obligors and the U.S. Agent on the Closing Date, or on the date of its
delivery of the Assignment pursuant to which it becomes a Lender, and
at such other times as required by United States law or as the
Obligors or the U.S. Agent shall reasonably request, two accurate and
complete original signed copies of either (A) Internal Revenue Service
Form 4224 (or successor form) certifying that all payments to be made
to it hereunder will be effectively connected to a United States trade
or business (the "Form 4224 Certification") or (B) Internal Revenue
Service Form 1001 (or successor form) certifying that it is entitled
to the benefit of a provision of a tax convention to which the United
States of America is a party which completely exempts from United
States withholding tax all payments to be made to it hereunder (the
"Form 1001 Certification"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver to the
Obligors and the U.S. Agent a new Form 4224 Certification prior to the
first payment date occurring in each of its subsequent taxable years;
and if it previously filed a Form 1001 Certification, it will deliver
to the Obligors and the U.S. Agent a new certification prior to the
first payment date falling in the third year following the previous
filing of such certification. Each Lender also agrees to deliver to
the Obligors and the U.S. Agent such other or supplemental forms as
may at any time be required as a result of changes in applicable law
or regulation in order to confirm or maintain in effect its
entitlement to exemption from United States withholding tax on any
payments hereunder, provided that the circumstances of such Lender at
the relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Obligors and the U.S. Agent of such fact. If a Lender is organized
under the laws of a jurisdiction outside the United States of America,
unless the Obligors and the U.S. Agent have received a Form 1001
Certification or Form 4224 Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Borrower shall
withhold taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless the Obligors or U.S.
Agent, as applicable, from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by
(i) the U.S. Agent as a result of such Lender's failure to submit any
form or certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Obligors or the U.S. Agent as a result of
their reliance on any such form or certificate which such Lender has
provided to them pursuant to this Section 4.06.
-43-
(ii) For any period with respect to which a Lender has failed
to provide the Obligors with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a form
originally was required to be provided and applying retroactively), such
Lender shall not be entitled to indemnification under Section 4.06 with
respect to taxes imposed by the United States which taxes would not have
been imposed but for such failure to provide such forms; provided, however,
that if a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to taxes because of its failure to
deliver a form required hereunder, the Obligors shall take such steps as
such Lender shall reasonably request to assist such Lender to recover such
taxes, provided that no Obligor shall be required to incur any out-of-
pocket expenses in connection with such assistance.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Obligors or the U.S. Agent or to change the
jurisdiction of its Applicable Lending Office or to contest any tax
imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to
such Lender.
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. Each Obligor shall pay directly to
each Lender from time to time such amounts as such Lender may determine to
be necessary to compensate such Lender for any costs actually incurred by
such Lender and attributable to its making or maintaining of any Eurodollar
Loans or Banker's Acceptances or issuing or participating in Letters of
Credit hereunder or its obligation to make any Eurodollar Loans or Banker's
Acceptances or issue or participate in any Letters of Credit hereunder, or
any reduction in any amount receivable by such Lender hereunder in respect
of any of such Eurodollar Loans, Banker's Acceptances, Letters of Credit or
such obligation in each case, applicable to such Obligor (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), in each case resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to such Lender under
this Agreement or any Note in respect of any of such Eurodollar Loans,
Banker's Acceptances or Letters of Credit (other than Excluded Taxes as
defined in Section 4.06(a); or (ii) imposes
-44-
or modifies any reserve, special deposit, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of such Lender, or the
Commitment, Banker's Acceptances or Loans of such Lender or the Eurodollar
interbank market; or (iii) imposes any other condition affecting this
Agreement or any Note (or any of such extensions of credit or liabilities)
or such Lender's Commitment, Loans or Banker's Acceptances. Each Lender
will notify the appropriate Agent and the Obligors of any event occurring
after the Closing Date which will entitle such Lender to compensation
pursuant to this Section 5.01(a) as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, and
will designate a different Applicable Lending Office for the Loans or
Banker's Acceptances of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the
United States. If any Lender requests compensation from any Obligor under
this Section 5.01(a), such Obligor may, by notice to such Lender, suspend
the obligation of such Lender to make additional Loans of the Type or
accept and purchase additional Bankers' Acceptances with respect to which
such compensation is requested until the Regulatory Change giving rise to
such request ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).
(b) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), each Obligor
shall pay directly to any Lender from time to time on request such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender or its parent or holding company for any costs actually incurred
which it determines are attributable to the maintenance by such Lender or
its parent or holding company (or any Applicable Lending Office), pursuant
to any Governmental Requirement as a result of any Regulatory Change, of
capital in respect of its Commitment, its Notes, or its Loans or any
interest held by it in any Banker's Acceptance or Letter of Credit, in each
case, attributable to such Obligor such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender or its parent or holding company (or any
Applicable Lending Office) to a level below that which such Lender or its
parent or holding company (or any Applicable Lending Office) could have
achieved but for such Regulatory Change. Such Lender will notify the
Obligors that it is entitled to compensation pursuant to this Section
5.01(b) as promptly as practicable after it determines to request such
compensation.
(c) Compensation Procedure. Any Lender notifying the Obligors of the
incurrence of additional costs under this Section 5.01 shall in such notice
to the Obligors and the U.S. Agent set forth in reasonable detail the basis
and amount of its request for compensation. Determinations and allocations
by each Lender for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to Section 5.01(a), or of the effect of capital
maintained pursuant to Section 5.01(b), on its costs or rate of return of
accepting and purchasing Bankers' Acceptances or maintaining Loans or its
obligation to
-45-
make Loans accept and purchase Bankers' Acceptances, or issue Letters of
Credit, or on amounts receivable by it in respect of Loans, Banker's
Acceptances or Letters of Credit, and of the amounts required to compensate
such Lender under this Section 5.01, shall be conclusive and binding for
all purposes absent manifest error, provided that such determinations and
allocations are made on a reasonable basis. Any request for additional
compensation under this Section 5.01 shall be paid by the Obligors whose
Loans, Bankers' Acceptances or Letters of Credit caused the incurrence of
additional costs within thirty (30) days of the receipt by such Obligors of
the notice described in this Section 5.01(c). No Lender shall be entitled
to recover costs under this Section 5.01 incurred or accrued more than 90
days prior to the notice described in this Section 5.01(c).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate for any Interest Period:
(i) either Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Rate" in Section 1.02
are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(ii) either Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" in Section 1.02 upon the basis of which
the rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not sufficient to adequately cover the cost to the Lenders
of making or maintaining Eurodollar Loans;
then such Agent shall give the Obligors prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans or accept, purchase, trade or hold Bankers' Acceptances hereunder, then
such Lender shall promptly notify the Obligors thereof and such Lender's
obligation to make Eurodollar Loans or accept, purchase, trade or hold Bankers'
Acceptances shall be suspended until such time as such Lender may again make and
maintain Eurodollar Loans or accept, purchase, trade or hold Bankers'
Acceptances (in which case the provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03.
If the obligation of any Lender to make Eurodollar Loans or to accept and
purchase Bankers' Acceptances shall be suspended pursuant to Sections 5.01, 5.02
or 5.03 ("Affected Loans"), all Affected Loans which would otherwise be made by
such Lender shall be made instead as Base Rate Loans (and, if an event referred
to in Section 5.02 or Section 5.03 has occurred and such Lender so requests by
notice to the
-46-
Obligors, all Affected Loans of such Lender then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such
Lender in such notice, provided that, if the law so allows, such Loans shall
continue as a Eurodollar Loan or Bankers' Acceptance, as applicable, until the
end of the applicable Interest Period or BA Interest Period) and, to the extent
that Affected Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to such Lender's Affected
Loans shall be applied instead to its Base Rate Loans.
Section 5.05 Compensation. The Obligors whose Loans or Bankers'
Acceptances are the subject of any loss, cost, expense or liability shall pay to
each Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for requesting
such amounts and which shall be conclusive and binding for all purposes provided
that such determinations are made on a reasonable basis), such amount or amounts
as shall compensate it for any loss, cost, expense or liability actually
incurred by such Lender which such Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan or
Bankers' Acceptance properly made by such Lender or any Obligor for any
reason (including, without limitation, the acceleration of the Loans
pursuant to Section 10.01) on a date other than the last day of the
Interest Period for such Loan; or
(ii) any failure by any Obligor for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a Eurodollar
Loan from such Lender, or issue a Bankers' Acceptance to such Lender, on
the date for such borrowing, continuation or conversion or issuance
specified in the relevant notice given pursuant to Section 2.02.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for U.S. Dollar deposits of leading banks in amounts comparable
to such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified any Obligor and the appropriate Agent
of its incurring additional costs under Section 5.01, has suspended its
obligation to make Eurodollar Loans or purchase and accept Banker's
Acceptances pursuant to Section 5.02 or
-47-
5.03 or has required any Obligor to make payments for Taxes under Section
4.06, then the Obligors may, unless such Lender has notified the Obligors
and such Agent that the circumstances giving rise to such notice no longer
apply, terminate, in whole but not in part, the Commitment of any Lender
(other than such Agents) (the "Terminated Lender") at any time thereafter
upon five (5) Business Days' prior written notice to the Terminated Lender
and such Agent (such notice referred to herein as a "Notice of
Termination").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Obligors shall: (i) obtain an agreement with one or
more Lenders to increase their Commitment or Commitments and/or (ii)
request any one or more other banking institutions to become parties to
this Agreement in place and instead of such Terminated Lender and agree to
accept a Commitment or Commitments; provided, however, that such one or
more other banking institutions are reasonably acceptable to the U.S. Agent
and become parties by executing an Assignment (the Lenders or other banking
institutions that agree to accept in whole or in part the Commitment of the
Terminated Lender being referred to herein as the "Replacement Lenders"),
such that the aggregate increased and/or accepted Commitments of the
Replacement Lenders under clauses (i) and (ii) above equal the Commitment
of the Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Lender
Termination Date"), and the name of Replacement Lender or Replacement
Lenders to which the Terminated Lender will assign its Commitment and, if
there will be more than one Replacement Lender, the portion of the
Terminated Lender's Commitment to be assigned to each Replacement Lender.
(d) On the Lender Termination Date, (i) the Terminated Lender shall
by execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or Replacement Lenders (pro rata, if there is more than
one Replacement Lender, in proportion to the portion of the Terminated
Lender's Commitment to be assigned to each Replacement Lender) indicated in
the Notice of Termination and shall assign to the Replacement Lender or
Replacement Lenders each of its Loans (if any) then outstanding and
participation interests in Letters of Credit (if any) then outstanding pro
rata as aforesaid), (ii) the Terminated Lender shall endorse its Notes,
payable without recourse, representation or warranty, except as set forth
in the Assignment, to the order of the Replacement Lender or Replacement
Lenders (pro rata as aforesaid), (iii) the Replacement Lender or
Replacement Lenders shall purchase the Notes held by the Terminated Lender
(pro rata as aforesaid) at a price equal to the unpaid principal amount
thereof plus interest and facility and other fees accrued and unpaid to the
Lender Termination Date, and (iv) the Replacement Lender or Replacement
Lenders will thereupon (pro rata as aforesaid) succeed to and be
substituted in all respects for the Terminated Lender with like effect as
if becoming a Lender pursuant to the terms of Section 12.06(b), and the
Terminated Lender will have the rights and benefits of an assignor under
Section 12.06(b). To the extent not in conflict, the terms of Section
12.06(b) shall supplement the provisions of this Section 5.06(d). For each
assignment made
-48-
under this Section 5.06, the Replacement Lender shall pay to the U.S. Agent
the processing fee provided for in Section 12.06(b). The Obligors will be
responsible for the payment of any breakage costs associated with such
termination and Replacement Lenders, as set forth in Section 5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject to the
receipt by the U.S. Agent and the Lenders of all fees payable pursuant to
Section 2.04 on or before the Closing Date and the receipt by the U.S. Agent of
the following documents and satisfaction of the other conditions provided in
this Section 6.01, each of which shall be satisfactory to the U.S. Agent in form
and substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
U.S. Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the U.S. Borrower to execute and deliver
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the U.S.
Borrower (y) who are authorized to sign the Loan Documents to which U.S.
Borrower is a party and (z) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized officers,
and (iv) the articles or certificate of incorporation and bylaws of the
U.S. Borrower, certified on behalf of the U.S. Borrower as being true and
complete. The U.S. Agent and the Lenders may conclusively rely on such
certificate until the U.S. Agent receives notice in writing from the U.S.
Borrower to the contrary.
(b) A certificate of the respective Secretary or an Assistant
Secretary of each of the Canadian Borrowers setting forth (i) resolutions
of its board of directors with respect to the authorization of such
Canadian Borrower to execute and deliver the Loan Documents to which it is
a party and to enter into the transactions contemplated in those documents,
(ii) the officers of such Canadian Borrower (y) who are authorized to sign
the Loan Documents to which such Canadian Borrower is a party and (z) who
will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate
of incorporation and bylaws or partnership agreement, as applicable, of
such Canadian Borrower certified on behalf of such
-49-
Canadian Borrower as being true and complete. The Agents and the Lenders
may conclusively rely on such certificate until they receive notice in
writing from such Canadian Borrower to the contrary.
(c) Certificates of the appropriate state and Canadian agencies with
respect to the existence, qualification and good standing of the Obligors.
(d) A compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated
as of the date of the Initial Funding.
(e) The Notes, duly completed and executed.
(f) The Guaranty Agreement, duly completed and executed.
(g) Opinions of Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., U.S. counsel
to the Obligors, and ▇▇▇▇, ▇▇▇ & Boers, Canadian counsel to the Obligors,
each in form and substance satisfactory to the U.S. Agent, as to such
matters incident to the transactions herein contemplated as the U.S. Agent
may reasonably request.
(h) A certificate of insurance coverage of the Obligors evidencing
that the Obligors are carrying insurance in accordance with Section 7.19.
(i) The U.S. Agent shall have received environmental reports and
conducted such due diligence relating to environmental matters such that
the U.S. Agent and the Lenders are reasonably satisfied with the
environmental condition of the Obligors' Oil and Gas Properties.
(j) The U.S. Agent shall have been furnished access to Obligors'
title records, as such exist on the date hereof, and shall have conducted
such due diligence relating to title matters such that the U.S. Agent and
the Lenders are reasonably satisfied with title to Obligors' Oil and Gas
Properties.
(k) The U.S. Agent shall have been furnished with appropriate UCC
search certificates reflecting no prior Liens other than Liens permitted by
Section 9.02.
(l) Such other documents as the U.S. Agent or any Lender or counsel
to the U.S. Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans, Bankers' Acceptances and
Letters of Credit. The obligation of the Lenders to make Loans to the Obligors
upon the occasion of each borrowing hereunder (other than Base Rate Loans which
are made pursuant to the terms hereof solely to replace existing Eurodollar
Loans or Bankers' Acceptances which have matured in the normal course on the
-50-
last day of an Interest Period therefor or pursuant to Section 5.03), to accept
and purchase a Bankers' Acceptance from the Canadian Borrowers and to issue,
renew, extend or reissue Letters of Credit for the account of the U.S. Borrower
(including the Initial Funding) is subject to the further conditions precedent
that, as of the date of such Loans, Bankers' Acceptances or Letters of Credit
and after giving effect thereto:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Obligors in
Article VII and in any other Loan Document shall be true on and as of the date
of the making of such Loans or issuance, renewal, extension or reissuance of a
Letter of Credit with the same force and effect as if made on and as of such
date and following such new borrowing, except to the extent such representations
and warranties are expressly limited to an earlier date or the Majority Lenders
may expressly consent in writing to the contrary.
Each request for a borrowing by an Obligor, acceptance or renewal of a
Bankers' Acceptance by a Canadian Borrower or issuance, renewal, extension or
reissuance of a Letter of Credit by the U.S. Borrower hereunder shall constitute
a certification by such Obligor to the effect set forth in Section 6.02(b) (both
as of the date of such notice and, unless such Obligor otherwise notifies the
U.S. Agent, prior to the date of and immediately following such borrowing,
acceptance of a Bankers' Acceptance, or issuance, renewal, extension or
reissuance of a Letter of Credit as of the date thereof).
Section 6.03 Initial Funding to PEL and PEC. In addition to the
conditions set forth in Sections 6.01 and 6.02, the obligation of the Lenders to
make Loans to and accept and purchase Bankers' Acceptances from PEL and PEC is
subject to the further condition precedent that the Debt outstanding under the
Alberta Credit Agreement is refinanced in a manner satisfactory to the Lenders.
Section 6.04 Conditions Precedent for the Benefit of Lenders. All
conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.05 No Waiver. No waiver of any condition precedent shall
preclude the U.S. Agent or the Lenders from requiring such condition to be met
prior to making any subsequent Loan or preclude the Lenders from thereafter
declaring that the failure of any Obligor to satisfy such condition precedent
constitutes a Default.
-51-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Each of the Obligors represents and warrants to the Agents and the Lenders
that (each representation and warranty herein is given as of the Closing Date
and shall be deemed repeated and reaffirmed on the dates of each borrowing,
acceptance of a Bankers' Acceptance, and issuance, renewal, extension or
reissuance of a Letter of Credit as provided in Section 6.02):
Section 7.01 Corporate Existence. Each of the Obligors and each
Subsidiary: (i) is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) has all
requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated balance sheet
of the U.S. Borrower and its Consolidated Subsidiaries as at December 31, 1996
and the related consolidated statement of income, stockholders' equity and cash
flow of the U.S. Borrower and its Consolidated Subsidiaries for the fiscal year
ended on said date, with the opinion thereon of Price Waterhouse LLP heretofore
furnished to the U.S. Agent and the unaudited consolidated balance sheet of the
U.S. Borrower and its Consolidated Subsidiaries as at March 31, 1997 and their
related consolidated statements of income, stockholders' equity and cash flow of
the U.S. Borrower and its Consolidated Subsidiaries for the three month period
ended on such date heretofore furnished to the U.S. Agent, are complete and
correct in all material respects and fairly present the consolidated financial
condition of the U.S. Borrower and its Consolidated Subsidiaries as at said
dates and the results of its operations for the fiscal year and the three month
period on said dates, all in accordance with GAAP, as applied on a consistent
basis (subject, in the case of the interim financial statements, to normal year-
end adjustments). None of the Obligors has on the Closing Date any material
Debt, contingent liabilities, liabilities for taxes, unusual forward or long-
term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements or in Schedule 7.02. Since December 31, 1996, there has been no
change or event having a Material Adverse Effect. Since the date of the
Financial Statements, neither the business nor the Properties of the Obligors
and their Subsidiaries take as a whole have been materially and adversely
affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of Property or cancellation of contracts, permits or concessions by any
Governmental Authority, riot, activities of armed forces or acts of God or of
any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule
7.03 hereto, at the Closing Date there is no litigation, legal, administrative
or arbitral proceeding, investigation or other action of any nature pending or,
to the knowledge of any Obligor threatened against or affecting the
-52-
Obligors or any Subsidiary which could reasonably be expected to result in a
judgment or liability against the Obligors or any Subsidiary not fully covered
by insurance (except for normal deductibles) that would have a Material Adverse
Effect.
Section 7.04 No Breach. Neither the execution and delivery of the Loan
Documents, nor compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent which has not been
obtained as of the Closing Date under, the respective charter or by-laws of the
Obligors or any Subsidiary or any Governmental Requirement or any material
agreement or instrument to which any Obligor or any Subsidiary is a party or by
which it is bound or to which it or its Properties are subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Obligors or any
Subsidiary pursuant to the terms of any such agreement or instrument other than
the Liens created by the Loan Documents.
Section 7.05 Authority. Each Obligor has all necessary corporate power
and authority to execute, deliver and perform its obligations under the Loan
Documents to which it is a party; and the execution, delivery and performance by
each Obligor and each Subsidiary of the Loan Documents to which it is a party,
have been duly authorized by all necessary corporate action on its part; and the
Loan Documents constitute the legal, valid and binding obligations of each
Obligor and each Subsidiary, enforceable in accordance with their terms, except
as limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general application relating to or affecting creditors' rights.
Section 7.06 Approvals. No authorizations, approvals or consents of, and
no filings or registrations with, any Governmental Authority are necessary for
the execution, delivery or performance by the Obligors or any Subsidiary of the
Loan Documents or for the validity or enforce ability thereof
Section 7.07 Use of Loans. The proceeds of the Loans shall be used only
for working capital and general business purposes, including acquisitions of Oil
and Gas Properties and related assets; provided, however, that for so long as
any Canadian Borrower is prohibited by the Note Purchase Agreement from
incurring funded Debt other than funded Debt secured by purchase money Liens,
the Canadian Borrowers may, pursuant to the terms and conditions of this
Agreement, only borrow hereunder and use the proceeds of the Loans or Bankers'
Acceptances for such purposes and shall, in the case of each such borrowing
hereunder, grant to the U.S. Agent or Canadian Agent, as applicable, as security
for such purchase money Loans or Bankers' Acceptances a valid Lien and security
interest in the Property being so acquired with such Loan or Bankers' Acceptance
proceeds. None of the Obligors is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan hereunder will
be used to buy or carry any margin stock. No more than 25% of the value,
reasonably determined, of either (i) the total assets of the U.S. Borrower or of
any of its Subsidiaries or (ii) those assets of the U.S. Borrower
-53-
or any Subsidiary that are subject to any restrictions under this Agreement as
to pledge, sale or other disposition, all as contemplated by section
207.2(f)(2)(i) of Regulation U, consist of Margin Stock.
Section 7.08 ERISA.
(a) The U.S. Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the U.S. Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974.
No liability to the PBGC (other than for the payment of current premiums
which are not past due) by the U.S. Borrower, any Subsidiary or any ERISA
Affiliate has been or is expected by the U.S. Borrower, any Subsidiary or
any ERISA Affiliate to be incurred with respect to any Plan. No ERISA
Event with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the U.S.
Borrower, any Subsidiary or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan,
and no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to
any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
U.S. Borrower's most recently ended fiscal year, exceed the current value
of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities. The
term "actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA.
(g) None of the U.S. Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such
plan maintained to provide benefits to former employees of such entities,
that may not be terminated by the U.S. Borrower, a Subsidiary or any ERISA
Affiliate in its sole discretion at any time without any material liability
other than for benefits due in the normal course of operation of such
welfare benefit plan.
-54-
(h) None of the U.S. Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the U.S. Borrower, any Subsidiary or any ERISA Affiliate
is required to provide security under section 401(a)(29) of the Code due to
a Plan amendment that results in an increase in current liability for the
Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Obligors and its Subsidiaries has filed all United States Federal income tax
returns and, except as would not have a Material Adverse Effect, all other tax
returns which are required to be filed by them and have paid all material taxes
due pursuant to such returns or pursuant to any assessment received by any
Obligor or any Subsidiary. The charges, accruals and reserves on the books of
each Obligor and its Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of each Obligor, adequate. No material tax lien has
been filed and, to the knowledge of each Obligor, no claim is being asserted
with respect to any such tax, fee or other charge, except for any such tax, fee
or other charge the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Obligors and its
Subsidiaries has good and defensible title to its material (individually or
in the aggregate) Properties, free and clear of all Liens, except Liens
permitted by Section 9.02. Except as set forth in Schedule 7.10, after
giving full effect to the Excepted Liens and any Transfers of Oil and Gas
Properties, the Obligors and Subsidiaries, each with respect to its
Properties, own the net interests in production attributable to the
Hydrocarbon Interests reflected in the most recently delivered Reserve
Report and the ownership of such Properties shall not in any material
respect obligate the Obligors and Subsidiaries, each with respect to its
Properties, to bear the costs and expenses relating to the maintenance,
development and operations of each such Property in an amount in excess of
the working interest of each Property set forth in the most recently
delivered Reserve Report. All information contained in the most recently
delivered Reserve Report is true and correct in all material respects as of
the date thereof.
(b) All leases and agreements necessary for the conduct of the
business of the Obligors and their Subsidiaries are valid and subsisting,
in full force and effect and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which would
affect in any material respect the conduct of the business of the Obligors
and their Subsidiaries.
(c) All of the assets and Properties of the Obligors and their
Subsidiaries which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance
with prudent business standards.
-55-
(d) All or portions of the Obligors' Oil and Gas Properties may be
comprised of interests which are other than working interests or which may
be operated by a party or parties other than an Obligor and to the extent
that all or any such interests and properties as may be comprised of
interests other than working interests or which may be operated by parties
other than an Obligor, the representations set forth in Sections 7.10(b)
and (c) are modified to be subject to the knowledge of the Obligors.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to the Agents and
the Lenders (or any of them) by the Obligors or any Subsidiary in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact necessary to make the statement
contained therein not materially misleading in the light of the circumstances in
which made and with respect to the Obligors and their Subsidiaries taken as a
whole.
Section 7.12 Investment Company Act. None of the Obligors nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. None of the Obligors
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries and Partnership. As of the Closing Date,
except as set forth on Schedule 7.14, none of the Obligors have any Subsidiaries
or any interests in any partnerships. Each of the Canadian Borrowers is a
Wholly-Owned Subsidiary of the U.S. Borrower.
Section 7.15 Location of Business and Offices. Each Obligor's principal
place of business and chief executive offices are located at the address stated
on the signature page of this Agreement. The principal place of business and
chief executive office of each Subsidiary are located at the addresses stated on
Schedule 7.14.
Section 7.16 Defaults. None of the Obligors nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which any
Obligor or any Subsidiary is a party or by which any Obligor or any Subsidiary
is bound which default would have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
-56-
(a) Neither any Property of any Obligor or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of any Obligor
or any Subsidiary nor the operations currently conducted thereon or, to the
best knowledge of the Obligors, by any prior owner or operator of such
Property or operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by
or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of
any and all Property of the Obligors and each Subsidiary, including without
limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly
obtained or filed, and the Obligors and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits, licenses and
similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all Property of any
Obligor or any Subsidiary have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of each Obligor, all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment,
and are not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection with
any Environmental Laws;
(e) The Obligors, with respect to any Oil and Gas Properties operated
by an Obligor, have taken all steps reasonably necessary to determine and
have determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property of the Obligors or any Subsidiary except
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment;
(f) To the extent applicable, all Property of each Obligor and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Obligors do not
have any reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
-57-
(g) None of the Obligors nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. None of the Obligors nor any
Subsidiary is in violation of any Governmental Requirement or failed to obtain
any license, permit, franchise or other governmental authorization necessary for
the ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties; specifically in this connection, (i) except as would not
have a Material Adverse Effect, after the Closing Date, no Oil and Gas Property
is subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) prior to
the Closing Date and (ii) except as would not have a Material Adverse Effect,
none of the ▇▇▇▇▇ comprising a part of the Oil and Gas Properties (or properties
unitized therewith) are deviated from the vertical more than the maximum
permitted by applicable laws, regulations, rules and orders. All ▇▇▇▇▇ are, in
fact, bottomed under and are producing from, and the well bores are wholly
within, the Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on
properties unitized therewith, such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Obligors and each Subsidiary as of the Closing Date. As of the Closing Date,
all such policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date of the closing have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for compliance with
all requirements of law in all material respects and of all material agreements
to which any Obligor or any Subsidiary is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Obligors and each Subsidiary; will remain in full force and effect through the
respective dates set forth in Schedule 7.19 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. Schedule 7.19
identifies all material risks, if any, which each Obligor and its Subsidiaries
and their respective Board of Directors or officers have designated as being
self insured (other than deductibles).
-58-
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Obligors and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the counter
party to each such agreement.
Section 7.21 Intentionally Deleted.
Section 7.22 Material Agreements. The Obligors have heretofore delivered
to the U.S. Agent and the Lenders a complete and correct copy of each of the
Note Purchase Agreement, the UBS Agreement, and the Alberta Credit Agreement,
and all material credit agreements, indentures, and guarantees, including any
modifications or supplements thereto, as in effect on the Closing Date.
Section 7.23 Gas Imbalances. As of the Closing Date, except as set forth
on Schedule 7.23, on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to the Obligors' Oil and Gas Properties which
would require the Obligors to deliver Hydrocarbons produced from the Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor exceeding 500,000,000 cubic feet of gas in the aggregate.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Each of the Obligors covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of all Loans and Bankers'
Acceptances hereunder, all interest thereon and all other amounts payable by the
Obligors hereunder:
Section 8.01 Reporting Requirements. The U.S. Borrower shall deliver, or
shall cause to be delivered, to the U.S. Agent and, except with respect to
Sections 8.01(c) and (g), with sufficient copies of each for the Lenders:
(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the U.S.
Borrower, the audited consolidated and unaudited consolidating statements
of income, stockholders' equity, and cash flow of the U.S. Borrower and its
Consolidated Subsidiaries for such fiscal year, and the related
consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year, and setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and accompanied by the related opinion of
independent public accountants of recognized national standing acceptable
to the U.S. Agent which opinion shall state that such consolidated
financial statements fairly
-59-
present in all material respects the consolidated financial condition and
results of operations of the U.S. Borrower and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP, except for
such changes in such principles with which the independent public
accountants shall have concurred and such opinion shall not contain a
"going concern" or like qualification or exception, and a certificate of
such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any Default. Notwithstanding anything to the contrary in this Section
8.01(a), the U.S. Borrower shall be required to prepare and deliver
consolidating financial statements hereunder only in substantially the form
of the worksheets currently prepared by the U.S. Borrower and only so long
as and to the extent that the U.S. Borrower prepares such statements in the
ordinary course of its business.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarterly periods of each fiscal year of the U.S. Borrower, consolidated
and consolidating statements of income, stockholders' equity and cash flow
of the U.S. Borrower and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective fiscal year to the end
of such period, and the related consolidated and consolidating balance
sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding period in
the preceding fiscal year, accompanied by the certificate of a Responsible
Officer, which certificate shall state that said financial statements
fairly present the consolidated and consolidating financial condition and
results of operations of the U.S. Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of, and for, such
period (subject to normal year-end audit adjustments). Notwithstanding
anything to the contrary in this Section 8.01(b), the U.S. Borrower shall
be required to prepare and deliver consolidating financial statements
hereunder only in substantially the form of the worksheets currently
prepared by the U.S. Borrower and only so long as and to the extent that
the U.S. Borrower prepares such statements in the ordinary course of its
business.
(c) Notice of Default, Material Adverse Effect, Etc. Promptly after
any Obligor knows that any Default or any Material Adverse Effect has
occurred, a notice of such Default or Material Adverse Effect, describing
the same in reasonable detail and the action the Obligors propose to take
with respect thereto.
(d) Other Accounting Reports. Promptly upon receipt thereof, a copy
of each other material report or letter (including the auditors' comment
letter to management, if such a letter is prepared) submitted to any
Obligor by independent accountants in connection with any annual, interim
or special audit made by them of the books of such Obligor, and a copy of
any response by such Obligor or any Subsidiary of such Obligor, or the
Board of Directors of such Obligor or any Subsidiary of such Obligor, to
such letter or report.
-60-
(e) SEC Filings, Etc. Promptly upon distribution thereof, each
financial statement, report, notice or proxy statement sent by the U.S.
Borrower to stockholders generally and each regular or periodic report and
any registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the U.S. Borrower with or
received by the U.S. Borrower in connection therewith from any securities
exchange or the SEC or any successor agency.
(f) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any notice of default furnished to any
Obligor pursuant to the terms of any indenture, loan or credit or other
similar agreement, other than this Agreement, to which such Obligor is a
party.
(g) Other Matters. From time to time such other information regarding
the business, affairs or financial condition of the Obligors or any
Subsidiary (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Agents may reasonably request.
(h) Hedging Agreements. Concurrently with the delivery of the
financial statements required by Sections 8.01(a) and (b), a report, in
form and substance satisfactory to the U.S. Agent, setting forth as of the
last Business Day of such calendar quarter a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Obligors and
each Subsidiary, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net
▇▇▇▇ to market value therefor, any new credit support agreements relating
thereto, any margin required or supplied under any credit support document,
and the counter party to each such agreement.
(i) Gas Imbalances. Concurrently with the delivery of the financial
statements required by Sections 8.01(a) and (b), a report of any and all
take-or-pay, pipeline imbalances, wellhead imbalances or other prepayments
with respect to their Oil and Gas Properties which would require the
Obligors to deliver Hydrocarbons produced from their Oil and Gas Properties
at some future time without then or thereafter receiving full payment
therefor to exceed 500,000,000 cubic feet of gas in the aggregate on a net
basis for the Obligors.
(j) Notice of Transfers. The U.S. Borrower shall provide to the U.S.
Agent at least ten (10) days prior written notice of any Transfer of Oil
and Gas Properties that will result in a reduction of the Borrowing Base
pursuant to Section 2.08(d) or Section 9.15.
The Obligors will furnish to the U.S. Agent, at the time each set of financial
statements is furnished pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C executed by a Responsible Officer (i)
certifying as to the matters set forth therein and stating that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the
-61-
same in reasonable detail), and (ii) setting forth in reasonable detail the
computations necessary to determine whether the Obligors are in compliance with
Sections 9.12, 9.13 and 9.14 as of the end of the respective fiscal quarter or
fiscal year.
Section 8.02 Litigation. The Obligors shall promptly give to the U.S.
Agent notice of: (i) all legal or arbitral proceedings, and of all proceedings
before any Governmental Authority in which any Obligor or any Subsidiary is a
party, and (ii) of any litigation or proceeding against the Obligors or any
Subsidiary or their Properties in which the amount involved is not covered in
full by insurance (subject to normal and customary deductibles and for which the
insurer has not assumed the defense), or in which injunctive or similar relief
is sought. The Obligors will, and will cause each of their Subsidiaries to,
promptly notify the U.S. Agent and each of the Lenders of any judgment, Lien or
other encumbrance affecting any Property of the Obligors or any Subsidiary if
the value of the judgment, Lien (other than Liens permitted by Section 9.02), or
other encumbrance affecting such Property shall exceed $500,000.
Section 8.03 Maintenance, Etc.
(a) Generally. The Obligors shall and shall cause each Subsidiary to:
preserve and maintain its corporate existence, except as otherwise
permitted under Section 9.08, and all of its material rights, privileges
and franchises except where the failure to do so would not have a Material
Adverse Effect; keep books of record and account in which full, true and
correct entries will be made of all dealings or transactions in relation to
its business and activities; comply with all Governmental Requirements if
failure to comply with such requirements will have a Material Adverse
Effect; pay and discharge all material taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of the U.S. Agent or any Lender, during normal business
hours, to examine, copy and make extracts from its books and records, to
inspect its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by such Lender or the U.S.
Agent (as the case may be); and keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character
usually insured by Persons engaged in the same or similar business
similarly situated against loss or damage of the kinds and in the amounts
customarily insured against by such Persons and carry such other insurance
as is usually carried by such Persons including, without limitation, any
such insurance that is environmental risk insurance to the extent
reasonably available.
(b) Proof of Insurance. Contemporaneously with the delivery of the
financial statements required by Section 8.01(a) to be delivered for each
year, the Obligors will furnish or cause to be furnished to the U.S. Agent
a certificate of insurance coverage from each
-62-
insurer in form and substance reasonably satisfactory to the U.S. Agent
and, if requested, will furnish the U.S. Agent copies of the applicable
policies.
(c) Oil and Gas Properties. Each Obligor will and will cause each
Subsidiary to, at its own expense, do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency all of its Oil and Gas Properties and other material Properties
including, without limitation, all equipment, machinery and facilities that
are used or useful in their business, and from time to time will make all
the reasonably necessary repairs, renewals and replacements so that at all
times the state and condition of its Oil and Gas Properties and other
material Properties will be fully preserved and maintained, except to the
extent a portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except for Transfers of
Oil and Gas Properties. Each Obligor will and will cause each Subsidiary
to promptly: (i) pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties, (ii) perform or make
reasonable and customary efforts to cause to be performed, in accordance
with the standards of a prudent operator and otherwise with industry
standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its interests
in its Oil and Gas Properties and other material Properties, (iii) will and
will cause each Subsidiary to do all other things necessary to keep
unimpaired, except for Liens described in Section 9.02, its rights with
respect to its Oil and Gas Properties and other material Properties and
prevent any forfeiture thereof or a default thereunder, except to the
extent a portion of such Properties in the reasonable judgment of such
Obligor or Subsidiary is no longer capable of producing Hydrocarbons in
economically reasonable amounts. Each Obligor will and will cause each
Subsidiary to operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause such
Oil and Gas Properties and other material Properties to be operated in a
manner consistent with the standards of a prudent operator and in
compliance with all applicable contracts and agreements and in compliance
in all material respects with all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. The Obligors will and will cause
each Subsidiary to establish and implement, or maintain, such procedures as
may be reasonably necessary to continuously determine and assure that any
failure of the following does not have a Material Adverse Effect: (i) all
Property of the Obligors and their Subsidiaries and the operations
conducted thereon and other activities of the Obligors and their
Subsidiaries are in compliance with and do not violate the requirements of
any Environmental Laws, (ii) no oil, hazardous substances or solid wastes
are disposed of or otherwise released on or to any Property owned by any
such party except in compliance with Environmental Laws, (iii) no hazardous
substance will be released on or to any such Property in a quantity equal
to or exceeding that quantity which requires reporting pursuant to Section
103 of CERCLA,
-63-
and (iv) no oil, oil and gas exploration and production wastes or hazardous
substance is released on or to any such Property so as to pose an imminent
and substantial endangerment to public health or welfare or the
environment.
(b) Notice of Action. The Obligors will promptly notify the U.S.
Agent and the Lenders in writing of any threatened action, investigation or
inquiry by any Governmental Authority of which any Obligor has knowledge in
connection with any Environmental Laws, excluding routine testing and
corrective action.
(c) Future Acquisitions. The Obligors will and will cause each
Subsidiary to provide environmental audits and tests as reasonably
requested by the U.S. Agent and the Lenders (or as otherwise required to be
obtained by the U.S. Agent or the Lenders by any Governmental Authority) in
connection with any future acquisitions of Oil and Gas Properties or other
material Properties.
Section 8.05 Further Assurances. The Obligors will and will cause each
Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of this Agreement and any other Loan
Documents. The Obligors at their expense will and will cause each Subsidiary to
promptly execute and deliver to the U.S. Agent upon request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of the Obligors in this Agreement and the other Loan Documents.
Section 8.06 Performance of Obligations. Each Obligor will pay its Notes
according to the reading, tenor and effect thereof; and the Obligors will and
will cause each Subsidiary to do and perform every act and discharge all of the
obligations to be performed and discharged by them under this Agreement and the
other Loan Documents, at the time or times and in the manner specified.
Section 8.07 Engineering Reports.
(a) On or before April 1 of each year, the Obligors shall furnish to
the U.S. Agent and the Lenders a Reserve Report prepared by ▇▇▇▇▇▇▇▇▇▇ &
Co., Inc. or other independent petroleum consultant(s) acceptable to the
U.S. Agent.
(b) In the event of an unscheduled redetermination, the Obligors shall
furnish to the U.S. Agent, with a sufficient number of copies for each of
the Lenders, a Reserve Report prepared by or under the supervision of the
chief engineer of the U.S. Borrower who shall certify on behalf of the
Obligors such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately
preceding Reserve Report. For any unscheduled redetermination requested by
the Majority Lenders pursuant to Section 2.08(d), the Obligors shall
provide such Reserve Report with an "as of" date as required by the
Majority Lenders no later than 30 days following the receipt of the request
by the U.S. Agent.
-64-
(c) With the delivery of each Reserve Report, the Obligors shall
provide to the U.S. Agent and the Lenders, a certificate from a Responsible
Officer certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Obligors own good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.02, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to their Oil and Gas
Properties evaluated in such Reserve Report which would require any Obligor
to deliver Hydrocarbons produced from such Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor,
(iv) none of the Obligors' Oil and Gas Properties have been the subject of
a Transfer since the date of the last Borrowing Base determination except
as set forth on an exhibit to the certificate, which certificate shall list
all of the Obligors' Oil and Gas Properties that were the subject of a
Transfer during such period and in such detail as reasonably required by
the Majority Lenders, and (v) attached to the certificate is a list of the
Obligors' Oil and Gas Properties added to and deleted from the immediately
prior Reserve Report and a list showing any material change in working
interest or net revenue interest in the Obligors' Oil and Gas Properties
occurring and the reason for such change.
(d) Upon any such redetermination the Obligors shall furnish to the
U.S. Agent production reports and general and administrative cost summaries
by lease for the Obligors' Oil and Gas Properties included in the most
recent Reserve Report, which reports shall include quantities or volume of
production, revenue, realized product prices, operating expenses, taxes,
capital expenditures and lease operating costs which have accrued to the
Obligors' accounts in such period, and such other information with respect
thereto as the U.S. Agent may reasonable request.
Section 8.08 Title Information.
(a) Delivery. On or before the delivery to the U.S. Agent and the
Lenders of each Reserve Report required by Section 8.07(a), the Obligors
will deliver title information in form and substance acceptable to the U.S.
Agent covering enough of the Oil and Gas Properties evaluated by such
Reserve Report that were not included in the immediately preceding Reserve
Report, so that the U.S. Agent shall have received together with title
information previously delivered to the U.S. Agent, which sufficiently
demonstrates that title is good and defensible (subject only to Liens
permitted by Section 9.02) on at least eighty percent (80%) of the value of
the Oil and Gas Properties evaluated by such Reserve Report to which
positive Loan Value is attributed.
(b) Cure of Title Defects. The Obligors shall cure any material title
defects or exceptions which are not Excepted Liens raised by such
information, within 60 days after a request by the U.S. Agent or the
Majority Lenders to cure such defects or exceptions.
-65-
(c) Failure to Cure Title Defects. If the Obligors are unable to cure
any material title defect requested by the U.S. Agent or the Lenders to be
cured within the 60 day period or the Obligors do not comply with the
requirements to provide title information pursuant to Section 8.08(a), such
default shall not be a Default or an Event of Default, but instead the U.S.
Agent and the Majority Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any
failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the U.S. Agent or the Majority Lenders.
To the extent that the U.S. Agent or the Majority Lenders are not satisfied
with title to any Property after the time period in Section 8.08(b) has
elapsed, the U.S. Agent may send a notice to the Obligors and the Lenders
that the then outstanding Borrowing Base shall be reduced by the Loan Value
attributable to the affected Oil and Gas Properties. This new Borrowing
Base shall become effective immediately after the Obligors' receipt of such
notice.
Section 8.09 ERISA Information and Compliance. The Obligors will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the U.S. Agent with sufficient copies to the Lenders (i)
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) promptly after
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action the Obligors, the Subsidiary or the ERISA Affiliate is taking or proposes
to take with respect thereto, and, when known, any action taken or proposed by
the Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) promptly after receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Obligors
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.10 Payment of Series A Debt and Series B Debt. On or before
June 30, 1997, the U.S. Borrower shall have made principal payments of
$1,225,000 of Series A Debt and $1,125,000 of Series B Debt.
-66-
ARTICLE IX
NEGATIVE COVENANTS
Each Obligor covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans and Bankers' Acceptances
hereunder, all interest thereon and all other amounts payable by the Obligors
hereunder:
Section 9.01 Debt. None of the Obligors nor any Subsidiary will incur,
create, assume or permit to exist any Debt, except:
(a) the Notes or other Indebtedness or any guaranty of or suretyship
arrangement for the Notes or other Indebtedness;
(b) Debt of the Obligors or Subsidiaries existing on the Closing Date
which is reflected in the Financial Statements or is disclosed in Schedule
9.01, and any renewals, extensions or refinancings (but not increases,
except for (i) increases under the Alberta Credit Agreement, provided that
such increases shall not exceed Can. $1,500,000 in the aggregate and shall
not create liability for any Obligors not already obligated thereon)
thereof and (ii) increases provided for under the UBS Agreement as in
effect on the Closing Date;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business
which, if greater than 90 days past the invoice or billing date, are being
contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of the Obligors pursuant to GAAP) not to exceed U.S.
$500,000 for the Obligors and their Subsidiaries in the aggregate;
(e) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and
Gas Properties;
(f) Debt of the Obligors and their Subsidiaries under Hedging
Agreements (i) relating to interest rates or currency exposure with an
Agent or other counterparties as approved by the reasonable determination
of the Majority Lenders entered into as a part of its normal business
operations as a risk management strategy and/or hedge against changes
resulting from market conditions related to the Borrower's operations and
not for speculative trading purposes and (ii) covering oil and gas
production of the Obligors or any Subsidiary; provided, however, that (A)
such Hedging Agreements shall not in the aggregate, cover more than eighty-
five percent (85%) of estimated production of the subject Obligor for each
individual period covered by such Hedging Agreements and no such Hedging
Agreement shall exceed a term of 12 months;
-67-
(g) Debt secured by Liens permitted by Section 9.02, other than
Excepted Liens which by their nature do not customarily secure Debt;
(h) Debt allowed by Section 9.03(g);
(i) Debt allowed by Section 9.07; and
(j) Purchase money Debt incurred by PEC and PEL after the Closing
Date, which in each case shall not exceed 100% of the lesser of the total
purchase price and the fair market value of the Property acquired as
determined at the time of acquisition, and which shall not exceed Can.
$500,000 in the aggregate during any 12 consecutive month period.
Section 9.02 Liens. None of the Obligors nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d), but only on
the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Liens on cash or securities of the Obligors or any Subsidiaries
securing the Debt described in Section 9.01(e);
(f) Liens originally created to secure the Debt permitted by Section
9.01(j); provided, however, (i) the Property to be purchased with the
proceeds of such Debt shall be purchased not more than sixty (60) days
prior to the date of the creation of such Lien and (ii) no such Lien shall
be created in or attach to any other Property at the time owned by any
Obligor or any Subsidiary; and
(g) Liens arising by operation of law to secure judgments for the
payment of money for amounts which in the case of each Obligor are equal to
or less than U.S. $1,000,000 in the aggregate.
Section 9.03 Investments, Loans and Advances. None of the Obligors nor
any Subsidiary will make or permit to remain outstanding any loans or advances
to or investments in any Person, except that the foregoing restriction shall not
apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
-68-
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of acquisition thereof;
(d) commercial paper maturing within one year from the date of
acquisition thereof rated in the highest grade by Standard & Poors
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, in cluding certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state thereof
or Canada or any province or territory thereof and has a short term deposit
rating of no lower than A1 or P1, as such rating is set forth from time to
time, by Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances in or to Obligors or Subsidiaries
(including any Person who becomes a Subsidiary by virtue of such
investment), provided that any such investments, loans or advances to PEC
and PEL (but not as between PEL and PEC) shall not exceed at any one time
outstanding U.S. $15,000,000 in the aggregate so long as the Alberta Credit
Agreement remains in effect;
(h) other investments, loans or advances not to exceed $500,000 in the
aggregate at any time; and
(i) investments by any of the Obligors or Subsidiaries in direct
ownership interests in additional Oil and Gas Properties and gas gathering
systems related thereto or equity interests in entities engaged in business
related thereto.
Section 9.04 Dividends, Distributions and Redemptions. None of the
Obligors nor any Subsidiary will declare or pay any dividend, purchase, redeem
or otherwise acquire for value any of its stock now or hereafter outstanding,
return any capital to its stockholders or make any distribution of its assets to
its stockholders, except that any Subsidiaries of the U.S. Borrower may pay
dividends to, purchase, redeem or otherwise acquire for value any of its stock
now or hereafter outstanding from, return any capital to, or make distributions
of its assets to (i) the U.S. Borrower or (ii) any other Wholly-Owned
Subsidiary.
Section 9.05 Sales and Leasebacks. None of the Obligors nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby any Obligor or any Subsidiary shall
-69-
sell or transfer any of its Property, whether now owned or hereafter acquired,
and whereby such Obligor or such Subsidiary shall then or thereafter rent or
lease as lessee such Property or any part thereof or other Property which such
Obligor or such Subsidiary intends to use for substantially the same purpose or
purposes as the Property sold or transferred.
Section 9.06 Nature of Business. None of the Obligors nor any Subsidiary
will allow any material change to be made in the character of its business as an
independent exploration, production, processing, transporting and marketing
company of oil and gas and related by-products.
Section 9.07 Limitation on Leases. None of the Obligors nor any
Subsidiary will create, incur, assume or permit to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal,
excluding capital leases and leases of Hydrocarbon Interests), except (i) under
non-recurring leases or lease agreements, in each case for a term of less than
one (1) year or (ii) under leases or lease agreements, in each case for a term
in excess of one (1) year, for which the aggregate amount of all payments made
by the Obligors and their Subsidiaries pursuant to all such leases or lease
agreements shall not exceed U.S. $1,250,000 in any period of twelve consecutive
calendar months during the life of such leases.
Section 9.08 Mergers, Etc. None of the Obligors nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person, except
that any Obligor may merge, consolidate or amalgamate into or with another
Person; provided that (i) no Default or Event of Default shall exist and be
continuing immediately before or after such merger, (ii) the Loan Documents will
be amended if deemed necessary by the Majority Lenders to reflect such merger in
form satisfactory to the Majority Lenders, (iii) such merger shall be permitted
by the terms of the Note Purchase Agreement, (iv) in the case of a merger
between an Obligor and another Person, an Obligor continues to exist after such
merger and, in the case of an amalgamation involving a Canadian Borrower, the
amalgamated entity resulting from such amalgamation assumes in writing all of
the Obligations of such Canadian Borrower under the Loan Documents, and (v) in
the case of a merger between any Subsidiary that is not an Obligor and another
Person, (A) a Subsidiary continues to exist after such merger or consolidation,
and, in the case of an amalgamation, the amalgamated entity resulting from such
amalgamation continues to be a Subsidiary or (B) if a Subsidiary does not
continue to exist after such merger or consolidation, or, in the case of an
amalgamation, the amalgamated entity resulting from such amalgamation does not
continue to be a Subsidiary, such merger, consolidation or amalgamation is
treated as a Transfer of Oil and Gas Properties of all of the assets of such
Subsidiary for purposes of Section 2.08(d) hereof. Any merger permitted by the
foregoing, by an Obligor or a Subsidiary which has Oil and Gas Properties
included in the Borrowing Base, which results in an entity which is not a Wholly
Owned Subsidiary shall be treated as a Transfer of such Oil and Gas Properties
for purposes of Sections 2.08(d) hereof.
Section 9.09 Proceeds of Notes; Letters of Credit. The Obligors will not
permit the proceeds of the Notes or Letters of Credit to be used for any purpose
other than those permitted by Section
-70-
7.07. None of the Obligors nor any Person acting on behalf of any Obligor has
taken or will take any action which might cause any of the Loan Documents to
violate Regulation G, T, U or X or any other regulation of the Board of
Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Obligors will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage
in, any transaction in connection with which the Obligors, any Subsidiary
or any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect to
any Plan, which could result in any liability of the Obligors, any
Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail
to make, full payment when due of all amounts which, under the provisions
of any Plan, agreement relating thereto or applicable law, the Obligors, a
Subsidiary or any ERISA Affiliate is required to pay as contributions
thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to
permit to exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code, whether or not waived,
with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan
maintained by the Obligors, any Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA)
of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified
in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire,
an interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Obligors, any Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or con tributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other
Plan that is subject to Title IV of ERISA under which the actuarial present
value of the benefit liabilities
-71-
under such Plan exceeds the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan or Multiemployer Plan under sections
515, 4062, 4063, 4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation
to contribute to, any employee welfare benefit plan, as defined in section
3(1) of ERISA, including, without limitation, any such plan maintained to
provide benefits to former employees of such entities, that may not be
terminated by such entities in their sole discretion at any time without
any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Obligors, any
Subsidiary or any ERISA Affiliate is required to provide security to such
Plan under section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. None of the Obligors nor
any Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable, except in the ordinary course of business.
Section 9.12 Current Ratio. The U.S. Borrower will not permit its ratio
of (i) consolidated current assets to (ii) consolidated current liabilities
(excluding current maturities of the Notes and any other long term Debt) to be
less than 1.0 to 1.0 at any time.
Section 9.13 Tangible Net Worth. The U.S. Borrower will not permit its
Tangible Net Worth at any time to be less than the sum of U.S. $50,000,000, plus
50% of positive Consolidated Net Income realized after December 31, 1996, plus
75% of the net U.S. Dollar amount realized by any non-redeemable preferred stock
or common stock offering after the Closing Date, less non-cash writedowns of
long-lived assets after March 31, 1997.
Section 9.14 Interest Coverage Ratio. The U.S. Borrower will not permit
its Interest Coverage Ratio as of the end of any fiscal quarter of the U.S.
Borrower (calculated quarterly at the end of each fiscal quarter) to be less
than 2.5 to 1.0. For the purposes of this Section 9.14, "Interest Coverage
Ratio" shall mean the ratio of (i) EBITDA for the four fiscal quarters ending on
such date to (ii) interest expense on a GAAP basis plus capitalized interest for
such four fiscal quarters of the U.S. Borrower and its Consolidated
Subsidiaries.
Section 9.15 Sale of Oil and Gas Properties to PEC and PEL. The Obligors
will not, and will not permit any Subsidiary to Transfer any Oil and Gas
Property or any interest in any Oil and Gas Property to PEC or PEL, except as
between PEC and PEL, unless the Borrowing Base is
-72-
reduced by the amount of the Loan Value attributed to such Oil and Gas
Properties the subject of a Transfer to PEC or PEL so long as the Alberta Credit
Agreement remains in effect.
Section 9.16 Environmental Matters. None of the Obligors nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.17 Transactions with Affiliates. None of the Obligors nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate unless such transactions are otherwise permitted under this
Agreement or are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate; provided, that any
Obligor or any Subsidiary may enter into any transaction with an Affiliate for
the allocation of general and administrative costs to any entity in which an
Obligor or any of its Subsidiaries has an interest..
Section 9.18 Subsidiaries and Partnerships. The Canadian Borrowers shall
at all times remain Wholly-Owned Subsidiaries. Further, the Obligors shall not
and shall not permit any Subsidiary to sell or to issue any stock or ownership
interest of a Subsidiary or partnership, except to the Obligors and except in
compliance with Section 9.03.
Section 9.19 Negative Pledge Agreements. Except as provided in the Note
Purchase Agreement, the UBS Agreement and the Alberta Credit Agreement, none of
the Obligors nor any Subsidiary will create, incur, assume or permit to exist
any contract, agreement or understanding (other than this Agreement) which in
any way prohibits or restricts any Subsidiary from paying dividends to an
Obligor, or which requires the consent of other Persons in connection therewith.
Section 9.20 Note Purchase Agreement. Except for payments of principal
expressly scheduled thereunder and interest required to be paid thereunder, the
U.S. Borrower will not make any optional prepayments in respect of principal or
interest on the Series A Debt or Series B Debt without the prior written consent
of the Majority Lenders. Without the prior written consent of the Majority
Lenders, the U.S. Borrower will not amend, supplement, restate or otherwise
modify the Note Purchase Agreement if such amendment, supplement, restatement or
other modification is a material modification of any financial covenant, or
would (i) increase the principal amount of, (ii) increase the interest rates
applicable to, (iii) shorten the final maturity of, or (iv) accelerate the
amortization of, the Series A Debt or Series B Debt outstanding under the UBS
Agreement.
Section 9.21 UBS Agreement. Except for payments expressly required to be
paid thereunder, PEI will not make any optional payments in respect of the Debt
under the UBS Agreement without the prior written consent of the Majority
Lenders. Without the prior written
-73-
consent of the Majority Lenders, PEI will not amend, supplement, restate or
otherwise modify the UBS Agreement if such amendment, supplement, restatement or
other modification is a material modification of any financial covenant, or
would (i) increase the principal amount of, (ii) increase the interest rates
applicable to, (iii) shorten the final maturity of, or (iv) accelerate the
amortization of, the Debt outstanding under the UBS Agreement.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Obligors shall (i) default in the payment or prepayment when
due of any principal of any Loan, the payment of any Bankers' Acceptances
or any reimbursement obligation for a disbursement made under any Letter of
Credit, (ii) default, and such default shall continue for three or more
days, in the payment when due of any interest on any Loan, or (iii)
default, and such default shall continue for five or more days, in the
payment of any fees or other amount payable by it hereunder or under any
other Loan Document; or
(b) any Obligor or any Subsidiary shall default in the payment when
due of any principal of or interest on any of its other Debt having an
outstanding principal balance of $1,000,000 or more, or any other default
in performance of any other provision contained in any note, agreement,
indenture or other document evidencing or relating to any such Debt shall
occur (which default shall not have been waived or cured) if the effect of
such event is to cause, or (with the giving of any notice or the lapse of
time or both) to permit the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause, such Debt to become
due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by any Obligor or any Subsidiary, or
any certificate furnished to any Lender or the Agents pursuant to the
provisions hereof or any other Loan Document, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or
(d) any Obligor shall default in the performance of any of its
obligations under Article IX (other than Sections 9.01, 9.02, 9.03, 9.07,
9.10, 9.17); or any Obligor shall default in the performance of any of its
obligations under Article VIII, Section 9.02, any other Article of this
Agreement (other than Article IX with respect to Sections 9.01, 9.03, 9.07,
9.10 and 9.17) or any other Loan Document (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such default
shall continue unremedied for a period of thirty (30) days after the
earlier to occur of (i) notice thereof to the Obligors by
-74-
the U.S. Agent or any Lender (through the U.S. Agent), or (ii) any officer
of any Obligor otherwise becoming aware of such default; or any Obligor
shall default in the performance of any of its obligations under Sections
9.01, 9.03, 9.07, 9.10, or 9.17 and such default shall continue unremedied
for a period of ten (10) days after the earlier to occur of (i) notice
thereof to the Obligors by the U.S. Agent or any Lender (through the U.S.
Agent), or (ii) any officer of any Obligor otherwise becoming aware of such
default; or
(e) any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) any Obligor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to its own bankruptcy, insolvency, reorganization, winding-up,
liquidation or composition or readjustment of debts, (v) fail to controvert
in a timely manner, or acquiesce in writing to, any petition filed against
it in an involuntary case under the Federal Bankruptcy Code, or (vi) take
any corporate action for the purpose of authorizing or effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of any Obligor, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of such Obligor of all
or any substantial part of its assets, or (iii) similar relief in respect
of such Obligor under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composi tion or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against such Obligor shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered by a court against any
Obligor or any Subsidiary and the same shall not be discharged (or
provision shall not be made for such discharge), or bonded or a stay of
execution thereof shall not be procured, within thirty (30) days from the
date of entry thereof and such Obligor or such Subsidiary shall not, within
said period of 30 days, or such longer period during which execution of the
same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) the Guaranty Agreement after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid,
-75-
binding and enforceable in accordance with its material terms, except to
the extent permitted by the terms of this Agreement, or the U.S. Borrower
shall so state in writing; or
(j) an event having a Material Adverse Effect shall occur; or
(k) at any time, during any 24 consecutive month period, more than
fifty percent (50%) of the directors comprising the Board of Directors of
the U.S. Borrower shall cease to be directors of the U.S. Borrower,
excluding by reason of death or disability; or
(l) the Obligors fail to pay any Deficiency Payment or to pay in full
any Borrowing Base Deficiency on or before the last day of the related
Deficiency Period; or
(m) any Subsidiary takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (e), (f) or (g).
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (n) to the extent it
relates to clauses (e), (f) or (g), the U.S. Agent, upon request of the
Majority Lenders, shall, by notice to the Obligors, cancel the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Obligors
hereunder and under the Notes (including without limitation the payment of
cash collateral to secure the LC Exposure as provided in Section 2.10(b))
to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration (except as set forth above in
this Section 10.02(a)) or other formalities of any kind, all of which are
hereby expressly waived by the Obligors.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01 or in clause (n) to the extent
it relates to clauses (e), (f) or (g), the Commitments shall be
automatically canceled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Obligors hereunder and under the Notes (including without limitation the
payment of cash collateral to secure the LC Exposure as provided in Section
2.10(b)) shall become automatically immediately due and payable without
presentment, demand, protest, notice of intent to accel erate, notice of
acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Obligors.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and any other Loan
Document; second to accrued interest on the Notes; third to fees; fourth
pro rata to principal outstanding on the Notes and other Indebtedness;
-76-
fifth to serve as cash collateral to be held by the U.S. Agent to secure
the LC Exposure; and any excess shall be paid to the Obligors or as
otherwise required by any Governmental Requirement.
ARTICLE XI
THE AGENTS
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agents to act as its agent under the
Loan Documents with such powers as are specifically delegated to the Agents by
the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. Each of the Agents (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 shall
include reference to their Affiliates and their Affiliates' officers, directors,
employees, attorneys, accountants, experts and agents): (i) shall have no
duties or responsibilities except those expressly set forth in the Loan
Documents, and shall not by reason of the Loan Documents be a trustee or
fiduciary for any Lender; (ii) makes no representation or warranty to any Lender
and shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
execution, effectiveness, legality, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or for any failure by the
Obligors or any other Person (other than such Agent) to perform any of its
obligations hereunder or thereunder or for the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Obligors, their Subsidiaries or any other obligor or guarantor; (iii) except
pursuant to Section 11.07 shall not be required to initiate or conduct any
litigation or collection proceedings hereunder; and (iv) shall not be
responsible for any action taken or omitted to be taken by it hereunder or under
any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. The Agents may employ agents,
accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants, attorneys
or experts. The Agents may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof permitted hereunder shall have been filed with
the U.S. Agent. Each of the Agents is authorized to release any collateral that
is permitted to be sold or released pursuant to the terms of the Loan Documents.
Section 11.02 Reliance by Agents. The Agents shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by such Agent.
-77-
Section 11.03 Defaults. Neither of the Agents shall not be deemed to
have knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the U.S. Agent has received notice from a Lender or
the Obligors specifying such Default and stating that such notice is a "Notice
of Default." In the event that the U.S. Agent receives such a notice of the
occurrence of a Default, the U.S. Agent shall give prompt notice thereof to the
Lenders. In the event of a payment Default, the U.S. Agent shall give each
Lender prompt notice of each such payment Default.
Section 11.04 Rights as a Lender.
(a) With respect to its Commitments and the Loans made by Toronto Dominion
(Texas), Inc. (and any successor acting as U.S. Agent) and The Toronto-Dominion
Bank (through an Applicable Lending Office in the United States) with respect to
its participation in the issuance of Letters of Credit, each in its capacity as
a Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though Toronto Dominion (Texas), Inc. were
not acting as the U.S. Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the U.S. Agent in its individual
capacity. Toronto Dominion (Texas), Inc. (and any successor acting as U.S.
Agent) and its Affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to and generally engage in any kind of banking,
trust or other business with the Obligors (and any of their Affiliates) as if it
were not acting as the U.S. Agent, and Toronto Dominion (Texas), Inc. and its
Affiliates may accept fees and other consideration from the Obligors for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
(b) With respect to its Commitments and the Loans made by it and its
acceptance and purchase of Bankers' Acceptances, The Toronto-Dominion Bank (and
any successor acting as Canadian Agent) in its capacity as a Lender hereunder
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not acting as the Canadian Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Canadian Agent in its individual capacity. The Toronto-Dominion
Bank (and any successor acting as Canadian Agent) and its Affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Obligors (and any of their Affiliates) as if it were not acting as the
Canadian Agent, and The Toronto-Dominion Bank and its Affiliates may accept fees
and other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
SECTION 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENTS
AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE
INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE OBLIGORS UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE OBLIGORS UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR
-78-
DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST EITHER OF THE AGENTS OR THE ISSUING BANK IN ANY
WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS
OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO
THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF
THE TERMS OF THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF EITHER OF THE AGENTS OR THE ISSUING BANK, PROVIDED THAT NO LENDER
SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENTS.
Section 11.06 Non-Reliance on Agents and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agents or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Obligors and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agents or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. Neither of the Agents shall be required to keep itself informed as
to the performance or observance by the Obligors of this Agreement, the Notes,
or the other Loan Document, or to inspect the properties or books of the
Obligors. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Agents hereunder, the
Agents shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Obligors (or any of their Affiliates) which may come into the
possession of the Agents or any of their Affiliates. In this regard, each
Lender acknowledges that ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. is acting in this transaction as
special counsel to the Agents only, except to the extent otherwise expressly
stated in any legal opinion or any Loan Document. Each Lender will consult with
its own legal counsel to the extent that it deems necessary in connection with
the Loan Documents and the matters contemplated therein.
Section 11.07 Action by Agents. Except for action or other matters
expressly required of the Agents hereunder, each of the Agents shall in all
cases be fully justified in failing or refusing to act hereunder unless it shall
(i) receive written instructions from the Majority Lenders (or all of the
Lenders as expressly required by Section 12.04) specifying the action to be
taken, and (ii) be indemnified to its satisfaction by the Lenders against any
and all liability and expenses which may be incurred by it by reason of taking
or continuing to take any such action. The instructions of the Majority Lenders
(or all of the Lenders as expressly required by Section 12.04) and any action
taken or failure to act pursuant thereto by the Agents shall be binding on all
of the Lenders. If a Default has occurred and is continuing, the Agents shall
take such action with respect to such Default as shall be directed by the
Majority Lenders (or all of the Lenders as required by Section 12.04) in the
written instructions (with indemnities) described in this Section 11.07,
provided that, unless and until the U.S. Agent shall have received such
directions, the Agents may (but shall not be obligated to)
-79-
take such action, or refrain from taking such action, with respect to such
Default as they shall deem advisable in the best interests of the Lenders. In no
event, however, shall the Agents be required to take any action which exposes
the Agents to personal liability or which is contrary to this Agreement, any
other Loan Document or applicable law.
Section 11.08 Resignation or Removal of Agents. Subject to the
appointment and acceptance of a successor Agent as provided below, either of the
Agents may resign at any time by giving notice thereof to the Lenders and the
Obligors, and either of the Agents may be removed at any time with or without
cause by the Majority Lenders. Upon any such resignation or removal, the
Majority Lenders shall have the right to appoint a successor Agent, which
successor shall be reasonably acceptable to the Obligors. If no successor Agent
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which successor shall be reasonably acceptable to the Obligors. Upon the
acceptance of such appointment hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation or removal hereunder as an Agent, the provisions of this
Article XI and Section 12.03 shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as such
Agent.
Section 11.09 Applicable Parties. The provisions of this Article XI
(other than Section 11.08) are solely for the benefit of the Agents and the
Lenders, and the Obligors shall not have any rights as a third party beneficiary
or otherwise or any obligations under any of the provisions of this Article. In
performing functions and duties hereunder and under the other Loan Documents,
the Agents shall act solely as the agent of the Lenders and do not assume, nor
shall the Agents be deemed to have assumed, any obligation or relationship of
trust or agency with or for the Obligors or any legal representative, successor,
and assign of the Obligors.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the U.S. Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
-80-
Section 12.02 Notices. All notices and other communications provided for
herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 5:00 p.m. Houston, Texas time on a Business Day (otherwise on
the next succeeding Business Day) by telex or telecopier and evidence or
confirmation of receipt is obtained, or personally delivered or, in the case of
a mailed notice, three (3) Business Days after the date deposited in the mails,
postage prepaid, in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc.
(a) The U.S. Borrower agrees:
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agents in the
administration (both before and after the execution hereof and including
advice of counsel to the Agents as to the rights and duties of the Agents
and the Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of, the
Loan Documents and any amendment, waiver or consent relating thereto
(including, without limitation, reasonable out-of-pocket expenses of the
Agents, the cost of environmen tal audits, surveys and appraisals at
reasonable intervals during the continuance of a Default, the reasonable
fees and disbursements of counsel and other outside consultants for the
U.S. Agent and, in the case of enforcement, the reasonable fees and
disbursements of counsel for the Agents and any of the Lenders); and
promptly reimburse the Agents for all amounts expended, advanced or
incurred by the Agents or the Lenders to satisfy any obligation of the
Obligors under this Agreement or any other Loan Document, including without
limitation, all costs and expenses of foreclosure;
(II) TO INDEMNIFY THE AGENTS AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND
PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE
INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY
OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN
ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE OBLIGORS OF THE
PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE
BUSINESS OF THE
-81-
OBLIGORS AND THEIR SUBSIDIARIES, (IV) THE FAILURE OF THE OBLIGORS OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OF ANY OBLIGOR SET FORTH IN ANY OF THE LOAN
DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR
PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT
OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE,
NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED
DRAFT(S) AND CERTIFICATION(S), OR (VIII) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES REASONABLY INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH
ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR
INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON
OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL
INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR
ANY LENDER AND EITHER OF THE AGENTS OR A LENDER'S SHAREHOLDERS AGAINST
EITHER OF THE AGENTS OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(III) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE OBLIGORS OR ANY SUBSIDIARY OR ANY OF
THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL
OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE
BREACH OR NON-COMPLIANCE BY THE OBLIGORS OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE OBLIGORS OR ANY SUBSIDIARY, (III) DUE
TO PAST OWNERSHIP BY THE OBLIGORS OR ANY SUBSIDIARY OF ANY OF THEIR
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL
AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV)
THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE OBLIGORS
OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER, NO
INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(A)(III) IN RESPECT OF
ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF
EITHER OF THE AGENTS OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH
PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH
PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).
-82-
(b) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the maximum
potential claims against the Indemnified Party to be indemnified pursuant
to this Section 12.03.
(c) In the case of any indemnification hereunder, the U.S. Agent or
Lender, as appropriate, shall give notice to the Obligors of any such claim
or demand being made against the Indemnified Party and the Obligors shall
have the non-exclusive right to join in the defense against any such claim
or demand provided that if the Obligors provide a defense, the Indemnified
Party shall bear its own cost of defense unless there is a conflict between
the Obligors and such Indemnified Party.
(D) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(e) The U.S. Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes and
shall continue thereafter in full force and effect.
(f) The U.S. Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Obligors of notice of
the amount due and identifying such amount due in reasonable detail.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
other Loan Document may be amended, modified or waived with the Obligors' and
the Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Credit Amounts, modifies the Borrowing Base, forgives the
principal amount of any Indebtedness outstanding under this Agreement, releases
any guarantor of the Indebtedness or releases all or substantially all of the
collateral, if any, reduces the interest rate applicable to the Loans or the
fees payable to the Lenders generally, affects Section
-83-
2.03(a), this Section 12.04 or Section 12.06(a) or modifies the definition of
"Majority Lenders" shall be effective without consent of all Lenders; (ii) no
amendment, modification or waiver which increases the Maximum Credit Amount of
any Lender shall be effective without the consent of such Lender; and (iii) no
amendment, modification or waiver which modifies the rights, duties or
obligations of the Agents shall be effective without the consent of the Agents.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Obligors may not assign their rights or obligations hereunder
or under the Notes or any Letters of Credit without the prior consent of
all of the Lenders and the U.S. Agent.
(b) Any Lender may, upon the written consent of the U.S. Agent and, if
no Event of Default under 10.01(a) has occurred and is continuing, the
Obligors (which consent will not be unreasonably withheld), assign to one
or more banking institutions all or a portion of its rights and obligations
under this Agreement pursuant to an Assignment Agreement substantially in
the form of Exhibit F (an "Assignment"); provided, however, that (i) any
such assignment shall be in the amount of at least U.S. $10,000,000 of the
Aggregate Maximum Credit Amount or such lesser amount to which the Obligors
have consented and (ii) the assignee or assignor shall pay to the U.S.
Agent a processing and recordation fee of $3,500 for each assignment; and
further provided, however; subject to all other provisions of this Section
12.06(b), any Lender may assign all or a portion of its rights and
obligations under this Agreement to an Affiliate (within the meaning of
clause (i) of the definition thereof) that is not an Investment Fund or any
other Lender without the prior consent of the U.S. Agent or the Obligors.
Any such assignment will become effective upon the execution and delivery
to the U.S. Agent of the Assignment and the consent of the U.S. Agent and
the Obligors if such consent is required. Promptly after receipt of an
executed Assignment, the U.S. Agent shall send to the Obligors a copy of
such executed Assignment. Upon receipt of such executed Assignment, the
Obligors, will, at their own expense, execute and deliver new Notes to the
assignor and/or assignee, as appropriate, in accordance with their
respective interests as they appear. Upon the effectiveness of any
assignment pursuant to this Section 12.06(b), the assignee will become a
"Lender," if not already a "Lender," for all purposes of this Agreement any
other Loan Document. The assignor shall, from and after the effective date
of such assignment be relieved of its obligations hereunder to the extent
of such assignment (and if the assigning Lender no longer holds any rights
or obligations under this Agreement, such assigning Lender shall cease to
be a "Lender" hereunder except that its rights under Sections 4.06, 5.01,
5.05 and 12.03 shall not be affected). The U.S. Agent will prepare on the
last Business Day of each month during which an assignment has become
effective pursuant to this Section 12.06(b), a new Annex I giving effect to
all such assign-
-84-
ments effected during such month, and will promptly provide the same to the
Obligors and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all or
any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person that is not an Investment Fund, provided that: (i)
--------
such Lender shall remain a "Lender" for all purposes of this Agreement and
the transferee of such participation shall not constitute a "Lender"
hereunder; and (ii) no participant under any such participation shall have
rights to approve any amendment to or waiver of any of the Loan Documents
except to the extent such amendment or waiver would (x) forgive any
principal owing on any Indebtedness or extend the final maturity of the
Loans, (y) reduce the interest rate (other than as a result of waiving the
applicability of any post-default increases in interest rates) or fees
applicable to any of the Commitments or Loans or Letters of Credit in which
such participant is participating, or postpone the payment of any thereof,
or (z) release any guarantor of the Indebtedness, if any (except as
provided in the Loan Documents) supporting any of the Commitments or Loans
or Letters of Credit in which such participant is participating. In the
case of any such participation, the participant shall not have any rights
under this Agreement or any other Loan Document (the participant's rights
against the granting Lender in respect of such participation to be those
set forth in the agreement with such Lender creating such participation),
provided no participant shall have any rights under this Agreement or any
of the other Loan Documents, each participant's rights against the granting
Lender in respect of any participation to be those set forth in the
participation agreement, and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not granted such participation,
except that such participant shall be entitled to receive additional
amounts under Article V on the same basis as if it were a Lender, but only
to the extent of the amount that the Lender of which it is a participant
would have been entitled to receive. In addition, each agreement creating
any participation must include an agreement by the participant to be bound
for the benefit of the Obligors by the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the Obligors in
the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound for the benefit of the Obligors by the
provisions of Section 12.15.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge any of its Notes to any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued
by such Federal Reserve System and/or such Federal Reserve Bank. No such
assignment and/or pledge shall release the assigning and/or pledging Lender
from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein
-85-
shall be permitted if such transfer, assignment or grant would require the
Obligors to file a registration statement with the SEC or to qualify the
Loans under the "Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or the Letters of Credit, the
Letter of Credit Agreements shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 12.09 References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05, 12.03 and 12.15 shall survive the repayment
of the Loans and the termination of the Commitments. To the extent that any
payments on the Indebtedness or proceeds of any collateral, if any, are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause, then to such
extent, the Indebtedness so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Agents' and the Lenders'
rights, powers and remedies under this Agreement and each other Loan Document
shall continue in full force and effect. In such event, each Loan Document
shall be automatically reinstated and the Obligors shall take such action as may
be reasonably requested by the U.S. Agent and the Lenders to effect such
reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
SECTION 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR
-86-
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT THE
RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED. TEX.
REV. CIV. STAT. ▇▇▇. ART. ▇▇▇▇, ▇▇. 15 (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO
THIS AGREEMENT OR THE NOTES.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE OBLIGORS, EACH OF THE AGENTS AND
EACH LENDER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW)
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH OF THE OBLIGORS, EACH OF THE AGENTS AND EACH
LENDER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS
SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE
LENDER FROM OBTAINING JURISDICTION OVER THE OBLIGORS IN ANY COURT OTHERWISE
HAVING JURISDICTION.
(C) EACH OF THE CANADIAN BORROWERS HEREBY IRREVOCABLY DESIGNATES THE
U.S. BORROWER LOCATED AT THE ADDRESS FOR NOTICES AS SET FORTH ON THE
SIGNATURE PAGE BENEATH ITS SIGNATURE BLOCK, AS THE DESIGNEE, APPOINTEE AND
AGENT OF THE CANADIAN BORROWERS TO RECEIVE, FOR AND ON BEHALF OF THE
CANADIAN BORROWERS, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE
PROMPTLY FORWARDED BY OVERNIGHT COURIER TO EACH CANADIAN BORROWER AT ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW, BUT THE FAILURE OF ANY
CANADIAN BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. EACH OBLIGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO EACH OBLIGOR AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
-87-
(D) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENTS OR ANY LENDER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OBLIGORS IN ANY OTHER
JURISDICTION, INCLUDING WITHOUT LIMITATION, THE COMMENCEMENT OF ENFORCEMENT
PROCEEDINGS UNDER THE GUARANTY AGREEMENTS IN ALL APPLICABLE JURISDICTIONS.
(E) EACH OBLIGOR AND EACH LENDER HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Notes or any other instrument, agreement or other document, it
is agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by such Lender to the Obligors); and (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or,
-88-
to the extent that the principal amount of the Indebtedness shall have been or
would thereby be paid in full, refunded by such Lender to the Obligors). All
sums paid or agreed to be paid to any Lender for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by law applicable
to such Lender, be amortized, prorated, allocated and spread throughout the full
term of the Loans evidenced by the Notes until payment in full so that the rate
or amount of interest on account of any Loans hereunder does not exceed the
maximum amount allowed by such applicable law. If at any time and from time to
time (i) the amount of interest payable to any Lender on any date shall be
computed at the Highest Lawful Rate applicable to such Lender pursuant to this
Section 12.14 and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such Lender would be less than the
amount of interest payable to such Lender computed at the Highest Lawful Rate
applicable to such Lender, then, to the extent permitted by law, the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14. To the extent that Article 5069-1.04 of the Texas
Revised Civil Statutes is relevant for the purpose of determining the Highest
Lawful Rate, such Lender elects to determine the applicable rate ceiling under
such Article by the indicated weekly rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that any Obligor provides
to either Agent or the Lenders nonpublic information identified as confidential
belonging to such Obligor, the Agents and the Lenders shall thereafter maintain
such information in confidence in accordance with the standards of care and
diligence that each utilizes in maintaining its own confidential information.
This obligation of confidence shall not apply to such portions of the
information which (i) are in the public domain, (ii) hereafter become part of
the public domain without the Agents or the Lenders breaching their obligation
of confidence to the Obligors, (iii) are previously known by the Agents or the
Lenders from some source other than the Obligors who owes no obligation of
confidence to the Obligors with respect to such information, (iv) are hereafter
developed by either Agent or the Lenders without using the Obligors'
information, (v) are obtained by or available to the U.S. Agent or the Lenders
from a third party who owes no obligation of confidence to the Obligors with
respect to such information (vi) are disclosed with the Obligors' consent, (vii)
must be disclosed either pursuant to any Governmental Requirement or to Persons
regulating the activities of the U.S. Agent or the Lenders, or (viii) as may be
required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding. Further, the U.S. Agent or a
Lender may disclose any such information to any other Lender, any independent
petroleum engineers or consultants, any independent certified public
accountants, any legal counsel (each of whom are informed by such Agent or
Lender of the confidential nature thereof and who agree not to use any such
Confidential Information except in connection with matters involving the Loan
Documents) employed by such Person in connection with this Agreement or any
other Loan Document, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
such Agent or the Lenders shall receive a confidentiality agreement
-89-
from the Person to whom such information is disclosed such that said Person
shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Agents or the Lenders hereunder. The
foregoing provisions are not intended to limit or reduce other obligations, if
any, which any of the Lender's may have with respect to confidentiality, at
common law or otherwise. Notwithstanding anything to the contrary provided
herein, this obligation of confidence shall cease three (3) years after the
termination of this Agreement an the Commitments hereunder, unless the Obligors
request in writing at least thirty (30) days prior to the expiration of such
three year period, to maintain the confidentiality of such information for an
additional three year period.
SECTION 12.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
[SIGNATURES BEGIN ON NEXT PAGE]
-90-
The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
OBLIGORS: PETROCORP INCORPORATED
By: _______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President - Finance,
Secretary and Treasurer
Address for Notices:
PetroCorp Incorporated
Suite 300, North Atrium
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 281/875-5080
Telephone No.: 281/▇▇▇-▇▇▇▇
Attention: Vice President - Finance
Signature Page 1
PCC ENERGY LIMITED PCC ENERGY CORP.
By: _________________________ By: _____________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President - Title: Vice President - Finance,
Finance, Secretary Secretary and Treasurer
and Treasurer
Address for Notices:
Address for Notices:
1210, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
1210, 333 - 7th Avenue S.W. Calgary, Alberta T2P 2Z1
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier No.:403/266-5812
Telecopier No.:403/▇▇▇-▇▇▇▇ Telephone No.: 403/▇▇▇-▇▇▇▇
Telephone No.: 403/▇▇▇-▇▇▇▇ Attention: Vice President - Finance
Attention: Vice President -
Finance with a copy to:
with a copy to: PetroCorp Incorporated
Suite 300, North Atrium
PetroCorp Incorporated ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Telecopier No.: 281/875-5080
Telephone No.: 281/▇▇▇-▇▇▇▇
Telecopier No.: 281/875-5080 Attention: Vice President - Finance
Telephone No.: 281/▇▇▇-▇▇▇▇
Attention: Vice President -
Finance
Signature of Page 2
LENDER AND U.S. AGENT: TORONTO DOMINION (TEXAS), INC., as U.S.
Agent and Individually
By: _________________________________
Name:
Title:
Lending Office for U.S. Loans and Letters of
Credit:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CANADIAN LENDER AND CANADIAN
AGENT: THE TORONTO-DOMINION BANK, acting through
its Calgary Agency, as Canadian Agent and
individually
By: __________________________________
Name: __________________________________
Title: __________________________________
Signature Page 3
Lending Office for Canadian Loans
and Bankers' Acceptances:
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Address for Notices:
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
U.S. LENDERS: THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
By: _____________________________
Name:
Title:
Lending Office for U.S. Loans:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Signature Page 4
with a copy to:
The Bank of Nova Scotia
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
CANADIAN LENDERS: THE BANK OF NOVA SCOTIA
By: ________________________________
Name:
Title:
Lending Office for Canadian Loans
and Bankers' Acceptances:
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Address for Notices:
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇
Signature Page 5
SCHEDULE 2.08
AUTOMATIC BORROWING BASE REDUCTIONS
REDUCTION DATE REDUCTION AMOUNT
----------------------------------------------------------
9-30-2000 7.5% of the Borrowing Base as determined
on the May 1, 2000 Scheduled
Redetermination Date
----------------------------------------------------------
12-31-2000 7.5% of the Borrowing Base as determined
on the May 1, 2000 Scheduled
Redetermination Date
----------------------------------------------------------
3-31-2001 7.5% of the Borrowing Base as determined
on the May 1, 2000 Scheduled
Redetermination Date
----------------------------------------------------------
6-30-2001 10% of the Borrowing Base as determined
on the May 1, 2001 Scheduled
Redetermination Date
----------------------------------------------------------
9-30-2001 11% of the Borrowing Base as determined
on the May 1, 2001 Scheduled
Redetermination Date
----------------------------------------------------------
12-31-2001 11% of the Borrowing Base as determined
on the May 1, 2001 Scheduled
Redetermination Date
----------------------------------------------------------
3-31-2002 11% of the Borrowing Base as determined
on the May 1, 2001 Scheduled
Redetermination Date
----------------------------------------------------------
7-1-2002 100% of the Borrowing Base as
determined on the May 1, 2002 Scheduled
Redetermination Date
----------------------------------------------------------
Schedule 2.03-1