45 COVER EX 10.7
AMENDED AND RESTATED CREDIT AGREEMENT
among
XXXXX PETROLEUM COMPANY
as Borrower
BANK OF AMERICA, N.A.
as Administrative Agent and as a Bank
and as Letter of Credit Issuer
THE FIRST NATIONAL BANK OF CHICAGO
as Documentation Agent and as a Bank
and
The Financial Institutions Listed on Schedule 1 Hereto
as Banks
$150,000,000
dated as of July 22, 1999
46
TABLE OF CONTENTS
ARTICLE I TERMS DEFINED 1
SECTION 1.1. Definitions 1
SECTION 1.2. Accounting Terms and Determinations 17
SECTION 1.3. Petroleum Terms 18
ARTICLE II THE CREDIT 18
SECTION 2.1. Commitments 18
SECTION 2.2. Method of Borrowing 22
SECTION 2.3. Method of Obtaining Letters of Credit 26
SECTION 2.4. Notes 26
SECTION 2.5. Interest Rates 26
SECTION 2.6. [Intentionally Deleted] 28
SECTION 2.7. Voluntary Prepayments 28
SECTION 2.8. [Intentionally Deleted] 28
SECTION 2.9. Voluntary Reduction of Commitments and
Prepayment of Loans 28
SECTION 2.10. Termination of Commitments;
Final Maturity; Maturity of Committed
Eurodollar Loans and Competitive
Bid Loans 28
SECTION 2.11. Application of Payments 29
SECTION 2.12. Commitment Fee 29
SECTION 2.13. Agency Fee 29
SECTION 2.14. Increases in the Total Commitment 29
ARTICLE III BORROWING BASE 31
SECTION 3.1. Reserve Report; Borrowing Base as of the
Closing Date; Proposed Borrowing Base 31
SECTION 3.2. Scheduled Redeterminations of the Borrowing
Base; Procedures and Standards 31
SECTION 3.3. Special Redetermination 32
SECTION 3.4. Borrowing Base Deficiency 32
ARTICLE IV GENERAL PROVISIONS 33
SECTION 4.1. Delivery and Endorsement of Notes 33
SECTION 4.2. General Provisions as to Payments 33
SECTION 4.3. Computation of Interest 34
SECTION 4.4. Overdue Principal and Interest 34
SECTION 4.5. Capital Adequacy 34
SECTION 4.6. Taxes 35
SECTION 4.7. Limitation on Number of Eurodollar Loans
and Competitive Bid Loans 35
SECTION 4.8. Foreign Lenders, Participants, and Assignees 36
SECTION 4.9. Replacement of a Bank 36
ARTICLE V SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS
AND LETTERS OF CREDIT 37
SECTION 5.1. Funding Losses 37
SECTION 5.2. Basis for Determining Interest Rate
Applicable to Eurodollar Loans Inadequate 37
SECTION 5.3. Illegality of Eurodollar Loans 37
i
47
SECTION 5.4. Increased Costs and Reduction of Return 38
SECTION 5.5. Alternative Loans Substituted for Affected
Eurodollar Loans 39
SECTION 5.6. Discretion of Banks as to Manner of Funding 39
ARTICLE VI CONDITIONS 40
SECTION 6.1. Conditions to Initial Borrowing and
Participation in Letter of Credit Exposure 40
SECTION 6.2. Conditions to Each Borrowing and
Participation in Letter of Credit Exposure 41
SECTION 6.3. Materiality of Conditions 42
ARTICLE VII REPRESENTATIONS AND WARRANTIES 42
SECTION 7.1. Corporate Existence and Power (Borrower) 42
SECTION 7.2. Existence and Power (Subsidiaries). 42
SECTION 7.3. Corporate and Governmental Authorization:
Contravention. 42
SECTION 7.4. Binding Effect 43
SECTION 7.5. Financial Information 43
SECTION 7.6. Litigation 43
SECTION 7.7. ERISA 43
SECTION 7.8. Taxes and Filing of Tax Returns 44
SECTION 7.9. Ownership of Properties Generally 45
SECTION 7.10. Mineral Properties 45
SECTION 7.11. [intentionally deleted] 45
SECTION 7.12. Licenses, Permits, Etc. 45
SECTION 7.13. Compliance with Law 46
SECTION 7.14. Full Disclosure 46
SECTION 7.15. Corporate Structure 46
SECTION 7.16. Environmental Matters 46
SECTION 7.17. Burdensome Obligations 47
SECTION 7.18. Fiscal Year 47
SECTION 7.19. No Default 47
SECTION 7.20. Government Regulation 47
SECTION 7.21. Insider 48
SECTION 7.22. Gas Balancing Agreements and Advance
Payment Contracts 48
SECTION 7.23. Year 2000 Compliance 48
ARTICLE VIII AFFIRMATIVE COVENANTS 48
SECTION 8.1. Information 49
SECTION 8.2. Maintenance of Existence 51
SECTION 8.3. Right of Inspection 51
SECTION 8.4. Maintenance of Insurance 52
SECTION 8.5. Payment of Taxes and Claims 52
SECTION 8.6. Compliance with Laws and Documents 52
SECTION 8.7. Operation of Properties and Equipment 52
SECTION 8.8. Environmental Law Compliance 53
SECTION 8.9. ERISA Reporting Requirements 53
SECTION 8.10. Additional Documents 54
SECTION 8.11. Environmental Matters 54
SECTION 8.12. Year 2000 Compliance 55
ARTICLE IX NEGATIVE COVENANTS 55
ii
SECTION 9.1. Incurrence of Debt 55
SECTION 9.2. Restrictions on Distributions 55
SECTION 9.3. Negative Pledge 56
SECTION 9.4. Consolidations and Mergers 56
SECTION 9.5. Asset Dispositions 56
SECTION 9.6. Amendments to Organizational Documents 56
SECTION 9.7. Use of Proceeds 56
SECTION 9.8. Investments 57
SECTION 9.9. Transactions with Affiliates 57
SECTION 9.10. ERISA 57
SECTION 9.11. Hedge Transactions 57
SECTION 9.12. Fiscal Year 57
SECTION 9.13. Change in Business 57
ARTICLE X FINANCIAL COVENANTS 58
SECTION 10.1. Minimum Consolidated Tangible
Net Worth of Borrower 58
ARTICLE XI DEFAULTS 58
SECTION 11.1. Events of Default 58
ARTICLE XII ADMINISTRATIVE AGENT 60
SECTION 12.1. Appointment and Authorization 60
SECTION 12.2. Administrative Agent and Affiliates 61
SECTION 12.3. Action by Administrative Agent 61
SECTION 12.4. Consultation with Experts 61
SECTION 12.5. LIABILITY OF ADMINISTRATIVE AGENT 61
SECTION 12.6. Delegation of Duties 62
SECTION 12.7. Indemnification 62
SECTION 12.8. Credit Decision 62
SECTION 12.9. Successor Administrative Agent 62
SECTION 12.10. Documentation Agent 63
ARTICLE XIII MISCELLANEOUS 63
SECTION 13.1. Notices 63
SECTION 13.2. No Waivers 64
SECTION 13.3. Expenses; Documentary Taxes; Indemnification 64
SECTION 13.4. Right and Sharing of Set-Offs 65
SECTION 13.5. Amendments and Waivers 66
SECTION 13.6. Survival 66
SECTION 13.7. Limitation on Interest 66
SECTION 13.8. Invalid Provisions 68
SECTION 13.9. Successors and Assigns 68
SECTION 13.10. TEXAS LAW 69
SECTION 13.11. Counterparts; Effectiveness 69
SECTION 13.12. No Third Party Beneficiaries 70
SECTION 13.13. COMPLETE AGREEMENT 70
SECTION 13.14. WAIVER OF JURY TRIAL 70
iii
49
SCHEDULES
SCHEDULE 1 - FINANCIAL INSTITUTIONS
SCHEDULE 2 - INVESTMENT GUIDELINES
SCHEDULE 7.6 - LITIGATION
SCHEDULE 7.16 - ENVIRONMENTAL DISCLOSURE
SCHEDULE 11.1(k) - PRINCIPAL SHAREHOLDERS
SCHEDULE 13.1 - ADDRESSES FOR NOTICES
EXHIBITS
EXHIBIT A - FORM OF COMMITTED NOTE
EXHIBIT B - FORM OF COMPETITIVE BID NOTE
EXHIBIT C - FORM OF COMPETITIVE BID REQUEST
EXHIBIT D - FORM OF NOTICE OF COMPETITIVE BID REQUEST
EXHIBIT E - FORM OF COMPETITIVE BID
EXHIBIT F - FORM OF REQUEST FOR COMMITTED LOANS
EXHIBIT G - FORM OF REQUEST FOR LETTER OF CREDIT
EXHIBIT H - FORM OF CERTIFICATE OF OWNERSHIP
EXHIBIT I - FORM OF CERTIFICATE OF FINANCIAL OFFICER
EXHIBIT J - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
iv
50
THIS AGREEMENT (herein so called) is entered into effective as
of the 22nd day of July, 1999, among XXXXX PETROLEUM COMPANY, a
Delaware corporation ("Borrower"), BANK OF AMERICA, N.A., as
Administrative Agent ("Administrative Agent") and as Letter of
Credit Issuer, The First National Bank of Chicago, as Documentation
Agent ("Documentation Agent") and the financial institutions
listed on Schedule 1 hereto as Banks (individually a "Bank" and
collectively "Banks").
W I T N E S S E T H:
WHEREAS, Borrower, Bank of America, N.A., formerly known as
NationsBank, N.A., as Agent and as a Bank and other banks entered
into that certain Credit Agreement dated as of December 1, 1996, as
amended by that certain First Amendment to Credit Agreement dated
as of May 29, 1998 and as further amended by that certain Second
Amendment to Credit Agreement dated as of January 21, 1999 (the
"Prior Agreement"); and
WHEREAS, Borrower has requested that the Prior Agreement be
amended and restated, and the Banks and the Administrative Agent
are willing to do so on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree
that the Prior Agreement shall be amended and restated to read in
its entirety, as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used
herein, have the following meanings:
"Adjusted Eurodollar Rate" applicable to any Interest Period,
means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary to the next higher 1/100 of 1%) by dividing
(i) the applicable Eurodollar Rate by (ii) 1.00 minus the
Eurodollar Reserve Percentage.
"Administrative Agent" means Bank of America, N.A. in its
capacity as administrative agent for Banks hereunder or any
successor thereto.
"Advance Payment Contract" means any contract whereby
Borrower or any of its Subsidiaries either (a) receives or becomes
entitled to receive (either directly or indirectly) any payment (an
"Advance Payment") to be applied toward payment of the purchase
price of hydrocarbons produced or to be produced from Mineral
Interests owned by Borrower or any of its Subsidiaries and which
Advance Payment is paid or to be paid in advance of actual delivery
of such production to or for the account of the purchaser
regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in
lieu of payment, and, in either of the foregoing instances, the
Advance Payment is, or is to be, applied as payment in full for
such production when sold and delivered or is, or is to be, applied
as payment for a portion only of the purchase price
1
51
thereof or of a percentage or share of such production; provided that
inclusion of the standard "take or pay" provision in any gas sales or
purchase contract or any other similar contract shall not, in and of itself,
constitute such contract as an Advance Payment Contract for the
purposes hereof
"Affiliate" means, as to any Person, any Subsidiary of such
Person, or any other Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such
Person and, with respect to Borrower, means, any director or
executive officer of Borrower and any Person who holds ten percent
(10%) or more of the voting stock of Borrower. For the purposes of
this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or partnership
interests, or by contract or otherwise.
"Agreement" shall mean this Agreement as the same may
hereafter be modified, amended or supplemented pursuant to Section
13.5.
"Applicable Environmental Law" means any Law affecting any
real or personal property owned, operated or leased by Borrower or
any Subsidiary of Borrower or any other operation of Borrower or
any Subsidiary of Borrower in any way pertaining to health or the
environment, including, without limitation, health and
environmental Laws, and further including without limitation, (a)
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (as amended from time to time, herein
referred to as "CERCLA"), (b) the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of
1980, the Solid Waste Recovery Act of 1976, the Solid Waste
Disposal Act of 1980, and the Hazardous and Solid Waste Amendments
of 1984 (as amended from time to time herein referred to as
"RCRA"), (c) the Safe Drinking Water Act, as amended from time to
time, (d) the Toxic Substances Control Act, as amended from time to
time, (e) the Clean Air Act, as amended from time to time, (f) the
Occupational Safety and Health Act of 1970, as amended from time to
time, and (g) any Laws which may now or hereafter require removal
of asbestos or other hazardous wastes or impose any liability
related to asbestos or other hazardous wastes. The terms
"hazardous substance", "petroleum", "release" and "threatened
release" have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; provided, that in the event either 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 with respect to all provisions of
this Agreement; and provided further, that to the extent the Laws
of any nation, province, state or political subdivision of any of
the foregoing in which any real or personal property owned,
operated or leased by Borrower or any Subsidiary of Borrower is
located establish a meaning for "hazardous substance",
"petroleum", "release", "solid waste" or "disposal" which is
broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply.
"Applicable Margin" means, on any date, with respect to each
Type of Loan, the amount determined in accordance with the table
below by reference to the ratio of (a) Outstanding Credit on such
date, to (b) the Borrowing Base in effect on such date; provided,
that, so long as the Borrowing Base is equal to or less than
$50,000,000 and no
2
Borrowing Base Deficiency exists, the Applicable Margin for Base Rate
Loans shall be 0% and the Applicable Margin for Committed Eurodollar
Loans shall be .75%:
Ratio of Outstanding Applicable Margin Applicable Margin for
Credit to Borrowing for Committed Eurodollar
Base Base Rate Loans Loans
<= .50 to 1 0.00% .75%
> .50 to 1 <= .75 to 1 0.00% 1.00%
> .75 to 1 <= .90 to 1 0.00% 1.25%
> .90 to 1 0.00% 1.50%
"Approved Petroleum Engineer" means XxXxxxxx and XxxXxxxxxxx
or any other reputable firm of independent petroleum engineers as
shall be selected by Borrower and approved by the Required Banks,
such approval not to be unreasonably withheld.
"Authorized Officer" means, as to any Person, its Chief
Executive Officer, its President, its Chief Financial Officer, any
of its Vice Presidents, its Treasurer or its Corporate Secretary.
"Availability" means, as of any date, the remainder of (a)
the Borrowing Base in effect on such date, minus (b) the
Outstanding Credit on such date.
"Bank" means any financial institution reflected on Schedule 1
hereto as having a Commitment and its successors and permitted
Assignees, and "Banks" shall mean all of Banks. References to
the "Banks" shall include each of Bank of America and any other
Bank designated as an Issuer pursuant to Section 2.1(b), in its
capacity as Issuer; for purposes of clarification only, to the
extent that Bank of America (or such other Bank that has been
designated as an Issuer) may have any rights or obligations in
addition to those of the Banks due to its status as Issuer, its
status as such will be specifically referenced.
"Bank of America" means Bank of America, N.A.
"Base Rate" means the floating rate of interest per annum
which is the higher of (a) the Federal Funds Rate plus one-half of
one percent (1/2%) per annum and (b) the Reference Rate. Any
change in the Base Rate due to a change in the Reference Rate or
the Federal Funds Rate shall be effective from and including the
effective date of such change in the Reference Rate or the Federal
Funds Rate, respectively. The Base Rate shall in no event exceed
the Maximum Lawful Rate.
"Base Rate Loan" means a Loan bearing interest with
reference to the Base Rate.
"Borrower" means Xxxxx Petroleum Company, a Delaware
corporation.
"Borrowing" means a Competitive Bid Borrowing or a Committed
Borrowing.
"Borrowing Base" has the meaning set forth in Section 3.2
hereof.
"Borrowing Base Deficiency" means, as of any date, the
amount, if any, by which the Outstanding Credit on such date
exceeds the Borrowing Base in effect on such date;
3
provided, that, for purposes of determining the existence and amount of any
Borrowing Base Deficiency, Letter of Credit Exposure will not be
deemed to be outstanding to the extent it is secured by cash or
U.S. Treasury securities in the manner contemplated by Section
2.1(b).
"Borrowing Base Properties" means (a) the Mineral Interests
owned by Borrower on the Closing Date located in the South Midway
Sunset, North Midway Sunset and Montalvo Fields, in Xxxx and
Xxxxxxx Counties, California, and in the Placerita Field in Los
Angeles County, California, and (b) any other Proved Mineral
Interest acquired by Borrower after the Closing Date in a single
transaction for a cash purchase price in excess of $1,000,000.
"Closing Date" means July 22, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committed Borrowing" means a borrowing consisting of
simultaneous Committed Loans of a single Type and having the same
Interest Period from each of Banks distributed ratably among Banks
in the manner described in Section 2.1(a).
"Committed Loan" means a Loan from a Bank to Borrower
pursuant to Section 2.2.2, which shall be a Base Rate Loan or a
Eurodollar Loan.
"Committed Note" means a promissory note of Borrower payable
to the order of a Bank, in substantially the form of Exhibit A
hereto, evidencing the aggregate indebtedness of Borrower to such
Bank resulting from Committed Loans made by such Bank to Borrower,
together with all modifications, extensions, renewals and
rearrangements thereof; and "Committed Notes" means all Committed
Notes.
"Commitment" means, with respect to each Bank, the amount
indicated opposite the name of such Bank on Schedule 1 hereto, as
such amount is reduced from time to time in accordance with the
provisions hereof.
"Commitment Fee Percentage" means, on any date, a per annum
percentage determined in accordance with the table below by
reference to the ratio of (a) the Outstanding Credit on such date,
to (b) the Borrowing Base in effect on such date; provided, that,
so long as the Borrowing Base is equal to or less than $50,000,000
and no Borrowing Base Deficiency exists, the Commitment Fee
Percentage shall be .25%:
Ratio of Outstanding Commitment Fee
Credit to Percentage
Borrowing Base
> .50 to 1 .25%
> .50 to 1 <= .75 to 1 .25%
> .75 to 1 <= .90 to 1 .30%
> .90 to 1 .35%
"Commitment Percentage" means, with respect to each Bank,
the percentage determined by dividing its Commitment by the Total
Commitment.
4
"Competitive Bid" means an offer by a Bank to make a
Competitive Bid Loan pursuant to Section 2.2.1.
"Competitive Bid Borrowing" means a borrowing hereunder
consisting of a single Competitive Bid Loan from a Bank or
simultaneous Competitive Bid Loans from each Bank whose Competitive
Bid, as all or as part of such Competitive Bid Borrowing, has been
accepted by Borrower under the bidding procedure described in
Section 2.2.1.
"Competitive Bid Eurodollar Loan" means a Competitive Bid
Loan from a Bank to Borrower bearing interest at a rate equal to
the Competitive Bid Eurodollar Margin offered by such Bank and
accepted by Borrower pursuant to Section 2.2.1 above or below the
Adjusted Eurodollar Rate.
"Competitive Bid Eurodollar Margin" means, as to any
Competitive Bid made by a Bank pursuant to Section 2.2.1 to make a
Competitive Bid Eurodollar Loan, the margin above or below the
Adjusted Eurodollar Rate offered by the Bank making such
Competitive Bid, expressed as a decimal to no more than four
decimal places.
"Competitive Bid Fixed Rate" means, as to any Competitive
Bid made by a Bank pursuant to Section 2.2.1 to make a Competitive
Bid Fixed Rate Loan, the fixed rate of interest offered by the Bank
making such Competitive Bid expressed as a decimal to no more than
four decimal places.
"Competitive Bid Fixed Rate Loan" means a Competitive Bid
Loan from a Bank to Borrower bearing interest at an absolute fixed
rate.
"Competitive Bid Loan" means a Loan from a Bank to Borrower
pursuant to the bidding procedure described in Section 2.2.1. Each
Competitive Bid Loan may be either a Competitive Bid Fixed Rate
Loan or a Competitive Bid Eurodollar Loan in each case as requested
by Borrower in the applicable Competitive Bid Request.
"Competitive Bid Note" means a promissory note of Borrower
payable to the order of a Bank, in substantially the form of
Exhibit B hereto, evidencing the aggregate indebtedness of Borrower
to such Bank resulting from the Competitive Bid Loans made by such
Bank to Borrower, together with all modifications, extensions,
renewals and rearrangements thereof; and "Competitive Bid Notes"
means all Competitive Bid Notes.
"Competitive Bid Request" means a request for Competitive
Bids to be made pursuant to Section 2.2.1 which Competitive Bid
Request shall be in the form of Exhibit C.
"Consolidated Net Income" means, for any Person for any
period, consolidated net earnings (after income taxes) of such
Person and its Consolidated Subsidiaries for such period,
determined in accordance with GAAP.
"Consolidated Subsidiary" or "Consolidated Subsidiaries"
means, for any Person, any Subsidiary or other entity the accounts
of which would be consolidated with those of such Person in its
consolidated financial statements.
"Consolidated Tangible Net Worth" means, for any Person at
any time, the consolidated shareholder's equity of such Person at
such time, less the consolidated
5
Intangible Assets of such Person at such time. For purposes of this
definition "Intangible Assets" means the amount (to the extent reflected
in determining such consolidated shareholder's equity) of all unamortized
debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights and
organization expenses.
"Debt" means, for any Person at any time, without
duplication, (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) all other indebtedness
(including capitalized lease obligations, other than usual and
customary oil and gas leases) of such Person on which interest
charges are customarily paid or accrued, (d) all Guarantees by such
Person, (e) the unfunded or unreimbursed portion of all letters of
credit issued for the account of such Person, (f) any amount owed
by such Person representing the deferred purchase price of property
or services other than accounts payable incurred in the ordinary
course of business and in accordance with customary trade terms,
and (g) all liability of such Person as a general partner of a
partnership for obligations of such partnership of the nature
described in (a) through (f) preceding.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice, lapse of time
or both would, unless cured or waived, become an Event of Default.
"Distribution" by any Person, means (a) with respect to any
stock issued by such Person or any partnership interest of such
Person, the retirement, redemption, purchase, or other acquisition
for value of any such stock or partnership interest, (b) the
declaration or payment of any dividend or other distribution on or
with respect to any stock or any partnership interest of any
Person, and (c) any other payment by such Person with respect to
such stock or partnership interest.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which national banks in Dallas, Texas, are
authorized by Law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address identified on Schedule 13.1 hereto as its
Domestic Lending Office or such other office as such Bank may
hereafter designate as its Domestic Lending Office by notice to
Borrower and Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any corporation or trade or business
under common control with Borrower as determined under section
414(b), (c), (m) or (o) of the Code.
"Eurodollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business
(including dealings in dollar deposits) in London.
"Eurodollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address identified on
Schedule 13.1 hereto as its Eurodollar Lending Office or such other
office, branch or affiliate of such Bank as it may hereafter
designate as its Eurodollar Lending Office by notice to Borrower
and Administrative Agent.
6
"Eurodollar Loan" means a Loan bearing interest with
reference to the Adjusted Eurodollar Rate. Each Eurodollar Loan
having a different Interest Period shall be deemed to be a separate
Eurodollar Loan. Eurodollar Loans may be Committed Loans (a
"Committed Eurodollar Loan") or Competitive Bid Loans.
"Eurodollar Rate" applicable to any Interest Period means
the rate per annum determined by Administrative Agent (rounded
upward, if necessary, to the next higher 1/100th of 1%) at which
deposits in dollars are offered to Administrative Agent by first
class banks in the London interbank market at approximately 10:00
a.m. (Dallas, Texas time) two (2) Eurodollar Business Days before
the first day of such Interest Period in an amount approximately
equal to the principal amount of the Eurodollar Loan to which such
Interest Period is to apply and for a period of time comparable to
such Interest Period. Administrative Agent shall determine the
Eurodollar Rate and shall notify Borrower and Banks as soon as
practicable.
"Eurodollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in
Dallas, Texas in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar
Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted Eurodollar Rate
shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Events of Default" has the meaning set forth in Section 11.1.
"Exhibit" refers to an exhibit attached to this Agreement
and incorporated herein by reference, unless specifically provided
otherwise.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of
New York on the Domestic Business Day next succeeding such day;
provided that (a) if such day is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (b) if
no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for such day shall be the
average rate charged to Bank of America on such day on such
transactions as determined by Administrative Agent.
"Financial Officer" of any Person means its Chief Financial
Officer; provided, that if no Person serves in such capacity,
"Financial Officer" shall mean the highest ranking executive
officer of such Person with responsibility for accounting,
financial reporting, cash management and similar functions.
"Fiscal Quarters" means the three month periods ending on
March 31, June 30, September 30 and December 31.
7
"Fiscal Year" means the period from and including January 1
of each year to and including December 31 of such year.
"Fully Funded" means, with respect to any Bank at the time
in question, that such Bank is prohibited from making any further
Loans pursuant to the Single Bank Credit Limit.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American
Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting
Standards Board or through other appropriate boards or committees
thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition,
and the results of operations and changes in financial position, of
Borrower and its Consolidated Subsidiaries, except that any
accounting principle or practice required to be changed by the said
Accounting Principles Board or Financial Accounting Standards Board
(or other appropriate board or committee of the said Boards) in
order to continue as a generally accepted accounting principle or
practice may be so changed.
"Gas Balancing Agreement" means any agreement or arrangement
whereby Borrower or any of its Subsidiaries or any other party
having an interest in any hydrocarbons to be produced from Mineral
Interests in which Borrower or any of its Subsidiaries have a right
to take more than its proportionate share of production therefrom.
"Governmental Authority" means any court or governmental
department, commission, board, bureau, agency, or instrumentality
of the United States or of any state, commonwealth, nation,
territory, possession, county, parish, or municipality, whether now
or hereafter constituted or existing.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing
any Debt of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions, by "comfort letter" or other similar undertaking of
support or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided
that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Hedge Transaction" means a transaction pursuant to which
Borrower or its Subsidiaries hedge the price to be received by them
for future production of hydrocarbons, including price swap
agreements under which Borrower or its Subsidiaries agree to pay a
price for a specified amount of hydrocarbons determined by
reference to a recognized market on a specified future date and the
contracting party agrees to pay Borrower or its Subsidiaries a
fixed price for the same or similar amount of hydrocarbons.
8
"Interest Period" means: (a) with respect to each Borrowing
comprised of Eurodollar Loans, the period commencing on the date of
such Borrowing and ending one (1), two (2), three (3) or six (6),
and, if available to Banks, nine (9) or twelve ( 12) months
thereafter, as Borrower may elect in the applicable Request for
Committed Loans or Competitive Bid Request; provided that:
(i) any Interest Period which would otherwise end on a
day which is not a Eurodollar Business Day shall be extended
to the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Eurodollar Business Day;
(ii) any Interest Period which begins on the last
Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last Eurodollar
Business Day of a calendar month;
(iii) if any Interest Period includes a date on which any
payment of principal of such Loans is required to be made
hereunder, but does not end on such date, then (A) the
principal amount of each Eurodollar Loan required to be repaid
on such date shall have an Interest Period ending on such
date, and (B) the remainder of each such Eurodollar Loan shall
have an Interest Period determined as set forth above; and
(iv) no Interest Period for Competitive Bid Eurodollar
Loans shall be for a period of more than three (3) months.
(b) with respect to each Borrowing comprised of Competitive
Bid Fixed Rate Loans, the period commencing on the date of such
Borrowing and ending 7, 30, 60 or 90 days thereafter as Borrower
may elect in the applicable Competitive Bid Request; provided,
that:
(i) any Interest Period (other than an Interest Period
determined pursuant to clause (ii)(A) below) which would
otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business
Day; and
(ii) if any Interest Period includes a date on which any
payment of principal of the Loans is required to be made
hereunder, but does not end on such date, then (A) the
principal amount of each Competitive Bid Fixed Rate Loan
required to be repaid on such date shall have an Interest
Period ending on such date, and (B) any remainder of each such
Competitive Bid Fixed Rate Loan shall have an Interest Period
determined as set forth above; and
(iii) no Interest Period shall extend past the thirtieth
(30th) day prior to the Termination Date.
"Investment" means, with respect to any Person, any loan,
advance, extension of credit, capital contribution to, investment
in or purchase of the stock or other securities of,
9
or interests in, any other Person; provided, that "Investment" shall not
include current customer and trade accounts which are payable in
accordance with customary trade terms.
"Investment Guidelines" means the guidelines in effect on
the date hereof for investment of Borrower's cash and cash
equivalents which have been adopted by Borrower's Board of
Directors, a true and correct copy of which is attached hereto as
Schedule 2.
"Issuer" has the meaning set forth in Section 2.1(b).
"Laws" means all applicable statutes, laws, ordinances,
regulations, orders, writs, injunctions, or decrees of any state,
commonwealth, nation, territory, possession, county, township,
parish, municipality or Governmental Authority.
"Lending Office" means as to any Bank its Domestic Lending
Office or its Eurodollar Lending Office, as the context may
require.
"Letters of Credit" means letters of credit issued for the
account of Borrower pursuant to Section 2.1(b).
"Letter of Credit Exposure" of any Bank means such Bank's
aggregate participation in the unfunded portion and the funded but
unreimbursed portion of Letters of Credit outstanding at any time.
"Letter of Credit Fee" means, the Letter of Credit Fee
payable pursuant to Section 2.1(b) and which shall accrue each day
at the greater of (a) a per annum fee of $500, or (b) a per annum
rate in effect on such day determined in accordance with the table
below by reference to the ratio of (i) the Outstanding Credit on
such day, to (ii) the Borrowing Base in effect on such day
provided, that, so long as the Borrowing Base is equal to or less
than $50,000,000 and no Borrowing Base Deficiency exists, the
Letter of Credit Fee shall be the greater of (y) a per annum fee of
$500, or (z) .75%:
Ratio of Outstanding Per Annum Letter of
Credit to Credit Fee
Borrowing Base
>= .50 to 1 .75%
> .50 to 1 <= .75 to 1 1.00%
> .75 to 1 <= .90 to 1 1.25%
> .90 to 1 1.50%
"Letter of Credit Fronting Fee" means the Letter of Credit
Fronting Fee payable pursuant to Section 2.1(b) which shall accrue
each day at a per annum rate of .125%.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement,
Borrower and its Subsidiaries shall be deemed to own subject to a
Lien any asset which is acquired or held subject to the interest of
a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
10
"Loan" means a Committed Loan, a Competitive Bid Loan, a
Base Rate Loan or a Eurodollar Loan and "Loans" means Committed
Loans, Competitive Bid Loans, Base Rate Loans, Eurodollar Loans, or
any combination thereof.
"Loan Papers" means this Agreement, the Notes and all other
certificates, documents or instruments delivered in connection with
this Agreement, as the foregoing may be amended from time to time.
"Margin Regulations" means Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Margin Stock" means "margin stock" as defined in
Regulation U.
"Material Agreement" means any material written or oral
agreement, contract, commitment, or understanding to which a Person
is a party, by which such Person is directly or indirectly bound,
or to which any assets of such Person may be subject, which is not
cancelable by such Person upon notice of thirty (30) days or less
without liability for further payment other than nominal penalty.
"Maximum Lawful Rate" means, with respect to each Bank, the
maximum nonusurious rate of interest that such Bank is permitted
under applicable law to contract for, take, charge, or receive with
respect to its Loans. All determinations herein of the Maximum
Lawful Rate, or of any interest rate determined by reference to the
Maximum Lawful Rate, shall be made separately for each Bank as
appropriate to assure that the Loan Papers are not construed to
obligate any Person to pay interest to any Bank at a rate in excess
of the Maximum Lawful Rate applicable to such Bank.
"Mineral Interests" means rights, estates, titles, and
interests in and to oil, gas, sulphur, or other mineral leases and
any mineral interests, royalty and overriding royalty interest,
production payment, net profits interests, mineral fee interests,
and other rights therein, including, without limitation, any
reversionary or carried interests relating to the foregoing,
together with rights, titles, and interests created by or arising
under the terms of any unitization, communization, and pooling
agreements or arrangements, and all properties, rights and
interests covered thereby, whether arising by contract, by order,
or by operation of Laws, which now or hereafter include all or any
part of the foregoing.
"Minimum Consolidated Tangible Net Worth" means the sum of
(a) $90,000,000 plus (b) seventy-five percent (75%) of any increase
in the shareholders equity of Borrower resulting from the issuance
of equity securities by Borrower after January 21, 1999.
"Moody's" means Xxxxx'x Investor Services, or any successor
thereto.
"Note" means a Competitive Bid Note or a Committed Note and
"Notes" means all Competitive Bid Notes and all Committed Notes.
"Obligations" means all present and future indebtedness,
obligations and liabilities, and all renewals and extensions
thereof, or any part thereof, of Borrower or any of its
Subsidiaries to any Bank arising pursuant to the Loan Papers, and
all interest accrued thereon and costs, expenses, and attorneys'
fees incurred in the enforcement or collection thereof, regardless
of whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several or joint and several.
11
"Outstanding Credit" means, on any date, the sum of (a) the
aggregate outstanding Letter of Credit Exposure on such date
including the aggregate Letter of Credit Exposure related to
Letters of Credit to be issued on such date, plus (b) the aggregate
outstanding principal balance of all Loans on such date, including
the outstanding principal balance of all Loans to be made on such
date.
"Participant" has the meaning given such term in Section
13.9 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means with respect to any asset:
(a) Liens (if any) securing the Notes in favor of Banks;
(b) Minor defects in title which do not secure the payment
of money and otherwise have no material adverse effect on the value
or operation of the subject property, and for the purposes of this
Agreement, a minor defect in title shall include easements,
rights-of-way, servitudes, permits, surface leases and other
similar rights in respect of surface operations, and easements for
pipelines, streets, alleys, highways, telephone lines, power lines,
railways and other easements and rights-of-way, on, over or in
respect of any of the properties of Borrower or its Subsidiaries
that are customarily granted in the oil and gas industry;
(c) Inchoate statutory or operators' liens securing
obligations for labor, services, materials and supplies furnished
to Mineral Interests which are not delinquent (except to the extent
permitted by Section 8.5);
(d) Mechanic's, materialmen's, warehouseman's, journeyman's
and carrier's liens and other similar liens arising by operation of
Law in the ordinary course of business which are not delinquent
(except to the extent permitted by Section 8.5);
(e) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are being contested in good
faith in the normal course of business by appropriate action, as
permitted by Section 8.5;
(f) Lease burdens payable to third parties which are
deducted in the calculation of discounted present value in the
Reserve Report including, without limitation, any royalty,
overriding royalty, net profits interest, production payment,
carried interest or reversionary working interest and which have
been disclosed to Administrative Agent in writing;
(g) Liens securing Debt incurred to finance the acquisition
of the assets which are the subject of such Liens; provided, that
the aggregate outstanding balance of all Debt secured by such Liens
shall not exceed $2,000,000 at any time; and
(h) Liens in effect on the Closing Date encumbering cash and
cash equivalents in any aggregate amount not to exceed $2,000,000
securing certain obligations of Borrower to Governmental Authorities.
12
"Permitted Investments" means (a) readily marketable direct
obligations of the United States of America, (b) fully insured time
deposits and certificates of deposit with maturities of one year or
less of any commercial bank operating in the United States having
capital and surplus in excess of $50,000,000, (c) commercial paper
of a domestic issuer if at the time of purchase such paper is rated
in one of the two highest ratings categories of S&P or Moody's, or
of a comparable or higher quality of any other rating agency
acceptable to Banks, (d) to the extent not permitted under clause
(a) through (c) preceding, Investments which are permitted pursuant
to the Investment Guidelines as in effect on the date hereof, or as
amended hereafter, provided that no Investments in equity
securities will constitute Permitted Investments under this clause
(d), and no Investments in debt securities will constitute
Permitted Investments under this clause (d) unless such securities
are rated "A-1" or higher by Moody's or "A+" or higher by S&P,
or of a comparable or higher quality of any other rating agency
acceptable to Banks and (e) other Investments in Persons engaged
primarily in the business of the acquisition, development and
production of Mineral Interests or the production, refining,
processing, transportation or marketing of hydrocarbons and
businesses reasonably related thereto; provided, that, the sum of
(i) the aggregate amount of outstanding Investments made pursuant
to this clause (e), plus (ii) the aggregate amount of capital
expenditures made by Borrower and its Subsidiaries to purchase
assets used in the transportation, processing, refining or
marketing of petroleum products (in each case measured on a cost
basis), shall not exceed $15,000,000 at any time.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization,
including a Government Authority.
"Plan" means an employee benefit plan within the meaning of
section 3(3) of ERISA, and any other similar plan, policy or
arrangement, whether formal or informal and whether legally binding
or not, under which Borrower or an ERISA Affiliate has any current
or future obligation or liability or under which any present or
former employee of Borrower or an ERISA Affiliate, or such present
or former employee's dependents or beneficiaries, has any current
or future right to benefits resulting from the present or former
employee's employment relationship with Borrower or an ERISA
Affiliate.
"Proved Mineral Interests" means Proved Producing Mineral
Interests, Proved Nonproducing Mineral Interests, and Proved
Undeveloped Mineral Interests.
"Proved Nonproducing Mineral Interests" means all Mineral
Interests which constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" means all Mineral
Interests (including all acreage subject to such Mineral Interests
that may be perpetuated beyond the primary term therefor) which
constitute proved developed producing reserves.
"Proved Undeveloped Mineral Interests" means all Mineral
Interests which constitute proved undeveloped reserves.
"Quarterly Date" means the last day of each March, June,
September and December.
"Redetermination" means any redetermination of the Borrowing
Base pursuant to Section 3.2 or 3.3 hereof.
13
"Reference Rate" means the rate of interest publicly
announced from time to time by Bank of America in San Francisco as
its reference rate, as in effect on such date of determination.
The reference rate is set by Bank of America based on various
factors including Bank of America's costs and desired return,
general economic conditions, and other factors, and is used as a
reference point for pricing some loans. Bank of America may make
loans at, above or below the rate announced by it as its reference
rate. Any change in the reference rate announced by Bank of
America shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Refunding Borrowing" means a Borrowing made solely for the
purpose of refinancing Loans which are then outstanding, including
any Borrowing made to refinance Eurodollar Loans or Competitive Bid
Loans on the expiration of the Interest Period applicable thereto.
Refunding Borrowings may be Base Rate Borrowings or Eurodollar
Borrowings.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Part 221, as in effect
from time to time.
"Request for Committed Loan(s)" has the meaning set forth in
Section 2.2.2(a).
"Request for Letter of Credit" has the meaning set forth in
Section 2.3(a).
"Required Banks" means (a) so long as no Default has
occurred which is continuing, Banks holding at least sixty-six and
two-thirds percent (66 2/3%) of the Total Commitment, and (b)
during the continuance of any Default, Banks holding at least
sixty-six and two-thirds percent (66 2/3%) of the Outstanding
Credit.
"Reserve Engineer's Letter" means, with respect to each
Reserve Report, a letter addressed to Borrower from the Approved
Petroleum Engineer which prepared such Reserve Report setting forth
the scope of such Reserve Report, the methodology employed in the
preparation of such report and a summary of the reserve data set
forth in such report.
"Reserve Report" means an unsuperseded engineering analysis
of the Mineral Interests owned by Borrower, in form and substance
acceptable to the Required Banks, prepared by an Approved Petroleum
Engineer in accordance with customary and prudent practices in the
petroleum engineering industry and Financial Accounting Standards
Board Statement 69; provided, however, that in connection with any
Special Redetermination requested by Borrower, the Reserve Report
shall be in form and scope mutually acceptable to Borrower and
Required Banks.
"Reserve Report Summary" means, with respect to any Reserve
Report, a summary in form, substance and scope reasonably
acceptable to Required Banks of the reserve data included in such
Reserve Report.
"S&P" means Standard & Poor's Rating Services, a division of
The XxXxxx-Xxxx Companies, Inc., or any successor thereto.
"Schedule" means a "schedule" attached to this Agreement
and incorporated herein by reference, unless specifically indicated
otherwise.
14
"Scheduled Redetermination" means any Redetermination of the
Borrowing Base pursuant to Section 3.2.
"Section" refers to a "section" or "subsection" of this
Agreement unless specifically indicated otherwise.
"Sharing Percentage" means, with respect to any Bank at any
time, the percentage determined by dividing (a) the sum of (i) such
Bank's aggregate Letter of Credit Exposure at such time, plus (ii)
the outstanding principal balance of all Loans held by such Bank at
such time, by (b) the Outstanding Credit at such time.
"Special Redetermination" means any Redetermination of the
Borrowing Base pursuant to Section 3.3.
"Subsidiary" means, for any Person, any corporation or other
entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the Board of Directors
or other persons performing similar functions (including that of a
general partner) are at the time directly or indirectly owned,
collectively, by such Person and any Subsidiaries of such Person.
The term Subsidiary shall include Subsidiaries of Subsidiaries (and
so on).
"Taxes" means all taxes, assessments, filing or other fees,
levies, imposts, duties, deductions, withholdings, stamp taxes,
capital transaction taxes, foreign exchange taxes or other charges,
or other charges of any nature whatsoever, from time to time or at
any time imposed by Law or any Governmental Authority. "Tax"
means any one of the foregoing.
"Termination Date" means January 21, 2004.
"Total Commitment" means the aggregate of all Banks'
Commitments.
"Type" means with reference to a Loan, the characterization
of such Loan as a Base Rate Loan or a Eurodollar Loan based on the
method by which the accrual of interest on such Loan is calculated.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP, applied on a
basis consistent with the most recent audited consolidated
financial statements of Borrower and its Consolidated Subsidiaries
delivered to Banks except for changes concurred in by Borrower's
independent certified public accountants and which are disclosed to
Administrative Agent on the next date on which financial statements
are required to be delivered to Banks pursuant to Sections 8.1(a)
or (b); provided that, unless the Required Banks shall otherwise
agree in writing, no such change shall modify or affect the manner
in which compliance with the covenants contained in Article X are
computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.
15
SECTION 1.3. Petroleum Terms. As used herein, the terms
"proved reserves," "proved developed reserves," "proved
developed producing reserves," "proved developed nonproducing
reserves," and "proved undeveloped reserves" have the meaning
given such terms from time to time and at the time in question by
the Society of Petroleum Engineers of the American Institute of
Mining Engineers.
ARTICLE II
THE CREDIT
SECTION 2.1. Commitments. (a) Each Bank severally agrees,
subject to the terms and conditions set forth in this Agreement, to
make Committed Loans to Borrower from time to time in amounts not
to exceed in the aggregate amount at any one time outstanding, the
lesser of (i) such Bank's Commitment Percentage of the Borrowing
Base in effect at such time reduced by the amount of such Bank's
Letter of Credit Exposure, or (ii) the amount of such Bank's
Commitment at such time reduced by the amount of such Bank's Letter
of Credit Exposure. In addition to the foregoing, each Bank may,
in its sole and absolute discretion, and in accordance with the
procedures set forth in Section 2.2.1 make Competitive Bid Loans to
Borrower without limit with respect to the amount of such Bank's
Commitment or such Bank's Commitment Percentage of the Borrowing
Base, but subject in all respects to Section 2.1(c) and the other
terms and provisions of this Agreement. Each Committed Borrowing
shall be in an aggregate principal amount of $1,000,000 or any
larger integral multiple of $100,000 (except that any Base Rate
Committed Borrowing may be in an amount equal to the Availability).
Borrower's right to request Competitive Bid Loans and the right of
each Bank to make Competitive Bid Loans hereunder shall be subject
to the restriction that no Bank shall be permitted to make
Competitive Bid Loans with an Interest Period expiring on or after
the thirtieth (30th) day prior to the Termination Date. Subject to
the foregoing limitations and the other provisions of this
Agreement, Borrower may obtain Borrowings under this Section
2.1(a), and repay Loans and request new Borrowings under this
Section 2.1(a).
(b) (i) Administrative Agent, or such Bank designated by
Administrative Agent which (without obligation to do so) consents
to the same ("Issuer") will, from time to time until the
ninetieth (90th) day prior to the Termination Date, upon request by
Borrower, issue Letters of Credit for the account of Borrower so
long as (I) the sum of (A) the total Letter of Credit Exposure then
existing and (B) the amount of the requested Letter of Credit does
not exceed twenty five percent (25%) of the Borrowing Base then in
effect, and (II) Borrower would be entitled to a Committed
Borrowing under Section 2.1(a) in an amount greater than or equal
to the requested Letter of Credit. Not less than three (3)
Domestic Business Days prior to the requested date of issuance of
any such Letter of Credit, Borrower shall execute and deliver to
Issuer, Issuer's customary letter of credit application. Each
Letter of Credit shall be in the minimum amount of $5,000 and shall
be in form and substance acceptable to Issuer. No Letter of Credit
shall have an expiration date later than the earlier of (i) thirty
(30) days prior to the Termination Date, or (ii) one (1) year from
the date of issuance. Upon the date of issuance of a Letter of
Credit, Issuer shall be deemed to have sold to each other Bank, and
each other Bank shall be deemed to have purchased from Issuer, a
participation in the related Letter of Credit and Letter of Credit
Exposure equal to such Bank's Commitment Percentage thereof.
Issuer shall notify each Bank by telephone, teletransmission or
telex of each Letter of Credit issued pursuant to the terms hereof.
If any Letter of Credit is presented for payment by the beneficiary
thereof, Administrative Agent shall cause a Committed
16
Borrowing comprised of Base Rate Loans to be made to reimburse Issuer for
the payment under the Letter of Credit, whether or not Borrower would
then be entitled to a Committed Borrowing pursuant to the terms
hereof, and each Bank which participated in such Letter and Letter
of Credit Exposure shall be obligated to make a Base Rate Loan
equal to the amount of its participation interest. On the
Termination Date, and on each Quarterly Date prior to the
Termination Date, and in the event the Commitments are terminated
in their entirety prior to the Termination Date, on the date of
such termination, Borrower shall pay to (a) the Administrative
Agent for the ratable benefit of each Bank, the Letter of Credit
Fee which accrued during the Fiscal Quarter (or portion thereof)
ending on such date, and (b) Administrative Agent solely for the
Issuer's own account, the Letter of Credit Fronting Fee which
accrued during the Fiscal Quarter (or portion thereof) ending at
such date. The Letter of Credit Fees and Letter of Credit Fronting
Fees payable hereunder shall accrue on a daily basis at the per
annum rates specified in the definitions of such terms and on the
aggregate outstanding Letter of Credit Exposure each day computed
on the basis of the actual number of days elapsed and assuming a
calendar year of 360 days.
(ii) Each Bank's obligation in accordance with Section
2.1(b)(ii) of this Agreement to make Committed Loans as a result of
a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuer and shall not be
affected by any circumstance, including (A) any set-off,
counterclaim, recoupment, defense or other right which such Bank
may have against the Issuer, the Borrower or any other Person for
any reason; (B) the occurrence or continuance of a Default or an
Event of Default; or (C) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
(iii) If the Administrative Agent or the Issuer is required at
any time to return to Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrower to the
Administrative Agent for the account of the Issuer in reimbursement
of a payment made under the Letter of Credit or interest or fee
thereon, each Bank shall, on demand of the Administrative Agent,
forthwith return to the Administrative Agent or the Issuer the
amount of its pro rata share of any amounts so returned by the
Administrative Agent or the Issuer plus interest thereon from the
date such demand is made to the date such amounts are returned by
such Bank to the Administrative Agent or the Issuer, at a rate per
annum equal to the Federal Funds Rate in effect from time to time.
(iv) Upon the occurrence of any Event of Default, and at the
times required by Section 3.4 hereof, Borrower shall deposit with
Administrative Agent cash or readily marketable United States
Treasury securities with a maturity of one year or less in such
amounts as Administrative Agent may request, up to a maximum amount
equal to the aggregate existing Letter of Credit Exposure of all
Banks. Any cash or securities so deposited shall be held by
Administrative Agent for the ratable benefit of all Banks with
Letter of Credit Exposure as security for such Letter of Credit
Exposure and as security for the Base Rate Loans to be made
pursuant to this Section 2.1(b) upon any payment of any related
Letter of Credit (the "L/C Obligations"). Borrower hereby grants
to the Administrative Agent, for the benefit of the Administrative
Agent, the Issuer and the Banks, a lien on and security interest in
all such cash and securities, and all income thereon and proceeds
thereof, as security for the L/C Obligations. Borrower will, in
connection therewith, execute and deliver such security agreements
in form and substance satisfactory to Administrative Agent which it
may, in its discretion, require. As drafts or demands for payment
are presented under any Letter of Credit, Administrative Agent shall
17
apply such cash (and liquidate such treasury securities and
apply the cash proceeds thereof) to satisfy such drafts or demands.
When either (i) all Letters of Credit have expired, the Obligations
have been repaid in full and the Commitments of all Banks have been
terminated, or (ii) all Events of Default have been cured to the
satisfaction of the Required Banks, Administrative Agent shall
release to Borrower any remaining cash and securities deposited
under this Section 2.1(b).
(v) Whenever Borrower is required to make deposits under this
Section 2.1(b) and fails to do so on the day such deposit is due,
Administrative Agent or any Bank may, without notice to Borrower,
make such deposit (whether by transfers from other accounts
maintained with any Bank or otherwise) using any funds then
available to any Bank of Borrower, any guarantor, or any other
person liable for all or any part of the Obligations.
(c) No Bank will be obligated to, or shall, lend to Borrower
or incur Letter of Credit Exposure, and Borrower shall not be
entitled to borrow any amount or obtain Letters of Credit hereunder
in an amount which would cause the Outstanding Credit to exceed the
Borrowing Base then in effect under Article III. Nothing in this
Section 2.1(c) shall be deemed to limit any Bank's obligation to
fund Base Rate Loans with respect to its participation in Letters
of Credit in connection with any Committed Borrowing comprised of
Base Rate Loans made as a result of the drawing under any Letter of
Credit.
(d) Each Bank and Borrower agree that, in paying any drawing
under a Letter of Credit, the Issuer shall not have any
responsibility to obtain any document (other than any sight draft
and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any
such document.
(e) Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use
of any Letter of Credit; provided, however, that this assumption is
not intended to, and shall not, preclude Borrower's pursuing such
rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. Neither the
Issuer, nor any of its correspondents, participants or assignees,
shall be liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 2.1(f); provided, however,
anything in such clauses to the contrary notwithstanding, that
Borrower may have a claim against the Issuer, and the Issuer may be
liable to Borrower, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered
by Borrower which Borrower proves were caused by the Issuer's
willful misconduct or gross negligence or the Issuer's willful
failure to pay under any Letter of Credit after the presentation to
it by the beneficiary of a sight draft and certificate(s) strictly
complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuer
may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) the Issuer shall
not be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a 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.
18
(f) The obligations of Borrower under this Agreement to
reimburse the Issuer for a drawing under a Letter of Credit, and to
repay any drawing under a Letter of Credit converted into Committed
Loans, shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and under
all circumstances, including the following: (i) any lack of
validity or enforceability of this Agreement or any Loan Paper
related to a Letter of Credit; (ii) any change in the time, manner
or place of payment of, or in any other term of, all or any of the
obligations of Borrower in respect of any Letter of Credit or any
other amendment or waiver of or any consent to departure from all
or any of the Loan Paper related to a Letter of Credit; (iii) the
existence of any claim, set-off, defense or other right that
Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuer or
any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or any unrelated transaction; (iv)
any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit; (v) any payment by the Issuer
under any Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of any
Letter of Credit; or any payment made by the Issuer under any
Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any insolvency
proceeding; (vi) any exchange, release or non-perfection of any
collateral for all or any of the obligations of Borrower in respect
of any Letter of Credit; or (vii) any other circumstance or
happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Borrower.
SECTION 2.2. Method of Borrowing.
2.2.1. Competitive Bid Procedure. (a) In order to request
Competitive Bids, Borrower shall hand deliver, telex or telecopy to
Administrative Agent a duly completed Competitive Bid Request, to
be received by Administrative Agent not later than 12:00 noon
(Dallas, Texas time), three (3) Domestic Business Days (in the case
of any request for Competitive Bid Fixed Rate Loans) and five (5)
Eurodollar Business Days (in the case of any request for
Competitive Bid Eurodollar Loans) before the date specified for a
proposed Competitive Bid Borrowing. No Competitive Bid Request
shall be made with respect to any Type of Loan other than a
Competitive Bid Fixed Rate Loan or a Competitive Bid Eurodollar
Loan, and Competitive Bids shall be submitted and Competitive Bid
Loans shall be made only of the Type requested in the applicable
Competitive Bid Request. A Competitive Bid Request that does not
conform substantially to the format of Exhibit C may be rejected at
Administrative Agent's sole discretion, and Administrative Agent
shall promptly notify Borrower of such rejection by telex or
telecopier. Each Competitive Bid Request shall in each case refer
to this Agreement and specify (x) the Borrowing date of such
Competitive Bid Loans (which shall be a Domestic Business Day) and
the aggregate principal amount thereof (which shall not be less
than $5,000,000 and shall be an integral multiple of $100,000), (y)
whether the Competitive Bid Loans to be made pursuant thereto are
to be Competitive Bid Fixed Rate Loans or Competitive Bid
Eurodollar Loans, and (z) the Interest Period with respect thereto.
Promptly after its receipt of a Competitive Bid Request that is not
rejected as aforesaid,
19
Administrative Agent shall invite by telex or telecopier (in the
form set forth in Exhibit D hereto) Banks to bid, on the terms and
conditions of this Agreement, to make Competitive Bid Loans pursuant to
such Competitive Bid Request.
(b) Each Bank may, in its sole discretion, make one or more
Competitive Bids to Borrower responsive to each Competitive Bid
Request. Each Competitive Bid by a Bank must be received by
Administrative Agent via telex or telecopier, in the form of
Exhibit E hereto, not later than 10:00 a.m. (Dallas, Texas time),
two (2) Domestic Business Days (in the case of any request for
Competitive Bid Fixed Rate Loans) or four (4) Eurodollar Business
Days (in the case of any request for Competitive Bid Eurodollar
Loans) before the date specified for a proposed Competitive Bid
Borrowing. Competitive Bids that do not conform substantially to
the format of Exhibit E may be rejected by Administrative Agent
after conferring with, and upon the instruction of Borrower, and
Administrative Agent shall notify the applicable Bank of such
rejection as soon as practicable. Each Competitive Bid shall refer
to this Agreement and (x) specify the principal amount (which shall
be in a minimum principal amount of $1,000,000 and in an integral
multiple of $100,000 and which, subject to the conditions set forth
in Section 2.1, may equal the entire principal amount of the
Competitive Bid Borrowing requested by Borrower) of the Competitive
Bid Loan that Bank is willing to make to Borrower, (y) specify the
Competitive Bid Fixed Rate or Competitive Bid Eurodollar Margin at
which such Bank is prepared to make the Competitive Bid Loan and
(z) confirm the Interest Period with respect thereto specified by
Borrower in its Competitive Bid Request. If any Bank shall elect
not to make a Competitive Bid, such Bank shall so notify
Administrative Agent via telex not later than 10:00 a.m. (Dallas,
Texas time), two (2) Domestic Business Days (in the case of any
request for Competitive Bid Fixed Rate Loans) or four (4)
Eurodollar Business Days (in the case of any request for
Competitive Bid Eurodollar Loans) before the date specified for a
proposed Competitive Bid Borrowing; provided, however, that failure
by any Bank to give such notice shall not cause such Bank to be
obligated to make any Competitive Bid Loan as part of such
Competitive Bid Borrowing. A Competitive Bid submitted by a Bank
pursuant to this paragraph (b) shall be irrevocable.
(c) Administrative Agent shall promptly notify Borrower and
each Bank by telex or telecopier of all the Competitive Bids made,
the Competitive Bid Fixed Rate or Competitive Bid Eurodollar Margin
and the principal amount of each Competitive Bid Loan in respect of
which a Competitive Bid was made and the identity of Bank that made
each bid. Administrative Agent shall send a copy of all
Competitive Bids to Borrower and each Bank for their records as
soon as practicable after completion of the bidding process set
forth in this Section 2.2.1.
(d) Borrower may in its sole and absolute discretion, subject
only to the provisions of this Section 2.2.1(d), accept or reject
any Competitive Bid referred to in paragraph (c) above; provided,
however, that the aggregate amount of the Competitive Bids so
accepted by Borrower may not exceed the principal amount of the
Competitive Bid Borrowing requested by Borrower. Borrower shall
notify Administrative Agent by telex or telecopier whether and to
what extent it has decided to accept or reject any or all of the
bids referred to in paragraph (c) above, not later than 10:00 a.m.
(Dallas, Texas time), one (1) Domestic Business Day (in the case of
any request for Competitive Bid Fixed Rate Loans) or three (3)
Eurodollar Business Days (in the case of any request for
Competitive Bid Eurodollar Loans) before the date specified for a
proposed Competitive Bid Borrowing; provided, however, that (w) the
failure by Borrower to give such notice
20
shall be deemed to be a rejection of all the bids referred to in
paragraph (c) above, (x) Borrower shall not accept a bid made at a
particular Competitive Bid Fixed Rate or Competitive Bid Eurodollar
Margin if Borrower has decided to reject a bid made at a lower Competitive
Bid Fixed Rate or Competitive Bid Eurodollar Margin, (y) if Borrower shall
accept bids made at a particular Competitive Bid Fixed Rate or Competitive
Bid Eurodollar Margin but shall be restricted by other conditions
hereof from borrowing the principal amount of all Competitive Bid
Loans in respect of which bids at such Competitive Bid Fixed Rate
or Competitive Bid Eurodollar Margin have been made, then Borrower
shall accept a pro rata portion of each bid made at such
Competitive Bid Fixed Rate or Competitive Bid Eurodollar Margin
based as nearly as possible on the respective principal amounts of
Competitive Bid Loans for which such bids were made, and (z) no bid
shall be accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal amount of $1,000,000
and an integral multiple of $100,000. Notwithstanding the
foregoing, if it is necessary for Borrower to accept a pro rata
allocation of the bids made in response to a Competitive Bid
Request (whether pursuant to the events specified in clause (y)
above or otherwise) and the available principal amount of
Competitive Bid Loans to be allocated among Banks is not sufficient
to enable Competitive Bid Loans to be allocated to each Bank in a
minimum principal amount of $1,000,000 and in integral multiples of
$100,000, then Borrower shall select Banks to be allocated such
Competitive Bid Loans and shall round allocations up or down to the
next higher or lower multiple of $100,000 as it shall deem
appropriate. A notice given by Borrower pursuant to this paragraph
(d) shall be irrevocable.
(e) Administrative Agent shall promptly notify each bidding
Bank whether or not its Competitive Bid has been accepted (and if
so, in what amount and at what Competitive Bid Fixed Rate or
Competitive Bid Eurodollar Margin) by telex or telecopier sent by
Administrative Agent, and each successful bidder will thereupon
become bound, subject to the other applicable conditions hereof, to
make the Competitive Bid Loan in respect of which its bid has been
accepted. After completing the notifications referred to in the
immediately preceding sentence, Administrative Agent shall notify
each Bank of the aggregate principal amount of all Competitive Bids
accepted.
(f) No Competitive Bid Borrowing shall be made within five
(5) Business Days of the date of any other Competitive Bid
Borrowing unless Borrower and Administrative Agent shall mutually
agree otherwise.
(g) If Administrative Agent shall at any time have a
Commitment hereunder and shall elect to submit a Competitive Bid in
its capacity as a Bank, it shall submit such bid directly to
Borrower at least one half of an hour earlier than the latest time
at which the other Banks are required to submit their bids to
Administrative Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.2.1 shall be made
in accordance with Section 13.1.
2.2.2. Method of Committed Borrowing. (a) In order to
request Committed Loans, Borrower shall hand deliver, telex or
telecopy to Administrative Agent a duly completed Request for
Committed Loans prior to 12:00 noon (Dallas, Texas time), (i) at
least one (1) Domestic Business Day before the date specified for a
proposed Base Rate Borrowing, and (ii) at least three (3)
Eurodollar Business Days before the date of a
21
proposed Eurodollar Borrowing. Each Request for Committed Loans shall
be substantially in the form of Exhibit F hereto, and shall specify:
(i) the date of such Committed Borrowing, which shall be
a Domestic Business Day in the case of a Committed Borrowing
comprised of Base Rate Loans or a Eurodollar Business Day in
the case of a Committed Borrowing comprised of Eurodollar
Loans;
(ii) the aggregate amount of such Committed Borrowing;
(iii) whether the Loans comprising such Committed
Borrowing are to be Base Rate Loans or Eurodollar Loans; and
(iv) in the case of a Committed Borrowing comprised of
Eurodollar Loans the duration of the Interest Period
applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Request for Committed Loans,
Administrative Agent shall promptly notify each Bank of the
contents thereof and the amount of the Committed Borrowing to be
loaned by such Bank pursuant thereto, and such Request for
Committed Loans shall not thereafter be revocable by Borrower.
(c) Not later than 12:00 noon (Dallas, Texas time) on the
date of each Committed Borrowing, each Bank shall (except as
provided in Section 2.2.2(d)) make available that portion of such
Committed Borrowing allocated to such Bank pursuant to Section
2.1(a) in Federal or other funds immediately available in Dallas,
Texas to Administrative Agent at its address referred to in Section
13.1. Notwithstanding the foregoing, if Borrower delivers to
Administrative Agent a Request for Committed Loans prior to 10:00
a.m. (Dallas, Texas time) on a Domestic Business Day requesting a
Committed Borrowing comprised of Base Rate Loans on such day, each
Bank shall use its best efforts to make available to Administrative
Agent that portion of such Committed Borrowing allocated to such
Bank pursuant to Section 2.1 by 1:00 p.m. (Dallas, Texas time) on
the same day. Unless Administrative Agent determines that any
applicable condition specified in Section 6.2 has not been
satisfied, Administrative Agent will make the funds so received
from Banks available to Borrower at Administrative Agent's
aforesaid address.
(d) If any Bank makes a new Committed Loan hereunder on a day
on which Borrower is to repay all or any part of an outstanding
Loan from such Bank, such Bank shall apply the proceeds of its new
Committed Loan to make such repayment and only an amount equal to
the difference (if any) between the amount being borrowed and the
amount being repaid shall be made available by such Bank to
Administrative Agent or remitted by Borrower to Administrative
Agent, as the case may be.
SECTION 2.3. Method of Obtaining Letters of Credit. (a)
Borrower shall give Administrative Agent notice (a "Request for
Letter of Credit") prior to 12:00 noon (Dallas, Texas time) at
least three (3) Domestic Business Days before the date Borrower
requests that a Letter of Credit be issued. Each Request for
Letter of Credit shall be substantially in the form of Exhibit G
attached hereto and shall be accompanied by the executed, complete
letter of credit application and agreement referenced in Section 2.1(b).
22
(b) Upon receipt of a Request for Letter of Credit,
Administrative Agent shall promptly notify each Bank of the
contents thereof and of the material provisions of the related
letter of credit application and agreement. Administrative Agent
shall provide a copy of the Request for Letter of Credit and the
original counterpart of the letter of credit application and
agreement to the proposed Issuer.
(c) Provided that the proposed Issuer agrees to issue the
requested Letter of Credit, and provided further that
Administrative Agent has not determined that a condition to such
issuance referred to in Section 6.2 has not been satisfied, not
later than 12:00 noon (Dallas, Texas time) on the date Borrower
requests that such Letter of Credit be issued, the Issuer shall
issue such Letter of Credit and deliver the same to the beneficiary
thereof and shall promptly thereafter provide notice thereof to
each other Bank.
SECTION 2.4. Notes. The Committed Loans of each Bank shall
be evidenced by a single Committed Note payable to the order of
such Bank in an amount equal to such Bank's Commitment. The
Competitive Bid Loans of each Bank shall be evidenced by a single
Competitive Bid Note payable to the order of such Bank in an amount
equal to the Total Commitment.
SECTION 2.5. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal balance thereof at a
rate per annum equal to the sum of the Applicable Margin plus the
Base Rate in effect from day to day, each change in the Base Rate
to be effective without notice to Borrower on the effective date of
each such change, provided that in no event shall the rate charged
hereunder or under the Notes exceed the Maximum Lawful Rate.
Interest on each Base Rate Loan shall be payable as it accrues on
each Quarterly Date.
(b) Each Committed Eurodollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin plus the applicable Adjusted Eurodollar Rate;
provided that in no event shall the rate charged hereunder or under
the Notes exceed the Maximum Lawful Rate. Interest on each
Eurodollar Loan having an Interest Period of one, two or three
months shall be payable on the last day of the Interest Period
applicable thereto. Interest on each Committed Eurodollar Loan
having an Interest Period of six, nine, or twelve months, shall be
payable on the last day of the Interest Period applicable thereto
and on each Quarterly Date during such Interest Period.
(c) Each Competitive Bid Fixed Rate Loan shall bear interest
at a rate per annum equal to the fixed rate of interest offered by
the Bank making such Competitive Bid Fixed Rate Loan in such Bank's
Competitive Bid and accepted by Borrower pursuant to Section 2.2.1;
provided, that in no event shall the rate charged hereunder or
under the Notes exceed the Maximum Lawful Rate. Interest on each
Competitive Bid Fixed Rate Loan shall be payable on the last day of
the Interest Period applicable thereto.
(d) Each Competitive Bid Eurodollar Loan shall bear interest
at a rate per annum equal to the sum of (i) the Competitive Bid
Eurodollar Margin offered by the Bank making such Competitive Bid
Eurodollar Loan in such Bank's Competitive Bid and accepted by
Borrower pursuant to Section 2.2.1, plus (ii) the applicable
Adjusted Eurodollar Rate; provided, that in no event shall the rate
charged hereunder or under the
23
Notes exceed the Maximum Lawful Rate. Interest on each Competitive Bid
Eurodollar Loan shall be payable on the last day of the Interest Period
applicable thereto.
(e) With respect to Committed Loans and Competitive Bid
Eurodollar Loans, Administrative Agent shall determine each
interest rate applicable thereto in accordance with the terms
hereof (and in accordance with the applicable Competitive Bids for
Competitive Bid Eurodollar Loans accepted by Borrower).
Administrative Agent shall promptly notify Borrower and Banks by
telex, telescope or cable of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of
manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of
interest calculated with reference to the Base Rate, any
Competitive Bid Fixed Rate accepted by Borrower or the Adjusted
Eurodollar Rate hereunder, if applicable, (the "contract rate")
is limited to the Maximum Lawful Rate, any subsequent reductions in
the contract rate shall not reduce the rate of interest on the
affected Loan below the Maximum Lawful Rate until the total amount
of interest accrued equals the amount of interest which would have
accrued if the contract rate had at all times been in effect. In
the event that at maturity (stated or by acceleration), or at final
payment of any Note, the total amount of interest paid or accrued
on such Note is less than the amount of interest which would have
accrued if the contract rate had at all times been in effect with
respect thereto, then at such time, to the extent permitted by law,
Borrower shall pay to the holder of such Note an amount equal to
the difference between (i) the lesser of the amount of interest
which would have accrued if the contract rate had at all times been
in effect and the amount of interest which would have accrued if
the Maximum Lawful Rate had at all times been in effect, and (ii)
the amount of interest actually paid on such Note.
SECTION 2.6. [Intentionally Deleted].
SECTION 2.7. Voluntary Prepayments. Borrower may, subject to
Section 5.1 and the other provisions of this Agreement, upon three
(3) Business Days advance notice to Administrative Agent, prepay
the principal of Committed Loans then outstanding in whole or in
part. Any partial prepayment shall be in a minimum amount of
$500,000 and shall be in an integral multiple of $100,000.
Voluntary prepayments of Competitive Bid Loans are not permitted.
SECTION 2.8. [Intentionally Deleted].
SECTION 2.9. Voluntary Reduction of Commitments and
Prepayment of Loans. Borrower may, by notice to Administrative
Agent five (5) Domestic Business Days prior to the effective date
of any such reduction, reduce the Total Commitment (and thereby
reduce the Commitment of each Bank ratably) in amounts not less
than $5,000,000 or any larger multiple of $5,000,000. On the
effective date of any such reduction, Borrower shall, to the extent
required as a result of such reduction, make a principal payment on
the Loans in an amount sufficient to cause the principal balance of
all Loans then outstanding to be equal to or less than the Total
Commitment as thereby reduced. Notwithstanding the foregoing,
Borrower shall not be permitted to voluntarily reduce the Total
Commitment to an amount less than the sum of (i) the aggregate
Letter of Credit Exposure of all Banks, plus (ii) the aggregate
outstanding principal balance of all Competitive Bid Loans.
24
SECTION 2.10. Termination of Commitments; Final Maturity;
Maturity of Committed Eurodollar Loans and Competitive Bid Loans.
The Total Commitment (and the Commitment of each Bank) shall
terminate, and the entire outstanding principal balance of all
Loans, all interest accrued thereon, all accrued but unpaid fees
hereunder and all other outstanding Obligations shall be due and
payable in full on the Termination Date. All Eurodollar Loans and
Competitive Bid Loans shall be due and payable on the expiration of
the Interest Period applicable thereto; provided, that, to the
extent permitted by Section 2.1(a) and 6.2, such Loans may be
refinanced on such date pursuant to a Refunding Borrowing.
SECTION 2.11. Application of Payments. Each repayment
pursuant to Sections 2.7, 2.9, 2.10, 3.4 or 4.5 shall be made
together with accrued interest on the amount repaid to the date of
payment, and shall be applied to payment of the Loans of Banks in
accordance with Section 4.2 and the other provisions of this
Agreement.
SECTION 2.12. Commitment Fee. On the Termination Date, on
each Quarterly Date prior to the Termination Date, and, in the
event the Commitments are terminated in their entirety prior to the
Termination Date, on the date of such termination, Borrower shall
pay to Administrative Agent, for the ratable benefit of each Bank
based on each Bank's Commitment Percentage, a commitment fee equal
to the Commitment Fee Percentage (applied on a per annum basis and
computed on the basis of actual days elapsed and as if each
calendar year consisted of 365 days) of the remainder of the
following for each day during the Fiscal Quarter (or portion
thereof) ending on such date (a) the Borrowing Base in effect on
such day, minus (b) the sum of (i) the aggregate outstanding
principal balance of all Committed Loans on such day, plus (ii) the
aggregate outstanding Letter of Credit Exposure on such day.
SECTION 2.13. Agency Fee. Borrower shall pay to
Administrative Agent and its Affiliates such other fees and amounts
as Borrower shall be required to pay to Administrative Agent and
its Affiliates from time to time pursuant to any separate agreement
between Borrower and Administrative Agent or such Affiliates. Such
fees and other amounts shall be retained by Administrative Agent
and its Affiliates, and no Bank (other than Administrative Agent)
shall have any interest therein.
SECTION 2.14. Increases in the Total Commitment. Borrower
shall have the option, at any time, by written notice (an
"Increase Request") to Administrative Agent and each Bank of
requesting an increase in the Total Commitment to an amount up to
$200,000,000. Any such increase shall require the approval of
Required Banks, and no such increase shall have the effect of
increasing the Commitment of any Bank without the prior written
consent of such Bank which consent may be withheld by each Bank in
its sole and absolute discretion. In the event Required Banks fail
to notify Borrower of their approval of any increase in the Total
Commitment within 15 Domestic Business Days following the date of
the Increase Request, such increase will be deemed to be denied.
In the event any of the Banks elect, in their sole and absolute
discretion, to increase their respective Commitments, such Banks
(individually, an "Electing Bank", and collectively, the
"Electing Banks") shall notify (an "Increase Notice")
Administrative Agent and Borrower of such election within 15
Domestic Business Days following the date of Borrower's Increase
Request. If the aggregate amount by which the Banks elect to
increase their Commitments exceeds the amount of the increase in
the Total Commitment requested by Borrower, the amount of the
increase in the Total Commitment shall be allocated to increases in
the Commitments of the Electing Banks in such manner as
25
Administrative Agent and Borrower shall determine as specified in a
written notice from Administrative Agent to all Banks; provided,
that in no event shall the Commitment of any Electing Bank be
increased by an amount greater than the amount specified by such
Electing Bank in its Increase Notice. In the event Banks deliver
Increase Notices and the aggregate amount of the increase in the
Commitments specified therein is less than or equal to the increase
in the Total Commitment requested by Borrower, each Electing Bank's
Commitment shall be increased by the amount specified in its
Increase Notice. In the event no Banks deliver Increase Notices or
the aggregate amount of the increase in the Commitments of the
Electing Banks specified in Increase Notices is less than or equal
to the increase in the Total Commitment requested by Borrower,
unless Required Banks have denied Borrower's request for an
increase in the Total Commitment, Borrower shall have the right to
cause one or more other financial institutions selected by Borrower
and approved by Administrative Agent, such approval to not be
unreasonably withheld, to become parties to this Agreement as Banks
("New Banks") and the Borrower and such New Banks shall execute
such documentation as the Administrative Agent shall specify to
evidence each New Bank's Commitment and its status as a Bank
hereunder; provided, that the aggregate Commitments of the New
Banks shall not exceed the difference between (a) the amount of the
increase in the Total Commitment requested by Borrower in the
related Increase Request, and (b) the amount of such requested
increase which was satisfied by the existing Banks in the manner
set forth above. Simultaneously with any increase in the Total
Commitment contemplated by this Section 2.14, (w) the Commitment
Percentages of each Bank shall be automatically adjusted to the
decimal, expressed as a percentage, determined by dividing the
amount of each Bank's Commitment (as then increased, if applicable)
by the amount of the Total Commitment as then increased, (x)
Borrower shall execute and deliver to each Bank which has increased
its Commitment a new Note payable to such Bank in the amount of its
Commitment as increased thereby, (y) Administrative Agent, on
behalf of all Banks, and Borrower, shall enter into such conforming
amendments to this Agreement and the other Loan Papers as
Administrative Agent shall deem necessary or appropriate to reflect
the increase in the Total Commitment contemplated thereby (and each
Bank hereby authorizes Administrative Agent to enter into any such
conforming amendments on its behalf, each of which shall be
enforceable by and against each Bank to the same extent as if
executed by such Bank), and (z) Borrower shall deliver to
Administrative Agent such certificates of officers of Borrower and
of Governmental Authorities, resolutions of the Board of Directors
of Borrower and other documents and instruments, including, without
limitation, opinions of counsel, as Administrative Agent shall
reasonably require to evidence the corporate existence of Borrower,
the due authorization of the increase in the Commitments and the
Total Commitment, the due authorization, execution and delivery of
any documents related to such increase (including any Addendum, new
Notes or conforming amendments contemplated by this Section 2.14)
and such other matters relating to such increase as Administrative
Agent shall reasonably require. No increase in the Total
Commitment shall result in any increase in the Borrowing Base
unless the Banks shall simultaneously approve an increase in the
Borrowing Base in the manner specified in Article III hereof.
ARTICLE III
BORROWING BASE
SECTION 3.1. Reserve Report; Borrowing Base as of the Closing
Date; Proposed Borrowing Base. The Borrowing Base as of the
Closing Date shall be $150,000,000.00. As soon as available and in
any event by March 1 of each year, Borrower shall (a) make or
26
cause to be made available to Administrative Agent and each Bank for its
review and inspection at Borrower's offices in Xxxx, California and
at the offices of the Approved Petroleum Engineer (or at such other
locations as Administrative Agent, the Borrower and the Banks may
mutually agree) a Reserve Report prepared as of the immediately
preceding December 31, and (b) deliver to Administrative Agent and
each Bank a Reserve Summary and a Reserve Engineer's Letter
prepared with respect to such Reserve Report. On or before April 1
of each year (or if such day is not a Domestic Business Day, on or
before the Domestic Business Day immediately preceding April 1 (or
on such other Domestic Business Day on or around April 1 as
Administrative Agent, Borrower and Banks shall mutually agree),
Borrower shall make available in Dallas, Texas (or at such other
locations as Administrative Agent, the Borrower and the Banks may
mutually agree) the appropriate representatives of the Approved
Petroleum Engineer and Borrower's in house engineering staff for a
meeting with the engineering staff of each Bank to review the data
contained in the Reserve Report and such other geologic,
geophysical and other information regarding Borrower's Mineral
Interests as each Bank shall request. Simultaneously with the
delivery to Administrative Agent and each Bank of each Reserve
Summary and Reserve Engineer's Letter commencing with the Reserve
Summary and Reserve Engineer's Letter to be delivered on or before
March 1, 2000, Borrower shall notify each Bank of the amount of the
Borrowing Base which Borrower requests becomes effective on the
next April 1 (or such date promptly following April 1 as Required
Banks shall elect).
SECTION 3.2. Scheduled Redeterminations of the Borrowing
Base; Procedures and Standards. Based in part on the Reserve
Report made available to Banks pursuant to Section 3.1, Banks shall
redetermine the Borrowing Base on or prior to May 1 of each
calendar year (or such date promptly thereafter as Required Banks
shall elect). Any Borrowing Base which becomes effective as a
result of any Redetermination of the Borrowing Base shall be
subject to the following restrictions: (a) such Borrowing Base
shall not exceed the Borrowing Base requested by Borrower pursuant
to Sections 3.1 or 3.3 (as applicable), (b) such Borrowing Base
shall not exceed the Total Commitment then in effect, (c) to the
extent such Borrowing Base represents an increase from the
Borrowing Base in effect prior to such Redetermination, such
Borrowing Base shall be approved by all Banks, and (d) any
Borrowing Base which represents a decrease in the Borrowing Base in
effect prior to such Redetermination shall be approved by Required
Banks. Subject to Banks' consistent application of their
respective standards for similar credits (which may vary from Bank
to Bank) each Redetermination shall be made by Banks in their sole
discretion. Without limiting such discretion, Borrower
acknowledges and agrees that Banks (i) may make such assumptions
regarding appropriate existing and projected pricing for
hydrocarbons as they deem appropriate in their sole discretion,
(ii) may make such assumptions regarding projected rates and
quantities of future production of hydrocarbons from the Borrowing
Base Properties as they deem appropriate in their sole discretion,
(iii) may consider the projected cash requirements of Borrower,
(iv) are not required to consider any asset other than Borrowing
Base Properties, and (v) may make such other assumptions,
considerations and exclusions as Banks deem appropriate in the
exercise of their sole discretion. Promptly following any
Redetermination of the Borrowing Base, Administrative Agent shall
notify Borrower of the amount of the Borrowing Base as
redetermined, which Borrowing Base shall be effective as of the
date of such notice, and shall remain in effect for all purposes of
this Agreement until the next Scheduled or Special Redetermination.
27
SECTION 3.3 Special Redetermination. (a) In addition to
Scheduled Redeterminations, Required Banks, in their sole
discretion, shall be permitted to make a Special Redetermination of
the Borrowing Base once in each Fiscal Year. Any request by
Required Banks pursuant to this Section 3.3(a) shall be submitted
to Administrative Agent and Borrower.
(b) In addition to Scheduled Redeterminations, Borrower shall
be permitted to request a Special Redetermination of the Borrowing
Base once in each Fiscal Year. Such request shall be submitted to
Administrative Agent and Required Banks and at the time of such
request Borrower shall (i) make, or cause to be made, a Reserve
Report available to Administrative Agent and the Banks for their
review and inspection at Borrower's offices in Xxxx, California,
and at the offices of the Approved Petroleum Engineer, and (ii)
deliver to Administrative Agent and each Bank a Reserve Summary and
Reserve Engineer's Letter prepared with respect to such Reserve
Report. Together with such request, Borrower shall also notify
each Bank of the Borrowing Base requested by Borrower in connection
with such Special Redetermination;
(c) Any Special Redetermination shall be made by Banks in
accordance with the procedures and standards set forth in Section
3.2; provided, that, no Reserve Report, Reserve Summary or Reserve
Engineer's Letter will be required to be made available or
delivered to Banks in connection with any Special Determination
requested by Required Banks pursuant to clause (a) above.
SECTION 3.4. Borrowing Base Deficiency. If a Borrowing Base
Deficiency exists after giving effect to any Redetermination,
Borrower shall be obligated to eliminate such Borrowing Base
Deficiency over a period not to exceed six (6) months from the
effective date of such Redetermination by making six (6) mandatory,
equal, consecutive, monthly payments of principal on the Loans,
each of which shall be in the amount of one sixth (1/6th) of such
Borrowing Base Deficiency. The first of such six (6) payments
shall be due on the thirtieth (30th) day following the effective
date of each such Redetermination and each subsequent payment shall
be due on the same day of each month thereafter (or if there is no
corresponding day of any subsequent month, then on the last day of
such month). If a Borrowing Base Deficiency cannot be eliminated
pursuant to this Section 3.4, by prepayment of all outstanding
Loans in full (as a result of outstanding Letter of Credit
Exposure), simultaneously with each principal payment required
pursuant to this Section 3.4, Borrower shall deposit cash or U.S.
Treasury securities with a maturity of one year or less with
Administrative Agent, to be held by Administrative Agent to secure
outstanding Letter of Credit Exposure in the manner contemplated by
Section 2.1(b), in an amount at least equal to one sixth (1/6th) of
the aggregate amount of cash or Treasury securities which must be
deposited with Administrative Agent to fully eliminate such
Borrowing Base Deficiency.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. Delivery and Endorsement of Notes.
Simultaneously with the execution of this Agreement, Administrative
Agent shall deliver to each Bank the Notes payable to such Bank
referenced in Section 6.1(a). Each Bank may endorse (and prior to
any transfer of its Note shall endorse) on the schedules forming a
part thereof appropriate notations to evidence the date and amount
of each Loan made by it, the Interest Period
28
applicable thereto, and the date and amount of each payment of principal
made by Borrower with respect thereto, provided that the failure by any
Bank to so endorse its Note shall not affect the liability of
Borrower for the repayment of all amounts outstanding under such
Note together with interest thereon. Each Bank is hereby
irrevocably authorized by Borrower to endorse its Note and to
attach to and make a part of any Note a continuation of any such
schedule as required.
SECTION 4.2. General Provisions as to Payments. (a)
Borrower shall make each payment of principal of, and interest on,
the Loans and all fees payable hereunder shall be paid not later
than 12:00 noon (Dallas, Texas time) on the date when due, in
Federal or other funds immediately available in Dallas, Texas, to
Administrative Agent at its address referred to in Section 13.1.
Administrative Agent will promptly (and if such payment is received
by Administrative Agent by 10:00 a.m., and otherwise if reasonably
possible, on the same Domestic Business Day) distribute to each
Bank its share (as determined in accordance with the other
provisions of this Agreement) of each such payment received by
Administrative Agent for the account of Banks. Whenever any
payment of principal of, or interest on, Base Rate Loans or
Competitive Bid Fixed Rate Loans or of fees shall be due on a day
which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day
(subject to the definition of Interest Period). Whenever any
payment of principal of, or interest on, the Eurodollar Loans shall
be due on a day which is not a Eurodollar Business Day, the date
for payment thereof shall be extended to the next succeeding
Eurodollar Business Day (subject to the definition of Interest
Period). If the date for any payment of principal is extended by
operation of Law or otherwise, interest thereon shall be payable
for such extended time. Borrower hereby authorizes Administrative
Agent to charge from time to time against Borrower's accounts with
Administrative Agent any amount then due.
(b) Prior to the occurrence of an Event of Default, all
principal payments received by Banks on Competitive Bid Loans shall
be applied to the Competitive Bid Loans then due, and all principal
payments received by Banks in respect of Committed Loans shall be
applied first, to Eurodollar Loans with Interest Periods ending on
the date of such payment, then to Base Rate Loans, then to
Eurodollar Loans next maturing until such principal payment is
fully applied with such adjustments in such order of payment as
Administrative Agent shall specify in order that each Bank receives
its ratable share of each such payment.
(c) After the occurrence of an Event of Default, all amounts
collected or received by Administrative Agent or any Bank in
respect of the Obligations shall be applied first to the payment of
all proper costs incurred by Administrative Agent in connection
with the collection thereof (including reasonable expenses and
disbursements of Administrative Agent), second to the payment of
all proper costs incurred by Banks in connection with the
collection thereof (including reasonable expenses and disbursements
of Banks), third to the reimbursement of any advances made by Banks
to effect performance of any unperformed covenants of Borrower
under any of the Loan Papers, fourth to the payment of any unpaid
agency fees required pursuant to Section 2.13, fifth to the payment
of any unpaid fees required pursuant to Sections 2.1(b), and 2.12
and sixth, to payment of the Loans to each Bank in accordance with
each Bank's Sharing Percentage.
SECTION 4.3. Computation of Interest. Interest payable on
the Loans hereunder shall be computed based on the number of actual
days elapsed assuming that each calendar year consisted of 360
days.
29
SECTION 4.4. Overdue Principal and Interest. Any overdue
principal of and, to the extent permitted by Law, overdue interest
on any Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the lesser of (a) the sum
of three percent (3%) plus the Base Rate, or (b) the Maximum Lawful
Rate.
SECTION 4.5. Capital Adequacy. Notwithstanding any provision
contained herein to the contrary, if, with respect to all or any
portion of any Commitment, any Law is hereafter promulgated or
adopted regarding capital adequacy, or any change is hereafter made
or adopted with respect to any existing Law regarding capital
adequacy, or any ruling or interpretation regarding capital
adequacy is hereafter made by any Governmental Authority or central
bank or other comparable authority, or any Bank complies with any
request or directive hereafter made by any Governmental Authority
or central bank or other comparable authority regarding capital
adequacy (whether or not having the force of Law), and the effect
of any of the foregoing is to cause a reduction in the rate of
return on such Bank's capital as a consequence of such Bank's
obligations hereunder to a level below that which such Bank
otherwise could have achieved (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by
such Bank to be material (and such Bank may, in determining such
amount, utilize such assumptions and allocations of costs and
expenses as such Bank shall deem reasonable and may use any
reasonable averaging or attribution method), then, such Bank shall
notify Borrower and Administrative Agent and deliver to Borrower
and Administrative Agent a certificate setting forth in reasonable
detail (a) the Law (or change therein or change in interpretation
thereof) giving rise to such request for compensation, and (b) the
calculation of the amount necessary to compensate such Bank
therefor, which certificate shall constitute prima facie evidence
of the contents thereof. Borrower shall promptly pay such amount
to such Bank; provided, however, that no Bank shall make any
request for compensation under this Section 4.5, and Borrower shall
not be obligated to compensate any Bank under this Section 4.5 for
any reduction on the rate of return on such Bank's capital for any
period prior to the 180th day prior to the date of any notice
requesting compensation delivered pursuant to this Section 4.5.
SECTION 4.6. Taxes. All amounts payable by Borrower under
the Loan Papers (whether principal, interest, fees, expenses, or
otherwise) to or for the account of each Bank shall be paid in
full, free of any deductions or withholdings for or on account of
any Taxes. If Borrower is prohibited by Law from paying any such
amount free of any such deductions and withholdings, then (at the
same time and in the same manner that such original amount is
otherwise due under the Loan Papers) Borrower shall pay to or for
the account of such Bank such additional amount as may be necessary
in order that the actual amount received by such Bank after
deduction and/or withholding (and after payment of any additional
Taxes due as a consequence of the payment of such additional
amount, and so on) will equal the amount such Bank would have
received if such deduction or withholding were not made.
SECTION 4.7. Limitation on Number of Eurodollar Loans and
Competitive Bid Loans. Unless otherwise agreed by Administrative
Agent with the consent of the Required Banks, there may be no more
than an aggregate of fifteen (15) Committed Eurodollar Loans and
Competitive Bid Loans outstanding at any time.
30
SECTION 4.8. Foreign Lenders, Participants, and Assignees.
Each Bank, Participant (by accepting a participation interest under
this Agreement), and Assignee (by executing an Assignment and
Assumption Agreement) that is not organized under the laws of the
United States of America or one of its states (a) represents to
each Administrative Agent and Borrower that (i) no Taxes are
required to be withheld by Administrative Agent or Borrower with
respect to any payments to be made to it in respect of the
Obligations and (ii) it has furnished to Administrative Agent and
Borrower two duly completed copies of either U.S. Internal Revenue
Service Form 4224, Form 1001, Form W-8, or other form acceptable to
Administrative Agent that entitles it to exemption from U.S.
federal withholding Tax on all interest payments under the Loan
Papers, and (b) covenants to (i) provide Administrative Agent and
Borrower a new Form 4224, Form 1001, Form W-8, or other form
acceptable to Administrative Agent upon the expiration or
obsolescence of any previously delivered form according to
applicable laws and regulations, duly executed and completed by it,
and (ii) comply from time to time with all applicable laws and
regulations with regard to the withholding Tax exemption. If any
of the foregoing is not true or the applicable forms are not
provided, then Borrower and Administrative Agent (without
duplication) may deduct and withhold from interest payments under
the Loan Papers any United States federal-income Tax at the maximum
rate under the Code, and Borrower shall not have to pay such
withheld funds to the applicable Bank, Participant or Assignee to
satisfy Section 4.6 hereof.
SECTION 4.9. Replacement of a Bank. If any Bank has
requested compensation or reimbursement in accordance with the
terms of Sections 4.5, 4.6 or 5.4 hereof or any Bank has notified
Administrative Agent and Borrower that its obligations to make
Eurodollar Loans has been suspended pursuant to Section 5.3 hereof,
and (a) such request or notification is not the result of any
uniform changes in the statutes or regulations for capital adequacy
or eurodollar deposits generally, (b) there exists no Default or
Event of Default hereunder, and (c) the Borrower and such Bank are
unable to reach a written agreement regarding such request or
suspension within 30 days following written notice by such Bank to
the Borrower and Administrative Agent of such request or
suspension, then after the expiration of 30 days following the
delivery of the notice under Sections 4.5, 4.6, 5.3 or 5.4,
Borrower may replace such Bank in whole with an Assignee reasonably
acceptable to Administrative Agent pursuant to an Assignment and
Assumption Agreement in accordance with Section 13.9 hereof. Until
such time as any Bank is replaced by Borrower, the Borrower shall
reimburse or compensate such Bank in accordance with the terms of
Sections 4.5, 4.6, or 5.4, and on date that it is so replaced such
Bank shall be paid (such payment to be made by either Borrower
and/or the Assignee) in full all principal, interest, fees and
other amounts owing to such Bank through the effective date of
replacement plus an amount equal to the amount, if any, that would
have been due to such Bank under Section 5.1 had all of such Bank's
Loans been paid in full by Borrower on such date of replacement.
ARTICLE V
SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS
AND LETTERS OF CREDIT
SECTION 5.1. Funding Losses. If Borrower makes any payment
of principal with respect to any Committed Eurodollar Loan or
Competitive Bid Loan (whether pursuant to Sections 2.7, 2.9, 2.10,
3.4, 11.1, the remaining provisions of this Article V or as a
voluntary or mandatory prepayment or otherwise) on any day other
than the last day of an
31
Interest Period applicable thereto, or if Borrower fails to borrow
any Committed Eurodollar Loan or Competitive Bid Loan after notice has
been given to any Bank in accordance with Section 2.2, Borrower shall
reimburse each Bank on demand for any resulting loss or expense incurred
by it, including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, or any loss arising
from the reemployment of funds at rates lower than the cost to such Bank of
such funds and related costs, which in the case of the payment or
prepayment prior to the end of the Interest Period for any
Committed Eurodollar Loan or Competitive Bid Loan shall include the
amount, if any, by which (i) the interest which such Bank would
have received, absent such payment or prepayment for the applicable
Interest Period exceeds (ii) the interest which such Bank would
receive if the amount of such Committed Eurodollar Loan or
Competitive Bid Loan were deposited, loaned, or placed by such Bank
in the interbank eurodollar market on the date of such payment or
prepayment for the remainder of the applicable Interest Period.
Such Bank shall promptly deliver to Borrower and Administrative
Agent a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 5.2. Basis for Determining Interest Rate Applicable
to Eurodollar Loans Inadequate. If on or prior to the first day of
any Interest Period the Required Banks advise Administrative Agent
that the Adjusted Eurodollar Rate as determined by Administrative
Agent will not adequately and fairly reflect the cost to such Banks
of funding their Eurodollar Loans for such Interest Period,
Administrative Agent shall give notice thereof to Borrower and
Banks, whereupon the obligations of Banks to make Eurodollar Loans
shall be suspended until Administrative Agent notifies Borrower
that the circumstances giving rise to such suspension no longer
exist. Unless Borrower notifies Administrative Agent at least two
(2) Domestic Business Days before the date of any Eurodollar
Borrowing for which a Request for Committed Loans or a Competitive
Bid Request requesting Competitive Bid Eurodollar Loans previously
been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Loan.
SECTION 5.3. Illegality of Eurodollar Loans. (a) If, after
the date of this Agreement, the adoption of any Law or any change
therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by any Bank (or its Eurodollar Lending Office) with
any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make
it unlawful or impossible for any Bank (or its Eurodollar Lending
Office) to make, maintain or fund its Eurodollar Loans and such
Bank shall so notify Administrative Agent, Administrative Agent
shall forthwith give notice thereof to the other Banks and
Borrower. Until such Bank notifies Borrower and Administrative
Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Eurodollar Loans
shall be suspended. Before giving any notice to Administrative
Agent pursuant to this Section 5.3, such Bank shall designate a
different Eurodollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and
fund any of its outstanding Eurodollar Loans to maturity and shall
so specify in such notice, Borrower shall immediately convert the
principal amount of each such Eurodollar Loan to a Base Rate Loan
of an equal principal amount from such Bank (on which interest and
principal shall be payable contemporaneously with the unaffected
Eurodollar Loans made by the other Banks).
32
(b) No Bank shall be required to make any Loan hereunder if
the making of such Loan would be in violation of any Law applicable
to such Bank.
SECTION 5.4. Increased Costs and Reduction of Return. If,
after the date hereof, the adoption of any applicable Law or any
change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank
or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending
Office) with any request or directive (whether or not having the
force of Law) of any such authority, central bank or comparable
agency:
(a) shall subject any Bank (or its Lending Office) to any Tax
with respect to its Eurodollar Loans, or its Notes or its
obligation to make Eurodollar Loans or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on its Eurodollar Loans or any other
amounts due under this Agreement in respect of its Eurodollar Loans
or its obligation to make Eurodollar Loans (except for changes in
the rate of Tax on the overall net income of such Bank or its
Lending Office imposed by the jurisdiction in which such Bank's
principal executive office or Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding with respect to any
Eurodollar Loan any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or
for the account of or credit extended by, any Bank's Lending Office
or shall impose on any Bank (or its Lending Office) or the London
interbank market any other condition affecting its Eurodollar
Loans, its Notes, or its obligation to make Eurodollar Loans or its
issuance of or participation in Letters of Credit;
and the result of any of the foregoing is to increase the cost to
such Bank (or its Lending Office) making or maintaining any
Eurodollar Loan or issuing or participating in Letters of Credit,
or to reduce the amount of any sum received or receivable by such
Bank (or its Lending Office) under this Agreement or under its
Notes with respect thereto, by an amount deemed by such Bank to be
material, then, within five (5) days after demand by such Bank
(with a copy to Administrative Agent), Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank
for such increased cost or reduction. Each Bank will promptly
notify Borrower and Administrative Agent of any event of which it
has knowledge, occurring after the date hereof, which will entitle
such Bank to compensation pursuant to this Section 5.4 and will
designate a different Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank claiming compensation under
this Section 5.4 and setting forth the additional amount or amounts
to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 5.5. Alternative Loans Substituted for Affected
Eurodollar Loans. If (a) the obligation of any Bank to make
Eurodollar Loans has been suspended pursuant to Section 5.3 or (b)
any Bank has demanded compensation under Section 5.4 and Borrower
shall, by at least five (5) Eurodollar Business Days prior notice
to such Bank through
33
Administrative Agent, have elected that the provisions of this
Section 5.5 shall apply to such Bank, then, unless and until such
Bank notifies Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Eurodollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the
unaffected Eurodollar Loans of the other Banks), and
(b) after each of its Eurodollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay
such Eurodollar Loans shall be applied to repay its Base Rate
Loans.
SECTION 5.6. Discretion of Banks as to Manner of Funding.
Notwithstanding any provisions of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of all
or any part of its Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually
funded and maintained each Eurodollar Loan during the Interest
Period for such Eurodollar Loan through the purchase of deposits
having a maturity corresponding to the last day of such Interest
Period and bearing an interest rate equal to the Eurodollar Rate
for such Interest Period.
ARTICLE VI
CONDITIONS
SECTION 6.1. Conditions to Initial Borrowing and
Participation in Letter of Credit Exposure. The obligation of each
Bank to make a Loan on the initial Borrowing and to participate in
Letter of Credit Exposure hereunder is subject to the condition
precedent that, on or before the date of such Borrowing or issuance
of such Letter of Credit, Administrative Agent shall have received
the following, in form and substance satisfactory to the Required
Banks:
(a) a Committed Note and a Competitive Bid Note payable to
the order of each Bank, each in the amount of such Bank's
Commitment, duly executed by Borrower, dated the date hereof;
(b) a copy of the Certificate of Incorporation, and all
amendments thereto, of Borrower accompanied by a certificate of the
Secretary of Borrower that such copy is true, correct and complete
on the date hereof;
(c) a copy of the Bylaws, and all amendments thereto, of
Borrower accompanied by a certificate of the Secretary of Borrower
that such copy is true, correct and complete as of the date hereof;
(d) certain certificates and other documents issued by the
appropriate Governmental Authorities of Borrower's state of
incorporation and of each jurisdiction in which Borrower is
qualified to do business, relating to the existence of Borrower and
to the effect that Borrower is in good standing with respect to the
payment of franchise and similar Taxes and is duly qualified to
transact business in such jurisdictions;
34
(e) a certificate of incumbency of all officers of Borrower
who will be authorized to execute or attest to any Loan Paper,
dated the date hereof, executed by the Secretary of Borrower;
(f) copies of resolutions approving the Loan Papers and
authorizing the transactions contemplated by this Agreement and the
other Loan Papers, duly adopted by the Board of Directors of
Borrower accompanied by certificates, dated the date hereof, of the
Secretary of Borrower that such copies are true and correct copies
of resolutions duly adopted at a meeting of or (if permitted by
applicable Law and, if required by such Law, by the Bylaws of
Borrower) by the unanimous written consent of the Board of
Directors of Borrower, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not
been amended, modified, or revoked in any respect, and are in full
force and effect as of the date hereof;
(g) payment of the fees and other amounts due as of the
Closing Date;
(h) an opinion of Nordman, Cormany, Hair & Xxxxxxx, counsel
for Borrower dated the date hereof, favorably opining as to the
enforceability of each of the Loan Papers and otherwise in form and
substance satisfactory to Administrative Agent and Banks;
(i) a certificate signed by an Authorized Officer stating
that (i) the representations and warranties contained in this
Agreement are true and correct in all respects, and (ii) no Default
or Event of Default has occurred and none is in existence;
(j) a Certificate of Ownership Interests signed by an
Authorized Officer of Borrower in the form of Exhibit H attached
hereto; and
(k) such other documents, instruments, agreements and
actions as may reasonably be required by Administrative Agent and
each Bank.
SECTION 6.2. Conditions to Each Borrowing and Participation
in Letter of Credit Exposure. The obligation of each Bank to make
Loans on each Borrowing and to participate in Letter of Credit
Exposure and the obligation of the Issuer to issue any Letter of
Credit hereunder is subject to the satisfaction of each of the
following conditions:
(a) timely receipt by Administrative Agent of a Competitive
Bid Request, a Request for Committed Loans or a Request for a
Letter of Credit (as applicable);
(b) immediately before and after giving effect to such
Borrowing or issuance of such Letter of Credit, no Default or Event
of Default shall have occurred and be continuing and the making of
any Loan in connection with such Borrowing or the issuance of the
requested Letter of Credit (as applicable) shall not cause a
Default or Event of Default;
(c) the representations and warranties of Borrower contained
in this Agreement shall be true and correct on and as of the date
of such Borrowing or issuance of such Letter of Credit (as applicable);
35
(d) the amount of the requested Borrowing or the amount of
the requested Letter of Credit shall not exceed the Availability;
(e) no material adverse change in the business, financial
condition, operations or prospects of Borrower or any of its
Subsidiaries shall have occurred; and
(f) the making of such Loans or the issuance of such Letter
of Credit shall be permitted by applicable Law.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by Borrower on the date of such Borrowing as to the facts
specified in Sections 6.2(b) through (e).
SECTION 6.3. Materiality of Conditions. Each condition
precedent herein is material to the transactions contemplated
herein, and time is of the essence in respect of each thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and
each Bank as follows:
SECTION 7.1. Corporate Existence and Power (Borrower).
Borrower (a) is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, (b)
has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its
businesses as now conducted and as proposed to be conducted, and
(c) is duly qualified to transact business as a foreign corporation
in each jurisdiction where a failure to be so qualified could have
a material adverse effect on the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered
as a whole.
SECTION 7.2. Existence and Power (Subsidiaries). Each
Subsidiary of Borrower (a) is a corporation, limited liability
company or partnership duly incorporated or organized (as
applicable) validly existing and in good standing under the laws of
its state of incorporation or organization (as applicable), (b) has
all corporate, limited liability company or partnership power (as
applicable) and all material governmental licenses, authorizations,
consents and approvals required to carry on its businesses as now
conducted and as proposed to be conducted, and (c) is duly
qualified to transact business as a foreign corporation, foreign
limited liability company or foreign partnership (as applicable) in
each jurisdiction where a failure to be so qualified could have a
material adverse effect on their respective financial condition or
operations.
SECTION 7.3. Corporate and Governmental Authorization:
Contravention. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Papers by Borrower are
within Borrower's corporate powers, when executed will be duly
authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any Governmental Authority and do
not contravene, or constitute a default under, any provision of
applicable Law (including, without limitation, the Margin
Regulations) or of the Certificate of Incorporation or bylaws of
Borrower or of any agreement,
36
judgment, injunction, order, decree or other instrument binding upon
Borrower or any of its Subsidiaries or result in the creation or
imposition of any Lien on any asset of Borrower or any of its Subsidiaries.
SECTION 7.4. Binding Effect. This Agreement constitutes a
valid and binding agreement of Borrower; the Notes and the other
Loan Papers when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of
Borrower; and each Loan Paper is enforceable against Borrower in
accordance with its terms except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting
creditors rights generally, and (ii) the availability of equitable
remedies may be limited by equitable principles of general
applicability.
SECTION 7.5. Financial Information. (a) The most recent
annual audited consolidated balance sheet of Borrower and the
related consolidated statements of operations and cash flows for
the fiscal year then ended, copies of which have been delivered to
each of Banks, fairly present, in conformity with GAAP, the
consolidated financial position of Borrower as of the end of such
fiscal year and its consolidated results of operations and cash
flows for such fiscal year.
(b) The most recent quarterly unaudited consolidated balance
sheet of Borrower delivered to Banks, and the related unaudited
consolidated statements of operations and cash flows for the
portion of Borrower's fiscal year then ended, fairly present, in
conformity with GAAP applied on a basis consistent with the
financial statements referred to in Section 7.5(a), the
consolidated financial position of Borrower as of such date and its
consolidated results of operations and cash flows for such portion
of Borrower's fiscal year.
(c) Except as disclosed in writing to Banks prior to the
execution and delivery of this Agreement, since the date of the
most recent quarterly consolidated balance sheet and consolidated
statements of operations and cash flow delivered to Banks, there
has been no material adverse change in the business, financial
position, results of operations or prospects of Borrower or any of
its Subsidiaries.
SECTION 7.6. Litigation. Except for matters disclosed on
Schedule 7.6 attached hereto, there is no action, suit or
proceeding pending against, or to the knowledge of Borrower,
threatened against or affecting Borrower or any of its Subsidiaries
before any Governmental Authority in which there is a reasonable
possibility of an adverse decision which could materially adversely
affect the business, financial condition, operations or prospects
of Borrower and its Subsidiaries considered as a whole, or which
could in any manner draw into question the validity of the Loan
Papers.
SECTION 7.7. ERISA. Neither Borrower nor any ERISA Affiliate
maintains or contributes to any Plan other than those disclosed to
Administrative Agent in writing. Neither Borrower nor any ERISA
Affiliate maintains or has ever maintained or been obligated to
contribute to any Plan covered by Title IV of ERISA or subject to
the funding requirements of Section 412 of the Code or Section 302
of ERISA, or a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA. Each Plan maintained by Borrower or any ERISA
Affiliate is in compliance in all material respects with the
applicable provisions of ERISA, the Code and any other applicable
Federal or state law, rule or regulation. All returns, reports and
notices required to be filed with any regulatory agency with
respect to any Plan have been filed timely. Neither Borrower nor
any ERISA
37
Affiliate has failed to make any contribution or pay any
amount due or owing as required by the terms of any Plan. There
are no pending or, to the best of Borrower's knowledge, threatened
claims, lawsuits, investigations or actions (other than routine
claims for benefits in the ordinary course) asserted or instituted
against, and neither Borrower nor any ERISA Affiliate has knowledge
of any threatened litigation or claims against, the assets of any
Plan or its related trust or against any fiduciary of a Plan with
respect to the operation of such Plan that are likely to result in
liability of Borrower having a material adverse effect on the
business, financial condition, operations or prospects of Borrower
and its Subsidiaries considered as a whole. Each Plan that is
intended to be "qualified" within the meaning of section 401 (a)
of the Code is, and has been during the period from its adoption to
date, so qualified, both as to form and operation and all necessary
governmental approvals, including a favorable determination as to
the qualification under the Code of such Plan and each amendment
thereto, have been or will be timely obtained. Neither Borrower
nor any ERISA Affiliate has engaged in any prohibited transactions,
within the meaning of section 406 of ERISA or section 4975 of the
Code, in connection with any Plan which would result in liability
of Borrower having a material adverse effect on the business,
financial condition, operations or prospects of Borrower and its
Subsidiaries considered as a whole. Neither Borrower nor any ERISA
Affiliate maintains or contributes to any Plan that provides a
post-employment health benefit, other than a benefit required under
Section 601 of ERISA, or maintains or contributes to a Plan that
provides health benefits that is not fully funded. Neither
Borrower nor any ERISA Affiliate maintains, has established or has
ever participated in a multiple employer welfare benefit
arrangement within the meaning of section 3(40)(A) of ERISA.
SECTION 7.8. Taxes and Filing of Tax Returns. Borrower and
each of its Subsidiaries have filed all material tax returns
required to have been filed and have paid all Taxes shown to be due
and payable on such returns, including interest and penalties, and
all other Taxes which are payable by such party, to the extent the
same have become due and payable, other than Taxes with respect to
which a failure to pay would not have a material adverse effect on
the business, financial condition, operations or prospects of
Borrower and its Subsidiaries considered as a whole. Borrower does
not know of any proposed material Tax assessment against it or any
of its Subsidiaries, and all Tax liabilities of each of Borrower
and its Subsidiaries are adequately provided for. Except as
hereinafter disclosed in writing to Banks, no income tax liability
of Borrower or any of its Subsidiaries has been asserted by the
Internal Revenue Service for Taxes in excess of those already paid
which assertion is reasonably expected to be ultimately resolved in
a manner adverse to Borrower and which, if so resolved, will have a
material adverse effect on the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered
as a whole.
SECTION 7.9. Ownership of Properties Generally. Borrower and
each of its Subsidiaries have good and valid fee simple or
leasehold title to all material properties and assets purported to
be owned by them, including, without limitation, all assets
reflected in the balance sheets referred to in Section 7.5(a) and
(b) and all assets which are used by Borrower and its Subsidiaries
in the operation of their respective businesses, and none of such
properties or assets is subject to any Lien other than Permitted
Encumbrances.
SECTION 7.10. Mineral Properties. Borrower has good,
indefeasible, record title to all Mineral Interests described in
the Reserve Report, free and clear of all Liens except Permitted
Encumbrances. All such Mineral Interests are valid, subsisting,
and in full
38
force and effect, and all rentals, royalties, and other
amounts due and payable in respect thereof have been duly paid.
Without regard to any consent or non-consent provisions of any
joint operating agreement covering any of Borrower's Proved Mineral
Interests, Borrower's share of (a) the costs for each Proved
Mineral Interest described in the Reserve Report is not greater
than the decimal fraction set forth in the Reserve Report, before
and after payout, as the case may be, and described therein by the
respective designations "working interests", "WI", "gross
working interest", "GWI", or similar terms, and (b) production
from, allocated to, or attributed to each such Proved Mineral
Interest is not less than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and
described therein by the designations net revenue interest, NRI, or
similar terms. Each well drilled in respect of each Proved
Producing Mineral Interest described in the Reserve Report (y) is
capable of, and is presently, producing hydrocarbons in
commercially profitable quantities, and Borrower is currently
receiving payments for its share of production, with no funds in
respect of any thereof being presently held in suspense, other than
any such funds being held in suspense pending delivery of
appropriate division orders, and (z) has been drilled, bottomed,
completed, and operated in compliance with all applicable Laws and
no such well which is currently producing hydrocarbons is subject
to any penalty in production by reason of such well having produced
in excess of its allowable production.
SECTION 7.11. [intentionally deleted]
SECTION 7.12. Licenses, Permits, Etc. Borrower and each of
its Subsidiaries possess such valid franchises, certificates of
convenience and necessity, operating rights, licenses, permits,
consents, authorizations, exemptions and orders of Governmental
Authorities, as are necessary to carry on their respective
businesses as now conducted, except to the extent a failure to
obtain any such item would not have a material adverse effect on
the business, financial condition, operations or prospects of
Borrower and its Subsidiaries considered as a whole.
SECTION 7.13. Compliance with Law. The business and
operations of Borrower and its Subsidiaries have been and are being
conducted in accordance with all applicable Laws other than
violations of Laws which do not (either individually or
collectively) have a material adverse effect on the business,
financial condition, operations or prospects of Borrower and its
Subsidiaries considered as a whole.
SECTION 7.14. Full Disclosure. All information heretofore
furnished by Borrower (or any other party in its behalf) to
Administrative Agent or any Bank for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by Borrower or in its
behalf to Administrative Agent or any Bank will be, true, complete
and accurate in every material respect or (to the extent disclosed)
based on reasonable estimates on the date as of which such
information is stated or certified. Borrower has disclosed to
Banks in writing any and all facts (other than facts of general
public knowledge) which might reasonably be expected to materially
and adversely affect the business, financial condition, operations
or prospects of Borrower and its Subsidiaries considered as a whole
or the ability of Borrower and its Subsidiaries to perform their
obligations under this Agreement and the other Loan Papers.
SECTION 7.15. Corporate Structure. Borrower does not have
any Subsidiaries on the Closing Date.
39
SECTION 7.16. Environmental Matters. Except for matters
disclosed on Schedule 7.16 hereto, no real or personal property
owned or leased by Borrower or any Subsidiary of Borrower
(including, without limitation, Borrower's and its Subsidiaries
Mineral Interests) and no operations conducted thereon, and to
Borrower's knowledge, no operations of any prior owner, lessee or
operator of any such properties, is or has been in violation of any
Applicable Environmental Law other than violations which neither
individually or in the aggregate will have a material adverse
effect on Borrower and its Subsidiaries taken as a whole. Except
for matters disclosed on Schedule 7.16 hereto, neither Borrower,
any Subsidiary of Borrower, nor any such property or operation is
the subject of any existing, pending or, to Borrower's knowledge,
threatened action, suit, investigation, inquiry or preceding with
respect to Applicable Environmental Laws which could, individually
or in the aggregate, have a material adverse effect on Borrower and
its Subsidiaries taken as a whole. All notices, permits, licenses,
and similar authorizations, required to be obtained or filed in
connection with the ownership or operation of each tract of real
property and each item of personal property owned, leased or
operated by Borrower or any of its Subsidiaries, including, without
limitation, notices, licenses, permits and authorizations required
in connection with any past or present treatment, storage,
disposal, or release of hazardous substances, petroleum, or solid
waste into the environment, have been duly obtained or filed except
to the extent the failure to obtain or file such notices, licenses,
permits and authorizations would not have a material adverse effect
on Borrower or any of its Subsidiaries taken as a whole. To
Borrower's knowledge, all hazardous substances, generated at each
tract of real property and by each item of personal property owned,
leased or operated by Borrower or any of its Subsidiaries have been
transported, treated, and disposed of only by carriers maintaining
valid permits under RCRA and all other Applicable Environmental
Laws. Except for matters disclosed on Schedule 7.16 hereto, there
has been no release or threatened release of any quantity of any
hazardous substances or petroleum on, to or from any real or
personal property owned, leased, or operated by Borrower or any
Subsidiary which was not in compliance with Applicable
Environmental Laws other than releases which would not,
individually or in the aggregate, have a material adverse effect on
Borrower and its Subsidiaries considered as a whole. Except for
matters disclosed on Schedule 7.16 hereto, neither Borrower nor any
Subsidiary has any contingent liability in connection with any
release or threatened release of any hazardous substance,
petroleum, or solid waste into the environment which could
reasonably be expected to have a material adverse effect on
Borrower and its Subsidiaries considered as a whole.
SECTION 7.17. Burdensome Obligations. Neither Borrower, any
Subsidiary of Borrower, nor any of their respective properties, is
subject to any Law or any pending or threatened change of Law or
subject to any restriction under its certificate (or articles) of
incorporation or bylaws or under any agreement or instrument to
which Borrower or any Subsidiary of Borrower is a party or by which
Borrower or any Subsidiary of Borrower or any of their respective
properties may be subject or bound, which is so unusual or
burdensome as to be likely in the foreseeable future to have a
material adverse effect on the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered
as a whole. Without limiting the foregoing, neither Borrower nor
any of its Subsidiaries is a party to or bound by any agreement or
subject to any order of any Governmental Authority which prohibits
or restricts in any way the right of a Subsidiary of Borrower to
make Distributions.
40
SECTION 7.18. Fiscal Year. Borrower's Fiscal Year is January
1 through December 31.
SECTION 7.19. No Default. Neither a Default nor an Event of
Default has occurred or will exist after giving effect to the
transactions contemplated by this Agreement.
SECTION 7.20. Government Regulation. Neither Borrower nor
any of its Subsidiaries is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act (as any of the preceding acts have been
amended), the Investment Company Act of 1940 or any other law which
regulates the incurring by Borrower of Debt, including, but not
limited to laws relating to common contract carriers or the sale of
electricity, gas, stream, water or other public utility services.
SECTION 7.21. Insider. Neither Borrower nor any of its
Subsidiaries is, nor any officer of Borrower or its Subsidiaries,
and no Person having "control" (as that term is defined in 12
U.S.C. Section 375(b) or regulations promulgated thereunder) of
Borrower or any Subsidiary is an "executive officer", "director"
or "shareholder" having "control" (as that term is defined in 12
U.S.C. Section 375(b) or regulations promulgated thereunder) of any
Bank or any bank holding company of which any Bank is a Subsidiary
or of any Subsidiary of such bank holding company.
SECTION 7.22. Gas Balancing Agreements and Advance Payment
Contracts. On the date of this Agreement, (a) the net gas
imbalances to Borrower and its Subsidiaries (considered in the
aggregate) under all Gas Balancing Agreements to which Borrower or
any of its Subsidiaries is a party or by which any Mineral Interest
owned by Borrower or any of its Subsidiaries is bound, is not in
excess of $500,000, and (b) the aggregate amount of all Advance
Payments received by Borrower or any of its Subsidiaries under
Advance Payment Contracts which have not been satisfied by delivery
of production does not exceed $500,000.
SECTION 7.23. Year 2000 Compliance. Borrower has (a)
initiated a review and assessment of all areas within its and each
of its Subsidiaries' business and operations (including those
affected by suppliers, vendors and customers) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk
that computer applications used by Borrower or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31,1999), (b)
developed a plan and time line for addressing the Year 2000 Problem
on a timely basis, and (c) to date, implemented that plan in
accordance with that timetable. Based on the foregoing, Borrower
believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any
of its Subsidiaries' business and operations are reasonably
expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1,
2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so could not reasonably be expected to
materially adversely effect the business, financial condition,
operators or prospects of Borrower and its Subsidiaries considered
as a whole.
41
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or
any amount payable under any Note remains unpaid or any Letter of
Credit remains outstanding:
SECTION 8.1. Information. Borrower will deliver, or cause to
be delivered, to each of Banks:
(a) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year, consolidated and
consolidating balance sheets of Borrower as of the end of such
Fiscal Year and the related consolidated and consolidating
statements of income and changes in financial position for such
Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all reported by Borrower in
accordance with GAAP and audited by a firm of independent public
accountants of nationally recognized standing and acceptable to
Administrative Agent;
(b) (i) as soon as available and in any event within
forty-five (45) days after the end of each of the first three (3)
Fiscal Quarters of each Fiscal Year, consolidated and consolidating
balance sheets of Borrower as of the end of such Fiscal Quarter and
the related consolidated and consolidating statements of income and
changes in financial position for such quarter and for the portion
of Borrower's fiscal year ended at the end of such Fiscal Quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of Borrower's
previous Fiscal Year. All financial statements delivered pursuant
to this Section 8.1(b) shall be certified as to fairness of
presentation, GAAP and consistency by a Financial Officer of
Borrower;
(c) simultaneously with the delivery of each set of
financial statements referred to in Sections 8.1(a) and (b), a
certificate of a Financial Officer in the form of Exhibit I
attached hereto, (i) setting forth in reasonable detail the
calculations required to establish whether Borrower was in
compliance with the requirements of Article X on the date of such
financial statements, (ii) stating whether there exists on the date
of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which Borrower is
taking or proposes to take with respect thereto, (iii) stating
whether or not such financial statements fairly reflect the
business and financial condition of Borrower as of the date of the
delivery of such financial statements, (iv) setting forth the
aggregate amount of all Investments made by Borrower which are
outstanding on the date of such certificates which are of the type
described in clause (d) of the definition of "Permitted
Investments", herein contained, (v) setting forth (A) the amount
of net gas imbalances under Gas Balancing Agreements to which
Borrower or any of its Subsidiaries are parties or by which any
Mineral Interests owned by Borrower or any of its Subsidiaries are
bound, and (B) the aggregate amount of all Advance Payments
received under Advance Payment Contracts to which Borrower or any
of its Subsidiaries are parties or by which any Mineral Interests
owned by Borrower or any of its Subsidiaries are bound which have
not been satisfied by delivery of production, if any, and (vi)
setting forth a list and description of Hedge Transactions to which
Borrower or any of its Subsidiaries is then a party, including a
calculation of Borrower's and its Subsidiaries' termination
liability assuming each of such Hedge Transactions was terminated
as of such date (whether or not
42
such Hedge Transactions are then terminable but without giving effect
to penalties for early termination, if any);
(d) promptly upon the mailing thereof to the stockholders of
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(e) promptly upon the filing thereof, copies of all final
registration statements, post-effective amendments thereto and
annual, quarterly or special reports which Borrower shall have
filed with the Securities and Exchange Commission; provided, that
Borrower must deliver, or cause to be delivered, any annual reports
which Borrower shall have filed with the Securities and Exchange
Commission, within ninety (90) days after the end of each Fiscal
Year of Borrower, and any quarterly reports which Borrower shall
have filed with the Securities and Exchange Commission, within
forty-five (45) days after the end of each of the first three (3)
Fiscal Quarters of each Fiscal Year of Borrower;
(f) promptly upon request therefore by any Bank, such title
opinions and other information in its possession, control or
direction regarding title to the oil and gas properties owned by
Borrower or its Subsidiaries as are appropriate to determine the
status thereof;
(g) promptly upon receipt of same, any notice or other
information received by Borrower or any Subsidiary of Borrower
indicating any potential, actual or alleged (i) noncompliance with
or violation of the requirements of any Applicable Environmental
Law which could result in liability to Borrower or any Subsidiary
for fines, clean up or any other remediation obligations or any
other liability in excess of $2,000,000 in the aggregate; (ii)
release or threatened release of any toxic or hazardous waste,
substance, or constituent, or other substance into the environment
which release would impose on Borrower or any Subsidiary a duty to
report to a governmental authority or to pay cleanup costs or to
take remedial action under any Applicable Environmental Law which
could result in liability to Borrower or any Subsidiary for fines,
clean up and other remediation obligations or any other liability
in excess of $2,000,000 in the aggregate; or (iii) the existence of
any Lien arising under any Applicable Environmental Law securing
any obligation to pay fines, clean up or other remediation costs or
any other liability in excess of $2,000,000 in the aggregate.
Without limiting the foregoing, Borrower shall provide to Banks
promptly upon receipt of same copies of all environmental
consultants or engineers reports received by Borrower or any
Subsidiary of Borrower which would render the representation and
warranty contained in Section 7.16 untrue or inaccurate in any
respect; provided, however, that no report shall be required to be
delivered if such report is subject to an attorney-client privilege
or contains information or discloses facts which could result in
liability to Borrower or any Subsidiary of Borrower for fines,
cleanup and any other remediation obligations or any other
liability of less than $2,000,000 in the aggregate;
(h) in the event any notification is provided by Borrower to
any Bank or Administrative Agent pursuant to Section 8.1(g) hereof
or Administrative Agent or any Bank otherwise learns of any event
or condition under which any such notice would be required, then,
upon request of Required Banks, Borrower shall deliver to
Administrative Agent and each Bank such information regarding such
event, condition or circumstance as Administrative Agent or
Required Banks shall reasonably require;
43
(i) immediately upon any Authorized Officer becoming aware
of the occurrence of any Default or Event of Default, a certificate
of an Authorized Officer setting forth the details thereof and the
action which Borrower is taking or proposes to take with respect
thereto;
(j) on or before thirty (30) days following the expiration
of each month, reports of net production volume and prices received
for each Borrowing Base property by field during the preceding
calendar month;
(k) notify Administrative Agent within thirty (30) days of
any change in Borrower's Investment Guidelines;
(l) promptly notify Banks of any material adverse change in
the business, financial condition, operations or prospects of
Borrower or any of its Subsidiaries; and
(m) from time to time such additional information regarding
the financial position or business of Borrower and its Subsidiaries
as Administrative Agent, at the request of any Bank, may reasonably
request.
SECTION 8.2. Maintenance of Existence. Borrower, shall, and
shall cause each Subsidiary to, at all times (a) maintain its
corporate, partnership or limited liability company existence in
its state of incorporation or organization except to the extent any
Subsidiary ceases to be in existence as a result of a merger or
consolidation expressly permitted pursuant to Section 9.4, and (b)
maintain its good standing and qualification to transact business
in all jurisdictions where the failure to maintain good standing or
qualification to transact business could have a material adverse
effect on the business, financial condition, operations or
prospects of Borrower or any of its Subsidiaries.
SECTION 8.3. Right of Inspection. Borrower will permit and
will cause each of its Subsidiaries to permit any officer, employee
or agent of Administrative Agent or any of Banks to visit and
inspect any of the assets of Borrower and its Subsidiaries, examine
Borrower's and its Subsidiaries' books of record and accounts, take
copies and extracts therefrom, and discuss the affairs, finances
and accounts of Borrower and its Subsidiaries with Borrower's and
its Subsidiaries' officers, accountants and auditors, all at such
reasonable times and as often as Administrative Agent or any of
Banks may desire, all at the expense of Borrower; provided, that,
prior to the occurrence of an Event of Default neither
Administrative Agent nor any Bank will require Borrower or any of
its Subsidiaries to incur any unreasonable expense as a result of
the exercise by Administrative Agent or any Bank of its rights
pursuant to this Section 8.3.
SECTION 8.4. Maintenance of Insurance. Borrower will, and
will cause each of its Subsidiaries to (and will use its best
efforts to cause all operators of Mineral Interests owned by
Borrower and its Subsidiaries) at all times maintain or cause to be
maintained insurance covering such risks as are customarily carried
by businesses similarly situated.
SECTION 8.5. Payment of Taxes and Claims. Borrower will, and
will cause each of its Subsidiaries to, pay (a) all Taxes imposed
upon it or any of its assets or with respect to any of its
franchises, business, income or profits before any material penalty
or interest accrues thereon and (b) all material claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which
44
by law have or might become a Lien (other than a Permitted
Encumbrance) on any of its assets; provided, however, no payment of
Taxes or claims shall be required if (i) the amount, applicability
or validity thereof is currently being contested in good faith by
appropriate action promptly initiated and diligently conducted in
accordance with good business practices and no material part of the
property or assets of Borrower or any of its Subsidiaries are
subject to levy or execution, (ii) Borrower as and to the extent
required in accordance with GAAP, shall have set aside on its books
reserves (segregated to the extent required by GAAP) deemed by it
to be adequate with respect thereto, and (iii) Borrower has
notified Administrative Agent of such circumstances, in detail
satisfactory to Administrative Agent.
SECTION 8.6. Compliance with Laws and Documents. Borrower
will and will cause each of its Subsidiaries to comply with all
Laws, their respective certificates (or articles) of incorporation,
bylaws and similar organizational documents and all Material
Agreements to which Borrower or any of its Subsidiaries are a
party, if a violation, alone or when combined with all other such
violations, could have a material adverse effect on the business,
financial condition, operations or prospects of Borrower or any of
its Subsidiaries.
SECTION 8.7. Operation of Properties and Equipment. (a)
Borrower will, and will cause each of its Subsidiaries to,
maintain, develop and operate their respective Mineral Interests in
a good and workmanlike manner, and observe and comply with all of
the terms and provisions, express or implied, of all oil and gas
leases relating to such Mineral Interests so long as such Mineral
Interests are capable of producing hydrocarbons and accompanying
elements in paying quantities.
(b) Borrower will, and will cause each of its Subsidiaries
to, comply in all respects with all contracts and agreements
applicable to or relating to their respective Mineral Interests or
the production and sale of hydrocarbons and accompanying elements
therefrom, except to the extent a failure to so comply could not
have a material adverse effect on the business, financial
condition, operations or prospects of Borrower or any of its
Subsidiaries.
(c) Borrower will, and will cause each of its Subsidiaries,
at all times, to maintain, preserve and keep all operating
equipment used with respect to the Mineral Interests of Borrower
and its Subsidiaries in proper repair, working order and condition,
and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the
efficiency of such operating equipment shall at all times be
properly preserved and maintained; provided that no item of
operating equipment need be so repaired, renewed, replaced, added
to or improved, if Borrower shall in good faith determine that such
action is not necessary or desirable for the continued efficient
and profitable operation of the business of Borrower and its
Subsidiaries.
SECTION 8.8. Environmental Law Compliance. Except to the
extent a failure to comply would not have a material adverse effect
on the business, financial condition, operations or prospects of
Borrower and its Subsidiaries considered as a whole, Borrower will,
and will cause each of its Subsidiaries to, comply with all
Applicable Environmental Laws, including, without limitation, (a)
all licensing, permitting, notification and similar requirements of
Applicable Environmental Laws, and (b) all provisions of all
Applicable Environmental Laws regarding storage, discharge,
release, transportation, treatment and disposal of hazardous
substances, petroleum, solid waste or other contaminants. Borrower
45
will, and will cause each of its Subsidiaries to, promptly pay and
discharge when due all legal debts, claims, liabilities and
obligations with respect to any clean-up or remediation measures
necessary to comply with Applicable Environmental Laws.
SECTION 8.9. ERISA Reporting Requirements. Borrower shall
furnish or cause to be furnished to Administrative Agent:
(a) Promptly and in any event (i) within thirty (30) days
after Borrower or any ERISA Affiliate receives notice from any
regulatory agency of the commencement of an audit, investigation or
similar proceeding with respect to a Plan, and (ii) within ten (10)
days after Borrower or any ERISA Affiliate contacts the Internal
Revenue Service for the purpose of participation in a closing
agreement or any voluntary resolution program with respect to a
Plan or knows or has reason to know that any event with respect to
any Plan of Borrower or any ERISA Affiliate has occurred that could
have a material adverse effect on Borrower or any ERISA Affiliate;
(b) Promptly and in any event within thirty (30) days after
the receipt by Borrower of a request therefor by a Bank, copies of
any annual and other report (including Schedule B thereto) with
respect to a Plan filed by Borrower or any ERISA Affiliate with the
United States Department of Labor, the Internal Revenue Service or
the PBGC;
(c) Notification within thirty (30) days of the effective
date thereof of any material increases in the benefits of any
existing Plan which is not a multiemployer plan (as defined in
section 4001(a)(3) of ERISA), or the establishment of any new
Plans, or the commencement of contributions to any Plan to which
Borrower or any ERISA Affiliate was not previously contributing;
(d) Promptly after receipt of written notice of commencement
thereof, notice of all (i) claims made by participants or
beneficiaries with respect to any Plan and (ii) actions, suits and
proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Borrower or any ERISA Affiliate with respect to
any Plan, except those which, in the aggregate, if adversely
determined could not have a material adverse effect on Borrower or
any ERISA Affiliate.
SECTION 8.10. Additional Documents. Borrower shall cure
promptly any defects in the creation and issuance of each Note, and
the execution and delivery of this Agreement and the other Loan
Papers and, at Borrower's expense, Borrower shall promptly and duly
execute and deliver to each Bank, upon reasonable request, all such
other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements
of Borrower in this Agreement and the other Loan Papers as may be
reasonably necessary or appropriate in connection therewith.
SECTION 8.11. Environmental Matters. Promptly upon Borrower
or any Subsidiary of Borrower receiving any notice or other
information indicating any potential, actual or alleged (i)
non-compliance with or violation of the requirements of any
Applicable Environmental Law which could result in liability to
Borrower or any Subsidiary for fines, clean up or any other
remediation obligations or any other liability in excess of
$15,000,000 (without any reductions for insurance or offsets) in
the aggregate; (ii) release or threatened release of any toxic or
hazardous waste, substance, or constituent, or other substance into
the environment which release would impose on
46
Borrower or any Subsidiary a duty to report to a governmental authority
or to pay cleanup costs or to take remedial action under any Applicable
Environmental Law which could result in liability to Borrower or
any Subsidiary for fines, clean up and other remediation
obligations or any other liability in excess of $15,000,000
(without any reductions for insurance or offsets) in the aggregate;
or (iii) the existence of any Lien arising under any Applicable
Environmental Law securing any obligation to pay fines, clean up or
other remediation costs or any other liability in excess of
$15,000,000 (without any reductions for insurance or offsets) in
the aggregate; then Banks shall have the right to have
environmental consultants and engineers chosen by Banks prepare
reports relating to the condition described above which creates
this right. Borrower shall reimburse Banks for the fees and
expenses of such consultants and engineers up to $350,000 in the
aggregate for each event described in the immediately preceding
sentence. Such consultants and engineers, in conducting any
testing, reviews and evaluations, shall operate at the direction of
Borrower. Banks will make their best efforts to protect any
attorney-client privilege which exists with respect to the reports
prepared by such engineers and consultants pursuant to this Section
8.11.
SECTION 8.12. Year 2000 Compliance. Borrower will promptly
notify Banks in the event Borrower discovers or determines that any
computer application (including those of its suppliers, vendors and
customers) that is material to its or any of its Subsidiaries'
business and operations will not be Year 2000 compliant, except to
the extent that such failure could not reasonably be expected to
materially adversely effect the business, financial condition,
operations or prospects of Borrower and its Subsidiaries considered
as a whole.
ARTICLE IX
NEGATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or
any amount payable under any Note remains unpaid or any Letter of
Credit remains outstanding:
SECTION 9.1. Incurrence of Debt. Borrower shall not, and
shall not permit any of its Subsidiaries to, incur any Debt other
than (a) the Obligations, and (b) other Debt in an aggregate amount
outstanding at any time not to exceed $10,000,000.
SECTION 9.2. Restrictions on Distributions. Borrower shall
not, directly or indirectly, declare or pay, or incur any liability
to declare or pay, Distributions in any Fiscal Year; provided, that
(a) so long as no Default or Event of Default exists on the date
any such Distribution is declared or paid and no Default or Event
of Default would result therefrom, Borrower shall be permitted to
declare and pay Distributions in any period of four (4) consecutive
Fiscal Quarters in an amount not to exceed the greater of (i)
$12,000,000, or (ii) seventy five percent (75%) of Borrower's
Consolidated Net Income for such period of four (4) consecutive
Fiscal Quarters (as reflected in the financial statements for
Borrower for such Fiscal Quarters delivered pursuant to Section
8.1(a) and (b), hereof), and (b) any Subsidiary of Borrower may
make Distributions to Borrower and to any wholly owned Subsidiary
of Borrower. Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into any agreement or become subject to any
order of any Governmental Authority which prohibits or restricts in
any way the right of any of Borrower's Subsidiaries to pay Distributions.
47
SECTION 9.3. Negative Pledge. Borrower shall not, and shall
not permit any Subsidiary to create, assume or suffer to exist any
Lien on any asset of Borrower or any of its Subsidiaries other than
Permitted Encumbrances. Borrower shall not, and shall not permit
any of its Subsidiaries to, enter into or become bound by any
agreement (other than this Agreement) that prohibits or otherwise
restricts the right of Borrower or any of its Subsidiaries to
create, assume or suffer to exist any Lien on any of Borrower's or
any of its Subsidiaries' assets in favor of Administrative Agent.
SECTION 9.4. Consolidations and Mergers. Borrower shall not,
and shall not permit any Subsidiary to, consolidate or merge with
or into any other Person; provided, that so long as no Default or
Event of Default exists or will result (a) Borrower may merge or
consolidate with another Person so long as Borrower is the
surviving corporation, (b) any wholly owned Subsidiary of Borrower
may merge or consolidate with any other Person so long as a wholly
owned Subsidiary of Borrower is the surviving corporation, and (c)
any Subsidiary of Borrower may merge with any other Person so long
as such Subsidiary is the surviving corporation.
SECTION 9.5. Asset Dispositions. Borrower shall not and
shall not permit any Subsidiary to sell, lease, transfer, abandon
or otherwise dispose of any asset other than (a) the sale in the
ordinary course of business of hydrocarbons produced from
Borrower's and its Subsidiaries' Mineral Interests, and (b) the
sale, lease, transfer, abandonment or other disposition of other
assets, provided that the aggregate value of all assets, sold,
leased, transferred or disposed of pursuant to this clause (b) in
any period of twelve (12) consecutive months shall not exceed Five
Million Dollars ($5,000,000).
SECTION 9.6. Amendments to Organizational Documents.
Borrower shall not and shall not permit any of its Subsidiaries to
enter into or permit any modification or amendment of, or waive any
material right or obligation of any Person under its certificate or
articles of incorporation, bylaws, partnership agreement,
regulations or other organizational documents other than
amendments, modifications and waivers which are not, individually
or in the aggregate, material.
SECTION 9.7. Use of Proceeds. The proceeds of Borrowings
will not be used for any purpose other than (a) to refinance Debt
outstanding under the Prior Agreement, (b) working capital, (c) to
finance the acquisition, exploration and development of Mineral
Interests, and (d) for general corporate purposes. None of such
proceeds (including, without limitation, proceeds of Letters of
Credit issued hereunder) will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, and none of such proceeds
will be used in violation of applicable Law (including, without
limitation, the Margin Regulations). Letters of Credit will be
issued hereunder only for the purpose of securing bids, tenders,
bonds, contracts and other obligations entered into in the ordinary
course of Borrower's business. Without limiting the foregoing, no
Letters of Credit will be issued hereunder for the purpose of or
providing credit enhancement with respect to any debt or equity
security of Borrower or any of its Subsidiaries or to secure
interest rate, commodity, currency or other swaps, caps, collars,
futures contracts or similar hedging arrangements.
SECTION 9.8. Investments. Borrower shall not and shall not
permit any of its Subsidiaries to directly or indirectly, make any
Investment other than Permitted Investments.
48
SECTION 9.9. Transactions with Affiliates. Borrower shall
not, and shall not permit any of its Subsidiaries, to engage in any
transaction with an Affiliate unless such transaction is as
favorable to Borrower or such Subsidiary as could be obtained in an
arm's length transaction with an unaffiliated Person in accordance
with prevailing industry customs and practices.
SECTION 9.10. ERISA. Borrower agrees that it will not
knowingly take action or fail to take action which would result in
a violation of ERISA, the Code or other laws applicable to the
Plans maintained or contributed to by it or any ERISA Affiliate.
Neither Borrower nor any ERISA Affiliate shall, without the prior
written consent of the Required Banks, materially modify the term
of, or the funding obligations or contribution requirements under
any existing Plan, establish a new Plan, or become obligated or
incur any liability under a Plan that is not maintained or
contributed to by Borrower or any ERISA Affiliate as of the Closing
Date.
SECTION 9.11. Hedge Transactions. Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any Hedge
Transactions which would cause the amount of hydrocarbons which are
the subject of Hedge Transactions in existence at such time to
exceed seventy five percent (75%) of Borrower's anticipated
production from Proved, Producing Mineral Interests during the term
of such existing Hedge Transactions.
SECTION 9.12. Fiscal Year. Borrower shall not change its
fiscal year.
SECTION 9.13. Change in Business. Borrower shall not, and
shall not permit any of its Subsidiaries to, engage in any business
other than the acquisition, exploration, production and development
of Mineral Interests; provided, that, this Section 9.13 shall not
prevent Borrower or any of its Subsidiaries from (a) making
Permitted Investments described in clause (e) of the definition of
Permitted Investments, or (b) making capital expenditures to
purchase assets used in the transportation, processing, refining or
marketing of petroleum products; provided, that the sum of (i) the
aggregate amount of capital expenditures made by Borrower and its
Subsidiaries in such "downstream" assets, plus (ii) the aggregate
amount of the outstanding Investments made pursuant to clause (e)
of the definition of Permitted Investments (in each case measured
on a cost basis), shall not exceed $15,000,000 at any time.
ARTICLE X
FINANCIAL COVENANTS
Borrower agrees that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or
any amount payable under any Note remains unpaid or any Letter of
Credit remains outstanding:
SECTION 10.1. Minimum Consolidated Tangible Net Worth of
Borrower. Borrower will not permit its Consolidated Tangible Net
Worth at any time to be less than the Minimum Consolidated Tangible
Net Worth at such time.
49
ARTICLE XI
DEFAULTS
SECTION 11.1. Events of Default. If one or more of the
following events (collectively "Events of Default" and
individually an "Event of Default") shall have occurred and be
continuing:
(a) Borrower shall fail to pay when due any principal on any
Note;
(b) Borrower shall fail to pay when due accrued interest on
any Note or any fees or any other amount payable hereunder and such
failure shall continue for a period of three (3) days following the
due date;
(c) Borrower shall fail to observe or perform any covenant
or agreement contained in Sections 8.1(a), (b), (c), (e) or (g),
8.10, Article IX or Article X of this Agreement;
(d) Borrower or any Subsidiary of Borrower shall fail to
observe or perform any covenant or agreement contained in this
Agreement or the other Loan Papers (other than those referenced in
Sections 11.1(a), (b) and (c)) and such failure continues for a
period of twenty (20) days after the earlier of (i) the date any
Authorized Officer of Borrower acquires knowledge of such failure,
or (ii) written notice of such failure has been given to Borrower
by Administrative Agent or any Bank;
(e) any representation, warranty, certification or statement
made or deemed to have been made by Borrower in this Agreement or
by Borrower, any Subsidiary of Borrower or any other Person on
behalf of Borrower or on behalf of any Subsidiary of Borrower in
any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in
any material respect when made;
(f) Borrower or any of its Subsidiaries shall fail to make
any payment when due on any Debt of such Person in a principal
amount equal to or greater than $2,500,000 or any other event or
condition shall occur which (i) results in the acceleration of the
maturity of any such Debt, or (ii) entitles the holder of such Debt
to accelerate the maturity thereof;
(g) Borrower or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be
commenced against Borrower or any of its Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian
50
or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against Borrower or any of its Subsidiaries of any of
them under the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more judgments or orders for the payment of
money aggregating in excess of $2,500,000 shall be rendered against
Borrower or any of its Subsidiaries and such judgment or order
shall continue unsatisfied and unstayed for thirty (30) days;
(j) (i) any event occurs with respect to any Plan or Plans
pursuant to which Borrower and/or any ERISA Affiliate incur a
liability due and owing at the time of such event, without existing
funding therefor, for benefit payments under such Plan or Plans in
excess of $1,500,000; or (ii) Borrower, any ERISA Affiliate, or any
other "party-in-interest" or "disqualified person", as such
terms are defined in section 3(14) of ERISA and section 4975(e)(2)
of the Code, shall engage in transactions which in the aggregate
would reasonably result in a direct or indirect liability to
Borrower or any ERISA Affiliate in excess of $500,000 under section
409 or 502 of ERISA or section 4975 of the Code;
(k) as of any date either (i) thirty percent (30%) of the
Persons who are members of Borrower's board of directors are
Persons who were not members of Borrower's board of directors on
the date which was twelve (12) months prior to such date, or (ii)
any single Person or group of Affiliated Persons (excluding Persons
who are directors or executive officers of Borrower on the Closing
Date or are listed on Schedule 11.1(k), attached hereto) shall
acquire thirty percent (30%) or more of the outstanding voting
stock of Borrower (whether in a single transaction or series of
related or unrelated transactions); or
(l) this Agreement or the other Loan Papers shall cease to
be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by Borrower, or Borrower shall deny that it has any
further liability or obligation under any of the Loan Papers to
which it is a party;
then, and in every such event, Administrative Agent shall without
presentment, notice or demand (unless expressly provided for
herein) of any kind (including, without limitation, notice of
intention to accelerate and acceleration), all of which are hereby
waived, (a) if requested by the Required Banks, terminate the
Commitments and they shall thereupon terminate, and (b) if
requested by the Required Banks, take such other actions as may be
permitted by the Loan Papers including, declaring the Notes
(together with accrued interest thereon) to be, and the Notes shall
thereupon become, immediately due and payable; provided that (c) in
the case of any of the Events of Default specified in Sections
11.1(g) or (h), without any notice to Borrower or any other act by
Administrative Agent or Banks, the Commitments shall thereupon
terminate and the Notes (together with accrued interest thereon)
shall become immediately due and payable.
ARTICLE XII
ADMINISTRATIVE AGENT
SECTION 12.1. Appointment and Authorization. (a) Each Bank
irrevocably appoints and authorizes Administrative Agent to take
such action as Administrative Agent
51
on its behalf and to exercise such powers under this Agreement, the Notes
and the other Loan Papers as are delegated to Administrative Agent by the
terms hereof or thereof, together with all such powers as are reasonably
incidental thereto, provided that, as between and among Banks,
Administrative Agent will not prosecute, settle or compromise any
claim against Borrower or release or institute enforcement
proceedings, except with the consent of the Required Banks. Each
Bank and Borrower agree that Administrative Agent is not a
fiduciary for Banks or for Borrower but simply is acting in the
capacity described herein to alleviate administrative burdens for
both Borrower and Banks and that Administrative Agent has no duties
or responsibilities to Banks or Borrower except those expressly set
forth herein.
(b) The Issuer shall act on behalf of the Banks with respect
to any Letters of Credit issued by it and the documents associated
therewith; provided, however, that the Issuer shall have all of the
benefits and immunities (i) provided to the Administrative Agent in
this Article XII with respect to any acts taken or omissions
suffered by the Issuer in connection with Letters of Credit issued
by it or proposed to be issued by it and the application and
agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term "Administrative Agent", as used in
this Article XII, included the Issuer with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with
respect to the Issuer.
SECTION 12.2. Administrative Agent and Affiliates. Bank of
America shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the
same as though it were not Administrative Agent or Issuer, and Bank
of America and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with Borrower and
its Subsidiaries or any affiliate of Borrower as if it were not
Administrative Agent hereunder or Issuer.
SECTION 12.3. Action by Administrative Agent. The
obligations of Administrative Agent hereunder are only those
expressly set forth herein. Without limiting the generality of the
foregoing, Administrative Agent shall not be required to take any
action with respect to any Default or Event of Default, except as
expressly provided in Article XI.
SECTION 12.4. Consultation with Experts. Administrative
Agent may consult with legal counsel (who may be counsel for
Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 12.5. LIABILITY OF ADMINISTRATIVE AGENT. NEITHER
ADMINISTRATIVE AGENT NOR ANY OF ITS DIRECTORS, OFFICERS, AGENTS, OR
EMPLOYEES SHALL BE LIABLE FOR ANY ACTION TAKEN OR NOT TAKEN BY IT
IN CONNECTION HEREWITH (A) WITH THE CONSENT OR AT THE REQUEST OF
THE REQUIRED BANKS OR (B) IN THE ABSENCE OF ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, IT BEING THE INTENTION OF BANKS
THAT SUCH PARTIES SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF THEIR
OWN NEGLIGENCE. Neither Administrative Agent nor any of its
directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (a) any
statement, warranty or representation made in connection with this
Agreement or any Borrowing hereunder, (b) the performance or
52
observance of any of the covenants or agreements of Borrower, (c)
the satisfaction of any condition specified in Article VI, except
receipt of items required to be delivered to Administrative Agent,
or (d) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished
in connection herewith. Administrative Agent shall not incur any
liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire,
telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties or upon any oral notice which
Administrative Agent believes will be confirmed in writing by the
proper party or parties. If Administrative Agent fails to take any
action required to be taken by it under the Loan Papers after a
default and within a reasonable time after being requested to do so
by any Bank (after such requesting Bank has obtained the approval
of such other Banks as required), Administrative Agent shall not
suffer or incur any liability as a result thereof, but such
requesting Bank may request Administrative Agent to resign,
whereupon Administrative Agent shall so resign pursuant to Section
12.9.
SECTION 12.6. Delegation of Duties. Administrative Agent may
execute any of its duties hereunder by or through officers,
directors, employees, attorneys, or agents.
SECTION 12.7. Indemnification. Each Bank shall, ratably in
accordance with its commitment, indemnify Administrative Agent (to
the extent not reimbursed by Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand, action,
loss or liability (except such as result from Administrative
Agent's gross negligence or willful misconduct) that Administrative
Agent may suffer or incur in connection with this Agreement or any
action taken or omitted by Administrative Agent hereunder,
including, without limitation, matters arising out of
Administrative Agent's own ordinary negligence. IT IS THE EXPRESS
INTENTION OF EACH BANK THAT ADMINISTRATIVE AGENT SHALL BE
INDEMNIFIED HEREUNDER FOR THE CONSEQUENCES OF ITS OWN ORDINARY
NEGLIGENCE.
SECTION 12.8. Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon Administrative
Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon
Administrative Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking any action
under this Agreement.
SECTION 12.9. Successor Administrative Agent. Administrative
Agent may resign at any time that an Event of Default is continuing
by giving written notice thereof to Banks and Borrower. In
addition, Borrower may, prior to a Default, request the designation
by Banks of a successor Administrative Agent. Upon any such
request by Borrower or resignation by Administrative Agent (which,
in the absence of an Event of Default, shall be made only with the
consent of Borrower), the Required Banks shall have the right to
appoint a successor Administrative Agent, which shall be one of
Banks and, except during the continuance of an Event of Default,
shall be approved by Borrower, such approval to not be unreasonably
withheld. If no successor Administrative Agent shall have been so
appointed by the Required Banks, so approved by Borrower (if
necessary), and accepted such appointment within thirty (30) days
after the retiring Administrative Agent's giving of notice of
resignation or Borrower's request for a successor Administrative
Agent, then the retiring Administrative Agent may, on behalf of
53
Banks, appoint a successor Administrative Agent, which shall (i) be
a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and
surplus of at least $500,000,000 and (ii) unless an Event of
Default is continuing, be approved by Borrower (such approval to
not be unreasonably withheld). Upon the acceptance of its
appointment as a successor Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder. After any
Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Article XII shall continue to inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent. Borrower shall be entitled to
recommend a successor Administrative Agent at the time of
designation of any successor Administrative Agent pursuant to this
Section 12.9. Banks shall give due consideration to the successor
nominated by Borrower, but shall have no obligation to approve such
nominee. Notwithstanding the foregoing, however, Borrower and
Required Banks may not replace Bank of America as Administrative
Agent unless Bank of America shall, if it so requests, also
simultaneously be replaced as "Issuer" hereunder pursuant to
documentation in form and substance reasonably satisfactory to Bank
of America.
SECTION 12.10. Documentation Agent. The First National Bank
of Chicago as "Documentation Agent" shall not have any right,
power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Banks. Without
limiting the foregoing, The First National Bank of Chicago as
"Documentation Agent" shall not have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that
it has not relied, and will not rely, on The First National Bank of
Chicago as "Documentation Agent" in deciding to enter into this
Agreement or in taking or not taking action hereunder.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including bank wire, telecopy or similar writing) and shall be
given at its address or telecopier number set forth on Schedule
13.1 hereto (or at such other address or telecopy number as such
party may hereafter specify for the purpose by notice to
Administrative Agent, Borrower and each Bank). Each such notice,
request or other communication shall be effective (a) if given by
telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 13.1 and receipt is confirmed, (b) if
given by mail, three (3) Domestic Business Days after deposit in
the mails with first class postage prepaid, addressed as aforesaid
or (c) if given by any other means, when delivered at the address
specified in this Section 13.1; provided that notices to
Administrative Agent or the Issuer under Article II and notices to
the Administrative Agent under Article VI shall not be effective
until received.
SECTION 13.2. No Waivers. No failure or delay by
Administrative Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note or other Loan Paper shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by law or in any of the other Loan Papers.
54
SECTION 13.3. Expenses; Documentary Taxes; Indemnification.
(a) Borrower shall pay (i) all reasonable out-of-pocket expenses
of Administrative Agent, including reasonable fees and
disbursements of special counsel for Administrative Agent, in
connection with the preparation of this Agreement and the other
Loan Papers and, if appropriate, the recordation of the Loan
Papers, any waiver or consent hereunder or any amendment hereof or
supplement hereto or any Default or alleged Default hereunder; and
(ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by Administrative Agent or any Bank, including
fees and disbursements of counsel in connection with such Event of
Default and collection and other enforcement proceedings resulting
therefrom, fees of auditors and consultants incurred in connection
therewith and investigation expenses incurred by Administrative
Agent or any Bank in connection therewith. Borrower shall
indemnify each Bank against any Taxes imposed by reason of the
execution and delivery of this Agreement or the Notes (other than
Taxes imposed on the overall net income of such Bank or its Lending
Office, unless and to the extent that such income Taxes are
assessed in a jurisdiction in which such Bank was not previously
subject to income Taxes and are assessed solely as a result of such
Bank's rights and obligations under this Agreement and the other
Loan Papers). Without limiting Borrower's rights under Section
2.9, Banks agree that if Taxes of the type described in this
Section 13.3 are imposed on any Bank and such Bank requests
indemnification therefor in an amount greater than $100,000,
Borrower shall have the right to either (i) reduce the Total
Commitment to zero pursuant to and in accordance with Section 2.9,
or (ii) replace such Bank with an Assignee reasonably acceptable to
Administrative Agent pursuant to an Assignment and Assumption
Agreement in accordance with Section 13.9 hereof.
(b) Borrower agrees to indemnify Administrative Agent and
each Bank and hold Administrative Agent and each Bank harmless from
and against any and all liabilities, losses, damages, costs and
expenses of any kind (including, without limitation, the reasonable
fees and disbursements of counsel for Administrative Agent and each
Bank in connection with any investigative, administrative or
judicial proceeding, whether or not such Bank shall be designated a
party thereto) which may be incurred by any Bank or by
Administrative Agent relating to or arising out of (i) the
existence of this Agreement or any of the Loan Papers, including
the performance by Borrower, Administrative Agent or any Bank of
its obligations hereunder, (ii) any transactions contemplated
hereby or by any of the other Loan Papers, (iii) the exercise of
any rights or remedies by Administrative Agent or any Bank under
this Agreement or applicable Law following any Default or Event of
Default hereunder or (iv) any actual or proposed use of proceeds of
Loans or Letters of Credit hereunder; provided that neither
Administrative Agent nor any Bank shall have the right to be
indemnified hereunder for its own gross negligence or willful
misconduct, IT BEING THE EXPRESS INTENTION OF BORROWER THAT EACH
BANK AND ADMINISTRATIVE AGENT SHALL BE INDEMNIFIED FOR THE
CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE. The obligation of
Borrower to provide indemnification under this Section 13.3 for
fees and expenses of counsel shall be limited to the fees and
expenses of one counsel in each jurisdiction representing all of
the Persons entitled to such indemnification, except to the extent
that, in the reasonable judgment of any such. indemnified Person,
the existence of actual or potential conflicts of interest make
representation of all of such indemnified Persons by the same
counsel inappropriate; in such a case, the Person exercising such
judgment shall be indemnified for the reasonable fees and expenses
of the separate counsel to the extent provided in this Section 13.3
without giving effect to the first clause of this sentence.
55
Nothing in this Section 13.3 is intended to limit the obligations
of Borrower under any other provision of this Agreement.
SECTION 13.4. Right and Sharing of Set-Offs. (a) Upon the
occurrence and during the continuance of an Event of Default, each
Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of Borrower against any
and all of the Obligations of Borrower now or hereafter existing
under this Agreement and any Note held by such Bank, irrespective
of whether or not such Bank shall have made any demand under this
Agreement or such Note and although such Obligations may be
unmatured. Each Bank agrees promptly to notify Borrower after any
such setoff and application made by such Bank, provided that the
failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Bank under this Section
13.4(a) are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which such Bank may
have.
(b) Each Bank agrees that if it shall, by exercising any
right of setoff or counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate
amount of principal and interest due with respect to any Note held
by such other Bank, Bank receiving such proportionately greater
payment shall purchase such participations in the Notes held by the
other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with
respect to the Notes held by Banks shall be shared by Banks
ratably; provided that nothing in this Section 13.4 shall impair
the right of any Bank to exercise any right of setoff or
counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of Borrower other than its
indebtedness under the Notes. Borrower agrees, to the fullest
extent it may effectively do so under applicable Law, that any
holder of a participation in a Note may exercise rights of setoff
or counterclaim and other rights with respect to such participation
as fully as if such holder of a participation were a direct
creditor of Borrower in the amount of such participation.
SECTION 13.5. Amendments and Waivers. Any provision of this
Agreement, the Notes or the other Loan Papers may be amended or
waived if, but only if such amendment or waiver is in writing and
is signed by Borrower and the Required Banks (and, if the rights or
duties of Administrative Agent are affected thereby, by
Administrative Agent); provided that no such amendment or waiver
shall, unless signed by all Banks, (a) increase the Commitments of
Banks or subject any Bank to any additional obligation, (b) forgive
any of the principal of or reduce the rate of interest on any Loan
or any fees hereunder, (c) postpone the date fixed for any payment
of principal of or interest on any Loan or any fees hereunder
including the Termination Date, (d) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Banks, which shall be required for Banks or
any of them to take any action under this Section 13.5 or any other
provision of this Agreement, (e) amend Article III or the
definitions contained in Section 1.1 applicable thereto; and
provided, further that if such amendment, waiver or consent affects
the rights or duties of the Issuer relating to any Letter of Credit
issued or to be issued by it, such amendment, waiver or consent
shall be signed by the Issuer.
56
SECTION 13.6. Survival. All representations, warranties and
covenants made by Borrower herein or in any certificate or other
instrument delivered by it or in its behalf under the Loan Papers
shall be considered to have been relied upon by Banks and shall
survive the delivery to Banks of such Loan Papers or the extension
of the Loans (or any part thereof), regardless of any investigation
made by or on behalf of Banks.
SECTION 13.7. Limitation on Interest. It is the intention of
the parties hereto to comply strictly with applicable usury laws,
if any; accordingly, notwithstanding any provision to the contrary
contained herein or in any fee letter or other Loan Paper or any
other document otherwise relating hereto, in no event shall this
Agreement or any Note or such documents require or permit the
payment, taking, reserving, receiving, collection or charging of
any sums constituting interest under applicable laws which exceed
the maximum amount permitted by such laws. If any such excess
interest is called for, contracted for, charged, taken, reserved,
or received in connection with any Loan or in any fee letter or
other Loan Paper, or in any communication by the Administrative
Agent, any Bank or any other Person to the Borrower or any other
Person, or in the event all or part of the principal or interest of
any Loan shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount
of interest contracted for, charged, taken, reserved, or received
on the amount of principal actually outstanding from time to time
under this Agreement or any Note shall exceed the maximum amount of
interest permitted by applicable usury laws, then in any such event
it is agreed as follows: (i) the provisions of this paragraph shall
govern and control, (ii) neither the Borrower nor any other Person
now or hereafter liable for the payment of any Loan shall be
obligated to pay the amount of such interest to the extent such
interest is in excess of the maximum amount of interest permitted
by applicable usury laws, (iii) any such excess which is or has
been received notwithstanding this paragraph shall be credited
against the then unpaid principal balance of the Loans or, if the
Loans have been or would be paid in full by such credit, refunded
to the Borrower, and (iv) the provisions of this Agreement, the
Notes and the other Loan Papers, and any communication to the
Borrower, shall immediately be deemed reformed and such excess
interest reduced, without the necessity of executing any other
document, to the maximum lawful rate allowed under applicable laws
as now or hereafter construed by courts having jurisdiction hereof
or thereof. Without limiting the foregoing, all calculations of
the rate of interest contracted for, charged, collected, taken,
reserved, or received in connection herewith which are made for the
purpose of determining whether such rate exceeds the maximum lawful
rate shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period
of the full term of the Loans, including all prior and subsequent
renewals and extensions, all interest at any time contracted for,
charged, taken, collected, reserved, or received. The terms of
this paragraph shall be deemed to be incorporated in every Loan
Paper and communication relating to this Agreement, the Loans and
the Notes.
To the extent that the interest rate laws of the State of
Texas are applicable to the Loans, the applicable interest rate
ceiling is the weekly ceiling (formerly the indicated rate ceiling)
determined in accordance with Tex. Rev. Civ. Stat., Title 79,
Article 5069-1D.003, also codified at Texas Finance Code, Section
303.301 (formerly Article 5069-1.04 (a)(1)), and, to the extent
that this Agreement is deemed an open end account as such term is
defined in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14),
also codified at Texas Finance Code Section 301.001(3) (formerly
Article 5069-1.01(f)), the Banks retain the right to modify the
interest rate in accordance with applicable law.
57
The parties agree that Texas Finance Code, Chapter 346
(formerly Tex. Rev. Civ. Stat., Title 79, Chapter 15), which
regulates certain revolving loan accounts and revolving triparty
accounts, shall not apply to any revolving loan accounts created
under this Agreement or the Notes or maintained in connection
therewith.
SECTION 13.8. Invalid Provisions. If any provision of the
Loan Papers is held to be illegal, invalid, or unenforceable under
present or future Laws effective during the term thereof, such
provision shall be fully severable, the Loan Papers shall be
construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the
remaining provisions thereof shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance therefrom. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of the Loan Papers a provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 13.9. Successors and Assigns. (a) Each Loan Paper
binds and inures to the parties to it, any intended beneficiary of
it, and each of their respective successors and permitted assigns.
Borrower shall not assign or transfer any rights or obligations
under any Loan Paper without first obtaining all Banks' consent,
and any purported assignment or transfer without all Banks' consent
is void. No Bank may transfer, pledge, assign, sell any
participation in, or otherwise encumber its portion of the
Obligations except as permitted by clauses (b) or (c) below.
(b) Any Bank may (subject to the provisions of this section,
in accordance with applicable law, in the ordinary course of its
business, and at any time) sell to one or more Persons (each a
"Participant") participating interests in its portion of the
Obligations. The selling Bank remains a "Bank" under the Loan
Papers, the Participant does not become a "Bank" under the Loan
Papers, and the selling Bank's obligations under the Loan Papers
remain unchanged. The selling Bank remains solely responsible for
the performance of its obligations and remains the holder of its
share of the outstanding Loans for all purposes under the Loan
Papers. Borrower and each Administrative Agent shall continue to
deal solely and directly with the selling Bank in connection with
that Bank's rights and obligations under the Loan Papers, and each
Bank must retain the sole right and responsibility to enforce due
obligations of Borrower. Participants have no rights under the
Loan Papers except certain voting rights as provided below.
Subject to the following, each Bank may obtain (on behalf of its
Participants) the benefits of Article XII with respect to all
participations in its part of the Obligations outstanding from time
to time so long as Borrower is not obligated to pay any amount in
excess of the amount that would be due to that Bank under Article
XII calculated as though no participations have been made. No Bank
may sell any participating interest under which the Participant has
any rights to approve any amendment, modification, or waiver of any
Loan Paper except as to matters in Section 13.5.
(c) Each Bank may make assignments to the Federal Reserve
Bank. Each Bank may also assign to one or more assignees (each an
"Assignee") all or any part of its rights and obligations under
the Loan Papers so long as (i) the assignor Bank and Assignee
execute and deliver to Administrative Agent, the Issuer and
Borrower for their consent and acceptance (that may not be
unreasonably withheld and will not be required from Borrower during
the existence of a Default or an Event of Default) an assignment
and assumption agreement in substantially the form of Exhibit J (an
"Assignment and
58
Assumption Agreement") and assignor Bank pays to
Administrative Agent a processing fee of $3,500, (ii) the
conditions (including, without limitation, minimum amounts of the
Total Commitment that may be assigned or that must be retained) for
that assignment set forth in the applicable Assignment and
Assumption Agreement are satisfied, and (iii) no Event of Default
exists under the Agreement. The "Effective Date" in each
Assignment and Assumption Agreement must (unless a shorter period
is agreeable to Borrower and Administrative Agent) be at least five
Domestic Business Days after it is executed and delivered by the
assignor Bank and the Assignee to the Administrative Agent and
Borrower for acceptance. Once that Assignment and Assumption
Agreement is accepted by Administrative Agent and Borrower, then,
from and after the Effective Date stated on it (i) the Assignee
automatically becomes a party to this Agreement and, to the extent
provided in that Assignment and Assumption Agreement, has the
rights and obligations of a Bank under the Loan Papers, (ii) the
assignor Bank, to the extent provided in that Assignment and
Assumption Agreement, is released from its obligations under this
Agreement and, in the case of an Assignment and Assumption
Agreement covering all of the remaining portion of the assignor
Bank's rights and obligations under the Loan Papers, that Bank
ceases to be a party to the Loan Papers, (iii) Borrower shall
execute and deliver to the assignor Bank and the Assignee the
appropriate Notes in accordance with this Agreement following the
transfer, (iv) upon delivery of the Notes under clause (iii)
preceding, the assignor Bank shall return Borrower all Notes
previously delivered to that Bank under this Agreement, and (v)
Schedule 1 is automatically deemed to be amended to reflect the
name, address, telecopy number and Commitment of the Assignee and
the remaining Commitment (if any) of the assignor Bank, and
Administrative Agent shall prepare and circulate to Borrower and
Banks an amended Schedule 1 reflecting those changes.
SECTION 13.10. TEXAS LAW. THIS AGREEMENT AND EACH NOTE AND
THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL
LAW.
SECTION 13.11. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become
effective when Administrative Agent shall have received
counterparts hereof signed by all of the parties hereto or, in the
case of any Bank as to which an executed counterpart shall not have
been received, Administrative Agent shall have received a signature
by facsimile or other written confirmation from such Bank of
execution of a counterpart hereof by such Bank.
SECTION 13.12. No Third Party Beneficiaries. It is expressly
intended that there shall be no third party beneficiaries of the
covenants, agreements, representations or warranties herein
contained other than third party beneficiaries permitted pursuant
to Section 13.9(b).
SECTION 13.13. COMPLETE AGREEMENT. THIS AGREEMENT AND THE
OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND
AMONG BANKS, ADMINISTRATIVE AGENT AND BORROWER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF BANKS, ADMINISTRATIVE AGENT
59
109
AND BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANKS,
ADMINISTRATIVE AGENT AND BORROWER.
SECTION 13.14. WAIVER OF JURY TRIAL. BORROWER AND BANKS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN PAPERS AND FOR ANY COUNTERCLAIM THEREIN.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
60
110
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers effective as of the day and year first above written.
XXXXX PETROLEUM COMPANY,
a Delaware corporation
By ______________________________
Xxxxx X. Xxxxxxx, President and
Chief Executive Officer
By _______________________________
Xxxxx X. Xxxxxxxx, Senior Vice
President and Chief Financial
Officer
BANK OF AMERICA, N.A., as
Administrative Agent
By _______________________
Xxxxxx X. Xxx
Managing Director
BANK OF AMERICA, N.A., as a Bank
and as Letter of Credit Issuer
By __________________________
Xxxxxx X. Xxx
Managing Director
THE FIRST NATIONAL BANK OF
CHICAGO, as Documentation Agent
And as a Bank
By ___________________________
Name: Xxxx Xxxxxx
Title: An Authorized Officer
UNION BANK OF CALIFORNIA, N.A.
By ___________________________
Name: Xxxxxx Xxxxxxxxx
Title: Senior Vice President
XXXXX FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By ____________________________
Name: Xxxx Xxxxxxxx
Title: Vice President
[SIGNATURE PAGE TO XXXXX PETROLEUM COMPANY CREDIT AGREEMENT]
61
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SCHEDULE 1
COMMITMENTS AND COMMITMENT PERCENTAGE
Banks Commitment Amount Commitment Percentage
Bank of America, N.A. $50,000,000.00 33.3333333%
The First National $40,000,000.00 26.0000000%
Bank of Chicago
Xxxxx Fargo Bank $30,000,000.00 20.0000000%
(Texas), National
Association
Union Bank of $30,000,000.00 20.0000000%
California, N.A.
TOTAL $150,000,000.00 100%
62
