EXHIBIT 10(d)
LETTER OF CREDIT AGREEMENT
dated as of May 19, 1993
among
SANTA FE ENERGY RESOURCES, INC.;
the Banks signatory hereto,
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Co-Agent and Administrative Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters,. . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . 1
1.2 Accounting Terms and Determinations . . . . . . . 26
Section 2. Commitments. . . . . . . . . . . . . . . . . . . 27
2.1 Letters of Credit . . . . . . . . . . . . . . . . 27
2.3 Reductions and Changes of Commitments . . . . . . 33
2.4 Several Obligations . . . . . . . . . . . . . . . 33
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . 33
Section 3. Prepayments . . . . . . . . . . . . . . . . . . 34
3.1 (a)Commitment Amount . . . . . . . . . . . . . . 34
Section 4. Payments of Principal and Interest . . . . . . . 34
4.1 Repayment of Reimbursement Obligations . . . . . 34
4.2 Interest . . . . . . . . . . . . . . . . . . . . 34
Section 5. Payments: Pro Rata Treatment: Computations, Etc. 35
5.1 Payments . . . . . . . . . . . . . . . . . . . . 35
5.2 Pro Rata Treatment. . . . . . . . . . . . . . . . 35
5.3 Computations. . . . . . . . . . . . . . . . . . . 35
5.4 Minimum And Maximum Amounts . . . . . . . . . . . 36
5.5 Certain Actions, Notices. Etc . . . . . . . . . . 36
5.6 Non-Receipt of Funds by the Agent . . . . . . . . 36
5.7 Sharing of Payments, Etc. . . . . . . . . . . . . 37
5.8 Other Expenses . . . . . . . . . . . . . . . . . 38
Section 6. Yield Protection and Illegality. . . . . . . . . 38
6.1 Additional Costs in Respect of Letters of
Credit. . . . . . . . . . . . . . . . . . . . . . 38
6.2 Capital Adequacy. . . . . . . . . . . . . . . . . 39
Section 7. Conditions Precedent . . . . . . . . . . . . . . 40
7.1 Closing Conditions . . . . . . . . . . . . . . . 40
7.2 All Letters of Credit . . . . . . . . . . . . . . 41
Section 8. Representations and Warranties . . . . . . . . . 42
8.1 Corporate Existence . . . . . . . . . . . . . . . 42
8.2 Information . . . . . . . . . . . . . . . . . . . 42
8.3 Litigation; Compliance. . . . . . . . . . . . . . 43
8.4 No Breach . . . . . . . . . . . . . . . . . . . . 43
8.5 Corporate Action . . . . . . . . . . . . . . . . 43
8.6 Approvals . . . . . . . . . . . . . . . . . . . . 43
8.7 Regulations G, U and X . . . . . . . . . . . . . 44
8.8 ERISA . . . . . . . . . . . . . . . . . . . . . . 44
8.9 Taxes . . . . . . . . . . . . . . . . . . . . . . 44
8.10 Subsidiaries . . . . . . . . . . . . . . . . . . 44
8.11 Investment Company Act . . . . . . . . . . . . . 44
8.12 Public Utility Holding Company Act . . . . . . . 45
-i-
8.13 Environmental Matters . . . . . . . . . . . . . . 45
Section 9. Covenants. . . . . . . . . . . . . . . . . . . . 45
9.1 Financial Statements and Certificates . . . . . . 45
9.2 Inspection of Property. . . . . . . . . . . . . . 49
9.3 Compliance with Environmental Laws . . . . . . . 49
9.4 Payment of Taxes . . . . . . . . . . . . . . . . 50
9.5 Maintenance of Insurance . . . . . . . . . . . . 50
9.6 Restricted Payments And Restricted Investments. . 50
9.7 Lien, Debt and Other Restrictions . . . . . . . . 52
9.8 Issuance of Stock by Restricted Subsidiaries. . . 62
Section 10. Defaults . . . . . . . . . . . . . . . . . . . 63
10.1 Events of Default. . . . . . . . . . . . . . . . 63
Section 11. The Agent . . . . . . . . . . . . . . . . . . . 67
11.1 Appointment, Powers and Immunities . . . . . . . 67
11.2 Reliance By Agent. . . . . . . . . . . . . . . . 67
11.3 Defaults . . . . . . . . . . . . . . . . . . . . 68
11.4 Rights as a Bank . . . . . . . . . . . . . . . . 68
11.5 Indemnification. . . . . . . . . . . . . . . . . 68
11.6 Non-Reliance on the Agent and Other Banks. . . . 69
11.7 Failure to Act . . . . . . . . . . . . . . . . . 69
11.8 Resignation or Removal of the Agent. . . . . . . 69
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . 70
12.1 Waiver . . . . . . . . . . . . . . . . . . . . . 70
12.2 Notices. . . . . . . . . . . . . . . . . . . . . 70
12.3 Expenses, Etc. . . . . . . . . . . . . . . . . . 70
12.4 Indemnification. . . . . . . . . . . . . . . . . 71
12.5 Amendments, Etc. . . . . . . . . . . . . . . . . 72
12.6 Successors and Assigns . . . . . . . . . . . . . 72
12.7 Survival; Term; Reinstatement. . . . . . . . . . 75
12.8 Limitation of Interest . . . . . . . . . . . . . 76
12.9 Captions . . . . . . . . . . . . . . . . . . . . 77
12.10 Counterparts . . . . . . . . . . . . . . . . . . 77
12.11 Governing Law. . . . . . . . . . . . . . . . . . 77
12.12 Severability . . . . . . . . . . . . . . . . . . 77
12.13 Chapter 15 Not Applicable. . . . . . . . . . . . 77
-ii-
LETTER OF CREDIT AGREEMENT
This Letter of Credit Agreement (as amended, modified,
supplemented and restated from time to time, this "AGREEMENT") dated
as of May 19, 1993, is by and among SANTA FE ENERGY RESOURCES, INC.
(the "COMPANY"), a Delaware corporation; each of the lenders which is
or which may from time to time become a Signatory hereto (individually
a "BANK" and collectively the "BANKS"); TEXAS COMMERCE BANK NATIONAL
ASSOCIATION ("TCB"), a national banking association, as Administrative
Agent for the Banks (in such capacity, together with its successors
in such capacity, the "Agent"); and TCB and NATIONSBANK OF TEXAS,
N.A., a national banking association, as Co-Agents (in such capacity,
the "CO- AGENTS").
The parties agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"ADDITIONAL COSTS" shall have the meaning ascribed to such term
in SECTION 6.1.
"ADOBE" shall mean Adobe Resources Corporation, a Delaware
corporation.
"ADOBE PROPERTIES" shall mean oil, gas and mineral properties and
other assets owned by Adobe at the time of the Merger.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or
is controlled by, such Person; and with respect to an individual,
"AFFILIATE" shall also mean any individual related to such individual
by blood or marriage. As used in this definition, "CONTROLS",
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH" shall mean possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"ALTERNATE ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of
any date of determination and for the Calculation Period in which such
date occurs and for each Calculation Period thereafter to and
including the Calculation Period including the Termination Date, the
lowest of the ratios obtained by dividing (a) Combined CFADS
(calculated on the basis of the Most Recent Engineering Report) for
such Calculation Period by (b) Alternate Debt Service of the Company
and the Restricted Subsidiaries for such Calculation
Period PLUS, at all times and to the extent the Special Subsidiary
Qualifying conditions are met, the Special Subsidiary Percentage times
the Alternate Debt Service of the Special Subsidiary for such
Calculation Period (in each case calculated on the basis set forth in
the most recent Coverage Report delivered to the Agent pursuant to
SECTION 9.1 and taking into account any incurrence or prepayment of
Covered Debt by the Company or any of the Restricted Subsidiaries or
the Special Subsidiary since the date of such Coverage Report).
"ALTERNATE BASE RATE" shall mean, for any date, a rate per annum
(rounded upwards, if necessary, to the next higher 1/100%) equal to
the greater of (a) the Prime Rate in effect on such day or (b) the Fed
Funds Rate in effect for such day plus 1/2%. Any change in the
Alternate Base Rate due to a change in the Fed Funds Rate shall be
effective on the effective date of such change in the Fed Funds Rate.
If for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Fed Funds Rate for any reason, including the inability
or failure of the Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the Alternate Base Rate shall be the
Prime Rate until the circumstances giving rise to such inability no
longer exist.
"ALTERNATE DEBT SERVICE" shall mean, for any Calculation Period
and with respect to any Person, the total of principal payments in
respect of Covered Debt of such Person and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Alternate Debt Service but such Covered Debt
will not bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Alternate
Debt Service with respect to such Covered Debt shall be calculated on
the basis of such fixed rate or rates for such time as the same shall
be applicable to such Covered Debt, and then at the interest rates set
forth in the most recent Approved Assumptions) in respect of Covered
Debt of such Person, in each case paid and scheduled to be paid during
such Calculation Period; PROVIDED that the principal amount of any
Covered Debt of such Person which by its terms matures on a date
within such Calculation Period but which may reasonably be expected to
be reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed that (a) surety bonds for environmental purposes and letters
of credit issued for the account of a Person will be fully drawn upon
their respective expiry dates, (b) the reimbursement obligations of a
Person with respect to all surety bonds for environmental purposes and
letters of credit issued for
-2-
its account shall be satisfied immediately and considered as a
"principal payment" for purposes of this definition.
"ANNUAL DEBT SERVICE COVERAGE RATIO" shall mean, as of any date
of determination and for the Calculation Period in which such date
occurs and for each Calculation Period thereafter to and including the
Calculation Period including the Termination Date, the lowest of the
ratios obtained by dividing (a) Combined CFADS (calculated on the
basis of the Most Recent Engineering Report) for such Calculation
Period by (b) Debt Service of the Company and the Restricted
Subsidiaries for such Calculation Period PLUS, at all times and to the
extent the Special Subsidiary Qualifying Conditions are met, the
Special Subsidiary Percentage times the Debt Service of the Special
Subsidiary for such Calculation Period (in each case calculated on the
basis set forth in the most recent Coverage Report delivered to the
Agent pursuant to SECTION 9.1 and taking into account any incurrence
or prepayment of Covered Debt by the Company and the Restricted
Subsidiaries and the Special Subsidiary since the date of such
Coverage Report).
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all applicable
environmental or pollution-control Legal Requirements governing,
without limitation, wastewater effluent, solid and hazardous waste or
substances and air emissions, together with any other applicable
requirements for conducting, on a timely basis, reporting, record
keeping, periodic tests and monitoring for contamination of ground
water, surface water, air and land and for biological toxicity of the
aforesaid, including, without limitation, the Resource Conservation
and Recovery Act of 1976, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (as amended by the Superfund
Amendments and Reauthorization Act), the Toxic Substances Control Act,
the Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Clean Air Act, the Clean Water Act, the Oil Pollution Act,
the Texas Water Code, the Texas Health and Safety Code, the Texas
Natural Resources Code, the Louisiana Environmental Quality Act, the
Louisiana Air Control Law, the Louisiana Water Control Law, the
Louisiana Solid Waste Management and Resource Recovery Law, the
Louisiana Hazardous Waste Control Law, the Louisiana Oil Spill
Prevention and Response Act, the Louisiana Resource Recovery and
Development Act, the Louisiana Waste Reduction Law, the Louisiana
Hazardous Material Information Development, Preparedness, and Response
Act, the Louisiana State and Local Coastal Resources Management Act of
1978, the Louisiana Coastal Wetlands Conservation and Restoration Act,
the Louisiana Abandoned Oilfield Waste Site Law, and the Louisiana
Mineral Code, in each case as amended from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each Bank the office
of such Bank (or of an Affiliate of such Bank) designated below its
name on the signature pages hereof or such other office of such Bank
(or of an Affiliate of such Bank) as such Bank may from time to time
specify to the Agent and the Company as the
-3-
office by which its Letters of Credit are to be issued and maintained.
"APPLICABLE MARGIN" for Letters of Credit shall mean 1.00% per
annum.
"APPLICATION" shall mean each application and agreement for a
Letter of Credit, or similar instrument or agreement, substantially in
the form of EXHIBIT A, now or hereafter executed by the Company in
connection with any Letter of Credit at any time issued or to be
issued hereunder; to the extent that an Application is inconsistent
with this Agreement, this Agreement shall control.
"APPROVED ASSUMPTIONS" shall mean (a) until the first delivery of
an Independent Engineering Report hereunder, those assumptions set
forth on SCHEDULE III and (b) thereafter, for each Independent
Engineering Report hereunder, assumptions as to product prices,
interest rates, escalation rates, discount rates and future levels of
production curtailment, which assumptions shall be determined by the
Co-Agents after consultation with the Company and set forth (x) in the
case of each Required Reserve Report, in a notice sent to the Banks on
or before January 21 of each such year and in a notice from the Agent
to the Company on or prior to the next succeeding February 1 or (y) in
the case of each Optional Reserve Report, in a notice sent to the
Banks within 30 days of the delivery of the notice to the Co-Agents
required by SECTION 2.2(d) and in a notice from the Agent to the
Company on or prior to a date 10 days after the date of such notice to
the Banks; PROVIDED that such assumptions are, within ten days after
any such notice is sent to the Banks, approved (as indicated in one or
more notices received by the Agent within such ten-day period) by
Banks with aggregate Commitment Percentages of 75% or more. If the
assumptions proposed by the Co-Agents are not approved, the Banks will
work to determine and approve alternative assumptions in good faith in
accordance with their customary oil and gas lending practices.
Approved Assumptions set forth in a notice to the Company shall govern
until new Approved Assumptions are set forth in a notice to the
Company as provided herein, and shall be used, without limitation, in
preparation of the next Independent Engineering Report required to be
delivered pursuant to SECTION 9.1 or permitted to be delivered
pursuant to SECTION 2.2(d).
"ASSIGNMENT AGREEMENT" shall mean an Assumption and Assignment
Agreement substantially in the form of EXHIBIT B.
"ATTRIBUTABLE DEBT" shall mean the lesser of (a) the fair market
value of the assets sold pursuant to any Sale and Leaseback
Transaction (which determination shall be based upon a written opinion
(the cost of which shall be borne exclusively by the Company) as to
valuation from an independent valuation expert selected by the
Company) or (b) the present value (discounted
-4-
according to GAAP at the interest rate implicit in the lease) of the
obligations of the lessee for rental payments during the term of any
lease constituting a part of such Sale and Leaseback Transaction.
"AVAILABLE AMOUNT" shall mean subject always to the limitation
set forth in SECTION 2.2(e), the Preliminary Available Amount from
time to time in effect, as the same may be adjusted upward and
downward in accordance with SECTION 2.2 or permanently decreased in
accordance with SECTION 2.3.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas
or New York, New York.
"CALCULATION PERIOD" shall mean the year ending on the last day
of a February; with respect to calculations for a Calculation Period
determined with reference to amounts for two calendar years, it shall
be assumed (unless such amounts are due on scheduled dates, in which
case such calculations shall be made with reference to such dates)
that each such calendar year amount is spread evenly over the
appropriate calendar year, with the result that each such amount for a
Calculation Period beginning on a March 1 shall be composed of (a)
10/12 of the calendar year amount for the calendar year containing
such March 1 plus (b) 2/12 of the calendar year amount for the next
calendar year.
"CAPITAL GAINS" shall mean gains (net of expenses and income
taxes applicable thereto) in excess of losses resulting from the sale,
conversion or other disposition of capital assets (I.E., assets other
than current assets).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the
books of the Company or any Restricted Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CFADS" shall mean, for any Calculation Period and with respect
to any Person, (a) Net Oil and Gas Income (PROVIDED that in
calculating Combined CFADS, no more than 25% of Net Oil and Gas Income
may be attributable to proved nonproducing and proved undeveloped
Recognized Proved Reserves) LESS (b) Projected G & A Expense LESS (c)
Projected Income Tax Expense PLUS (d) anticipated net income (or minus
anticipated net losses) from the Price Protection Agreements
(determined on the basis of the Approved Assumptions), (e) PLUS any
anticipated gain, and MINUS any anticipated loss, on Interest Rate
Protection Agreements (determined on the basis of the Approved
Assumptions), PLUS (f)
-5-
other income from operations as reasonably projected under the
Approved Assumptions, not to exceed 5% of Combined CFADS, and PLUS (g)
proceeds of sales of assets permitted by the Credit Documents, to the
extent (but only to the extent) such proceeds are applied as
prepayments pursuant to SECTION 3.1, in each case for such Calculation
Period and such Person.
"CHANGE OF CONTROL" shall mean any change so that any Person (or
any Persons acting together which would constitute a Group), together
with any Affiliates or Related Persons thereof, shall at any time
either (1) Beneficially Own more than 50% of the aggregate Voting
power of all classes of Voting Stock of the Company or (2) succeed in
having sufficient of its or their nominees elected to the Board of
Directors of the Company such that such nominees, when added to any
existing director remaining on the Board of Directors of the Company
after such election who is an Affiliate or Related Person of such
Person or Group, shall constitute a majority of the Board of
Directors of the Company. As used herein (a) "BENEFICIALLY OWN" shall
mean beneficially own as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any
successor provision thereto; (b) "GROUP" shall mean a "group" for
purposes of Section 13(d) of the Exchange Act; (c) "RELATED PERSON" of
any Person shall mean any other Person owning (1) 5% or more of the
outstanding common stock of such Person or (2) 5% or more of the
Voting Stock of such Person, and (d) "VOTING STOCK" of any Person
shall mean capital stock of such Person which ordinarily has voting
power for the election of directors (or persons performing similar
functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any
contingency.
"CHAPTER ONE" shall mean Chapter One of the Texas Credit Code, as
in effect on the date the document using such term was executed.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute, together with all publicly available written
regulations, rulings and interpretations thereof or thereunder by the
Internal Revenue Service.
"COLLATERAL" shall mean all property at any time subject to the
Security Documents under the Revolving and Term Credit Agreement.
"COMBINED CFADS" shall mean, for any Calculation Period, the sum
of (a) CFADS of the Company and the Restricted Subsidiaries PLUS, at
all times and to the extent all Special Subsidiary Qualifying
Conditions are met, but not at any other time, (b) the product of (1)
the Special Subsidiary Percentage times (2) the CFADS of the Special
Subsidiary, in each case for such Calculation Period.
-6-
"COMBINED COVERED DEBT" shall mean, as of any date, the sum of
(a) the Covered Debt of the Company and the Restricted Subsidiaries,
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the Covered Debt of the Special Subsidiary, all
as of such date.
"COMBINED GROUP" shall mean the Company, the Restricted
Subsidiaries and the Special Subsidiary.
"COMBINED RESERVE VALUE" shall mean, as of any date, the sum of
(a) the Reserve Value of the Company and the Restricted Subsidiaries
PLUS, at all times and to the extent all Special Subsidiary Qualifying
Conditions are met, (b) the product of (1) the Special Subsidiary
Percentage times (2) the Reserve Value of the Special Subsidiary, all
as of such date. In calculating the Combined Reserve Value, no more
than 25% of such Combined Reserve Value may be attributable to the
combination of proved nonproducing and proved undeveloped Recognized
Proved Reserves.
"COMMITMENT" shall mean, as to any Bank, the obligation, if any,
of such Bank to incur Letter of Credit Liabilities in an aggregate
principal amount at any one time outstanding up to but not exceeding
such Bank's Commitment Percentage times the difference between (a) the
Available Amount then in effect, and (b) the aggregate unpaid balance
of the Revolving Notes, which amount shall be up to but not exceeding
the amount set forth opposite such Bank's name on the signature pages
hereof under the caption "COMMITMENT" (as the same may be reduced from
time to time pursuant to SECTION 2.3).
"COMMITMENT FEE" shall mean the fee payable by the Company to the
Agent for the account of the Banks in their Commitment Percentages as
provided in SECTION 2.5.
"COMMITMENT PERCENTAGE" shall mean, as to any Bank, the
percentage equivalent of a fraction, the numerator of which is the
amount of such Bank's Commitment as shown opposite such Bank's name on
the signature pages hereof under the caption "Commitment", subject to
reduction and the identification of new Banks pursuant to SECTION
12.6, and the denominator of which is the aggregate amount of the
Commitments of all the Banks.
"CONSOLIDATED NET EARNINGS" shall mean consolidated gross
revenues (including Capital Gains) of the Company and the Restricted
Subsidiaries less all operating and non-operating expenses of the
Company and the Restricted Subsidiaries including all charges of a
proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included
in gross revenues, and current additions to reserves), but not
including in gross revenues any dividends, distributions or other
payments received by the Company and the Restricted Subsidiaries
-7-
from the Special Subsidiary or gains resulting from write-up of
assets, any equity of the Company or any Restricted Subsidiary in the
unremitted earnings of any Person which is not a Restricted
Subsidiary, any earnings of any Person acquired by the Company or any
Restricted Subsidiary through purchase, merger or consolidation or
otherwise for any year prior to the year of acquisition, or any
deferred credit representing the excess of equity in any Restricted
Subsidiary at the date of acquisition over the cost of the investment
in such Restricted Subsidiary; all determined in accordance with GAAP.
"CONSOLIDATED NET EARNINGS AVAILABLE FOR FIXED CHARGES" shall
mean for any period the sum of (a) Consolidated Net Earnings for such
period (PROVIDED that the maximum amount of Capital Gains included
therein shall be $3,000,000 through December 31, 1990 and such maximum
amount shall increase by $150,000 on the first day of each year
thereafter); without duplication, (b) cash distributions received
during such period by the Company and the Restricted Subsidiaries on
their Investment in the Special Subsidiary to the extent not
reinvested in the Special Subsidiary; to the extent deducted from
gross revenues in determining Consolidated Net Earnings, (c) all
provisions for any federal, state or other income taxes made by the
Company and the Restricted Subsidiaries during such period; (d) Fixed
Charges of the Company and the Restricted Subsidiaries during such
period; (e) depreciation, depletion and amortization charges of the
Company and the Restricted Subsidiaries for such period, and (f) all
other non-cash charges of the Company and the Restricted Subsidiaries
for such period, all determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean the aggregate net
tangible assets of the Company and the Restricted Subsidiaries,
determined as follows:
(a) The MLP Investment (at such times as SFEP is treated as the
Special Subsidiary) plus the aggregate gross book value of all the
assets of the Company and the Restricted Subsidiaries, both real and
personal, shall be computed, EXCLUDING, however, the following items:
(i) all franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense, unamortized debt discount and
expense, and all other assets which under GAAP are deemed intangible;
(ii) any reacquired shares or reacquired Debt of the
Company or the Restricted Subsidiaries;
(iii) any write-up of assets made after December 31, 1989;
-8-
(iv) 50% of the value of all assets of the Company and the
Restricted Subsidiaries acquired after April 1, 1990 which are located
outside the United States of America and Canada and not freely
returnable to the United States of America or Canada, including any
notes or accounts receivable from any debtor having any substantial
part of its business, operations or properties located outside the
United States of America and Canada, except notes or accounts
receivable from such a debtor which arose in the ordinary course of
business of the Company or any Restricted Subsidiary, as the case may
be, to which such notes or accounts receivable are payable and which
otherwise constitute current assets, but only to the extent of an
amount of dollars readily realizable from such notes or accounts
receivable by liquidation either directly or through a currency freely
convertible into dollars; and
(v) all Restricted Investments of the Company and the
Restricted Subsidiaries.
(b) From the gross book value of the tangible assets of the
Company and the Restricted Subsidiaries, determined as provided in the
preceding CLAUSE (a), there shall be deducted the following items:
(i) all reserves for depreciation, depletion, obsolescence
and amortization of the assets of the Company and the Restricted
Subsidiaries (other than assets excluded as provided in the preceding
CLAUSE (a), all proper reserves (other than reserves for deferred
taxes and general contingency reserves and other reserves representing
mere appropriations of surplus) which in accordance with GAAP should
be set aside in connection with the business conducted by them;
(ii) all Current Debt of the Company and the Restricted
Subsidiaries; and
(iii) all other liabilities of the Company and the
Restricted Subsidiaries, including the reduction in equity
attributable to minority interests but excluding deferred taxes,
Funded Debt of the Company and the Restricted Subsidiaries, capital
shares, surplus and general contingency reserves and other reserves
representing mere appropriations of surplus.
(c) In the determination of Consolidated Net Tangible Assets, no
amount shall be included therein on account of any excess cost of
acquisition of shares of any Restricted Subsidiary over the net book
value of the assets of such Restricted Subsidiary attributable to such
shares at the date of such acquisition or on account of any excess of
the net book value of the assets of any Restricted Subsidiary
attributable to any shares of such Restricted Subsidiary at the date
of acquisition of such shares over the cost of acquisition of such
shares.
-9-
"COVERAGE REPORT" shall mean a report substantially in the form
of SCHEDULE IV setting forth the calculation of the Life-of-Reserves
Coverage Ratio, the Annual Debt Service Coverage Ratio and the
Alternate Annual Debt Service Coverage Ratio.
"COVERED DEBT" shall mean, without duplication, (a) all
obligations for borrowed money; (b) all obligations evidenced by
bonds, debentures, notes or other similar instruments; (c) all
obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course
of business; (d) all Capitalized Lease Obligations; (e) all
obligations in respect of production payments, proceeds production
payments and similar financing arrangements; (f) all reimbursement
obligations and all letter of credit advances with respect to letters
of credit issued for the account of such Person, including the Letter
of Credit Liabilities; (g) surety bonds for environmental purposes;
(h) all obligations of the types described in CLAUSES (a) through (g)
of this definition (collectively, "ORDINARY DEBT") of another Person
secured by a Lien on any property of the Person as to which Covered
Debt is being determined, regardless of whether such Ordinary Debt is
assumed by such Person, and (i) all Ordinary Debt of another Person
guaranteed (but excluding the obligations of the Company and the
Restricted Subsidiaries arising solely by virtue of their serving as
general partner of SFEP) by such Person; PROVIDED that Covered Debt
shall not include Ordinary Debt or any obligation of the types
described in CLAUSES (h) or (i) of this definition which is (1)
non-recourse (either directly or contingently) as to all members of
the Combined Group and (2) secured only by assets which are not
Recognized Proved Reserves.
"CREDIT DOCUMENTS" shall mean this Agreement, all Applications,
all Letters of Credit, the Notice of Entire Agreement, the Revolving
and Term Credit Agreement and all instruments, certificates and
agreements now or hereafter executed or delivered to the Agent or any
Bank pursuant to any of the foregoing.
"CURRENT DEBT" shall mean any obligation for borrowed money (and
any notes payable and drafts accepted representing obligations for
borrowed money) payable on demand or within a period of one year from
the date of the creation thereof and any Guaranty with respect to
Current Debt (of the kind otherwise described in this definition) of
another Person; PROVIDED that any obligation shall be treated as
Funded Debt, regardless of this term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the
creation of such obligation, or may be payable out of the proceeds of
a similar obligation pursuant to the terms of such obligation or of
any such agreement.
-10-
"DEBT" shall mean Funded Debt and/or Current Debt, as the case may be.
"DEBT SERVICE" shall mean, for any Calculation Period, the total
of principal payments in respect of Covered Debt of the Person as to
which Debt Service is to be determined and the total of interest
payments (using, with respect to interest to accrue, the interest
rates set forth in the most recent Approved Assumptions for such
Covered Debt not bearing interest at a fixed rate; if some or all of
such Covered Debt bears interest at one or more fixed rates as of the
date of determination of Debt Service but such Covered Debt will not
bear interest at such fixed rate or rates to the end of such
Calculation Period, then interest payments in respect of Debt Service
with respect to such Covered Debt shall be calculated on the basis of
such fixed rate or rates for such time as the same shall be applicable
to such Covered Debt, and then at the interest rates set forth in the
most recent Approved Assumptions) in respect of Covered Debt of such
Person, in each case paid and scheduled to be paid during such
Calculation Period; PROVIDED that the principal amount of any Covered
Debt of such Person which by its terms matures on a date within such
Calculation Period but which may reasonably be expected to be
reborrowed in a Rollover on such date shall not be deemed, for
purposes of this definition, to be scheduled to be paid on such date;
and PROVIDED FURTHER that for purposes of this definition it shall be
assumed (to the extent relevant with respect to such Person) that (a)
Letters of Credit will be fully drawn upon their respective expiry
dates; (b) other letters of credit issued for the account of such
Person will not be drawn; (c) surety bonds for environmental purposes
issued on behalf of such Person will not be drawn, and (d) the
reimbursement obligations of the Company under the Letter of Credit
Agreement shall be satisfied immediately and considered as a
"principal payment" for purposes of this definition.
"DEFAULT" shall mean an Event of Default or an event which with
notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"EBITD" shall mean for any period Consolidated Net Earnings for
such period, plus the aggregate amounts deducted in determining
Consolidated Net Earnings in respect of (a) all provisions for any
federal, state or other income taxes made by the Company and the
Restricted Subsidiaries during such period; (b) Fixed Charges of the
Company and the Restricted Subsidiaries during such period; (c)
depreciation, depletion and amortization charges of the Company and
the Restricted Subsidiaries for such period, and (d) all other
non-cash charges of the Company and the Restricted Subsidiaries for
such period, all determined in accordance with GAAP.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank having total
assets in excess of $1,000,000,000 or (b) a finance company, insurance
company, other financial institution or fund, acceptable
-11-
to the Agent and the Company, which is regularly engaged in making,
purchasing or investing in loans and having total assets in excess of
$1,000,000,000.
"ENGINEERING SHORTFALL" shall mean, during the pendency of a
Default described in SECTION 10.1(e), the amount, if any, by which the
sum of (a) the aggregate outstanding principal balance of the
Revolving Notes PLUS (b) the aggregate Letter of Credit Liabilities
shall exceed the Available Amount at the time of any delivery of (and
as determined in accordance with) an Independent Engineering Report
and its related Coverage Report.
"ENVIRONMENTAL CLAIM" means any claim, demand, action, cause of
action, suit, judgment, governmental or private investigation relating
to remediation or compliance with Applicable Environmental Laws,
proceeding or lien, whether threatened, sought, brought or imposed,
that seeks to recover costs, damages, punitive damages, expenses,
fines, criminal liability, judgments, response costs, investigative
and monitoring costs, abatement costs, attorney's fees, expert's fees
or consultant's fees, or seeks to impose liability regarding the
Company or any of its Subsidiaries, or any of their sites or
properties for violations of Applicable Environmental Laws or for
pollution, contamination, preservation, protection, remediation or
clean up of the air, surface water, ground water, soil or wetlands, or
otherwise in relation to the use, storage, generation, release,
handling or disposal of materials and substances that is regulated by
or subject to Applicable Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations and
interpretations by the Internal Revenue Service or the Department of
Labor thereunder.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) which on and after December 5, 1990 is under common
control with the Company within the meaning of the regulations under
Section 414 of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in SECTION 10.
"EXISTING LETTERS OF CREDIT" shall mean the letters of credit
listed on SCHEDULE IX.
"FDIC" means the Federal Deposit Insurance Corporation or any
entity succeeding to any or all of its functions.
"FED FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by
-12-
federal funds brokers, as published on the succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it.
"FIXED CHARGES" shall mean (without duplication) for any period
the sum of interest expense in respect of all Debt of the Person for
which the determination is made (calculated, in the case of Debt which
bears interest at a floating rate, at the rate in effect at the time
of calculation), including imputed interest expense in respect of
Capitalized Lease Obligations.
"FUNDED DEBT" shall mean and include, without duplication, any
obligation (including the current maturities thereof)
(a) payable more than one year from the date of creation thereof
(1) for borrowed money; (2) evidenced by bonds, debentures, notes or
reimbursement obligations in respect of letters of credit or other
similar instruments (other than letters of credit and surety bonds
relating to trade obligations incurred in the ordinary course of
business and includable, under GAAP, in current liabilities on a
balance sheet or in the notes relating thereto); (3) for the payment
of the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (4)
constituting Capitalized Lease Obligations; (5) in respect of
production payments, proceeds production payments or similar financing
arrangements; (6) which is, under GAAP, shown on a balance sheet
(after giving effect, in the case of the balance sheet of the Company
or a Restricted Subsidiary, to the eliminating entries, if any, for
the Unrestricted Subsidiaries as a group and the Special Subsidiary)
as long-term debt (excluding provisions for deferred income taxes,
unfunded pension obligations, unfunded liabilities for other
post-employment benefits and other reserves or provisions to the
extent that such reserves or provisions do not constitute an
obligation), or (7) for any item described in any of the foregoing
CLAUSES (1) through (6) which is secured by any Lien on property owned
by the Company or any Restricted Subsidiary, whether or not the
obligations secured thereby shall have been assumed by the Company or
such Restricted Subsidiary; or
(b) payable more than one year from the date of creation
thereof, which under GAAP is shown on the balance sheet as a long-term
liability (EXCLUDING provisions for deferred income taxes, unfunded
pension obligations, unfunded liabilities for other post-employment
benefits and other reserves or provisions to the extent that such
reserves or provisions do not constitute an obligation); or
(c) constituting a Guaranty with respect to Funded Debt (of the
kind otherwise described in CLAUSES (A) and (b) of this
-13-
definition) of another Person, including any obligation by the Company
or a Restricted Subsidiary for Funded Debt of SFEP or any other
Person, regardless of the percentage of equity interest owned therein
by the Company or a Restricted Subsidiary, by virtue of its capacity
as a general partner of SFEP or such other Person.
"GAAP" shall mean, as to a particular Person, such accounting
practice as, in the opinion of the independent accountants of
recognized national standing regularly retained by such Person and
acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally accepted
accounting principles means those principles and practices which are
(a) recognized as such by the Financial Accounting Standards Board;
(b) applied for all periods after the date hereof in a manner
consistent with the manner in which such principles and practices were
applied to the financial statements of the relevant Person dated
December 31, 1991 and for the period then ended, and (c) consistently
applied for all periods after the date hereof so as to reflect
properly the financial condition and results of operations of such
Person.
"GOVERNMENTAL AUTHORITY" shall mean any sovereign governmental
authority, the United States of America, any State of the United
States and any political subdivision of any of the foregoing, and any
agency, instrumentality, department, commission, board, bureau,
central bank, authority, court or other tribunal, in each case whether
executive, legislative, judicial, regulatory or administrative,
having jurisdiction over the Company, any of the Company's
Subsidiaries, any of their respective property, the Agent, the
Co-Agent or any Bank.
"GUARANTY" shall mean and include, without limitation, any
obligation of the Company or a Restricted Subsidiary
(a) constituting a guaranty, endorsement (other than an
endorsement of a negotiable instrument for collection in the ordinary
course of business) or other contingent liability (whether direct or
indirect) in connection with the obligations, stock or dividends of
any Person (other than the Company or a Restricted Subsidiary);
(b) payable under any contract (other than the Tax
Indemnification Agreement and any other tax indemnification or sharing
agreement) providing for the making of loans, advances or capital
contributions to any Person (other than the Company or a Restricted
Subsidiary), or for the purchase of any property from any Person, in
each case in order primarily to enable such Person to maintain working
capital, net worth or any other balance sheet condition or to pay
debts, dividends or expenses;
(c) payable under any contract for the purchase of materials,
supplies or other property or services (other than any natural gas
-14-
transportation contract or any electrical, water supply, steam
purchase or other utility supply contract) if such contract (or any
related document) requires that payment for such materials, supplies
or other property or services shall be made regardless of whether or
not delivery of such materials, supplies or other property or services
is ever made or tendered; PROVIDED that the exceptions contained in
this CLAUSE (c) shall not apply to any contract for the purchase or
transportation of natural gas where payment is required regardless of
whether the delivery of such natural gas is ever made or tendered,
unless at the time such contract is entered into the aggregate of
payments under such contract and all such existing contracts would not
exceed $20,000,000 in any calendar year based on existing rates and
automatic escalations in such rates under such contracts;
(d) payable under any contract to rent or lease (as lessee) any
real or personal property (other than any oil and gas leases) if such
contract (or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general
use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor; or
(e) payable under any other contract which, in economic effect,
is substantially equivalent to a guarantee for any payment or
performance of an obligation of a Person other than the Company or a
Restricted Subsidiary.
"HIGHEST LAWFUL RATE" shall mean, on any day, the maximum
nonusurious rate of interest permitted for that day by whichever of
applicable federal or Texas law permits the higher interest rate,
stated as a rate per annum. On each day, if any, that Chapter One
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day.
"HYDROCARBONS" shall mean crude oil, condensate, natural gas,
natural gas liquids and associated substances.
"INDEPENDENT ENGINEERING REPORT" shall mean a report prepared by
an Independent Petroleum Engineer which sets forth the gross and net
volume of Hydrocarbons projected to be produced from the Petroleum
Properties, by calendar years, for the remaining economic life of the
Petroleum Properties. The Petroleum Properties of the Special
Subsidiary shall be segregated from the Petroleum Properties of the
other members of the Combined Group, and the Adobe Properties shall be
separately identified. Each Independent Engineering Report shall also
contain a list of Petroleum Properties of the members of the Combined
Group and indicate the Net Oil and Gas Income for each calendar year
attributable thereto, all in reasonable detail. Each such report
shall identify which of the Petroleum Properties covered thereby are
"proved developed
-15-
producing," "proved developed non-producing" and "proved undeveloped"
(as defined in the "Definitions for Oil and Gas Reserves" as published
by the Society of Petroleum Engineers). Each such report shall be
prepared in accordance with established criteria generally accepted in
the oil and gas industry and standards customarily used by independent
petroleum engineers well regarded in the industry in making reserve
determinations or appraisals, and shall be based on Approved
Assumptions and such other assumptions, estimates and projections as
are fully disclosed in such Independent Engineering Report.
"INDEPENDENT PETROLEUM ENGINEER" shall mean Ryder Scott Company
Petroleum Engineers or another independent petroleum engineer retained
by the Company acceptable to the Required Banks.
"INTEREST RATE PROTECTION AGREEMENTS" shall mean an interest rate
swap agreement, interest rate cap agreement or other similar
arrangement which satisfies all of the following requirements: (a) a
member of the Combined Group is a party to such agreement; (b) the
Company has given evidence (satisfactory to the Agent) of such
agreement to the Agent; (c) the terms and parties to such agreement,
taking into account all similar agreements to which members of the
Combined Group are parties, are satisfactory to the Required Banks;
and (d) such agreement is in full force and effect and has not been
unwound.
"INVESTMENT" shall mean any purchase or other acquisition of the
stock, obligations or securities of, or any interest in, or any
capital contribution, loan or advance to, or any Guaranty in respect
of the obligations of (but excluding the obligations of the Company
and the Restricted Subsidiaries arising solely by virtue of their
serving as general partner of SFEP) any Person, but in any event shall
include as an investment in any Person the amount of all Debt owed by
such Person, and all accounts receivable from such Person which are
not current assets or did not arise from sales to such Person in the
ordinary course of business. As used herein, any capital contribution
of assets by the Company or any Restricted Subsidiary shall be valued
at the book value of such assets as reflected in the consolidated
financial statements of the Company and the Restricted Subsidiaries as
at the end of the quarter ending immediately prior to each
contribution.
"LEGAL REQUIREMENT" shall mean any applicable law, statute,
ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation by any Governmental Authority of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, in each case as now or hereafter in effect.
"LETTER OF CREDIT" shall have the meaning ascribed to each term
in SECTION 2.1(a).
-16-
"LETTER OF CREDIT FEE" shall mean with respect to any Letter of
Credit issued pursuant hereto a fee equal to 1% per annum of the face
amount of each such Letter of Credit issued; PROVIDED, that each
Letter of Credit Fee shall in no event be less than $600.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time and in
respect of Letters of Credit under this Agreement, the sum of (i) the
aggregate amounts then or thereafter available for drawings under such
outstanding Letters of Credit PLUS (without duplication) (ii) the
aggregate unpaid amount of all Reimbursement Obligations at the time
due and payable in respect of previous drawings made under such
Letters of Credit.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing
of, or agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction or any other type of preferential
arrangement.
"LIFE-OF-RESERVES COVERAGE RATIO" shall mean, as of any date of
determination, the ratio of (a) the Combined Reserve Value to (b) the
Combined Covered Debt, in each case as of such date.
"LOANS" shall mean the loans and Rollover of loans provided for
by the Revolving and Term Credit Agreement.
"MATERIAL ADVERSE CHANGE" shall mean an occurrence of whatever
nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), which after
taking into account actual insurance coverage and effective
indemnification with respect to such occurrence, (a) has a material
adverse effect on the financial condition, business, operations or
properties of the Company and its Subsidiaries taken as a whole and
(b) impairs in any material respect either (1) the ability of the
Company to perform any of its obligations under the Credit Documents
or (2) the ability of the Banks to enforce any of such obligations or
any of their remedies under the Credit Documents.
"MERGER" shall mean the merger of Adobe into the Company
described in the Registration Statement.
"MLP INVESTMENT" shall mean, at any time, the lesser of (a) the
book value of the Investment of the Company and the Restricted
Subsidiaries in the Special Subsidiary, as determined from the most
recent consolidated balance sheet of the Company or (b) the product of
(1) the average closing price of the publicly traded limited partner
interests of the Special Subsidiary for the 30 days immediately
preceding the date upon which such determination is made multiplied by
(2) the total limited partner interests in the
-17-
Special Subsidiary owned by the Company and the Restricted
Subsidiaries on the date such determination was made.
"MOST RECENT ENGINEERING REPORT" shall mean, as of any date of
determination, (a) until the first Independent Engineering Report is
delivered pursuant to SECTION 9.1 or SECTION 2.2(d), the Independent
Engineering Report of Ryder Scott Company Petroleum Engineers dated
February 10, 1992; (b) thereafter, the most recent Independent
Engineering Report delivered pursuant to either Section 9.1 or
SECTION 2.2(d) on or prior to such date of determination.
"NET OIL AND GAS INCOME" shall mean, for any calendar year (or
portion thereof) and for any Person, (a) an amount (or, with respect
to any portion of a calendar year, PRO RATA in accordance with the
number of days in such portion of such calendar year) of projected
gross revenues (based on the prices set forth in the Approved
Assumptions) from the sale of Hydrocarbons produced from the
Recognized Proved Reserves to be received, subject to no entitlement
of any other Person but including appropriate adjustments for
over- and under-produced statue, by such Person during such calendar year as
set forth in the Most Recent Engineering Report LESS (b) an amount
(or, with respect to any portion of a calendar year, PRO RATA in
accordance with the number of days in such portion of such calendar
year) of projected royalties and windfall profit, production, ad
valorem, severance and all other similar taxes and operating and
capital expenditures required to be incurred during each calendar year
in order to generate such gross revenues (but not including general
and administrative expenses or principal and interest payable with
respect to Debt), as set forth in the Most Recent Engineering Report.
"NOTICE OF ENTIRE AGREEMENT" shall mean that certain Notice of
Entire Agreement, DTPA Waiver and Release of Claims of even date
herewith between the Company and the Agent.
"OBLIGATIONS" shall mean, as at any date of determination
thereof, the sum of (a) the aggregate principal amount of Loans
outstanding under the Revolving and Term Credit Agreement PLUS (b) the
aggregate amount of the Reimbursement Obligations.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or
its Treasurer.
"OPTIONAL RESERVE REPORT" shall mean the Independent Engineering
Report permitted by Section 2.2(d).
"ORGANIZATIONAL DOCUMENT" shall mean, with respect to a
corporation, the certificate of incorporation, articles of
incorporation and bylaws of such corporation; with respect to a
-18-
partnership or a limited partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the
joint venture agreement establishing such joint venture; and with
respect to a trust, the instrument establishing such trust; in each
case including any and all modifications thereof as of the date of the
Credit Document referring to such Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean and include an individual or legal entity in
the form of a partnership, a joint venture, a corporation, a trust, an
unincorporated organization or a government or any department or
agency thereof. The term "Person" shall not, however, mean and include
an arrangement that is not a separate legal entity such as the legal
arrangement between two or more parties owning interests in the same
property or unit.
"PETROLEUM PROPERTIES" shall mean, at any time and with respect
to any Person, all Recognized Proved Reserves which are (a) owned by
such Person at such time free and clear of any Lien (other than Liens
permitted by SECTION 9.7) and (b) covered in the Most Recent
Engineering Report.
"PLAN" shall mean an employee benefit plan which is covered by
ERISA which is either (a) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate or (b)
a multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which (i) the Company, (ii) any ERISA Affiliate or (iii) any trade or
business which was previously under common control with the Company
within the meaning of Section 414 of the Code (but only with respect
to such period of common control with the Company), has an obligation
to make contributions (or with respect to (iii) above, had an
obligation to make contributions during any portion of time that the
limitations period under Section 4301(f) of ERISA with respect to such
obligation has not expired).
"POST-DEFAULT RATE" shall mean, in respect of any principal of
any Reimbursement Obligation or any other amount payable by the
Company under any Credit Document which is not paid when due (whether
at stated maturity, by acceleration, or otherwise), a rate per annum
on each day during the period commencing on the due date until such
amount is paid in full equal to the lesser of (a) the Alternate Base
Rate as in effect for that day PLUS the Applicable Margin in effect
for that day plus 2% or (b) the Highest Lawful Rate for that day.
"PRELIMINARY AVAILABLE AMOUNT" shall mean (a) $20,000,000 on and
after the date hereof and prior to February 28, 1994, (b) $5,000,000
on and after February 28, 1994 and prior to December 31, 1994, and (c)
notwithstanding the foregoing, $0 on and after the
-19-
Termination Date (as defined in the Revolving and Term Credit
Agreement).
"PRICE PROTECTION AGREEMENT" shall mean a product price
protection agreement which satisfies all of the following
requirements: (a) a member of the Combined Group is a party to such
agreement; (b) the Company has given evidence (satisfactory to the
Agent) of such agreement to the Agent; (c) the terms and parties to
such agreement, taking into account all similar agreements to which
members of the Combined Group are parties, are satisfactory to the
Required Banks; and (d) such agreement is in full force and effect and
has not been unwound. The agreements described on SCHEDULE III hereto
are Price Protection Agreements for purposes of this Agreement as of
the date hereof.
"PRIME RATE" shall mean, as of a particular date, the prime rate
most recently announced by TCB and thereafter entered in the minutes
of TCB's Loan and Discount Committee, automatically fluctuating upward
and downward with and at the time specified in each such announcement
without special notice to the Company or any other Person, which prime
rate may not necessarily represent the lowest or best rate actually
charged to a customer.
"PRINCIPAL OFFICE" shall mean the principal banking building of
the Agent, presently located at 712 Main Street, Houston, Harris
County, Texas 77002.
"PROJECTED G & A EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of general and administrative
expense and district overhead to be used in the calculation of CFADS
of such Person, as mutually agreed among the Agent, the Co-Agent and
the Company as soon as practical after the delivery of the Most Recent
Engineering Report.
"PROJECTED INCOME TAX EXPENSE" shall mean, for any Person, the
appropriate projected annual levels of income tax expense to be used
in the calculation of CFADS of such Person, as determined by the Agent
after consultation with the Company and based on such Person's current
tax position projected into the future and the Most Recent Engineering
Report; the Agent will give written notice of the Projected Income Tax
Expense of each such Person to the Company as soon as practical after
the delivery of the Most Recent Engineering Report.
"PROVED RESERVES" shall mean reserves of Hydrocarbons in place
which are estimated to be recoverable with reasonable certainty and
are consistent with the "Definitions for Oil and Gas Reserves" as
published by the Society of Petroleum Engineers.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December; PROVIDED that if any such date is not a
-20-
Business Day, the relevant Quarterly Date shall be the next succeeding
Business Day.
"RECOGNIZED PROVED RESERVES" shall mean Proved Reserves if (a)
the designation of such Proved Reserves was by an Independent
Petroleum Engineer; (b) a member of the Combined Group owns such
Proved Reserves; (c) the estimates with respect to such Proved
Reserves were made on the basis of the most recent Approved
Assumptions, and (d) either (1) such Proved Reserves are located
onshore or offshore the United States or Canada or (2) the Required
Banks have consented to the inclusion of such Proved Reserves in the
Recognized Proved Reserves.
"REGISTRATION STATEMENT" shall mean the Registration Statement on
Form S-4 filed by the Company with the Securities and Exchange
Commission and declared effective by the Commission on February 27,
1992, true and correct copies of which have been delivered to the
Banks.
"REGULATION D" shall mean Regulation D of the Board as the same
may be amended or supplemented from time to time and any successor or
other regulation relating to reserve requirements.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any
change on or after the date of this Agreement in any Legal Requirement
(including Regulation D) or the adoption or making on or after such
date of any official interpretation, directive or request applying to
a class of banks including such Bank under any Legal Requirement
(whether or not having the force of law) by any Governmental Authority
charged with the interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any date, the
obligations of the Company then outstanding in respect of Letters of
Credit under this Agreement to reimburse the Banks for the amount paid
by such Banks in respect of any drawing under such Letters of Credit
or otherwise owing under this Agreement.
"REQUIRED BANKS" shall mean Banks having equal to or greater than
66-2/3% of the Commitments.
"REQUIRED RATIOS" shall mean (a) an Annual Debt Service Coverage
Ratio of at least 1.15 to 1; (b) an Alternate Annual Debt Service
Coverage Ratio of at least 1.0 to 1, and (c) a Life-of-Reserves
Coverage Ratio of at least 1.75 to 1.
"REQUIRED RESERVE REPORT" shall mean each Independent Engineering
Report required to be provided pursuant to SECTION 9.1(a).
"RESERVE VALUE" shall mean, as of any date and with respect to a
Person, the net present value (discounted at the discount rate
-21-
set forth in the most recent Approved Assumptions) of projected Net
Oil and Gas Income (calculated on the basis of the Most Recent
Engineering Report) attributable to the Petroleum Properties of such
Person for the period commencing on such date and ending at the end of
the economic life of such Petroleum Properties.
"RESTRICTED INVESTMENT" shall mean any Investment other than:
(a) Investments in the Company or a Restricted Subsidiary or in
an entity which immediately after or concurrently with such Investment
will be a Restricted Subsidiary;
(b) Investments in the Special Subsidiary;
(c) readily marketable direct full faith and credit obligations
of the United States of America or any agency thereof or obligations
unconditionally guaranteed by the full faith and credit of the United
States of America or any agency thereof, due within three years of the
making of the Investment;
(d) readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such
State having a credit rating of at least "Aa" by Moody's Investors
Service, Inc ("MOODY'S") or "AA" by Standard & Poor's Corporation
("S&P"), in each case due within three years from the making of the
Investment;
(e) domestic and Eurodollar certificates of deposit maturing
within one year from the making of the Investment issued by, deposits
in, Eurodollar deposits through, and banker's acceptances of,
commercial banks incorporated under the laws of the United States or
any State thereof, Canada, Japan or any Western European country, and
having combined capital, surplus and undivided profits of at least
$100,000,000;
(f) readily marketable commercial paper of any commercial bank or
corporation doing business and incorporated under the laws of the
United States of America or any State thereof having a credit rating
of at least "A-l" from S&P or at least "P-1" by Moody's, in each case
due within 270 days after the making of the Investment;
(g) money market investment programs which primarily invest in
the types of Investments described in CLAUSES (C) through (F) above
and which are classified as a current asset in accordance with GAAP
and which are administered by broker-dealers acceptable to the Agent;
(h) repurchase agreements with major dealers or banks, pursuant
to which physical delivery of the respective securities is required,
except for obligations of the U.S. Treasury to be delivered through
the Federal Reserve book entry system;
-22-
(i) travel and other like advances to officers and employees of
the Company or a Restricted Subsidiary in the ordinary course of
business; or
(j) Investments not described in CLAUSES (A) through (I) of this
definition in an aggregate principal amount not to exceed $10,000,000.
"RESTRICTED SUBSIDIARY" shall mean each Subsidiary of the Company
designated as a Restricted Subsidiary on SCHEDULE I, together with any
Subsidiary hereafter created or acquired and, at the time of creation
or acquisition, not designated by the Board of Directors of the
Company as an Unrestricted Subsidiary. Any Subsidiary of the Company
designated as an Unrestricted Subsidiary for purposes of this
Agreement may thereafter be designated a Restricted Subsidiary upon 30
days' prior written notice to the Banks if, at the time of such
designation and after giving effect thereto and to the concurrent
retirement of any Debt, (a) no Default shall have occurred and be
continuing; (b) such Subsidiary is organized under the laws of the
United States or any state thereof; (c) 80% or more of each class of
voting stock outstanding of such Subsidiary is owned by the Company or
a wholly owned Restricted Subsidiary, and (d) such Subsidiary could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(4).
"REVOLVING AND TERM CREDIT AGREEMENT" shall mean that certain
Revolving and Term Credit Agreement dated as of May 20, 1992, among
the Company, the Agent, the Co-Agent, and the Banks.
"REVOLVING COMMITMENTS" shall have the meaning ascribed to such
term in the Revolving and Term Credit Agreement.
"REVOLVING LOAN" shall mean a Loan made pursuant to SECTION
2.1(b) of the Revolving and Term Credit Agreement.
"REVOLVING NOTES" shall mean the Revolving Notes of the Company
under (and as defined in) the Revolving and Term Credit Agreement.
"ROLLOVER" shall mean any reborrowing from a lender of a loan
which is prepaid, or by its terms is due, to such lender on the date
of such reborrowing if the instrument or agreement governing such Debt
specifically contemplates the periodic prepayment or repayment and
simultaneous reborrowing of such loan, PROVIDED that such reborrowing
results in no net increase in the aggregate outstanding principal
balance of such loan; without limiting the generality of the
foregoing, "Rollover" shall include specifically the repayment of a
Loan at the end of the Interest Period applicable thereto and the
simultaneous reborrowing by the Company of a new Loan in the same
principal amount.
-23-
"SALE AND LEASEBACK TRANSACTION" shall mean any arrangement in
which the Company or a Restricted Subsidiary shall sell its buildings,
equipment or surface real properties, which was acquired or occupied
by the Company or a Restricted Subsidiary for more than 180 days, and
within 180 days from the date of such sale, enter into a lease as
lessee of such buildings, equipment or surface real properties having
a term (including terms of renewal or extension at the option of the
lessor or the lessee, whether or not such option has been exercised)
expiring three or more years after the commencement of the initial
term.
"SECURED DEBT" shall mean all Funded Debt that is secured by a
Lien permitted by SECTION 9.7(a)(13) on any property or assets of the
Company or any Restricted Subsidiary.
"SERIAL NOTE AGREEMENT" shall mean that certain Note Agreement
dated as of March 31, 1990, evidencing the issuance of Series A, B, C,
D, E, F and G Notes by the Company in the aggregate amount of
$365,000,000, as amended from time to time.
"SFEP" shall mean, collectively, Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P., each a Delaware limited
partnership.
"SFP GROUP" shall mean Santa Fe Pacific Corporation and its
affiliated group of corporations which together constitute an
affiliated group of corporations within the meaning of Section 1504(a)
of the Code.
"SPECIAL DEBT" shall mean the sum of (a) Attributable Debt;
(b) Secured Debt, and (c) Funded Debt of the Restricted Subsidiaries.
"SPECIAL SUBSIDIARY" shall mean SFEP until (a) the Company
designates SFEP a Restricted Subsidiary pursuant to the terms of the
Serial Note Agreement or (b) the Company designates or continues to
designate SFEP as an Unrestricted Subsidiary subsequent to the
acquisition by the Company and the Restricted Subsidiaries of all of
the outstanding limited partnership interests in SFEP.
"SPECIAL SUBSIDIARY PERCENTAGE" shall mean, as of any date, the
percentage ownership interest of the Company and the Restricted
Subsidiaries in the Special Subsidiary on such date.
"SPECIAL SUBSIDIARY QUALIFYING CONDITIONS" shall mean all of the
following conditions: (a) the Company or a Restricted Subsidiary
owns more than 50% of the outstanding indicia of equity rights issued
by Santa Fe Energy Partners, L.P. and serves as the sole managing
general partner of Santa Fe Energy Partners, L.P.; (b) Santa Fe
Energy Partners, L.P. owns more than 50% of the outstanding indicia of
equity rights issued by Santa Fe Energy
-24-
Operating Partners, L.P.; (c) the Company or a Restricted Subsidiary
serves as the sole managing general partner of Santa Fe Energy
Operating Partners, L.P., and (d) both Santa Fe Energy Partners, L.P.
and Santa Fe Energy Operating Partners, L.P. are permitted (by
applicable law and applicable contract) to make distributions to their
partners.
"SPIN-OFF" shall mean (a) the distribution, by dividend to the
stockholders of Santa Fe Pacific Corporation of the shares of capital
stock of the Company owned by Santa Fe Pacific Corporation, which
distribution was commenced on December 4, 1990, and (b) the
distribution by SFP Properties, Inc. to Santa Fe Pacific Corporation
of the capital stock of the Company that was made on December 27,
1989.
"SPRINGING LIEN" shall mean the Liens on real property of SFEP
that come into existence at any time SFEP is a Restricted Subsidiary
pursuant to section 5.08(b) or 5.11 of the Credit Agreement (the
"SPRINGING LIEN AGREEMENT") dated as of June 30, 1987 among Santa Fe
Energy Operating Partners, L.P., the lenders listed on the signature
pages thereof and Morgan Guaranty Trust Company of New York, as the
Agent, as the same may be amended, PROVIDED that (a) the Debt under
the Springing Lien Agreement is not increased, extended or renewed and
(b) the Springing Lien Agreement is not amended in any way which would
increase the likelihood or potential circumstances under which such
Liens may arise; if either clause of the foregoing proviso is
violated, then such Liens shall not be "Springing Liens" for purposes
of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person (the
"PARENT"), any corporation or entity, a majority of the shares of
voting stock (or in the case of an entity which is not a corporation,
of the equity interests that provide the power to manage or direct the
management of such entity) of which is at the time any determination
is being made, owned, directly or indirectly, by the parent.
"TAX ALLOCATION AGREEMENTS" shall mean those nine certain
agreements among the SFP Group, dated as of January 1, 1990 unless
otherwise specified in this definition and styled as follows:
(a) Agreement for the Allocation of the Combined Utah Franchise Tax
Liability; (b) Agreement for the Allocation of the Combined Oregon
Excise Tax Liability; (c) Agreement for the Allocation of the
Consolidated New Mexico Income Tax Liability; (d) Agreement for the
Allocation of the Combined Kansas Income Tax Liability; (e) Agreement
for the Allocation of the Combined Illinois Income Tax Liability; (f)
Agreement for the Allocation of the Combined California Franchise Tax
Liability; (g) Agreement for the Allocation of the Combined Arizona
Income Tax Liability; (h) Agreement Concerning Taxes, and (i)
Agreement for the Allocation of the Consolidated Federal Income Tax
Liability Among the Members of
-25-
the Santa Fe Southern Pacific Corporation Affiliated Group, dated as
of January 1, 1987.
"TAX INDEMNIFICATION AGREEMENT" shall mean any agreement pursuant
to which the Company agrees to indemnify Santa Fe Pacific Corporation
or any member of the SFP Group from and against any and all federal,
state or local taxes, interest, penalties or additions to tax imposed
upon or incurred by the SFP Group or any member thereof as a result of
the Spin-Off to the extent specified in any such agreement.
"TERMINATION DATE" shall mean the earliest of (a) the date
determined by the Agent pursuant to SECTION 10.1, (b) the date the
Commitments are terminated by the Company pursuant to SECTION 2.3, or
(c) May 18, 1994.
"TEXAS CREDIT CODE" shall mean Title 79, Revised Civil Statutes
of Texas, 1925, as amended.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all
benefits under such Plan exceeds (b) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan (in accordance with GAAP), but
only to the extent that such excess represents a potential liability
of the Company or any ERISA Affiliate to the PBGC or a Plan under
Title IV of ERISA.
"UNRESTRICTED SUBSIDIARY" shall mean each Subsidiary of the
Company designated as an Unrestricted Subsidiary on SCHEDULE I,
together with any Subsidiary of the Company which is hereafter
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary. Unless designated as a Restricted Subsidiary after the
date hereof, SFEP shall be treated hereunder as an Unrestricted
Subsidiary except as SFEP is otherwise treated hereunder as a Special
Subsidiary. Any Subsidiary may be designated an Unrestricted
Subsidiary upon 30 days' prior written notice to the Banks if, at the
time of such designation and after giving effect thereto and to the
concurrent retirement of any Debt, (a) no Default shall have occurred
and be continuing; (b) such Subsidiary does not own, directly or
indirectly, any Funded Debt or capital stock of the Company or a
Restricted Subsidiary, and (c) the Company could incur at least $l.00
of additional Funded Debt without violation of SECTION 9.7(b)(3).
"UNUSED COMMITMENT" shall mean, on any date, the difference of
(a) the Available Amount minus (b) the sum of (1) the aggregate
outstanding principal balance of the Revolving Notes plus (2) the
Letter of Credit Liabilities, all determined on such date.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except where
specifically otherwise provided:
-26-
(a) The symbol "$" and the word "dollars" shall mean lawful
money of the United States of America.
(b) Any accounting term not otherwise defined shall have the
meaning ascribed to it under GAAP.
(c) Unless otherwise expressly provided, any accounting concept
and all financial covenants shall be determined on a consolidated
basis, and financial measurements shall be computed without
duplication.
(d) Wherever the term "including" or any of its correlatives
appears in the Credit Documents, it shall be read as if it were
written "including (by way of example and without limiting the
generality of the subject or concept referred to)".
(e) Wherever the word "herein" or "hereof" is used in any Credit
Document, it is a reference to that entire Credit Document and not
just to the subdivision of it in which the word is used.
(f) References in any Credit Document to Section numbers are
references to the Sections of such Credit Document.
(g) References in any Credit Document to Exhibits, Schedules,
Annexes and Appendices are to the Exhibits, Schedules, Annexes and
Appendices to such Credit Document, and they shall be deemed
incorporated into such Credit Document by reference.
(h) Any term defined in the Credit Documents which refers to a
particular agreement, instrument or document shall also mean, refer to
and include all modifications, amendments, supplements, restatements,
renewals, extensions and substitutions of the same; PROVIDED that
nothing in this subsection shall be construed to authorize any such
modification, amendment, supplement, restatement, renewal, extension
or substitution except as may be permitted by other provisions of the
Credit Documents.
(i) All times of day used in the Credit Documents mean local
time in Houston, Texas.
(j) Defined terms may be used in the singular or plural, as the
context requires.
Section 2. COMMITMENTS.
2.1 LETTERS OF CREDIT. (a) COMMITMENTS. Subject to the terms
and conditions of this Agreement, the Agent agrees, upon receipt by
Agent of an Application therefor, to issue, and each Bank severally
agrees to purchase from the Agent a participation in (according to
such Bank's Commitment Percentage), letters of credit containing such
provisions not inconsistent with the terms of this Agreement as the
Company may reasonably request and such provisions
-27-
not inconsistent with the terms of this Agreement as the Banks may
reasonably require (together with the Existing Letters of Credit, the
"LETTERS OF CREDIT") for the account of the Company and on behalf of
the Company, or for the joint and several account of and on behalf of
the Company and one or more of its Subsidiaries, as follows. From time
to time on or after the conditions herein set forth to issue such
Letters of Credit have been satisfied, and prior to the Termination
Date, the Agent shall issue and/or may have outstanding Letters of
Credit under this SECTION 2.1 in an aggregate principal amount at any
one time outstanding (including all Letter of Credit Liabilities at
such time) up to but not exceeding the lesser of (1) $15,000,000 (as
adjusted downward from time to time in accordance herewith) or (2) the
Available Amount less the aggregate unpaid principal balance of the
Revolving Notes; PROVIDED, that the aggregate Letter of Credit
Liabilities at any one time outstanding together with the aggregate
principal amount of Revolving Loans at any time outstanding shall
never exceed the Available Amount and PROVIDED, that anything to the
contrary in this Agreement notwithstanding, the Agent shall have no
obligation to issue any Letter of Credit on or after the Termination
Date. Upon the date of the issuance of a Letter of Credit on or after
the date hereof, the Agent 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 Agent, a participation, to the extent of such Bank's
Commitment Percentage, in such Letter of Credit and the related Letter
of Credit Liabilities. No Letter of Credit issued pursuant to this
Agreement shall have an expiry date later than one year from date of
issuance. Each Bank has heretofore purchased participations in each of
the Existing Letters of Credit and the related Letter of Credit
Liabilities, to the extent of such Bank's Commitment Percentage. Such
participations are hereby ratified and confirmed and made subject
hereto. All provisions of this Agreement applicable to participations
in Letters of Credit hereunder shall be deemed to apply to
participations in the Existing Letters of Credit.
(b) ADDITIONAL PROVISIONS. The following additional provisions
shall apply to each Letter of Credit:
(i) The Company shall give the Agent and each other Bank at
least five Business Days' irrevocable prior notice (effective upon
receipt) specifying the date such Letter of Credit is to be issued and
describing the proposed terms of such Letter of Credit and the nature
of the transaction proposed to be supported thereby. The Company shall
furnish such additional information regarding such transaction as the
Agent may reasonably request. Upon receipt of such notice, the Agent
shall promptly notify each Bank of such Bank's Commitment Percentage
of the amount of the proposed Letter of Credit and not later than two
Business Days prior to the requested issuance date for such Letter of
Credit shall furnish to each Bank and the Company a proposed form of
an Application for
-28-
such Letter of Credit. The issuance by the Agent of each Letter of
Credit shall, in addition to the conditions precedent set forth in
SECTION 7, be subject to the conditions precedent that such Letter of
Credit shall be in such form and contain such terms as shall be
reasonably satisfactory to the Agent and that the Company shall have
executed and delivered to the Agent an Application and such other
instruments and agreements relating to such Letter of Credit not
inconsistent with terms of this Agreement as the Agent shall have
reasonably requested and are not inconsistent with the terms of this
Agreement.
(ii) No Letter of Credit may be issued if after giving effect
thereto the sum of (a) the aggregate outstanding principal amount of
the Revolving Loans plus (b) the aggregate Letter of Credit
Liabilities would exceed the Available Amount. On each day during the
period commencing with the issuance of any Letter of Credit and until
such Letter of Credit shall have expired or been terminated, the
Revolving 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 amount then or thereafter available for drawings
under such Letter of Credit.
(iii) In consideration of the issuance of each Letter of Credit
the Company agrees to pay to the Agent, for the ratable benefit of the
Banks, the Letter of Credit Fee. The Letter of Credit Fee shall be
payable concurrently with the issuance of each such Letter of Credit
and shall be separate from and in addition to interest on any
Reimbursement Obligation. The Agent will pay to each Bank, promptly
after receiving any payment in respect of Letter of Credit Fees, an
amount equal to such Bank's Commitment Percentage of such Letter of
Credit Fees.
(iv) Upon receipt from the beneficiary of any Letter of Credit
of any demand for payment thereunder, the Agent shall promptly notify
the Company and each Bank as to the amount to be paid as a result of
such demand and the payment date. If at any time the Agent shall have
made a payment to a beneficiary of a Letter of Credit in respect of a
drawing or in respect of an acceptance created in connection with a
drawing under such Letter of Credit, each Bank will pay to the Agent
immediately upon demand (or, if such demand is made after 1:00 p.m.,
on the next succeeding Business Day) by the Agent at any time during
the period commencing after such payment until reimbursement thereof
in full by the Company, an amount equal to such Bank's Commitment
Percentage of such payment, together with interest on such amount for
each day from the later of (x) the date such payment is due as
provided in the preceding sentence or (y) the date such payment is
made under such Letter of Credit to the date of payment by such Bank
of such amount at a rate of interest per annum equal to the Fed Funds
Rate for such period. No interest shall be due from any Bank that
makes full payment to the Agent on the date such payment is due.
Nothing herein shall be deemed to require any Bank to pay to the Agent
any
-29-
amount as reimbursement for any payment made by the Agent to acquire
(discount) for its own account prior to maturity thereof any
acceptance created under a Letter of Credit.
(v) The Company shall be irrevocably and unconditionally
obligated forthwith to reimburse the Agent for the account of each
Bank for any amount paid by the Agent or such Bank upon any drawing
under any Letter of Credit, without presentment, demand, protest or
other formalities of any kind all of which are hereby expressly waived
by the Company. Each drawing under any Letter of Credit shall bear
interest at the Post-Default Rate until the Company shall have made
reimbursement for such drawing. If the Company shall fail to make
reimbursement for any such drawing prior to noon on the second
Business Day after such notice is given, the Agent may in its
discretion and without the consent of (but with concurrent notice to)
the Company effect such reimbursement of any Letter of Credit, subject
to the satisfaction of the conditions in SECTION 7 of the Revolving
and Term Credit Agreement and to the existence of Revolving
Commitments, by borrowing of Revolving Loans and the application of
the proceeds thereof to the related Reimbursement Obligations. The
Reimbursement Obligations shall survive the Termination Date and the
termination of this Agreement. The Agent will pay to each Bank such
Bank's Commitment Percentage of all amounts received from the Company
for application in payment, in whole or in part, of the Reimbursement
Obligation in respect of any Letter of Credit, but only to the extent
such Bank has made payment to the Agent in respect of such Letter of
Credit pursuant to CLAUSE (iv) above. Nothing herein shall be deemed to
require the Agent to pay to any Bank any part of the proceeds of
disposition (rediscount) by the Agent for its own account to any other
Person of any acceptance created under a Letter of Credit which is
acquired (discounted) by the Agent prior to the maturity thereof or to
require any Bank to reimburse the Agent for the consequences of the
Agent's own gross negligence or willful misconduct.
(vi) The obligations of the Company to pay Reimbursement
Obligations under this Agreement shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with
the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) any lack of legality, validity, regularity or
enforceability of this Agreement, any Letter of Credit, any
Application or any agreement or document related to any of the
foregoing;
(b) any amendment or waiver of (including any default), or
any consent to departure from, any Letter of Credit, this Agreement,
any Application or any agreement or document related to any of the
foregoing;
-30-
(c) the existence of any claim, set-off, defense or other
rights which the Company may have at any time against any beneficiary
or any transferee of any Letter of Credit (or any Persons or entities
for which such beneficiary or any such transferee may be acting), the
Agent, any Bank or any other Person, whether in connection with this
Agreement, any Letter of Credit, any Application or any agreement or
document related to any of the foregoing, the transactions
contemplated hereby or any unrelated transaction;
(d) any statement, certificate, draft or any other document
presented under any Letter of Credit proves to have been forged,
fraudulent, invalid or insufficient in any respect or any statement
therein proves to have been untrue or inaccurate in any respect
whatsoever;
(e) payment by the Agent under any Letter of Credit against
presentation of a draft or certificate which appears on its face to
comply but does not in fact comply with the terms of such Letter of
Credit;
(f) any defense based upon the failure of any beneficiary
or any transferee to receive all or any part of the proceeds of a draw
under any Letter of Credit transmitted by the Agent, or any
non-application or misapplication by any beneficiary or other
transferee of the proceeds of demand for payment under any Letter of
Credit; and
(g) any bankruptcy, insolvency, reorganization,
arrangement, assignment for the benefit of creditors, readjustment of
debt, dissolution, liquidation or other similar event with respect to
the Company.
PROVIDED, that no such payment shall impair any claim the Company may
have against the Agent or any Bank.
(c) ILLEGALITY. In the event that any restriction or limitation
is imposed upon or determined or held to be applicable to the Agent,
any Bank or the Company by, under or pursuant to any Legal
Requirement, which in the reasonable judgment of the Agent or any Bank
would prevent the Agent or such Bank from legally incurring liability
under or in respect of a Letter of Credit issued or proposed to be
issued hereunder, then the Agent shall give prompt written notice
thereof to the Company, whereupon the Agent and the Bank or Banks
affected shall have no obligation to issue or purchase participations
in any such Letter of Credit.
2.2 AVAILABLE AMOUNT
(a) Concurrently with the delivery of each Independent
Engineering Report and related Coverage Report required or permitted
hereby, there shall be determined, based on the Most
-31-
Recent Engineering Report and Approved Assumptions, the total maximum
amount of Revolving Loans and Letters of Credit to be available to the
Company hereunder without violation of the Required Ratios. Upon each
such delivery, the Company may by notice to the Co-Agents designate as
the Available Amount any amount (not to exceed $50,000,000) equal to
or less than such total maximum amount. The Available Amount so
designated shall remain in effect as the Available Amount until the
next determination under this SECTION 2.2. If no different amount is
designated in accordance with this SECTION 2.2, the Available Amount
shall be the lesser of (a) the Preliminary Available Amount then in
effect or (b) such total maximum amount.
(b) Notwithstanding anything herein to the contrary, (1) no
Bank shall be required to have aggregate Letters of Credit Liabilities
at any one time outstanding in excess of such Bank's Commitment
Percentage of the lesser of (x) $15,000,000 and (y) the difference
between (i) the Available Amount and (ii) the aggregate Revolving
Loans, and (2) if a Bank fails to participate in a Letter of Credit as
and when required hereunder and the Company subsequently makes a
repayment on the Reimbursement Obligations with respect to such Letter
of Credit, such repayment shall be split among the non-defaulting
Banks ratably in accordance with their respective Commitment
Percentages until each Bank has its Commitment Percentage of all of
the outstanding Reimbursement Obligations, and the balance of such
repayment shall be divided among all of the Banks in accordance with
their respective Commitment Percentages.
(c) Notwithstanding anything in this Agreement to the
contrary, the Agent shall not be required to issue any Letter of
Credit during the existence of an Engineering Shortfall.
(d) The Company may from time to time at its option,
exercisable by giving written notice to the Co-Agents not more often
than once in any Calculation Period, provide to the Co-Agents an
Independent Engineering Report. Upon the receipt of such notice, the
Co-Agents shall consult with the Company to determine new Approved
Assumptions, which shall be furnished to the Banks by a notice as
provided in the definition of "Approved Assumptions" and shall be
subject to the proviso therein. The Optional Reserve Report shall be
based on the new Approved Assumptions and shall be accompanied by a
Coverage Report as of the date such Report is furnished. The Annual
Debt Service Coverage Ratio, the Alternate Annual Debt Service
Coverage Ratio and the Life-of-Reserves Coverage Ratio shall each be
redetermined in accordance with this Agreement on the basis of each
such Optional Reserve Report and Coverage Report, and the Available
Amount recalculated as provided in this SECTION 2.2.
-32-
(e) Notwithstanding any other provision of this Agreement
to the contrary, should both (x) the Company at any time designate as
the Available Amount an amount less than the maximum amount then
offered to it as the Available Amount by the Co-Agents and (y) as a
result the Company shall obtain the release of any Mortgaged
Properties under the Revolving and Term Credit Agreement, the
Available Amount may never thereafter exceed the amount so designated
by the Company.
2.3 REDUCTIONS AND CHANGES OF COMMITMENTS.
(a) MANDATORY. On the Termination Date the aggregate Commitments
shall be terminated in their entirety.
(b) THE COMPANY'S OPTION. The Company shall have the right to
terminate or reduce the unused portion of the Commitments at any time
or from time to time; PROVIDED that: (i) the Company shall give notice
of each such termination or reduction to the Agent as provided in
SECTION 5.5; (ii) each such partial reduction shall be in minimum
increments equal to $5,000,000; and (iii) the Company may not cause
the Available Amount to be less than the aggregate principal amount of
the Revolving Loans then outstanding plus the Letter of Credit
Liabilities then outstanding. Any voluntary reduction in the Available
Amount prior to any scheduled reduction in the Available Amount shall
not affect the Available Amount after such scheduled reduction date
unless such voluntarily reduced Available Amount is less than the
amount scheduled to be the Available Amount after such scheduled
reduction date, in which case the Available Amount after such
scheduled reduction date shall be no greater than such voluntarily
reduced Available Amount.
2.4 SEVERAL OBLIGATIONS. The failure of any Bank to participate
in any Letter of Credit shall not relieve any other Bank of its
obligation to participate in any Letter of Credit (the face amount of
which shall be reduced dollar for dollar by the amount of the share of
the Bank that failed to participate in such Letter of Credit) on such
date, but neither the Agent nor any Bank shall be responsible for the
failure of any other Bank to participate in any Letter of Credit.
2.5 FEES. In consideration of the Commitments, the Company shall
pay to the Agent for the account of each Bank in accordance with its
Commitment Percentage commitment fees (the "COMMITMENT FEES") for the
period from the date of the execution of this Agreement to and
including the earlier of the date the Commitments are terminated or
the Termination Date at a rate per annum equal to 1/2% of the Unused
Commitment. The Company shall be entitled to credit on the Commitment
Fees any amount paid pursuant to SECTION 2.3 of the Revolving and Term
Credit Agreement. The Commitment Fees shall be computed for each day
and shall be based on the Unused Commitment for such day. Accrued
Commitment Fees shall be payable in arrears on the date of the initial
Letter of
-33-
Credit, within three days after demand therefor on or about the
Quarterly Dates, and within three days after demand therefor on or
about the Termination Date. All past due Commitment Fees shall bear
interest at the Post-Default Rate. Upon receipt, the Agent shall
disburse the Commitment Fees to the Banks in accordance with their
Commitment Percentages.
Section 3. PREPAYMENTS.
3.1 (a) COMMITMENT AMOUNT. The Company shall from time to time
on demand by the Agent prepay the Revolving Loans or reduce Letter of
Credit Liabilities in such amounts as shall be necessary so that at
all times the aggregate outstanding principal amount of all Revolving
Loans and all Letter of Credit Liabilities hereunder shall not be in
excess of the aggregate of the Revolving Commitments and the
Commitments. Any such payment shall be allocated between Revolving
Loans, Letter of Credit Liabilities (and if to Letter of Credit
Liabilities, first, to Reimbursement Obligations) and other
obligations as the Company may elect.
(b) AVAILABLE AMOUNT. The Company shall from time to time on
demand by the Agent and on the Termination Date prepay the Revolving
Loans or reduce Letter of Credit Liabilities in such amounts as shall
be necessary so that at all times the aggregate outstanding principal
amount of all Revolving Loans and all Letter of Credit Liabilities of
the Company hereunder shall be less than or equal to the Available
Amount. Any such payment shall be allocated between Revolving Loans,
Letter of Credit Liabilities (and if to Letter of Credit Liabilities,
first, to Reimbursement Obligations) and other obligations as the
Company may elect.
Section 4. PAYMENTS OF PRINCIPAL AND INTEREST.
4.1 REPAYMENT OF REIMBURSEMENT OBLIGATIONS. The Company will pay
to the Agent for the account of each Bank the amount of each
Reimbursement Obligation forthwith upon its incurrence. The amount of
any Reimbursement Obligation may, if the applicable conditions
precedent specified in SECTION 7 of the Revolving and Term Credit
Agreement have been satisfied, be paid with the proceeds of Revolving
Loans.
4.2 INTEREST. Subject to SECTION 12.8, the Company will pay to
the Agent for the account of each Bank interest on the unpaid
principal amount of each Reimbursement Obligation owed to such Bank
for the period commencing on the date such Reimbursement Obligation
arises to but excluding the date such Reimbursement Obligation shall
be paid in full, at the Post-Default Rate.
Accrued interest shall be due and payable from time to time on
demand of the Agent or the Required Banks (through the Agent).
-34-
Section 5. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.
5.1 PAYMENTS. (a) Except to the extent otherwise provided
herein, all payments of principal of or interest on the Reimbursement
Obligations and other amounts to be made by the Company hereunder
shall be made in dollars, in immediately available funds, to the Agent
at its Principal Office (or in the case of a Successor Agent, at the
principal office of such successor Agent in the United States), not
later than 11:00 a.m. on the date on which such payment Shall become
due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment
hereunder, specify to the Agent the Reimbursement Obligations or other
amounts payable by the Company hereunder to which such payment is to
be applied (and in the event that it fails so to specify, such payment
shall be applied as the Agent may designate to the amounts then due
and payable); PROVIDED that if no Reimbursement Obligations are then
due and payable or an Event of Default has occurred and is continuing,
the Agent may apply such payment to the Obligations in such order as
it may elect in its sole discretion, but subject to the other terms
and conditions of this Agreement, including SECTION 5.2). Each payment
received by the Agent hereunder for the account of a Bank shall be
paid promptly to such Bank, in immediately available funds for the
account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder falls on a day which
is not a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension.
5.2 PRO RATA TREATMENT. Except to the extent otherwise provided
herein, (a) each issuance of a Letter of Credit and each termination
or reduction of the Commitments of the Banks under SECTION 2.3 shall
be made PRO RATA according to the Banks' respective Commitments;
(b) each payment by the Company of principal of or interest on any
Reimbursement Obligation shall be made to the Agent for the account of
the Banks PRO RATA in accordance with the respective unpaid principal
amounts of such Reimbursement Obligation held by the Banks; and (c)
the Banks (other than the Agent) shall purchase from the Agent
participations in the Letters of Credit in accordance with their
respective Commitment Percentages.
5.3 COMPUTATIONS. Interest based on the Alternate Base Rate (to
the extent determined by reference to the Prime Rate), and fees
hereunder, will be computed on the basis of 365 (or 366) days and
actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. All other interest
-35-
shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring
in the period for which payable, unless the effect of so computing
shall be to cause the rate of interest to exceed the Highest Lawful
Rate (in which event interest shall be calculated on the basis of the
actual number of days elapsed in a year composed of 365 or 366 days,
as the case may be).
5.4 MINIMUM AND MAXIMUM AMOUNTS. Each Letter of Credit shall be
in a face amount at least equal to $100,000.
5.5 CERTAIN ACTIONS, NOTICES, ETC. Notices to the Agent of any
termination or reduction of Commitments, prepayments under SECTION 3.1
and requests for the issuance of Letters of Credit shall be
irrevocable and shall be effective only if received by the Agent not
later than 11:00 a.m. on the number of Business Days prior to the date
of the relevant issuance, termination, reduction, and/or prepayment
specified below:
Number of Business
Days Prior
Notice
Termination or reduction
of Commitments 10
Issuance of Letters of Credit 5
Prepayments 1
Each such notice of termination or reduction shall specify the amount
of the Commitments to be terminated or reduced. Each such notice of
prepayment shall specify the amount to be prepaid (subject to SECTION
3.1) and the date of prepayment (which shall be a Business Day). The
Agent shall promptly notify the Banks of the contents of each such
notice or Application. Notice of any prepayment having been given,
the principal amount specified in such notice, together with interest
thereon to the date of prepayment, shall be due and payable on such
prepayment date.
5.6 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Bank prior to noon on the date on which such
Bank is to make payment to the Agent of any amount to be paid by such
Bank to reimburse the Agent for a drawing under any Letter of Credit
or by the Company prior to the date on which the Company is to make a
payment to the Agent for the account of one or more of the Banks, as
the case may be (such Bank or the Company being herein called the
"PAYOR" and such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption
-36-
(but shall not be required to), make the amount thereof available to
the intended recipient on the date that such Required Payment is to be
made. If the Payor is the Company and the Company has not in fact made
the Required Payment to the Agent on or before such date, the
recipient of such payment (or, if the recipient is the beneficiary of
a Letter of Credit, the Company, and, if the Company fails to pay the
amount thereof to the Agent on demand, then the Banks, to the extent
not already paid, ratably in proportion to their respective Commitment
Percentages) shall, on demand, pay to the Agent the amount made
available by the Agent, together with interest thereon from the date
such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to the Fed Funds
Rate for the first three days and thereafter at the Fed Funds Rate
plus 2%. If the Payor is a Bank and such Bank has not in fact made the
Required Payment to the Agent on or before such date, then such Bank
shall pay to the Agent the amount made available by the Agent on
behalf of such Bank, together with interest thereon from the date such
amount was so made available by the Agent until the Agent recovers
such amount at a rate per annum equal to the Fed Funds Rate for the
first three days and thereafter at the Fed Funds Rate plus 2%.
5.7 SHARING OF PAYMENTS, ETC. If a Bank or any participant of a
Bank shall obtain payment of any obligation to it under this
Agreement, through the exercise of any right of set-off, banker's
lien, counterclaim or similar right, or otherwise, then such Bank or
participant shall promptly purchase from the other Banks
participations in the Reimbursement Obligations or other obligations
held by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that
all the Banks and participants shall share the benefit of such payment
(net of any expenses which may be incurred by such Bank or its
participant in obtaining or preserving such benefit) PRO RATA in
accordance with the unpaid principal and interest on such obligations
then due to each of them. To such end all the Banks and their
participants shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Company agrees, to the
fullest extent it may effectively do so under applicable law, that any
Bank so purchasing a participation in the Reimbursement Obligations or
other obligations held by other Banks may exercise all rights of
set-off, bankers' lien, counterclaims or similar rights with respect
to such participation as fully as if such Bank were a direct holder of
Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company.
-37-
5.8 OTHER EXPENSES. The Company agrees to pay the Agent, for the
account of the Agent, the usual and customary charges of TCB for each
extension, amendment and wire advice of and drawing under the Letters
of Credit.
Section 6. YIELD PROTECTION AND ILLEGALITY.
6.1 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a
result of any Regulatory Change there shall be imposed, modified or
deemed applicable any tax, reserve, special deposit or similar
requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to the Agent or any Bank of issuing or
maintaining or participating in any Letter Of Credit or reduce any
amount receivable by the Agent or any Bank hereunder in respect of any
Letter of Credit or participation therein, then such Bank shall notify
the Company through the Agent, and upon demand therefor by such Bank
through the Agent, the Company (subject to SECTION 12.8) shall pay to
the Agent or such Bank, from time to time as specified by the Agent or
such Bank, such additional amounts as shall be sufficient to
compensate the Agent or such Bank for such increased costs or
reductions in amount. Before making such demand pursuant to this
SECTION 6.1, the Agent or such Bank will designate a different
available Applicable Lending Office for the Letter of Credit or
participation or take such other action as the Company may request, if
such designation or action will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of the
Agent or such Bank, be disadvantageous to the Agent or such Bank. A
statement as to such increased costs or reductions in amount incurred
by the Agent or such Bank, submitted by the Agent or such Bank to the
Company, shall cover amounts accruing under this section with respect
to a period beginning not earlier than 120 days from the date thereof
and be conclusive as to the amount thereof, absent manifest error.
In the event any Bank shall seek compensation pursuant to this
SECTION 6.1, the Company may give notice to such Bank (with copies to
the Agent) that it wishes to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitment of
such Bank and to purchase and assume its outstanding Letter of Credit
Liabilities. Each Bank requesting compensation pursuant to this
SECTION 6.1 agrees to sell its Commitment and interest in this
Agreement and in the Obligations and in the Revolving and Term Credit
Agreement pursuant to SECTION 12.6 (without recourse, representation
or warranty except as provided in SECTION 12.6) to any such Eligible
Assignee for an amount equal to the sum of the outstanding unpaid
principal of and accrued interest on such Obligations plus all other
fees and amounts (including any compensation claimed by such Bank
under this SECTION 6.1) owing to such Bank hereunder and under the
Revolving and Term Credit Agreement calculated, in each case, to the
date such Commitment, Obligations and interests are purchased,
whereupon such Bank shall
-38-
have no further Commitment or other obligation to the Company
hereunder or under the Revolving and Term Credit Agreement.
6.2 CAPITAL ADEQUACY. If any Bank shall have determined that the
adoption after the date hereof or effectiveness after the date hereof
(regardless of whether previously announced) of any applicable Legal
Requirement or treaty regarding capital adequacy, or any change after
the date hereof in any existing or future Legal Requirement or treaty
regarding capital adequacy, or any change in the interpretation or
administration thereof after the date hereof by any Governmental
Authority or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive after the date hereof
regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority or comparable agency has or would have
the effect of reducing the rate of return on the capital of such Bank
(or any holding company of which such Bank is a part) as a consequence
of its obligations hereunder and under or in respect of the Letters of
Credit to a level below that which such Bank or holding company could
have achieved but for such adoption, change or compliance by an amount
deemed by such Bank to be material, then from time to time, upon
demand by such Bank (with a copy to the Agent), the Company (subject
to SECTION 12.8) shall pay to such Bank such additional amount or
amounts as will compensate such Bank or holding company for such
reduction. The certificate of any Bank setting forth such amount or
amounts as shall be necessary to compensate it and the basis therefor
shall cover amounts accruing under this SECTION 6.2 with respect to a
period beginning not earlier than 120 days from the date thereof and
shall be conclusive and binding, absent manifest error. The Company
shall pay the amount shown as due on any such certificate upon
delivery of such certificate. In preparing such certificate, a Bank
may employ such assumptions and allocations of costs and expenses as
it shall in good faith deem reasonable and may use any reasonable
averaging and attribution method. In the event any Bank shall seek
compensation pursuant to this SECTION 6.2, the Company may give notice
to such Bank (with copies to the Agent) that it wishes to seek one or
more Eligible Assignees (which may be one or more of the Banks) to
assume the Commitment of such Bank and to purchase and assume its
outstanding Letter of Credit Liabilities. Each Bank requesting
compensation pursuant to this SECTION 6.2 agrees to sell its
Commitment and interest in this Agreement and in the Obligations and
in the Revolving and Term Credit Agreement pursuant to SECTION 12.6
(without recourse, representation or warranty except as provided in
SECTION 12.6) to any such Eligible Assignee for an amount equal to the
sum of the outstanding unpaid principal of and accrued interest on
such Obligations plus all other fees and amounts (including any
compensation claimed by such Bank under this SECTION 6.2) owing to
such Bank hereunder and under the Revolving and Term Credit Agreement
calculated, in each case, to the date such Commitment, Obligations,
and interests are purchased, whereupon such Bank shall
-39-
have no further Commitment or other obligation to the Company
hereunder or under the Revolving and Term Credit Agreement.
Section 7. CONDITIONS PRECEDENT.
7.1 CLOSING CONDITIONS. The effectiveness of this Agreement is
subject to the following conditions precedent, each of which shall
have been fulfilled or waived to the satisfaction of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received
copies of the Organizational Documents of the Company certified by the
Secretary of the Company, and resolutions of the Board of Directors of
the Company, certified by the Secretary of the Company, for all
corporate action taken by the Company authorizing the execution,
delivery and performance of the Credit Documents and all other
documents related to this Agreement, together with such certificates
as may be appropriate to demonstrate the qualification and good
standing of and payment of taxes by each member of the Combined Group
in each jurisdiction set forth on SCHEDULE VIII.
(b) INCUMBENCY. The Company shall have delivered to the Agent a
certificate in respect of the name and signature of each officer who
(1) is authorized to sign on its behalf the applicable Credit
Documents related to any Letter of Credit and (2) will, until replaced
by another officer or officers duly authorized for that purpose, act
as its representative for the purposes of signing documents and giving
notices and other communications in connection with any Letter of
Credit hereunder. The Agent and each Bank may conclusively rely on
such certificates until they receive notice in writing from the
Company to the contrary.
(c) FEES AND EXPENSES. The Company shall have paid to the Agent
all fees in the amounts previously agreed upon in writing among the
Company and the Agent.
(d) OPINION OF COUNSEL TO THE COMPANY. The Agent shall have
received the opinion of Andrews & Kurth, L.L.P. and David L. Hicks,
counsel to the Company, substantially in the forms of SCHEDULES VI and
VII hereto, respectively.
(e) COUNTERPARTS. The Agent shall have received counterparts of
each of the Credit Documents duly executed and delivered by or on
behalf of each of the parties thereto (or, in the case of any Bank as
to which the Agent shall not have received such a counterpart, the
Agent shall have received evidence satisfactory to it of the execution
and delivery by such Bank of a counterpart hereof).
(f) CONSENTS. The Agent shall have received evidence satisfactory
to it that all consents of each Governmental Authority and of each
other Person, if any, required in connection with (1)
-40-
the Letters of Credit and (2) the execution, delivery and performance
of the Credit Documents have been received and remain in full force
and effect.
(g) REVOLVING AND TERM CREDIT AGREEMENT. The Revolving and Term
Credit Agreement shall be executed and delivered by the parties
thereto and shall be in full force and effect.
(h) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to
the transactions contemplated hereby as the Agent may reasonably
request.
All provisions and payments required by this SECTION 7.1 are
subject to the provisions of SECTION 12.8.
7.2 ALL LETTERS OF CREDIT. In addition to the conditions precedent
described in SECTION 2, the obligation of the Agent to issue
and each Bank to participate in any Letter of Credit is subject to the
additional conditions precedent that, as of the date of such issuance
and after giving effect thereto:
(a) no Default shall have occurred and be continuing, and no
"Default" shall have occurred and be continuing under the Revolving
and Term Credit Agreement;
(b) there has been no Material Adverse Change since December 31,
1991;
(c) the representations and warranties made in each Credit
Document shall be true and correct in all material respects on and as
of the date of the issuance of such Letter of Credit, with the same
force and effect as if made on and as of such date;
(d) the Company shall have delivered to the Agent an Application
within the time specified in SECTION 5.5;
(e) the issuance of such Letter of Credit shall not be prohibited
by, or subject any Bank to any penalty under, any Legal Requirement
applicable to any Bank; and
(f) after giving effect to such Letter of Credit the Company
shall be in compliance with all Required Ratios and no Engineering
Shortfall shall exist.
Each request for issuance of a Letter of Credit by the Company
hereunder shall include a representation and warranty by the Company
to the effect set forth in SUBSECTIONS (a) through (d) and SUBSECTION
(f) (if applicable) of this SECTION 7.2 (both as of the date of such
notice and, unless the Company otherwise notifies the Agent prior to
the date of such issuance, as of the date of such issuance).
-41-
Section 8. REPRESENTATIONS AND WARRANTIES. To induce the
Agent and the Banks to enter into this Agreement and to issue and
participate in Letters of Credit, the Company represents and warrants
(such representations and warranties to survive any investigation and
the issuance of Letters of Credit) to the Banks and the Agent as
follows:
8.1 CORPORATE EXISTENCE. Each member of the Combined Group (a)
is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) has all requisite
power, and has all licenses, permits, authorizations, consents and
approvals necessary, to own its property and carry on its business as
now being conducted, and (c) is qualified to do business, and is in
good standing, in (1) all jurisdictions in which any of the Recognized
Proved Reserves which it owns are located and (2) any other
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary or advisable, unless (for purposes only
of this CLAUSE (2)) the failure to be so qualified or in good standing
would not individually or in the aggregate have a material adverse
effect on the business, financial condition or results of operations
of the Combined Group taken as a whole.
8.2 INFORMATION.
(a) (i) The most recent consolidated balance sheet of the Company
and its Subsidiaries and the related consolidated statements of
operations, changes in financial position and cash flows for the
period then ended, together with the respective notes thereto,
delivered to each of the Banks prior to the execution of this
Agreement (which financial statements are dated December 31, 1991) or
in accordance with the provisions of SECTION 9.1(a) or (b), as the
case may be (the latest of such financial statements and the notes
thereto being referred to herein as the "MOST RECENT FINANCIAL
STATEMENTS"), fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of such date
and their consolidated results of operations for the period then ended
in conformity with GAAP.
(ii) The Company and its Subsidiaries did not on the date of the
Most Recent Financial Statements, and do not on the date as of which
this representation is made in accordance with the terms of this
Agreement, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
commitments, except (A) as referred to or reflected or provided for in
the Most Recent Financial Statements; (B) as otherwise hereafter
disclosed to the Banks in writing in accordance with the terms of this
Agreement, or (C) in connection with the obligations of the Company
under this Agreement and the Revolving and Term Credit Agreement.
-42-
(b) Since December 31, 1991, there has been no Material Adverse
Change.
8.3 LITIGATION; COMPLIANCE. Except as disclosed in the
Registration Statement, or as hereafter disclosed to the Banks in
accordance with the provisions of SECTION 9.1(e), there are no legal
or arbitral proceedings or any proceedings by or before any
Governmental Authority now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its
Subsidiaries which, if adversely determined, would cause a Material
Adverse Change. The Company and its Subsidiaries comply in all
material respects with all applicable material (based on the Company
and its Subsidiaries taken as a whole) Legal Requirements other than
the Applicable Environmental Laws. Neither the Company nor any of its
Subsidiaries is in default in any material respect under or violation
of any material (based on the Company and its Subsidiaries taken as a
whole) judgment, order or decree of any Governmental Authority.
8.4 NO BREACH. None of the execution and delivery of the
Credit Documents, the consummation of the transactions therein
contemplated or compliance with the terms and provisions thereof will
conflict with or result in a breach of, or require any consent that
has not been obtained under, the Serial Note Agreement, the
Organizational Documents of the Company or any of its Subsidiaries or
any material Legal Requirement (including any securities law, rule or
regulation) applicable to the Company or any of its Subsidiaries or
(except for the Liens required or permitted by this Agreement) result
in the creation or imposition of any Lien upon any of the revenues or
property of the Company or any of its Subsidiaries. Such execution,
delivery, consummation and compliance do not and will not conflict
with or result in a breach of any material agreement or instrument to
which the Company is a party or by which the Company is bound or to
which it is subject, or constitute a default under any such agreement
or instrument.
8.5 CORPORATE ACTION. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations
under the Credit Documents. The execution, delivery and performance of
the Credit Documents by the Company have been duly authorized by all
necessary corporate action. The Credit Documents have been duly and
validly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general
equitable principles.
8.6 APPROVALS. All authorizations, approvals and consents of,
and all filings and registrations with, all Governmental Authorities
and each other Person necessary for the execution,
-43-
delivery or performance of any Credit Document or for the validity or
enforceability thereof, except for the filings and recordings of the
Liens created pursuant to the Security Documents under the Revolving
and Term Credit Agreement, have been obtained by the Company.
8.7 REGULATIONS G, U AND X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
G, U or X of the Board) and no Letter of Credit hereunder will be used
to acquire or carry, directly or indirectly, any such margin stock.
8.8 ERISA. (a) The Company and each ERISA Affiliate have
fulfilled their contribution obligations under each Plan subject to
Title IV of ERISA and have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each
Plan subject to Title IV of ERISA, and in all other regard with
respect to each Plan are in material compliance with the applicable
provisions of ERISA, the Code, and all other applicable laws,
regulations and rules, to the extent that noncompliance with such
provisions would result in a Material Adverse Change. (b) The Company
has no knowledge of any event with respect to each Plan which could
result in a Material Adverse Change.
8.9 TAXES. Each of the Company and its Subsidiaries has filed
all United States federal income tax returns and all other material
tax returns which are required to be filed by it and has paid all
taxes due pursuant to such returns or pursuant to any assessment
received by it, except to the extent the same may be contested in good
faith by appropriate proceedings diligently conducted for which
adequate reserves have been established in accordance with GAAP. The
charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges, as
made on a periodic basis, are adequate.
8.10 SUBSIDIARIES. SCHEDULE I is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company. All
shares or other indicia of equity interest of the Restricted
Subsidiaries and the Special Subsidiary directly or indirectly owned
by the Company are free and clear of Liens, and all such shares are
validly issued, fully paid and non-assessable.
8.11 INVESTMENT COMPANY ACT. No member of the Combined Group is
an investment company within the meaning of the Investment Company Act
of 1940, as amended, or, to the best knowledge of the Company,
directly or indirectly controlled by or acting on behalf of any Person
which is an investment company, within the meaning of said Act.
-44-
8.12 PUBLIC UTILITY HOLDING COMPANY ACT. No member of the
Combined Group is a "public utility company", or, to the knowledge of
the Company, an "affiliate" or a "subsidiary company" of a "public
utility company", or a "holding company", or an "affiliate" or a
"subsidiary company" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
8.13 ENVIRONMENTAL MATTERS. Except as disclosed in the
Registration Statement, the Company and its Subsidiaries, and the
plants and sites of each, have complied with all Applicable
Environmental Laws, except, in any such case, where such failure to so
comply would not result in a Material Adverse Change. Without limiting
the generality of the preceding sentence, neither the Company nor any
of its Subsidiaries has received notice of or has actual knowledge of
any actual or claimed or asserted failure so to comply with Applicable
Environmental Laws or of any other Environmental Claim which alone or
together with all other such failures or Environmental Claims is
material and would result in a Material Adverse Change. Except as
disclosed in the Registration Statement, neither the Company nor any
of its Subsidiaries nor their plants or other sites manage, generate
or dispose of, or during their respective period of use, ownership,
occupancy or operation by the Company or its Subsidiaries have
managed, generated, released or disposed of, any hazardous wastes,
hazardous substances, hazardous materials, toxic substances or toxic
pollutants, as those terms are used or defined in the Applicable
Environmental Laws, in material violation of or in a manner which
would result in liability under the Applicable Environmental Laws or
any other applicable Legal Requirement, or in a manner which would
result in an Environmental Claim except where such noncompliance or
liability or Environmental Claim would not result in a Material
Adverse Change. The representation and warranty contained in this
SECTION 8.13 is based in its entirety upon (a) current interpretations
and enforcement policies that have been publicly disseminated and are
used by Governmental Authorities charged with the enforcement of the
Applicable Environmental Laws or which apply to the Company or any of
its Subsidiaries with respect to any property or sites in a particular
jurisdiction and (b) current levels of publicly disseminated
scientific knowledge concerning the detection of, and the health and
environmental risks associated with the discharge of, substances and
pollutants regulated pursuant to the Applicable Environmental Laws.
Section 9. COVENANTS. The Company agrees with the Banks and the
Agent that until the termination of this Agreement:
9.1 FINANCIAL STATEMENTS AND CERTIFICATES. The Company will
deliver in duplicate:
-45-
(a) to each Bank, as soon as practicable and in any event within
45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated and consolidating
statements of operations, stockholders' equity and cash flows of the
Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such quarterly period, setting forth
(1) as to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidated and consolidating
figures for the Company and the Restricted Subsidiaries, and setting
forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year, all in reasonable detail and
unaudited but certified by an authorized financial officer of the
Company as fairly presenting the financial position and results of
operations of the Company and its Subsidiaries as of the date thereof
and the period then ended, subject to changes resulting from year-end
adjustments;
(b) to each Bank, as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidated and
consolidating statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such year, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth (1) as
to each account affected thereby, all eliminating entries for the
Unrestricted Subsidiaries as a group and for the Special Subsidiary,
respectively, and (2) the resulting consolidating figures for the
Company and the Restricted Subsidiaries, and setting forth in each
case in comparative form corresponding consolidating figures from the
preceding annual audit, all in reasonable detail and which shall be
reported on by Price Waterhouse & Co. or other independent public
accountants of recognized national standing selected by the Company
whose report shall (A) contain an opinion that shall be unqualified as
to the scope or limitations imposed by the Company and shall not be
subject to any other material qualification and (B) state that such
financial statements present fairly, in all material respects, the
financial position of the Company and its Subsidiaries at the dates
indicated and their cash flows and the results of their operations and
the changes in their financial position for the periods indicated in
conformity with GAAP, and shall be accompanied by a report of such
independent public accountants stating that (W) such audit was made
for the purpose of forming an opinion on the consolidated financial
statements taken as a whole; (X) the consolidating information set
forth therein is presented for purposes of additional analysis rather
than to present the financial position, results of operations and cash
flows of the individual companies; (Y) such consolidating information
has been subjected to the auditing procedures applied in the audit of the
-46-
basic financial statements, and (Z) in such independent public
accountants' opinion, such consolidating information is fairly stated
in all material respects in relation to the consolidated financial
statements taken as a whole, with such changes thereto as such
accountants reasonably determine to be appropriate under the
circumstances;
(c) to each Bank, promptly upon transmission thereof, copies of
all financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits, and other than registration statements
and reports relating to employee benefit or compensation plans) and
all reports which it files with the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(d) to each Bank, promptly upon receipt thereof, a copy of each
other report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any such
Subsidiary;
(e) to each Bank, as soon as practicable and in any event within
15 days after any executive officer of the Company obtains knowledge
(1) of any Default or any condition or event which, in the opinion of
management of the Company, would have a Material Adverse Change (to
the extent affecting the Company and its Subsidiaries in a materially
different manner or extent than the oil and gas industry generally);
(2) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION 10.(b)
or (m); (3) of the institution of any litigation involving
claims against the Company or any of its Subsidiaries equal to or
greater than $5,000,000 with respect to any single cause of action or
of any adverse determination in any court proceeding in any litigation
involving a potential liability to the Company or any of its
Subsidiaries equal to or greater than $5,000,000 with respect to any
single cause of action which makes the likelihood of an adverse
determination in such litigation against the Company or such
Subsidiary substantially more probable, or (4) of any regulatory
proceeding which, if determined adversely to the Company, would have a
Material Adverse Change (to the extent affecting the Company and its
Subsidiaries in a materially different manner or extent than the oil
and gas industry generally), an Officer's Certificate specifying the
nature and period of existence of any such Default, condition or
event, or specifying the notice given or action taken by such Person
and the nature of any such claimed Default, event or condition, or
specifying the details of such proceeding, litigation or dispute and,
in each case, what action the Company or any of its
-47-
Subsidiaries has taken, is taking or proposes to take with respect
thereto;
(f) to each Bank, (1) promptly after the filing or receiving
thereof, copies of all annual reports and such other material reports
and notices which the Company or any ERISA Affiliate files under ERISA
with the Internal Revenue Service, the PBGC or the U.S. Department of
Labor with respect to a Plan that is subject to Title IV of ERISA; (2)
promptly upon acquiring knowledge of any "reportable events" (as
defined in Section 4043 of ERISA) or of any "prohibited transaction,"
as such term is defined in the Code or ERISA, in connection with any
Plan which may result in a Material Adverse Change, a statement
executed by the president or chief financial officer of the Company or
the applicable ERISA Affiliate, setting forth the details thereof and
the action which the Company or the ERISA Affiliate proposes to take
with respect thereto and, when known, any action taken by the PBGC,
the Internal Revenue Service or the U.S. Department of Labor with
respect thereto; (3) promptly after the filing or receiving thereof by
the Company or any ERISA Affiliate, any notice of the institution of
any proceedings or other actions which may result in the termination
of any Plan or notice of complete or partial withdrawal liability
under Title IV of ERISA, and (4) each request for waiver of the
funding standards or extension of the amortization periods required by
Sections 303 and 304 of ERISA or Section 412 of the Code promptly
after the request is submitted by the Company or any ERISA Affiliate,
to the Secretary of the Treasury, the U.S. Department of Labor or the
Internal Revenue Service, as the case may be;
(g) to each Bank, as soon as available but in no event later than
February 28 of each year, an Independent Engineering Report reflecting
data as of January 1 of such year; and
(h) to each Bank, with reasonable promptness, such other
information respecting the business, financial condition or results of
operations of the Company or any of its Subsidiaries as such Bank may
reasonably request.
Together with each delivery of financial statements required by
SUBSECTION (a) above, each Required Reserve Report and each Optional
Reserve Report, the Company will deliver to each Bank an Officer's
Certificate and a Coverage Report demonstrating (with computations in
reasonable detail) compliance by the Company and the Restricted
Subsidiaries with the provisions of SECTIONS 9.6, 9.7(b)(3), (4) and
(6), 9.7(c)(2) and (3), 9.7(d), 9.7(e), 9.7(f), 9.7(g) and 9.9,
demonstrating that no Default exists under SECTION 10.1(i) and stating
that there then exists no Default, or, if any Default exists,
specifying the nature and period of existence thereof and what action
the Company proposes to take with respect thereto.
-48-
Together with each delivery of financial statements required by
SUBSECTION (b) above, the Company will deliver to each Bank a
certificate of such accountants stating that, in conducting the audit
of the Company's consolidated financial statements in accordance with
generally accepted auditing standards they have obtained no knowledge
of any Default arising under SECTION 10.1(a), (b) or (i) or any
Default arising under SECTION 10.1(d) that occurs as result of the
breach or violation by the Company or the Restricted Subsidiaries of
SECTIONS 9.6, 9.7(b), (c), (d), (e), (f), (g), (h), (i) or 9.8, or, if
they have obtained knowledge of any such Default, specifying the
nature and period of existence thereof. Such accountants, however,
shall not be liable to the Agent or any Bank by reason of their
failure to obtain knowledge of any such Default which would not be
disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. The Company also covenants
that forthwith upon the chief executive officer, principal financial
officer or principal accounting officer of the Company obtaining
knowledge of a Default, it will deliver to each Bank an Officer's
Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
9.2 INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated in writing by any Bank, at such Bank's
expense and risk, to visit and inspect any of the properties of the
Company and its Subsidiaries; and also to examine the corporate books
and financial records of the Company and its Subsidiaries and to make
copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of such Persons with the executive officers of
the Company, the petroleum reserve engineers employed by the Company
and its Subsidiaries and the Company's independent public accountants,
all at such reasonable times, with a representative of the Company
present and as often as such Bank may reasonably request, and will
assist such Person or Persons in all such activities.
9.3 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will, and will
cause each of its Subsidiaries and each of its Affiliates that are
controlled by the Company or its Subsidiaries to, comply in a timely
fashion with, or operate pursuant to valid waivers of the provisions
of, all Applicable Environmental Laws, except where non-compliance
would not (a) result in a Material Adverse Change or (b) subject the
Agent or any Bank to any liability for such non compliance (PROVIDED
that the Company shall not be in default of this SUBSECTION (b) if the
Company indemnifies each of the Agent, Banks or any of them subjected
to such liability and provides collateral to secure such
indemnification, all to the extent required by the Person subjected to
such liability in its sole and unfettered discretion). The Company
agrees to indemnify and hold the Agent and each Bank, and their
respective officers, agents and employees harmless from any loss,
liability, claim or expense which any such Person may incur or suffer
as a result of a breach by the
-49-
Company or its Subsidiaries or Affiliates, as the case may be, of this
covenant. The Company shall not be deemed to have breached or violated
this SECTION 9.3 if the Company or its Subsidiary or Affiliate, as the
case may be, are challenging in good faith by appropriate proceedings
diligently pursued the application or enforcement of any such
Applicable Environmental Laws for which adequate reserves have been
established in accordance with GAAP.
9.4 PAYMENT OF TAXES. The Company will, and will cause each of its
Subsidiaries to, pay, or have paid on its behalf, before the same become
delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property, except to the extent contested in good faith by
appropriate proceedings diligently conducted for which adequate reserves
have been established in accordance with GAAP.
9.5 MAINTENANCE OF INSURANCE. The Company covenants that it and
each of its Subsidiaries will carry and maintain insurance (subject to
self-insurance in the maximum amount of $10,000,000, customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained
by other companies operating similar businesses and, together with
each delivery of financial statements required by SECTION 9.1(b), will
deliver to the Agent for each Bank an Officer's Certificate specifying
the details of such insurance in effect. Upon the request of the Agent
or any Bank, the Company shall promptly deliver to the Agent one or
more current certificates of the insurer or insurers providing the
insurance required by this SECTION 9.5 to the effect that such
insurance may not be canceled, reduced or affected in any manner
without 30 days' prior written notice to the Agent.
9.6 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company
will not and will not permit any Restricted Subsidiary to (a) make any
Restricted Investment; (b) pay or declare any dividend on any class of
its stock or make any other distribution on account of any class of
its stock, or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock, or (c) make any additional
Investment in the Special Subsidiary (all of the foregoing described
in SUBSECTIONS (b) and (c) above being herein called "RESTRICTED
PAYMENTS") (1) except out of Consolidated Net Earnings Available for
Restricted Payments and Restricted Investments; PROVIDED that the
Company or any wholly owned Restricted Subsidiary may, without
violation of this clause, in a single transaction or a series of
publicly announced related transactions to be completed within six
months, make an Investment in the Special Subsidiary which results in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the outstanding general and limited partner
interests in the Special Subsidiary; PROVIDED FURTHER that the amount
of such Investment shall be included in any subsequent computations of
Restricted Payments and of Consolidated Net Earnings Available for
Restricted
-50-
Payments and Restricted Investments under this Section unless
immediately after giving effect to such Investment in the Special
Subsidiary, the Special Subsidiary is designated as a Restricted
Subsidiary; (2) unless, after giving effect to any such Restricted
Investment or Restricted Payment, as the case may be, (A) no Default
shall have occurred and be continuing and (B) the Company could incur
at least $1.00 of additional Funded Debt without violation of SECTION
9.7(b)(3), and (3) unless, in the case of Investments in the Special
Subsidiary, such Investment shall otherwise be permitted by SECTION
9.7(g).
"CONSOLIDATED NET EARNINGS AVAILABLE FOR RESTRICTED PAYMENTS AND
RESTRICTED INVESTMENTS" shall mean an amount equal to
(a) the sum of (1) $45,000,000; (2) 100% (or minus 100% in case of
a deficit) of Consolidated Net Earnings for the period (taken as one
accounting period) commencing on April 1, 1990 (the "COMMENCEMENT
DATE") and terminating at the end of the last fiscal quarter preceding
the date of any proposed Restricted Investment or Restricted Payment,
as the case may be; (3) the net cash proceeds received by the Company
or any Restricted Subsidiary from the sale of any shares of its stock
on or after the Commencement Date, except (A) any such proceeds used
as a basis, for a prepayment in respect of the then-outstanding notes
issued under the Serial Note Agreement pursuant to Paragraphs 4A, 4B
or 4C thereof and (B) any proceeds from the sale of stock to the
Company or any of its Subsidiaries on or after the Commencement Date;
(4) the net cash proceeds received by the Company or any Restricted
Subsidiary from the sale, on or after the Commencement Date, of any
convertible debt security which has been converted into stock of the
Company or a Restricted Subsidiary, except (A) any such proceeds used
as a basis for a prepayment in respect of the then-outstanding notes
issued under the Serial Note Agreement pursuant to Paragraphs 4A, 4B
or 4C thereof and (B) any proceeds from the sale of such convertible
debt security to the Company or any of its Subsidiaries; (5) any cash
distributions from the Special Subsidiary received by the Company or
any Restricted Subsidiary on or after the Commencement Date, and (6)
any return of capital from Unrestricted Subsidiaries or Restricted
Investments received by the Company or any Restricted Subsidiary on or
after the Commencement Date, less
(b) the sum of all Restricted Investments and all Restricted
Payments made on or after the Commencement Date.
There shall not be included in Restricted Payments or in any
computation of Consolidated Net Earnings Available for Restricted
Payments and Restricted Investments (w) dividends paid or declared in
respect of stock held by any Person, or distributions made to any
Person, in stock of the Company or any Restricted Subsidiary; (x)
exchanges of stock of one or more classes of the Company or any
Restricted Subsidiary for common stock of the Company or such
-51-
Restricted Subsidiary, as the case may be, or for stock of the Company
or such Restricted Subsidiary, as the case may be, of the same class,
except to the extent that cash or other value is involved in such
exchange; (y) dividends paid or declared in respect of stock held by,
or distributions made to, or redemptions, purchases or other
acquisitions of stock made from, the Company or a wholly owned
Restricted Subsidiary, or (z) any advances to the Special Subsidiary
not in excess of $20,000,000 in the aggregate at any one time
outstanding that are repaid in full within 60 days pursuant to
customary cash management services provided to the Special Subsidiary.
The term "stock" as used in this Section shall include warrants,
options to purchase stock and redeemable rights.
9.7 LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and
will not permit any Restricted Subsidiary to:
(a) LIENS. Create, assume or suffer to exist any Lien upon any of
its properties or assets, whether now owned or hereafter acquired
except
(1) Liens for taxes or assessments or other governmental charges
or levies not yet due or which are being actively contested in good
faith by appropriate proceedings;
(2) Liens (including mechanics' and materialmen's liens,
landlord liens, easements, rights-of-way or the like) incidental to
the conduct of its business or the ownership of its property and
assets which are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than advances or
credit on open account, includable in current liabilities, for goods
and services in the ordinary course of business and on terms and
conditions which are customary in the oil, gas and mineral exploration
and development business) or the guaranteeing of the obligations of
another Person, and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
(3) Liens for lessor's royalties, overriding royalties, net
profits interests, carried interests, reversionary interests and other
similar burdens, production sales contracts, division orders,
contracts for the sale, purchase, exchange, or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of
development, area of mutual interest agreements, gas balancing or
deferred production agreements, processing agreements, plant
agreements, pipeline gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other
disposal agreements, seismic or geophysical permits or agreements, and
other agreements which are customary in the oil, gas and mineral
exploration and development business or in the business of processing
gas and gas condensate production for the extraction of products
therefrom, if the net cumulative effect of
-52-
such burdens does not operate to reduce the net revenue interest of
any oil and gas properties to less than (A) the "Net Revenue Interest"
set forth in the Most Recent Engineering Report for those oil and gas
properties included in the Most Recent Engineering Report or (B) the
net revenue interest so acquired for those oil and gas properties
acquired after the date of the Most Recent Engineering Report;
PROVIDED that such Liens are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than
advances or credit on open account, includable in current liabilities,
for goods and services in the ordinary course of business and on terms
and conditions which are customary in the oil, gas and mineral
exploration and development business) or the guaranteeing of the
obligations of another Person;
(4) Liens described in SCHEDULE II securing Debt of the Company
or a Restricted Subsidiary set forth in SCHEDULE II;
(5) the Springing Lien, Liens existing on any real property of
any Person at the time such Person becomes a Restricted Subsidiary, or
any Liens existing prior to the time of acquisition upon any real
property acquired by the Company or any Restricted Subsidiary through
purchase, merger or consolidation or otherwise, whether or not the
obligation secured by such Lien is assumed by the Company or such
Restricted Subsidiary; PROVIDED that except as otherwise permitted by
SECTION 9.7(a), any such Springing Lien or Lien (A) shall not encumber
any other property of the Company or any Restricted Subsidiary and (B)
shall not have been created in anticipation of such Person becoming a
Restricted Subsidiary or in anticipation of the acquisition by the
Company or any Restricted Subsidiary of the real property secured
thereby;
(6) Liens placed on property at the time of acquisition,
construction, development or improvement thereof, or created in
respect of such property within six months after the time of
acquisition thereof or the commencement of construction, development
or improvement thereof, as the case may be, to secure all or a portion
of (or to secure Debt incurred to pay all or a portion of) the
purchase price of such acquisition, or the cost of such construction,
development or improvement, as the case may be; PROVIDED that (A) such
property is not and shall not thereby become encumbered in an amount
in excess of the lesser of the cost or fair market value thereof; (B)
except as otherwise permitted in SECTION 9.(a), any such Lien shall
not encumber any other property of the Company or a Restricted
Subsidiary, and (C) any such Lien shall not encumber property of the
Company or a Restricted Subsidiary for the purpose of securing an
obligation of the Company or a Restricted Subsidiary or securing a
Guaranty by the Company or any Restricted Subsidiary in connection
with the sale, exchange, transfer or other disposition by the Company
or a Restricted Subsidiary of net profits interests; PROVIDED that the
Company or a Restricted Subsidiary may assign all or part of the
proceeds of production of property in which a net profits interest has
been
-53-
granted to secure its obligation to make net profits interests
payments therefrom; and PROVIDED FURTHER that any such Lien shall not
encumber any other property of the Company or any Restricted
Subsidiary;
(7) Liens on the capital stock of a Restricted Subsidiary
acquired after April 11, 1990 by the Company or a Restricted
Subsidiary and created or assumed contemporaneously with such
acquisition, to secure Debt assumed or incurred to finance all or a
part of the purchase price of such acquisition;
(8) Liens on the capital stock of an Unrestricted Subsidiary
other than the Special Subsidiary;
(9) from and after the time that the Company and the wholly
owned Restricted Subsidiaries shall have become the owners of all of
the outstanding general and limited partner interests in the Special
Subsidiary, (A) Liens on all or any portion of the limited partner
interests in SFEP, at such times as SFEP shall be an Unrestricted
Subsidiary or (B) at such times as SFEP shall be a Restricted
Subsidiary, Liens securing Debt incurred to finance all or a part of
the purchase price of limited partner interests in the Special
Subsidiary acquired by the Company and the wholly owned Restricted
Subsidiaries from Persons other than the Special Subsidiary in a
single transaction or a series of publicly announced related
transactions that were completed within six months and that result in
the ownership by the Company and the wholly owned Restricted
Subsidiaries of 100% of the general and limited partner interests
therein; PROVIDED that the Liens described in this CLAUSE (B) shall
extend only to the limited partner interests so acquired;
(10) Liens on property of the Company or a Restricted Subsidiary
to secure Debt assumed or incurred in the form of Capitalized Lease
Obligations or industrial revenue bonds, pollution control bonds or
similar tax-exempt financings; PROVIDED that any such Lien shall not
encumber any property of the Company or a Restricted Subsidiary other
than the property the acquisition or construction of which is financed
or refinanced, in whole or in part, with proceeds from such Debt;
(11) Liens created pursuant to the Security Documents under the
Revolving and Term Credit Agreement;
(12) any Lien renewing or extending any Lien permitted by
CLAUSES (4), (5), (6), (7), (8), (9), (10) or (11) above; PROVIDED
that the principal amount of the Debt secured thereby is not increased
and such Lien is not extended to other property; and
(13) other Liens on any property of the Company or a Restricted
Subsidiary securing any Funded Debt of the Company or a Restricted
Subsidiary permitted by SECTION 9.7(b)(3)(C) or (4)(C).
-54-
(b) DEBT. Create, incur, assume or suffer to exist any Debt,
except
(1) Funded Debt of the Company under the Revolving and Term
Credit Agreement and Funded Debt of the Company hereunder or
represented by the notes issued pursuant to the Serial Note Agreement;
(2) Funded Debt of the Company or any Restricted Subsidiary set
forth in SCHEDULE II, which may not be renewed, extended, refunded or
permitted to remain outstanding after the stated maturities thereof
except by the Person primarily liable thereon and unless, after giving
effect to such renewal, extension or refunding, neither the principal
amount thereof nor the aggregate Funded Debt of the Company and the
Restricted Subsidiaries is increased thereby;
(3) Funded Debt of the Company if at the time it is created,
incurred or assumed and after giving effect thereto, to the receipt of
the proceeds thereof, and to the concurrent retirement of any Debt,
(A) the aggregate amount of all Funded Debt of the Company and the
Restricted Subsidiaries shall not exceed 65% of Consolidated Net
Tangible Assets; (B) Consolidated Net Earnings Available for Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) most recently ended shall equal at least 225% of Fixed Charges
for the four fiscal quarters of the Company (taken as a single period)
commencing with and including the fiscal quarter during which such
Funded Debt is created, incurred or assumed, and (C) if such Funded
Debt is Secured Debt, Special Debt shall not exceed 10% of
Consolidated Net Tangible Assets;
(4) Funded Debt of a Restricted Subsidiary if at the time it is
created, incurred or assumed and after giving effect thereto, to the
receipt of the proceeds thereof, and to the concurrent retirement of
any Debt, (A) the aggregate amount of all Funded Debt of the Company
and the Restricted Subsidiaries shall not exceed 65% of Consolidated
Net Tangible Assets; (B) Consolidated Net Earnings Available for
Fixed Charges for the four fiscal quarters of the Company (taken as a
single period) most recently ended shall equal at least 225% of Fixed
Charges for the four fiscal quarters of the Company (taken as a single
period) commencing with and including the fiscal quarter during which
such Funded Debt is created, incurred or assumed, and (C) Special Debt
shall not exceed 10% of Consolidated Net Tangible Assets;
(5) Debt of the Company owing to a wholly owned Restricted
Subsidiary which is subordinated to the Obligations upon terms set
forth on SCHEDULE V, and Debt of a Restricted Subsidiary owing to the
Company or any other wholly owned Restricted Subsidiary; and
-55-
(6) Current Debt of the Company not secured by any Lien on any
property owned by the Company or the Restricted Subsidiaries; PROVIDED
that for a period of at least 45 consecutive days in each period of 18
consecutive months commencing April 1, 1990, the amount of Current
Debt (other than Current Debt existing pursuant to customary cash
management services provided to the Special Subsidiary which is repaid
in full within 60 days) permitted by this clause shall at no time
exceed the maximum amount of Funded Debt that the Company could then
incur under SECTION 9.7(b)(3) without violation thereof.
For purposes of this SECTION 9.7(b), any Debt (i) which is
extended, renewed or refunded shall be deemed to have been incurred
when extended, renewed or refunded (except as provided pursuant to
CLAUSE (2) above); (ii) of a Person when it becomes, or is merged
into, or is consolidated with a Restricted Subsidiary or the Company
shall be deemed to have been incurred at that time; (iii) which is
permitted by CLAUSE (5) above and which is owing to a wholly owned
Restricted Subsidiary when it ceases to be a wholly owned Restricted
Subsidiary shall be deemed to have been incurred at that time; (iv) of
a Restricted Subsidiary which is owing to the company or any other
Restricted Subsidiary shall be deemed to have been incurred at the
time the Company or such other Restricted Subsidiary disposes of such
Debt to any Person other than the Company or a wholly owned Restricted
Subsidiary; (v) which is Funded Debt of the Company or a Restricted
Subsidiary consisting of a reimbursement obligation in respect of a
letter of credit or similar instrument shall be deemed to be incurred
when such letter of credit or similar instrument is issued, or (vi)
which is Funded Debt of the type described in CLAUSE (b) of the
definition of Funded Debt, or any Guaranty of such Funded Debt, shall
not be deemed to have been created, incurred or assumed, as the case
may be, at the time it becomes Funded Debt, but shall be included in
all subsequent calculations of Funded Debt for all purposes of this
Agreement.
(c) SALE OF LESS THAN SUBSTANTIALLY ALL ASSETS. Sell, exchange,
transfer or otherwise dispose of part, but less than all or
substantially all, of their respective assets, unless
(1) such sale, exchange, transfer or other disposition is made
in the ordinary course of business (including abandonments, farm-ins,
farm-outs, leases and subleases of developed or undeveloped properties
owned or held by the Company or any Restricted Subsidiary that are
made or entered into in the ordinary course of business, but
EXCLUDING, however, any sale of net profits interests in developed oil
and gas properties); or
(2) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas
-56-
properties) sold, exchanged, transferred or otherwise disposed of (on
a consolidated basis) (but excluding assets sold, exchanged,
transferred or otherwise disposed of in the ordinary course of
business pursuant to SECTION 9.7(c)(1) during the period of 12
consecutive months immediately preceding such sale, exchange, transfer
or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which have been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(A) during such 12-month period shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted Subsidiaries as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition, and (B) the assets described in the foregoing
CLAUSE (A) shall not have contributed more than 10% of EBITD of the
Company and the Restricted Subsidiaries for the four most recently
completed fiscal quarters taken as a single accounting period; or
(3) after giving effect to such sale, exchange, transfer or
other disposition, (A) the aggregate net book value of (i) all assets
of the Company and the Restricted Subsidiaries (including the sale of
net profits interests in developed oil and gas properties) sold,
exchanged, transferred or otherwise disposed of (on a consolidated
basis) (but excluding assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(1) and (2)) during the period
of 12 consecutive months immediately preceding such sale, exchange,
transfer or other disposition and (ii) the assets of all Restricted
Subsidiaries, the stock of which has been sold or otherwise disposed
of pursuant to SECTION 9.7(d)(2)(B) during such 12-month period, shall
not exceed 10% of Consolidated Net Tangible Assets of the Company and
the Restricted Subsidiaries as of the end of the fiscal quarter
immediately preceding or coinciding with such sale, exchange, transfer
or other disposition; (B) the assets described in the foregoing CLAUSE
(A) shall not have contributed more than 10% of EBITD for the four
most recently completed fiscal quarters taken as a single accounting
period, and (C) within six months after such sale, exchange, transfer
or other disposition, the net proceeds thereof are applied toward, or
the exchange results in, (1) the acquisition by the Company or a
Restricted Subsidiary of (i) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and its Restricted Subsidiaries from such sale, exchange,
transfer or other disposition; (ii) if the assets so sold, exchanged,
transferred or otherwise disposed of were located in the United States
of America or Canada, the assets acquired are located in the United
States of America or Canada, and (iii) the assets so acquired are of a
type usual and customary in the oil and gas business; PROVIDED that no
Liens shall at any time exist on the assets so acquired which secure
any Debt except as permitted by SECTION 9.7(a)(13) or (2) the
prepayment of an aggregate principal amount of all Obligations plus
accrued interest and premium, if any, thereon in accordance with this
Agreement and the Revolving and Term Credit Agreement, or the payment
of an
-57-
aggregate principal amount of other Funded Debt (other than Funded
Debt subordinate in right of payment to the Obligations) plus accrued
interest and premium, if any, in either case in an amount at least
equal to the aggregate net proceeds that the Company or a Restricted
Subsidiary receives from the sale, exchange, transfer or other
disposition of such assets.
(d) SALE OF STOCK OF RESTRICTED SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock of any
Restricted Subsidiary, except (1) to the Company or another wholly
owned Restricted Subsidiary and (2) that all shares of stock of any
Restricted Subsidiary at the time owned by the Company and all
Restricted Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair market value (as determined in
good faith by the Board of Directors of the Company) at the time of
sale of the shares of stock so sold; PROVIDED that for purposes of
this exception:
(A) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and all Restricted Subsidiaries sold, exchanged,
transferred or otherwise disposed of pursuant to SECTION 9.7(c)(2)
during the preceding 12-month period, does not represent more than 10%
of Consolidated Net Tangible Assets as of the end of the fiscal
quarter immediately preceding or coinciding with such sale, exchange,
transfer or other disposition and (ii) the earnings of such Restricted
Subsidiary together with (x) the earnings of any other Restricted
Subsidiary the stock of which was sold or otherwise disposed of
pursuant to the exception described in this CLAUSE (A) during the
preceding 12-month period and (y) the earnings attributable to the
assets sold, exchanged, transferred or otherwise disposed of pursuant
to SECTION 9.7(c)(2) during such 12-month period, do not represent
more than 10 of EBITD for the four most recently completed fiscal
quarters taken as a single accounting period; and PROVIDED FURTHER
that, at the time of such sale, such Restricted Subsidiary shall not
own, directly or indirectly, any shares of stock of the Company or any
other Restricted subsidiary unless all of the shares of stock of such
other Restricted Subsidiary owned, directly or indirectly, by the
Company and all Restricted Subsidiaries are simultaneously being sold
as permitted by the exception described in this CLAUSE (A); or
(B) (i) the net book value of the assets of such Restricted
Subsidiary together with (x) the net book value of the assets of any
other Restricted Subsidiary the stock of which was sold during the
preceding 12-month period and (y) the net book value of the assets of
the Company and any Restricted Subsidiary sold, exchanged, transferred
or otherwise disposed of pursuant to SECTION 9.7(c)(3) during the
preceding 12-month period, does not represent more than 10% of the
Consolidated Net Tangible Assets as
-58-
of the end of the fiscal quarter immediately preceding or coinciding
with such sale, exchange, transfer or other disposition; (ii) the
earnings of such Restricted Subsidiary together with (x) the earnings
of any other Restricted Subsidiary the stock of which was sold or
otherwise disposed of pursuant to the exception described in this
CLAUSE (B) during the preceding 12-month period and (y) the earnings
attributable to the assets sold, exchanged, transferred or otherwise
disposed of pursuant to SECTION 9.7(c)(3) during such 12-month period,
do not represent sore than 10% of EBITD for the four most recently
completed fiscal quarters taken as a single accounting period, and
(iii) within six months after such sale or other disposition, the
proceeds thereof are applied toward (i) the acquisition by the Company
or a Restricted Subsidiary of (1) assets which have an aggregate fair
market value at least equal to the net proceeds received by the
Company and the Restricted Subsidiaries from such sale or other
disposition and (2) the assets so acquired are of a type usual and
customary in the oil and gas business; PROVIDED that no Liens shall at
any time exist on the assets so acquired which secure Any Debt except
as permitted by SECTION 9.7(a)(13), or (ii) the prepayment of an
aggregate principal amount of all Obligations in accordance with this
Agreement and the Revolving and Term Credit Agreement, or the payment
of an aggregate principal amount of other Funded Debt (other than
Funded Debt subordinate in right of payment to the Obligations) plus
accrued interest and premium, if any, in either case in an amount at
least equal to the aggregate net proceeds that the Company or a
Restricted Subsidiary receives from the sale or other disposition; and
PROVIDED FURTHER that, at the time of such sale or other disposition,
such Restricted Subsidiary shall not own, directly or indirectly, (y)
any shares of stock of the Company or any other Restricted Subsidiary
unless all of the shares of stock of such other Restricted Subsidiary
owned, directly or indirectly, by the Company and all Restricted
Subsidiaries are simultaneously being sold as permitted by the
exception described in this CLAUSE (B).
(e) MERGER AND SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. Merge or
consolidate with or into any other Person or convey, exchange,
transfer or otherwise dispose of all or a substantial part of its
assets (i.e., assets which could not otherwise be disposed of pursuant
to SECTION 9.7(c)(2) or (3)) to any Person except that
(1) any wholly owned Restricted Subsidiary may merge with the
Company (PROVIDED that the Company shall be the continuing or
surviving corporation) or with any one or more other wholly owned
Restricted Subsidiaries;
(2) any Restricted Subsidiary may sell, exchange, transfer or
otherwise dispose of any of its assets to the Company or to a wholly
owned Restricted Subsidiary;
-59-
(3) any Restricted Subsidiary may sell, exchange, transfer or
otherwise dispose of all or substantially all of its assets subject to
the conditions and provisions specified in SECTIONS 9.7(c)(2) and (3);
(4) any Restricted Subsidiary may merge into or consolidate with
any Person which does not thereupon become a Restricted Subsidiary,
subject to the conditions and provisions specified in SECTION 9.7(d)
with respect to a sale or other disposition of the stock of such
Restricted Subsidiary;
(5) any Restricted Subsidiary may permit any Person to be merged
into such Restricted Subsidiary or may consolidate with or merge into
a Person which thereupon becomes a Restricted Subsidiary; PROVIDED
that immediately after any such merger or consolidation, no Default
shall have occurred and be continuing;
(6) the Company may permit any Person to be merged into the
Company (such that the Company shall be the continuing or surviving
corporation); and
(7) the Company may permit any corporation to consolidate with
the Company and the Company may merge into or otherwise dispose of its
assets as an entirety or substantially as an entirety to any solvent
corporation organized under the laws of the United States of America
or any state thereof and having at least 80% of its consolidated
assets located in the United States of America and Canada which
expressly assumes in writing the due and punctual performance of the
obligations of the Company under the Credit Documents, to the same
extent as if such successor or transferee corporation had originally
executed the Credit Documents in the place of the Company (it being
agreed that such assumption shall, upon the request of any Bank and at
the expense of such successor or transferee corporation, be evidenced
by the exchange of each outstanding Application for another
Application executed by such successor or transferee corporation, with
such changes in phraseology and form as may be appropriate but in
substance of like terms as the Application surrendered for such
exchange and of like unpaid principal amount, and that each
Application executed pursuant to this Agreement after such assumption
shall be executed by and in the name of such successor or transferee
corporation);
PROVIDED that for purposes of SECTIONS 9.7(e)(6) and (7) immediately
after such merger, consolidation, sale or other disposition, and after
giving effect thereto, (x) such successor or transferee Person could
incur at least $1.00 of additional Funded Debt without violation of
SECTION 9.7(b)(3) and (y) no Default shall have occurred and be
continuing. As soon as practicable, and in any event at least 75 days
prior to the proposed consummation date of any merger, consolidation,
sale or other disposition described in SECTION 9.7(e)(7), the Company
shall give written notice thereof to each Bank describing in
reasonable detail the
-60-
proposed transaction, the date on which it is proposed to be
consummated and the identity, jurisdiction of organization, and
geographic composition of assets of the proposed successor or
transferee corporation. No disposition by the Company of its assets
as an entirety or substantially as an entirety under SECTION 9.7(e)(7)
shall release the Company as the applicant under any Application from
its liability as obligor thereon.
(f) SALE AND LEASEBACK. Enter into any Sale and Leaseback
Transaction unless:
(1) immediately after giving effect thereto and to the
application of any sales proceeds received in connection therewith,
Special Debt shall not exceed 10% of the Consolidated Net Tangible
Assets; or
(2) the net sales proceeds received by the Company or a
Restricted Subsidiary in respect of the assets sold pursuant to such
Sale and Leaseback Transaction are greater than or equal to the fair
market value of the assets sold (which determination shall be based
upon a written opinion (the cost of which shall be borne exclusively
by the Company) as to valuation from an independent valuation expert
selected by the Company) and such proceeds are concurrently applied to
(A) the purchase, acquisition, development or construction of assets
having a value at least equal to such net proceeds, and to be used in
the Company's or such Restricted Subsidiary's business; PROVIDED that
no Liens shall at any time exist on such assets which secure any Debt
except as permitted by SECTION 9.7(a)(13); (B) the prepayment in
accordance with this Agreement of any aggregate principal amount of
all the Obligations (plus accrued interest and premium, if any) at
least equal to the amount of such net proceeds; or (C) the payment of
other Funded Debt (other than Funded Debt subordinate in right of
payment to the Obligations) in an aggregate principal amount at least
equal to the amount of such net sales proceeds; or
(3) the Sale and Leaseback Transaction involves the sale of
assets by the Company to a wholly owned Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another wholly owned
Restricted Subsidiary; PROVIDED that if the Company is the seller
under any such Sale and Leaseback Transaction, its lease obligations
thereunder shall be subordinated to the Obligations represented by the
Applications upon terms set forth on SCHEDULE V.
(g) INVESTMENTS IN THE SPECIAL SUBSIDIARY. Directly or indirectly
make an Investment in the Special Subsidiary after March 31, 1990,
unless (1) the aggregate amount of all other Investments in the
Special Subsidiary made, directly or indirectly, by the Company and
the Restricted Subsidiaries after March 31, 1990 shall not exceed the
aggregate amount of cash distributions received by the Company and the
Restricted Subsidiaries from the Special Subsidiary after March 31,
1990 or (2) in the opinion of
-61-
the Board of Directors of the Company, the Investment would not impair
the ability of the Company to make when due any payment (including any
prepayment required by SECTION 3 of principal of or interest on the
Reimbursement Obligations.
(h) TRANSACTIONS WITH AFFILIATES. Directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise, (1) any Affiliate (except any employee
compensation benefit plan or any Restricted Subsidiary) or (2) any
Person (other than a Restricted Subsidiary) in which an Affiliate or
the Company (directly or indirectly) owns, beneficially or of record,
5% or more of the outstanding voting stock or similar equity interest,
except that (A) any Affiliate may be a director, officer or employee
of the Company or any Restricted Subsidiary and may be paid reasonable
compensation in connection therewith and (B) subject to applicable
fiduciary standards with respect to the Special Subsidiary, acts and
transactions that would otherwise be prohibited by this Subsection may
be performed or engaged in if upon terms not less favorable to the
Company or any Restricted Subsidiary than if no relationship described
in CLAUSES (1) and (2) above existed.
(i) TAX CONSOLIDATION. Except for the Tax Allocation Agreements,
the Company will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return
with any Person unless such other Person shall have agreed in writing
with the Company that the Company's or such Subsidiary's liability
with respect to taxes as a result of the filing of any such
consolidated income tax return with such Person shall not be
materially greater, nor the receipt of any tax benefits materially
less, than they would have been had the Company and its Subsidiaries
continued to file a consolidated income tax return with the Company as
the parent corporation.
9.8 ISSUANCE OF STOCK BY RESTRICTED SUBSIDIARIES. The Company
covenants that it will not permit any Restricted Subsidiary (either
directly or indirectly, by the issuance of rights or options for, or
securities convertible into, such shares) to issue, sell or otherwise
dispose of any shares of any authorized but unissued or treasury class
of such Restricted Subsidiary's stock (other than directors'
qualifying shares) except to the Company or another Restricted
Subsidiary.
9.9 COVERAGE RATIOS. As of the end of each fiscal quarter of the
Company, and each delivery of a Required Reserve Report or Optional
Reserve Report, the Company shall be in compliance with all Required
Ratios (except for any noncompliance resulting solely from an
Engineering Shortfall, and then only during the cure period permitted
by Section 10.1(e)).
-62-
Section 10. DEFAULTS.
10.1 EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) the Company shall fail to pay any principal of any
Reimbursement Obligation or any fee or other principal amount payable
hereunder or under any other Credit Document when due, or shall fail
to pay any interest on any amount hereunder or under any other Credit
Document for more than three days after the date due; or
(b) any member of the Combined Group shall default in any payment
of principal of or interest on any other obligation for money borrowed
(or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any obligation
issued or assumed as full or partial payment for property whether or
not secured by a purchase money mortgage or any obligation under notes
payable or drafted accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or any member of
the Combined Group shall fail to perform or observe any other
agreement, term or condition contained in any agreement under which
any such obligation is created (or if any other event thereunder or
under any such agreement shall occur and be continuing) and the effect
of such failure or other event is to cause, or to permit the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due prior to any stated
maturity, or any member of the Combined Group shall fail to pay any
Guaranty relating to Debt for borrowed money in accordance with its
terms, PROVIDED that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration shall occur
and be continuing shall exceed $10,000,000; or
(c) any representation or warranty by the Company or any of its
officers in any Credit Document or in any writing furnished to the
Agent or the Banks in connection herewith shall prove to have been
false or misleading in any material respect as of the date as of which
it was made; or
(d) the Company shall default in the performance of any of its
obligations under SECTIONS 9.6 through 9.8 or under SECTION 9.9 (other
than a Default resulting solely from an Engineering Shortfall); or
(e) the Company hall deliver any Independent Engineering Report
and related Coverage Report to the Banks in accordance with SECTION
9.1 or SECTION 2.2(d) reflecting noncompliance with any Required Ratio
and such noncompliance shall result solely from an Engineering
Shortfall and shall not be cured (such cure to be
-63-
evidenced by a new Coverage Report demonstrating compliance with all
Required Ratios) on or before the date 180 days after the Company
delivers such Independent Engineering Report and related Coverage
Report; or
(f) the Company shall default in the performance of any of its
obligations in any Credit Document other than those specified
elsewhere in this SECTION 10.1 and such default shall not be remedied
within 30 days after any executive officer of the Company obtains
actual knowledge thereof; or
(g) any member of the Combined Group shall (1) make An assignment
for the benefit of creditors; (2) generally fail to pay its debts as
such debts become due, or (3) admit in writing its inability to
generally pay its debts as such debts become due; or
(h) a Governmental Authority shall enter any decree or order for
relief in respect of any member of the Combined Group under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(i) any member of the Combined Group shall petition or apply to
any Governmental Authority for, or consent to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of such member of the Combined Group, or of any
substantial part of the assets of such member of the Combined Group,
or shall commence a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to any member of the Combined Group under the Bankruptcy Law
of any other jurisdiction; or
(j) any such petition or application referred to in SECTION
10.1(i) shall be filed, or any such proceedings referred to in SECTION
10.1(i) shall be commenced, against any member of the Combined Group
and such member of the Combined Group by any act shall indicate its
approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree shall be entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree shall remain unstayed and in effect for more than
60 consecutive days; or
(k) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing the
dissolution of any member of the Combined Group and such order,
judgment or decree shall remain unstayed and in effect for more than
the appeal time provided by law; or
-64-
(l) any order, judgment or decree shall be entered in any
proceedings against any member of the Combined Group decreeing a
split-up of such member of the Combined Group which requires (1) the
divestiture of assets which exceed, or the divestiture of partnership
interest in the Special Subsidiary or of the stock of a Restricted
Subsidiary whose assets exceed, 10% of Consolidated Net Tangible
Assets as of the end of the fiscal quarter immediately preceding or
coinciding with such divestiture or (2) the divestiture of assets or
stock of a Restricted Subsidiary or assets of or partnership interest
in the Special Subsidiary, which shall have contributed more than 10%
of EBITD for the four most recently completed fiscal quarters, and
such order, judgment or decree shall remain unstayed and in effect for
more than 60 consecutive days; or
(m) any judgment or order, or series of judgments or orders, for
the payment of money in an amount in excess of $5,000,000 shall be
rendered against any member of the Combined Group and the same shall
not be discharged (or provision shall not be made for such discharge),
or a stay of execution thereof shall not be procured, within the
appeal time provided by law from the date of entry thereof, or such
member of the Combined Group shall not, within said Appeal time, or
such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(n) the Company or any ERISA Affiliate shall fail to pay when due
an amount or amounts aggregating in excess of $5,000,000 which it
shall have become liable to pay with respect to any Plan; or notice of
intent to terminate a Plan or Plans (other than a multiemployer plan
under Section 4001(a)(3) of ERISA) having aggregate Unfunded
Liabilities in excess of $5,000,000 shall be filed under Title IV of
ERISA by the Company or any ERISA Affiliate, any plan administrator or
any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Plan or Plans (other than a
multiemployer plan under Section 4001(a)(3) of ERISA) having aggregate
Unfunded Liabilities in excess of $5,000,000 or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the
Company or any ERISA Affiliate to enforce Section 515 or 4219(c)(5) of
ERISA; or the Company or any ERISA Affiliate shall incur a complete or
partial withdrawal liability under Title IV of ERISA in an annual
amount in excess of $2,000,000 (and in the aggregate $5,000,000) in
connection with any Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that
any Plan or Plans having aggregate Unfunded Liabilities in excess of
$5,000,000 must be terminated; or there shall occur any event or
condition that might reasonably constitute grounds for the termination
of any Plan or Plans having aggregate Unfunded Liabilities in excess
of $5,000,000 or with respect to such Plan or Plans either the
imposition of any liability in excess of $5,000,000 (other than
contributions in the ordinary course) or any
-65-
Lien provided under Section 4068 of ERISA securing an amount in excess
of $5,000,000 on any property of the Company or any ERISA Affiliate;
provided, however, any amounts owing by Santa Fe Pacific Corporation
pursuant to the ERISA Indemnification Agreement between Santa Fe
Pacific Corporation and the Company shall first be offset against the
dollar threshold amounts set forth above before any such condition or
event constitutes an event of default under this paragraph; or
(o) one or more demands for payment is made upon the Company by
Santa Fe Pacific Corporation or any other Person pursuant to the Tax
Indemnification Agreement and such demands would exceed $5,000,000 in
the aggregate; or
(p) any Change of Control shall occur; or
(q) any Event of Default shall occur and be continuing under the
Revolving and Term Credit Agreement,
THEREUPON: (I) the Agent may (and, if directed by the Required Banks,
shall) do any or all of the following: (a) terminate any Letter of
Credit providing for such termination by sending a notice of
termination as provided therein; (b) declare the Commitments
terminated (whereupon the Commitments shall be terminated); and (c)
declare the principal amount then outstanding of and the accrued
interest on all Reimbursement Obligations and all fees and all other
amounts payable hereunder and under the Applications to be forthwith
due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including notice of
acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby
expressly WAIVED by the Company; PROVIDED that in the case of the
occurrence of an Event of Default with respect to the Company referred
to in SECTION 10.1(g) through (l), the Commitments shall be
automatically terminated and the principal amount then outstanding of
and the accrued interest on the Reimbursement Obligations and fees and
all other amounts payable hereunder and under the Applications shall
be and become automatically and immediately due and payable, without
notice (including notice of intent to accelerate and notice of
acceleration) and without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly WAIVED by
the Company; (II) each Bank may exercise its rights of offset against
each account and all other property of the Company in the possession
of such Bank, which right is hereby granted by the Company to the
Banks; and (III) the Agent and each Bank may exercise any and all
other rights pursuant to the Credit Documents, at law and in equity.
-66-
Section 11. THE AGENT.
11.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its Agent
under the Credit Documents and under the Letters of Credit with such
powers as are specifically delegated to the Agent by the terms
thereof, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this SECTION 11 shall
include reference to its Affiliates and its own and its Affiliates'
officers, directors, employees and agents) shall (a) have no duties or
responsibilities except those expressly set forth in the Letters of
Credit and the Credit Documents, and shall not by reason of any Credit
Document be a trustee or fiduciary for any Bank; (b) not be
responsible to any Bank for any recitals, statements, representations
or warranties contained in any Credit Document, or in any certificate
or other document referred to or provided for in, or received by any
of them under, any Credit Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any
Credit Document or any other document referred to or provided for
therein or any property covered thereby or for any failure by the
Company or any other Person to perform any of its obligations
thereunder; (c) not be required to initiate or conduct any litigation
or collection proceedings hereunder or under any Credit Document
except to the extent requested by the Required Banks (and SECTION 11.7
shall apply), and (d) not be responsible for any action taken or
omitted to be taken by it under any Credit Document or any other
document or instrument referred to or provided for therein or in
connection therewith, including pursuant to its own negligence, except
for its own gross negligence or willful misconduct. The Agent may
employ agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Without in any way limiting any
of the foregoing, each Bank acknowledges that the Agent shall have no
greater responsibility in the operation of the Letters of Credit than
is specified in the Uniform Customs and Practice of Documentary
Credits (1983 Revision, International Chamber of Commerce Publication
No. 400).
11.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal
counsel (which may be counsel for the Company), independent
accountants and other experts selected by the Agent. As to any matters
not expressly provided for by any Credit Document, the Agent shall in
all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions of the
Required Banks, and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
-67-
11.3 DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of
principal of or interest on Reimbursement Obligations) unless it has
received notice from a Bank or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default, the
Agent shall give prompt notice thereof to the Banks (and shall give
each Bank prompt notice of each such non-payment). The Agent shall
(subject to SECTIONS 11.7 and 12.5) take such action with respect to
such Default as shall be directed by all Banks or the Required Banks,
as appropriate, and within its rights under the Credit Documents and
at law or in equity; PROVIDED that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action,
permitted hereby with respect to such Default as it shall deem
advisable in the best interests of the Banks and within its rights
under the Credit Documents, at law or in equity.
11.4 RIGHTS AS A BANK. With respect to their Commitments, the
Letters of Credit and the Reimbursement Obligations, TCB and
NationsBank in their capacities as Banks hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the
same as though they were not acting as the Agent or the Co-Agents, and
the term "Bank" or "Banks" shall, unless the context otherwise
indicates, include the Agent and the Co-Agents in their individual
capacity. The Agent and the Co-Agents may (without having to account
therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust, letter of credit,
agency or other business with the Company (and any of its Affiliates)
as if they were not acting as the Agent and the Co-Agents, and the
Agent and the Co-Agents may accept fees and other consideration from
the Company and its Affiliates (in addition to the fees heretofore
agreed to between the Company and the Agent or the Co-Agents) for
services in connection with this Agreement or otherwise without having
to account for the same to the Banks.
11.5 INDEMNIFICATION. The Banks agree to indemnify the Agent (to
the extent not reimbursed under SECTION 12.3 or 12.4, but without
limiting the obligations of the Company under said SECTIONS 12.3 and
12.4), ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever (including the consequences of the
negligence of the Agent) which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of
any Credit Document or any other documents contemplated by or referred
to therein or the transactions contemplated thereby (including the
costs and expenses which the Company is obligated to pay under
SECTIONS 12.3 and 12.4 but excluding, unless a Default has occurred
and is continuing, normal administrative costs and expenses incident
to the performance of
-68-
its agency duties hereunder) or the enforcement of any of the terms
hereof or thereof or of any such other documents, including the
negligence of the Agent; PROVIDED that no Bank shall be liable for any
of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified. The obligations of
the Banks under this SECTION 11.5 shall survive the termination of
this Agreement.
11.6 NON-RELIANCE ON THE AGENT AND OTHER BANKS. Each Bank agrees
that it has received current financial information with respect to the
Company and that it has, independently and without reliance on the
Co-Agents or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis
of the Company and decision to enter into this Agreement and that it
will, independently and without reliance upon the Co-Agents or any
other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Credit Documents.
The Co-Agents shall not be required to keep themselves informed as to
the performance or observance by the Company of any Credit Document or
any other document referred to or provided for therein or to inspect
the property or books of the Company or any other Person. Except for
notices, reports and other documents and information expressly
required to be furnished to the Banks by the Co-Agents under the
Credit Documents, the Co-Agents shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of
the Company (or any of its Affiliates) which may come into the
possession of the Co-Agents.
11.7 FAILURE TO ACT. Except for action expressly required of the
Agent under the Credit Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under SECTION 11.5 against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
11.8 RESIGNATION OR REMOVAL OF THE AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Banks and
the Company, and the Agent may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal,
the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent. Any successor Agent
shall be a bank which has an office in the United States and a
combined
-69-
capital and surplus of at least $250,000,000 and with its deposits
insured by the FDIC. Upon the acceptance of any appointment as the
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 hereunder. Such
successor Agent shall promptly specify its Principal Office referred
to in SECTIONS 3.1 and 5.1 by notice to the Company. After any
retiring Agent's resignation or removal hereunder as the Agent, the
provisions of this SECTION 11 shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.
Section 12. MISCELLANEOUS.
2.1 WAIVER. No waiver of any Default shall be a waiver of any
other Default. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any Credit Document
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege thereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The remedies provided in the Credit Documents are
cumulative and not exclusive of any remedies provided by law or in
equity.
12.2 NOTICES. All notices and other communications provided for
herein (including any modifications of, or waivers or consents under,
this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party, at such other address as shall be
designated by such party in a notice to the Company and the Agent
given in accordance with this Section. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.3 EXPENSES, ETC. Whether or not any Letter of Credit is ever
issued, the Company shall pay or reimburse on demand each of the Banks
and the Co-Agents for paying: (a) the reasonable fees and expenses of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., special counsel to the
Agent, in connection with (1) the preparation, execution and delivery
of the Credit Documents (including the exhibits and schedules hereto),
the issuance of the Letters of Credit hereunder and (2) any
modification, supplement or waiver of any of the terms of any Credit
Document; (b) all reasonable out-of-pocket costs and expenses of the
Banks and the Co-Agents (including reasonable counsels' fees) in
connection with
-70-
any Event of Default under or the enforcement of any Credit Document;
(c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority
in respect of any Credit Document or any other document referred to
therein; and (d) reasonable expenses of due diligence and syndication,
and mutually agreed advertising and marketing costs.
12.4 INDEMNIFICATION. The Company shall indemnify the Agent
(including the Agent when acting as issuer of the Letters of Credit),
the Co-Agents, the Banks, and each Affiliate thereof and their
respective directors, officers, employees, agents and counsel from,
and hold each of them harmless against, any and all losses,
liabilities, costs, expenses, claims or damages to which any of them
may become subject, regardless of and including losses arising from
the negligence of the Agent or the Co-Agents or the Banks or any other
indemnitee, (A) in connection with the execution and delivery or
transfer of or payment or failure to pay under any Letter of Credit,
including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Agent, such Co-Agent or such
Bank, as the case may be, may incur (whether incurred as a result of
its own negligence or otherwise) by reason of or in connection with
the failure of any other Bank (whether as a result of its own
negligence or otherwise) to fulfill or comply with its obligations to
the Agent or such Bank, as the case may be, hereunder (but nothing
herein contained shall affect the rights the Company may have against
such defaulting Bank); and (B) insofar as such losses, liabilities,
costs, expenses, claims or damages arise out of or result from any (a)
actual or proposed use by the Company of the proceeds of any extension
of credit by the Agent or any Bank hereunder; (b) breach by the
Company of any Credit Document; (c) violation by the Company or any of
its Subsidiaries of any Legal Requirement including Applicable
Environmental Laws; (d) any Bank's or the Agent's or any Co-Agent's
being deemed an owner or operator of any assets of the Company or its
Subsidiaries by a court or other regulatory or administrative agency
or tribunal in circumstances in which neither the Agent, either
Co-Agent nor any of the Banks is generally operating or generally
exercising control over such assets, to the extent such losses,
liabilities, claims or damages arise out of or result from any Legal
Requirement including Applicable Environmental Laws pertaining to the
condition of such assets, (e) Environmental Claim or (f)
investigation, litigation or other proceeding (including any
threatened investigation or proceeding) relating to any of the
foregoing, and the Company shall reimburse the Agent, Co-Agent, each
Bank, and each Affiliate thereof and their respective directors,
officers, employees, agents and counsel, upon demand, for any expenses
(including reasonable legal fees) incurred in connection with any such
investigation or proceeding; but excluding any such losses,
liabilities, claims, damages, costs or expenses incurred by a Person
or any Affiliate thereof or their respective directors, officers,
employees, agents or counsel by reason of the gross negligence or
willful misconduct
-71-
of such Person, Affiliate director, officer, employee, agent or
counsel. The obligation of the Company to provide indemnification
under this SECTION 12.4 for fees and expenses of counsel shall be
limited to the fees and expenses of one counsel in each jurisdiction
representing all of the Persons entitled to such indemnification,
except to the extent that, in the reasonable judgment of any such
indemnified Person, the existence of actual or potential conflicts of
interest make representation of all of such indemnified Persons by the
same counsel inappropriate; in such a case, the Person exercising such
judgment shall be indemnified for the reasonable fees and expenses of
its separate counsel to the extent provided in this SECTION 12.4
without giving effect to the first clause of this sentence. Nothing
in this SECTION 12.4 is intended to limit the obligations of the
Company under any other provision of this Agreement.
12.5 AMENDMENTS, ETC. No amendment or waiver of any provision of
any Credit Document, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Required Banks and the Company, and each
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
each Bank affected thereby, (a) increase the Commitment of any of the
Banks or subject the Banks to any additional obligations; (b) reduce
the principal of, or interest on, any Reimbursement Obligation, fee or
other sum to be paid under any Credit Document; (c) postpone any
scheduled date fixed for any payment of principal of, or interest on,
any Reimbursement Obligation, fee or other sum to be paid under any
Credit Document; (d) change the percentage of any of the Commitments,
or of the aggregate unpaid principal amount of the Reimbursement
Obligations, or the number of Banks which shall be required for the
Banks or any of them to take any action under this Agreement; (e)
change any provision contained in SECTIONS 2.3, 5.2, 5.7, 6, 12.3 or
12.4 or this SECTION 12.5, or in the definition of "Required Ratios".
Anything in this SECTION 12.5 to the contrary, no amendment, waiver or
consent shall be made with respect to SECTION 11 without the consent
of the Agent and the Co-Agents.
12.6 SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding
upon and inure to the benefit of the Company, the Agent, the Co-Agents
and the Banks and their respective successors and assigns. The
Company may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of all of the Banks.
(b) Each Bank may sell participations to any Person in all or part
of its Reimbursement Obligation, or all or part of its Commitment, in
which event, without limiting the foregoing, the provisions of SECTION
6 shall inure to the benefit of each purchaser of a participation and
the PRO RATA treatment of
-72-
payments, as described in SECTION 5 2, shall be determined as if such
Bank had not sold such participation. In the event any Bank shall
sell any participation, (1) the Company, the Agent, the Co-Agent and
the other Banks shall continue to deal solely and directly with such
selling Bank in connection with such selling Bank's rights and
obligations under the Credit Documents (including the Applications
held by such selling Bank); (2) such Bank shall retain the sole right
and responsibility to enforce the Reimbursement Obligations, including
the right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or
waivers with respect to (A) any fees payable hereunder to the Banks,
and (B) the amount of principal or the rate of interest payable on, or
the dates fixed for the scheduled repayment of principal of, the
Reimbursement Obligations and other sums to be paid to the Banks
hereunder, and (3) the Company agrees, to the fullest extent it may
effectively do so under applicable law, that any participant of a Bank
may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such
participant were a direct holder of Reimbursement Obligations if such
Bank has previously given notice of such participation to the Company.
(c) Each Bank may assign to one or more Banks or Eligible
Assignees all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of its Commitment and
the same portion of the related Reimbursement Obligations at the time
owing to it); PROVIDED (1) other than in the case of an assignment to
a Person at least 50% owned by the assignor Bank, or by a common
parent of both, or to another Bank, the Agent and the Company must
give their respective prior written consent, which consent will not be
unreasonably withheld; (2) the aggregate amount of the Commitment
and/or Reimbursement Obligations of the assigning Bank subject to each
such assignment (determined as of the date the Assignment Agreement
with respect to such assignment is delivered to the Agent) shall in no
event be less than $750,000 (or $75,000 in the case of an assignment
between Banks) (except for certain exceptions approved by the Company
and the Agent) and shall be in an amount that is an integral multiple
of $75,000; (3) the assigning Bank shall contemporaneously assign to
such assignee Bank or Eligible Assignee an equal percentage of the
assigning Bank's Revolving Commitment and Term Loan Commitment and all
assigning Bank's other rights and obligations under the Revolving and
Term Credit Agreement; and (4) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and
recording in its records, an Assignment Agreement with blanks
appropriately completed, together with the Applications subject to
such assignment and a processing and recordation fee of $2,000 (for
which the Company shall have no liability except in the case of
assignments required by the Company pursuant to SECTION 6.1 or 6.2, in
which case such fee shall be paid by the Company). Upon such
execution, delivery, acceptance and recording, from and after the
-73-
effective date specified in each Assignment Agreement, (A) the
assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment Agreement, have the rights and obligations
of a Bank hereunder and (B) the Bank thereunder shall, to the extent
provided in such assignment, be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement 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).
(d) By executing and delivering an Assignment Agreement, the Bank
assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows (1) other
than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby, such assignor
Bank makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in
or in connection with any Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any
Credit Document; (2) such assignor Bank makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the performance or observance by the
Company of any of its obligations under any Credit Document; (3) such
assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements of the Company
previously delivered in accordance herewith and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment Agreement; (4)
such assignee will, independently and without reliance upon the Agent,
such assignor Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under the
Credit Documents; (5) such assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under the Credit Documents as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental
thereto, and (6) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of the
Credit Documents are required to be performed by it as a Bank.
(e) The Agent shall maintain at its office a copy of each
Assignment Agreement delivered to it and a record of the names and
addresses of the Banks and the Commitment of, and principal amount of
the Reimbursement Obligations owing to, each Bank from time to time.
The entries in such record shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Banks say treat
each Person the name of which is recorded therein as a Bank hereunder
for all purposes of the Credit Documents. Such records shall be
available for inspection by the Company or any
-74-
Bank at any reasonable time and from time to time upon reasonable
prior notice.
(f) Upon its receipt of an Assignment Agreement executed by an
assigning Bank and the assignee thereunder together with the
Application subject to such assignment, the written consent to such
assignment and the fee payable in respect thereto, the Agent shall, if
such Assignment Agreement has been completed with blanks appropriately
filled, (1) accept such Assignment Agreement; (2) record the
information contained therein in its records, and (3) give prompt
notice thereof to the Company.
(g) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Company furnished to
such Bank by or on behalf of the Company.
(h) Any assignment by a Bank pursuant to this SECTION 12.6 shall
not result in any single Bank holding in excess of 25% of the
aggregate of the Commitments at any one time.
(i) Notwithstanding any other provision of this SECTION 12.6, TCB
and its Affiliates may not assign their rights hereunder unless, after
giving effect to such assignment, TCB and its Affiliates would have an
aggregate Commitment Percentage of at least 10%.
(j) Notwithstanding anything herein to the contrary, each Bank may
pledge and assign all or any portion of its rights and interests under
the Credit Documents to any Federal Reserve Bank.
12.7 SURVIVAL; TERM; REINSTATEMENT. In addition to the other
provisions of this Agreement expressly stated to survive the
termination of this Agreement, the obligations of the Company under
SECTIONS 6, 12.3 and 12.4 and the last sentence of this SECTION 12.7
and the obligations of the Banks under SECTION 12.8 shall survive the
termination of this Agreement. The term of this Agreement shall be
until (a) the full and final payment of all Reimbursement Obligations,
(b) the expiry of all Letters of Credit, (c) the termination of all
Commitments and (d) the payment of all amounts due under the Credit
Documents. The Company agrees that if at any time all or any part of
any payment previously applied by any Bank to any Reimbursement
Obligation or other sum hereunder is or must be returned by or
recovered from such Bank for any reason (including the order of any
bankruptcy court), the Credit Documents shall automatically be
reinstated to the same effect as if the prior application had not been
made, and the Company hereby agrees to indemnify such Bank against,
and to save and hold such Bank harmless from, any required return by
or recovery from such Bank of any such payment because of its being
deemed preferential under applicable Legal Requirements, or for any
other reason.
-75-
12.8 LIMITATION OF INTEREST. The parties to this Agreement
intend to strictly comply with all applicable laws, including
applicable usury laws. Accordingly, the provisions of this Section
shall govern and control over every other provision of any Credit
Document which conflicts or is inconsistent with this Section, even if
such provision declares that it controls. As used in this SECTION
12.8, the term "interest" includes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under
applicable law; PROVIDED that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized
as an expense or as compensation for something other than the use,
forbearance or detention of money, and not as interest and (b) all
interest at any time contracted for, reserved, charged or received
shall be amortized, prorated, allocated and spread, in equal parts
during the full term of this Agreement and the Commitments. In no
event shall the Company or any other Person be obligated to pay, or
the Agent or any Bank have any right or privilege to reserve, receive
or retain, (x) any interest in excess of the maximum amount of
nonusurious interest permitted under the laws of the State of Texas or
the applicable laws (if any) of the United States or of any other
state or (y) total interest in excess of the amount which the Agent or
such Bank could lawfully have contracted for, reserved, received,
retained or charged had the interest been calculated for the full term
of this Agreement at the Highest Lawful Rate. On each day, if any,
that the interest rate (the "Stated Rate") called for under any Credit
Document exceeds the Highest Lawful Rate, the rate at which interest
shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain
fixed at the Highest Lawful Rate for each day thereafter until the
total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is
imposed by this sentence. Thereafter, interest shall accrue at the
Stated Rate unless and until the Stated Rate again exceeds the Highest
Lawful Rate when the provisions of the immediately preceding sentence
shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the
Highest Lawful Rate shall be determined by dividing the applicable
Highest Lawful Rate per annum by the number of days in the calendar
year for which such calculation is being made. None of the terms and
provisions contained in any Credit Document which directly or
indirectly relate to interest shall ever be construed without
reference to this Section, or be construed to create a contract to pay
for the use, forbearance or detention of money at an interest rate in
excess of the Highest Lawful Rate. If the term of this Agreement is
shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or
permitted prepayment, and if for that (or any other) reason the Agent
or any Bank at any time, including the stated maturity, is owed or
receives (and/or has received) interest in excess of interest
calculated at the Highest Lawful Rate, then and in any such event all
of any such excess interest shall be
-76-
canceled automatically as of the date of such acceleration, prepayment
or other event which produces the excess, and, if such excess interest
has been paid to the Agent or such Bank, it shall be credited PRO
TANTO against the then-outstanding principal balance of the Company's
obligations to the Agent or such Bank, effective as of the date or
dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully
paid and satisfied, whichever occurs first, and any remaining balance
of such excess shall be promptly refunded to its payor.
12.9 CAPTIONS. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
12.10 COUNTERPARTS. Each Credit Document may be executed in any
number of counterparts, all of which taken together shall constitute
one and the same agreement and any of the parties hereto may execute
such Credit Document by signing any such counterpart.
12.11 GOVERNING LAW. Except to the extent otherwise specified
therein, each Credit Document shall be governed by and construed in
accordance with the law of the State of Texas and the United States of
America. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of Texas
and of any Texas state court sitting in Harris County, Texas for
purposes of all legal proceedings arising out of or relating to the
Credit Documents or the transactions contemplated thereby The Company
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in
an inconvenient forum.
12.12 SEVERABILITY. Whenever possible, each provision of the
Credit Documents shall be interpreted in such manner as to be
effective and valid under applicable law. If any provision of any
Credit Document shall be invalid, illegal or unenforceable in any
respect under any applicable law, the validity, legality and
enforceability of the remaining provisions of such Credit Document
shall not be affected or impaired thereby.
12.13 CHAPTER 15 NOT APPLICABLE. Chapter 15 of the Texas Credit
Code shall not apply to any Credit Document or to any Commitment or
Letter of Credit or Application or Reimbursement Obligation, nor shall
any Credit Document be governed by or be subject to the provisions of
such Chapter 15 in any manner whatsoever.
-77-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered on May 20, 1992 but effective as of
the day and year first above written.
SANTA FE ENERGY RESOURCES, INC.
a Delaware corporation
By: M. J. ROSINSKI
Name: M. J. Rosinski
Title: Vice President & Chief
Financial Officer
Address for Notices:
Santa Fe Energy Resources, Inc.
1616 South Voss, Suite 100
Houston, Texas 77097
Telecopy: (713) 268-5341
Attention: Vice President-Finance
Telex: 794-567
(Answerback: SFEPROD HOU)
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually,
as Administrative Agent and as
Co-Agent
By: JAMES R. MCBRIDE
James R. McBride
Senior Vice President
Address for Notices:
Texas Commerce Bank National
Lending Offices: Association
712 Main Street
Texas Commerce Bank National Houston, Texas 77002
Association Attention: Manager, Energy Group
ABA #113000609 Telecopy: (713) 236-4117
For Credit To: Acct. #10967 Telex: 166-053 (Answerback:
Attention: Investment TCB HOU)
Operations/Norma Benzon with copies to:
Reference: Santa Fe Energy
Resources, Inc. Texas Commerce Bank National
Association
P.O. Box 2558
COMMITMENT: $1,817,496.23 Houston, Texas 77252
Attention: Manager, Capital
Markets Division
and
Texas Commerce Bank National
Association
P.O. Box 2558
Houston, Texas 77252
Attention: Manager, Loan
Agreements Division
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By: H. GENE SHIELS
Name: H. Gene Shiels
Title: Vice President
Address for Notices:
Lending Offices:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
ABA #111000025 700 Louisiana
For Credit to: Acct. P.O. Box 2518
#0180019828 Houston, Texas 77252-2518
Attention: Loan Funds Attention: H. Gene Shiels
Transfer Telecopy: (713) 247-6432
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,817,496.23
THE BANK OF NEW YORK
By: M. B. DAVIS
Name: M. B. Davis
Title: Vice President
Lending Office: Address for Notices:
The Bank of New York
ABA #021000018 The Bank of New York
For Credit To: Special One Wall Street, 19th Floor
Financial Products Dept. New York, New York 10286
Account No. 803-329-7689 Attention: Administration
Reference: Santa Fe Energy Telecopy: (212) 635-7923
Resources, Inc. Telex: 420-268 (Answerback:IRV UI)
Specify fees, period.
COMMITMENT: $1,538,461.54
THE BANK OF NOVA SCOTIA
By: A. S. NORSWORTHY
Name: A. S. Norsworthy
Title: Assistant Agent
Address for Notices:
Lending Office:
Bank of Nova Scotia, New The Bank of Nova Scotia
York Agency 55 Park Plaza, Suite 650
ABA #026002532 Atlanta, Georgia 30303
For Credit To: Atlanta Attention: Claude Ashby
Agency Telecopy: (404) 525-3833
Reference: Santa Fe Energy Telex: 00542319
Resources, Inc. (Answerback: SCOTIABANK ATL)
COMMITMENT: $1,538,461.54
with a copy to:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Mark Ammerman
Telecopy: (713) 752-2425
BANK OF MONTREAL
By: MARK GREEN
Name: Mark Green
Title: Director
Address for Notices:
Lending Offices:
Harris Bank Bank of Montreal
ABA #071000288 700 Louisiana, Suite 4400
For Credit To: Bank of Houston, Texas 77002
Montreal, Chicago Branch Attention: Dennis Spencer
Attention: E. Rios Telecopy: (713) 223-4007
Reference: Santa Fe Energy Telex: 77-5640
Resources, Inc. (Answerback: BKMONTREAL HOU)
COMMITMENT: $1,538,461.54
CIBC, INC.
By: BRIAN R. SWINFORD
Name: Brian R. Swinford
Title: Vice President
Address for Notices:
Lending Offices:
Morgan Guaranty Trust CIBC, Inc.
Company of New York 200 Galleria Parkway, NW
ABA #021-000-238 Suite 650
For Credit To: CIBC, Atlanta, Georgia 30339
Atlanta Acct. #630-00-480 Attention: Alex Dymanus
For Further Credit To: Telecopy: (404) 955-1185
Acct. #0701610 Telex: 790-745
Attention: Loan Operations (Answerback: CANBANK ATL)
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,538,461.54
with a copy to:
Canadian Imperial Bank of
Commerce
2 Houston Center, Suite 1200
Houston, Texas 77010
Attention: Brian R. Swinford
Telecopy: (713) 658-9922
BANQUE PARIBAS HOUSTON AGENCY
By: BARTON D. SCHOUEST
Name: Barton D. Schouest
Title: Group Vice President
By: MEI WAN TONG
Name: Mei Wan Tong
Title: Group Vice President
Lending Offices: Address for Notices:
Bankers Trust Co.
ABA #02-100-1033 Banque Paribas Houston Agency
1200 Smith Street, Suite 3100
Houston, Texas 77002
For Credit To: Banque Attention: Brian Malone
Paribas New York Telecopy: (713) 659-3832
#04202195
Final Credit 2144-001545
Banque Paribas Houston Agency
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,153,846.16
THE FIRST NATIONAL BANK OF BOSTON
By: JOHN R. VAUGHAN, JR.
Name: John R. Vaughan, Jr.
Title: Director
Address for Notices:
Lending Offices:
Bank of Boston The First National Bank of Boston
ABA #011000390 100 Federal Street
Boston, Massachusetts 02110
For Credit To: Attention: George W. Passela
not applicable Telecopy: (617) 434-3652
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $1,538,461.54
ABN AMRO Bank, N.V.--HOUSTON AGENCY
By: CHARLES W. RANDALL
Name: Charles W. Randall
Title: Assistant Vice President
Address for Notices:
Lending Offices:
ABN AMRO New York ABN AMRO Bank, N.V.--Houston
ABA #026009580 Agency
Three Riverway, Suite 1600
Houston, Texas 77056
Attention: Mr. Collis Sanders
For Credit To: ABN AMRO Telecopy: (713) 629-7533
Houston Agency
Acct. #651001071541
Reference: Santa Fe Energy
Resources, Inc.
COMMITMENT: $2,134,238.30
EXHIBITS:
A - Form of Application
B - Assignment Agreement
SCHEDULES:
I - Restricted and Unrestricted Subsidiaries
II - Liens and Funded Debt
III - Initial Approved Assumptions and Price Protection Agreements
IV - Coverage Report
V - Subordination Provisions
VI - Opinion of Andrews & Kurth, L.L.P.
VII - Opinion of David L. Hicks
VIII - Jurisdictions for Which Certificates Are to Be Provided
IX - Existing Letters of Credit