AMENDED AND RESTATED CREDIT AGREEMENT
ABRAXAS PETROLEUM CORPORATION,
as the Borrower,
the Banks named herein,
and
BANKERS TRUST COMPANY,
as Agent
and
ING (U.S.) CAPITAL CORPORATION,
as Co-Agent
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 14, 1996
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TABLE OF CONTENTS
PRELIMINARY STATEMENT 1
ARTICLE I DEFINITIONS, ETC. 2
Section 1.01. Certain Defined Terms 2
Section 1.02. Accounting Terms 2
Section 1.03. Computation of Time Periods 2
Section 1.04. References, Etc. 2
ARTICLE II COMMITMENTS AND TERMS OF CREDIT 2
Section 2.01. Commitments 2
Section 2.02. Borrowing Procedures; Conversions 3
Section 2.03. Issuing and Reimbursing the Letters
of Credit 5
Section 2.04. Borrowing Base 7
Section 2.05. The Notes 9
Section 2.06. Reduction of the Commitments 9
Section 2.07. Mandatory Repayment of Loans 9
Section 2.08. Interest Accrual, Payments 10
Section 2.09. Optional Prepayments 12
Section 2.10. Payments, Notice of Certain Repayments
and Computations 12
Section 2.11. Fees 13
Section 2.12. Setoff, Counterclaims and Taxes 14
Section 2.13. Funding Losses 16
Section 2.14. Change of Law 17
Section 2.15. Increased Costs 18
ARTICLE III CONDITIONS OF CREDIT 19
Section 3.01. Conditions Precedent to Effectiveness,
the Initial Borrowing 19
Section 3.02. Conditions Precedent to All Letters of
Credit and Loans 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES 22
Section 4.01. Corporate Existence 23
Section 4.02. Corporate Authority; Binding Obligations 23
Section 4.03. No Conflict 23
Section 4.04. No Consent 23
Section 4.05. No Defaults or Violations of Law 24
Section 4.06. Financial Position 24
Section 4.07. Litigation 24
Section 4.08. Use of Proceeds 24
Section 4.09. Governmental Regulation 25
Section 4.10. Disclosure 25
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Section 4.11. ERISA 25
Section 4.12. Payment of Taxes 26
Section 4.13. Title and Liens 26
Section 4.14. Gas Imbalances 27
Section 4.15. Environmental Matters 27
ARTICLE V AFFIRMATIVE COVENANTS 27
Section 5.01. Reporting Requirements 28
Section 5.02. Taxes; Claims 30
Section 5.03. Compliance with Laws 30
Section 5.04. Insurance 30
Section 5.05. Corporate Existence 31
Section 5.06. Inspections 31
Section 5.07. Maintenance of Properties 31
Section 5.08. Accounting Systems 32
Section 5.09. Use of Loans 32
Section 5.10. Reserve Reports 32
Section 5.11. Title 34
Section 5.12. Additional Collateral 34
Section 5.13. Further Assurances in General 34
Section 5.14. Enforcement of Acquisition Documents 34
ARTICLE VI NEGATIVE COVENANTS 35
Section 6.01. Indebtedness Restriction 35
Section 6.02. Lien Restriction 36
Section 6.03. Derivatives 38
Section 6.04. Interest Coverage Ratio 38
Section 6.05. Current Ratio 38
Section 6.06. Tangible Net Worth 38
Section 6.07. Sales of Assets 38
Section 6.08. Consolidation and Mergers 38
Section 6.09. Restricted Disbursements 39
Section 6.10. Lines of Business 39
Section 6.11. Transactions with Affiliates 40
ARTICLE VII DEFAULT AND REMEDIES 40
Section 7.01. Events of Default 40
Section 7.02. Setoff in Event of Default 43
Section 7.03. No Waiver; Remedies 43
Section 7.04. Hydrocarbon Proceeds 43
Section 7.05. Application of Proceeds After Acceleration 44
ARTICLE VIII THE AGENT 45
Section 8.01. Authorization and Action 45
Section 8.02. Reliance, Etc. 46
Section 8.03. BTCo and Affiliates 46
Section 8.04. Bank Credit Decision 47
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Section 8.05. Indemnification 47
Section 8.06. Employees of the Agent and the Issuing Bank 48
Section 8.07. Successor Agent 48
Section 8.08. Successor Co-Agent and Successor
Issuing Bank 49
Section 8.09. Notice of Default 50
Section 8.10. Execution of Loan Documents 50
ARTICLE IX MISCELLANEOUS 50
Section 9.01. Amendments, Etc. 50
Section 9.02. Participation Agreements and Assignments 51
Section 9.03. Notices 53
Section 9.04. Costs and Expenses 54
Section 9.05. Successors and Assigns 55
Section 9.06. Independence of Covenants 55
Section 9.07. Survival of Representations and Warranties 55
Section 9.08. Separability 55
Section 9.09. Captions 55
Section 9.10. Counterparts 55
Section 9.11. Governing Law 56
Section 9.12. Submission to Jurisdiction 56
Section 9.13. Limitation on Interest 56
Section 9.14. Indemnification 57
Section 9.15. Ratification of Security Documents 58
Section 9.16. Confidentiality 58
Section 9.17. Final Agreement of the Parties 59
Exhibits and Schedules
Exhibit 2.02(a) Form of Borrowing Request
Exhibit 2.02(c) Form of Conversion Notice
Exhibit 2.03 Form of Letter of Credit Request
Exhibit 2.05 Form of Revolving Note
Exhibit 9.02 Form of Assignment and Acceptance Agreement
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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THIS AMENDED AND RESTATED CREDIT
AGREEMENT dated as of November 14, 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"), and as the issuing
bank with respect to the Letters of Credit issued hereunder (together with its
successors and assigns in such capacity, the "Issuing Bank"), and ING (U.S.)
CAPITAL CORPORATION (formerly known as Internationale Nederlanden (U.S.) Capital
Corporation), as co-agent for the Banks (together with its successors and
assigns in such capacity, the "Co-Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Article I are used herein as so
defined.
PRELIMINARY STATEMENT
A. The Borrower, the Agent and the Banks entered into
that certain Credit Agreement dated as of September 30, 1996 (the "Original
Credit Agreement") whereby the Banks agreed to make certain loans to the
Borrower.
B. Bankers Trust Company has assigned a portion of its
rights and obligations under the Original Credit Agreement to Union Bank of
California, N.A., pursuant to that certain Assignment and Acceptance dated
November 13, 1996.
C. In connection with the consummation of the Bond
Offering (as defined herein) the Borrower has paid contemporaneously with the
effectiveness of this Agreement all amounts outstanding under the Original
Credit Agreement.
D. The Borrower, the Agent and the Banks desire to amend
and restate the Original Credit Agreement in its entirety, to provide for among
other things, the modification, extension and renewal of the "Revolving
Commitments" under the Original Credit Agreement, which are the Commitments
referred to herein.
Accordingly, in consideration of the foregoing and the
mutual covenants set forth herein, the parties agree that the Original Credit
Agreement is hereby amended and restated in its entirety to read as follows:
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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.
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ARTICLE II
COMMITMENTS AND TERMS OF CREDIT
Section 2.01. Commitments. (a) (i) Each Bank severally
agrees, on the terms and conditions hereinafter set forth, to make one or more
loans (the "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 Commitment. Each Loan shall be made as either a Base Rate
Loan or a Eurodollar Rate Loan and as part of a single Borrowing made on the
same day by the Banks ratably according to their respective Commitment
Percentages. Each Base Rate Borrowing shall be in an aggregate amount not less
than $2,000,000, or, if less, the entire unfunded portion of the Total
Commitment. Each Eurodollar Rate 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).
(ii) The Issuing Bank agrees, on the terms and conditions
hereinafter set forth, to issue standby or commercial letters of credit for the
account of the Borrower (the "Letters of Credit") from time to time on any one
or more Business Days during the period from the Effective Date up to, but
excluding, the ninetieth (90th) day preceding the Maturity Date in an aggregate
amount for all Outstanding Letters of Credit not exceeding at any time the
Letter of Credit Limit. Each Letter of Credit shall be denominated in Dollars,
shall expire no later than the date set forth in Section 2.03(a), and shall be
in such form as approved from time to time by the Issuing Bank and the Borrower.
Each Bank severally agrees, on the terms and conditions hereinafter set forth,
to purchase participations in the Letters of Credit issued by the Issuing Bank
pursuant to this Agreement in an amount equal to such Bank's Commitment
Percentage of the face amount of such Letter of Credit. Upon the issuance of
each Letter of Credit, the Issuing Bank shall be deemed, without further action
by any party hereto, to have sold to each Bank, and each Bank shall be deemed,
without further action by any party hereto, to have purchased from the Issuing
Bank, a participation, to the extent of such Bank's Commitment Percentage, in
such Letter of Credit, the obligations of the Issuing Bank thereunder and in the
reimbursement obligations of the Borrower due in respect of drawings made under
such Letter of Credit. Subject to the terms of the Loan Documents, the Banks
will execute any other documents the Issuing Bank may reasonably request to
evidence the purchase of such participation. On each day during the period
commencing with the issuance by the Issuing Bank of any Letter of Credit and
ending on the date when such Letter of Credit shall have expired or been
terminated, and, irrespective of whether such Letter of Credit has expired or
terminated if such Letter of Credit has been drawn upon and the amount so drawn
has not been reimbursed to the Issuing Bank, the Commitment of each Bank shall
be deemed to be utilized for all purposes hereof in an amount equal to such
Bank's Commitment Percentage of the Outstanding Letters of Credit.
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(iii) Notwithstanding any other term or provision hereof
(A) no Loan shall be made and no Letter of Credit shall be issued if after
giving effect to the making of such Loan or issuance of such Letter of Credit
the aggregate amount of Credit Outstanding would exceed the Total Commitment and
(B) no Letter of Credit shall be issued if after giving effect to the issuance
of such Letter of Credit the aggregate amount of Outstanding Letters of Credit
would exceed the Letter of Credit Limit.
(b) 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
Loans. 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 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 Borrowing, or (B) the Business
Day immediately preceding the proposed Borrowing Date in the case of a Base Rate
Borrowing, and the Agent shall give each other member of the Bank Group prompt
notice of such request by telecopier, telex or cable.
(ii) Each request for a Borrowing (a "Borrowing Request")
made by the Borrower shall be in substantially the form of Exhibit
2.02(a), 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
HOU04:43581.4
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, 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 Loans into Borrowings comprised of 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 into Base Rate Loans.
Section 2.03. Issuing and Reimbursing the Letters of
Credit. (a) Each Letter of Credit shall, subject to the terms of this Agreement,
be issued upon the written or facsimile transmitted request (an original of
which shall be immediately forwarded by overnight courier to the Issuing Bank)
of the Borrower given to the Agent not later than 11:00 a.m. (New York time) on
the third Business Day prior to the proposed date of issuance of such Letter of
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Credit. Each such request for a Letter of Credit (a "Letter of Credit Request")
made by the Borrower shall be in substantially the form of Exhibit 2.03 hereto
and shall specify the Business Day on which such Letter of Credit is to be
issued, the beneficiary of such Letter of Credit, the amount of such Letter of
Credit, the draw conditions applicable thereto and shall provide for an expiry
date which is not later than thirty days prior to the Maturity Date.
(b) Upon satisfaction of the applicable terms and
conditions set forth in Article III, the Issuing Bank shall issue such Letter of
Credit to the specified beneficiary not later than the close of business (New
York time) on the date so specified. The Issuing Bank shall provide each other
member of the Bank Group with a copy of each Letter of Credit so issued, but any
failure of the Issuing Bank to provide such Persons with a copy of such Letter
of Credit shall not in any way affect the Borrower's obligation to reimburse the
Issuing Bank for any amount paid by the Issuing Bank under any Letter of Credit
or the Banks' obligation to reimburse the Issuing Bank for such amount, to the
extent provided herein, in the event the Borrower fails to do so. Each such
Letter of Credit shall (i) provide for the payment of drafts or other forms of
payment to be presented for honor thereunder by the beneficiary in accordance
with the terms thereon, at sight when accompanied by the documents described
therein and (ii) be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
(and any subsequent revisions thereof approved by a Congress of the
International Chamber of Commerce and adhered to by the Issuing Bank) (the
"UCP") and shall, as to matters not governed by the UCP, be governed by, and
construed and interpreted in accordance with, the governing law specified in
this Agreement.
(c) Upon presentment to the Issuing Bank of any draft for
honor under any Letter of Credit by the beneficiary thereof and the
determination by the Issuing Bank that such draft is in order, the Issuing Bank
shall give prompt notice (a "Reimbursement Notice") to the Borrower of (i) the
Letter of Credit to which such Reimbursement Notice relates, (ii) the amounts to
be paid on account of such draft (the "Reimbursement Amount") and (iii) the date
on which such amounts are to be paid (the "Reimbursement Date"), but any failure
to so notify the Borrower shall not in any way affect the Borrower's obligations
to reimburse the Issuing Bank for any amount paid by the Issuing Bank under any
Letter of Credit.
(d) Upon receipt of any Reimbursement Notice, the
Borrower shall reimburse the Issuing Bank by forthwith paying to the Agent for
the benefit of the Issuing Bank (who shall promptly notify the Issuing Bank of
such payment) no later than 10:00 a.m. (New York time) on the Reimbursement Date
specified in such Reimbursement Notice an amount equal to the Reimbursement
Amount specified in such Reimbursement Notice, and, if the Issuing Bank is not
fully reimbursed by the Borrower on such Reimbursement Date, together with
interest from such Reimbursement Date until such reimbursement is made by the
Borrower at a fluctuating rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the Base Rate in effect during the time such reimbursement
HOU04:43581.4
obligation remains unpaid plus the Applicable Margin for Base Rate Loans from
such Reimbursement Date until the third day immediately following the delivery
of such Reimbursement Notice by the Issuing Bank to Borrower and (B) thereafter,
the Default Rate. To the extent availability may then exist, and upon compliance
with the relevant terms and conditions of this Agreement, the Borrower may repay
any or all of the obligations described in this paragraph by requesting a
Borrowing and applying the proceeds thereof accordingly.
(e) If the Borrower shall fail to reimburse the Issuing
Bank for any payment by the Issuing Bank under a Letter of Credit by 12:00 noon.
(New York time) on the Reimbursement Date specified in the Reimbursement Notice
related thereto, the Agent shall give prompt notice thereof to each other member
of the Bank Group. Upon receipt of such notice, each Bank shall, notwithstanding
any other provision of this Agreement (including the occurrence and continuance
of a Default or an Event of Default), make available to the Agent for the
benefit of the Issuing Bank an amount equal to its Commitment Percentage of the
Reimbursement Amount specified in the related Reimbursement Notice no later than
the close of business on such Reimbursement Date. If such amount is not in fact
made available to the Agent by such Bank on such Reimbursement Date, such Bank
shall pay to the Agent for the account of the Issuing Bank, on demand made by
the Issuing Bank, in addition to such amount, interest on such amount for the
number of days that elapse from such Reimbursement Date to the date on which the
amount equal to such Bank's Commitment Percentage of such Reimbursement Amount
becomes immediately available to the Issuing Bank at a rate per annum equal to
the average daily Federal Funds Rate for such days. Any amount received by the
Agent or the Issuing Bank from the Borrower in respect of a draft honored under
a Letter of Credit after one or more of the Banks have made funds available for
the payment of such draft pursuant to this paragraph shall be paid over by the
Agent or the Issuing Bank, as the case may be, to the Banks, pro rata according
to the amounts so made available by the Banks, promptly upon receipt by the
Agent or the Issuing Bank of such amount. Nothing in this Agreement shall
diminish the Borrower's obligation under this Agreement to provide the funds for
the payment of, or on demand to reimburse the Issuing Bank for payment of, any
draft presented to, and duly honored by, the Issuing Bank under any Letter of
Credit.
(f) In order to induce the issuance of Letters of Credit
by the Issuing Bank and the purchase of participations therein by the Banks, the
Borrower irrevocably agrees (i) that the obligation of the Borrower to reimburse
the Issuing Bank for amounts paid by the Issuing Bank under any Letter of
Credit, including accrued interest thereon, as set forth herein is absolute and
unconditional, (ii) that no member of the Bank Group shall be responsible or
liable for, and the Borrower's unconditional obligation to reimburse the Issuing
Bank through the Agent for amounts paid by the Issuing Bank on account of drafts
honored under the Letters of Credit shall not be affected by, any circumstance,
act or omission whatsoever relating to any Letter of Credit, whether or not
known to any member of the Bank Group, unless such circumstance, act or omission
results in the wrongful payment or the wrongful dishonor of any Letter of Credit
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or is otherwise the result of the gross negligence or willful misconduct of such
member of the Bank Group, (iii) that any action taken or omitted to be taken by
any member of the Bank Group under or in connection with any Letter of Credit or
any related draft, document or property shall be binding on the Borrower and
shall not put any member of the Bank Group under any resulting liability to the
Borrower, unless such action or omission results in the wrongful payment or the
wrongful dishonor of any Letter of Credit or otherwise is the result of the
gross negligence or willful misconduct of such member of the Bank Group and (iv)
to indemnify, defend and hold each member of the Bank Group harmless from and
against any and all liabilities, damages, claims or reasonable expenses
(including reasonable attorneys' fees and amounts paid in settlement) arising
out of or based on any Letter of Credit, except to the extent the same is the
result of the wrongful payment or the wrongful dishonor of any Letter of Credit
or is otherwise the result of the gross negligence or willful misconduct of the
Person seeking indemnity hereunder, IT BEING THE EXPRESS INTENTION OF THE
BORROWER THAT EACH MEMBER OF THE BANK GROUP SHALL BE INDEMNIFIED AND HELD
HARMLESS AGAINST ANY AND ALL LIABILITIES, CLAIMS, OR REASONABLE EXPENSES ARISING
OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY)
OF SUCH MEMBER OF THE BANK GROUP. The Borrower hereby waives presentment for
payment and notice of dishonor, protest and notice of protest with respect to
drafts honored under the Letters of Credit.
(g) The provisions of this Agreement and the other Loan
Documents concerning collateral, standard of care of the Issuing Bank, timing of
payments, interest rates applicable to any reimbursement obligation relating to
any Letter of Credit, any representations, warranties, covenants, events of
default, remedies and governing law shall supersede in their entirety the
provisions of any Letter of Credit application relating to such matters. In the
event any other provision of any Letter of Credit application is inconsistent
with, or in conflict of any provision of this Agreement or any Loan Documents,
the provisions of this Agreement or the Loan Documents shall govern.
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 $20,000,000. 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.
HOU04:43581.4
(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 and November 1 of each year
commencing 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 taking into account all of the
assets and liabilities of the Borrower and its Subsidiaries. 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 redetermination of the
Borrowing Base which would increase the Borrowing Base must be approved by all
of 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 or about May 1 and
November 1 of each year commencing May 1, 1997 (each being a "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, at any time after the
first scheduled Redetermination Date, (i) the Borrower may request a
redetermination of the Borrowing Base on its own initiation at any time in
connection with a proposed acquisition of Oil and Gas Properties with a fair
market value in excess of $10,000,000 and at one additional time during any
consecutive twelve (12) month period, and (ii) the Agent and Majority Banks may
each initiate a redetermination of the Borrowing Base at any time as they so
elect; provided, however, that the Agent and Majority Banks may each initiate
only one such unscheduled redetermination during any consecutive twelve (12)
month period (each being an "Unscheduled Redetermination Date"). Any
redetermination of the Borrowing Base on 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.
HOU04:43581.4
Section 2.05. The Notes. The Loans made by each Bank
shall be evidenced by a single 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 Commitment Percentage of the Aggregate Maximum Commitment
and (iii) otherwise duly completed. Each 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 Note of such Bank, provided, that prior to any transfer of any such Note,
such Bank shall endorse the amount and maturity of any outstanding Loans on the
schedule (or a continuation thereof) attached to such Note.
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
Aggregate Maximum Commitment; provided, that each partial reduction in the
Aggregate Maximum Commitment shall be in the aggregate amount of $1,000,000 or
an integral multiple of $1,000,000 in excess thereof. Any such reduction or
termination shall be irrevocable by the Borrower.
(b) On each Commitment Reduction Date, the Reducing
Commitment Amount shall automatically be reduced by an amount equal to 8.2% of
the Reducing Commitment Amount as of the first Commitment Reduction Date. On the
Maturity Date the 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 Loans comprising part of the same
Borrowing or provide cover for Outstanding Letters of Credit in such amounts as
shall be necessary so that at all times the Credit Outstanding shall not be in
excess of the Total Commitment. Except to the extent that repayment or cover is
required to be made in three equal monthly installments under Section 2.07(b),
any repayment or cover required by this Section 2.07(a) shall be due and payable
on the date such repayment or cover obligation accrues pursuant to the preceding
sentence.
(b) The Borrower shall from time to time repay the Loans
comprising part of the same Borrowing or provide cover for Outstanding Letters
of Credit (as provided below) in whole or ratably in part in an amount equal to
the excess of (i) the Credit 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 or cover 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.
HOU04:43581.4
(c) In the event that the Borrower shall be required
pursuant to this Section 2.07 to repay Loans or provide cover for Outstanding
Letters of Credit, the Borrower shall make such repayment and provide such cover
in the following order: (i) first, pay the amount of all unreimbursed drawings
under the Letters of Credit, (ii) second, repay the principal of the Loans and
(iii) third, provide cover for Letters of Credit. Cover for Letters of Credit
shall be effected by paying to the Agent immediately available funds, to be held
by the Agent in an account under the sole dominion and control of the Agent, for
the benefit of the Bank Group, as security for the obligations of the Borrower
under the Loan Documents until the earlier of (A) the occurrence in this Section
2.07 which necessitated such cover no longer exists or (B) such time as the
Letters of Credit have been terminated and all obligations of the Borrower to
the Bank Group (including the Issuing Bank) in respect thereof have been paid in
full, at which time the Agent shall remit the amount of such cover, in
immediately available funds, at the direction or instruction of the Borrower.
Any funds delivered pursuant to the preceding sentence shall be placed in an
interest bearing account selected by the Agent and so long as no Default has
occurred and is continuing, any accrued interest on such funds shall be
distributed monthly to the Borrower.
(d) All outstanding Loans shall be fully due and payable
on the Maturity Date, together with any unpaid interest accrued thereon.
(e) 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 first be applied to Base Rate Borrowings, and second to Eurodollar Rate
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
HOU04:43581.4
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 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) if the aggregate amount of Loans outstanding as of
the date of determination is equal to or greater than 66.7% of the Total
Commitment as of such date, then such rate per annum shall be one-half of
one percent (1/2%) for Base Rate Loans, and two percent (2%) for
Eurodollar Rate Loans;
(ii) if the aggregate amount of Loans outstanding as
HOU04:43581.4
of the date of determination is equal to or greater than 33.3% but less
than 66.7% of the Total Commitment as of such date, such rate per annum
shall be one-half of one percent (1/2%) for Base Rate Loans and one and
three-quarters (1 3/4%) for Eurodollar Rate Loans; and
(iii) if the aggregate amount of Loans outstanding as of
the date of determination is less than 33.3% of the Total Commitment as of
such date, such rate per annum shall be one-half of one percent (1/2%) for
Base Rate Loans, and one and one-quarter percent (1 1/4%) for Eurodollar
Rate Loans.
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 (other than Bank
Group Derivatives) 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
HOU04:43581.4
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 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 or the Issuing Bank 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), or payments
by the Issuing Bank made pursuant to Section 2.03, in excess of its ratable
share of payments on account of the Loans or payments by the Issuing Bank made
pursuant to Section 2.03, obtained by all the Banks, such Bank shall forthwith
purchase from the other Banks such participations in the Loans made by such
other Banks, or the reimbursement obligations in respect of the payments by the
Issuing Bank made pursuant to Section 2.03, as the case may be, 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
HOU04:43581.4
permitted by law and this Agreement, exercise all its rights of payment
(including the right of setoff) with respect to 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. (a) 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 (1/2%) per annum on the average unused portion of the
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 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 Commitment of such Bank and on the Maturity
Date (or if earlier, the termination in full of the Commitment); provided that
if the Borrower has not been notified by Agent of the amount of such fee at
least one Business Day prior to any such date, such fee shall be due and payable
one 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. Subject to the provisions of Section 9.13, so long as any
Obligation shall remain outstanding or any Banks shall have any Commitment
hereunder the Borrower shall pay the Agent an annual agency fee of $25,000 on
the Execution Date and on each anniversary date thereof.
(b) (i) The Borrower agrees to pay the Issuing Bank a fee
in respect of each Letter of Credit issued for the account of the Borrower (the
"L/C Fees"). With respect to each Letter of Credit, Borrower agrees to pay an
L/C Fee, for the period from the date of issuance of such Letter of Credit in an
amount equal to 1 1/4 % per annum on the outstanding face amount of such Letter
of Credit. All L/C Fees shall be paid in immediately available funds and shall
based on a 360 day year and actual days elapsed. Accrued L/C Fees for each
Letter of Credit shall be due and payable in arrears on each Quarterly Payment
Date and on the termination or expiration date of such Letter of Credit (or if
earlier, the termination in full of the Commitments). The Issuing Bank shall be
entitled to retain, solely for the Issuing Bank's account, .15% per annum as an
issuing fee on all Letters of Credit (the "Retained L/C Fees") and pay to the
Agent for the pro rata benefit of the Banks all remaining L/C Fees. In addition
to the L/C Fees, the Borrower shall pay the Issuing Bank, solely for the Issuing
Bank's account, its customary administrative service charges relating to the
issuance of, amendment to, payment under and transfer of any Letters of Credit.
Such amounts to be due and payable when such services are rendered by the
Issuing Bank.
(ii) On each Quarterly Payment Date, the Issuing Bank
shall pay the aggregate amount of all L/C Fees collected by the Issuing Bank
during the quarterly period then ended, net of the amount of any Retained L/C
Fees retained by the Issuing Bank for such period, to the Agent. Upon receipt by
the Agent, the Agent shall distribute such net amount of L/C Fees to the Banks
ratably according to their respective Commitment Percentages. Within ten (10)
HOU04:43581.4
Business Days after each Quarterly Payment Date, the Issuing Bank shall give a
written report to the other members of the Bank Group specifying the gross
amount of all L/C Fees collected by the Issuing Bank during the quarterly period
then ended, the amount of all Retained L/C Fees, and the net amount of such L/C
Fees delivered to the Agent for distribution to the Banks.
Section 2.12. Setoff, Counterclaims and Taxes. (a) All
payments of principal, interest, expenses, reimbursements, compensation,
commitment fees, L/C Fees, arrangement fees or administration 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.
(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.
HOU04:43581.4
(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, the
Issuing Bank, the Borrower and the Guarantor 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 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 or under the Guaranty are not subject
to United States withholding tax or the Agent otherwise has reason to believe
HOU04:43581.4
that such Bank is subject to U.S. withholding tax, the Borrower and the
Guarantor shall withhold taxes from such payments at the applicable statutory
rate. Each Bank shall indemnify and hold the Borrower, the Guarantor, the
Issuing Bank 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, the Guarantor, the Issuing Bank or the Agent on any such form or
certificate which such Bank has provided to them pursuant to this Section
2.12(f).
HOU04:43581.4
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 or to cause a Letter of
Credit to be issued after a Borrowing Request, Letter of Credit 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 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
the Co-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
HOU04:43581.4
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.
(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
HOU04:43581.4
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) If any law, executive order or regulation is adopted
or interpreted by any central bank or other Governmental Authority so as to
affect any of the Borrower's obligations or the compensation to any Bank or the
Issuing Bank in respect of the Letters of Credit or the cost to such Bank or the
Issuing Bank of establishing and/or maintaining the Letters of Credit (or any
participation therein), then the Borrower shall from time to time upon demand,
subject to the provisions of Section 9.13, reimburse or indemnify such Bank or
the Issuing Bank, as the case may be, with respect thereto so that such Bank or
the Issuing Bank, as the case may be, shall be in the same position as if there
had been no such adoption or interpretation.
(d) Each Bank or the Issuing Bank, as the case may be,
will notify the Borrower of any event occurring after the date of this Agreement
which will entitle such Bank or the Issuing Bank, as the case may be, 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 or the Issuing Bank, as the case may be, setting 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) or the Issuing
Bank, as the case may be, 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 or to the Issuing
Bank, as the case may be, the amount shown as due on any such certificate within
ten (10) days after its receipt of the same. The failure of any Bank or the
Issuing 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, any other Bank or the Issuing
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
Issuing Bank and the Banks regardless of any possible contention of invalidity
or inapplicability of law, regulation or condition which shall have been
imposed.
HOU04:43581.4
ARTICLE III
CONDITIONS OF CREDIT
Section 3.01. Conditions Precedent to Effectiveness, the
Initial Borrowing or Letter of Credit. The effectiveness of this Agreement and
the obligation of each Bank to make its initial Loan on the occasion of the
initial Borrowing hereunder or the obligation of the Issuing Bank to issue the
initial Letter of Credit hereunder, as the case may be, is subject to the
conditions precedent that the Agent shall have received on or before the date of
such initial Borrowing or initial Letter of Credit, 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 New Mortgage executed by the Borrower,
(iv) the Mortgage Amendment amending the Existing
Mortgage executed by the Borrower, and
(v) the Guaranty executed by the Guarantor.
(b) Evidence that the Liens created by the Security
Documents have been duly perfected, or will be duly perfected upon the filing of
the instruments referred to in subsections (i) and (ii) below, and constitute
valid first priority Liens, which shall include, without limiting the generality
of the foregoing:
(i) the delivery to the Agent of such financing
statements under the Uniform Commercial Code for filing in such
jurisdictions as the Agent may require, and
(ii) the delivery to the Agent of the New Mortgage and
the Mortgage Amendment for filing 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 or Letters of
Credit to be issued thereunder and the consummation of the transactions
contemplated thereby, (B) authorizing officers of the Borrower to negotiate the
HOU04:43581.4
Loan Documents to which it is a party and which will be delivered at or prior to
the date of the initial Borrowing or Letter of Credit 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) A certificate of the secretary or an assistant
secretary of the Guarantor certifying, inter alia, (i) true and correct copies
of resolutions adopted by the Board of Directors of the Guarantor (A)
authorizing the execution, delivery and performance by the Guarantor of the Loan
Documents to which it is or will be a party and the consummation of the
transactions contemplated thereby, (B) authorizing officers of the Guarantor 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 or Letter of Credit and (C)
authorizing officers of the Guarantor 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 Guarantor and (iii) the incumbency and
specimen signatures of the officers of the Guarantor executing any documents on
behalf of it.
(e) Certificates of appropriate public officials as to
the existence and good standing of the Borrower in the States of Texas, Nevada
and Wyoming.
(f) Certificates of appropriate public officials as the
existence and good standing of the Guarantor in Alberta, Canada.
(g) 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").
(h) Evidence satisfactory to the Agent that all of the
conditions to the Initial Purchaser's obligation under the Bond Purchase
Agreement have been satisfied and that the Bond Offering has been consummated in
accordance with the Bond Purchase Agreement and all Requirements of Law.
(i) Evidence satisfactory to the Agent that the Guarantor
has acquired all of the outstanding capital stock of CGGS and that CGGS has
merged with and into the Guarantor.
(j) Evidence satisfactory to the Agent that the Portilla-
Happy Acquisition has been consummated in accordance with the Portilla-Happy
HOU04:43581.4
Acquisition Documents and all Requirements of Law and
original counterparts of the assignment of the Portilla-Happy Acquisition
Properties to the Borrower.
(k) A portion of the proceeds of the Bond Offering shall
have been used to repay in full all Obligations accrued or otherwise outstanding
under the Original Credit Agreement.
(l) Evidence of payment in full of the Portilla-Happy
Debt and fully executed and acknowledged releases of all Liens existing as
security for the Portilla-Happy Debt, in form, scope and substance satisfactory
to the Agent.
(m) 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.
(n) Copies of all authorizations, consents, approvals,
licenses, filings or registrations obtained from or made with any Governmental
Authority or any other Person in connection with the Bond Offering, 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.
(o) 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.
(p) A satisfactory review of Borrower, including a review
of its marketing, transportation and hedging arrangements for Hydrocarbons.
(q) A certificate signed by a Responsible Officer of the
Borrower certifying as to the satisfaction of the conditions specified in
Section 3.02(a).
(r) The favorable, signed opinions of Cox & Smith
Incorporated, special counsel to the Borrower and its Subsidiaries, Burnet,
Duckworth & Palmer, special Canadian counsel to the Guarantor, and Stikeman,
Elliott, special Canadian 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.
(s) A written confirmation from the Process Agent of its
appointment and acceptance as process agent for the Guarantor as provided for
HOU04:43581.4
in the Guaranty.
(t) The payment to the Bank Group of the fees due to them
as of such date under the Loan Documents.
(u) 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 Letters of
Credit and Loans. The obligation of the Issuing Bank to issue any Letter of
Credit, and of each Bank to make any Loan, shall be subject to the further
conditions precedent that (a) on the Borrowing Date of such Loan or the issuance
date of such Letter of Credit, as the case may be, the following statements
shall be true, and the Borrower, by virtue of its delivery of a Borrowing
Request or a Letter of Credit Request, as applicable, 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 and as of such date,
before and after giving effect to such Loan or Letter of Credit, as the case may
be, 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 or Letter
of Credit, as the case may be, 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
HOU04:43581.4
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.
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 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
HOU04:43581.4
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 Subsidiaries as of the dates thereof and the results of their operations
for the periods then ended. 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 and of the Letters of Credit 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 or Letter of Credit 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
HOU04:43581.4
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 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
HOU04:43581.4
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 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 the 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.
HOU04:43581.4
(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. Environmental Matters. Except as disclosed
in the environmental reports delivered to the Bank Group pursuant to the
Original Credit Agreement or Section 3.01 hereof, (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)
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) 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 any of its Subsidiaries is adversely
affected, by contract or otherwise; and (d) 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.
HOU04:43581.4
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Letter of Credit remains outstanding, any
principal amount of any Loan, any principal amount of any reimbursement
obligation in respect of any Letter of Credit, any amount of interest accrued
under the Notes or in respect of any Letter of Credit, 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 fiscal quarters of the
Borrower:
(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.
(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
HOU04:43581.4
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 been 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, 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.
HOU04:43581.4
(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) On or before April 30, 1997, an environmental report
prepared by an independent environmental firm approved by the Agent covering the
real property owned by the Borrower and its Subsidiaries in form, scope and
substance reasonably satisfactory to the Agent.
(j) 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
HOU04:43581.4
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 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 3.01 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
HOU04:43581.4
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
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 and Letters of Credit. All
Letters of Credit shall be issued for general corporate purposes consistent with
the terms of this Agreement and all Requirements of Law. The Borrower will use
the proceeds of all Loans hereunder for general corporate purposes (including
working capital purposes) consistent with the terms of this Agreement and all
Requirements of Law.
Section 5.10. Reserve Reports. (a) By March 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. 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
HOU04:43581.4
satisfactory to the Agent and shall set forth, as of the immediately preceding
December 31: (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. By August 15 of each year commencing August 15,
1997, the Borrower shall furnish to the Agent and the Banks a Reserve Report
dated as of the immediately preceding June 30. Each such Reserve Report shall be
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 prepared in accordance
with the procedures used in the immediately preceding Reserve Report delivered
to the Banks under this Section 5.10(a).
(b) With respect to any unscheduled redetermination of
the Borrowing Base requested by the Borrower in connection with a proposed
acquisition of Oil and Gas Properties with a fair market value in excess of
$10,000,000, the Borrower shall furnish to the Bank Group a Reserve Report
prepared by certified independent petroleum engineers acceptable to the Agent
covering the Oil and Gas Properties to be acquired. Such Reserve Report shall be
prepared in accordance with the procedures set forth in Section 5.10(a) and
contain such other information as the Agent may reasonably request. In the event
of any other 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 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 or the Agent, 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
HOU04:43581.4
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 November 30, 1996, the Borrower
shall provide the Bank Group production reports for the Borrower's Oil and Gas
Properties and gas throughput reports for the Guarantor's gas plants, in each
case, certified by an officer of the Borrower, which reports shall include
quantities or volume of production or gas throughput which have accrued to the
Borrower's or the Guarantors accounts (as applicable) in such period, and such
other information with respect thereto as the Agent may reasonably request.
(e) By March 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. Each such 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: (i) the
Proved Reserves attributable to the Guarantor'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.
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
HOU04:43581.4
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. Upon written request by the Agent, the Borrower will
immediately execute and deliver to the Agent Security Documents in form and
substance satisfactory to the Agent granting to the Agent as security for the
Obligations a first priority Lien (subject only to Excepted Liens) on (a) all
notes or other instruments or documents evidencing Indebtedness of each
Subsidiary of the Borrower owing to the Borrower that is permitted under Section
6.01(f) and (b) all Liens in favor of the Borrower securing such Indebtedness.
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 Letter of Credit or any subsequent Borrowings
or Letters of Credit.
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 Letter of Credit remains outstanding, any
principal amount of any reimbursement obligation in respect of any Letter of
Credit, any principal amount of any Loan, any amount of interest accrued under
the Notes or in respect of any Letter of Credit, 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:
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:
HOU04:43581.4
(a) Indebtedness of the Borrower and the Guarantor under
the Loan Documents;
(b) Indebtedness of the Borrower or its Subsidiaries 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) the Bond Indebtedness;
(e) Indebtedness set out on Schedule 6.01;
(f) Indebtedness of Subsidiaries of the Borrower to the
Borrower or to a Wholly Owned Subsidiary not to exceed $5,000,000 in the
aggregate so long as such Indebtedness (i) is held only by the Borrower or a
Wholly Owned Subsidiary, and (ii) is secured by Liens in favor of the Borrower
or a Wholly Owned Subsidiary, as appropriate, covering Property of such
Subsidiary with a fair market value equal to or in excess of the amount of such
Indebtedness.
(g) Indebtedness of the Borrower to a Wholly Owned
Subsidiary so long as such Indebtedness (i) is held only by a Wholly Owned
Subsidiary and (ii) is unsecured and subordinated to the Obligations pursuant to
a written subordination agreement satisfactory to the Agent;
(h) Indebtedness under the CGGS Debentures, provided that
such Indebtedness is repaid not later than five (5) days after the date of this
Agreement; and
(i) Indebtedness of Borrower and its Subsidiaries in the
aggregate amount not to exceed $1,000,000 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
HOU04:43581.4
warranted under this Agreement, the Existing Mortgage or the New 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);
(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, the Existing
Mortgage or the New 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 liens 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);
(h) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
HOU04:43581.4
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) Liens in favor of the trustee under Section 7.07 of
the Bond Indenture;
(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;
(l) Liens on any assets of any Subsidiary in favor of the
Borrower or the Guarantor;
(m) Liens in favor of the Frost National Bank ("Frost")
on various certificates of deposits issued by Frost to the Borrower in an
original principal amount of $60,000, which Liens secure Indebtedness of the
Borrower to Frost pursuant to the letters of credit issued by Frost for the
benefit of the Borrower that are described on Schedule 6.01;
(n) Any Lien reserved in a lease or farmout agreement to
secure the payment of rents or royalties or other obligations under such farmout
agreement or lease, but only to the extent that any such Lien referred to in
this clause secures obligations 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)
and encumbers the Property covered by such lease or farmout agreement and does
not materially impair (i) the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Subsidiary, or
(ii) the value of the Property subject thereto; and
(o) Liens in favor of collecting or payor banks having a
right of setoff, revocation, refund or chargeback with respect to money or
instruments of the Borrower or any Subsidiary on deposit with or in possession
of such bank.
Section 6.03. Derivatives. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any Derivatives other
than (a) commodity price Derivatives presently existing with Christiania (b)
commodity price Derivatives related to bona fide hedging activities so long as
(i) the aggregate notional amounts of such Derivatives during any calculation
HOU04:43581.4
period do not exceed fifty percent (50%) of the Borrower's and such
Subsidiaries' projected actual production of Hydrocarbons (based on the
projected production of Proved Producing Reserves reflected in the most recent
Reserve Report or reserve report delivered under Section 5.10(e), as applicable,
delivered pursuant hereto) for such period, and (ii) such commodity price
Derivative has been entered into with the Agent, the Co-Agent or such other
Person agreed to by the Majority Banks and (c) interest rate and foreign
exchange Derivatives entered into with the Agent, the Co-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 1.50 to 1.00 as of the last day of any calendar quarter through June
30, 1997 or to be less than 1.75 to 1.00 as of the last day of any calendar
quarter after June 30, 1997.
Section 6.05. Current Ratio. The Borrower will not permit
the ratio of (i) its consolidated current assets, including amounts available
under the Commitments based on the Credit Outstanding and the most recent
determination of the Borrowing Base, to (ii) its consolidated current
liabilities, excluding the aggregate amount of Credit Outstanding, at the end of
any fiscal quarter to be less than 1.00 to 1.00.
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 $2,000,000. Upon written request of the
Borrower and provided no Event of Default shall exist, the Agent shall release
the Lien in favor of the Agent covering assets sold by the Borrower, to the
extent (and only to the extent) the sale of such assets was permitted under
subclause (d) of the preceding sentence.
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
HOU04:43581.4
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 by the Borrower to develop its
Proved Reserves, Capital Expenditures by any Subsidiary to develop its Proved
Reserves, and additional Capital Expenditures by the Borrower and its
Subsidiaries in an amount not to exceed $5,000,000 in the aggregate 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;
(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;
(f) the repayment of the CGGS Debentures Indebtedness;
(g) payments by the Borrower or any Subsidiary on account
of Indebtedness permitted under Section 6.01;
(h) investments or capital contributions not to exceed
$2,000,000 in the aggregate made by the Borrower in or to any Wholly Owned
Subsidiary; and
(i) investments or capital contributions made by any
Subsidiary of the Borrower in or to the Borrower or any Wholly Owned Subsidiary.
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,
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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 any reimbursement obligation in respect
of any Letter of Credit; or
(b) the Borrower shall fail to pay any interest on any
Loan or any arrangement fee, commitment fee, administration fee, funding fee,
L/C 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 thirty (30) days after notice thereof from the Agent
to the Borrower; or
(e) the Borrower or the Guarantor 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
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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 $500,000 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 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
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(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
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; or
(n) a Change of Control shall occur; or
(o) an event of default shall occur under the Bond
Indenture;
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
HOU04:43581.4
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 the Agent may direct the beneficiary of any outstanding Letter of
Credit to make a drawing under such Letter of Credit in an amount equal to the
full amount available thereunder and require from the Borrower immediate
reimbursement for payments made pursuant to such drawing, or the Agent may
direct the Borrower to deposit with the Issuing Bank cash equal to the aggregate
amount of all Outstanding Letters of Credit as security for the Borrower's
obligations in respect of such Letters of Credit, 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, and the Agent may direct the
beneficiary of any outstanding Letter of Credit to make a drawing under such
Letter of Credit in an amount equal to the full amount available thereunder and
require from the Borrower immediate reimbursement for payments made pursuant to
such drawing, or the Agent may direct the Borrower to deposit with the Issuing
Bank cash equal to the aggregate amount of all Outstanding Letters of Credit as
security for the Borrower's obligations in respect of such Letters of Credit.
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,
without limitation, other rights of setoff) which the Bank Group may have
hereunder or under any applicable law.
HOU04:43581.4
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.
Section 7.05. Application of Proceeds After Acceleration.
If any Event of Default shall have occurred and be continuing, and if the
Obligations have become due and payable, all cash collateral held by the Agent
under this Agreement and the proceeds of any sale, disposition or other
realization by the Agent upon the Mortgaged Property (or any portion thereof)
pursuant to the Security Documents, shall be distributed in whole or in part by
the Agent in the following order of priority, unless otherwise directed by all
of the Banks:
First, to the Agent and the Co-Agent, ratably, in an
amount equal to all costs and expenses of the Agent and the Co-Agent due
and payable as of the date of such distribution;
Second, to the Banks, ratably, in an amount equal to all
accrued interest and fees owing to the Banks under the Credit Agreement
due and payable as of the date of such distribution; provided, however,
that in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
HOU04:43581.4
Third, to the Banks, ratably, in an amount equal to all
unreimbursed drawings under the Letters of Credit owing to the Banks due
and payable as of the date of such distribution; provided, however, that
in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Fourth, to the Banks, ratably, in an amount equal to the
principal of all Loans owing to the Banks under the Credit Agreement due
and payable as of the date of such distribution; provided, however, that
in case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Fifth, to the Agent as cash collateral in an amount equal
to all Outstanding Letters of Credit;
Sixth, to the Banks, ratably, in an amount equal to all
amounts owing to the Banks under all Bank Group Derivatives due and
payable as of the date of such distribution; provided, however, that in
case such proceeds shall be insufficient to pay in full all such
Obligations, then to the payment thereof to the Banks, ratably, in
proportion to its percentage of the sum of the aggregate amounts of all
such Obligations;
Seventh, to the Banks in an amount equal to all other
Obligations due and payable as of the date of such distribution; provided,
however, that in case such proceeds shall be insufficient to pay in full
all such Obligations, then to the payment thereof to the Banks, ratably,
in proportion to its percentage of the sum of the aggregate amounts of all
such Obligations; and
Eighth, to the extent of any surplus, to the Borrower, as
its interests may appear, except as may be provided otherwise by law;
it being understood that the Borrower shall remain liable to the extent of any
deficiency between the amount of the proceeds of the Mortgaged Property and the
aggregate of the sums referred to in clauses First through Seventh above.
HOU04:43581.4
ARTICLE VIII
THE AGENT, THE CO-AGENT AND THE ISSUING BANK
Section 8.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Agent and the Issuing Bank 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 or the
Issuing Bank 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), neither the Agent nor
the Issuing Bank shall 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 neither the Agent nor the
Issuing Bank shall be required to take any action which exposes it to personal
liability or which is contrary to the Loan Documents or applicable law. Each of
the Agent and the Issuing Bank 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, any
Letters of Credit 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 or the Issuing Bank 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, the
Issuing Bank, their Affiliates and their respective 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 and the Issuing Bank: (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 no
HOU04:43581.4
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, the Issuing Bank, their Affiliates and their
respective 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,
the Notes issued to it and its interest in the Outstanding Letters of Credit,
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
Issuing Bank or 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 property, contained in any other agreements,
documents or instruments related to such Other Activities; provided, that if any
HOU04:43581.4
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 and the Issuing Bank, the Co-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, THE CO-AGENT, THE
ISSUING BANK AND THEIR 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. Neither
the Agent, the Issuing Bank nor the Co-Agent shall 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, the Issuing
Bank and the Co-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 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, the Issuing Bank or the Co-Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
HOU04:43581.4
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, the Issuing Bank or the
Co-Agent is not reimbursed for such expenses by the Borrower.
Section 8.06. Employees of the Agent and the Issuing
Bank. Each of the Agent and the Issuing Bank may execute any of their respective
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. Each of the Agent and the Issuing Bank 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 or corporation 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 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. Successor Co-Agent and Successor Issuing
Bank. (a) The Co-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
HOU04:43581.4
or removal, the Majority Banks shall have the right to appoint a successor
Co-Agent. If no successor Co-Agent shall have been so appointed by the Majority
Banks, and shall have accepted such appointment, within thirty (30) days after
the retiring Co-Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Co-Agent, then the retiring Co-Agent may, on behalf of
the Banks, appoint a successor Co-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 Co-Agent hereunder by a successor Co-Agent,
such successor Co-Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Co-Agent, and the
retiring Co-Agent shall be discharged from its duties and obligations under this
Agreement, subject to the requirement that such retiring Co-Agent will execute
such documents and take such actions as may be necessary or desirable to cause
the successor Co-Agent to be vested with all such rights, powers, privileges and
duties. After any retiring Co-Agent's resignation or removal hereunder as
Co-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 Co-Agent under this
Agreement. All reasonable costs and expenses incurred by the Bank Group in
connection with any amendments or other documentation required by this Section
8.08 shall be paid by the Borrower pursuant to Section 9.04 hereof.
(b) The Issuing Bank 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 Issuing Bank. If no successor Issuing Bank shall have been
so appointed by the Majority Banks, and shall have accepted such appointment,
within thirty (30) days after the retiring Issuing Bank's giving of notice of
resignation or the Majority Banks' removal of the retiring Issuing Bank, then
the retiring Issuing Bank may, on behalf of the Banks, appoint a successor
Issuing Bank, which shall be a commercial bank or corporation 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 Issuing Bank hereunder by a successor Issuing Bank, such
successor Issuing Bank shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Issuing Bank, and the
retiring Issuing Bank shall be discharged from its duties and obligations under
this Agreement, subject to the requirement that such retiring Issuing Bank will
execute such documents and take such actions as may be necessary or desirable to
cause the successor Issuing Bank to be vested with all such rights, powers,
privileges and duties. Without limiting the generality of the foregoing, the
Borrower, the retiring Issuing Bank and the successor Issuing Bank will cause
each Letter of Credit issued by the retiring Issuing Bank to be terminated and
replaced by a Letter of Credit issued by the successor Issuing Bank. After any
retiring Issuing Bank's resignation or removal hereunder as Issuing Bank, 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 Issuing Bank under this
Agreement. All costs and expenses incurred by the Bank Group in connection with
HOU04:43581.4
any amendments or other documentation required by this Section 8.08(b) shall be
paid by the Borrower pursuant to Section 9.04 hereof.
Section 8.09. 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 8.10. Execution of Loan Documents. Each member of
the Bank Group hereby authorizes and directs the Agent and the Issuing Bank 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, the reimbursement obligations in respect of the Letters of Credit or any
fees or other amounts payable hereunder, (d) postpone any date fixed for any
payment of principal of, or interest on, the Notes, the reimbursement
obligations in respect of the Letters of Credit 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, the Issuing
Bank 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 (1) unless in
writing and signed by the Co-Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Co-Agent under this
Agreement or any other Loan Document and (2) unless in writing and signed by the
Issuing Bank in addition to the Banks required above to take such action, affect
the rights or duties of the Issuing Bank under this Agreement, the Letters of
Credit, Letter of Credit Applications, 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, the Note or the
Notes held by it, its interest in the Outstanding Letters of Credit 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
HOU04:43581.4
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
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 and the Issuing
Bank, to take such action on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to such Person by the
HOU04:43581.4
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 Commitment assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a 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 2.05 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 and its interest in the Outstanding Letters
of Credit); 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 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
HOU04:43581.4
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 the Letters of
Credit 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 amount of any
reimbursement obligations payable with respect to any Letter of Credit or the
dates fixed for payments of principal or interest on the Loans or reimbursement
obligations in respect of any Letters of Credit).
(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, the Issuing Bank 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:
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
HOU04:43581.4
if to the Issuing Bank or 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 any of the Agent, the Co-Agent and the Issuing Bank
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 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.
HOU04:43581.4
Section 9.05. Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Agent, the
Issuing Bank, the Banks and their respective 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 or the Guarantor in connection
herewith or therewith, shall survive the execution and delivery of this
Agreement, the Notes and the other Loan Documents, the expiration of the Letters
of Credit 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.
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
loans and revolving triparty accounts), shall not apply to this Agreement or the
Notes or the transactions contemplated hereby.
HOU04:43581.4
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
proceeding against 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
HOU04:43581.4
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.
Section 9.14. Indemnification. The Borrower agrees to
indemnify, defend and hold the Agent, the Co-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 Letters of Credit or
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
HOU04:43581.4
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.
Section 9.15. Ratification of Security Documents. The Borrower
hereby ratifies, adopts and confirms the Liens granted by and under the Security
Documents as security for all of the Obligations. The Borrower further
acknowledges and agrees that the term "Secured Obligations" as defined in the
Security Agreement shall include, without limitation, the payment and
performance of the Obligations as defined in this Agreement.
Section 9.16. 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
HOU04:43581.4
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
9.16.
Section 9.17. 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.
HOU04:43581.4
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:
Robert L. G. Watson
Chief Executive Officer
BANKERS TRUST COMPANY, as
Agent and as Issuing Bank
By:
Mary Jo Jolly
Assistant Vice President
ING (U.S.) CAPITAL
CORPORATION, as
Co-Agent
By:
Christopher R. Wagner
Vice President
HOU04:43581.4
Bank:
Commitment: $15,000,000.00 BANKERS TRUST COMPANY
By:
Mary Jo Jolly
Assistant 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
HOU04:43581.4
Bank:
Commitment: $15,000,000.00 ING (U.S.) CAPITAL
CORPORATION
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
HOU04:43581.4
Bank:
Commitment: $10,000,000.00 UNION BANK OF CALIFORNIA,
N.A.
By:
Name:
Title:
By:
Name:
Title:
Address:
Union Bank of California, N.A.
500 North Akard, Suite 4200
Dallas, Texas 75201
Telecopy No.: (214) 922-4209
Domestic Lending Office
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 90071
Eurodollar Lending Office
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 90071
HOU04:43581.4