EXHIBIT 10.1
CREDIT AGREEMENT
AMONG
HOWELL PETROLEUM CORPORATION,
AS BORROWER,
BANK ONE, TEXAS, N.A.,
AS AGENT AND AS A LENDER,
BANK OF MONTREAL,
AS A LENDER,
COMPASS BANK-HOUSTON,
AS A LENDER,
AND
DEN NORSKE BANK AS,
AS A LENDER
Dated as of March 31, 1995
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above 1
1.2 Additional Defined Terms 1
1.3 Undefined Financial Accounting Terms 16
1.4 References 16
1.5 Articles and Sections 16
1.6 Number and Gender 16
1.7 Incorporation of Exhibits 17
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit 17
2.2 Letter of Credit Facility 18
2.3 Limitations on Interest Periods 19
2.4 Limitation on Types of Loans 20
2.5 Use of Loan Proceeds and Letters of Credit 20
2.6 Interest 20
2.7 Repayment of Loans and Interest 21
2.8 General Terms 22
2.9 Time, Place, and Method of Payments 22
2.10 Pro Rata Treatment; Adjustments 22
2.11 Borrowing Base Determinations 23
2.12 Mandatory Prepayments 24
2.13 Voluntary Prepayments and Conversions of Loans 24
2.14 Commitment Fee 25
2.15 Facility Fee 25
2.16 Letter of Credit Fee 25
2.17 Agency Fee 25
2.18 Loans to Satisfy Obligations of Borrower 25
2.19 Security Interest in Accounts; Right of Offset 25
2.20 General Provisions Relating to Interest 26
2.21 Obligations Absolute 27
2.22 Yield Protection 28
2.23 Illegality 29
2.24 Taxes 30
2.25 Replacement Lenders 31
2.26 Regulatory Change 32
2.27 Letters in Lieu of Transfer Orders 32
2.28 Power of Attorney 32
ARTICLE III CONDITIONS
3.1 Conditions Precedent to Initial Loan 33
3.2 Conditions Precedent to Each Loan 35
3.3 Conditions Precedent to Issuance of Letters of Credit 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization 37
4.2 Corporate Existence 37
4.3 Valid and Binding Obligations 37
4.4 Security Instruments 37
4.5 Title to Assets 37
4.6 Scope and Accuracy of Financial Statements 37
4.7 No Material Misstatements 38
4.8 Liabilities, Litigation, and Restrictions 38
4.9 Authorizations; Consents 38
4.10 Compliance with Laws 38
4.11 ERISA 38
4.12 Environmental Laws 39
4.13 Compliance with Federal Reserve Regulations 39
4.14 Investment Company Act Compliance 39
4.15 Public Utility Holding Company Act Compliance 39
4.16 Proper Filing of Tax Returns; Payment of Taxes Due 40
4.17 Refunds 40
4.18 Gas Contracts 40
4.19 Intellectual Property 40
4.20 Casualties or Taking of Property 40
4.21 Locations of Borrower 40
4.22 Subsidiaries 41
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records 41
5.2 Monthly Financial Reports 41
5.3 Quarterly Financial Statements; Compliance
Certificates 41
5.4 Annual Financial Statements; Compliance Certificates 41
5.5 Oil and Gas Reserve Reports 42
5.6 Title Opinions; Title Defects 42
5.7 Notices of Certain Events 42
5.8 Letters in Lieu of Transfer Orders; Division Orders 44
5.9 Additional Information 44
5.10 Compliance with Laws 44
5.11 Payment of Assessments and Charges 44
5.12 Maintenance of Corporate Existence and Good Standing 44
5.13 Further Assurances 45
5.14 Fees and Expenses 45
5.15 Operation of Oil and Gas Properties 45
5.16 Maintenance and Inspection of Properties 45
5.17 Maintenance of Insurance 46
5.18 Maintenance of Operating Accounts 46
5.19 Indemnification 46
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness 47
6.2 Contingent Obligations 48
6.3 Liens 48
6.4 Sales of Assets 48
6.5 Loans or Advances 48
6.6 Investments 48
6.7 Dividends and Distributions 49
6.8 Capital Expenditures 49
6.9 Issuance of Stock; Changes in Corporate Structure 49
6.10 Transactions with Affiliates 49
6.11 Lines of Business 49
6.12 Rental or Lease Agreements 49
6.13 ERISA Compliance 49
6.14 Tangible Net Worth 50
6.15 Cash Flow Coverage 50
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default 50
7.2 Remedies 52
ARTICLE VIII THE AGENT
8.1 Appointment 53
8.2 Delegation of Duties 53
8.3 Exculpatory Provisions 53
8.4 Reliance by Agent 54
8.5 Notice of Default 54
8.6 Non-Reliance on Agent and Other Lenders 55
8.7 Indemnification 55
8.8 Restitution 56
8.9 Agent in Its Individual Capacity 56
8.10 Successor Agent 57
8.11 Applicable Parties 57
ARTICLE IX MISCELLANEOUS
9.1 Assignments; Participations 57
9.2 Survival of Representations, Warranties, and Covenants 58
9.3 Notices 58
9.4 Parties in Interest 59
9.5 Rights of Third Parties 59
9.6 No Waiver; Rights Cumulative 59
9.7 Survival Upon Unenforceability 59
9.8 Amendments; Waivers 59
9.9 Controlling Agreement 60
9.10 GOVERNING LAW 60
9.11 JURISDICTION AND VENUE 60
9.12 WAIVER OF RIGHTS TO JURY TRIAL 61
9.13 ENTIRE AGREEMENT 61
9.14 Counterparts 61
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Assignment Agreement
Exhibit III - Form of Borrowing Request
Exhibit IV - Commitment Amounts
Exhibit V - Form of Compliance Certificate
Exhibit VI - Existing Letters of Credit
Exhibit VII - Notice of Change in Total Debt to Capitalization Ratio
Exhibit VIII - Form of Opinion of Counsel
Exhibit IX - Form of Opinion of Local Counsel
Exhibit X - Disclosures
THIS CREDIT AGREEMENT is made and entered into as of the 31st day of
March, 1995, by and among HOWELL PETROLEUM CORPORATION, a Delaware corporation
(the "Borrower"), BANK ONE, TEXAS, N.A., a national banking association ("Bank
One"), BANK OF MONTREAL, a Canadian chartered bank ("BOM"), COMPASS BANK-
HOUSTON, a Texas state chartered banking institution ("Compass"), and DEN NORSKE
BANK AS, a Norwegian bank ("DNB;" with each of Bank One, BOM, Compass, DNB, and
each other lender that becomes a signatory hereto as provided in Section 9.1,
individually, together with its successors and assigns, a "Lender" and
collectively, together with their respective successors and assigns, the
"Lenders"), and Bank One, as agent for the Lenders (in such capacity, together
with its successors in such capacity pursuant to the terms hereof, the "Agent").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows, amending and restating in
its entirety the Credit Agreement dated as of December 31, 1992, by and between
the Borrower and Bank One (as heretofore amended, restated, or supplemented, the
"Existing Credit Agreement").
ARTICLE IDEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms "Agent,"
"Bank One," "BOM," "Borrower," "Compass," "DNB," "Existing Credit Agreement,"
"Lender," and "Lenders" shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of the
following terms shall have the meaning assigned thereto in this Section, unless
the context otherwise requires:
"Additional Costs" shall mean costs which the Agent or any Lender
determines are attributable to its obligation to make or its making or
maintaining any LIBO Rate Loan or issuing or participating in Letters of Credit,
or any reduction in any amount receivable by the Agent or any Lender in respect
of any such obligation or any LIBO Rate Loan or Letter of Credit, resulting from
any Regulatory Change which (a) changes the basis of taxation of any amounts
payable to the Agent or such Lender under this Agreement or any Note in respect
of any LIBO Rate Loan or Letter of Credit (other than taxes imposed on the
overall net income of the Agent or such Lender or its Applicable Lending Office
for any such LIBO Rate Loan by the jurisdiction in which the Agent or such
Lender has its principal office or Applicable Lending Office), (b) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio, or
similar requirements (other than the Reserve Requirement utilized in the
determination of the Adjusted LIBO Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, the Agent or such Lender (including LIBO Rate Loans and Dollar
deposits in the London interbank market in connection with LIBO Rate Loans), or
the Commitment of the Agent or such Lender, or the London interbank market, or
(c) imposes any other condition affecting this Agreement or any Note or any of
such extensions of credit, liabilities, or Commitments.
"Adjusted LIBO Rate" shall mean, for any Interest Period for any LIBO
Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Agent to be equal to the quotient of (a)
the sum of the LIBO Rate for such Interest Period for such Loan plus the
Applicable Margin from time to time in effect divided by (b) 1 minus the Reserve
Requirement for such Loan for such Interest Period, such rate to be computed on
the basis of a year of 360 days and actual days elapsed (including the first day
but excluding the last day) during the period for which payable, but in no event
shall such rate exceed the Highest Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly controlled
by, controlling, or under common control with, the Borrower and includes any
Subsidiary of the Borrower and any "affiliate" of the Borrower within the
meaning of Reg. 240.12b-2 of the Securities Exchange Act of 1934, as amended,
with "control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Agency Fee Letter" shall mean the letter agreement dated as of
February 9, 1995, between Bank One and the Guarantor concerning certain fees in
connection with the transactions contemplated hereby, and any agreements or
instruments executed in connection therewith, as amended, restated, or
supplemented from time to time.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Applicable Lending Office" shall mean, for each Lender and type of
Loan, the lending office of such Lender (or an affiliate of such Lender)
designated for such type of Loan on the signature pages hereof or such other
office of such Lender (or an affiliate of such Lender) as such Lender may from
time to time specify to the Agent and the Borrower as the office by which its
Loans of such type are to be made and maintained.
"Applicable Margin" shall mean, as to each LIBO Rate Loan and subject
to adjustment as provided in Section 2.6, two percent (2%).
"Assignment Agreement" shall mean an Assignment Agreement,
substantially in the form of Exhibit II, with appropriate insertions.
"Available Commitment" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the lesser of the Maximum Commitment Amount or the
Borrowing Base in effect at such time minus (b) the sum of the Loan Balance at
such time plus the L/C Exposure at such time.
"Base Rate" shall mean the interest rate announced or published by
Bank One from time to time as its general reference rate of interest, which Base
Rate shall change upon each change in such announced or published general
reference interest rate and which Base Rate may not be the lowest interest rate
charged by Bank One.
"Borrowing Base" shall mean, at any time, the amount determined by the
Lenders in accordance with Section 2.11.
"Borrowing Request" shall mean each written request, in substantially
the form attached hereto as Exhibit III, by the Borrower to the Agent for a
borrowing or conversion pursuant to Section 2.1 or 2.13, each of which shall:
be signed by a Responsible Officer of the Borrower;
specify the amount and type of Loan requested or the Loan to be converted
and the requested date of such borrowing or conversion (which shall be a
Business Day);
when requesting a Floating Rate Loan, be delivered to the Agent no later
than noon, Central Standard or Daylight Savings Time, as the case may be, on the
Business Day of the requested borrowing or conversion; and
when requesting a LIBO Rate Loan, be delivered to the Agent no later than
9:00 a.m., Central Standard or Daylight Savings Time, as the case may be, the
second Business Day preceding the requested borrowing or conversion and
designate the Interest Period requested with respect to such Loan.
"Business Day" shall mean (a) for all purposes other than as covered
by clause (b) of this definition, a day other than a Saturday, Sunday, legal
holiday for commercial banks under the laws of the State of Texas, or any other
day when banking is suspended in the State of Texas, and (b) with respect to all
requests, notices, and determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is a Business Day
described in clause (a) of this definition and which is a day for trading by and
between banks for Dollar deposits in the London interbank market.
"Capitalization" shall mean, at any time, the sum of Total Debt plus
Consolidated Shareholders' Equity.
"Cash Flow" shall mean, for any period, Net Income (exclusive of any
non-cash income) for such period plus depreciation, amortization, and other non-
cash expenses for such period deducted in the determination of Net Income for
such period.
"Closing Date" shall mean March 31, 1995.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Mortgaged Properties, all capital stock of
the Borrower and Howell Crude Oil Company, a Delaware corporation, and any other
Property now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commitment Amount" shall mean, for each Lender, the amount set forth
opposite the name of such Lender on Exhibit IV under the caption "Commitment
Amounts," as modified from time to time to reflect assignments permitted by
Section 9.1 or otherwise pursuant to the terms hereof.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean June 1, 1997.
"Commitments" shall mean the several obligations of the Lenders to
make and maintain Loans to or for the benefit of the Borrower pursuant to
Section 2.1 and the obligation of the Agent to issue and the Lenders to
participate in Letters of Credit pursuant to Section 2.2.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower or the Guarantor within the meaning of Section
4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
the form attached hereto as Exhibit V, executed by a Responsible Officer of the
Borrower and the Guarantor and delivered by the Borrower from time to time in
accordance with the terms hereof.
"Consolidated Shareholders' Equity" shall mean, at any time, all
amounts which would, in accordance with GAAP, be included under consolidated
common stock and other stockholders' equity of the Guarantor (including, without
limitation, amounts for non-redeemable preferred stock, common stock, capital
surplus, and retained earnings and other stockholders' equity so long as not
subject to any mandatory redemption).
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person (for purposes of this
definition, a "primary obligation") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
regardless of whether such obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other Person in
respect of any primary obligation, or otherwise to maintain the net worth or
solvency of any other Person, (c) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any primary obligation of the
ability of the Person primarily liable for such primary obligation to make
payment thereof, or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"Debt Service" shall mean, (a) for any fiscal quarter ending prior to
the Commitment Termination Date, an amount equal to 1/16 of the sum of the Loan
Balance plus the L/C Exposure at the end of such fiscal quarter, and (b) for any
fiscal quarter ending after the Commitment Termination Date, an amount equal to
the actual payments of principal required to be made by the Borrower (regardless
of whether such payments are in fact made and excluding any voluntary
prepayments) on all obligations of the Borrower evidenced by bonds, debentures,
promissory notes or similar evidences of Indebtedness of the Borrower during
such fiscal quarter.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Base
Rate plus five percent (5%), such rate to be computed on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed (including the
first day but excluding the last day) during the period for which payable, but
in no event shall such rate exceed the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Complaint" shall mean any written or oral complaint,
order, directive, claim, citation, or notice of violation, investigation, or
potential liability by or from any Governmental Authority or any other Person
with respect to (a) air emissions of Hazardous Substances, (b) spills, releases,
or discharges of Hazardous Substances to soils, any improvements located
thereon, surface water, groundwater, or the sewer, septic, waste treatment,
storage, or disposal systems servicing any Property of the Borrower or the
Guarantor or any Affiliate of the Guarantor, (c) solid or liquid waste disposal,
(d) the use, generation, storage, transportation, or disposal of any Hazardous
Substance, or (e) other environmental, health, or safety matters affecting any
Property of the Borrower or the Guarantor or any Affiliate of the Guarantor or
the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as they
may be amended from time to time: the Clean Air Act, the Clean Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Hazardous Materials Transportation Act of 1986, the
Occupational Safety and Health Act, the Oil Pollution Act of 1990, the Resource
Conservation and Recovery Act of 1976, the Safe Drinking Water Act, the
Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act,
and the Pipeline Safety Act; (b) any and all equivalent environmental statutes
of any state in which Property of the Borrower, the Guarantor, or any Affiliate
of the Guarantor is situated, as they may be amended from time to time; (c) any
rules or regulations promulgated under or adopted pursuant to the above federal
and state laws; and (d) any other equivalent federal, state, or local statute or
any requirement, rule, regulation, code, ordinance, or order adopted pursuant
thereto, including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or release of
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Existing Letters of Credit" shall mean the letters of credit
described on Exhibit VI issued by Bank One and outstanding as of the Closing
Date.
"Existing Loan Documents" shall mean the Loan Documents, as such term
is defined in the Existing Credit Agreement.
"Existing Note" shall mean the Note, as such term is defined in the
Existing Credit Agreement.
"Existing Security Instruments" shall mean the Security Instruments,
as such term is defined in the Existing Credit Agreement.
"Facility Fee Letter" shall mean the letter agreement dated as of
March 24, 1995, among the Agent, Bank One, BOM, Compass, DNC, and the Borrower
concerning certain fees in connection with the transactions contemplated hereby,
and any agreements or instruments executed in connection therewith, as amended,
restated, or supplemented from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas, Texas, on the Business
Day next succeeding such day, provided that (a) if the day for which such rate
is to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Final Maturity" shall mean June 1, 2001.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and consisting of
at least a balance sheet and related statements of operations, common stock and
other stockholders' equity, and cash flows and, when required by applicable
provisions of this Agreement to be audited, accompanied by the unqualified
certification of a nationally-recognized firm of independent certified public
accountants or other independent certified public accountants acceptable to the
Agent and footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP (except that separate financial statements of the Borrower
not consolidated with the Guarantor need not contain footnotes or provision for
income taxes) consistently applied and in comparative form with respect to the
corresponding period of the preceding fiscal period.
"Floating Rate" shall mean, for any day, an interest rate per annum
equal to the greater of (a) the Base Rate for such day or (b) the Federal Funds
Rate for such day plus one-half of one percent (1/2%), such rate to be computed,
in either case, on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
during the period for which payable, but in no event shall such rate exceed the
Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request for
such Loan or a subsequent Borrowing Request for such portion of the Loan
Balance, bear interest at the Floating Rate, or which pursuant to the terms
hereof are otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time to
time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.
"Guarantor" shall mean Howell Corporation, a Delaware corporation.
"Guaranty" shall mean the Guaranty executed by the Guarantor in favor
of the Agent, guaranteeing the payment and performance of the Obligations, as
ratified, amended, restated, or supplemented from time to time.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum non-usurious interest rate, if any (or, if the context so requires, an
amount calculated at such rate), that at any time or from time to time may be
contracted for, taken, reserved, charged, or received under laws applicable to
such Lender, as such laws are presently in effect or, to the extent allowed by
applicable law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet, (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money and
capitalized leases, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether or not
such Person has assumed or become liable for the obligation secured by such
Lien).
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or of all
or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief, or other similar law of the United States, the State of Texas, or any
other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such term
as used in Section 4245 of ERISA.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Interest Period" shall mean, subject to the limitations set forth in
Section 2.3, with respect to any LIBO Rate Loan, a period commencing on the date
such Loan is made or converted from a Loan of another type pursuant to this
Agreement or the last day of the next preceding Interest Period with respect to
such Loan and ending on the numerically corresponding day in the calendar month
that is one, two, three, or, subject to availability, six months thereafter, as
the Borrower may request in the Borrowing Request for such Loan.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security of, investment or partnership
interest in or loan to, such Person.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" shall mean the Existing Letters of Credit and any
commercial or standby letter of credit issued for the account of the Borrower
pursuant to Section 2.2.
"Letter of Credit Application" shall mean the standard letter of
credit application employed by the Agent, as the issuer of the Letters of
Credit, from time to time in connection with letters of credit.
"Letter of Credit Payment" shall mean any payment made by the Agent on
behalf of the Lenders under a Letter of Credit, to the extent that such payment
has not been repaid by the Borrower.
"LIBO Rate" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to the average of the offered quotations appearing on
Knight-Ridder Page 62 (or any successor or similar service selected by the Agent
and the Borrower) as of approximately 11:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the day two Business Days prior to the
first day of such Interest Period for Dollar deposits in an amount comparable to
the principal amount of such LIBO Rate Loan and having a term comparable to the
Interest Period for such LIBO Rate Loan. If neither such Knight-Ridder Page 62
nor any successor or similar service is available, the term "LIBO Rate" shall
mean, with respect to any Interest Period for any LIBO Rate Loan, the rate per
annum (rounded upwards if necessary, to the nearest 1/16 of 1%) quoted by the
Agent at approximately 11:00 a.m., London time (or as soon thereafter as
practicable) two Business Days prior to the first day of the Interest Period for
such LIBO Rate Loan for the offering by the Agent to leading banks in the London
interbank market of Dollar deposits in an amount comparable to the principal
amount of such LIBO Rate Loan and having a term comparable to the Interest
Period for such LIBO Rate Loan.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request for
such Loan or a subsequent Borrowing Request for such portion of the Loan
Balance, bear interest at the Adjusted LIBO Rate and which are permitted by the
terms hereof to bear interest at the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether such
interest is based on common law, statute, or contract, and including, but not
limited to, the lien or security interest arising from a mortgage, ship
mortgage, encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment, or bailment for security purposes (other than
true leases or true consignments), liens of mechanics, materialmen, and
artisans, maritime liens and reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Property which secure an obligation owed
to, or a claim by, a Person other than the owner of such Property (for the
purpose of this Agreement, the Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
financing lease, or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security purposes), and
the filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean, with respect to any Lender, any period
while any amount remains owing on the Note payable to such Lender and interest
on such amount, calculated at the applicable interest rate, plus any fees or
other sums payable to such Lender under any Loan Document and deemed to be
interest under applicable law, would exceed the amount of interest which would
accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by any Lender to or for the benefit of
the Borrower pursuant to this Agreement and any payment made by the Agent or any
Lender under a Letter of Credit.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Notes at such time.
"Loan Documents" shall mean the Existing Loan Documents, this
Agreement, the Notes, the Guaranty, the Letter of Credit Applications, the
Letters of Credit, the Agency Fee Letter, the Facility Fee Letter, the Related
Facilities Agreement, the Security Instruments, and all other documents and
instruments now or hereafter delivered pursuant to the terms of or in connection
with the Existing Loan Documents, this Agreement, the Notes, the Guaranty, the
Letter of Credit Applications, the Letters of Credit, the Agency Fee Letter, the
Facility Fee Letter, the Related Facilities Agreement, or the Security
Instruments, and all renewals and extensions of, amendments and supplements to,
and restatements of, any or all of the foregoing from time to time in effect.
"Material Adverse Effect" shall mean any adverse effect upon the
Collateral or the business of the Borrower or the Guarantor or any Affiliate of
the Guarantor which significantly increases the risk that any of the Obligations
will not be repaid as and when due.
"Maximum Commitment Amount" shall mean the sum of the Commitment
Amounts of all Lenders.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower and/or the Guarantor subject to a perfected first-priority Lien in
favor of the Agent, subject only to Permitted Liens, as security for the
Obligations.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income (or loss) of
the Borrower for such period, determined in accordance with GAAP.
"Notes" shall mean, collectively, each of the promissory notes of the
Borrower payable to a Lender in the amount of the Commitment Amount of such
Lender or such amount in excess thereof as may be agreed to by the Borrower, the
Agent, and such Lender, in the form attached hereto as Exhibit I, with
appropriate insertions, together with all renewals, extensions for any period,
increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the obligation of the Borrower to provide to or
reimburse the Agent, as the issuer of Letters of Credit, or the Lenders, as the
case may be, for, amounts payable, paid, or incurred with respect to Letters of
Credit, (c) the undrawn, unexpired amount of all outstanding Letters of Credit,
(d) the obligation of the Borrower for the payment of fees and expenses pursuant
to the Loan Documents, (e) the obligations of the Guarantor under the Guaranty,
and (f) all other obligations and liabilities of the Borrower or the Guarantor
to the Agent and the Lenders, now existing or hereafter incurred, under, arising
out of or in connection with any Loan Document, and to the extent that any of
the foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued, been earned
and which remains unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests
in or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon
leases with respect to Properties situated in the United States or offshore from
any State of the United States, including, without limitation, overriding
royalty and royalty interests, leasehold estate interests, net profits
interests, production payment interests, and mineral fee interests, together
with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging, affixed, or
incidental thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any or
all of its functions under ERISA.
"Percentage Share" shall mean, as to each Lender, the percentage such
Lender's Commitment Amount constitutes of the Maximum Commitment Amount.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been initiated) are
being contested in good faith by appropriate proceedings, and such reserve as
may be required by GAAP shall have been made therefor, (b) Liens in connection
with workers' compensation, unemployment insurance or other social security
(other than Liens created by Section 4068 of ERISA), old-age pension, or public
liability obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (c) Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, and materialmen, and construction
or similar Liens arising by operation of law in the ordinary course of business
in respect of obligations that are not past-due or which are being contested in
good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and non-
operators under joint operating agreements or similar contractual arrangements
arising in the ordinary course of the business of the Borrower or the Guarantor
to secure amounts owing, which amounts are not yet due or are being contested in
good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (e) Liens under production sales agreements,
division orders, operating agreements, and other agreements customary in the oil
and gas business for processing, producing, and selling hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do not
secure obligations to deliver hydrocarbons at some future date without receiving
full payment therefor within 90 days of delivery, (f) easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the chain of
title which are customarily accepted in the oil and gas financing industry, none
of which interfere with the ordinary conduct of the business of the Borrower or
the Guarantor or materially detract from the value or use of the Property to
which they apply, (g) Liens of record under terms and provisions of the leases,
unit agreements, assignments, and other transfer of title documents in the chain
of title under which the Borrower or the Guarantor acquired the relevant
Property, and (h) Liens created by the Loan Documents and other Liens expressly
permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political subdivision of
any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, the Guarantor, or any
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the Agent in
Houston, Texas, presently located at 910 Travis.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as amended or supplemented from
time to time.
"Regulatory Change" shall mean, with respect to any Lender, the
passage, adoption, institution, or modification of any federal, state, local, or
foreign Requirement of Law (including, without limitation, Regulation D), or any
interpretation, directive, or request (whether or not having the force of law)
of any Governmental Authority or monetary authority charged with the
enforcement, interpretation, or administration thereof, occurring after the
Closing Date and applying to a class of lenders including such Lender or its
Applicable Lending Office.
"Related Facilities Agreement" shall mean the Agreement dated as of
the Closing Date among the Borrower, Howell Crude Oil Company, the Guarantor,
the Agent, and the Lenders, as amended, restated or supplemented from time to
time.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with applicable
Requirements of Law or the terms of a valid permit, license, certificate, or
approval of the relevant Governmental Authority, of any Hazardous Substance, in
amounts in excess of the relevant reportable quantity, into or upon (a) the air,
(b) soils or any improvements located thereon, (c) surface water or groundwater,
or (d) the sewer or septic system, or the waste treatment, storage, or disposal
system servicing any Property of the Borrower or the Guarantor.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in Section
4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
2615.
"Required Lenders" shall mean, at any time when no Loans are
outstanding, Lenders whose Percentage Shares total at least seventy percent
(70%), and, at any time when any Loans are outstanding, Lenders holding at least
seventy percent (70%) of the Loan Balance (without regard to any sale of a
participation in any Loan).
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and bylaws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator, court, or
other Governmental Authority, including, without limitation, rules, regulations,
orders, and requirements for permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
"Reserve Report" shall mean each report provided by the Borrower
pursuant to Section 5.5.
"Reserve Requirement" shall mean, for any Interest Period for any LIBO
Rate Loan, the average maximum rate at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in Dallas, Texas, with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D) and any other
reserves required by reason of any Regulatory Change to be maintained by such
member banks against (a) any category of liabilities which includes deposits by
reference to which the LIBO Rate is to be determined as provided herein in the
definition of the term "LIBO Rate" or (b) any category of extensions of credit
or other assets which include a LIBO Rate Loan.
"Responsible Officer" shall mean, as to any Person, its President, any
Vice President, or its Treasurer.
"Security Instruments" shall mean the Existing Security Instruments
and the security instruments executed and delivered in satisfaction of the
condition set forth in Section 3.1(g), and all other documents and instruments
at any time executed as security for all or any portion of the Obligations, as
such instruments may be amended, restated, or supplemented from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Subordinated Debt" shall mean Indebtedness (a) the payment of
principal and interest on which is subordinated, upon terms satisfactory to the
Agent and the Required Lenders in their sole discretion, to the repayment in
full of all Obligations, and (b) for which no payments (other than interest
payments) shall be required and no sinking fund or other similar mechanism shall
be established prior to the repayment in full of the Obligations and the
termination of the Commitments.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action or any
comparable state registries or list in any state of the United States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared in accordance with GAAP
(except for the omission of footnotes and provision for income taxes), exclusive
of Intellectual Property, experimental or organization expenses, franchises,
licenses, permits, and other intangible assets, treasury stock, unamortized
underwriters' debt discount and expenses, and goodwill minus (b) total
liabilities, as would be reflected on a balance sheet of the Borrower prepared
in accordance with GAAP (except for the omission of footnotes and provision for
income taxes).
"Total Debt" shall mean, at any time, the total liabilities of the
Guarantor, the Borrower, and all Subsidiaries of the Guarantor, on a
consolidated basis, for borrowed money, capitalized leases, and obligations to
the Department of Energy.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined financial accounting terms
used in this Agreement shall be defined according to GAAP at the time in effect.
1.4 References. References in this Agreement to Exhibit, Article, or Section
numbers shall be to Exhibits, Articles, or Sections of this Agreement, unless
expressly stated to the contrary. References in this Agreement to "hereby,"
"herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," "hereunder" and
words of similar import shall be to this Agreement in its entirety and not only
to the particular Exhibit, Article, or Section in which such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference herein made to
the single number shall be understood to include the plural; and likewise, the
plural shall be understood to include the singular. Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all
purposes.
ARTICLE IITERMS OF FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and conditions and relying on
the representations and warranties contained in this Agreement, each Lender
severally agrees to make Loans during the Commitment Period to or for the
benefit of the Borrower in an aggregate principal amount not to exceed at any
time outstanding the lesser of the Commitment Amount of such Lender or the
Percentage Share of such Lender of the Borrowing Base then in effect; provided,
however, that (i) the Loan Balance plus the L/C Exposure shall not exceed at any
time the lesser of the Maximum Commitment Amount or the Borrowing Base then in
effect, and (ii) the sum of the outstanding principal balance of all Loans by
any Lender plus the Percentage Share of such Lender of the L/C Exposure shall
not exceed at any time an amount equal to the Percentage Share of such Lender
multiplied by the lesser of the Maximum Commitment Amount or the Borrowing Base
then in effect. Loans shall be made from time to time on any Business Day
designated by the Borrower in its Borrowing Request for such Loan.
Subject to the terms of this Agreement, during the Commitment Period, the
Borrower may borrow, repay, and reborrow, and, from the closing date through
final maturity, convert Loans of one type or with one Interest Period into Loans
of another type or with a different Interest Period. Except for prepayments
made pursuant to Section 2.12, each borrowing, conversion, and prepayment of
principal of Loans shall be in an amount at least equal to $500,000. Each
borrowing, prepayment, or conversion of or into a Loan of a different type or,
in the case of a LIBO Rate Loan, having a different Interest Period, shall be
deemed a separate borrowing, conversion, and prepayment for purposes of the
foregoing, one for each type of Loan or Interest Period. Anything in this
Agreement to the contrary notwithstanding, the aggregate principal amount of
LIBO Rate Loans having the same Interest Period shall be at least equal to
$1,000,000; and if any LIBO Rate Loan would otherwise be in a lesser principal
amount for any period, such Loan shall be a Floating Rate Loan during such
period.
Not later than 3:00 p.m., Central Standard or Daylight Savings Time, as the
case may be, on the date specified for each borrowing, each Lender shall make
available an amount equal to its Percentage Share of the borrowing to be made on
such date to the Agent, at an account designated by the Agent, in immediately
available funds, for the account of the Borrower. The amount so received by the
Agent shall, subject to the terms and conditions hereof, be made available to
the Borrower in immediately available funds at the Principal Office. All Loans
by each Lender shall be maintained at the Applicable Lending Office of such
Lender and shall be evidenced by the Note of such Lender.
The failure of any Lender to make any Loan required to be made by it
hereunder shall not relieve any other Lender of its obligation to make any Loan
required to be made by it, and no Lender shall be responsible for the failure of
any other Lender to make any Loan.
2.2 Letter of Credit Facility. (a) Upon the terms and conditions and relying
on the representations and warranties contained in this Agreement, the Agent, as
issuing bank for the Lenders, agrees from the date of this Agreement until the
date which is thirty days prior to the Commitment Termination Date, to issue on
behalf of the Lenders in their respective Percentage Shares Letters of Credit
for the account of the Borrower and to renew and extend such Letters of Credit.
Letters of Credit shall be issued, renewed, or extended from time to time on any
Business Day designated by the Borrower following the receipt in accordance with
the terms hereof by the Agent of the written (or oral, confirmed promptly in
writing) request by a Responsible Officer of the Borrower therefor and a Letter
of Credit Application. Letters of Credit shall be issued in such amounts as the
Borrower may request; provided, however, that (i) no Letter of Credit shall have
an expiration date which is more than 365 days after the issuance thereof or
subsequent to Final Maturity, (ii) each automatically renewable Letter of Credit
shall provide that it may be terminated by the Agent at its then current expiry
date by not less than 30 days' written notice by the Agent to the beneficiary of
such Letter of Credit, and (iii) the Agent shall not be obligated to issue any
Letter of Credit if (A) the face amount thereof would exceed the Available
Commitment, or (B) after giving effect to the issuance thereof, (I) the L/C
Exposure, when added to the Loan Balance then outstanding, would exceed the
lesser of the Maximum Commitment Amount or the Borrowing Base, or (II) the L/C
Exposure would exceed $5,000,000.
Prior to any Letter of Credit Payment in respect of any Letter of Credit,
each Lender shall be deemed to be a participant through the Agent with respect
to the relevant Letter of Credit (including, without limitation, the Existing
Letters of Credit) in the obligation of the Agent, as the issuer of such Letter
of Credit, in an amount equal to the Percentage Share of such Lender of the
maximum amount which is or at any time may become available to be drawn
thereunder. Upon delivery by such Lender of funds requested pursuant to Section
2.2(c), such Lender shall be treated as having purchased a participating
interest in an amount equal to such funds delivered by such Lender to the Agent
in the obligation of the Borrower to reimburse the Agent, as the issuer of such
Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as
the issuer of such Letter of Credit, with respect to such Letter of Credit.
Each Lender shall be unconditionally and irrevocably liable, without regard
to the occurrence of any Default or Event of Default, to the extent of the
Percentage Share of such Lender at the time of issuance (or, with respect to the
Existing Letters of Credit, on the Closing Date) of each Letter of Credit, to
reimburse, on demand, the Agent, as the issuer of such Letter of Credit, for the
amount of each Letter of Credit Payment under such Letter of Credit. Each
Letter of Credit Payment shall be deemed to be a Floating Rate Loan by each
Lender to the extent of funds delivered by such Lender to the Agent with respect
to such Letter of Credit Payment and shall to such extent be deemed a Floating
Rate Loan under and shall be evidenced by the Note of such Lender and shall be
payable by the Borrower upon demand by the Agent.
EACH LENDER AGREES TO INDEMNIFY THE AGENT, AS THE ISSUER OF EACH LETTER OF
CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER AND
WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), RATABLY ACCORDING TO
THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE OF SUCH LETTER OF
CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY
TIME FOLLOWING THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST
THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY
ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT
LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED
OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER
(OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT AS THE
ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.2(d) SHALL
SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF
THIS AGREEMENT.
2.3 Limitations on Interest Periods. Each Interest Period selected by the
Borrower (a) which commences on the last Business Day of a calendar month (or
any day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month, (b) which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day), (c) which would otherwise end after Final Maturity
shall end on Final Maturity, and (d) shall have a duration of not less than one
month and, if any Interest Period would otherwise be a shorter period, the
relevant Loan shall be a Floating Rate Loan during such period.
2.4 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, no more than five separate Loans shall be outstanding at any
one time, with, for purposes of this Section, all Floating Rate Loans
constituting one Loan and all LIBO Rate Loans for the same Interest Period
constituting one Loan. Anything herein to the contrary notwithstanding, if, on
or prior to the determination of any interest rate for any LIBO Rate Loan for
any Interest Period therefor:
(a) the Agent determines (which determination shall be conclusive, absent
manifest error) that quotations of interest rates for the deposits referred to
in the definition of "LIBO Rate" in Section 1.2 are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining the
rate of interest for such Loan as provided in this Agreement; or
(b) the Agent determines (which determination shall be conclusive, absent
manifest error) that the rates of interest referred to in the definition of
"LIBO Rate" in Section 1.2 upon the basis of which the rate of interest for such
Loan for such Interest Period is to be determined do not accurately reflect the
cost to the Lenders of making or maintaining such Loan for such Interest Period,
then the Agent shall give the Borrower and the Lenders prompt notice thereof
(which notice shall be deemed rebuttably presumptive evidence of the conditions
set forth therein); and so long as such condition remains in effect, the Lenders
shall be under no obligation to make LIBO Rate Loans or to convert Floating Rate
Loans into LIBO Rate Loans, and the Borrower shall, on the last day of the then
current Interest Period for each outstanding LIBO Rate Loan, either prepay such
LIBO Rate Loan or convert such Loan into a Floating Rate Loan in accordance with
Section 2.13. Before giving such notice pursuant to this Section, the Agent
will take such action as the Borrower may request if such action will avoid the
need to suspend the obligation of the Lenders to make LIBO Rate Loans hereunder
and will not, in the opinion of the Agent, be disadvantageous to the Lenders.
2.5 Use of Loan Proceeds and Letters of Credit. (a) As of the date hereof,
indebtedness in the amount of $34,300,000 is outstanding under the Existing
Note. On the Closing Date, each Lender other than Bank One shall pay to Bank
One an amount equal to the Percentage Share of such Lender of the amount of such
outstanding indebtedness. Such indebtedness shall be renewed, extended, and
rearranged pursuant to the terms of this Agreement and the Notes and shall for
all purposes be deemed a borrowing hereunder. Proceeds of all subsequent Loans
shall be used solely for general corporate purposes of the Borrower, including
advances and acquisitions not prohibited by the terms hereof.
Letters of Credit shall be used solely for general corporate purposes of
the Borrower.
2.6 Interest. (a) Subject to the terms of this Agreement (including, without
limitation, Section 2.20), interest on the Loans shall accrue and be payable at
a rate per annum equal to the Floating Rate for each Floating Rate Loan and the
Adjusted LIBO Rate for each LIBO Rate Loan. Notwithstanding the foregoing,
interest on past-due principal and, to the extent permitted by applicable law,
past-due interest, shall accrue at the Default Rate and shall be payable upon
demand by the Agent at any time as to all or any portion of such interest. In
the event that the Borrower fails to select the duration of any Interest Period
for any LIBO Rate Loan within the time period and otherwise as provided herein,
such Loan (if outstanding as a LIBO Rate Loan) will be automatically converted
into a Floating Rate Loan on the last day of the then current Interest Period
for such Loan or (if outstanding as a Floating Rate Loan) will remain as, or (if
not then outstanding) will be made as, a Floating Rate Loan. Interest provided
for herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date or
dates of such advances until repayment.
(b) In the event the ratio of Total Debt to Capitalization as of the
end of any fiscal quarter of the Guarantor is less than or equal to .5 to 1.0,
the Borrower and the Guarantor may give notice, in the form of Exhibit VII, of
such fact to the Agent. On the Business Day following the receipt by the Agent
of such notice, the Applicable Margin shall be reduced to one and one-half
percent (1-1/2%). If, at any time thereafter, the ratio of Total Debt to
Capitalization as of the end of any fiscal quarter of the Guarantor is greater
than .5 to 1.0, the Borrower and the Guarantor shall give notice, in the form of
Exhibit VII, of such fact to the Agent. On the Business Day following the
receipt by the Agent of such notice, the Applicable Margin shall be increased to
two percent (2%) and thereafter shall not be subject to reduction as provided in
the first sentence of this subsection until the ratio of Total Debt to
Capitalization shall have been less than or equal to .5 to 1.0 for two
successive fiscal quarters.
2.7 Repayment of Loans and Interest. (a) Accrued and unpaid interest on each
outstanding Floating Rate Loan shall be due and payable monthly commencing on
the first day of May, 1995, and continuing on the first day of each calendar
month thereafter while any Floating Rate Loan remains outstanding, the payment
in each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Loan. Accrued and unpaid interest on each
outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third calendar month following the
commencement of such Interest Period corresponding to the day of the calendar
month on which such Interest Period commenced, the payment in each instance to
be the amount of interest which has accrued and remains unpaid in respect of the
relevant Loan.
The Loan Balance as of the Commitment Termination Date shall be due and
payable in quarterly installments commencing on the first day of September,
1997, and continuing thereafter on the first day of each third calendar month
while any Loan Balance remains outstanding, the payment in each instance to be
established by the Lenders in connection with the then most recent semi-annual
redetermination of the Borrowing Base pursuant to Section 2.11 and communicated
to the Borrower in writing at the time of each such redetermination. The Loan
Balance, together with all accrued and unpaid interest thereon, shall be due and
payable at Final Maturity.
At the time of making each payment hereunder or under the Notes, the
Borrower shall specify to the Agent the Loans or other amounts payable by the
Borrower hereunder to which such payment is to be applied. In the event the
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Agent may apply such payment as it may elect in its sole
discretion and in accordance with the terms hereof.
2.8 General Terms. (a) The outstanding principal balance of the Note of each
Lender reflected in the records of such Lender shall be deemed rebuttably
presumptive evidence of the principal amount owing on such Note. The liability
for payment of principal and interest evidenced by each Note shall be limited to
principal amounts actually advanced and outstanding pursuant to this Agreement
and interest on such amounts calculated in accordance with this Agreement.
Unless the Agent shall have been notified by a Lender or the Borrower prior
to the date on which either of them is scheduled to make payment to the Agent of
(in the case of a Lender) the proceeds of a Loan to be made by such Lender
hereunder or (in the case of the Borrower) a payment to the Agent for the
account of one or more of the Lenders hereunder (such payment being herein
called the "Required Payment"), which notice shall be effective upon receipt,
that such Lender or the Borrower, as the case may be, does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and, in reliance upon such assumption, may (but shall not
be required to) make the amount thereof available to the intended recipient on
such date. If such Lender or the Borrower, as the case may be, has not in fact
made the Required Payment to the Agent, the recipient of such payment shall, on
demand, repay to the Agent for its account the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to, in the case of a Lender as
recipient, the Federal Funds Rate or, in the case of the Borrower as recipient,
the Floating Rate.
2.9 Time, Place, and Method of Payments. All payments required pursuant to
this Agreement or the Notes shall be made without set-off or counterclaim in
Dollars and in immediately available funds. All payments by the Borrower shall
be deemed received on the next Business Day following receipt if such receipt is
after 5:00 p.m., Central Standard or Daylight Savings Time, as the case may be,
on any Business Day, and shall be made to the Agent at the Principal Office.
Except as provided to the contrary herein, if the due date of any payment
hereunder or under any Note would otherwise fall on a day which is not a
Business Day, such date shall be extended to the next succeeding Business Day,
and interest shall be payable for any principal so extended for the period of
such extension.
2.10 Pro Rata Treatment; Adjustments. (a) Except to the extent otherwise
expressly provided herein, (i) each borrowing made pursuant to this Agreement
shall be from the Lenders pro rata in accordance with their Percentage Shares,
(ii) each payment by the Borrower of fees shall be made for the account of the
Lenders pro rata in accordance with their respective Percentage Shares, (iii)
each payment of principal of Loans shall be made for the account of the Lenders
pro rata in accordance with their respective shares of the Loan Balance, and
(iv) each payment of interest on Loans shall be made for the account of the
Lenders pro rata in accordance with their respective shares of the aggregate
amount of interest due and payable to the Lenders.
The Agent shall distribute all payments with respect to the Obligations to
the Lenders promptly upon receipt in like funds as received. In the event that
any payments made hereunder by the Borrower at any particular time are
insufficient to satisfy in full the Obligations due and payable at such time,
such payments shall be applied (a) first, to fees and expenses due pursuant to
the terms of this Agreement or any other Loan Document, (b) second, to accrued
interest, (c) third, to the Loan Balance, and (d) last, to any other
Obligations.
If any Lender (for purposes of this Section, a "benefitted Lender") shall
at any time receive any payment of all or part of its portion of the
Obligations, or receive any Collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Sections 7.1(e) or 7.1(f), or otherwise) in an amount greater
than such Lender was entitled to receive pursuant to the terms hereof, such
benefitted Lender shall purchase for cash from the other Lenders such portion of
the Obligations of such other Lenders or shall provide such other Lenders with
the benefits of any such Collateral or the proceeds thereof as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds with each of the Lenders according to
the terms hereof. If all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded and the purchase price and benefits returned by such Lender, to the
extent of such recovery, but without interest. The Borrower agrees that each
such Lender so purchasing a portion of the Obligations of another Lender may
exercise all rights of payment (including, without limitation, rights of set-
off) with respect to such portion as fully as if such Lender were the direct
holder of such portion. If any Lender ever receives, by voluntary payment,
exercise of rights of set-off or banker's lien, counterclaim, cross-action or
otherwise, any funds of the Borrower to be applied to the Obligations, or
receives any proceeds by realization on or with respect to any Collateral, all
such funds and proceeds shall be immediately forwarded to the Agent for
distribution in accordance with the terms of this Agreement.
2.11 Borrowing Base Determinations. (a) The Borrowing Base as of the Closing
Date is acknowledged by the Borrower and the Lenders to be $43,250,000.
Commencing on May 1, 1995, and continuing thereafter on the first day of each
calendar month through the Commitment Termination Date, the amount of the
Borrowing Base shall be reduced by $750,000.
The Borrowing Base shall be redetermined by the Lenders in their sole
discretion on or before each April 1 and October 1 during the term hereof on the
basis of information supplied by the Borrower in compliance with the provisions
of this Agreement, including, without limitation, Reserve Reports, and all other
information available to the Lenders, subject, in the case of any increase in
the Borrowing Base, to the normal credit approval processes of the Lenders. In
addition, the Lenders shall, in the normal course of business following a
request of the Borrower, redetermine the Borrowing Base; provided, however, the
Lenders shall not be obligated to redetermine the Borrowing Base more than once
in any three-month period, including, without limitation, each scheduled semi-
annual redetermination provided for above. Notwithstanding the foregoing, at
the request of any Lender, the Lenders may at their discretion redetermine the
Borrowing Base and the amount by which the Borrowing Base shall be reduced each
calendar month as set forth in Section 2.11(a) at any time and from time to
time, including, without limitation, upon the sale of any assets.
Upon each determination of the Borrowing Base, the Agent shall notify the
Borrower verbally (confirming such notice promptly in writing) of such
determination, and the Borrowing Base and the amount by which the Borrowing Base
shall be reduced so communicated to the Borrower shall become effective upon
such verbal notification and shall remain in effect until the next subsequent
determination of the Borrowing Base.
The Borrowing Base shall represent the determination by the Lenders, in
accordance with the applicable definitions and provisions herein contained and
their customary lending practices for loans of this nature, of the value, for
loan purposes, of the Mortgaged Properties, subject, in the case of any increase
in the Borrowing Base, to the normal credit approval processes of the Lenders.
Furthermore, the Borrower acknowledges that the determination of the Borrowing
Base contains an equity cushion (market value in excess of loan value), which is
acknowledged by the Borrower to be essential for the adequate protection of the
Lenders.
2.12 Mandatory Prepayments. If at any time the sum of the Loan Balance and the
L/C Exposure exceeds the lesser of the Maximum Commitment Amount or the
Borrowing Base then in effect, the Borrower shall, within 30 days of notice from
the Agent of such occurrence, (a) prepay, or make arrangements acceptable to the
Lenders for the prepayment of, the amount of such excess for application on the
Loan Balance, (b) provide additional collateral, of character and value
satisfactory to the Lenders in their sole discretion, to secure the Obligations
by the execution and delivery to the Agent of security instruments in form and
substance satisfactory to the Agent, or (c) effect any combination of the
alternatives described in clauses (a) and (b) of this Section and acceptable to
the Lenders in their sole discretion. In the event that a mandatory prepayment
is required under this Section and the Loan Balance is less than the amount
required to be prepaid, the Borrower shall repay the entire Loan Balance and, in
accordance with the provisions of the relevant Letter of Credit Applications
executed by the Borrower or otherwise to the satisfaction of the Agent, deposit
with the Agent, as additional collateral securing the Obligations, an amount of
cash, in immediately available funds, equal to the L/C Exposure minus the lesser
of the Maximum Commitment Amount or the Borrowing Base. The cash deposited with
the Agent in satisfaction of the requirement provided in this Section may be
invested, at the sole discretion of the Agent and then only at the express
direction of the Borrower as to investment vehicle and maturity (which shall be
no later than the latest expiry date of any then outstanding Letter of Credit),
for the account of the Borrower in cash or cash equivalent investments offered
by or through Bank One.
2.13 Voluntary Prepayments and Conversions of Loans. Subject to applicable
provisions of this Agreement, the Borrower shall have the right at any time or
from time to time to prepay Loans and to convert Loans of one type or with one
Interest Period into Loans of another type or with a different Interest Period;
provided, however, that (a) the Borrower shall give the Agent notice of each
such prepayment or conversion of all or any portion of a LIBO Rate Loan no less
than two Business Days prior to prepayment or conversion, (b) any LIBO Rate Loan
may be prepaid or converted only on the last day of an Interest Period for such
Loan, (c) the Borrower shall pay all accrued and unpaid interest on the amounts
of LIBO Rate Loans prepaid or converted, and (d) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.14 Commitment Fee. To compensate the Lenders for maintaining funds available,
the Borrower shall pay to the Agent for the account of the Lenders a fee in the
amount of three-eighths of one percent (3/8%) per annum, calculated on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day), on the average daily
amount of the Available Commitment. Such accrued commitment fees shall be
payable on the first day of July, 1995, and on the first day of each third
calendar month thereafter during the Commitment Period (or within five days
following the notice from the Agent of the amount of such fee owing, if later),
and on the Commitment Termination Date.
2.15 Facility Fee. To compensate the Lenders for the extension of credit
hereunder, the Borrower shall pay to the Agent for the account of the Lenders on
the Closing Date a facility fee in accordance with the terms of the Facility Fee
Letter.
2.16 Letter of Credit Fee. The Borrower shall pay to the Agent for the account
of the Lenders, on the date of issuance or renewal of each Letter of Credit, an
issuing fee equal to the greater of $500 or one percent (1%) per annum,
calculated on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day), on the
face amount of such Letter of Credit during the period for which such Letter of
Credit is issued or renewed. The Borrower also agrees to pay on demand to the
Agent for its own account as the issuer of the Letters of Credit its customary
letter of credit transactional fees and expenses, including, without limitation,
amendment fees, payable with respect to each Letter of Credit.
2.17 Agency Fee. The Borrower shall pay to the Agent for its own account all
fees owing or which may become owing under the Agency Fee Letter as provided
therein.
2.18 Loans to Satisfy Obligations of Borrower. The Lenders may, but shall not
be obligated to, make Loans for the benefit of the Borrower and apply proceeds
thereof to the satisfaction of any condition, warranty, representation, or
covenant of the Borrower or the Guarantor contained in this Agreement or any
other Loan Document. Such Loans shall be evidenced by the Notes, shall be made
as a Floating Rate Loan, and shall be payable upon demand. The Agent agrees to
notify the Borrower of any such Loan; provided, however, the failure of the
Agent or any Lender to do so shall not subject the Agent or any Lender to any
liability and shall not relieve the Borrower from liability for any Obligation.
2.19 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent and each Lender and grants to the Agent and
each Lender a security interest in all funds of the Borrower now or hereafter or
from time to time on deposit with the Agent or such Lender, with such interest
of the Agent and the Lenders to be retransferred, reassigned, and/or released,
as the case may be, at the reasonable expense of the Borrower upon payment in
full and complete performance of all Obligations and the termination of the
Commitments. All remedies as secured party or assignee of such funds shall be
exercisable by the Agent and the Lenders with the verbal consent (confirmed
promptly in writing) of the Required Lenders upon the occurrence of any Event of
Default, regardless of whether the exercise of any such remedy would result in
any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, the Borrower hereby grants to the Agent and each Lender the right,
exercisable at such time as any Event of Default shall occur, of offset or
banker's lien against all funds of the Borrower now or hereafter or from time to
time on deposit with the Agent or such Lender, regardless of whether the
exercise of any such remedy would result in any penalty or loss of interest or
profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof.
2.20 General Provisions Relating to Interest. (a) It is the intention of the
parties hereto to comply strictly with all applicable usury laws. In this
connection, there shall never be collected, charged, or received on the sums
advanced hereunder interest in excess of that which would accrue at the Highest
Lawful Rate. For purposes of Article 5069-1.04, Vernon's Texas Civil Statutes,
as amended, the Borrower agrees that the Highest Lawful Rate shall be the
"indicated (weekly) rate ceiling" as defined in such Article, provided that the
Agent and the Lenders may also rely, to the extent permitted by applicable laws,
on alternative maximum rates of interest under other laws, if greater.
Notwithstanding anything herein or in the Notes to the contrary, during any
Limitation Period, the interest rate to be charged on amounts evidenced by the
Notes shall be the Highest Lawful Rate, and the obligation, if any, of the
Borrower for the payment of fees or other charges deemed to be interest under
applicable law shall be suspended. During any period or periods of time
following a Limitation Period, to the extent permitted by applicable laws, the
interest rate to be charged hereunder shall remain at the Highest Lawful Rate
until such time as there has been paid to the Agent and each Lender (i) the
amount of interest in excess of that accruing at the Highest Lawful Rate that
such Lender would have received during the Limitation Period had the interest
rate remained at the otherwise applicable rate, and (ii) all interest and fees
otherwise payable to the Agent and such Lender but for the effect of such
Limitation Period.
If, under any circumstances, the aggregate amounts paid on the Notes or
under this Agreement or any other Loan Document include amounts which by law are
deemed interest and which would exceed the amount permitted if the Highest
Lawful Rate were in effect, the Borrower stipulates that such payment and
collection will have been and will be deemed to have been, to the extent
permitted by applicable laws, the result of mathematical error on the part of
the Borrower, the Agent, and the Lenders; and the party receiving such excess
shall promptly refund the amount of such excess (to the extent only of such
interest payments in excess of that which would have accrued and been payable on
the basis of the Highest Lawful Rate) upon discovery of such error by such party
or notice thereof from the Borrower. In the event that the maturity of any
Obligation is accelerated, by reason of an election by the Lenders or otherwise,
or in the event of any required or permitted prepayment, then the consideration
constituting interest under applicable laws may never exceed the Highest Lawful
Rate; and excess amounts paid which by law are deemed interest, if any, shall be
credited by the Agent and the Lenders on the principal amount of the
Obligations, or if the principal amount of the Obligations shall have been paid
in full, refunded to the Borrower.
All sums paid, or agreed to be paid, to the Agent and the Lenders for the
use, forbearance and detention of the proceeds of any advance hereunder shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.21 Obligations Absolute. Subject to the further provisions of this Section,
the Obligations of the Borrower under this Article shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim, or defense to payment or performance which the Borrower may have
or have had against the Agent, any Lender, or any beneficiary of any Letter of
Credit. The Borrower agrees that none of the Agent or the Lenders shall be
responsible for, nor shall the Obligations be affected by, among other things,
(a) the validity or genuineness of documents or any endorsements thereon
presented in connection with any Letter of Credit, even if such documents shall
in fact prove to be in any and all respects invalid, fraudulent or forged, AND
EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY
LENDER, so long as the Agent, as the issuer of such Letter of Credit, has no
actual knowledge of any such invalidity, lack of genuineness, fraud, or forgery
prior to the presentment for payment of a corresponding Letter of Credit or any
draft thereunder; provided, however, with respect to the preceding matters in
this Section, the Agent, as the issuer of the Letters of Credit, agrees to
exercise ordinary care in examining each document required to be presented
pursuant to each Letter of Credit to ascertain that each such document appears
on its face to comply with the terms thereof, or (b) any dispute between or
among the Borrower and any beneficiary of any Letter of Credit or any other
party to which any Letter of Credit may be transferred, or any claims whatsoever
of the Borrower against any beneficiary of any Letter of Credit or any such
transferee, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT OR ANY LENDER; provided, in all respects, that the Agent, as the issuer of
Letters of Credit, shall be liable to the Borrower to the extent, but only to
the extent, of any direct, as opposed to consequential or punitive, damages
suffered by the Borrower as a result of the willful misconduct or gross
negligence of the Agent as the issuer of Letters of Credit in determining
whether documents presented under a Letter of Credit complied with the terms of
such Letter of Credit that resulted in either a wrongful payment under such
Letter of Credit or a wrongful dishonor of a claim or draft properly presented
under such Letter of Credit. In the absence of gross negligence or willful
misconduct by the Agent as the issuer of Letters of Credit, the Agent shall not
be liable for any error, omission, interruption or delay, EVEN IF DUE TO THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT, in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Agent, the Lenders, and the Borrower agree that any
action taken or omitted by the Agent, as issuer of any Letter of Credit, under
or in connection with any Letter of Credit or the related drafts or documents,
EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY
LENDER, if done in the absence of gross negligence or willful misconduct, shall
be binding as among the Agent, as issuer of such Letter of Credit or otherwise,
the Lenders, and the Borrower and shall not put the Agent, as issuer of such
Letter of Credit or otherwise, or any Lender under any liability to the
Borrower.
2.22 Yield Protection. (a) Without limiting the effect of the other provisions
of this Section (but without duplication), the Borrower shall pay to the Agent
and each Lender from time to time such amounts as the Agent or such Lender may
determine are necessary to compensate it for any Additional Costs incurred by
the Agent or such Lender.
Without limiting the effect of the other provisions of this Section (but
without duplication), the Borrower shall pay to each Lender from time to time on
request such amounts as such Lender may determine are necessary to compensate
such Lender for any costs attributable to the maintenance by such Lender (or any
Applicable Lending Office), pursuant to any Regulatory Change, of capital in
respect of its Commitment, such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of such
Lender (or any Applicable Lending Office) to a level below that which such
Lender (or any Applicable Lending Office) could have achieved but for such
Regulatory Change.
Without limiting the effect of the other provisions of this Section (but
without duplication), in the event that any Requirement of Law or Regulatory
Change or the compliance by the Agent or any Lender therewith shall (i) impose,
modify, or hold applicable any reserve, special deposit, or similar requirement
against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
impose upon the Agent or such Lender any other condition regarding any Letter of
Credit or obligation to issue Letters of Credit, and the result of any such
event shall be to increase the cost to the Agent or such Lender of issuing or
maintaining any Letter of Credit or obligation to issue Letters of Credit or any
liability with respect to Letter of Credit Payments, or to reduce any amount
receivable in connection therewith, then upon demand by the Agent or such
Lender, as the case may be, the Borrower shall pay to the Agent or such Lender,
from time to time as specified by the Agent or such Lender, additional amounts
which shall be sufficient to compensate the Agent or such Lender for such
increased cost or reduced amount receivable.
Without limiting the effect of the other provisions of this Section (but
without duplication), the Borrower shall pay to the Agent and each Lender such
amounts as shall be sufficient in the reasonable opinion of the Agent and such
Lender to compensate them for any loss, cost, or expense incurred by and as a
result of:
any payment, prepayment, or conversion by the Borrower of a LIBO Rate Loan
on a date other than the last day of an Interest Period for such Loan; or
any failure by the Borrower to borrow a LIBO Rate Loan or to convert a
Floating Rate Loan into a LIBO Rate Loan on the date for such borrowing or
conversion specified in the relevant Borrowing Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed or converted for the period from the date of such payment, prepayment,
conversion, or failure to borrow or convert to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow or
convert, the Interest Period for such Loan which would have commenced on the
date of such failure to borrow or convert) at the applicable rate of interest
for such Loan provided for herein over (B) the interest component of the amount
the Agent or such Lender would have bid in the London interbank market for
Dollar deposits of amounts comparable to such principal amount and maturities
comparable to such period, as reasonably determined by the Agent or such Lender.
The Agent or such Lender shall determine for purposes of this Section the
effect of any Regulatory Change on capital maintained, its costs or rate of
return, maintaining Loans, issuing Letters of Credit, its obligation to make
Loans and issue Letters of Credit, or on amounts receivable by it in respect of
Loans, Letters of Credit, or such obligations, and the additional amounts
required to compensate the Agent or such Lender under this Section and shall
furnish the Borrower with a certificate setting forth in reasonable detail the
basis and amount of increased costs incurred or reduced amounts receivable as a
result of any such event. The statements set forth therein shall be deemed
rebuttably presumptive evidence of such amount. The Agent or the relevant
Lender shall notify the Borrower, as promptly as practicable after the Agent or
such Lender obtains knowledge of any Additional Costs or other sums payable
pursuant to this Section and determines to request compensation therefor, of any
event occurring after the Closing Date which will entitle the Agent or such
Lender to compensation pursuant to this Section. If any Lender requests
compensation from the Borrower under this Section, the Borrower may, by notice
to the Agent and such Lender, require that the Loans by the Lender of the type
with respect to which such compensation is requested be converted into Floating
Rate Loans in accordance with Section 2.13. Any compensation requested by the
Agent or any Lender pursuant to this Section shall be due and payable to the
Agent or such Lender within five days of delivery of any such notice to the
Borrower.
The Agent and the Lenders agree not to request, and the Borrower shall not
be obligated to pay, any Additional Costs or other sums payable pursuant to this
Section unless similar additional costs and other sums payable are also
generally assessed by the Agent or such Lender against other customers similarly
situated where such customers are subject to documents providing for such
assessment.
2.23 Illegality. Notwithstanding any other provision of this Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to (a) honor its obligation to make LIBO Rate Loans, or (b) maintain LIBO Rate
Loans, then such Lender shall promptly notify the Agent and the Borrower
thereof. The obligation of such Lender to make LIBO Rate Loans and to convert
Floating Rate Loans into LIBO Rate Loans shall then be suspended until such time
as such Lender may again make and maintain LIBO Rate Loans, and the outstanding
LIBO Rate Loans of such Lender shall be converted into Floating Rate Loans in
accordance with Section 2.13. Before giving such notice pursuant to this
Section, such Lender will take such action as the Borrower may request if such
action will avoid the need to suspend the obligation of such Lender to make LIBO
Rate Loans and will not, in the opinion of such Lender, be disadvantageous to
such Lender.
2.24 Taxes. (a) All payments made by the Borrower under this Agreement shall be
made free and clear of, and without reduction or withholding for or on account
of, present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority on the basis of any change
after the date hereof in any applicable treaty, law, rule, guideline or
regulations or in the interpretation or administration thereof, excluding, in
the case of the Agent and each Lender, net income and franchise taxes imposed on
the Agent or such Lender by the jurisdiction under the laws of which the Agent
or such Lender is organized or any political subdivision or taxing authority
thereof or therein, or by any jurisdiction in which such Lender's lending office
is located or any political subdivision or taxing authority thereof or therein
(all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to the Agent or any Lender hereunder or under
any other Loan Document, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
other Loan Documents. The Agent or the relevant Lender shall, as promptly as
practicable after becoming aware of any Taxes, notify the Borrower thereof; and
notwithstanding the foregoing, unless such Taxes are made retroactive, the
Borrower shall not be obligated for the payment of any Taxes to the extent such
Taxes accrued more than 150 days prior to the earlier of the date of such notice
or the date on which the Borrower otherwise became aware that such Taxes were to
be imposed. Whenever any Taxes are payable by the Borrower, as promptly as
possible thereafter, the Borrower shall send to the Agent for its own account or
for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof. If
the Borrower fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in this
Section shall survive the termination of this Agreement and the payment of all
Obligations.
Each Lender that is not incorporated under the laws of the United States of
America or a state thereof agrees that, prior to the first date on which any
payment is due to it hereunder, it will, to the extent it may lawfully do so,
deliver to the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, certifying in each case that such Lender is entitled to receive
payments under this Agreement and the Note payable to it, without deduction or
withholding of any United States federal income taxes. At the written request
of the Borrower, each Lender which delivers to the Borrower and the Agent a Form
1001 or 4224 pursuant to the preceding sentence further undertakes to deliver to
the Borrower and the Agent two further copies of such Form 1001 or 4224, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower, and such extensions or
renewals thereof as may reasonably be requested by the Borrower, certifying in
the case of Form 1001 or 4224 that such Lender is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes, unless in any such case, an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises the
Borrower that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
2.25 Replacement Lenders. (a) If any Lender has notified the Borrower of its
incurring additional costs under Section 2.22 or that, pursuant to Section 2.23
or 2.26, its obligation to make or maintain LIBO Rate Loans is to be suspended,
or has required the Borrower to make payments for Taxes under Section 2.24, the
Borrower may, unless such Lender has notified the Borrower that the
circumstances giving rise to such notice no longer apply, terminate, in whole
but not in part, the Commitment of any Lender (other than the Agent) (the
"Terminated Lender") at any time upon five Business Days' prior written notice
to the Terminated Lender and the Agent (such notice referred to herein as a
"Notice of Termination").
In order to effect the termination of the Commitment of the Terminated
Lender, the Borrower shall (i) with the consent of Lenders holding at least
seventy percent (70%) of the Loan Balance, without regard to any sale of a
participation in any Loan and exclusive of the portion of the Loan Balance
outstanding to the Terminated Lender, pay to the Agent for the account of the
Terminated Lender only, all amounts owing to such Terminated Lender under the
Loan Documents, or (ii) obtain an agreement with one or more Lenders to increase
their Commitments and/or request any one or more other banking institutions to
become a "Lender" in place and instead of such Terminated Lender and agree to
accept a Commitment; provided, however, that such other banking institutions are
reasonably acceptable to the Agent and become parties by executing an Assignment
Agreement (the Lenders or other banking institutions that agree to accept in
whole or in part the Commitment of the Terminated Lender being referred to
herein as the "Replacement Lenders"), such that the aggregate increased and/or
accepted Commitment Amounts of the Replacement Lenders equal the Commitment
Amount of the Terminated Lender.
The Notice of Termination shall include the name of the Terminated Lender,
the date the termination will occur (the "Termination Date"), the Replacement
Lender or Replacement Lenders to which the Terminated Lender will assign its
Commitment, and, if there will be more than one Replacement Lender, the portion
of the Terminated Lender's Commitment to be assigned to each Replacement Lender.
On the Termination Date, (i) the Terminated Lender shall by execution and
delivery of an Assignment Agreement assign its Commitment to the Replacement
Lender or Replacement Lenders (pro rata, if there is more than one Replacement
Lender, in proportion to the portion of the Terminated Lender's Commitment to be
assigned to each Replacement Lender) indicated in the Notice of Termination and
shall assign to the Replacement Lender or Replacement Lenders its Loan (if any)
then outstanding pro rata as aforesaid), (ii) the Terminated Lender shall
endorse its Note, payable without recourse, representation or warranty to the
order of the Replacement Lender or Replacement Lenders (pro rata as aforesaid),
(iii) the Replacement Lender or Replacement Lenders shall purchase the Note held
by the Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid
principal amount thereof plus interest and fees accrued and unpaid to the
Termination Date, and (iv) the Replacement Lender or Replacement Lenders will
thereupon (pro rata as aforesaid) succeed to and be substituted in all respects
for the Terminated Lender with like effect as if becoming a Lender pursuant to
the terms of Section 9.1(b), and the Terminated Lender will have the rights and
benefits of an assignor under Section 9.1(b). To the extent not in conflict,
the terms of Section 9.1(b) shall supplement the provisions of this Section.
2.26 Regulatory Change. In the event that by reason of any Regulatory Change or
any other circumstance arising after the Closing Date affecting any Lender, such
Lender (a) incurs Additional Costs (other than those incurred as a result of an
increase in the Reserve Requirement) based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
any LIBO Rate Loan is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes any LIBO Rate
Loan, or (b) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, at the election of such Lender
with notice to the Agent and the Borrower, the obligation of such Lender to make
LIBO Rate Loans and to convert Floating Rate Loans into LIBO Rate Loans shall be
suspended until such time as such Regulatory Change or other circumstance ceases
to be in effect, and all such outstanding LIBO Rate Loans shall be converted
into Floating Rate Loans in accordance with Section 2.13.
2.27 Letters in Lieu of Transfer Orders. The Agent agrees that none of the
letters in lieu of transfer or division orders previously provided by the
Borrower or subsequently provided pursuant to Section 5.8 will be sent to the
addressees thereof prior to the occurrence of an Event of Default, at which time
the Agent may, at its option and in addition to the exercise of any of its other
rights and remedies, send any or all of such letters.
2.28 Power of Attorney. The Borrower hereby designates the Agent as its agent
and attorney-in-fact, to act in its name, place, and stead for the purpose of
completing and, upon the occurrence of an Event of Default, delivering any and
all of the letters in lieu of transfer orders currently held by the Agent or
subsequently delivered by the Borrower pursuant to Section 5.8, including,
without limitation, completing any blanks contained in such letters and
attaching exhibits thereto describing the relevant Collateral. The Borrower
hereby ratifies and confirms all that the Agent shall lawfully do or cause to be
done by virtue of this power of attorney and the rights granted with respect to
such power of attorney. This power of attorney is coupled with the interests of
the Agent in the Collateral, shall commence and be in full force and effect as
of the Closing Date and shall remain in full force and effect and shall be
irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Agent by this appointment are
solely to protect the interests of the Agent and the Lenders under the Loan
Documents and shall not impose any duty upon the Agent to exercise any such
powers. The Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and shall not be responsible
to the Borrower or any other Person for any act or failure to act with respect
to such powers, EVEN IF DUE TO THE NEGLIGENCE (WHETHER SOLE OR CONCURRENT) OF
THE AGENT, except for gross negligence or willful misconduct.
ARTICLE IIICONDITIONS
3.1 Conditions Precedent to Initial Loan. The Lenders shall have no obligation
to make the initial Loan unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Agent or its counsel of the title of the Borrower
to its Oil and Gas Properties shall be satisfactory to the Agent, and the Agent
shall have received, reviewed, and approved multiple counterparts, as requested
by the Agent, of the following documents and other items, appropriately executed
when necessary and, where applicable, acknowledged by one or more authorized
officers of the Borrower or the Guarantor, as the case may be, all in form and
substance satisfactory to the Agent and dated, where applicable, of even date
herewith or a date prior thereto and acceptable to the Agent:
(a) this Agreement;
(b) the Guaranty;
(c) the Notes;
(d) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the Borrower and the Guarantor, accompanied by a certificate issued
by the secretary or an assistant secretary of the Borrower or the Guarantor, as
the case may be, to the effect that each such copy is correct and complete;
(e) certificates of incumbency and signatures of all officers of the
Borrower and the Guarantor who are authorized to execute Loan Documents on
behalf of such entities, each such certificate being executed by the secretary
or an assistant secretary of the Borrower or the Guarantor, as the case may be;
(f) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted by
the boards of directors of the Borrower and the Guarantor, accompanied by
certificates of the secretary or an assistant secretary of the Borrower or the
Guarantor, as the case may be, to the effect that such copies are true and
correct copies of resolutions duly adopted at a meeting or by unanimous consent
of the board of directors of the Borrower or the Guarantor, as the case may be,
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 of such certificate;
(g) the following Security Instruments ratifying, amending, and/or
restating the Existing Security Instruments, creating, evidencing, perfecting,
and otherwise establishing Liens in favor of the Agent in and to the Collateral:
(i) Ratification of and Amendment to Mortgage, Deed of Trust,
Indenture, Security Agreement, Assignment of Production, and Financing
Statement from the Borrower;
(ii) Amendment to Act of Pledge of Collateral Mortgage Note from the
Borrower;
(iii) First Act of Supplement and Amendment to Collateral Mortgage and
Security Agreement from the Borrower;
(iv) Security Agreement (Stock Pledge) by the Guarantor covering 100%
of the stock of the Borrower and Howell Crude Oil Company, accompanied by stock
certificates evidencing such stock and stock powers endorsed in blank;
(v) Financing Statement Changes constituent to the documents
referenced above, as necessary;
(vi) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the Borrower covering
Oil and Gas Properties of the Borrower and all improvements, personal property,
and fixtures related thereto; and
(vii) Financing Statement constituent to the document referenced above;
(h) certificates dated as of a recent date from the Secretary of State or
other appropriate Governmental Authority evidencing the existence or
qualification and good standing of the Borrower and the Guarantor in their
respective jurisdictions of incorporation and in any other jurisdictions where
either of them does business (other than the State of Oklahoma);
(i) results of searches of the UCC Records of the Secretary of State of
the States of Alabama, Louisiana, Mississippi, Oklahoma, Texas, and Wyoming
from a source acceptable to the Agent and reflecting no Liens against any of the
Collateral as to which perfection of a Lien is accomplished by the filing of a
financing statement other than in favor of Bank One or the Agent;
(j) the opinion of Bracewell & Patterson, L.L.P., counsel to the Borrower
and the Guarantor, in the form attached hereto as Exhibit VIII, with such
changes thereto as may be approved by the Agent;
(k) the opinion of special counsel to the Agent and the Lenders in each
of the states of Alabama, Mississippi, and Wyoming, in the form attached hereto
as Exhibit IX, with such changes thereto as may be approved by the Agent;
(l) subordination agreement, in form and substance satisfactory to the
Agent, executed by the Borrower and the Guarantor and covering the Indebtedness
of the Borrower to the Guarantor;
(m) Notice of Final Agreement executed by the Borrower and the Guarantor;
(n) audited consolidated and unaudited consolidating Financial Statements
of the Guarantor as of December 31, 1994;
(o) the Related Facilities Agreement; and
(p) such other agreements, documents, instruments, opinions, certificates,
waivers, consents, and evidence as the Agent or any Lender may reasonably
request.
3.2 Conditions Precedent to Each Loan. The obligations of the Lenders to make
each Loan are subject to the satisfaction of the following additional conditions
precedent:
(a) the Borrower shall have delivered to the Agent a Borrowing Request at
least the requisite time prior to the requested date for the relevant Loan; and
each statement or certification made in such Borrowing Request shall be true and
correct in all material respects on the requested date for such Loan;
(b) no Default or Event of Default shall exist or will occur as a result
of the making of the requested Loan;
(c) if requested by the Agent or any Lender, the Borrower and the
Guarantor shall have delivered evidence satisfactory to the Agent or such Lender
substantiating any of the matters contained in this Agreement which are
necessary to enable the Borrower to qualify for such Loan;
(d) no event shall have occurred which, in the reasonable opinion of the
Lenders, could have a Material Adverse Effect;
(e) each of the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct and shall be deemed to be
repeated by the Borrower as if made on the requested date for such Loan;
(f) the Guaranty and all of the Security Instruments shall be in full
force and effect and provide to the Lenders the security intended thereby;
(g) each of the Borrower and the Guarantor shall hold full legal title to
the Collateral pledged by such entity and be the sole beneficial owner thereof;
(h) the Agent and each Lender shall have received the payment of all fees
payable by the Borrower hereunder and the Agent shall have received
reimbursement from the Borrower, or special legal counsel for the Agent shall
have received payment from the Borrower, for (i) all reasonable fees and
expenses of counsel to the Agent for which the Borrower is responsible pursuant
to applicable provisions of this Agreement and for which invoices have been
presented as of or prior to the date of such Loan, and (ii) estimated fees
charged by filing officers and other public officials incurred or to be incurred
in connection with the filing and recordation of any Security Instruments, for
which invoices have been presented as of or prior to the date of such Loan; and
(i) all matters incident to the consummation of the transactions hereby
contemplated shall be satisfactory to the Agent and each Lender.
3.3 Conditions Precedent to Issuance of Letters of Credit. The obligation of
the Agent, as the issuer of the Letters of Credit, to issue, renew, or extend
any Letter of Credit is subject to the satisfaction of the following additional
conditions precedent:
(a) the Borrower shall have delivered to the Agent a written (or oral,
confirmed promptly in writing) request for the issuance, renewal, or extension
of a Letter of Credit at least two Business Days prior to the requested
issuance, renewal, or extension date and a Letter of Credit Application at least
two Business Days prior to the requested issuance date; and each statement or
certification made in such Letter of Credit Application shall be true and
correct in all material respects on the requested date for the issuance of such
Letter of Credit;
(b) no Default or Event of Default shall exist or will occur as a result
of the issuance, renewal, or extension of such Letter of Credit; and
(c) the terms, provisions, and beneficiary of the Letter of Credit or such
renewal or extension shall be satisfactory to the Agent, as the issuer of the
Letters of Credit, in its sole discretion.
ARTICLE IVREPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
extend credit to the Borrower, the Borrower represents and warrants to the Agent
and each Lender (which representations and warranties shall survive the delivery
of the Notes) that:
4.1 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Notes and the other Loan Documents, the repayment of the Notes
and interest and fees provided for in the Notes and this Agreement, and the
performance of all obligations of the Borrower under the Loan Documents are
within the power of the Borrower, have been duly authorized by all necessary
corporate action by the Borrower, and do not and will not (a) require the
consent of any Governmental Authority, (b) contravene or conflict with any
Requirement of Law, (c) contravene or conflict with any indenture, instrument,
or other agreement to which the Borrower is a party or by which any Property of
the Borrower may be presently bound or encumbered, or (d) result in or require
the creation or imposition of any Lien in, upon or of any Property of the
Borrower other than as contemplated by the Loan Documents.
4.2 Corporate Existence. The Borrower is a corporation duly organized, legally
existing, and in good standing under the laws of its state of incorporation and
is duly qualified as a foreign corporation and is in good standing in all
jurisdictions wherein the ownership of Property or the operation of its business
necessitates same, other than those jurisdictions wherein the failure to so
qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents to which the Borrower is
a party, when duly executed and delivered by the Borrower, will be the legal,
valid, and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
4.4 Security Instruments. The provisions of each Security Instrument executed
by the Borrower are effective to create in favor of the Agent, a legal, valid,
and enforceable Lien in all right, title, and interest of the Borrower in the
Collateral described therein, which Liens, assuming the accomplishment of
recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully perfected
first-priority Liens on all right, title, and interest of the Borrower in the
Collateral described therein.
4.5 Title to Assets. The Borrower has good and indefeasible title to all of
its Oil and Gas Properties, free and clear of all Liens except Permitted Liens,
and owns all of its other Properties free and clear of all Liens except
Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial Statements of
the Borrower as of September 30, 1994, present fairly the financial position and
results of operations and cash flows of the Borrower in accordance with GAAP
(except for the omission of footnotes and provision for income taxes) as at the
relevant point in time or for the period indicated, as applicable, subject to
normal year-end audit adjustments. No event or circumstance has occurred since
September 30, 1994, which could reasonably be expected to have a Material
Adverse Effect.
4.7 No Material Misstatements. No information, exhibit, statement, or report
furnished to the Agent or any Lender by or at the direction of the Borrower in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not misleading as of the date made or deemed made in light of
the circumstances in which they were made.
4.8 Liabilities, Litigation, and Restrictions. Other than as disclosed in the
Financial Statements provided to the Lenders on or before the Closing Date, the
Borrower has no liabilities, direct, or contingent, which may materially and
adversely affect its business or operations or its ownership of the Collateral.
Except as disclosed in writing to the Lenders on the Closing Date, no litigation
or other action of any nature affecting the Borrower in which the amount in
controversy exceeds $100,000 is pending before any Governmental Authority or, to
the best knowledge of the Borrower, threatened against or affecting the
Borrower. No unusual or unduly burdensome restriction, restraint or hazard
exists by contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership and operation of the Collateral
other than such as relate generally to Persons engaged in business activities
similar to those conducted by the Borrower, the effect of which could reasonably
be expected to have a Material Adverse Effect.
4.9 Authorizations; Consents. Except as expressly contemplated by this
Agreement, no authorization, consent, approval, exemption, franchise, permit, or
license of, or filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required in connection with the valid
execution and delivery by the Borrower of the Loan Documents or any instrument
contemplated hereby, the repayment by the Borrower of the Notes and interest and
fees provided in the Notes and the other Loan Documents, or the performance by
the Borrower of the Obligations.
4.10 Compliance with Laws. The Borrower and its Property, including, without
limitation, the Mortgaged Property, are in compliance with all applicable
Requirements of Law, including, without limitation, Environmental Laws, the
Natural Gas Policy Act of 1978, as amended, and ERISA, except to the extent non-
compliance with any such Requirements of Law could not reasonably be expected to
have a Material Adverse Effect.
4.11 ERISA. No Reportable Event has occurred with respect to any Single
Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan maintained by the Borrower
or any Commonly Controlled Entity (based on the assumptions used to fund such
Plan) did not, as of the last annual valuation date applicable thereto, exceed
the value of the assets of such Plan allocable to such vested benefits. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any withdrawal
liability. As of the most recent valuation date applicable to any Multiemployer
Plan, neither the Borrower nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Borrower or such Commonly Controlled
Entity were to withdraw completely from such Multiemployer Plan. Neither the
Borrower nor any Commonly Controlled Entity has received notice that any
Multiemployer Plan is Insolvent or in Reorganization. To the best knowledge of
the Borrower, no such Insolvency or Reorganization is reasonably likely to
occur. The Borrower has no reason to believe that the annual cost during the
term of this Agreement to the Borrower and all Commonly Controlled Entities for
post-retirement benefits to be provided to the current and former employees of
the Borrower and all Commonly Controlled Entities under Plans which are welfare
benefit plans (as defined in Section 3(1) of ERISA) will, in the aggregate, have
a Material Adverse Effect.
4.12 Environmental Laws. (a) No Property of the Borrower is currently on
or has ever been on, or, to the knowledge of the Borrower, is adjacent to any
Property which is on or has ever been on, any federal or state list of Superfund
Sites.
(b) To the knowledge of the Borrower, no Hazardous Substances have been
generated, transported, and/or disposed of by the Borrower at a site which was,
at the time of such generation, transportation, and/or disposal, or has since
become, a Superfund Site.
(c) No Release of Hazardous Substances by the Borrower or from, affecting,
or related to any Property of the Borrower or, to the knowledge of the Borrower,
any Property adjacent to any Property of the Borrower, has occurred which could
reasonably be expected to have a Material Adverse Effect.
(d) No Environmental Complaint has been received by the Borrower which has
not been satisfactorily resolved.
4.13 Compliance with Federal Reserve Regulations. No transaction contemplated
by the Loan Documents is in violation of any regulations promulgated by the
Board of Governors of the Federal Reserve System, including, without limitation,
Regulations G, T, U, or X.
4.14 Investment Company Act Compliance. The Borrower is not, nor is the
Borrower directly or indirectly controlled by or acting on behalf of any Person
which is, an "investment company" or an "affiliated person" of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance. The Borrower is not a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due. All United States
income tax returns and all other tax returns which are required to be filed on
behalf of the Borrower have been filed, and all taxes owing by the Borrower and
the Guarantor have been paid except such as are being contested in good faith
and as to which adequate provisions and disclosures have been made in accordance
with GAAP. The respective charges and reserves on the books of the Borrower and
the Guarantor with respect to taxes and other governmental charges are adequate.
4.17 Refunds. No orders of, proceedings pending before, or other requirements
of, the Federal Energy Regulatory Commission, the Texas Railroad Commission, or
any Governmental Authority exist which could result in the Borrower being
required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons constituting part of the Mortgaged
Property.
4.18 Gas Contracts. The Borrower (a) is not obligated in any material respect
by virtue of any prepayment made under any contract containing a "take-or-pay"
or "prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor at the time of delivery, and (b) has not
produced gas, in any material amount, subject to, and neither the Borrower nor
any of the Mortgaged Properties is subject to, balancing rights of third parties
or subject to balancing duties under governmental requirements, except as to
such matters for which the Borrower has established monetary reserves adequate
in amount to satisfy such obligations and has segregated such reserves from
other accounts.
4.19 Intellectual Property. The Borrower owns or is licensed to use all
Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person
with the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
4.20 Casualties or Taking of Property. Since September 30, 1994, neither the
business nor any Property of the Borrower has been materially adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property, or cancellation of contracts, permits, or concessions by any
Governmental Authority, riot, activities of armed forces, or acts of God.
4.21 Locations of Borrower. The principal place of business and chief executive
office of the Borrower is located at the address of the Borrower set forth for
the Borrower on the signature pages hereof or at such other location as the
Borrower may have, by proper written notice hereunder, advised the Agent and the
Lenders, provided that such other location is within a state in which
appropriate financing statements from the Borrower in favor of the Agent have
been filed.
4.22 Subsidiaries. The Borrower has no Subsidiaries except those described on
Exhibit X under the heading "Subsidiaries of Borrower", and the Guarantor has no
Subsidiaries except those described on Exhibit X under the heading "Subsidiaries
of Guarantor".
ARTICLE VAFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records, in accordance
with GAAP, of all its transactions so that at any time, and from time to time,
its true and complete financial condition may be readily determined, and
promptly following the reasonable request of the Agent or any Lender, make such
records available for inspection by the Agent or any Lender and, at the expense
of the Borrower, allow the Agent or any Lender to make and take away copies
thereof.
5.2 Monthly Financial Reports. Deliver to the Agent and each Lender, on or
before the 30th day after the close of each calendar month, the management
information report prepared by the Borrower containing information regarding
volumes of production, pricing, finding and lifting costs, authorizations for
expenditures, and capital expenditures and a monthly balance sheet and income
statement.
5.3 Quarterly Financial Statements; Compliance Certificates. Deliver to the
Agent and each Lender, on or before the 45th day after the close of each of the
first three quarterly periods of each fiscal year of the Borrower, (a) a copy of
the unaudited consolidated and consolidating Financial Statements of the
Borrower and the Guarantor as at the close of such quarterly period and from the
beginning of such fiscal year to the end of such period, such Financial
Statements to be certified by the chief financial officer of the Borrower and
the Guarantor as having been prepared in accordance with GAAP (except for the
omission of footnotes and provision for income taxes in the separate financial
statements of the Borrower not consolidated with the Guarantor) consistently
applied and as a fair presentation of the condition of the Borrower and the
Guarantor, subject to changes resulting from normal year-end audit adjustments,
and (b) a Compliance Certificate, together with a schedule setting forth the
calculation of the financial matters set forth in such Compliance Certificate.
5.4 Annual Financial Statements; Compliance Certificates. Deliver to the Agent
and each Lender, on or before the 90th day after the close of each fiscal year
of the Borrower, (a) a copy of the annual unaudited consolidated and
consolidating Financial Statements of the Borrower, certified by the chief
financial officer of the Borrower as having been prepared in accordance with
GAAP (except for the omission of footnotes and provision for income taxes)
consistently applied and as a fair presentation of the condition of the
Borrower, (b) a copy of the annual audited consolidated and unaudited
consolidating Financial Statements of the Guarantor, and (c) a Compliance
Certificate, together with a schedule setting forth the calculation of the
financial matters set forth in such Compliance Certificate.
5.5 Oil and Gas Reserve Reports. (a) Deliver to the Agent and each Lender no
later than March 1 of each year during the term of this Agreement, engineering
reports meeting the reporting requirements of the Securities and Exchange
Commission, certified by H. J. Gruy and Associates, Inc. or any nationally-or
regionally-recognized independent consulting petroleum engineers acceptable to
the Agent as fairly and accurately setting forth, as of January 1 of such year,
(i) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the Oil and Gas
Properties of the Borrower, (ii) the aggregate present value of the future net
income with respect to such Oil and Gas Properties, discounted at a stated per
annum discount rate of proven and producing reserves, and (iii) projections of
the annual rate of production, gross income, and net income with respect to such
proven and producing reserves.
Deliver to the Agent and each Lender no later than September 1 of each year
during the term of this Agreement, engineering reports in form and substance
satisfactory to the Lender prepared by or under the supervision of the chief
petroleum engineer of the Borrower evaluating the Oil and Gas Properties of the
Borrower as of July 1 of the year for which such reserve reports are furnished
and updating the information provided in the reports pursuant to Section 5.5(a).
Each of the reports provided pursuant to this Section shall be submitted to
the Agent and each Lender together with additional data concerning pricing,
quantities of production from the Oil and Gas Properties of the Borrower,
volumes of production sold, purchasers of production, gross revenues, expenses,
the "take-or-pay," "prepayment," and gas-balancing liabilities of the Borrower,
and such other information and engineering and geological data with respect
thereto as the Agent or any Lender may reasonably request.
5.6 Title Opinions; Title Defects. Within 30 days of request by the Agent,
furnish to the Agent title opinions, in form and substance and by counsel
satisfactory to the Agent, or other confirmation of title acceptable to the
Agent, covering such Mortgaged Properties as may be requested by the Agent; and
promptly, but in any event within 60 days after notice by the Agent of any
defect, material in the opinion of the Agent in value, in the title of the
Borrower to any of the Mortgaged Properties, clear such title defects, and, in
the event any such title defects are not cured in a timely manner, pay all
related costs and fees incurred by the Agent to do so.
5.7 Notices of Certain Events. (a) Deliver to the Agent and each Lender,
promptly upon having knowledge of the occurrence of any of the following events
or circumstances, a written statement with respect thereto, signed by a
Responsible Officer of the Borrower and setting forth the relevant event or
circumstance and the steps being taken by the Borrower or the Guarantor with
respect to such event or circumstance:
(b) any Default or Event of Default;
(c) any default or event of default under any contractual obligation of
the Borrower or the Guarantor, or any litigation, investigation, or proceeding
between the Borrower or the Guarantor and any Governmental Authority which, in
either case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(d) any litigation or proceeding involving the Borrower or the Guarantor
as a defendant or in which any Property of the Borrower or the Guarantor is
subject to a claim and in which the amount involved is $1,000,000 or more and
which is not covered by insurance or which affects title to any Collateral or
in which injunctive or similar relief is sought;
(e) the receipt by the Borrower of any Environmental Complaint or any
formal request from any Governmental Authority for information (other than
requirements for compliance reports) regarding any Release of Hazardous
Substances by the Borrower or from, affecting, or related to any Property of the
Borrower, the effect of which could reasonably be expected to have a Material
Adverse Effect;
(f) any actual, proposed, or threatened testing or other investigation by
any Governmental Authority concerning the environmental condition of, or
relating to, any Property of the Borrower following any allegation of a
violation of any Requirement of Law, the effect of which could reasonably be
expected to have a Material Adverse Effect;
(g) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or failure to
renew, any permit, license, registration, approval, or authorization which could
reasonably be expected to have a Material Adverse Effect;
(h) any Reportable Event or imminently expected Reportable Event with
respect to any Plan; any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan; the institution of proceedings or the
taking of any other action by the PBGC, the Borrower, the Guarantor or any
Commonly Controlled Entity or Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any Single Employer
Plan or Multiemployer Plan; or any Prohibited Transaction in connection with any
Plan or any trust created thereunder, the effect of which could reasonably be
expected to have a Material Adverse Effect, and the action being taken by the
Internal Revenue Service with respect thereto; and
(i) any other event or condition which could reasonably be expected to
have a Material Adverse Effect.
5.8 Letters in Lieu of Transfer Orders; Division Orders. Promptly upon request
by the Agent at any time and from time to time, and without limitation on the
rights of the Lender pursuant to Sections 2.27 and 2.28, execute such letters in
lieu of transfer orders and/or division and/or transfer orders as are necessary
or appropriate to transfer and deliver to the Agent proceeds from or
attributable to any Mortgaged Property.
5.9 Additional Information. Furnish to the Agent and each Lender, within five
days after any material report (other than financial statements) or other
material communication is sent by the Borrower or the Guarantor to its
stockholders (in their capacity as stockholders) or filed by the Borrower or the
Guarantor with the Securities and Exchange Commission or any successor or
analogous Governmental Authority, copies of such report or communication and,
promptly upon the request of the Agent or any Lender, such additional financial
or other information concerning the assets, liabilities, operations, and
transactions of the Borrower as the Agent or any Lender may from time to time
request; and notify the Agent not less than ten Business Days prior to the
occurrence of any condition or event that may change the proper location for the
filing of any financing statement or other public notice or recording for the
purpose of perfecting a Lien in any Collateral, including, without limitation,
any change in its name or the location of its principal place of business or
chief executive office; and upon the request of the Agent, execute such
additional Security Instruments as may be necessary or appropriate in connection
therewith.
5.10 Compliance with Laws. Except to the extent the failure to comply or cause
compliance would not have a Material Adverse Effect, (a) comply with all
applicable Requirements of Law, including, without limitation, (i) the Natural
Gas Policy Act of 1978, as amended, (ii) ERISA, (iii) Environmental Laws, and
(iv) all permits, licenses, registrations, approvals, and authorizations (A)
related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any Property of the
Borrower, (B) required for the performance of the operations of the Borrower, or
(C) applicable to the use, generation, handling, storage, treatment, transport,
or disposal of any Hazardous Substances; and (b) cause all employees, crew
members, agents, contractors, subcontractors, and future lessees (pursuant to
appropriate lease provisions) of the Borrower, while such Persons are acting
within the scope of their relationship with the Borrower, to comply with all
such Requirements of Law as may be necessary or appropriate to enable the
Borrower to so comply.
5.11 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect; and provide evidence satisfactory to the Agent of the
payment by the Guarantor of its obligations to the Department of Energy promptly
after the making of each such payment by the Guarantor.
5.12 Maintenance of Corporate Existence and Good Standing. Maintain its
corporate existence or qualification and good standing in its jurisdictions of
incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same
except to the extent the failure to do so would not have a Material Adverse
Effect.
5.13 Further Assurances. Promptly cure any defects in the execution and
delivery of any of the Loan Documents and all agreements contemplated thereby,
and execute, acknowledge, and deliver such other assurances and instruments and
take such action as shall, in the opinion of the Agent, be necessary to fulfill
the terms of the Loan Documents and to perfect and maintain the perfection of
the Liens on the Collateral.
5.14 Fees and Expenses. (a) Upon request by the Agent, promptly pay all
reasonable fees and expenses of the Agent in connection with the preparation,
negotiation, syndication, execution, delivery, administration, and enforcement
of this Agreement and the other Loan Documents and any amendments, restatements,
or supplements thereto, and the satisfaction of the conditions precedent set
forth herein, the filing and recordation of Security Instruments, and the
consummation of the transactions contemplated in the Loan Documents, including,
without limitation, attorneys' fees and expenses.
(b) Within five days of the request by the Agent, pay (to the fullest
extent permitted by law) all amounts reasonably expended, advanced, or incurred
by or on behalf of the Agent or any Lender (excluding overhead and internal
charges of the Agent or any Lender) to satisfy any obligation of the Borrower
under any of the Loan Documents; to collect the Obligations; to enforce the
rights of the Agent and the Lenders under any of the Loan Documents; and to
protect the Properties or business of the Borrower and the Guarantor, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Agent
and which amounts shall include, but not be limited to (i) all court costs, (ii)
reasonable fees and expenses of legal counsel, auditors, accountants, engineers,
and environmental and insurance consultants, (iii) fees and expenses incurred in
connection with the participation by the Agent and the Lenders as members of the
creditors' committee in a case commenced under any Insolvency Proceeding, (iv)
fees and expenses incurred in connection with lifting the automatic stay
prescribed in 362 Title 11 of the United States Code, and (v) fees and expenses
incurred in connection with any action pursuant to 1129 Title 11 of the United
States Code all reasonably incurred by the Agent and the Lenders in connection
with the collection of any sums due under the Loan Documents, together with
interest at the per annum interest rate equal to the Default Rate on each such
amount from the date of notification that the same was expended, advanced, or
incurred by the Agent or such Lender until the date it is repaid to the Agent or
such Lender, with the obligations under this Section surviving the non-
assumption of this Agreement in a case commenced under any Insolvency Proceeding
and being binding upon the Borrower and/or a trustee, receiver, custodian, or
liquidator of the Borrower appointed in any such case.
5.15 Operation of Oil and Gas Properties. Develop, maintain, and operate its
Oil and Gas Properties in a prudent and workmanlike manner in accordance with
industry standards.
5.16 Maintenance and Inspection of Properties. Maintain all of its tangible
Properties in good repair and condition, ordinary wear and tear excepted, make
all necessary replacements thereof, and operate such Properties in a good and
workmanlike manner unless the failure to do so would not have a Material Adverse
Effect; and permit any authorized representative of the Agent or any Lender to
visit and inspect, at the expense of the Borrower, any tangible Property of the
Borrower.
5.17 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Agent and, within 60 days of the Closing Date for property
damage insurance covering Oil and Gas Properties of the Borrower and business
interruption insurance, if any, maintained by the Borrower, naming the Agent as
loss payee, and, upon any renewal of any such insurance and at other times upon
request by the Agent, furnish to the Agent evidence, satisfactory to the Agent,
of the maintenance of such insurance. The Agent shall have the right to
collect, and the Borrower hereby assigns to the Agent, any and all monies that
may become payable under any policies of insurance relating to business
interruption or by reason of damage, loss, or destruction of any of the Oil and
Gas Properties of the Borrower. In the event of any damage, loss, or
destruction for which insurance proceeds relating to business interruption or
Oil and Gas Properties of the Borrower exceed $250,000, the Agent may, at its
option, apply all such sums or any part thereof received by it toward the
payment of the Obligations, whether matured or unmatured, application to be made
first to interest and then to principal, and shall deliver to the Borrower the
balance, if any, after such application has been made. In the event of any such
damage, loss, or destruction for which insurance proceeds are $250,000 or less,
provided that no Default or Event of Default has occurred and is continuing, the
Agent shall deliver any such proceeds received by it to the Borrower. In the
event the Agent receives insurance proceeds not attributable to Oil and Gas
Properties or business interruption, the Agent shall deliver any such proceeds
to the Borrower.
5.18 Maintenance of Operating Accounts. Maintain its primary operating accounts
with Bank One.
5.19 Indemnification. INDEMNIFY AND HOLD THE AGENT AND EACH OF THE LENDERS AND
THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT
OR THE LENDERS UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS,
REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A
WRONGFUL DISHONOR BY THE AGENT OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY
OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE
FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF THEIR RESPECTIVE SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY
TRUSTEE FOR THE BENEFIT OF THE AGENT OR THE LENDERS UNDER ANY SECURITY
INSTRUMENT, BUT EXCLUDING ANY OF THE FOREGOING IN THIS SECTION ARISING FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY LENDER; WITH THE
FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
ARTICLE VINEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower will not:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any Indebtedness,
whether by way of loan or otherwise; provided, however, the foregoing
restriction shall not apply to (a) the Obligations, (b) accounts payable
incurred in the ordinary course of business, which are not unpaid in excess of
120 days beyond invoice date or are being contested in good faith and as to
which such reserve as is required by GAAP has been made, (c) with the prior
written consent of the Lenders, Subordinated Debt, (d) crude oil, natural gas,
or other hydrocarbon swap agreements, in form and substance and with a Person
acceptable to the Required Lenders, provided that each commitment issued under
any approved crude oil, natural gas, or other hydrocarbons swap agreement must
also be approved by the Required Lenders, (e) interest rate swap or other
financial hedging agreements, in form and substance and with a Person acceptable
to the Required Lenders, or (f) obligations (other than Indebtedness for
borrowed money or capitalized leases) secured by Permitted Liens.
6.2 Contingent Obligations. Create, incur, assume, or suffer to exist any
Contingent Obligation; provided, however, the foregoing restriction shall not
apply to (a) performance guarantees, performance surety or other bonds provided
in the ordinary course of business, (b) indemnity obligations incurred in the
ordinary course of business so long as such obligations do not cover the primary
obligation of any Affiliate of the Borrower, (c) trade credit incurred or
operating leases entered into in the ordinary course of business if permitted
pursuant to the other terms of this Agreement, or (d) Contingent Obligations
(other than with respect to Indebtedness for borrowed money or capitalized
leases) secured by Permitted Liens.
6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any of its
Properties, whether now owned or hereafter acquired, or its capital stock;
provided, however, the foregoing restrictions shall not apply to Permitted
Liens.
6.4 Sales of Assets. Without the prior written consent of the Required
Lenders, sell, transfer, or otherwise dispose of, in one or any series of
transactions within any 12-month period, assets, whether now owned or hereafter
acquired, the aggregate book value of which or, in the case of Oil and Gas
Properties, the aggregate present worth of which, as set forth in the most
recent Reserve Report prepared in accordance with Section 5.5(a) provided to and
approved by the Lenders, exceeds $2,500,000, or enter into any agreement to do
so; provided, however, the foregoing restriction shall not apply to (a) the sale
of hydrocarbons or inventory in the ordinary course of business, or (b) the sale
or other disposition of Property destroyed, lost, worn out, damaged, or having
only salvage value or no longer used or useful in the business of the Borrower
or the Guarantor.
6.5 Loans or Advances. Make or agree to make any loans or advances to any
Person; provided, however, the foregoing restrictions shall not apply to
(a) advances or extensions of credit in the form of accounts receivable incurred
in the ordinary course of business and upon terms common in the industry for
such accounts receivable, (b) advances to employees for the payment of expenses
in the ordinary course of business, or (c) so long as no Default or Event of
Default exists, loans or advances to the Guarantor.
6.6 Investments. Acquire Investments in, or purchase or otherwise acquire all
or substantially all of the assets of, any Person; provided, however, the
foregoing restriction shall not apply to the purchase or acquisition of (a) Oil
and Gas Properties, (b) Investments in the form of (i) debt securities issued or
directly and fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof, with maturities of no more than one year,
(ii) commercial paper of a domestic issuer rated at the date of acquisition at
least P-2 by Moody's Investor Service, Inc. or A-2 by Standard & Poor's
Corporation and with maturities of no more than one year from the date of
acquisition, or (iii) repurchase agreements covering debt securities or
commercial paper of the type permitted in this Section, certificates of deposit,
demand deposits, eurodollar time deposits, overnight bank deposits and bankers'
acceptances, with maturities of no more than one year from the date of
acquisition, issued by or acquired from or through the Agent, any Lender, or any
bank or trust company organized under the laws of the United States or any state
thereof and having capital surplus and undivided profits aggregating at least
$100,000,000, (c) other short-term Investments similar in nature and degree of
risk to those described in clause (b) of this Section, or (d) money-market
funds.
6.7 Dividends and Distributions. Declare, pay, or make, whether in cash or
other Property, any dividend or distribution on, or purchase, redeem, or
otherwise acquire for value, any share of any class of its capital stock at any
time that (a) a Default or Event of Default exists or will occur as the result
of the payment of such dividend or distribution, or (b) the sum of the Loan
Balance plus the L/C Exposure exceeds the lesser of the Maximum Commitment
Amount or the Borrowing Base then in effect.
6.8 Capital Expenditures. Make expenditures for capital or fixed assets;
provided, however, the foregoing restriction shall not apply to expenditures for
the acquisition of Oil and Gas Property or other expenditures incurred in
connection with the exploration, development, and production of oil, gas, and
other hydrocarbons.
6.9 Issuance of Stock; Changes in Corporate Structure. Issue or agree to issue
additional shares of capital stock, in one or any series of transactions, to any
Person other than the Guarantor; enter into any transaction of consolidation,
merger, or amalgamation; liquidate, wind up, or dissolve (or suffer any
liquidation or dissolution).
6.10 Transactions with Affiliates. Directly or indirectly, enter into any
material transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates, other than upon fair and
reasonable terms no less favorable than could be obtained in an arm's length
transaction with a Person not an Affiliate.
6.11 Lines of Business. Expand, on its own or through any Subsidiary, into any
line of business other than the exploration, development, and production of oil,
gas, and other hydrocarbons.
6.12 Rental or Lease Agreements. Enter into any contract to rent or lease as
lessee any Properties, real or personal; provided, however, the foregoing
restriction shall not apply to (a) leases in effect as of the Closing Date and
renewals and extensions thereof under terms and conditions not materially
different from those in effect as of the Closing Date, (b) oil, gas, and mineral
leases, or (c) other operating leases the rental and lease payments under which
in any calendar or fiscal year do not exceed $500,000 in the aggregate for all
such leases of the Borrower, the Guarantor, and its Subsidiaries.
6.13 ERISA Compliance. Permit any Plan maintained by it or any Commonly
Controlled Entity to (a) engage in any Prohibited Transaction, the effect of
which could reasonably be expected to have a Material Adverse Effect, (b) incur
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA, or (c) terminate in a manner which could result in the imposition of a
Lien on any Property of the Borrower pursuant to Section 4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multiemployer Plan.
6.14 Tangible Net Worth. Permit Tangible Net Worth to be less than $58,000,000
plus (a) 50% of positive Net Income for all fiscal quarters ending subsequent to
December 31, 1994, and (b) 70% of any increase in net worth of the Borrower
resulting from the sale or issuance of capital stock after December 31, 1994;
provided, however, in the event the Borrower is required by GAAP to write down
the carrying value of its Oil and Gas Properties as a result of lower prices for
hydrocarbons, the required level of Tangible Net Worth shall be reduced by the
amount of such write down but not more than $5,000,000 in the aggregate for all
such write downs.
6.15 Cash Flow Coverage. Permit, as of the close of any fiscal quarter, the
ratio of (a) Cash Flow for such quarter to (b) Debt Service for such quarter to
be less than 1.25 to 1.00.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default shall be made in the payment when due of any installment of
principal or interest under this Agreement or the Notes or in the payment when
due of any fee or other sum payable under any Loan Document and, with respect to
the payment of interest or fees only, such default shall continue for three
days;
(b) default shall be made by the Borrower or the Guarantor in the due
observance or performance of any of their respective obligations under the Loan
Documents, and, with respect to the observance or performance of obligations of
the Borrower pursuant to Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7(d), 5.7(e),
5.7(f), 5.7(g), 5.9, 5.16, 5.17, 6.1(b), or 6.14 and obligations of the
Guarantor pursuant to Sections 4.1, 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g), 4.3,
5.12, 5.13, or 5.14 of the Guaranty only, such default shall continue for 30
days after the earlier of notice thereof to the Borrower by the Agent or
knowledge thereof by the Borrower or the Guarantor;
(d) any representation or warranty made by the Borrower or the Guarantor
in any of the Loan Documents proves to have been untrue in any material respect
or any representation, statement (including Financial Statements), certificate,
or data furnished or made to the Agent or any Lender in connection herewith
proves to have been untrue in any material respect as of the date the facts
therein set forth were stated or certified;
(e) default shall be made by the Borrower or the Guarantor (as principal
or guarantor or other surety) in the payment of any Indebtedness for borrowed
money, capitalized leases, or owing to the Department of Energy, and such
default shall remain unremedied for in excess of the period of grace, if any,
with respect thereto;
(f) either the Borrower or the Guarantor shall (i) apply for or consent to
the appointment of a receiver, trustee, or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition commencing an
Insolvency Proceeding, (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it in any Insolvency Proceeding;
(g) an order, judgment, or decree shall be entered against either the
Borrower or the Guarantor by any court of competent jurisdiction or by any other
duly authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver, trustee,
conservator, custodian, or liquidator of it or all or any substantial part of
its assets, and such order, judgment, or decree shall not be dismissed or stayed
within 30 days;
(h) the levy against any significant portion of the Property of the
Borrower or the Guarantor, or any execution, garnishment, attachment,
sequestration, or other writ or similar proceeding which is not permanently
dismissed or discharged within 30 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be entered
against the Borrower or the Guarantor for money damages and/or Indebtedness due
in an amount in excess of $1,000,000, and such order, judgment, or decree shall
not be dismissed or stayed or paid within 30 days;
(j) either the Borrower or the Guarantor shall have (i) concealed,
removed, or diverted, or permitted to be concealed, removed, or diverted, any
part of its Property, with intent to hinder, delay, or defraud its creditors or
any of them, (ii) made or suffered a transfer of any of its Property which may
be fraudulent under any bankruptcy, fraudulent conveyance, or similar law,
(iii) made any transfer of its Property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid, or (iv) shall
have suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any of its Property through legal proceedings or distraint which is not vacated
within 30 days from the date thereof;
(k) any Security Instrument shall for any reason not, or cease to, create
valid and perfected first-priority Liens against the Collateral purportedly
covered thereby;
(l) any Person shall engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, the effect
of which could reasonably be expected to have a Material Adverse Effect; any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan for which an excise tax is
due or would be due in the absence of a waiver; a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Agent, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; any Single Employer
Plan shall terminate for purposes of Title IV of ERISA; the Borrower, the
Guarantor or any Commonly Controlled Entity shall incur, or in the reasonable
opinion of the Agent, be likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan;
or any other event or condition shall occur or exist with respect to a Plan and
the result of such events or conditions referred to in this Section 7.1(k) could
subject the Borrower, the Guarantor or any Commonly Controlled Entity to any tax
(other than an excise tax under Section 4980 of the Code), penalty or other
liabilities which taken in the aggregate would have a Material Adverse Effect
and any such circumstance shall exist for in excess of 30 days;
(m) the Guarantor shall cease to own all of the outstanding capital stock
of any class issued by the Borrower; or
(n) the occurrence of any event or condition which could reasonably be
expected to have a Material Adverse Effect and the same shall remain unremedied
for in excess of 30 days after notice given by the Agent.
7.2 Remedies. (a) Upon the occurrence of an Event of Default specified in
Sections 7.1(e) or 7.1(f), immediately and without notice, (i) all Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of protest, default, or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, or other notice of any
kind, except as may be provided to the contrary elsewhere herein, all of which
are hereby expressly waived by the Borrower; (ii) the Commitments shall
immediately cease and terminate unless and until reinstated by the Agent and the
Lenders in writing; and (iii) with the oral consent of the Required Lenders
(confirmed promptly in writing), the Agent and each Lender are hereby authorized
at any time and from time to time, without notice to the Borrower (any such
notice being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by the
Agent or such Lender and any and all other indebtedness at any time owing by the
Agent or such Lender to or for the credit or account of the Borrower against any
and all of the Obligations.
(b) Upon the occurrence of any Event of Default other than those specified
in Sections 7.1(e) or 7.1(f), (i) the Agent may and, upon the request of the
Required Lenders, shall, by notice to the Borrower, declare all Obligations
immediately due and payable, without presentment, demand, protest, notice of
protest, default, or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity, or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower; (ii) the Agent may and, upon the request of the Required
Lenders, shall, declare the Commitments terminated, whereupon the Commitments
shall immediately cease and terminate unless and until reinstated by the Agent
and the Lenders in writing; and (iii) with the oral consent of the Required
Lenders (confirmed promptly in writing), the Agent and each Lender are hereby
authorized at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set-off and apply
any and all deposits (general or special, time or demand, provisional or final)
held by the Agent or such Lender and any and all other indebtedness at any time
owing by the Agent or such Lender to or for the credit or account of the
Borrower against any and all of the Obligations although such Obligations may be
unmatured.
(c) Upon the occurrence of any Event of Default, the Lenders, with the
oral consent of the Required Lenders (confirmed promptly in writing), and the
Agent, in accordance with the terms hereof, may, in addition to the foregoing in
this Section, exercise any or all of their rights and remedies provided by law
or pursuant to the Loan Documents.
ARTICLE VIII
THE AGENT
8.1 Appointment. Each Lender hereby designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Loan Documents. Each
Lender authorizes the Agent, as the agent for such Lender, to take such action
on behalf of such Lender under the provisions of this Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities except those expressly set forth herein or in any other Loan
Document or any fiduciary relationship with any Lender; and no implied
covenants, functions, responsibilities, duties, obligations, or liabilities on
the part of the Agent shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties under this
Agreement and the other Loan Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (a)
required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Required Lenders and contribution
by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or for the sufficiency, accuracy, or
completeness of any materials provided by the Agent, or the failure of the Agent
to provide any materials or disclose any matter to any Lender except as may be
expressly required herein, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless and until a written notice of
assignment, negotiation, or transfer thereof shall have been received by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate and contribution by each Lender of its Percentage Share of costs
reasonably expected by the Agent to be incurred in connection therewith. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Loan Documents in accordance with a
request of the Required Lenders. Such request and any action taken or failure
to act pursuant thereto shall be binding upon the Lenders and all future holders
of the Notes. In no event shall the Agent be required to take any action that
exposes the Agent to personal liability or that is contrary to any Loan Document
or applicable Requirement of Law.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall promptly give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
Agent shall have received such directions, subject to the provisions of Section
7.2, the Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders. In the event that
the officer of the Agent primarily responsible for the lending relationship with
the Borrower or the officer of any Lender primarily responsible for the lending
relationship with the Borrower becomes aware that a Default or Event of Default
has occurred and is continuing, the Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, promptly of such occurrence. Notwithstanding the preceding
sentence, failure to comply with the preceding sentence shall not result in any
liability to the Agent or any Lender.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent or any Lender to any other Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, condition (financial and otherwise) and creditworthiness
of the Borrower and the value of the Collateral and other Properties of the
Borrower and has made its own decision to enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, condition (financial
and otherwise) and creditworthiness of the Borrower and the value of the
Collateral and other Properties of the Borrower. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial and otherwise), or creditworthiness
of the Borrower or the value of the Collateral or other Properties of the
Borrower which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE AGENT AND ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO THE
EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE
BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER,
FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY
KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME
FOLLOWING THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF
THIS AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY
OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES
IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT
LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED
OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE AGREEMENTS
IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND
THE TERMINATION OF THIS AGREEMENT.
8.8 Restitution. Should the right of the Agent or any Lender to realize funds
with respect to the Obligations be challenged and any application of such funds
to the Obligations be reversed, whether by Governmental Authority or otherwise,
or should the Borrower otherwise be entitled to a refund or return of funds
distributed to the Lenders in connection with the Obligations, the Agent or such
Lender, as the case may be, shall promptly notify the Lenders of such fact. Not
later than Noon, Central Standard or Daylight Savings Time, as the case may be,
of the Business Day following such notice, each Lender shall pay to the Agent an
amount equal to the ratable share of such Lender of the funds required to be
returned to the Borrower. The ratable share of each Lender shall be determined
on the basis of the percentage of the payment all or a portion of which is
required to be refunded originally distributed to such Lender, if such
percentage can be determined, or, if such percentage cannot be determined, on
the basis of the Percentage Share of such Lender. The Agent shall forward such
funds to the Borrower or to the Lender required to return such funds. If any
such amount due to the Agent is made available by any Lender after Noon, Central
Standard or Daylight Savings Time, as the case may be, of the Business Day
following such notice, such Lender shall pay to the Agent (or the Lender
required to return funds to the Borrower, as the case may be) for its own
account interest on such amount at a rate equal to the Federal Funds Rate for
the period from and including the date on which restitution to the Borrower is
made by the Agent (or the Lender required to return funds to the Borrower, as
the case may be) to but not including the date on which such Lender failing to
timely forward its share of funds required to be returned to the Borrower shall
have made its ratable share of such funds available.
8.9 Agent in Its Individual Capacity. The Agent and its affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrower as though the Agent were not the agent hereunder. With respect to
any Note issued to the Lender serving as the Agent, the Agent shall have the
same rights and powers under this Agreement as a Lender and may exercise such
rights and powers as though it were not the Agent. The terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.10 Successor Agent. The Agent may resign as Agent upon ten days' notice to
the Lenders and the Borrower. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, Lenders for which the Percentage Shares
aggregate at least 60% shall appoint from among the Lenders a successor agent
for the Lenders, whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent. The term "Agent" shall mean such successor
agent effective upon its appointment. The rights, powers, and duties of the
former Agent as Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this Agreement or
any holders of the Notes. After the removal or resignation of any Agent
hereunder as Agent, the provisions of this Article VIII and Sections 2.2(d),
5.14, and 5.19 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
8.11 Applicable Parties. The provisions of this Article are solely for the
benefit of the Agent and the Lenders, and the Borrower shall not have any rights
as a third party beneficiary or otherwise under any of the provisions of this
Article. In performing functions and duties hereunder and under the other Loan
Documents, the Agent shall act solely as the agent of the Lenders and does not
assume, nor shall it be deemed to have assumed, any obligation or relationship
of trust or agency with or for the Borrower or any legal representative,
successor, and assign of the Borrower.
ARTICLE IX
MISCELLANEOUS
9.1 Assignments; Participations. (a) The Borrower may not assign any of its
rights or obligations under any Loan Document without the prior consent of the
Agent and the Lenders.
(b) Except pursuant to Section 2.25 and the Related Facilities
Agreement, no Lender may assign all or any portion of its rights and obligations
under this Agreement. Any assignment of rights and obligations of a Lender
under this Agreement shall be made pursuant to an Assignment Agreement. Any
such assignment of rights and obligations of a Lender hereunder shall become
effective upon the execution and delivery to the Agent of the Assignment
Agreement and the consent of the Agent. Promptly following receipt of an
executed Assignment Agreement, the Agent shall send to the Borrower a copy of
such executed Assignment Agreement. Promptly following receipt of such executed
Assignment Agreement, the Borrower shall execute and deliver, at its own
expense, new Notes to the assignee and, if applicable, the assignor, in
accordance with their respective interests, whereupon the prior Notes of the
assignor and, if applicable, the assignee, shall be cancelled and returned to
the Borrower. Upon the effectiveness of any assignment pursuant to this Section
9.1(b), the assignee will become a "Lender," if not already a "Lender," for all
purposes of the Loan Documents, and the assignor shall be relieved of its
obligations hereunder to the extent of such assignment. If the assignor no
longer holds any rights or obligations under this Agreement, such assignor shall
cease to be a "Lender" hereunder, except that its rights under Sections 2.21 and
5.19 shall not be affected. On the last Business Day of each month during which
an assignment has become effective pursuant to this Section 9.1(b), the Agent
shall prepare a new Exhibit IV giving effect to all such assignments effected
during such month and will promptly provide a copy thereof to the Borrower and
each Lender.
(c) Each Lender may transfer, grant, or assign participations in all or
any portion of its interests hereunder to its affiliates only pursuant to this
Section 9.1(c), provided that such Lender shall remain a "Lender" for all
purposes of this Agreement and the transferee of such participation shall not
constitute a "Lender" hereunder. In the case of any such participation, the
participant shall not have any rights under any Loan Document, the rights of the
participant in respect of such participation to be against the granting Lender
as set forth in the agreement with such Lender creating such participation, and
all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation.
(d) The Lenders may furnish any information concerning the Borrower in the
possession of the Lenders from time to time to permitted assignees and
participants and, with the consent of the Borrower, to prospective assignees and
participants.
(e) Notwithstanding anything in this Section to the contrary, any Lender
may assign and pledge all or any of its Notes or any interest therein to any
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank. No such assignment or pledge shall release the assigning
or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section, no transfer or
assignment of the interests or obligations of any Lender or grant of
participations therein shall be permitted if such transfer, assignment, or grant
would require the Borrower to file a registration statement with the Securities
and Exchange Commission or any successor Governmental Authority or qualify the
Loans under the "Blue Sky" laws of any state.
9.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.3 Notices. Except as to oral notices expressly authorized herein, which oral
notices shall be confirmed in writing, all notices, requests, and communications
hereunder shall be in writing (including by telecopy). Unless otherwise
expressly provided herein, any such notice, request, demand, or other
communication shall be deemed to have been duly given or made when delivered by
hand, or, in the case of delivery by mail, two Business Days after deposited in
the mail, certified mail, return receipt requested, postage prepaid, or, in the
case of telecopy notice, when receipt thereof is acknowledged orally or by
written confirmation report, addressed to each party at the "Address for
Notices" specified below its name on the signature pages hereof or at such other
address as shall be designated by such party in a properly given notice.
9.4 Parties in Interest. Subject to the restrictions on changes in corporate
structure set forth in Section 6.9 and other applicable restrictions contained
herein, all covenants and agreements herein contained by or on behalf of the
Borrower, the Agent or the Lenders shall be binding upon and inure to the
benefit of the Borrower, the Agent or the Lenders, as the case may be, and their
respective legal representatives, successors, and permitted assigns.
9.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Agent, the Lenders and the Borrower and their
successors and permitted assigns. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing
to require satisfaction of provisions hereof in accordance with their terms.
9.6 No Waiver; Rights Cumulative. No course of dealing on the part of the
Agent or the Lenders, or their officers or employees, nor any failure or delay
by the Agent or the Lenders with respect to exercising any of their rights under
any Loan Document shall operate as a waiver thereof. The rights of the Agent
and the Lenders under the Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right. Neither the making of any Loan nor the issuance of a Letter of Credit
shall constitute a waiver of any of the covenants, warranties, or conditions of
the Borrower contained herein. In the event the Borrower is unable to satisfy
any such covenant, warranty, or condition, neither the making of any Loan nor
the issuance of a Letter of Credit shall have the effect of precluding the Agent
or the Lenders from thereafter declaring such inability to be an Event of
Default as hereinabove provided.
9.7 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.8 Amendments; Waivers. Neither this Agreement nor any of the other Loan
Documents nor any terms hereof or thereof may be amended, supplemented,
modified, or waived except in writing and in accordance with the provisions of
this Section. The Agent and the Borrower may, from time to time with the
written consent of the Required Lenders, enter into written amendments,
supplements, or modifications to the Loan Documents for the purpose of adding
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or the Borrower hereunder or thereunder or
waiving, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such amendment, supplement, modification, or waiver shall (a)
extend the time of payment of any Obligation, change the rate of interest
thereon, extend the Commitment Termination Date or Final Maturity, reduce any
fee payable for the account of the Lenders hereunder, release any Collateral,
reduce the amount of any Obligation, increase the Maximum Commitment Amount,
change the Borrowing Base or any provision applicable to the determination of
the Borrowing Base, amend, modify, or waive any provision of this Section or
Sections 3.2, 3.3, 5.14, 5.19, or 8.10, change the percentage specified in the
definition of Required Lenders, or consent to the assignment or transfer by the
Borrower of any of its rights or obligations under this Agreement or the other
Loan Documents, in any such case without the written consent of all Lenders, or
(b) amend, modify, or waive any provision of Article VIII or the rights or
obligations of the Agent (including its rights and obligations as issuer of the
Letters of Credit) without the written consent of the Agent. Any such
amendment, supplement, modification, or waiver shall apply equally to each of
the Lenders and shall be binding upon the Borrower, the Lenders, and the Agent
and all future holders of the Notes. Notwithstanding the foregoing, the Agent
may, provided that no Default or Event of Default exists, release Collateral the
value of which, as set forth in the most recently provided Reserve Report, in
any fiscal year of the Borrower does not exceed $1,000,000. In the event of any
waiver, the Borrower, the Lenders, and the Agent shall be restored to their
respective former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right with respect thereto.
9.9 Controlling Agreement. In the event of a conflict between the provisions
of this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control.
9.10 GOVERNING LAW. THIS AGREEMENT, THE NOTES, AND THE GUARANTY SHALL BE DEEMED
TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS
CIVIL STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.11 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT OR ANY LENDER IN ACCORDANCE WITH
THIS SECTION.
9.12 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, THE AGENT, AND EACH LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM,
OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN
THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS
AGREEMENT.
9.13 ENTIRE AGREEMENT. THIS AGREEMENT AMENDS, RESTATES, AND REPLACES THE
EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR
AGREEMENT BETWEEN OR AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING
TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE EXISTING CREDIT
AGREEMENT AND THE CORRESPONDENCE DATED FEBRUARY 9, 1995, FROM BANK ONE TO THE
GUARANTOR AND THE TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD,
THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
9.14 Counterparts. For the convenience of the parties, this Agreement may be
executed in multiple counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which shall together constitute but one and the same agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORROWER:
HOWELL PETROLEUM CORPORATION
Address for Notices: By: /s/ Michael R. Drake
--------------------
Michael R. Drake
President
Howell Petroleum Corporation
1111 Fannin, Suite 1500
Houston, Texas 77002
Attention: Allyn Skelton
Telecopy: (713) 658-4007
AGENT AND LENDER:
BANK ONE, TEXAS, N.A.
Address for Notices: By: /s/ Stephen M. Smith
--------------------
Stephen M. Smith
Vice President
Bank One, Texas, N.A.
910 Travis
Houston, Texas 77002
(or for notice by mail, to:
P.O. Box 2629
Houston, Texas 77252-2629)
Attention: Energy Group
Telecopy: (713) 751-3544
Applicable Lending Office
for Floating Rate Loans
and LIBO Rate Loans:
910 Travis
Houston, Texas 77002
(Signatures Continued on Next Page)
LENDER:
BANK OF MONTREAL
Address for Notices: By: /s/ Robert L. Roberts
---------------------
Robert L. Roberts
Bank of Montreal Director, U. S. Corporate Banking
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Robert L. Roberts
Telecopy: (713) 223-4007
Applicable Lending Office
for Floating Rate Loans
and LIBO Rate Loans:
700 Louisiana, Suite 4400
Houston, Texas 77002
LENDER:
COMPASS BANK-HOUSTON
Address for Notices: By: /s/ Murray E. Brasseux
----------------------
Murray E. Brasseux
Compass Bank - Houston Executive Vice President
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
Attention: Energy Lending
Telecopy: (713) 968-8222
Applicable Lending Office
for Floating Rate Loans
and LIBO Rate Loans:
24 Greenway Plaza, Suite 1401
Houston, Texas 77046
(Signatures Continued on Next Page)
LENDER:
DEN NORSKE BANK AS
Address for Notices: By: /s/ Nelvin Farstad
------------------
Nelvin Farstad
Senior Vice President
Den norske Bank AS
Three Allen Center
333 Clay, Suite 4890
Houston, Texas 77002 By: /s/ Fran Meyers
Attention: William V. Moyer ---------------
Telecopy: (713) 757-1167 Fran Meyers
Vice President
Applicable Lending Office
for Floating Rate Loans
and LIBO Rate Loans:
600 Fifth Avenue
New York, New York 10020