CREDIT AGREEMENT
ABRAXAS PETROLEUM CORPORATION,
as the Borrower,
the Banks named herein,
and
BANKERS TRUST COMPANY,
as Agent
Dated as of September 30, 1996
TABLE OF CONTENTS
PRELIMINARY STATEMENT ................................................ 1
ARTICLE I DEFINITIONS, ETC.......................................... 1
Section 1.01. Certain Defined Terms ........................... 1
Section 1.02. Accounting Terms ................................ 1
Section 1.03. Computation of Time Periods ..................... 1
Section 1.04. References, Etc. ................................ 1
ARTICLE II COMMITMENTS AND TERMS OF CREDIT .......................... 2
Section 2.01. Commitments ..................................... 2
Section 2.02. Borrowing Procedures; Conversions ............... 3
Section 2.03. Warrants ........................................ 5
Section 2.04. Borrowing Base .................................. 5
Section 2.05. The Notes ....................................... 6
Section 2.06. Reduction of the Commitments .................... 6
Section 2.07. Mandatory Repayment of Loans .................... 6
Section 2.08. Interest Accrual, Payments ...................... 7
Section 2.09. Optional Prepayments ............................ 9
Section 2.10. Payments, Notice of Certain Repayments and
Computations ............................................. 9
Section 2.11. Fees ............................................ 10
Section 2.12. Setoff, Counterclaims and Taxes ................. 11
Section 2.13. Funding Losses .................................. 13
Section 2.14. Change of Law ................................... 13
Section 2.15. Increased Costs ................................. 14
ARTICLE III CONDITIONS OF CREDIT .................................. 15
Section 3.01. Conditions Precedent to the Initial Borrowing.... 15
Section 3.02. Conditions Precedent to All Loans ............... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES ......................... 18
Section 4.01. Corporate Existence ............................. 18
Section 4.02. Corporate Authority; Binding Obligations ........ 18
Section 4.03. No Conflict ..................................... 19
Section 4.04. No Consent ...................................... 19
Section 4.05. No Defaults or Violations of Law ................ 19
Section 4.06. Financial Position .............................. 19
Section 4.07. Litigation ...................................... 20
Section 4.08. Use of Proceeds ................................. 20
Section 4.09. Governmental Regulation ......................... 20
Section 4.10. Disclosure ...................................... 20
Section 4.11. ERISA ........................................... 20
Section 4.12. Payment of Taxes ................................ 21
Section 4.13. Title and Liens ................................. 21
Section 4.14. Gas Imbalances................................... 22
Section 4.15. Consummation of Acquisition...................... 22
Section 4.16. Environmental Matters............................ 22
ARTICLE V AFFIRMATIVE COVENANTS...................................... 23
Section 5.01. Reporting Requirements........................... 23
Section 5.02. Taxes; Claims.................................... 26
Section 5.03. Compliance with Laws............................. 26
Section 5.04. Insurance ....................................... 26
Section 5.05. Corporate Existence.............................. 27
Section 5.06. Inspections ..................................... 27
Section 5.07. Maintenance of Properties........................ 27
Section 5.08. Accounting Systems............................... 27
Section 5.09. Use of Loans..................................... 28
Section 5.10. Reserve Reports.................................. 28
Section 5.11. Title............................................ 29
Section 5.12. Additional Collateral............................ 29
Section 5.13. Further Assurances in General.................... 29
Section 5.14. Enforcement of Acquisition Documents............. 30
ARTICLE VI NEGATIVE COVENANTS........................................ 30
Section 6.01. Indebtedness Restriction......................... 30
Section 6.02. Lien Restriction................................. 30
Section 6.03. Derivatives...................................... 32
Section 6.04. Interest Coverage Ratio.......................... 32
Section 6.05. Current Ratio.................................... 32
Section 6.06. Tangible Net Worth............................... 32
Section 6.07. Sales of Assets.................................. 32
Section 6.08. Consolidation and Mergers........................ 32
Section 6.09. Restricted Disbursements......................... 33
Section 6.10. Lines of Business................................ 33
Section 6.11. Transactions with Affiliates..................... 33
ARTICLE VII DEFAULT AND REMEDIES..................................... 33
Section 7.01. Events of Default................................ 33
Section 7.02. Setoff in Event of Default....................... 36
Section 7.03. No Waiver; Remedies.............................. 37
Section 7.04. Hydrocarbon Proceeds............................. 37
ARTICLE VIII THE AGENT............................................... 37
Section 8.01. Authorization and Action......................... 37
Section 8.02. Reliance, Etc.................................... 38
Section 8.03. BTCo and Affiliates.............................. 38
Section 8.04. Bank Credit Decision............................. 39
Section 8.05. Indemnification.................................. 39
Section 8.06. Employees of the Agent........................... 40
Section 8.07. Successor Agent.................................. 40
Section 8.08. Notice of Default................................ 41
Section 8.09. Execution of Loan Documents...................... 41
ARTICLE IX MISCELLANEOUS............................................. 41
Section 9.01. Amendments, Etc.................................. 41
Section 9.02. Participation Agreements and Assignments......... 42
Section 9.03. Notices.......................................... 45
Section 9.04. Costs and Expenses............................... 46
Section 9.05. Successors and Assigns........................... 46
Section 9.06. Independence of Covenants........................ 46
Section 9.07. Survival of Representations and Warranties ...... 46
Section 9.08. Separability..................................... 46
Section 9.09. Captions......................................... 47
Section 9.10. Counterparts..................................... 47
Section 9.11. Governing Law.................................... 47
Section 9.12. Submission to Jurisdiction....................... 47
Section 9.13. Limitation on Interest........................... 48
Section 9.14. Indemnification.................................. 48
Section 9.15. Confidentiality.................................. 49
Section 9.16. Final Agreement of the Parties................... 49
EXHIBITS
Exhibit 2.02(a)-1 Form of Borrowing Request (Revolving Borrowing)
Exhibit 2.02(a)-2 Form of Borrowing Request (Tranche A Borrowing and
Tranche B Borrowing)
Exhibit 2.02(c) Form of Conversion Notice
Exhibit 2.03 Form of Warrant Agreement
Exhibit 2.05(a) Form of Revolving Note
Exhibit 2.05(b) Form of Tranche A Note
Exhibit 2.05(c) Form of Tranche B Note
Exhibit 9.02 Form of Assignment and Acceptance Agreement
SCHEDULES
Schedule 4.01 List of Borrower's Subsidiaries
Schedule 4.04 Consents
Schedule 4.07 Litigation
Schedule 4.13 Titles and Liens
Schedule 4.14 Gas Imbalances
Schedule 6.01 Indebtedness
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of September 30, 1996 is among
ABRAXAS PETROLEUM CORPORATION, a Nevada corporation (the "Borrower"), the banks
named on the signature pages hereto (together with their respective successors
and assigns in such capacity, the "Banks"), and BANKERS TRUST COMPANY, as agent
for the Banks (together with its successors and assigns in such capacity, the
"Agent"). Unless otherwise defined herein, all capitalized terms used herein and
defined in Article I are used herein as so defined.
PRELIMINARY STATEMENT
The Borrower has requested that the Banks provide the Borrower with
(a) a $30,000,000 revolving credit facility, (b) a $35,000,000 term loan
facility and (c) a $25,000,000 term loan facility, each of which will be used as
specified herein. The Banks have agreed to provide the Borrower with such credit
facilities upon the terms and conditions set forth in this Agreement.
Accordingly, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS, ETC.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein, shall have the respective meanings
set forth in Annex A hereto (such meanings to be equally applicable to both
singular and plural forms of the terms defined).
Section 1.02. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the consolidated financial statements referred to in Section 4.06.
Section 1.03. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
Section 1.04. References, Etc. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to Sections, Annexes, Exhibits and Schedules
shall, unless the context requires a different construction, be deemed to be
references to the Sections of this Agreement and the Annexes, Exhibits and
Schedules attached hereto and made a part hereof. In this Agreement, unless a
clear contrary intention appears the word "including" (and with correlative
meaning "include") means including, without limiting the generality of any
description preceding such term. No provision of this Agreement shall be
interpreted or construed against any Person solely because that Person or its
legal representative drafted such provision.
ARTICLE II
COMMITMENTS AND TERMS OF CREDIT
Section 2.01. Commitments. (a) Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make one or more revolving loans
(the "Revolving Loans") to the Borrower from time to time on any Business Day
during the period from the Effective Date up to, but excluding, the Maturity
Date in an aggregate amount outstanding for such Bank not to exceed at any time
an amount equal to such Bank's Revolving Commitment. Each Revolving Loan shall
be made as either a Base Rate Loan or a Eurodollar Rate Loan and as part of a
single Revolving Borrowing made on the same day by the Banks ratably according
to their respective Commitment Percentages. Each Base Rate Revolving Borrowing
shall be in an aggregate amount not less than $2,000,000, or, if less, the
entire unfunded portion of the Total Revolving Commitment. Each Eurodollar Rate
Revolving Borrowing shall be in an aggregate amount not less than $2,000,000 or
an integral multiple of $1,000,000 in excess thereof. Within the limits set
forth above and subject to the terms and conditions of this Agreement, the
Borrower may borrow, repay pursuant to Section 2.07 or prepay pursuant to
Section 2.09 and reborrow under this Section 2.01(a)(i).
Notwithstanding any other term or provision hereof no Revolving Loan
shall be made if after giving effect thereto (A) the aggregate amount of Loans
outstanding would exceed the Borrowing Base or (B) the aggregate amount of
outstanding Revolving Loans would exceed the Total Revolving Commitment.
(b) Each Bank severally agrees, on the terms and conditions
hereinafter set forth, to make term loans to the Borrower (the "Tranche A
Loans") on the Effective Date in an aggregate amount equal to such Bank's
Tranche A Commitment. If the Tranche A Loan made by a Bank on the Effective Date
is less than such Bank's Tranche A Commitment, such Tranche A Commitment shall
automatically be reduced to the amount of such Tranche A Loan, as contemplated
by the definition of Tranche A Commitment. Each Tranche A Loan shall be made as
a Base Rate Loan or a Eurodollar Rate Loan and as part of a single Tranche A
Borrowing made on the Effective Date by the Banks ratably
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according to their respective Commitment Percentages. Each Eurodollar Rate
Tranche A Borrowing shall be in an aggregate amount not less than $2,000,000 or
an integral multiple of $1,000,000 in excess thereof. Any Tranche A Borrowing in
an aggregate amount less than $2,000,000 shall be a Base Rate Borrowing. Tranche
A Loans, once repaid, may not be reborrowed.
(c) Each Bank severally agrees, on the terms and conditions
hereinafter set forth, to make a term loan to the Borrower (the "Tranche B
Loans") on the Effective Date in an aggregate amount equal to such Bank's
Tranche B Commitment. If the Tranche B Loan made by a Bank on the Effective Date
is less than such Bank's Tranche B Commitment, such Tranche B Commitment shall
automatically be reduced to the amount of such Tranche B Loan, as contemplated
by the definition of Tranche B Commitment. Each Tranche B Loan shall be made and
maintained as a Base Rate Loan and as part of a single Tranche B Borrowing made
on the Effective Date by the Banks ratably according to their respective
Commitment Percentages. Tranche B Loans, once repaid, may not be reborrowed.
(d) Loans of more than one Type may be outstanding at the same time,
but the Borrower shall not be entitled to request any Borrowing or to Convert
Loans comprising any Borrowing into Loans of another Type, if after giving
effect to such Borrowing or Conversion, as the case may be, any Bank would have
outstanding (i) at any one time more than four (4) different Types of Revolving
Loans or more than four (4) different Types of Tranche A Loans or (ii) a Tranche
B Loan other than as a Base Rate Loan. Loans having different Interest Periods,
regardless of whether they commence on the same date or have the same type of
interest rate, shall be considered different Types of Loans; provided, however,
that all Base Rate Loans are the same type of Loan so long as they remain Base
Rate Loans.
Section 2.02. Borrowing Procedures; Conversions. (a) (i) Each
Revolving Borrowing shall be made upon the written, telecopied or facsimile
transmitted request of the Borrower, given to the Agent not later than 11:00
a.m. (New York time) on (A) the third Business Day prior to the proposed
Borrowing Date in the case of a Eurodollar Rate Revolving Borrowing, or (B) the
Business Day immediately preceding the proposed Borrowing Date in the case of a
Base Rate Revolving Borrowing, and the Agent shall give each other member of the
Bank Group prompt notice of such request by telecopier, telex or cable.
(ii) The Tranche A Borrowings to be funded on the Effective Date
shall be made upon the written, telecopied or facsimile transmitted
request of the Borrower, given to the Agent not later than 11:00 a.m. (New
York time) on (A) the third Business Day prior to the Effective Date in
the case of a Eurodollar Rate Tranche A Borrowing or (B) on the Business
Day prior to the Effective Date in the case of a Base Rate Tranche A
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Borrowing, and the Agent shall give each other member of the Bank Group
prompt notice of such request by telecopier, telex or cable. The Tranche B
Borrowing to be funded on the Effective Date shall be made upon the
written, telecopied or facsimile transmitted request of the Borrower,
given to the Agent not later than 11:00 a.m. (New York time) on the
Business Day prior to the Effective Date, and the Agent shall give each
other member of the Bank Group prompt notice of such request by
telecopier, telex or cable.
(iii) Each request for a Borrowing (a "Borrowing Request") made by
the Borrower shall be in substantially the form of Exhibit 2.02(a)-1 in
the case of a Revolving Borrowing, or Exhibit 2.02(a)-2 in the case of the
Tranche A Borrowing and Tranche B Borrowing to be made on the Effective
Date, specifying therein (A) the Borrowing Date for such Borrowing, (B)
the Type of Loans comprising such Borrowing, (C) the aggregate amount of
such Borrowing and (D) in the case of a Eurodollar Rate Borrowing, the
Interest Period for the Loans comprising such Borrowing. Each Bank shall,
before 12:00 Noon (New York time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Agent at
its address referred to in Section 9.03, in same day funds, such Bank's
ratable portion of such Borrowing. After the Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrower at the
Agent's aforesaid address. Each Borrowing Request shall be irrevocable and
binding on the Borrower.
(b) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's ratable portion of such Borrowing, the Agent may assume that such
Bank has made such portion available to the Agent on the date of such Borrowing
in accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such ratable portion available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount, together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the Agent
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Bank, the
Federal Funds Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan as part of such
Borrowing for purposes of this Agreement, and Borrower shall be relieved of
Borrower's obligation to repay such amount under this Section 2.02(b). The
failure of any Bank to make the Loan to be made by it as part of any Borrowing
shall not relieve any other Bank of its obligation, if any,
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hereunder to make its Loan on the date of such Borrowing or any subsequent
Borrowing Date, but no Bank shall be responsible for the failure of any other
Bank to make the Loan to be made by such other Bank on the date of any
Borrowing.
(c) The Borrower may, subject to the terms of this Agreement, on any
Business Day, upon written, telecopied or facsimile transmitted notice to the
Agent, given not later than 11:00 a.m. (New York time) on (i) the third Business
Day prior to the proposed Conversion Date in the case of a Conversion of Loans
into Eurodollar Rate Loans, or (ii) the Business Day immediately preceding the
proposed Conversion Date in the case of a Conversion of Loans into Base Rate
Loans, Convert Revolving Loans into Revolving Borrowings comprised of Revolving
Loans of another Type or Convert Tranche A Loans into Tranche A Borrowings
comprised of Tranche A Loans of another Type, and the Agent shall promptly
transmit the contents of such notice to each other member of the Bank Group by
telecopier, telex or cable. Notwithstanding any other term or provision hereof,
after giving effect to any such Conversion, the size of all Borrowings
outstanding hereunder, and the number of different Types of Loans outstanding
hereunder, shall conform to the requirements of Section 2.01. In the event of
any Conversion of Eurodollar Rate Loans on any day other than the last day of
the Interest Period applicable thereto, the Borrower shall be obligated to
reimburse the Banks in respect thereof pursuant to Section 2.13. Each notice of
a Conversion (a "Conversion Notice") given by the Borrower shall be in
substantially the form of Exhibit 2.02(c) hereto, specifying therein (A) the
Conversion Date for such Conversion, (B) the Loans to be Converted, (C) the Type
of Loans to which such Loans are to be Converted and (D) in the case of a
Conversion into Eurodollar Rate Loans, the Interest Period for such Converted
Loans. If the Borrower shall fail to give a timely Conversion Notice conforming
to the requirements of this Agreement with respect to any Eurodollar Rate Loans
prior to the expiration of the Interest Period applicable thereto, such
Eurodollar Rate Loans shall, automatically on the last day of such Interest
Period, be Converted, in the case of Eurodollar Rate Revolving Loans, into Base
Rate Revolving Loans, or, in the case of Eurodollar Rate Tranche A Loans, into
Base Rate Tranche A Loans.
Section 2.03. Warrants. If the Loans and other Obligations have not
been paid in full, and the Commitments terminated, by January 1, 1997, then, no
later than January 15, 1997, the Borrower shall execute and deliver the Warrant
Agreement to a "Warrant Agent" approved by the Agent and issue the Banks
Warrants sufficient to purchase five percent (5%) of the Borrower's issued and
outstanding common stock, on a fully diluted basis, as of January 1, 1997, with
each Bank receiving a number of Warrants equal to its Commitment Percentage of
the total number of Warrants so issued. The Warrants shall be issued pursuant
to, and shall be governed by and subject to the terms of, the Warrant Agreement.
HOU04:37909.7
Concurrently with delivery of the Warrants to the Banks, the
Borrower shall cause to be delivered to the Banks an opinion of counsel, in form
and substance satisfactory to the Banks, covering such matters as the Banks may
request, including that (i) the Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada,
(ii) the execution, delivery and performance of the Warrant Agreement, and the
issuance of the Warrants, have been duly authorized by all necessary corporate
action, (iii) the Warrants and the Warrant Agreement have been duly executed and
delivered by the Borrower, and constitute the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with their
respective terms, (iv) the execution, delivery and performance by the Borrower
of the Warrants and the Warrant Agreement will not violate any Requirement of
Law or breach any provision contained in the articles or certificate of
incorporation or bylaws of the Borrower or any material agreement, instrument or
document to which it is now a party or by which it or its properties is bound,
and (v) the shares of common stock to be issued upon exercise of the Warrants
are validly authorized and, when the Warrants are exercised, such shares will be
validly issued, fully paid and nonassessable.
Section 2.04. Borrowing Base. (a) The Borrowing Base in effect from
time to time shall represent the maximum amount (subject to the Total
Commitment) of Loans that the Banks will make to the Borrower. During the period
from and after the Effective Date until the Borrowing Base is redetermined in
accordance with this Section, the amount of the Borrowing Base shall be
$85,000,000. The Borrowing Base shall be determined in accordance with Section
2.04(b) by the Agent and approved by all of the Banks or the Majority Banks, as
applicable. The Borrowing Base is subject to redetermination in accordance with
Section 2.04(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive date that the
redetermined Borrowing Base becomes effective subject to the notice requirements
specified in Section 2.04(e) for both the scheduled redetermination and
unscheduled redeterminations. So long as any part of the Commitments are in
effect and until all of the Loans outstanding hereunder are paid in full, this
Agreement shall be governed by the then effective Borrowing Base.
(b) The Agent will after receipt of the most recent Reserve Report
delivered to the Banks under Section 5.10, and such other data and supplemental
information as may from time to time be reasonably requested by the Agent, but
in no event later than May 1, 1997, redetermine the Borrowing Base based on such
Reserve Report. The Agent and each Bank will redetermine the Borrowing Base in
accordance with their respective normal and customary oil and gas lending
criteria as such exist at that particular time. The Agent and each Bank, in
their sole discretion, may make reasonable adjustments to the rates, volumes and
prices and other assumptions set forth in the Reserve Reports and such other
data and supplemental information. Each
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redetermination of the Borrowing Base which would increase the Borrowing Base
must be approved by all the Banks, and each other redetermination of the
Borrowing Base must be approved by the Majority Banks. Failure of a Bank to
object to a redetermination within 14 days after notice of such redetermination
is given to such Bank by the Agent shall be deemed an approval of such
redetermination by such Bank.
(c) The Agent may exclude any Oil and Gas Property or portion of
production therefrom from the Borrowing Base, at any time, because the status of
title to such Oil or Gas Property is not reasonably satisfactory to Agent or
because such Oil and Gas Property is not subject to a first priority lien in
favor of the Agent as security for the Obligations.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, effective on May 1, 1997 ("Scheduled
Redetermination Date"), the Agent with the approval of all of the Banks or the
Majority Banks, as applicable, shall redetermine the amount of the Borrowing
Base in accordance with Section 2.04(b). In addition, the Agent, the Majority
Banks and the Borrower may initiate a redetermination of the Borrowing Base at
any other time after the Scheduled Redetermination Date as they so elect;
provided that the Agent, the Majority Banks and the Borrower may each initiate
only one such unscheduled redetermination during any consecutive twelve (12)
month period (an "Unscheduled Redetermination Date"). Any redetermination of the
Borrowing Base or an Unscheduled Redetermination Date shall be in accordance
with Section 2.04(b).
(e) The Agent shall promptly notify in writing the Borrower and the
Banks of the new Borrowing Base. Such redetermination of the Borrowing Base
shall not be in effect until notice is given to the Borrower.
Section 2.05. The Notes. (a) The Revolving Loans made by each Bank
shall be evidenced by a single Revolving Note issued to such Bank by the
Borrower, (i) dated the date of this Agreement (or such other date as may be
specified in Section 9.02), (ii) payable to the order of such Bank in a
principal amount equal to such Bank's Revolving Commitment and (iii) otherwise
duly completed. Each Revolving Loan made by a Bank to the Borrower and all
payments made on account of the principal amount thereof shall be entered by
such Bank in its records or on the schedule (or a continuation thereof) attached
to the Revolving Note of such Bank, provided, that prior to any transfer of any
such Revolving Note, such Bank shall endorse the amount and maturity of any
outstanding Revolving Loans on the schedule (or a continuation thereof) attached
to such Revolving Note.
(b) The Tranche A Loans made by each Bank shall be evidenced by a
single Tranche A Note issued to such Bank by the Borrower, (i) dated the date of
this Agreement (or such other date as may be specified in
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Section 9.02), (ii) payable to the order of such Bank in a principal amount
equal to such Bank's Tranche A Commitment and (iii) otherwise duly completed.
(c) The Tranche B Loans made by each Bank shall be evidenced by a
single Tranche B Note issued to such Bank by the Borrower, (i) dated the date of
this Agreement (or such other date as may be specified in Section 9.02), (ii)
payable to the order of such Bank in a principal amount equal to such Bank's
Tranche B Commitment and (iii) otherwise duly completed.
Section 2.06. Reduction of the Commitments. (a) The Borrower shall
have the right, upon at least three Business Days' notice to the Agent to
terminate in whole or reduce ratably in part the unused portions of the
respective Revolving Commitments of the Banks; provided, that (i) the respective
Revolving Commitments of the Banks may not be so partially reduced until such
time as the Tranche A Loans and the Tranche B Loans have been paid in full and
(ii) each partial reduction in the Total Revolving Commitment shall be in the
aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess
thereof.
(b) Upon any prepayment of the Revolving Loans pursuant to Section
2.07(c) or Section 2.07(e), the Revolving Commitment of each Bank shall
automatically be reduced by its ratable share of such prepayment. On the
Maturity Date the Revolving Commitment of each Bank shall automatically be
reduced to zero.
Section 2.07. Mandatory Repayment of Loans. (a) The Borrower shall
from time to time repay the Revolving Loans comprising part of the same
Borrowing in such amounts as shall be necessary so that at all times the
Revolving Loans outstanding shall not be in excess of the Total Revolving
Commitment.
(b) The Borrower shall from time to time repay the Loans comprising
part of the same Borrowing in whole or ratably in part in an amount equal to the
excess of (i) the Loans outstanding as of any redetermination of the Borrowing
Base pursuant to Section 2.04 over (ii) the Borrowing Base as of such date. Any
repayment required by this Section 2.07(b) shall be due and payable in three
equal monthly installments, each in an amount equal to one third (1/3rd) of the
original amount of such excess, commencing on the last day of the calendar month
immediately following such redetermination of the Borrowing Base and continuing
on the same day of each subsequent calendar month, and applied (x) first, to
repay the Tranche A Loans, (y) second, to repay the Tranche B Loans, and (z) the
remainder, to repay the Revolving Loans.
(c) Immediately upon receipt of any Net Proceeds, the Borrower shall
repay the Loans comprising part of the same Borrowing in whole or ratably
HOU04:37909.7
in part in an amount equal to such Net Proceeds. Any repayment required by this
Section 2.07(c) shall be applied (i) first, to repay the Tranche A Loans, (ii)
second, to repay the Tranche B Loans, and (iii) the remainder, to repay the
Revolving Loans.
(d) All outstanding Loans shall be fully due and payable on the
Maturity Date, together with any unpaid interest accrued thereon.
(e) All outstanding Loans shall be fully due and payable upon the
occurrence of a Change of Control, together with any unpaid interest accrued
thereon.
(f) Each repayment of Loans required by this Section 2.07 shall be
accompanied by payment of accrued interest to the date of such payment on the
principal amount paid. In the event of any payment of a Eurodollar Rate Loan,
the Borrower shall be obligated to reimburse the Banks in respect thereof
pursuant to Section 2.13. All principal payments required by this Section 2.07
shall (i) in the case of Tranche A Loans, first be applied to Base Rate Tranche
A Borrowings, and second to Eurodollar Rate Tranche A Borrowings, and (ii) in
the case of Revolving Loans, first be applied to Base Rate Revolving Borrowings,
and second to Eurodollar Rate Revolving Borrowings.
Section 2.08. Interest Accrual, Payments. (a) Accrual and
Payment. Subject to the provisions of Section 9.13, the Borrower shall pay
interest on the unpaid principal amount of each Loan made by each Bank from the
date of such Loan until such principal amount shall be paid in full, on the
dates and at the rates per annum specified as follows:
(i) Base Rate Loans. If such Loan is a Base Rate Loan, a rate per
annum equal at all times to the lesser of (A) the Highest Lawful Rate and
(B) the Base Rate in effect from time to time plus the Applicable Margin
in effect from time to time, and unpaid accrued interest on such Loans
shall be due and payable on each Quarterly Payment Date and on the date
such Base Rate Loan shall be paid in full; provided, however, that if the
Borrower has not been notified by the Agent of the amount of such accrued
interest at least one Business Day prior to such date, such accrued
interest shall be due and payable one Business Day after the Borrower is
notified of such amount.
(ii) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate Loan,
a rate per annum equal at all times during the Interest Period for such
Loan to the lesser of (A) the Highest Lawful Rate and (B) the sum of the
Eurodollar Rate for such Interest Period plus the Applicable Margin in
effect as of the first day of such Interest Period, and unpaid accrued
interest on such Loans shall be due and payable on the last day of such
Interest Period; provided, however, that if the Borrower has not been
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notified by the Agent of the amount of such accrued interest at least one
Business Day prior to such date, such accrued interest shall be due and
payable one Business Day after the Borrower is notified of such amount.
Any amount of principal or, to the extent permitted by applicable law, interest
which is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest from the date on which such amount is due until
such amount is paid in full, at a rate per annum equal at all times to the
lesser of (A) the Highest Lawful Rate and (B) the Base Rate in effect from time
to time during the applicable period plus the Applicable Margin in effect from
time to time during such period plus two percent (2%) (the "Default Rate"),
payable on demand.
(b) Determination of Interest Rates. (i) The Agent shall give prompt
notice to the Borrower and each other member of the Bank Group of the applicable
interest rate determined by the Agent hereunder for each Borrowing. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(ii) If the Majority Banks shall, at least one Business Day before
the date of any requested Eurodollar Rate Borrowing, notify the Agent that the
Eurodollar Rate applicable to such Borrowing will not adequately reflect the
cost to such Banks of making, funding or maintaining their respective Eurodollar
Rate Loans for such Borrowing, the right of the Borrower to select Eurodollar
Rate Loans for such Borrowing or any subsequent Borrowing shall be suspended
until the Agent shall notify the Borrower and each other member of the Bank
Group that the circumstances causing such suspension no longer exist, and each
Loan comprising such Borrowing shall be made as, or Converted into, as
applicable, a Base Rate Loan.
(c) Applicable Margin. As used in this Agreement and the other Loan
Documents, "Applicable Margin" means, as to Loans consisting of a single
Borrowing, a rate per annum determined by reference to the Type of Loans
comprising such Borrowing as follows:
(i) in the case of Revolving Loans, such rate per annum shall be one
percent (1%) for Base Rate Revolving Loans, and two and one-quarter
percent (2.25%) for Eurodollar Rate Revolving Loans;
(ii) in the case of Tranche A Loans, such rate per annum
shall be one percent (1%) for Base Rate Tranche A Loans, and two and
one-quarter (2.25%) for Eurodollar Rate Tranche A Loans; and
(iii) in the case of Tranche B Loans, (A) from the date hereof
through December 31, 1996, three percent (3%) , (B) from January 1,
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1997 through March 31, 1997, three and one-half percent (3.50%), (C) from
April 1, 1997 through June 30, 1997, four percent (4%), (D) from July 1,
1997 through September 30, 1997, four and one-half percent (4.50%), and
(E) thereafter, five percent (5%).
Section 2.09. Optional Prepayments. (a) The Borrower may, from time
to time on any Business Day, upon notice to the Agent stating the proposed date
and aggregate principal amount thereof, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Base Rate Loans (without
premium or penalty) comprising part of the same Borrowing in whole or ratably in
part; provided, that any partial prepayment of such Base Rate Loans shall be in
an aggregate principal amount of not less than $500,000. The Borrower may from
time to time upon at least three Business Days' notice to the Agent stating the
proposed date and the aggregate principal amount thereof, and if such notice is
given the Borrower shall, prepay the outstanding principal amount of the
Eurodollar Rate Loans comprising part of the same Borrowing in whole or ratably
in part; provided, that any partial prepayment of such Eurodollar Rate Loans
shall be in an aggregate principal amount of not less than $500,000 or an
integral multiple of $100,000 in excess thereof.
(b) Each prepayment of Loans made pursuant to this Section 2.09
shall be accompanied by a payment of accrued interest to the date of such
prepayment on the principal amount prepaid. In the event of any prepayment of a
Eurodollar Rate Loan, the Borrower shall be obligated to reimburse the Banks in
respect thereof pursuant to Section 2.13.
Section 2.10. Payments, Notice of Certain Repayments and Computations. (a)
All payments of principal, interest, commitment fees and other amounts
hereunder, under the Notes and the other Loan Documents shall be made in Dollars
to the Agent at its address specified in Section 9.03 for the account of each of
the Banks, in immediately available funds not later than 11:00 a.m. (New York
time) on the date when due. Upon receipt of such payments, the Agent will
promptly cause to be distributed like funds relating to the payment of principal
or interest or commitment fees ratably (other than amounts payable pursuant to
Section 2.12, Section 2.13, Section 2.14 or Section 2.15) to the Banks, for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Bank, to such Bank for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks under the Loan
Documents that the Borrower will not make such payment in full, the Agent may
assume that the Borrower has made such payment in full to the Agent on
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such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent the Borrower shall not have made such payment in
full to the Agent each Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank, together with interest thereon for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent at the Federal Funds Rate.
(c) All payments by the Borrower of the fees payable to the Agent shall be
made in Dollars directly to such Person at its address specified in Section 9.03
in immediately available funds not later than 11:00 a.m. (New York time) on the
date when due.
(d) All computations of interest based on the Base Rate shall be made on
the basis of a year of 365 or 366 days, as the case may be, and all computations
of interest based on the Eurodollar Rate or the Federal Funds Rate, as well as
commitment fees, shall be made on the basis of a year of 360 days (unless use of
a 360 day year would cause the interest contracted for, charged or received
hereunder to exceed the Highest Lawful Rate, in which case such computations
shall be made on the basis of a year of 365 or 366 days, as the case may be), in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or commitment fees
are payable.
(e) Whenever any payment under the Loan Documents shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, if such extension would cause payment of interest on or
principal of Eurodollar Rate Loans to be made in the next following calendar
month, such payment shall be made on the immediately preceding Business Day.
(f) If any Bank shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) on account of the
Loans made by it (other than pursuant to Section 2.08(b), Section 2.12, Section
2.13, Section 2.14 or Section 2.15), in excess of its ratable share of payments
on account of the Loans obtained by all the Banks, such Bank shall forthwith
purchase from the other Banks such participations in the Loans made by such
other Banks as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.10(f)
may, to the fullest extent permitted by law and this Agreement, exercise all its
rights of payment (including the right of setoff) with respect to
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such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation.
Section 2.11. Fees. Subject to the provisions of Section 9.13, the Borrower
agrees to pay to each Bank a commitment fee equal to one-half of one percent
(.50%) per annum on the average unused portion of the Revolving Commitment of
such Bank in effect from time to time for the period from the Execution Date to,
but excluding, the Maturity Date (or if earlier, the termination in full of the
Revolving Commitment). Accrued commitment fees shall be due and payable in
arrears on each Quarterly Payment Date in each year, on the date of any
reduction or termination of the Revolving Commitment of such Bank and on the
Maturity Date (or if earlier, the termination in full of the Revolving
Commitment); provided that if the Borrower has not been notified by Agent of the
amount of such fee at least one (1) Business Day prior to any such date, such
fee shall be due and payable one (1) Business Day after the Borrower is notified
by Agent of such amount, and shall be computed for the period commencing with
the day to which such fee was last paid (or, in the case of the first commitment
fee payment date, for the period commencing with and including the Execution
Date) to the date such fee is due and payable.
Section 2.12. Setoff, Counterclaims and Taxes. (a) All payments of
principal, interest, expenses, reimbursements, compensation, fees and any other
amount from time to time due under the Notes, this Agreement or any other Loan
Document shall be made by the Borrower without setoff or counterclaim and shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each member of the
Bank Group, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such member of the Bank Group is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Loan Document to any member of the
Bank Group, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.12) such member of the Bank Group
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
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(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or the
other Loan Documents or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Notes or the other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each member of the Bank Group for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.12) paid, by such member of the Bank Group (whether paid on its own behalf or
on behalf of any other member of the Bank Group) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 10 days from the date such member of
the Bank Group makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Agent, at its address referred to in Section 9.03, the
original or a certified copy of a receipt evidencing payment thereof. If no
Taxes are payable in respect of any payment hereunder or under the Notes or the
other Loan Documents, upon the reasonable request of the Agent, the Borrower
will furnish to the Agent at its address referred to in Section 9.03, a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Agent stating that such payment is exempt from or not subject
to Taxes.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.12 shall survive the payment in full of the Credit Outstanding
and all other amounts owing under the other Loan Documents. The provisions of
this Section 2.12 are in all respects subject to Section 9.13 hereof.
(f) Each Bank represents and warrants to the Agent and the Borrower that
such Bank is either (i) a corporation organized under the laws of the United
States or a state thereof or (ii) entitled to complete exemption from United
States withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement and the other Loan Documents
(x) under an applicable provision of a tax convention to which the United States
is a party or (y) because it is acting through a branch, agency or office in the
United States and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States. Upon becoming a party
to this Agreement (whether by assignment or as an original signatory hereto),
and in any event, from time to time upon the request of the Agent or the
Borrower, each Bank which is not a corporation organized under the laws of the
United States or any state thereof shall deliver to the Agent and the Borrower
such forms, certificates or other instruments as may be required by
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the Agent in order to establish that such Bank is entitled to complete
exemption from United States withholding taxes imposed on or with respect to any
payments, including fees, to be made to such Bank under this Agreement and the
other Loan Documents. Each Bank also agrees to deliver to the Borrower and the
Agent and such other supplemental forms as may at any time be required as a
result of the passage of time or changes in applicable law or regulation in
order to confirm or maintain in effect its entitlement to exemption from U.S.
withholding tax on any payments hereunder; provided, that the circumstances of
the Bank at the relevant time and applicable laws permit it to do so. If a Bank
determines, as a result of any change in either (1) applicable law, regulation
or treaty, or in any official application thereof or (2) its circumstances, that
it is unable to submit any form or certificate that it is obligated to submit
pursuant to this Section 2.12(f), or that it is required to withdraw or cancel
any such form or certificate previously submitted, it shall promptly notify the
Borrower and the Agent of such fact. If a Bank is organized under the laws of a
jurisdiction outside the United States, and the Borrower and the Agent have not
received forms, certificates or other instruments indicating to their
satisfaction that all payments to be made to such Bank hereunder are not subject
to United States withholding tax or the Agent otherwise has reason to believe
that such Bank is subject to U.S. withholding tax, the Borrower shall withhold
taxes from such payments at the applicable statutory rate. Each Bank shall
indemnify and hold the Borrower and the Agent harmless from any United States
taxes, penalties, interest and other expenses, costs and losses incurred or
payable by them as a result of either (A) such Bank's failure to submit any form
or certificate that it is required to provide pursuant to this Section 2.12(f)
or (B) reliance by the Borrower or the Agent on any such form or certificate
which such Bank has provided to them pursuant to this Section 2.12(f).
Section 2.13. Funding Losses. The Borrower shall indemnify each Bank
against any loss or reasonable expense (including, but not limited to, any loss
or reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or reemploying deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Rate Loan) which such
Bank may sustain or incur as a consequence of (a)any failure by the Borrower to
fulfill on the date of any Borrowing hereunder the applicable conditions set
forth in Article III, (b) any failure by the Borrower to borrow hereunder, or to
Convert Loans hereunder after a Borrowing Request or Conversion Notice,
respectively, has been given, (c) any payment, prepayment or Conversion of a
Eurodollar Rate Loan required or permitted by any other provisions of this
Agreement, including, without limitation, payments made due to the acceleration
of the maturity of the Notes pursuant to Section 7.01, or otherwise made on a
date other than the last day of the applicable Interest Period, (d) any default
in the payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, by notice of prepayment or otherwise) or (e) the occurrence of an
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Event of Default. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, as determined by each Bank of
(i) its cost of obtaining the funds for the Loan being paid, prepaid or
Converted or not borrowed or Converted (based on the Eurodollar Rate applicable
thereto) for the period from the date of such payment, prepayment or Conversion
or failure to borrow or Convert to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow or Convert, the Interest Period for
the Loan which would have commenced on the date of such failure to borrow or
Convert) over (ii) the amount of interest (as estimated by such Bank) that would
be realized by such Bank in reemploying the funds so paid, prepaid or Converted
or not borrowed or Converted for such period or Interest Period, as the case may
be. A certificate of each Bank setting forth any amount or amounts which such
Bank is entitled to receive pursuant to this Section 2.13 shall be delivered to
the Borrower (with a copy to the Agent) and shall be conclusive, if made in good
faith, absent manifest error. The Borrower shall pay to the Agent for the
account of each Bank the amount shown as due on any certificate within 10 days
after its receipt of the same. Notwithstanding the foregoing, in no event shall
any Bank be permitted to receive any compensation hereunder constituting
interest in excess of the Highest Lawful Rate. Without prejudice to the survival
of any other obligations of the Borrower hereunder, the obligations of the
Borrower under this Section 2.13 shall survive the termination of this Agreement
and/or the payment or assignment of any of the Notes.
Section 2.14. Change of Law. (a) If at any time any Bank determines in good
faith (which determination shall be conclusive) that any change in any
applicable law, rule or regulation or in the interpretation, application or
administration thereof makes it unlawful, or any central bank or other
Governmental Authority asserts that it is unlawful, for such Bank or its foreign
branch or branches to fund or maintain any Eurodollar Rate Loan (any of the
foregoing determinations being a "Eurodollar Event"), then, such Bank, at its
option, may: (i) declare that Eurodollar Rate Loans will no longer be made or
maintained by such Bank, whereupon the right of the Borrower to select
Eurodollar Rate Loans for any Borrowing shall be suspended until such Bank shall
notify the Agent that the circumstances causing such Eurodollar Event no longer
exist; (ii) with respect to any Eurodollar Rate Loans of such Bank then
outstanding, require that all such Eurodollar Rate Loans be Converted to Base
Rate Loans, in which event all such Eurodollar Rate Loans shall automatically be
Converted into Base Rate Loans on the effective date of such notice and all
payments or prepayments of principal that would have otherwise been applied to
repay such Converted Eurodollar Rate Loans shall instead be applied to repay the
Base Rate Loans resulting from such Conversion; and/or (iii) with respect to any
Eurodollar Rate Loans requested of such Bank but not yet made as or Converted
into such, require that such Eurodollar Rate Loans be made as or Converted into,
as applicable, Base Rate Loans.
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(b) Upon the occurrence of any Eurodollar Event, and at any time thereafter
so long as such Eurodollar Event shall continue, such Bank may exercise its
aforesaid option by giving written notice thereof to the Agent and the Borrower,
such notice to be effective upon receipt thereof by the Borrower. Any Conversion
of any Eurodollar Rate Loan which is required under this Section 2.14 shall be
made, together with accrued and unpaid interest and all other amounts payable to
such Bank under this Agreement with respect to such Converted Loan (including,
without limitation, amounts payable pursuant to Section 2.13 hereof), on the
date stated in the notice to the Borrower referred to above.
Section 2.15. Increased Costs. (a) If, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline issued or request made by any central bank or
other Governmental Authority (whether or not having the force of law) after the
date hereof, there shall be any increase in the cost to any Bank of agreeing to
make or making, funding or maintaining Eurodollar Rate Loans, then the Borrower
shall from time to time, subject to the provisions of Section 9.13, pay to the
Agent for the account of such Bank additional amounts sufficient to compensate
such Bank for such increased cost upon demand by such Bank.
(b) If any Bank shall have determined in good faith that any law, rule,
regulation or guideline adopted after the date hereof pursuant to or arising out
of the July 1988 report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of Capital Measurement
and Capital Standards" or that the adoption after the date hereof of any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change after the date hereof in any of the foregoing or in the interpretation or
administration thereof by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or compliance by such
Bank (or any lending office of such Bank) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority or comparable agency, affects or would affect the amount
of capital required or expected to be maintained by such Bank or any corporation
controlling such Bank, then the Borrower shall from time to time, subject to the
provisions of Section 9.13, pay to such Bank upon demand additional amounts
sufficient to compensate such Bank or such corporation in the light of such
circumstances, to the extent that such Bank reasonably determines such increase
in capital to be allocable to the existence of such Bank's Commitment hereunder.
(c) Each Bank will notify the Borrower of any event occurring after the
date of this Agreement which will entitle such Bank to compensation pursuant to
this Section 2.15 as promptly as practicable after such Bank obtains knowledge
of the occurrence of such event. A certificate of such Bank setting
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forth in reasonable detail (i) such amount or amounts as shall be necessary
to compensate such Bank (or participating banks or other entities pursuant to
Section 9.02) as specified above and (ii) the calculation of such amount or
amounts shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay to such Bank the amount shown as due on
any such certificate within ten (10) days after its receipt of the same. The
failure of any Bank to demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return on capital shall not
constitute a waiver of the right of such Bank or any other Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital as such rights are set forth
herein. The protection of this Section 2.15 shall be available to the Banks
regardless of any possible contention of invalidity or inapplicability of law,
regulation or condition which shall have been imposed.
ARTICLE III
CONDITIONS OF CREDIT
Section 3.01. Conditions Precedent to the Initial Borrowing. The obligation
of each Bank to make its initial Loan on the occasion of the initial Borrowing
hereunder is subject to the conditions precedent that the Agent shall have
received on or before the date of such initial Borrowing all of the following,
each in form and substance reasonably satisfactory to the Bank Group and in such
number of counterparts as may be reasonably requested by the Agent:
(a) The following Loan Documents duly executed by the
Persons indicated below:
(i) this Agreement executed by the Borrower and each member
of the Bank Group,
(ii) the Notes executed by the Borrower,
(iii) the Mortgage executed by the Borrower, and
(iv) the Security Agreement executed by the Borrower.
(b) Evidence that the Liens created by the Security Documents have
been duly perfected and constitute valid first priority Liens, which shall
include, without limiting the generality of the foregoing:
(i) the filing of such financing statements under the Uniform
Commercial Code in such jurisdictions as the Agent may require, and
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(ii) the filing of the Mortgage in such jurisdictions as the Agent
may require.
(c) A certificate of the secretary or an assistant secretary of the
Borrower certifying, inter alia, (i) true and correct copies of resolutions
adopted by the Board of Directors of the Borrower (A) authorizing the execution,
delivery and performance by the Borrower of the Loan Documents to which it is or
will be a party and the Borrowings to be made thereunder and the consummation of
the transactions contemplated thereby, (B) authorizing officers of the Borrower
to negotiate the Loan Documents to which it is a party and which will be
delivered at or prior to the date of the initial Borrowing and (C) authorizing
officers of the Borrower to execute and deliver the Loan Documents to which it
is or will be a party and any related documents, including, without limitation,
any agreement or security document contemplated by this Agreement, (ii) true and
correct copies of the articles of incorporation and bylaws (or other similar
charter documents) of the Borrower and (iii) the incumbency and specimen
signatures of the officers of the Borrower executing any documents on behalf of
it.
(d) Certificates of appropriate public officials as to the existence and
good standing of the Borrower in the States of Texas, Nevada and Wyoming.
(e) An engineering report covering the Acquisition Properties and the other
Oil and Gas Properties of the Borrower prepared by DeGolyer and MacNaughton
dated as of June 30, 1996 (the "Initial Reserve Report").
(f) Copies of all environmental reports in the Borrower's possession
covering its existing Oil and Gas Properties and an environmental report
prepared by Borrower with respect to the Acquisition Properties, in form, scope
and substance satisfactory to the Agent.
(g) A true and correct copy of the Acquisition Documents and evidence
satisfactory to the Agent that the Acquisition has been consummated in
accordance with the terms thereof and all Requirements of Law.
(h) Fully executed and acknowledged releases of all Liens existing as
security for the First Union Debt, in form, scope and substance satisfactory to
the Agent.
(i) Title opinions covering at least 80% of the value of the Borrower's Oil
and Gas Properties included in the Initial Reserve Report in form, scope and
substance satisfactory to the Agent.
(j) Copies of all authorizations, consents, approvals, licenses, filings or
registrations obtained from or made with any Governmental Authority or
HOU04:37909.7
any other Person in connection with the Acquisition or the execution, delivery
and performance of the Loan Documents, together with a certificate from a
Responsible Officer of the Borrower to the effect that all such authorizations,
consents, approvals, licenses, filings or registrations have been obtained or
made, as applicable, and are in full force and effect.
(k) A list of all insurance policies and programs in effect with respect to
the properties and businesses of the Borrower and its Subsidiaries, specifying
for each such policy or program the amount thereof, the risks insured against
thereby, the name of the insurer and each insured party thereunder and the
policy or other identification number thereof, together with a certificate from
a Responsible Officer of the Borrower to the effect that all such policies and
programs are in full force and effect.
(l) A satisfactory review of Borrower, including a review of its marketing,
transportation and hedging arrangements for Hydrocarbons.
(m) A certificate signed by a Responsible Officer of the Borrower
certifying as to the satisfaction of the conditions specified in Section
3.02(a).
(n) The favorable, signed opinions of Cox & Smith Incorporated, special
counsel to the Borrower and its Subsidiaries and Brown & Drew, special Wyoming
counsel to the Agent and the Bank Group, each addressed to the Agent and the
Bank Group, in form and substance reasonably satisfactory to the Agent and its
counsel.
(o) A written confirmation from the Process Agent of its appointment and
acceptance as process agent for the Borrower as provided for in Section 9.12.
(p) The payment to the Bank Group of the fees due to them as of such date
under the Loan Documents, and the payment of all legal fees and expenses of
counsel to the Agent, including those of Andrews & Kurth L.L.P. and Cahill
Gordon & Reindel.
(q) Such other documents, certificates and opinions as the Agent may
reasonably request relating to this Agreement and the other Loan Documents.
Section 3.02. Conditions Precedent to All Loans. The obligation of each
Bank to make any Loan, shall be subject to the further conditions precedent that
(a) on the Borrowing Date of such Loan the following statements shall be true,
and the Borrower, by virtue of its delivery of a Borrowing Request shall be
deemed to have certified to the Bank Group as of such date that (i) the
representations and warranties contained in Article IV are true and correct on
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and as of such date, before and after giving effect to such Loan and as
though made on and as of such date, (ii) no Default or Event of Default has
occurred and is continuing, or would result from such Loan and (iii) no event
has occurred since the Execution Date that could reasonably be expected to have
a Material Adverse Effect on the Borrower or any of its Subsidiaries and (b)
that the Agent shall have received on or before such date such other documents,
certificates, information and opinions as the Agent may reasonably request
relating to this Agreement and the other Loan Documents, each in form and
substance reasonably satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank Group to enter into this Agreement, the
Borrower hereby represents and warrants to the Bank Group as follows:
Section 4.01. Corporate Existence. Each of the Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the conduct of its
operations or the ownership or leasing of its properties requires such
qualification or licensing, except where the failure to be so qualified or
licensed will not have a Material Adverse Effect on such Person. Schedule 4.01
is a complete list of the Borrower's Subsidiaries.
Section 4.02. Corporate Authority; Binding Obligations. Each of the
Borrower and its Subsidiaries has all requisite corporate power and authority to
conduct its business, to own, operate and encumber its Property, and to execute,
deliver and perform all of its obligations under the Loan Documents executed by,
or to be executed by, such Person. The execution, delivery and performance of
each of the Loan Documents to which the Borrower or any of its Subsidiaries is a
party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary corporate action. Each of the Loan Documents to
which the Borrower or any of its Subsidiaries is a party has been duly executed
and delivered by such Person, is in full force and effect and constitutes the
legal, valid and binding obligation of such Person, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and general principles
of equity. The Security Documents create valid Liens in the collateral described
therein, securing the secured obligations described therein.
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Section 4.03. No Conflict. The execution, delivery and performance by the
Borrower or any of its Subsidiaries of each Loan Document to which such Person
is a party and the consummation of each of the transactions contemplated thereby
do not and shall not, by the lapse of time, the giving of notice or otherwise:
(a) constitute a violation of any Requirement of Law or a breach of any
provision contained in the articles or certificate of incorporation or bylaws of
such Person, or any shareholder agreement pertaining to such Person, or
contained in any material agreement, instrument or document to which it is now a
party or by which it or its properties is bound, except for such violations or
breaches that will not have a Material Adverse Effect on any such Person; or (b)
result in or require the creation or imposition of any Lien whatsoever upon any
of the properties or assets of the Borrower or any of its Subsidiaries (other
than Excepted Liens and Liens in favor of the Agent arising pursuant to the Loan
Documents).
Section 4.04. No Consent. No authorization, consent, approval, license, or
exemption of or filing or registration with, any Governmental Authority or any
other Person, which has not been obtained, was, is or will be necessary for the
valid execution, delivery or performance by the Borrower or any of its
Subsidiaries of any of the Loan Documents to which it is a party and the
consummation of each of the transactions contemplated thereby (including,
without limitation, the consummation of the Acquisition) or the Borrower's or
any of its Subsidiaries' ownership, use or operation of any of their Properties
other than (a) those listed on Schedule 4.04 and (b) those that the failure to
obtain, file or make will not have a Material Adverse Effect on any such Person.
Section 4.05. No Defaults or Violations of Law. No Default or Event of
Default has occurred and is continuing. No default (or event or circumstance
occurred which, but for the passage of time or the giving of notice, or both,
would constitute a default) has occurred and is continuing with respect to any
note, indenture, loan agreement, mortgage, lease, deed or other agreement to
which the Borrower or any of its Subsidiaries is a party or by which any of them
or their Properties is bound, except for such defaults that will not have a
Material Adverse Effect on the Borrower or any of its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries is in violation of any applicable
Requirement of Law except for such violations that will not have a Material
Adverse Effect on any such Person.
Section 4.06. Financial Position. (a) Prior to the Execution Date, the
Borrower has furnished to the Agent and the Bank Group audited financials of the
Borrower and its Subsidiaries as of December 31, 1995 and unaudited financials
of the Borrower as of June 30, 1996. The audited financials referred to in the
previous sentence have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved and
present fairly the financial condition of the Borrower and its
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Subsidiaries as of the dates thereof and the results of their operations
for the periods then ended. As of the Execution Date, no event has occurred
since June 30, 1996 that could reasonably be expected to have a Material Adverse
Effect on the Borrower or any of its Subsidiaries.
(b) Except as fully reflected in the audited financials referred to in
paragraph (a) of this Section 4.06, as of the date hereof, there are no
liabilities or obligations of the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, would have a
Material Adverse Effect on the Borrower or any of its Subsidiaries.
Section 4.07. Litigation. Except as set out in Schedule 4.07, there are no
actions, suits or proceedings pending or, to the knowledge of the Borrower
threatened against or affecting the Borrower or any of its Subsidiaries, or the
Properties of any such Person, before or by any Governmental Authority or other
Person, which, if determined adversely to such Person could have a Material
Adverse Effect on any such Person.
Section 4.08. Use of Proceeds. (a) The Borrower's uses of the proceeds of
the Loans are, and will continue to be, legal and proper corporate uses (duly
authorized by Borrower's board of directors), and such uses are consistent with
the terms of the Loan Documents, including, without limitation, Section 5.09,
and all Requirements of Law.
(b) Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U), and no part of the proceeds of any
Loan will be used, directly or indirectly, (i) to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or (ii) for the purpose of purchasing, carrying or trading in
any securities under such circumstances as to involve the Borrower or any of its
Subsidiaries in a violation of Regulation X.
Section 4.09. Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act, as amended, the Investment Company Act of 1940, as amended, or any other
Requirement of Law such that the ability of any such Person to incur
indebtedness is limited or its ability to consummate the transactions
contemplated by this Agreement, the other Loan Documents or any document
executed in connection therewith is impaired.
Section 4.10. Disclosure. The schedules, documents, exhibits, reports,
certificates and other written statements and information furnished by or on
behalf of the Borrower or any of its Subsidiaries to the Bank Group do not
HOU04:37909.7
contain any Material misstatement of fact, or omit to state a Material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. Neither the Borrower
nor any of its Subsidiaries has intentionally withheld any fact known to it
which has or is reasonably likely to have a Material Adverse Effect on the
Borrower or any of its Subsidiaries.
Section 4.11. ERISA. (a) The Borrower, and each ERISA Affiliate and
Subsidiary have operated and administered each Pension Plan and Other Benefit
Plan in compliance with all applicable laws, except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Borrower nor any ERISA
Affiliate or Subsidiary has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Internal Revenue Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists or is threatened that
could reasonably be expected to result in the incurrence of any such liability
by the Borrower or any ERISA Affiliate or Subsidiary, or in the imposition of
any Lien on any of the rights, properties or assets of the Borrower or any ERISA
Affiliate or Subsidiary, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the
Internal Revenue Code, other than such liabilities or Liens as would not be,
individually or in the aggregate, Material.
(b) The present value of the aggregate benefit liabilities under each
Pension Plan subject to Title IV of ERISA, determined as of the end of such
Pension Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Pension Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Pension Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA and the
terms "current value" and "present value" have the meaning specified in Section
3 of ERISA.
(c) The Borrower and its ERISA Affiliates and Subsidiaries do not currently
and have never had any liability or obligation with respect to any liabilities
(and are not subject to contingent withdrawal liabilities) under section 4201 or
4204 of any Multiemployer Plan.
(d) The expected post-retirement benefit obligation (determined as of the
last day of the Borrower's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Internal Revenue Code ("COBRA")) of the Borrower and its ERISA Affiliates
and Subsidiaries is not Material and, except as modified by
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COBRA, such obligations can be unilaterally terminated at any time by the
Borrower, or its ERISA Affiliates and Subsidiaries without any Material
liability.
Section 4.12. Payment of Taxes. The Borrower has filed, and has caused each
of its Subsidiaries to file, all federal, state and local tax returns and other
reports that the Borrower and each such Subsidiary are required by law to file
and have paid all taxes and other similar charges that are due and payable
pursuant to such returns and reports, except to the extent any of the same may
be contested in good faith by appropriate proceedings promptly initiated and
diligently conducted, and with respect to which adequate reserves have been set
aside on the books of such Person in accordance with generally accepted
accounting principles.
Section 4.13. Title and Liens. (a) Except as set out in Schedule 4.13 the
Borrower and its Subsidiaries have good and defensible title to its Properties,
free and clear of all Liens except Liens permitted by Section 6.02. Except as
set forth in Schedule 4.13, after giving full effect to the Excepted Liens, the
Borrower owns the net interests in production attributable to Oil and Gas
Properties reflected in the Initial Reserve Report and the ownership of such Oil
and Gas Properties shall not in any material respect obligate the Borrower to
bear the costs and expenses relating to the maintenance, development and
operations of each such Oil and Gas Property in an amount in excess of the
working interest of each Oil and Gas Property set forth in the Initial Reserve
Report. Further, upon delivery of each Reserve Report, the statements made in
the preceding sentence shall be true with respect to such furnished Reserve
Reports including the ownership of the Oil and Gas Properties set forth therein.
To the best of the Borrower's knowledge, all information contained in the
Initial Reserve Report is true and correct in all material respects as of the
date thereof.
(b) All material leases and agreements necessary for the conduct of the
business of the Borrower and its Subsidiaries are valid and subsisting, in full
force and effect and, to the knowledge of the Borrower, there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such lease or leases, which would
affect in any material respect the conduct of the business of the Borrower and
its Subsidiaries.
(c) The rights, properties and other assets presently owned, leased or
licensed by the Borrower and its Subsidiaries including, without limitation, all
easements and rights of way, include all rights, properties and other assets
necessary to permit the Borrower and its Subsidiaries to conduct their business
in all material respects in the same manner as their business has been conducted
prior to the date hereof.
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(d) All of the assets and properties of the Borrower and its
Subsidiaries which are reasonably necessary for the operation of its business
are in good working condition and are maintained in accordance with prudent
business standards.
Section 4.14. Gas Imbalances. As of the date of this Agreement,
except as set forth in Schedule 4.14 or on the most recent certificate delivered
pursuant to Section 5.10(c), on a net basis there are no gas imbalances, take or
pay or other prepayments with respect to the Borrower's Oil and Gas Properties
which would require the Borrower to deliver Hydrocarbons produced from the Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor exceeding a market value of $100,000 in the aggregate.
Section 4.15. Consummation of Acquisition. The transactions
described in the Acquisition Documents, including, without limitation, the
Acquisition, have been completed in accordance with terms of the Acquisition
Documents, and with all Requirements of Law.
Section 4.16. Environmental Matters. Except as set forth in the
report delivered to the Banks on the Effective Date pursuant to Section 3.01,
(a) (i) the Borrower and each of its Subsidiaries possess all environmental,
health and safety licenses, permits, authorizations, registrations, approvals
and similar rights necessary under law or otherwise for such Person to conduct
its operations as now being conducted, (ii) each of such licenses, permits,
authorizations, registrations, approvals and similar rights is valid and
subsisting, in full force and effect and enforceable by such Person, and (iii)
such Person is in compliance with all terms, conditions or other provisions of
such permits, authorizations, registrations, approvals and similar rights,
except to the extent that the failure to do so will not have a Material Adverse
Effect on such Person; (b) except as disclosed in the environmental reports
delivered to the Bank Group on the Effective Date pursuant to Section 3.01,
neither the Borrower nor any of its Subsidiaries has received any notices of any
violation of, noncompliance with, or remedial obligation under, Requirements of
Environmental Laws, and there are no writs, injunctions, decrees, orders or
judgments outstanding, or lawsuits, claims, proceedings, investigations or
inquiries pending or, to the knowledge of the Borrower, threatened, relating to
the ownership, use, condition, maintenance, or operation of, or conduct of
business related to, any Property owned, leased or operated by the Borrower or
any of its Subsidiaries, other than those violations, instances of
noncompliance, obligations, writs, injunctions, decrees, orders, judgments,
lawsuits, claims, proceedings, investigations or inquiries that will not have a
Material Adverse Effect on such Person; (c) except as disclosed in the
environmental reports delivered to the Agent pursuant to Section 3.01, there are
no material obligations, undertakings or liabilities arising out of or relating
to Environmental Laws to which the Borrower or any of its Subsidiaries has
agreed to, assumed or retained, or by which the Borrower or
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any of its Subsidiaries is adversely affected, by contract or otherwise; and (d)
except as disclosed in the environmental reports delivered to the Banks on the
Effective Date pursuant to Section 3.01, neither the Borrower nor any of its
Subsidiaries has received a written notice or claim to the effect that such
Person is or may be liable to any Person as the result of a release or
threatened release of a hazardous material or solid waste.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any principal amount of any Loan, any amount of interest
accrued under the Notes or any commitment or other fee, expense, compensation or
any other amount payable to any member of the Bank Group under the Loan
Documents shall remain unpaid or outstanding or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
Section 5.01. Reporting Requirements. The Borrower shall deliver or
cause to be delivered to the Agent (with sufficient copies for the Agent to
distribute the same to the other members of the Bank Group):
(a) As soon as available and in any event within forty-five (45)
days after the end of each of the first three calendar quarters:
(i) copies of the unaudited consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such period, and unaudited
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for that fiscal period and for the portion
of the fiscal year ending with such period, in each case setting forth in
comparative form (on a consolidated basis) the figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail; and
(ii) a certificate of a Responsible Officer of the Borrower (1)
stating that (A) such financial statements fairly present in all material
respects the consolidated financial position and results of operations of
the Borrower and its Subsidiaries in accordance with generally accepted
accounting principles consistently applied, subject to year-end
adjustments and the absence of notes and (B) no Default or Event of
Default has occurred and is continuing or, if any such event has occurred
and is continuing, the action the Borrower is taking or proposes to take
with respect thereto, and (2) setting forth calculations demonstrating
compliance by the Borrower with Sections 6.04, 6.05 and 6.06.
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(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower (i) copies of the audited
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of such fiscal year and audited consolidated and
consolidating statements of income and retained earnings and a statement of cash
flows of the Borrower and its Subsidiaries for such fiscal year, in each case
setting forth in comparative form (on a consolidated basis) the figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion
thereon (which shall not be qualified by reason of any limitation imposed by the
Borrower) of independent accountants of recognized national standing selected by
the Borrower and reasonably satisfactory to the Majority Banks, to the effect
that such consolidated financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except for
changes in which such accountants concur) and that such audit has been made in
accordance with generally accepted auditing standards and (ii) a certificate of
a Responsible Officer of the Borrower (A) setting forth calculations
demonstrating compliance by the Borrower with Sections 6.04, 6.05 and 6.06 and
(B) stating that no Default or Event of Default has occurred and is continuing
or, if any such event has occurred and is continuing, the action the Borrower is
taking or proposes to take with respect thereto.
(c) Promptly after the sending or filing thereof, copies of all
reports and shareholder information which the Borrower or any of its
Subsidiaries sends to any holders of its respective securities in their
capacities as holders of such securities and not in their capacities as
directors, officers or employees of the Borrower or any of the Borrower's
Subsidiaries, or to the SEC.
(d) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware of the
occurrence of a Default or Event of Default, a certificate of a Responsible
Officer of the Borrower setting forth details of such Default or Event of
Default and the action which has been taken or is to be taken with respect
thereto.
(e) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware thereof,
written notice from a Responsible Officer of the Borrower of (i) the institution
of or overt threat of, any action, suit, proceeding, governmental investigation
or arbitration by any Governmental Authority or other Person against or
affecting the Borrower or any of its Subsidiaries that could have a Material
Adverse Effect on any such Person and that has not previously disclosed in
writing to the Bank Group pursuant to this Section 5.01 or (ii) any material
development in any action, suit, proceeding, governmental investigation or
arbitration already disclosed to the Bank Group pursuant to this Section 5.01 or
Section 3.01.
(f) As soon as reasonably possible and in any event within ten (10)
days after the Borrower or any of its Subsidiaries becomes aware thereof,
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written notice from a Responsible Officer of the Borrower of (i) any violation
of, noncompliance with, or remedial obligations under, Requirements of
Environmental Laws, (ii) any release or threatened release affecting any
property owned, leased or operated by the Borrower or any of its Subsidiaries
that could have a Material Adverse Effect on the Borrower or any of its
Subsidiaries, (iii) the amendment or revocation of any permit, authorization,
registration, approval or similar right that could have a Material Adverse
Effect on the Borrower or any of its Subsidiaries or (iv) changes to
Requirements of Environmental Laws that could have a Material Adverse Effect on
the Borrower or any of its Subsidiaries.
(g) Promptly, and in any event within five days after becoming aware
of any of the following, a written notice setting forth the nature thereof and
the action, if any, that the Borrower or an ERISA Affiliate or Subsidiary
proposes to take with respect thereto: (i) with respect to any Pension Plan, any
Reportable Event, for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or (ii) the taking by the PBGC of
steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or the receipt by the
Borrower or any ERISA Affiliate or Subsidiary of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or (iii) any event, transaction or condition that could
result in the incurrence of any liability by the Borrower or any ERISA Affiliate
or Subsidiary pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Internal Revenue Code relating to employee benefit plans, or
in the imposition of any Lien on any of the rights, properties or assets of the
Borrower or any ERISA Affiliate or Subsidiary pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions; or (iv) the inability or failure of
the Borrower or any ERISA Affiliate or Subsidiary to make timely any payment or
contribution to or with respect to any Pension Plan, Multiemployer Plan or Other
Benefit Plan, if such failure, either separately or together with all other such
failures could reasonably be expected to be Material; or (v) any event with
respect to any Pension Plan, Multiemployer Plan and/or Other Benefit Plan,
individually or in the aggregate, that could reasonably be expected to be a
Material liability.
(h) As soon as available and in any event simultaneously with the
delivery of the financial statements delivered pursuant to Section 5.01(b),
copies of the budget of the Borrower and its Subsidiaries containing a
consolidated and consolidating balance sheet, and detailed statements of income,
cash flow and projected capital expenditures for the then current fiscal year.
(i) As soon as possible and in any event within ten (10) days after
the Borrower becomes aware thereof, any claim by or against the Borrower
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under the Acquisition Documents, including claims for breach of warranty and
claims for indemnity.
(j) As soon as possible and in any event within ninety (90) days
after the end of each calendar year commencing March 31, 1997, an environmental
report prepared by Pilko & Associates or any other independent environmental
firm qualified to prepare such reports and approved by the Agent covering the
real property owned by the Borrower and its Subsidiaries in form and substance
satisfactory to the Agent.
(k) Such other information as any member of the Bank Group may from
time to time reasonably request respecting the business, properties, operations
or condition, financial or otherwise, of the Borrower or any of its
Subsidiaries.
Section 5.02. Taxes; Claims. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon such Person or upon
its income or profits, or upon any properties belonging to such Person, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien upon any properties of such Person, other than any
such tax, assessment, charge, levy or claim which is being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted,
and with respect to which adequate reserves are set aside on the books of such
Person in accordance with generally accepted accounting principles.
Section 5.03. Compliance with Laws. The Borrower will comply, and
will cause each of its Subsidiaries to comply, with all applicable Requirements
of Law imposed by, any Governmental Authority, non-compliance with which might
have a Material Adverse Effect on any such Person. Without limitation of the
foregoing, the Borrower shall, and shall cause each of its Subsidiaries to,
comply with all Requirements of Environmental Laws, operate properties and
conduct its business in accordance with good environmental practices, and
handle, treat, store and dispose of hazardous materials or solid waste in
accordance with such practices, except where the failure to do so will not have
a Material Adverse Effect on any such Person.
Section 5.04. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain, with financially sound and reputable
insurance companies or associations, or self-insure against such risks, and in
such amounts (and with co-insurance and deductibles), as are usually insured
against by Persons of similar size and established reputation engaged in the
same or similar businesses and similarly situated, including insurance against
fire, casualty, business interruption, injury to Persons or property and other
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normal hazards normally insured against, but, in any event, such insurance shall
not be substantially dissimilar from that described in the insurance schedule
delivered on the Effective Date pursuant to Section 3.01. In addition, on or
before January 31 of each year commencing January 31, 1997, the Borrower will
deliver to the Agent a report prepared by Borrower's insurance broker listing
all insurance policies and programs then in effect with respect to the
properties and businesses of the Borrower and each of its Subsidiaries,
specifying for each such policy and program, (a) the amount thereof, (b) the
risks insured against thereby, (c) the name of the insurer and each insured
party thereunder and (d) the policy or other identification number thereof.
Other than with respect to worker's compensation policies, each policy listed on
the schedule delivered pursuant to Section 3.02 and each additional policy
maintained in compliance with this Agreement shall be endorsed showing the Agent
as an additional insured, or a loss payee, as applicable. All policies of
insurance required by the terms of this Agreement or any Security Document shall
provide that at least 30 days' prior written notice be given to the Agent of any
termination, cancellation, reduction or other modification of such insurance.
Section 5.05. Corporate Existence. The Borrower will preserve and
maintain, and will cause each of its Subsidiaries to preserve and maintain, its
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each of its
Subsidiaries to qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is material to the business and
operations of such Person or the ownership or leasing of the properties of such
Person except to the extent that a Subsidiary merges or consolidates in
compliance with Section 6.08 or ceases to be a Subsidiary of Borrower if such
cessation is permitted under this Agreement.
Section 5.06. Inspections. From time to time during regular business
hours upon reasonable prior notice, the Borrower will permit, and will cause
each of its Subsidiaries to permit, any agents or representatives of any member
of the Bank Group to examine and make copies of and abstracts from the records
and books of account of, and visit the properties of the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of any such
Person with any of its independent public accountants, officers or directors,
all at the expense of the Borrower.
Section 5.07. Maintenance of Properties. The Borrower will maintain
and preserve, and will cause each Subsidiary of the Borrower to maintain and
preserve, all of its personal property and fixtures (or replacement therefor)
necessary for the proper conduct of its business in good working order and
condition as would a reasonably prudent operator, ordinary wear and tear
excepted. The Borrower shall cause, or in the event the Borrower is not the
operator of its Oil and Gas Properties, use reasonable best efforts consistent
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with its rights under applicable operating agreements to cause, its Oil and Gas
Properties to be maintained, developed, protected against drainage and operated
in a good and workmanlike manner as would a reasonably prudent operator and in
material compliance with all operating agreements, other applicable agreements
and all applicable Requirements of Law.
Section 5.08. Accounting Systems. The Borrower will keep, and will
cause each of its Subsidiaries to keep, adequate records and books of account in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied (subject to year end adjustments),
reflecting all financial transactions of such Person. The Borrower shall
maintain or cause to be maintained a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in conformity with generally accepted accounting
principles, and each of the financial statements described herein shall be
prepared from such system and records.
Section 5.09. Use of Loans. Except as specified in the following
sentence, the Borrower will use the proceeds of all Revolving Loans hereunder
for general corporate purposes (including working capital purposes) consistent
with the terms of this Agreement and all Requirements of Law. The proceeds of
the Loans funded on the Effective Date will be used to (a) fund the purchase
price payable by the Borrower under the Acquisition Documents, and (b) pay in
full the First Union Debt.
Section 5.10. Reserve Reports. (a) By March 15 and September 15 of
each year commencing March 15, 1997, the Borrower shall furnish to the Agent and
the Banks a Reserve Report dated as of the immediately preceding December 31 or
June 30, as the case may be. Each Reserve Report shall be prepared by certified
independent petroleum engineers acceptable to the Agent. Each such Reserve
Report shall be in form and substance satisfactory to the Agent and shall set
forth, as of the immediately preceding December 31 or June 30, as the case may
be: (i) the Proved Reserves attributable to the Borrower's Oil and Gas
Properties together with a projection of the rate of production and future net
income, taxes, operating expenses and capital expenditures with respect thereto
as of such dates, based upon pricing and escalation assumptions consistent with
SEC reporting requirements at the time and (ii) such other information as the
Agent may reasonably request.
(b) In the event of an unscheduled redetermination of the Borrowing
Base, the Borrower shall furnish to the Agent and the Banks a Reserve Report
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify, to the best of his knowledge and in all material respects, such
Reserve Report to be true and accurate and to have been
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prepared in accordance with the procedures used in the immediately preceding
Reserve Report delivered to the Banks under Section 5.10(a) with an "as of date"
as requested by the Majority Banks. For any unscheduled redetermination of the
Borrowing Base initiated by the Majority Banks, the Borrower shall provide such
Reserve Report as soon as possible, but in any event no later than 30 days
following the Borrower's receipt of notice of such unscheduled redetermination
from the Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Bank Group, a certificate from the Responsible Officer that, to
the best of his knowledge and in all material respects, (i) the information
contained in the Reserve Report and any other information delivered therewith is
true and correct, (ii) the Borrower owns good and defensible title to its Oil
and Gas Properties evaluated in such Reserve Report free of all Liens except for
Excepted Liens and that the Borrower has created or allowed to be created no new
Liens on its Oil and Gas Properties except for Excepted Liens, (iii) except as
set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require the Borrower to
delivery Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor exceeding a
market value of $100,000 in the aggregate, (iv) none of its Oil and Gas
Properties have been sold (other than Hydrocarbons produced and sold in the
ordinary course of business) since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold (other than
Hydrocarbons produced and sold in the ordinary course of business) and in such
detail as reasonably required by the Agent, (v) attached to the certificate is a
list of its Oil and Gas Properties added to and deleted from the immediately
prior Reserve Report and an updated list of all Persons (with their addresses)
disbursing proceeds to the Borrower from its Oil and Gas Properties, (vi) except
as set forth on a schedule attached to the certificate, all of the Oil and Gas
Properties evaluated by such Reserve Report are Mortgaged Property, and (vii)
any change in working interest or net revenue interest in its Oil and Gas
Properties occurring since the last Reserve Report and the reason for such
change.
(d) As soon as available and in any event within 30 days after the
end of each month commencing with October 31, 1996, the Borrower shall provide
the Bank Group production reports certified by an officer of the Borrower for
its Oil and Gas Properties, which reports shall include quantities or volume of
production which have accrued to the Borrower's accounts in such period, and
such other information with respect thereto as the Agent may reasonably request.
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Section 5.11. Title. Promptly and in any event within 30 days after
written request therefor by the Agent, the Borrower will provide the Agent with
title opinions reasonably satisfactory to the Agent with respect to the
Borrower's Oil and Gas Properties which are included in the most recent Reserve
Report delivered to the Bank Group and for which title opinions have not been
previously delivered so that the Agent will have acceptable title opinions on at
least eighty percent (80%) of the value of the Borrower's Oil and Gas Properties
included in such Reserve Report.
Section 5.12. Additional Collateral. Should the Borrower own
additional Oil and Gas Properties that are not subject to a first priority Lien
under the Security Documents or acquire any additional Oil and Gas Properties,
the Borrower will grant to the Agent as security for the Obligations a first
priority Lien (subject only to Excepted Liens) on the Borrower's interest in
such Oil and Gas Properties which Lien will be created and perfected by and in
accordance with the provisions of mortgages, deeds of trust, security agreements
and financing statements, or other Security Documents, all in form and substance
satisfactory to the Agent in its sole discretion and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.
Section 5.13. Further Assurances in General. The Borrower shall, and
shall cause each of its Subsidiaries to, protect and perfect the Liens
contemplated by the Security Documents. The Borrower at its expense shall, and
shall cause each of its Subsidiaries to, promptly execute and deliver all such
other and further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of the Borrower or any of its
Subsidiaries in the Loan Documents, including, without limitation, the
accomplishment of any condition precedent that may have been waived by the Banks
prior to the initial Borrowing or any subsequent Borrowings.
Section 5.14. Enforcement of Acquisition Documents. The Borrower
will enforce in all material respects all of the terms, covenants, warranties
and representations in favor of the Borrower under the Acquisition Documents.
ARTICLE VI
NEGATIVE COVENANTS
So long as any principal amount of any Loan, any amount of interest
accrued under the Notes or any commitment, facility or other fee, expense,
compensation or any other amount payable to any member of the Bank Group under
the Loan Documents shall remain unpaid or outstanding or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
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Section 6.01. Indebtedness Restriction. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume or suffer to
exist, any Indebtedness other than:
(a) Indebtedness of the Borrower and its Subsidiaries under the
Loan Documents,
(b) Indebtedness of the Borrower in respect of any Derivatives
permitted by Section 6.03,
(c) purchase money Indebtedness for equipment or similar items
purchased or leased in the ordinary course of business not to exceed in the
aggregate $2,000,000 outstanding at any time,
(d) Indebtedness owing to Christiania Bank og Kreditkasse that the
Borrower is obligated to make contributions to Portilla-1996, L.P. to allow such
partnership to pay under Section 6.03 of that certain Purchase and Sale
Agreement, dated September 18, 1996, among the Borrower and Acco, LLC, et al.
and under paragraph 4 of the August 22, 1996 letter agreement between the
Borrower and Christiania Bank og Kreditkasse; provided, that if the Borrower is
required to contribute any amount in excess of $2,000,000 in the aggregate under
such purchase and sale agreement and letter agreement, such event shall
constitute an Event of Default under this Agreement;
(e) Indebtedness set out on Schedule 6.01; and
(f) Indebtedness of Borrower and its Subsidiaries in the aggregate
amount not to exceed $500,000 in addition to all other Indebtedness permitted by
this Section 6.01.
Section 6.02. Lien Restriction. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to be
created, assumed or incurred or to exist, any Lien upon any of such Person's
property or assets, whether now owned or hereafter acquired other than the
following Liens ("Excepted Liens"):
(a) Liens created pursuant to this Agreement or any other Loan
Document,
(b) royalties, overriding royalties, reversionary interests,
production payments and similar burdens with respect to the Borrower's or its
Subsidiaries Oil and Gas Properties to the extent such burdens do not reduce the
Borrower's net interests in production in its Oil and Gas Properties below the
interests reflected in each Reserve Report or the interests warranted under this
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Agreement or the Mortgage and do not operate to deprive the Borrower or its
Subsidiaries of any material rights in respect of its assets or properties
(except for rights customarily granted with respect to such interests);
(c) statutory liens, including liens for taxes or other assessments
that are not yet delinquent (or that, if delinquent, are being contested in good
faith by appropriate proceedings and for which the Borrower or its Subsidiaries
have set aside on their books adequate reserves in accordance with generally
accepted accounting principles consistently applied);
(d) easements, rights of way, servitudes, permits, surface leases
and other rights in respect to surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like, conditions, covenants and other
restrictions, and easements of streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other easements and rights of way on, over or
in respect of the Borrower's or its Subsidiaries' assets or properties;
(e) materialmen's, mechanic's, repairman's, contractor's,
sub-contractor's, operator's and other Liens incidental to the construction,
maintenance, development or operation of the Borrower's or its Subsidiaries'
assets or properties to the extent not delinquent (or which, if delinquent, are
being contested in good faith by appropriate proceedings and for which the
Borrower or its Subsidiaries have set aside on their books adequate reserves in
accordance with generally accepted accounting principles consistently applied);
and
(f) all contracts, agreements and instruments, and all defects and
irregularities and other matters affecting the Borrower's or its Subsidiaries'
assets and properties which were in existence at the time such assets and
properties were originally acquired by such Person and all routine operational
agreements entered into in the ordinary course of business, which contracts,
agreements, instruments, defects, irregularities and other matters and routine
operational agreements do not reduce the Borrower's net interest in production
in its Oil and Gas Properties below the interests reflected in each Reserve
Report or the interests warranted under this Agreement or the Mortgage and do
not interfere materially with the operation, value or use of the Borrower's or
its Subsidiaries' assets and properties;
(g) landlord's lien securing obligations that are not yet delinquent
(or that, if delinquent, are being contested in good faith by appropriate
proceedings and for which the Borrower or its Subsidiaries have set aside on
their books adequate reserves in accordance with generally accepted accounting
principles consistently applied);
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(h) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings and for which the Borrower or
its Subsidiaries have set aside on their books adequate reserves in accordance
with generally accepted accounting principles consistently applied);
(i) Liens securing purchase money Indebtedness permitted under
Section 6.01(c) but only to the extent such Liens cover the equipment or other
similar items purchased or leased;
(j) Undertaking by Grey Wolf Exploration Ltd. to The Alberta
Stock Exchange dated January 4, 1996, concerning the common shares of Cascade
Oil & Gas Ltd.; and
(k) Lien in favor of Compass Bank-San Antonio covering certain real
property in Comal County, Texas described in that certain Real Estate Lien Note,
dated December 28, 1995, issued by the Borrower, in the principal amount of
$238,500, to the extent the Lien secures such Real Estate Lien Note.
Section 6.03. Derivatives. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any Derivatives other than (a)
Derivatives presently existing with First Union National Bank of North Carolina,
which are being assumed by the Agent, (b) commodity price Derivatives related to
bona fide hedging activities so long as (i) the aggregate notional amounts of
such Derivatives during any calculation period do not exceed fifty percent (50%)
of the Borrower's projected actual production of Hydrocarbons (based on the
projected production of Proved Producing Reserves reflected in the Reserve
Report delivered pursuant hereto immediately prior to the execution of such
Derivative) for such period, and (ii) such commodity price Derivative has been
entered into with the Agent or such other Person agreed to by the Majority Banks
and (c) interest rate and foreign exchange Derivatives entered into with the
Agent or otherwise approved by the Majority Banks.
Section 6.04. Interest Coverage Ratio. The Borrower will not permit
the ratio of (a) EBITDA to (b) Interest Expense, measured as of the last day of
any calendar quarter for the twelve month period then ended, to be less than
1.75 to 1.00.
Section 6.05 Current Ratio. The Borrower will not permit the ratio
of (i) its consolidated current assets, including amounts available under the
Revolving Commitments based on the Revolving Loans outstanding and the most
recent determination of the Borrowing Base, to (ii) its consolidated current
liabilities, excluding the aggregate amount of Loans outstanding, at the end of
any fiscal quarter to be less than 1.00 to 1.00.
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Section 6.06. Tangible Net Worth. The Borrower will not permit its
Consolidated Tangible Net Worth to be less than $30,000,000 at any time.
Section 6.07. Sales of Assets. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, transfer, assign, farm-out, lease or
otherwise transfer or dispose of any assets other than (a) sales of Hydrocarbon
production in the ordinary course of business and sales of obsolete or worn-out
equipment in the ordinary course of business, (b) sales or transfers of assets
by any of the Borrower's wholly-owned Subsidiaries to the Borrower or any such
other wholly-owned Subsidiary, (c) sale of the Gaelic Resources Stock, and (d)
any other sale of assets sold at fair market value, so long as the aggregate Net
Proceeds for all such sales made under this subclause (d) during any calendar
year does not exceed $500,000 and the Net Proceeds of all such sales are applied
as a mandatory prepayment of the Loans in accordance with Section 2.07.
Section 6.08. Consolidation and Mergers. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, consolidate
with or merge into any Person or permit any Person to consolidate with or merge
into it, except that any Subsidiary of the Borrower may merge into or
consolidate with any other Subsidiary of the Borrower and any Subsidiary of the
Borrower may merge into or consolidate with the Borrower, provided in each case
that, immediately after giving effect and pro forma effect thereto, no event
shall occur and be continuing which constitutes either a Default or an Event of
Default, and if the Borrower is a party to such merger, the Borrower is the
surviving entity.
Section 6.09. Restricted Disbursements. The Borrower will not, and
will not permit any of its Subsidiaries to approve, make, incur or commit to
incur any Restricted Disbursements other than:
(a) advances or extensions of credit on terms customary in the
industry involved in the form of accounts receivable incurred, and investments,
loans, and advances made in settlement of such accounts receivable, all in the
ordinary course of business;
(b) Permitted Investments;
(c) Capital Expenditures to develop Proved Reserves as detailed in
the most recent Reserve Report delivered by the Borrower, plus Capital
Expenditures in an amount not to exceed $2,000,000 during any six-month period
commencing on any October 1 or April 1, as the case may be;
(d) preferred stock dividends not to exceed $365,928 per annum so
long as no Event of Default has occurred and is continuing or would be caused by
payment of such preferred stock dividend; and
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(e) dividends paid by any Subsidiary of the Borrower to the Borrower
or any of its Subsidiaries and any minority shareholders of such Subsidiary, so
long as such dividend is paid at a uniform rate to all shareholders of such
Subsidiary and no Event of Default would exist after giving effect to such
payment.
Section 6.10. Lines of Business. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly engage in any business
other than the acquisition, disposition, exploration, ownership development and
operation of Oil and Gas Properties and the gathering, marketing, treating,
processing, storage and transporting of production from Oil and Gas Properties.
Section 6.11. Transactions with Affiliates. Neither the Borrower nor
any of its Subsidiaries, will enter into any transaction with an Affiliate other
than (a) transactions entered into in the ordinary course of business and upon
terms no less favorable than those that the Borrower or its Subsidiary, as
applicable, could obtain in an arms length transaction with a Person that is not
an Affiliate and (b) transactions between the Borrower and any of its
Subsidiaries, or between such Subsidiaries, that do not and will not, either
directly or indirectly, cause an Event of Default.
ARTICLE VII
DEFAULT AND REMEDIES
Section 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay when due any installment of
principal of the Notes; or
(b) the Borrower shall fail to pay any interest on any Loan or any
arrangement fee, commitment fee, administration fee, funding fee, commission,
expense, compensation, reimbursement or other amount when due; or
(c) the Borrower shall fail to perform any term, covenant or
agreement contained in Article VI, or Section 5.01(e) of this Agreement; or
(d) the Borrower shall fail to perform any term, covenant or
agreement contained in this Agreement (other than those referenced in
subsections (a), (b) and (c) of this Section 7.01) and such failure shall not
have been remedied within ten (10) days after notice thereof from the Agent to
the Borrower; or
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(e) the Borrower shall fail to perform any term, covenant or
agreement contained in any Loan Document (other than those referenced in
subsections (a), (b), (c) and (d) of this Section 7.01) and such failure shall
not have been remedied within thirty (30) days after notice thereof from the
Agent to the Borrower; or
(f) any representation or warranty made by the Borrower, or any of
its officers, in any Loan Document or in any certificate, agreement, instrument
or statement contemplated by or delivered pursuant to, or in connection with,
any Loan Document shall prove to have been incorrect in any material respect
when made; or
(g) the Borrower or any of its Subsidiaries shall (i) fail to pay
Indebtedness having a principal amount in excess of $250,000 in the aggregate
(other than the amounts referred to in subsections (a) and (b) of this Section
7.01) owing by such Person, or any interest or premium thereon, when due (or, if
permitted by the terms of the relevant document, within any applicable grace
period), whether such Indebtedness shall become due by scheduled maturity, by
required prepayment, by acceleration, by demand or otherwise; or (ii) fail to
perform any term, covenant or condition on its part to be performed under any
agreement or instrument evidencing, securing or relating to any such
Indebtedness, when required to be performed, and such failure shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such failure is to accelerate, or to permit the
holder or holders of such Indebtedness to accelerate, the maturity of such
Indebtedness; or
(h) any Loan Document shall (other than with the consent of the
Majority Banks), at any time after its execution and delivery and for any
reason, cease to be in full force and effect or to provide the Liens
contemplated thereby, or shall be declared to be null and void, or the validity
or enforceability thereof or of the Liens contemplated thereby shall be
contested by any Person party to the Loan Documents or any such Person shall
deny that it has any or further liability or obligation under any Loan Document;
or
(i) the Borrower or any of its Subsidiaries shall be adjudicated
insolvent, or shall generally not pay, or admit in writing its inability to pay,
its debts as they mature, or make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by any such Person seeking to
adjudicate it insolvent, seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property, or the
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Borrower or any of its Subsidiaries shall take any action in furtherance of
any of the actions set forth above in this Section 7.01(i); or
(j) any proceeding of the type referred to in Section 7.01(i) is
filed, or any such proceeding is commenced against the Borrower or any of its
Subsidiaries or any such Person by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order for relief is entered in an
involuntary case under the bankruptcy law of the United States, or an order,
judgment or decree is entered appointing a trustee, receiver, custodian,
liquidator or similar official or adjudicating any such Person insolvent, or
approving the petition in any such proceedings, and such order, judgment or
decree remains in effect for sixty (60) days; or
(k) a final judgment or order for the payment of money in excess of
$500,000 (net of acknowledged, uncontested insurance coverage) shall be rendered
against the Borrower or any of its Subsidiaries which has not been discharged,
vacated or reversed and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) a stay of
enforcement of such judgment or order by reason of a pending appeal or
otherwise, shall not be in effect for any period of thirty (30) consecutive
days; or
(l) if (i) any Pension Plan shall fail to satisfy the minimum
funding standards of ERISA or the Internal Revenue Code for any plan year or
part thereof or a waiver of such standards or extension of any amortization
period is sought or granted under section 412 of the Internal Revenue Code, (ii)
a notice of intent to terminate any Pension Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under Section 4042 of ERISA to terminate or appoint a trustee to
administer any Pension Plan or the PBGC shall have notified the Borrower or any
ERISA Affiliate or Subsidiary that a Pension Plan may become a subject to any
such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of Section 4001(a)(18) of ERISA) under all Pension Plans,
determined in accordance with Title IV of ERISA, shall exceed $100,000, (iv) the
Borrower or any ERISA Affiliate or Subsidiary shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV of ERISA,
the penalty or excise tax provisions of the Internal Revenue Code relating to
employee benefit plans and/or other liability with respect to one or more Other
Benefit Plans, (v) the Borrower or any ERISA Affiliate or Subsidiary withdraws
from any Multiemployer Plan, (vi) the Borrower or any ERISA Affiliate or
Subsidiary fails to make any contribution due, or payment to, any Pension Plan,
Multiemployer Plan and/or Other Benefit Plan, or (vii) the Borrower or any ERISA
Affiliate or Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would increase
the liability of the Borrower or any ERISA Affiliate or Subsidiary thereunder,
and any such event or events described in clauses (i) through (vii) above,
either
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individually or together with any other such event or events, could reasonably
be expected to have a Material Adverse Effect; or
(m) any event which has a Material Adverse Effect shall occur.
then, (i) upon the occurrence of any Event of Default described in Section
7.01(i) or Section 7.01(j), (A) the Commitments shall automatically terminate
and (B) the entire unpaid principal amount of all Loans, all interest accrued
and unpaid thereon, and all other amounts payable by the Borrower under this
Agreement, the Notes, the other Loan Documents and any other agreement or
security document contemplated by or delivered in connection with this Agreement
shall automatically become immediately due and payable, without presentment for
payment, demand, protest, notice of intent to accelerate, notice of acceleration
or further notice of any kind, all of which are hereby expressly waived by the
Borrower, and (ii) upon the occurrence of any Event of Default, the Agent may,
and upon the direction of the Majority Banks shall, by notice to the Borrower
(A) declare the Commitments to be terminated, whereupon the same shall forthwith
terminate and (B) declare the entire unpaid principal amount of all Loans, all
interest accrued and unpaid thereon, and all other amounts payable by the
Borrower under this Agreement, the Notes, the other Loan Documents and any other
agreement or security document contemplated by or delivered in connection with
this Agreement, to be forthwith due and payable, whereupon all such amounts
shall become and be forthwith due and payable, without presentment for payment,
demand, protest, notice of intent to accelerate, notice of acceleration or
further notice of any kind, all of which are hereby expressly waived by the
Borrower.
Section 7.02. Setoff in Event of Default. Upon the occurrence and
during the continuance of any Event of Default, each member of the Bank Group is
hereby authorized, at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower) and to the
fullest extent permitted by applicable law, to setoff and apply any and all
deposits at any time held and other indebtedness at any time owing by such
member of the Bank Group (or any branch, subsidiary or affiliate of such member
of the Bank Group) to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower or any other Person, now or
hereafter existing under this Agreement, the Notes or the other Loan Documents,
irrespective of whether or not such member of the Bank Group shall have made any
demand for satisfaction of such obligations and although such obligations may be
unmatured. Any member of the Bank Group exercising such right agrees to notify
the Borrower promptly after any such setoff and application made by such Person;
provided, that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Bank Group under this Section
7.02 are in addition to other rights and remedies (including,
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without limitation, other rights of setoff) which the Bank Group may have
hereunder or under any applicable law.
Section 7.03. No Waiver; Remedies. No failure on the part of any
member of the Bank Group to exercise, or any delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided in any of the other Loan
Documents or by law.
Section 7.04. Hydrocarbon Proceeds. Notwithstanding that, by the terms of
the various Security Documents, Borrower is and will be absolutely and
unconditionally assigning to the Agent for the ratable benefit of the Banks all
Hydrocarbons and all proceeds therefrom accruing to the interest of the Borrower
in the Mortgaged Property, so long as no Event of Default has occurred the
Borrower shall have the right (revocable at any time by the Agent upon the
occurrence of an Event of Default) to receive from the purchasers of production
all such Hydrocarbon proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified. Upon the
occurrence of an Event of Default, the Agent may exercise all rights and
remedies granted under the Security Documents, including the right to obtain
possession of all such Hydrocarbon proceeds then held by the Borrower or to
receive directly from the purchasers of production all other such Hydrocarbon
proceeds. In no case shall any failure, whether purposed or inadvertent, by the
Agent to collect directly any such Hydrocarbon proceeds constitute in any way a
waiver, remission or release of any of its rights under the Security Documents,
nor shall any release of any such Hydrocarbon proceeds by the Agent to the
Borrower constitute a waiver, remission or release of any other such Hydrocarbon
proceeds or of any rights of the Agent to collect other such proceeds
thereafter.
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ARTICLE VIII
THE AGENT
Section 8.01. Authorization and Action. Each Bank hereby appoints
and authorizes the Agent to take such action in such capacity on such Bank's
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes or of amounts owing under the
other Loan Documents), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks and any other holders of Notes; provided, however, that
the Agent shall not be required to take any action which exposes it to personal
liability or which is contrary to the Loan Documents or applicable law. The
Agent is hereby expressly authorized on behalf of the other members of the Bank
Group, without hereby limiting any implied authority, (a) to receive on behalf
of each of the other members of the Bank Group any payment of principal of or
interest on the Loans outstanding hereunder and all other amounts accrued
hereunder paid to such Persons, and promptly to distribute to each other member
of the Bank Group its proper share of all payments so received; (b) to give
notice within a reasonable time on behalf of each other member of the Bank Group
to the Borrower of any Default or Event of Default specified in this Agreement
of which the Agent has actual knowledge as provided in Section 8.09; (c) to
distribute to the other members of the Bank Group copies of all notices,
agreements and other material as provided for in this Agreement as received by
such Person; and (d) to distribute to the Borrower any and all requests, demands
and approvals received by such Person from any other member of the Bank Group.
Nothing herein contained shall be construed to constitute the Agent as a trustee
for any holder of the Notes or of a participation therein, nor to impose on the
Agent any duties or obligations other than those expressly provided for in the
Loan Documents.
Section 8.02. Reliance, Etc. None of the Agent, its Affiliates and
their directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (a) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Bank which is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
9.02; (b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes
HOU04:37909.7
no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations (whether written or oral)
made in or in connection with this Agreement or the other Loan Documents; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of the Borrower or any other Person or to
inspect the property (including the books and records) of the Borrower or any
other Person; (e) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document, any collateral provided for therein, or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties. None of the Agent, its Affiliates and their directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure or delay in performance or breach by any Bank of any of its
obligations hereunder or to any Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of its
obligations hereunder or in connection herewith; provided, however, that the
foregoing shall not relieve BTCo of its obligations as a Bank hereunder.
Section 8.03. BTCo and Affiliates. Without limiting the right of any
other Bank to engage in any business transactions with the Borrower or any of
its Affiliates, with respect to its Commitment, the Loans made by it and the
Notes issued to it. Bankers Trust Company ("BTCo") shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include BTCo in its individual capacity. BTCo, or
any of its Affiliates, may be engaged in, or may hereafter engage in, one or
more loan, letter of credit, leasing, derivative or other financing activities
not the subject of the Loan Documents (collectively, the "Other Financings")
with the Borrower or any of its Affiliates, or may act as trustee on behalf of,
or depositary for, or otherwise engage in other business transactions with the
Borrower or any of its Affiliates (all Other Financings and other such business
transactions being collectively, the "Other Activities") with no responsibility
to account therefor to the Banks. Without limiting the rights and remedies of
the Banks specifically set forth in the Loan Documents, no other Bank shall have
any interest in (a) any Other Activities, (b) any present or future guarantee by
or for the account of the Borrower not contemplated or included in the Loan
Documents, (c) any present or future offset exercised by BTCo in respect of any
such Other Activities, (d) any present or future property taken as security for
any such Other Activities or (e) any property now or hereafter in the possession
or control of BTCo which may be or become security for the obligations of the
Borrower under the Loan Documents by reason of the general description of
indebtedness secured, or of
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property, contained in any other agreements, documents or instruments related to
such Other Activities; provided, that if any payment in respect of such
guarantees or such property or the proceeds thereof shall be applied to
reduction of the obligations evidenced hereunder and by the Notes, then each
Bank shall be entitled to share in such application according to its pro rata
portion of such obligations.
Section 8.04. Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon any other member of the Bank
Group and based on the financial statements referred to in Section 4.06 and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any other
member of the Bank Group and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
Section 8.05. Indemnification. The Banks agree to indemnify each of
the Agent, its Affiliates or any of their respective directors, officers, agents
or employees (to the extent not reimbursed by the Borrower), ratably according
to its Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any such Person in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken or
omitted by any such Person under this Agreement or the other Loan Documents,
provided, that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Person's gross negligence or
willful misconduct. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE
AGENT, AND ITS AFFILIATES AND THEIR DIRECTORS, OFFICERS, AGENTS OR EMPLOYERS
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND ARISING OUT OF OR RESULTING FROM THE
ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH PERSON. The Agent
shall not be required to do any act hereunder or under any other document or
instrument delivered hereunder or in connection herewith or take any action
toward the execution or enforcement of the agencies hereby created, or to
prosecute or defend any suit in respect of this Agreement or the Loan Documents
or any collateral security, unless indemnified to its satisfaction by the
holders of the Notes against loss, cost, liability, and expense. If any
indemnity furnished to the Agent for any purpose is, in the opinion of such
Person insufficient or becomes impaired, such Person may call for additional
indemnity and not commence or
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cease to do the acts indemnified against until such additional indemnity is
furnished. Without limitation of the foregoing, each Bank agrees to reimburse
the Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by such Person in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Loan Documents, to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
Section 8.06. Employees of the Agent. The Agent may execute any of
its duties under this Agreement, the other Loan Documents and any instrument,
agreement or document executed, issued or delivered pursuant hereto or thereto
or in connection herewith or therewith, by or through employees, agents and
attorneys-in-fact, and shall not be answerable for the default or misconduct of
any such employee, agent or attorney-in-fact selected by it with reasonable
care. The Agent may, and upon the written instruction of the Majority Banks
shall, enforce on behalf of the Banks any claims which the Agent and/or the
Banks may have against any such employee, agent or attorney-in-fact, and any
recovery therefrom shall be applied for the pro rata benefit of the Banks.
Section 8.07. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the other members of the Bank Group and the
Borrower and may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Banks, and shall have accepted such appointment,
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, subject to the requirement that such retiring Agent will execute
such documents and take such actions as may be necessary or desirable to cause
the successor Agent to be vested with all such rights, powers, privileges and
duties. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. All
reasonable costs and expenses incurred by the Bank Group in connection with
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any amendments or other documentation required by this Section 8.07 shall be
paid by the Borrower pursuant to Section 9.04 hereof.
Section 8.08. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it shall have received notice from a Bank or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default" or "notice of event of
default," as applicable. If the Agent receives such a notice from the Borrower,
the Agent shall give notice thereof to the other members of the Bank Group and,
if such notice is received from a Bank, the Agent shall give notice thereof to
the other members of the Bank Group and the Borrower. The Agent shall be
entitled to take action or refrain from taking action with respect to such
Default or Event of Default as provided in this Article VIII.
Section 8.09. Execution of Loan Documents. Each member of the Bank
Group hereby authorizes and directs the Agent to execute and deliver on its
behalf each Loan Document to be executed by the Agent pursuant to the terms of
this Agreement.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, any Note or any other Loan Document, or consent to
any departure by any Person herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Borrower and the
Majority Banks, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) waive any of the conditions specified in
Article III, (b) increase the Commitments of the Banks or subject the Banks to
any additional obligations, (c) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, (e) release the Borrower or any other Person
from its payment obligations to the Bank Group, regardless of whether such
obligations are those of a primary obligor, a guarantor or surety, or otherwise,
(f) authorize the Agent to release Liens against a substantial portion of any
collateral covered by the Security Documents, (g) take action which expressly
requires the signing of all the Banks pursuant to the terms of this Agreement,
(h) reduce the Commitment Percentages or the aggregate unpaid principal amount
of the Notes, or the number of Banks, as the case may be, required for the Agent
or the Banks or any of them to take any action under this Agreement or reduce
the percentage of Majority Banks or (i) amend this Section 9.01; provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Banks required above to take such action,
affect the rights or duties of the Agent under this Agreement or any other Loan
Document. Notwithstanding the foregoing, the Agent may (without the consent of
the Banks) release the Lien created under the Security Documents on any assets
of the Borrower or any of its Subsidiaries if the sale of such assets is
permitted under Section 6.07.
Section 9.02. Participation Agreements and Assignments. (a) Each
Bank may assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Loans owing to it and the other Loan
Documents); provided, that (i) each such assignment shall be of a constant, and
not a varying, percentage of all rights and obligations of the assignor under
this Agreement and the other Loan Documents, and no assignment shall be made
unless it covers a pro rata share of all rights and obligations of such assignor
under this Agreement and the other Loan Documents, (ii) the amount of the
Commitment of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall, unless otherwise agreed to by the Agent or
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unless such assignment is to a member of the Bank Group, in no event be less
than $5,000,000, (iii) each such assignment to an Eligible Assignee who is not a
member of the Bank Group must be approved by the Agent and (iv) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register (defined below), an Assignment and Acceptance,
together with any Note subject to such assignment and a recordation fee in the
amount of $3,500 for processing such assignment. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations under the Loan Documents have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Bank under the Loan Documents, (y) the assigning Bank
thereunder shall, to the extent that rights and obligations under the Loan
Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from further obligations under the Loan
Documents (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto) and (z) be deemed to have
made, as of such effective date, to the Agent and the Borrower the
representations and warranties set forth in Section 2.12(f) hereof.
(b) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any other Person or the performance or observance by the Borrower or
any other Person of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement and the other Loan Documents,
together with copies of the financial statements referred to in Section 4.06 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon any member of
the Bank Group (including such assigning Bank) and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent, to take such action on its
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behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to such Person by the terms thereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement and the other Loan Documents are required to be
performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in Section
9.03 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Loans owing to, each Bank from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower and each
member of the Bank Group may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any member of the Bank
Group at any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee,
together with any Notes subject to such assignment and the administrative fee
payable to the Agent for such assignment, the Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit
9.02 hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five (5) Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Notes, new Notes to the order of such
Eligible Assignee in an amount corresponding to the Revolving Commitment assumed
by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a Revolving Commitment hereunder, new Notes to the
order of the assigning Bank in an amount corresponding to the Commitment
retained by it hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form prescribed by Section 2.04 hereto.
(e) Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Loans owing to it); provided, that (i) such Bank's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) and the other Loan Documents shall remain unchanged, (ii) such
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Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, and the participating banks or other entities
shall not be considered a "Bank" for purposes of the Loan Documents, (iii) the
participating banks or other entities shall be entitled to the cost protection
provisions contained in Sections 2.11 through 2.14 to the same extent that the
Bank from which such participating bank or other entity acquired its
participation would be entitled to the benefit of such cost protection
provisions, so long as Borrower is not obligated to pay any amount under such
Sections in excess of the amount that would have been due to such Bank under
such Sections if no participations had been made by such Bank, and (iv) the
Borrower and the other members of the Bank Group shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents, and such Bank
shall retain the sole right to enforce the obligations of the Borrower relating
to the Loans and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
with respect to the amounts of any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans or the dates
fixed for payments of principal or interest on the Loans).
(f) Any Bank may at any time pledge or assign all or any portion of
its rights under this Agreement and the other Loan Documents to any Federal
Reserve Bank without notice to or consent of the Borrower. No such pledge or
assignment shall release the assigning Bank from its obligations hereunder.
(g) The Agent and each Bank may furnish any information concerning
the Borrower or its Subsidiaries in the possession of the Agent or such Bank
from time to time to Affiliates of the Agent or such Bank (including without
limitation, in the case of Bankers Trust Company, BT Securities Corporation and
its employees, to the extent necessary for the purposes contemplated by this
Agreement, including, without limitation, the syndication of the credit
facilities contemplated hereby) and, in the case of each Bank, to assignees and
participants (including prospective assignees and participants) of such Bank.
Each Bank will take reasonable steps to protect the confidentiality of any
information concerning the Borrower or its Subsidiaries provided to a respective
participant or assignee and known by such Bank to be confidential, and, if
requested by the Borrower, such Bank will identify the prospective assignees and
participants that have received such information.
Section 9.03. Notices. All correspondence, statements, notices,
requests and demands (collectively "Communications") shall be in writing
(including telegraphic Communications) and mailed, telegraphed, telecopied,
facsimile transmitted or delivered as follows:
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if to the Borrower --
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
Attention: Robert L.G. Watson
Telecopier: (210) 490-8816
if to the Agent--
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Attention: James T. Cullen
Telecopier: (212) 250-6029 or (212) 250-7351
with a copy to --
BT Southwest, Inc.
909 Fannin Street, Suite 3000
Houston, Texas 77010
Attention: Roberta Bohn
Telecopier: (713) 759-6708
if to any Bank, at its Domestic Lending Office, or as to each such party, at
such other address as such party shall designate in a written Communication to
each of the other parties hereto. All such Communications shall be effective, in
the case of written or telegraphed Communications, when deposited in the mails
or delivered to the telegraph company, respectively, and, in the case of a
Communication by telecopy or facsimile transmission, when telecopied or
transmitted against receipt of a confirmation, in each case addressed as
aforesaid, except that Communications to any member of the Bank Group pursuant
to Article II and Article VIII shall not be effective until received by such
Persons.
Section 9.04. Costs and Expenses. The Borrower agrees to pay
promptly (a) all reasonable costs and expenses (including fees and expenses of
legal counsel) of the Agent incurred in connection with the preparation,
execution, delivery, filing, administration and recording of the Loan Documents
and any other agreements or security documents delivered in connection with or
pursuant to any of the Loan Documents and the syndication of this Agreement both
before and after the date hereof, and (b) all reasonable costs and expenses of
any member of the Bank Group incurred in connection with the enforcement of the
Loan Documents and any other agreements or security documents executed
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in connection with or pursuant to any of the Loan Documents, including, but not
limited to, the reasonable fees and out-of-pocket expenses of counsel for any
member of the Bank Group, and local counsel who may be retained by such counsel,
with respect thereto, and the costs and expenses in connection with the custody,
preservation, use or operation of, or the sale of, or collection from, or other
realization upon the sale of, or collection from, or other realization upon any
collateral covered by any of the other documents executed in connection with or
pursuant to any of the Loan Documents. The agreements of Borrower contained in
this Section 9.04 shall survive the termination of the Commitments and the
payment of all other amounts owing hereunder or under any of the other Loan
Documents.
Section 9.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Agent, the Banks and
its successors and assigns, except that the Borrower may not assign or transfer
its rights hereunder without the prior written consent of the Banks.
Section 9.06. Independence of Covenants. All covenants contained in
the Loan Documents shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that
such action or condition would be permitted by an exception to, or otherwise be
within the limitations of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
Section 9.07. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement and the other Loan
Documents or made in writing by the Borrower in connection herewith or
therewith, shall survive the execution and delivery of this Agreement, the Notes
and the other Loan Documents, and the repayment of the Loans. Any investigation
by any member of the Bank Group shall not diminish in any respect whatsoever its
right to rely on such representations and warranties.
Section 9.08. Separability. Should any clause, sentence, paragraph,
subsection, Section or Article of this Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom by the
parties hereto, and the remainder will have the same force and effectiveness as
if such stricken part or parts had never been included herein.
Section 9.09. Captions. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatsoever in construing the terms and provisions of this
Agreement.
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Section 9.10. Counterparts. This Agreement may be executed in any
number of 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 taken together shall constitute one and the same agreement.
Section 9.11. Governing Law. THIS AGREEMENT (INCLUDING THE VALIDITY
AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK. Chapter 15, Subtitle 3, Title 79, of
the Revised Civil Statutes of Texas, 1925, as amended (relating to revolving
loan and revolving triparty accounts), shall not apply to this Agreement or the
Notes or the transactions contemplated hereby.
Section 9.12. Submission to Jurisdiction. (a) The Borrower hereby
irrevocably submits to the non-exclusive jurisdiction of any New York state
court located in the Borough of Manhattan, City and State of New York, or any
federal court located in the Southern District of New York over any action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents, and each of the Borrower irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York state or federal court; provided, nothing in this Section 9.12 is intended
to waive the right of any member of the Bank Group to remove any such action or
proceeding commenced in any such New York state court to an appropriate New York
federal court to the extent the basis for such removal exists under applicable
law. The Borrower hereby irrevocably appoints CT Corporation (the "Process
Agent"), with an office on the date hereof at 1633 Broadway, New York, New York
10019, as its agent to receive on behalf of it and its properties service of
copies of the summons and complaint and any other process which may be served in
any such action or proceeding. Such service may be made by mailing by certified
mail a copy of such process to the Borrower in care of the Process Agent at the
Process Agent's above address, with a copy to such Person at its address
specified herein and each of the Borrower hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf. As an
alternative method of service, each of the Borrower also irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing by certified mail of copies of such process to it at its address
specified herein. The Borrower agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 9.12 shall affect the right of any
member of the Bank Group to serve legal process in any other manner permitted by
law or affect the right of any member of the Bank Group to bring any action or
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proceeding against any of the Borrower, or such Person's properties, in the
courts of any other jurisdiction.
Section 9.13. Limitation on Interest. Each provision in this
Agreement and each other Loan Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Borrower for the use, forbearance or detention of the money to be loaned under
this Agreement or any other Loan Document or otherwise (including any sums paid
as required by any covenant or obligation contained herein or in any other Loan
Document which is for the use, forbearance or detention of such money), exceed
that amount of money which would cause the effective rate of interest to exceed
the Highest Lawful Rate, and all amounts owed under this Agreement and each
other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Agreement or such Loan Document shall in no event
exceed that amount of money which would cause the effective rate of interest to
exceed the Highest Lawful Rate. To the extent that the Highest Lawful Rate
applicable to a Bank is at any time determined by Texas law, such rate shall be
the "indicated rate ceiling" described in Section (a)(1) of Article 1.04 of
Chapter 1, Subtitle 1, Title 79, of the Revised Civil Statutes of Texas, 1925,
as amended; provided, to the extent permitted by such Article, the Banks from
time to time by notice from the Agent to Borrower may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the Loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Loan Document to the contrary, if the
maturity of the Notes or the obligations in respect of the other Loan Documents
are accelerated for any reason, or in the event of prepayment of all or any
portion of the Notes or the obligations in respect of the other Loan Documents
by the Borrower or in any other event, earned interest on the Loans and such
other obligations of the Borrower may never exceed the maximum amount permitted
by applicable law, and any unearned interest otherwise payable under the Notes
or the obligations in respect of the other Loan Documents that is in excess of
the maximum amount permitted by applicable law shall be cancelled automatically
as of the date of such acceleration or prepayment or other such event and, if
theretofore paid, shall be credited on the principal of the Notes or, if the
principal of the Notes has been paid in full, held as collateral for any
contingent or unmatured obligation of the Borrower, or, if there are no
contingent or unmatured obligations of the Borrower then outstanding, refunded
to the Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate, the Borrower
and the Banks shall, to the maximum extent permitted by applicable law,
amortize, prorate, allocate and spread, in equal parts during the period of the
actual term of this Agreement, all interest at any time contracted for, charged,
received or reserved in connection with this Agreement.
HOU04:37909.7
Section 9.14. Indemnification. The Borrower agrees to indemnify,
defend and hold the Agent and each member of the Bank Group, their Affiliates
and their officers, employees, agents, directors, shareholders and Affiliates
(collectively, "Indemnified Persons") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (i) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of its obligations hereunder and thereunder
(including but not limited to the making of the Commitments of each Bank) and
consummation of the transactions contemplated hereby and thereby, (ii) the
actual or proposed use of the proceeds of the Loans, (iii) any violation by the
Borrower or any of its Subsidiaries of any Requirement of Law, including but not
limited to Environmental Laws, (iv) ownership by the Bank Group of any real or
personal property following foreclosure under the Security Documents, to the
extent such losses, liabilities, damages, judgments, claims, deficiencies or
expenses arise out of or result from the presence, disposal or release of any
hazardous materials or solid waste in, on or under such property during the
period owned, leased or operated by the Borrower or any of its Subsidiaries,
including, without limitation, losses, liabilities, damages, judgments, claims,
deficiencies or expenses which are imposed under Environmental Laws upon Persons
by virtue of their ownership, (v) any member of the Bank Group being deemed an
operator of any such real or personal property in circumstances in which no
member of the Bank Group is generally operating or generally exercising control
over such property, to the extent such losses, liabilities, damages, judgments,
claims, deficiencies or expenses arise out of or result from any hazardous
materials or solid waste located in, on or under such property or (vi) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Person is a party thereto; provided that such
indemnity shall not apply to any such losses, claims, damages, liabilities or
related expenses that are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. WITHOUT LIMITING ANY PROVISION OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, IT IS THE EXPRESS INTENTION
OF THE BORROWER THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES,
JUDGMENTS OR REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY
NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH INDEMNIFIED PERSON. THE
OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 9.14 SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT.
HOU04:37909.7
Section 9.15. Confidentiality. In the event that the Borrower
provides to the Agent or the Banks written confidential information belonging to
the Borrower, if the Borrower shall denominate such information in writing as
"confidential", the Agent and the Banks shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Agent or the Banks breaching their obligation of confidence
to the Borrower, (iii) are previously known by the Agent or the Banks from some
source other than the Borrower, (iv) are hereafter obtained by or available to
the Agent or the Banks from a third party who owes no obligation of confidence
to the Borrower with respect to such information or through any other means
other than through disclosure by the Borrower, (vi) are disclosed with the
Borrower's consent, (vii) must be disclosed either pursuant to any Requirements
of Law or to Persons regulating the activities of the Agent or the Banks, or
(viii) as may be required by law or regulation or order of any Governmental
Authority in any judicial, arbitration or governmental proceeding. Further, the
Agent or a Bank may disclose any such information to any other Bank, any
independent petroleum engineers or consultants, any independent certified public
accountants, any legal counsel employed by such Person in connection with this
Agreement or any Security Document, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee
or participant (including prospective assignees and participants) in the Loans;
provided, however, that the Agent or Bank imposes on the Person to whom such
information is disclosed the same obligation to maintain the confidentiality of
such information as is imposed upon it hereunder. Notwithstanding anything to
the contrary provided herein, this obligation of confidence shall cease three
(3) years from the date the information was furnished, unless the Borrower
requests in writing at least thirty (30) days prior to the expiration of such
three year period, to maintain the confidentiality of such information for an
additional three year period. The Borrower waives any and all other rights it
may have to confidentiality as against the Agent and the Banks arising by
contract, agreement, statute or law except as expressly stated in this Section
9.15.
Section 9.16. Final Agreement of the Parties. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
HOU04:37909.7
HOU04:37909.7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by its officers thereunto duly authorized as of the date first above
written.
ABRAXAS PETROLEUM
CORPORATION
By:_____________________________
Chris E. Williford
Executive Vice President
BANKERS TRUST COMPANY,
as
Agent
By:__________________________
Mary Zadroga
Vice President
HOU04:37909.7
Bank:
Revolving Commitment: $25,000,000.00 BANKERS TRUST COMPANY
Tranche A Commitment: $29,166,666.67
Tranche B Commitment: $20,833,333.33
By:_________________________
Mary Zadroga
Vice President
Address:
130 Liberty Street, 14th Floor
New York, New York 10006
Telecopy No.: (212) 250-6029
Domestic Lending Office
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Eurodollar Lending Office
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
HOU04:37909.7
Bank:
Revolving Commitment: $5,000,000.00 INTERNATIONALE
NEDERLANDEN
Tranche A Commitment: $5,833,333.33 (U.S.) CAPITAL
CORPORATION
Tranche B Commitment: $4,166,666.67
By:__________________________
Christopher R. Wagner
Vice President
Address:
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
Domestic Lending Office
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
Eurodollar Lending Office
135 East 57th Street
8th Floor
New York, New York 10022
Telecopy No.: (212) 832-3616
HOU04:37909.7