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SECOND RESTATED CREDIT AGREEMENT
NUEVO ENERGY COMPANY,
as Borrower
NATIONSBANK, N.A.
as Administrative Agent
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
BANC OF AMERICA SECURITIES LLC,
as Lead Arranger and Sole Book Manager
and CERTAIN LENDERS
$400,000,000
Dated as of June 30, 1999
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TABLE OF CONTENTS
Page
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SECOND RESTATED CREDIT AGREEMENT 1
ARTICLE I - Definitions and References 1
Section 1.1. Defined Terms 1
Section 1.2. Exhibits and Schedules; Additional Definitions 25
Section 1.3. Amendment of Defined Instruments 25
Section 1.4. References and Titles 25
Section 1.5. Calculations and Determinations 26
ARTICLE II - The Loans 26
Section 2.1. Advances 26
Section 2.2. Requests for Advances 27
Section 2.3. Use of Proceeds 28
Section 2.4. Rate Elections 28
Section 2.5. Facility Fees 28
Section 2.6. Administrative Agent's Fees 29
Section 2.7. Optional Prepayments 29
Section 2.8. Mandatory Prepayments 29
Section 2.9. Payments to Lenders 31
Section 2.10. Initial Borrowing Base 32
Section 2.11. Subsequent Determinations of Borrowing Base 32
Section 2.12. Prudent Industry Lending Standards 33
Section 2.13. Capital Reimbursement 33
Section 2.14. Increased Cost of Fixed Rate Portions 34
Section 2.15. Availability 34
Section 2.16. Funding Losses 35
Section 2.17. Reimbursable Taxes 35
Section 2.18. Change of Lending Office and Lender; Time Limit; etc 37
ARTICLE III - Conditions Precedent to Lending 37
Section 3.1. Documents to be Delivered 37
Section 3.2. Additional Conditions Precedent 38
ARTICLE IV - Representations and Warranties 39
Section 4.1. Borrower's Representations and Warranties 39
(a) No Default 39
(b) Organization and Good Standing 39
(c) Authorization 40
(d) No Conflicts or Consents 40
(e) Enforceable Obligations 40
(f) Initial Financial Statements 41
(g) Other Obligations and Restrictions 41
i
(h) Full Disclosure 41
(i) Litigation 42
(j) Labor Disputes and Acts of God 42
(k) ERISA Liabilities 42
(l) Environmental and Other Laws 42
(m) Names and Places of Business 43
(n) Borrower's Subsidiaries 43
(o) Title to Properties; Licenses 44
(p) Government Regulation 44
(q) Benefit to Guarantors 44
(r) Reasonable Consideration for Guaranties 44
(s) No Insolvencies 45
Section 4.2. Representation by Lenders 45
ARTICLE V - Covenants of Borrower 45
Section 5.1. Affirmative Covenants 45
(a) Payment and Performance 45
(b) Books, Financial Statements and Reports 45
(c) Other Information; Inspections; Confidentiality 47
(d) Notice of Material Events and Change of Address 48
(e) Maintenance of Properties 48
(f) Maintenance of Existence and Qualifications 48
(g) Payment of Trade Liabilities, Taxes, etc 49
(h) Insurance 49
(i) Payment of Expenses 49
(j) Performance on Borrower's Behalf 50
(k) Interest 50
(l) Compliance with Agreements and Law 50
(m) Evidence of Compliance 50
(n) Agreement to Deliver Security Documents 50
(o) Perfection and Protection of Security Interests and Liens 51
(p) Production Proceeds 51
Section 5.2. Negative Covenants 51
(a) Guaranties and Indebtedness 52
(b) Prepayments of Subordinated Indebtedness 52
(c) Prepayments of Additional Senior Indebtedness 53
(d) Limitation on Liens 53
(e) Limitation on Mergers, Issuances of Securities 54
(f) Limitation on Sales of Property 54
(g) Derivative Contracts 55
(h) Restricted Payments and Investments 55
(i) Limitation on Acquisitions, New Businesses, and Margin Stock 56
(j) Transactions with Affiliates 57
(k) Certain Prohibited Contracts; Torch Agreements; Multiemployer ERISA Plans 57
(l) Unrestricted Subsidiaries 57
ii
(m) EBITDAX to Fixed Charges 58
(n) Indebtedness to Capitalization 58
ARTICLE VI - Subsidiary Guaranties and Subordination 58
Section 6.1. Subsidiary Guarantors 58
Section 6.2. Guaranty 58
Section 6.3. Unconditional Guaranty 59
Section 6.4. Waivers 62
Section 6.5. Exercise of Remedies 62
Section 6.6. Delayed Subrogation 63
Section 6.7. Subordination 63
Section 6.8. Release of Guarantor 64
ARTICLE VII - Events of Default and Remedies 64
Section 7.1. Events of Default 64
Section 7.2. Acceleration; Other Remedies 66
Section 7.3. Indemnity 67
Section 7.4. Bank Accounts; Offset 68
ARTICLE VIII - Administrative Agent 68
Section 8.1. Appointment and Authority 68
Section 8.2. Exculpation, Administrative Agent's Reliance, Etc. 69
Section 8.3. Lenders' Credit Decisions 69
Section 8.4. Indemnification 69
Section 8.5. Rights as Lender 70
Section 8.6. Sharing of Set-Offs and Other Payments 70
Section 8.7. Investments 71
Section 8.8. Benefit of Article VIII 71
Section 8.9. Resignation 71
ARTICLE IX - Miscellaneous 72
Section 9.1. Waivers and Amendments; Acknowledgments 72
Section 9.2. Survival of Agreements; Cumulative Nature 73
Section 9.3. Notices 74
Section 9.4. Joint and Several Liability; Parties in Interest 74
Section 9.5. Governing Law; Submission to Process 76
Section 9.6. Limitation on Interest 77
Section 9.7. Termination; Limited Survival 77
Section 9.8. Severability 78
Section 9.9. Counterparts 78
SECTION 9.10. WAIVER OF JURY TRIAL. 78
Section 9.11. Restatement 78
iii
Schedules and Exhibits:
LENDER SCHEDULE
SCHEDULE 1 Disclosure Schedule
SCHEDULE 2 Security Schedule
SCHEDULE 3 California Real Estate
SCHEDULE 4 List of Initial Engineering Reports
EXHIBIT A Promissory Note
EXHIBIT B Request for Advances
EXHIBIT C Rate Election
EXHIBIT D-1 Opinion of Butler & Binion, L.L.P., counsel for Related Persons
EXHIBIT D-2 Opinion of Tim Lewy, special California counsel for Borrower
EXHIBIT E Certificate Accompanying Financial Statements
EXHIBIT F Assignment and Assumption
EXHIBIT G Supplement to Credit Agreement for Additional Subsidiary
Guarantor
iv
SECOND RESTATED CREDIT AGREEMENT
THIS SECOND RESTATED CREDIT AGREEMENT is made as of June 30, 1999, by and
among Nuevo Energy Company, a Delaware corporation (herein called "Borrower"),
certain Subsidiaries of Borrower from time to time a party hereto, NationsBank,
N.A., a national banking association (herein called "Administrative Agent"),
Morgan Guaranty Trust Company of New York (herein called "Documentation Agent"),
and the Lenders referred to below.
RECITALS
WHEREAS, Borrower, Administrative Agent, Documentation Agent and Lenders
entered into that certain Amended and Restated Credit Agreement dated as of
February 13, 1998, as amended (the "Original Agreement"); and
WHEREAS, the parties desire to amend and restate the Original Agreement for
the purposes set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein the parties hereto do hereby (a) amend and restate the Original
Agreement so that it shall read in its entirety as follows and (b) agree as
follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"1996 Indenture" means the Indenture dated as of April 1, 1996,
effective as of April 9, 1996, among Borrower, as issuer, certain Subsidiaries
of Borrower, as guarantors (such Subsidiaries being released as guarantors by a
Release and Termination of Subsidiary Guarantees dated February 2, 1998), and
State Street Bank and Trust Company, as Indenture Trustee, pursuant to which the
1996 Subordinated Notes were issued, as supplemented by that certain First
Supplemental Indenture dated as of December 23, 1996.
"1996 Subordinated Notes" means Borrower's 9 1/2% Senior Subordinated
Notes due April 1, 2006, issued by Borrower in the aggregate principal amount of
$160,000,000 under the 1996 Indenture.
"1998 Indenture" means the Indenture dated as of June 8, 1998, among
Borrower, as issuer, any Subsidiary Guarantor (as therein defined) that may
become parties thereto, and State Street Bank and Trust Company, as Indenture
Trustee, pursuant to which (i) the 1998 Subordinated Notes were issued and (ii)
an additional amount of senior subordinated notes may be issued by Borrower in
the original principal amount of up to $75,000,000.
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"1998 Subordinated Notes" means Borrower's 8 7/8% Senior Subordinated
Notes due 2008, issued by Borrower in the aggregate principal amount of
$100,000,000 under the 1998 Indenture.
"Additional Senior Indebtedness" means Indebtedness owing by any
Related Person, excluding (a) the Obligations, (b) Subordinated Indebtedness,
(c) Intercompany Indebtedness, (d) Indebtedness arising under Derivative
Contracts, (e) Non-Recourse Indebtedness, and (f) guaranties in respect of any
of the foregoing.
"Adjusted EBITDAX" means the sum, without duplication, determined for
Borrower and its Restricted Subsidiaries on a consolidated basis for the period
in question, of EBITDAX for such period, including (a) all gains and losses from
sales of Borrowing Base Assets, and (b) gross proceeds from sales of assets
other than Borrowing Base Assets (excluding in each case sales of hydrocarbons
in the ordinary course of business).
"Adjusted EBITDAX/Fixed Charge Ratio" means, at the end of any Fiscal
Quarter, the ratio of (A) Adjusted EBITDAX for the four-Fiscal Quarter period
ending with such Fiscal Quarter to (B) Fixed Charges for the same four-Fiscal
Quarter period.
"Adjusted Net Income" for any period means the consolidated net income
of Borrower and its Restricted Subsidiaries for such period, calculated after
excluding: (a) the after-tax effects of all write-ups or write-downs (such as
Impairment Adjustments), after the date hereof, in the book value of assets as a
result of the reevaluation thereof, (b) the net income or loss of any Person
(other than Borrower and the Restricted Subsidiaries) in which Borrower or any
Restricted Subsidiary has any ownership interest, except to the extent that
Borrower or a Restricted Subsidiary has actually received cash during such
period in respect of dividends or distributions from such Person (whether such
dividends or distributions accrued during such period or an earlier period), and
(c) the after-tax effects of exploration expenses.
"Adjusted Net Worth" means, at the time in question, that portion of
the consolidated stockholders' equity of Borrower and its Restricted
Subsidiaries which is attributable to Non-Redeemable Stock (excluding treasury
stock), but calculated after excluding: (a) the cumulative effects on retained
earnings of (i) the after-tax effects of all write-ups or write-downs (such as
Impairment Adjustments) after December 31, 1995, in the book value of assets as
a result of the reevaluation thereof, and (ii) the net income or loss after
December 31, 1995, of any Person (other than Borrower and the Restricted
Subsidiaries) in which Borrower or any Restricted Subsidiary has any ownership
interest, except to the extent that Borrower or a Restricted Subsidiary has
actually received cash in respect of dividends or distributions from such
Person, and (b) the book value of all Investments in Unrestricted Subsidiaries
(provided that for the purposes of this definition the book value of the
California Real Estate, as reported on the consolidated balance sheet of
Borrower and all of its Subsidiaries, shall be included in such calculation,
regardless of whether the California Real Estate is held by Borrower, a
Restricted Subsidiary, or an Unrestricted Subsidiary).
"Administrative Agent" means NationsBank, N.A., as Administrative
Agent hereunder, and its successors in such capacity.
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"Advance" has the meaning given it in Section 2.1.
"Affiliate" means, as to any Person, each other Person that directly
or indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power:
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
For so long as the Torch Agreements (or any similar agreement) are in
effect, Torch and its Subsidiaries shall also be deemed Affiliates of the
Related Persons.
"Agreement" means this Second Restated Credit Agreement.
"Allowed Put" means any put agreement with respect to capital stock issued
by Borrower which obligates Borrower to repurchase such capital stock at an
exercise or strike price that Borrower views as favorable for the purpose of
reacquiring its stock; provided, that at the time of entering into such put
agreement, the repurchase by Borrower of the underlying capital stock at such
exercise or strike price would not be prohibited by Section 5.2(h) hereof.
"Approved Petroleum Engineers" means, in connection with any annual
Engineering Report to be furnished under Section 5.1(b), any one or more of the
following independent petroleum engineering firms:
Miller & Lents, Ltd.
Netherland, Sewell, & Associates, Inc.
Ryder Scott Company,
S. A. Holditch and Associates, Inc.,
or any other independent petroleum engineers chosen by Borrower and acceptable
to Majority Lenders. D.O.R. Engineering Inc. shall be deemed acceptable to
Majority Lenders with respect to Borrower's properties listed on Schedule 3
hereto as having been reviewed by such firm. In addition, if Borrower furnishes
such Engineering Report in the form of multiple reports covering different
Borrowing Base Assets and if one or more of such multiple reports is prepared,
audited or reviewed by other independent petroleum engineering firms or by
Borrower's or Torch's internal reserve engineers, such other firms or internal
reserve engineers shall also be considered to be "Approved Petroleum Engineers"
to the extent that the Borrowing Base Assets which are covered by their reports
do not, in the aggregate, have present values as shown in such reports which
exceed ten percent of the aggregate present values of all Borrowing Base Assets
covered by such Engineering Report taken as a whole.
3
"Available Borrowing Base" means, at the particular time in question, the
lesser of (a) the Borrowing Base then in effect minus the aggregate amount of
Additional Senior Indebtedness outstanding at such time, and (b) the Maximum
Loan Amount.
"BBB/Baa2 Debt Rating", and Borrower's maintenance of a "BBB/Baa2 Debt
Rating", means that at the time in question:
(a) any two Rating Agencies are then giving the following ratings to
Borrower's non-credit enhanced, senior subordinated long-term debt
securities:
(i) a rating of BB+ (or its then equivalent) or higher by S&P, or
(ii) a rating of Ba1 (or its then equivalent) or higher by Moody's, or
(iii) a rating of BB+ (or its then equivalent) or higher by Duff &
Phelps; or
(b) if any Rating Agencies are rating any of Borrower's non-credit
enhanced, senior unsecured long-term debt securities which are outstanding
at such time, any two Rating Agencies are then giving the following ratings
to such senior unsecured long-term debt securities:
(i) a rating of BBB (or its then equivalent) or higher by S&P, or
(ii) a rating of Baa2 (or its then equivalent) or higher by Moody's,
or
(iii) a rating of BBB (or its then equivalent) or higher by Duff &
Phelps.
"Base Rate" means, for any day, the then applicable Base Rate Spread plus
the higher of (a) the Federal Funds Rate for such day plus one-half percent
(0.5%), and (b) Administrative Agent's Prime Rate as in effect on such day. As
used in this paragraph, Administrative Agent's "Prime Rate" means the rate of
interest established by Administrative Agent from time to time as its "prime
rate". Such rate is set by Administrative Agent as a general reference rate of
interest, taking into account such factors as it may deem appropriate, it being
understood that many of Administrative Agent's commercial or other loans are
priced in relation to such rate, that it is not necessarily the lowest or the
best rate actually charged to any customer, that it may not correspond with
further increases or decreases in interest rates charged by other lenders or
market rates in general and that Administrative Agent may make various
commercial or other loans at rates of interest having no relationship to such
rate. If Administrative Agent's Prime Rate, the Federal Funds Rate, or the
applicable Base Rate Spread changes after the date hereof the Base Rate shall be
automatically increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective time of each such change. The
Base Rate shall in no event, however, exceed the Highest Lawful Rate.
"Base Rate Portion" means that portion of the unpaid principal balance of
any Loan which is not made up of Fixed Rate Portions.
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"Base Rate Spread" means zero percent (0%) per annum.
"Borrower" means Nuevo Energy Company, a Delaware corporation.
"Borrowing Base" means, at the particular time in question, either the
amount provided for in Section 2.10, as increased as provided in such section,
or the amount determined by Administrative Agent and Lenders in accordance with
the provisions of Section 2.11(a), (c) or (d), as reduced by Borrower pursuant
to Section 2.11(b).
"Borrowing Base Assets" means, at the time in question, all material Oil
and Gas Properties then owned by any Related Person which are located in or
offshore of the United States and which have proved oil or gas reserves
attributable thereto, excluding from time to time any of the foregoing which (i)
were not included among the assets and properties addressed in the Engineering
Report then most recently given under Section 5.2(b)(iv) (or, prior to receipt
of the first such Engineering Report, addressed in the Initial Engineering
Report) or (ii) were acquired by any Related Person after the date hereof and in
connection therewith were contemporaneously made subject to Forward
Sales/Production Payments.
"Borrowing Base Asset Sale" means any transaction of any kind which results
in a Related Person (other than a Restricted Subsidiary which is obligated in
any way for Non-Recourse Indebtedness) ceasing to be the direct owner of
Borrowing Base Assets. "Borrowing Base Asset Sales" include all sales, leases,
exchanges, dispositions and other transfers of Borrowing Base Assets, whether
made to Unrestricted Subsidiaries or to any other Person (other than a Related
Person which is not obligated in any way for Non-Recourse Indebtedness),
including Forward Sales/Production Payments and Investments in Unrestricted
Subsidiaries or any other such Person by means of transfers of Borrowing Base
Assets. "Borrowing Base Asset Sales" also include any designations which result
in Restricted Subsidiaries which own Borrowing Base Assets becoming Unrestricted
Subsidiaries and any sales or other transfers of Equity Interests (other than
Permitted Preferred Trust Securities) in any such Restricted Subsidiaries.
Sales of hydrocarbons shall not, however, be included in Borrowing Base Asset
Sales if sold after production in the ordinary course of business. The "amount"
of any Borrowing Base Asset Sale shall be the fair market value of the Borrowing
Base Assets transferred, which shall be deemed to be the gross cash proceeds
received in any all-cash transaction with third parties which are not Affiliates
of Borrower and which shall otherwise be determined in good faith by Borrower's
Board of Directors.
"Borrowing Base Deficiency" has the meaning given it in Section 2.8(b).
"Borrowing Base Utilization" means the quotient of (a) the Obligations
outstanding at such time (excluding accrued interest which is not past due),
divided by (b) the Borrowing Base in effect at such time.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas and New
York, New York. Any Business Day in any way relating to Fixed Rate Portions
(such as the day on which an Interest Period begins or ends) must also be a day
on which, in the reasonable judgment of
5
Administrative Agent, significant transactions in dollars are carried out in the
interbank eurocurrency market in London, England.
"California Real Estate" means the fee simple interests of Borrower in real
property located in the State of California acquired from the Unocal companies,
excluding the mineral estate in all such fee simple interests, as described on
Schedule 3 attached hereto.
"Cash Equivalents" means any of the following:
(a) any evidence of indebtedness with a maturity of 180 days or less
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full
faith and credit of the United States of America is pledged in support
thereof);
(b) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000;
(c) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of Borrower and is organized under the
laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's;
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subparagraph (a) above
entered into with any commercial bank meeting the specifications of
subparagraph (b) above;
(e) overnight bank deposits and bankers' acceptances at any commercial
bank meeting the qualifications specified in subparagraph (b) above;
(f) deposits available for withdrawal on demand with any commercial
bank not meeting the qualifications specified in subparagraph (b) above but
which is organized under the laws of any country in which any Related
Person maintains an office or is engaged in the oil and gas business,
provided that (i) all such deposits are required to be made in such
accounts in the ordinary course of business, (ii) such deposits do not at
any one time exceed $5,000,000 in the aggregate, and (iii) no funds so
deposited remain on deposit in such bank for more than 30 days; and
(g) investments in money market funds substantially all of whose
assets comprise securities of the types and maturities described in
subparagraphs (a) through (e) above.
"Change of Control" has the meaning given to such term in the 1996
Indenture as originally executed, without giving regard to any amendments made
thereto.
6
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) under the terms of any Security Document or is purported to be subject
to such a Lien.
"Commitment Period" means the period from and including the date hereof,
until and including April 1, 2003 (or, if earlier, the day on which the Notes
first become due and payable in full).
"Consolidated Funded Indebtedness" means, at the time in question, all
consolidated Indebtedness of Borrower and its Restricted Subsidiaries (whether
current or long term) of the kinds specified in subsection (a), (b), (c), (f),
(g) or (i)(2) of the definition herein of "Indebtedness"; provided, that
"Consolidated Funded Indebtedness" shall not include accrued interest which is
not past due.
"Debt to Capitalization Ratio" means the ratio of (i) the aggregate amount
of Consolidated Funded Indebtedness to (ii) the sum of (1) Adjusted Net Worth
plus (2) Consolidated Funded Indebtedness.
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Derivative Contracts" means all futures contracts, forward contracts,
swap, cap or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements. Allowed Puts and Forward
Sales/Production Payments do not constitute Derivative Contracts.
"Determination Date" has the meaning given it in Section 2.11.
"Disclosure Report" means any notice given by Borrower under Section
5.1(d), any financial statements furnished by Borrower under Section 5.1(b)(i)
or (ii), any certificate given by Borrower's chief financial officer under
Section 5.1(b)(ii), or any other notice given by Borrower to Administrative
Agent or Lenders which expressly states that it is a Disclosure Report under
this Agreement.
"Disclosure Schedule" means Schedule 1 hereto.
"Documentation Agent" means Morgan Guaranty Trust Company of New York.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., or its successor at
the time in question.
"EBITDAX" means the sum, without duplication, determined for Borrower and
its Restricted Subsidiaries on a consolidated basis for the period in question,
of:
(a) Adjusted Net Income for such period, determined after excluding:
(i) all extraordinary gains or losses, (ii) all gains or losses from sales
of assets (other than sales
7
of hydrocarbons in the ordinary course of business), and (iii) the net
income (or net loss) of any Person combined with Borrower or any Restricted
Subsidiary on a "pooling of interests" basis to the extent the same is
attributable to any period prior to the date of combination, plus
(b) all interest expenses (other than interest attributable to dollar-
denominated production payments), income taxes, adjustments for
depreciation and amortization, and other non-cash charges, to the extent
any of the foregoing were taken into account in determining such Adjusted
Net Income, minus
(c) all non-cash gains and revenues that were taken into account in
determining such Adjusted Net Income.
"EBITDAX/Fixed Charge Ratio" means, at the end of any Fiscal Quarter, the
ratio of (A) EBITDAX for the four-Fiscal Quarter period ending with such Fiscal
Quarter to (B) Fixed Charges for the same four-Fiscal Quarter period. For
purposes of determining the Fixed Rate Spread, the applicable "EBITDAX/Fixed
Charge Ratio" shall be determined on the date on which Administrative Agent and
Lenders receive the financial statements of Borrower for each Fiscal Quarter as
set forth in Section 5.1(b)(ii) (the "Redetermination Date"), based on EBITDAX
and Fixed Charges for the four-Fiscal Quarter period ending with such Fiscal
Quarter, and shall be effective from such Redetermination Date until the next
Redetermination Date.
"Eligible Transferee" means a Person which either:
(a) is primarily engaged in the business of commercial banking and is
(i) a Lender, (ii) a Subsidiary of a Lender, (iii) a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iv) a Person of which a Lender is a
Subsidiary, or
(b) is consented to as an Eligible Transferee by both Borrower and
Administrative Agent, which consent will not be unreasonably withheld
(provided that no consent of Borrower shall be required during the
continuance of any Event of Default described in Section 7.1(a) or (b)),
and represents that it is either (i) a commercial bank organized under the
laws of the United States, or any state thereof, having a combined capital
and surplus of at least $200,000,000, or (ii) a commercial bank organized
under the laws of any other country which is a member of the Organization
for Economic Development, or a political subdivision of any such country,
having a combined capital and surplus of at least $200,000,000, provided
that such bank is acting through a branch or agency located in the United
States and further provided that Borrower is not required to pay
withholding taxes on interest or principal owed to such bank.
"Engineering Report" means the Initial Engineering Report and each
engineering report (or set of concurrently delivered engineering reports)
delivered pursuant to Section 5.1(b)(iv).
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or
8
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"Equity Interests" means, with respect to any Person: (a) any stock, shares
or other equity interests in such Person, (b) any other participations or rights
of any kind in the equity interests (however designated) in such Person, and (c)
any rights (other than debt securities convertible into or exchangeable for any
equity interest), warrants or options exercisable for, exchangeable for or
convertible into any such stock, shares, other equity interests, participations
or rights. For purposes of this Agreement, Allowed Puts do not constitute
Equity Interests. Permitted Preferred Trust Securities constitute undivided
interests of indebtedness but for purposes of this Agreement shall constitute
Equity Interests.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any Related Person or any Affiliate thereof for which any
Related Person has a fixed or contingent liability.
"Eurodollar Rate" means, with respect to each particular Fixed Rate Portion
and the related Interest Period, the rate per annum (rounded upwards, if not an
even 1/16th or 1/100th of 1%, to the nearest 1/100th of 1%) reported, on the
date two Business Days prior to the first day of such Interest Period, on
Telerate Access Service Page 3750 (British Bankers Association Settlement Rate)
as the London Interbank Offered Rate for U.S. dollar deposits having a term
comparable to such Interest Period and in an amount of $1,000,000 or more
(provided that, if such Page shall cease to be publicly available or if the
information contained on such Page, in Administrative Agent's reasonable
judgment, shall cease to accurately reflect such London Interbank Offered Rate
or if such Page does not report information for the term of the Interest Period
selected by Borrower, such rate shall be that reported by any publicly available
source of similar market data selected by Administrative Agent, or that
interpolated by Agent from such market data, which, in Administrative Agent's
reasonable judgment, accurately reflects such London Interbank Offered Rate).
"Evaluation Date" means each of the following:
(a) March 1 and September 1 of each year, beginning September 1,
1999;
(b) at the option of Majority Lenders, any date specified by Majority
Lenders as of which the Borrowing Base shall be redetermined, provided that
Majority Lenders shall not be entitled to specify any such optional
redetermination more than once during any calendar year;
9
(c) at the option of Borrower, any date specified by Borrower as of
which the Borrowing Base shall be redetermined, provided that Borrower
shall not be entitled to specify any such optional redetermination more
than once during any calendar year; and
(d) whenever any of the events specified in Section 2.11(c) occurs,
and Majority Lenders elect, as contemplated in such subsections, to
designate an additional Evaluation Date, any date specified by Majority
Lenders as of which the Borrowing Base shall be redetermined.
"Event of Default" has the meaning given it in Section 7.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be such rate as reported by any
publicly available source of similar market data selected by Administrative
Agent that, in Administrative Agent's reasonable judgment, accurately reflects
such rate on overnight Federal funds transactions.
"Fee Letter" means that certain letter agreement of even date herewith
among Borrower and Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Fixed Charges" means the sum, without duplication, determined for Borrower
and its Restricted Subsidiaries on a consolidated basis for the period in
question, of:
(i) all interest of any kind (including the interest component of
capitalized leases) paid, or required to be paid, in cash during such
period on all consolidated Indebtedness of Borrower and its Restricted
Subsidiaries (other than interest attributable to dollar-denominated
production payments, fees and transaction costs for any issuances of
Indebtedness which are accounted for as interest and are actually paid by
Borrower from the proceeds of such issuances, and interest expense of any
Person combined with Borrower or any Restricted Subsidiary on a "pooling of
interests" basis to the extent the same is attributable to any period prior
to the date of combination), plus
(ii) all cash payments (without duplication) by Borrower or any
Restricted Subsidiary with respect to (1) the TECON Debentures or any other
Permitted
10
Subordinated Trust Indebtedness or (2) the TECONS or any other Permitted
Preferred Trust Securities, plus
(iii) all payments by Borrower and its Restricted Subsidiaries on
Derivative Contracts relating to interest rates which were made, or
required to be made, in cash during such period (reduced by all of
Borrower's and its Restricted Subsidiaries' consolidated cash receipts on
such Derivative Contracts which were received during such period), plus
(iv) all fees, discounts, commissions and other charges paid, or
required to be paid, in cash by Borrower and its Restricted Subsidiaries
during such period with respect to bankers' acceptances, letters of credit,
or applications or reimbursement agreements therefor, plus
(v) all cash dividends paid during such period on any preferred stock
issued by Borrower or any Restricted Subsidiary (other than dividends
payable to each other which are permitted hereunder).
"Fixed Rate" means, with respect to each particular Fixed Rate Portion and
the associated Eurodollar Rate, the rate per annum calculated by Administrative
Agent, determined on a daily basis pursuant to the following formula:
Fixed Rate = Eurodollar Rate + Fixed Rate Spread
The Fixed Rate for any Fixed Rate Portion shall change whenever the Fixed Rate
Spread changes, without notice to Borrower. The Fixed Rate shall in no event,
however, exceed the Highest Lawful Rate.
"Fixed Rate Portion" means any portion of the unpaid principal balance of a
Loan which Borrower designates as such in a Rate Election.
"Fixed Rate Spread" means, at the time in question, the per annum
percentage set forth in the first column of the following table opposite the
range set forth in the second column of such table in which range is included
the Borrowing Base Utilization:
Per Annum Fixed Rate Spread Borrowing Base Utilization
0.5% less than 25%
0.625% 25% or more but less than 50%
0.875% 50% or more but less than 75%
1% 75% or more but less than 90%
1.25% 90% or more
provided, however, that in the event the EBITDAX/Fixed Charge Ratio at such time
is less than 2.0, the Fixed Rate Spread shall be determined as described above
but pursuant to the following table:
11
Per Annum Fixed Rate Spread Borrowing Base Utilization
0.625% less than 25%
0.875% 25% or more but less than 50%
1.25% 50% or more but less than 75%
1.5% 75% or more but less than 90%
1.75% 90% or more
"Forward Sales/Production Payments" means (i) obligations to deliver oil,
gas or other minerals to be acquired or produced in the future in consideration
of advance payments therefor, and/or (ii) present assignments of interests in a
quantity (measured by proceeds or volume) of oil, gas or other minerals to be
produced in the future, if and when produced, in consideration for a payment in
advance of such production.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Subsidiaries (or, where specified, Borrower and its Restricted Subsidiaries),
are 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 audited
Initial Financial Statements. If any change in any accounting principle or
practice is required by the Financial Accounting Standards Board (or any such
successor) in order for such principle or practice to continue as a generally
accepted accounting principle or practice, all reports and financial statements
required hereunder may be prepared in accordance with such change, but all
calculations and determinations to be made hereunder may be made in accordance
with such change only if Borrower and Majority Lenders agree to such change (and
to any related modifications of the terms hereof).
A "guaranty" by a Person means any direct or indirect guaranty by such
Person of any Liability of any other Person or any agreement by such Person to
purchase or acquire, or to assure the payment or performance of, or to otherwise
protect or insure a creditor against loss in respect of, any Liability of any
other Person (such as obligations under working capital maintenance agreements,
agreements to keep-well or cover losses, or agreements to purchase any
Liability, assets, goods, securities or services), but excluding indorsements in
the ordinary course of business of negotiable instruments in the course of
collection. When used as a verb, "guarantee" has a corresponding meaning.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any
12
Person to pay interest to any Lender at a rate in excess of the Highest Lawful
Rate applicable to such Lender.
"Impairment Adjustment" means any recognition by Borrower and its
Restricted Subsidiaries, in accordance with Borrower's oil and gas accounting
election, of a charge for consolidated accumulated depletion, depreciation and
amortization expense due to a valuation adjustment which reduces the net book
value of Borrower's and its Restricted Subsidiaries' consolidated Oil and Gas
Properties to the net present value of their consolidated oil and gas reserves.
"Indebtedness" of any Person means any Liability in any of the following
categories (without duplication):
(a) any Liability for borrowed money,
(b) any Liability constituting an obligation to pay the deferred
purchase price of property or services,
(c) any Liability evidenced by a bond, debenture, note or similar
instrument,
(d) any Liability which (i) would under GAAP be shown on such
Person's balance sheet as a liability, and (ii) is payable more than one
year from the date of creation thereof (other than reserves for taxes and
reserves for contingent obligations),
(e) any Liability arising under Derivative Contracts (on a net basis
to the extent netting is not prohibited in the applicable Derivative
Contract),
(f) any Liability under capitalized leases,
(g) any Liability arising under conditional sales or other title
retention agreements,
(h) any Liability owing under any guaranty given by such Person of
Indebtedness owing by any other Person,
(i) any Liability consisting of (1) an obligation (for example, a
repurchase agreement) to purchase securities or other property, if such
Liability arises out of or in connection with the sale of the same or
similar securities or property, or (2) an obligation under any agreement to
redeem or purchase any stock or other equity security issued by such Person
or any of its Affiliates or to exchange such stock or other equity security
for, or convert such stock or other equity security to, any debt security
issued by such Person or any of its Affiliates, or
(j) any Liability with respect to letters of credit or applications
or reimbursement agreements therefor;
13
provided, however, that the "Indebtedness" of any Person shall not include any
Liability (1) under Allowed Puts or Permitted Preferred Trust Securities or any
Permitted Subordinated Trust Indebtedness, (2) for gas balancing that was
incurred by such Person in the ordinary course of business, (3) under Forward
Sales/Production Payments, or (4) that was incurred by such Person on ordinary
(or better than ordinary) trade terms to vendors, suppliers, or other Persons
providing goods and services for use by such Person in the ordinary course of
its business.
"Initial Engineering Report" means, collectively, the engineering reports
listed on Schedule 4 attached hereto concerning various Oil and Gas Properties
of the Related Persons.
"Initial Financial Statements" means the audited annual Consolidated
financial statements of Borrower as of December 31, 1998, copies of which
financial statements have heretofore been delivered to Administrative Agent and
each Lender.
"Intercompany Indebtedness" means Indebtedness owed by any Related Person
to any other Related Person.
"Interest Period" means, with respect to each particular Fixed Rate Portion
of a Loan, a period of 1, 2, 3 or 6 months (or any other period which is 15 days
or longer, shorter than six months, and acceptable to Administrative Agent), as
specified in the Rate Election applicable thereto, beginning on and including
the date specified in such Rate Election (which must be a Business Day), and, if
such Interest Period is denominated in months, ending on but not including the
same day of the month as the day on which it began (e.g., a 2-month period
beginning on the third day of January shall end on but not include the third day
of the following March), provided that each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the immediately preceding Business Day). No Interest Period may be elected
which would extend past the date on which the associated Note is due and payable
in full.
"Investment" means any direct or indirect investment in any Person,
including (a) any purchase or other acquisition of Equity Interests in or
Indebtedness owing by any Person, (b) any other loan, advance, extension of
credit or capital contribution to any Person, and (c) any guarantee of any
Liabilities of any Person (other than guaranties of the type referred to in
clause (c) of the definition of Permitted Subordinated Trust Indebtedness), in
each case regardless of whether the consideration for such investment, or the
means by which such investment is made, consists of cash, the transfer of
property, the rendering of services, the issuance or exchange of Equity
Interests or other securities, the assumption of liabilities, the payment of
joint and several liabilities by one member of a jointly liable group without
obtaining appropriate reimbursement from any other member of the group (e.g.,
Borrower's payment of jointly owed taxes or ERISA obligations on behalf of any
Unrestricted Subsidiary), or otherwise. For the purposes of this Agreement, the
amount of any Investment made in property shall be the greater of (i) the fair
market value of such property (as determined in good faith by the board of
directors (or equivalent governing body) of the Person making such Investment)
and (ii) the net book value thereof on the books of such Person, in each case
determined as of the date on which such Investment is made. For the purposes of
this Agreement, whenever Borrower designates any of
14
its Subsidiaries as an Unrestricted Subsidiary, Borrower shall be deemed to have
made an Investment in an amount equal to the greater of (1) the fair market
value of Borrower's interests in such Subsidiary, as determined in good faith by
Borrower's Board of Directors and evidenced by a resolution of such board, and
(2) Borrower's shareholder's equity in such Subsidiary, in each case determined
as of the date on which such designation is made.
"Late Payment Rate" means, at the time in question, two percent (2.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Fixed Rate Portion with an Interest Period extending beyond the date such Fixed
Rate Portion becomes due and payable, "Late Payment Rate" shall mean two percent
(2.0%) per annum plus the related Fixed Rate. The Late Payment Rate shall in no
event, however, exceed the Highest Lawful Rate.
"Lenders" means each signatory hereto (other than Borrower), including
NationsBank, N.A. in its capacity as a lender hereunder rather than as
Administrative Agent and Morgan Guaranty Trust Company of New York in its
capacity as a lender hereunder rather than as Documentation Agent, and the
successors and permitted assigns of each such signatory as holder of a Note.
Each Lender may, in its discretion, fund all or any portion of its Loan through
any of its offices, branches, or Affiliates, and in such event references herein
to such Lender shall include such offices, branches or Affiliates.
"Liability" means, as to any Person, any indebtedness, liability or
obligation of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be set forth on a balance sheet
prepared pursuant to GAAP.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure any Liability owed to such creditor or any other
arrangement with such creditor which provides for the payment of such Liability
out of such property or assets or which allows such creditor to have such
Liability satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists. "Liens"
do not include survey exceptions, easements, rights-of-way, zoning restrictions,
and other minor defects in title which do not secure or provide for the payment
of any Liability and which do not interfere in any material respect with the
ordinary conduct of the business of the owner of the property subject thereto.
"Loan" has the meaning given it in Section 2.1.
15
"Loan Documents" means this Agreement, the Notes, the Fee Letter, the
Security Documents, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets, commitment letters, correspondence and
similar documents used in the negotiation hereof, except to the extent the same
(a) contain information provided by any Related Person about Borrower or its
Affiliates, properties, business or prospects or (b) are expressly referred to
in the Fee Letter), excluding any Derivative Contracts between any Related
Person and any Lender.
"Majority Lenders" means, at any time in question, Lenders then
collectively having Percentage Shares totaling at least sixty-six and two-thirds
percent (66 2/3%).
"Material Adverse Effect" means a material adverse effect on the business,
condition (financial or otherwise), operations, or properties of Borrower and
its Subsidiaries, taken as a whole, or on the ability of Borrower to perform its
payment obligations or other material obligations under any of the Loan
Documents, or on the aggregate value of the Collateral; provided, Lenders hereby
acknowledge and agree that any industry-wide decline in oil and gas prices shall
not in itself constitute a "Material Adverse Effect" hereunder.
"Material Restricted Subsidiary" means any Restricted Subsidiary of
Borrower which, as of the end of any Fiscal Quarter, either:
(i) has EBITDAX equal to or greater than five percent (5%) of the EBITDAX
of Borrower and its Restricted Subsidiaries on a consolidated basis,
or
(ii) owns five percent (5%) or more of the book value of Borrower's and
Restricted Subsidiaries' consolidated assets.
"Maximum Loan Amount" means the amount of $400,000,000, provided that
Borrower may from time to time, by notice to Administrative Agent, permanently
reduce the Maximum Loan Amount as may be required under the 1996 Indenture in
connection with "Asset Sales" (as defined therein) or as may be required under
similar provisions of indentures or agreements governing Additional Senior
Indebtedness or Subordinated Indebtedness which is permitted hereunder.
"Moody's" means Moody's Investors Service, Inc., or its successor at the
time in question.
"Non-Recourse Indebtedness" means:
(a) Indebtedness of an Unrestricted Subsidiary which is not a
Liability, in whole or part, of any Related Person and which is not secured
by any Lien upon any property or assets of any Related Person, provided
that no such Indebtedness of an Unrestricted Subsidiary shall be considered
"Non-Recourse Indebtedness" if any default with respect to such
Indebtedness would allow or require any Indebtedness of $10,000,000 or more
in aggregate amount which is owed by one or more of the Related Persons to
be accelerated or otherwise made payable in advance of its stated maturity,
and
16
(b) Indebtedness of a Restricted Subsidiary which is not a Liability,
in whole or part, of any other Related Person and which is not secured by
any Lien upon any property or assets of any other Related Person, provided
that Borrower must designate such Indebtedness as "Non-Recourse
Indebtedness" to Administrative Agent prior to the incurrence thereof, and
provided further that no Indebtedness of a Restricted Subsidiary shall be
considered "Non-Recourse Indebtedness" if such Restricted Subsidiary owns
any Borrowing Base Assets at the time of such incurrence or at any time
when such Indebtedness is outstanding or if any other Related Person owes
Intercompany Indebtedness to such Restricted Subsidiary at any such time.
For the purposes hereof, any Restricted Subsidiary shall be deemed "obligated"
for Non-Recourse Indebtedness if it has any Liability to pay such Non-Recourse
Indebtedness, or if it has in any way guaranteed such Non-Recourse Indebtedness,
or if any of its assets or properties are subject to any Lien securing such Non-
Recourse Indebtedness.
"Non-Redeemable Stock" means common or preferred stock issued by Borrower,
provided that no Related Person has any obligation to redeem or purchase such
stock or to exchange such stock for, or convert such stock to, any other
security (other than Non-Redeemable Common Stock) on or prior to 91 days after
the last day of the Commitment Period, whether such obligation arises pursuant
to the terms of such stock or of any agreement relating thereto or otherwise and
whether or not such obligation exists in all circumstances or only upon the
occurrence of a particular event or condition or upon the passage of time or
otherwise. "Non-Redeemable Common Stock" means Non-Redeemable Stock that is
common stock issued by Borrower.
"Note" has the meaning given it in Section 2.1.
"Nuevo Trust" means Nuevo Financing I, a business trust formed under the
laws of the State of Delaware.
"Obligations" means all Liabilities from time to time owing by any of the
Related Persons to Administrative Agent or any Lender under or pursuant to any
of the Loan Documents. "Obligation" means any part of the Obligations.
"Oil and Gas Business" means the businesses of exploring for, developing,
acquiring, producing, gathering, processing, marketing, storing, or transporting
oil, gas and related hydrocarbons.
"Oil and Gas Properties" means operating and non-operating interests
(whether held under leases, in fee, or otherwise, and including production
payments and royalties) in oil and gas wells, production facilities, reserves,
development acreage, exploratory acreage, or gathering, processing, storage or
transportation facilities.
"Percentage Share" means, with respect to any Lender: (a) when used in
Sections 2.1 or 2.5, in any Request for Advances or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the signature pages of this Agreement or, after any
17
assignment under Section 9.4(c), on the schedule then most recently delivered by
Administrative Agent under Section 9.4(c)(ii), and (b) when used otherwise, the
percentage equal to the unpaid principal balance of such Lender's Loan at the
time in question divided by the aggregate unpaid principal balance of all Loans
at such time.
"Permitted Liens" means:
(a) Liens which secure Obligations only;
(b) Liens under the Security Documents which secure obligations and
indebtedness of Related Persons owing to Lenders under Derivative Contracts
between Related Persons and Lenders;
(c) Liens described on the Disclosure Schedule which secure
Indebtedness outstanding as of the date hereof and any renewals, extensions
or refinancings (but not increases) of such Indebtedness;
(d) Liens for taxes, assessments and governmental charges or claims
which are either not delinquent or are being contested in good faith by
appropriate proceedings and as to which the Related Persons shall have set
aside on their books such reserves as may be required pursuant to GAAP;
(e) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for claims which are either not
delinquent or are being contested in good faith by appropriate proceedings
and as to which the Related Persons shall have set aside on their books
such reserves as may be required pursuant to GAAP;
(f) Liens on Cash Equivalents, deposits of cash or Cash Equivalents,
and statutory Liens on any assets, in each case created or made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to secure the
payment or performance of tenders, statutory or regulatory obligations,
surety and appeal bonds, bids, government contracts and leases, performance
and return of money bonds and other similar obligations (exclusive of
obligations for the payment of Indebtedness), including lessee or operator
obligations under statutes, governmental regulations or instruments related
to the ownership, exploration and production of oil, gas and minerals on
private, state, federal or foreign lands or waters);
(g) judgment Liens not giving rise to an Event of Default or a
Default under Section 5.2, so long as any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such proceeding
may be initiated shall not have expired;
(h) Liens which (1) arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out agreements, division orders,
contracts for the sale, transportation or
18
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements and other agreements which
are customary in the oil and gas business, and (2) are for claims which are
either not delinquent or are being contested in good faith by appropriate
proceedings and as to which the Related Persons shall have set aside on
their books such reserves as may be required pursuant to GAAP;
(i) Liens reserved in oil and gas mineral leases, or created by
statute, to secure royalty, bonus or rental payments and compliance with
the terms of such leases;
(j) Forward Sales/Production Payments, and liens on properties
subject thereto to secure performance obligations in connection therewith;
(k) Liens on cash or Cash Equivalents to secure Indebtedness pursuant
to Derivative Contracts which are permitted under Section 5.2(g), provided
that the aggregate amount of cash and Cash Equivalents subject to such
Liens does not at any time exceed the sum of (i) $20,000,000 plus (ii) the
amount, if any, by which (1) five percent (5%) of the Borrowing Base as in
effect at such time, exceeds (2) all Permitted Priority Senior Indebtedness
(other than accrued interest which is not past due) which is outstanding at
such time;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies and burdening only deposit accounts or other funds maintained
with a creditor depository institution; provided that (i) no such deposit
account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth
by regulations promulgated by the Board of Governors of the Federal Reserve
System, and (ii) no such deposit account is intended by Borrower or any
other Related Person to provide collateral to the depository institution;
(m) Liens on properties of any Related Person to secure Indebtedness
which, both at the time such Indebtedness is created or otherwise incurred
and at the time such Liens are created, is Permitted Priority Senior
Indebtedness; and
(n) Liens on properties of any Restricted Subsidiary (provided such
Restricted Subsidiary does not own any Borrowing Base Assets) to secure
Non-Recourse Indebtedness owing by such Restricted Subsidiary that is
incurred in compliance with Section 5.2(a)(viii).
"Permitted Preferred Trust Securities" means (i) the TECONS and (ii) any
other securities made up of trust participation interests, or of limited
partnership interests, issued by a Subsidiary of Borrower, provided that:
(a) the issuer of such securities has no assets other than Permitted
Subordinated Trust Indebtedness owing to it by Borrower;
19
(b) payments upon such securities can be made only out of funds
received in payment of such Permitted Subordinated Trust Indebtedness; and
(c) all payments upon such securities can in all circumstances, at the
election of Borrower (acting either directly or through such issuer), be
deferred for the greater of (i) one or more payment periods, (ii) a period
expiring not earlier than the day after the last day of the Commitment
Period in effect at the time of issuance of such securities and (iii) a
period of not less than twelve months.
"Permitted Priority Senior Indebtedness" means Additional Senior
Indebtedness in either of the following categories:
(a) Additional Senior Indebtedness owing by Borrower which is secured
by Liens, and
(b) Additional Senior Indebtedness owing by any Restricted
Subsidiary, whether or not secured by Liens,
which is incurred or created after the date hereof and which, at the time such
Additional Senior Indebtedness is created or otherwise incurred, does not cause
the sum of such Additional Senior Indebtedness plus the aggregate outstanding
amount of all Permitted Priority Senior Indebtedness previously created or
incurred (excluding accrued interest which is not past due) to exceed five
percent (5%) of the Borrowing Base as in effect at such time.
"Permitted Subordinated Trust Indebtedness" means (a) the TECON Debentures,
(b) any other promissory notes or debentures issued by Borrower to any issuer of
Permitted Preferred Trust Securities, provided that such notes or debentures (1)
are subordinated to the Obligations upon substantially similar terms as the
TECON Debentures, (2) do not require any principal payments to be made until
more than one year after the last day of the Commitment Period in effect at the
time of issuance of such notes or debentures, and (3) provide that all payments
upon such notes or debentures can in all circumstances, at the election of
Borrower be deferred for the greater of (i) one or more payment periods, (ii) a
period expiring not earlier than the day after the last day of the Commitment
Period in effect at the time of issuance of such notes or debentures, and (iii)
a period of not less than twelve months, and (c) any guaranty by Borrower that
the issuer of such Permitted Preferred Trust Securities will make required
distributions thereon to the extent it has funds available therefor, provided
that such guaranty is subordinated to the Obligations upon substantially similar
terms as the TECON Guaranty.
"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Rate Election" has the meaning given it in Section 2.4.
"Rating Agency" means any of S&P, Moody's, and Duff & Phelps.
20
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"Related Person" means any of Borrower and the Restricted Subsidiaries.
"Request for Advances" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Reserve Requirement" means, on any day with respect to each particular
Fixed Rate Portion in a Tranche, the maximum reserve requirement, as determined
by Administrative Agent (including without limitation any basic, supplemental,
marginal, emergency or similar reserves), expressed as a percentage and rounded
to the next higher 0.01%, which would then apply under Regulation D with respect
to "Eurocurrency liabilities" (as such term is defined in Regulation D).
"Restricted Investment" means any Investment in any Person made after the
date hereof by any Related Person other than:
(a) Investments in Cash Equivalents.
(b) normal and prudent extensions of credit to customers buying goods
and services in the ordinary course of business, which extensions shall not
be for longer periods than those extended by similar businesses operated in
a normal and prudent manner.
(c) normal and prudent extensions of credit (not to exceed $200,000
at any time outstanding) to employees for travel advances or other purposes
which assist such employees to carry out the businesses of the Related
Persons.
(d) indorsements of negotiable instruments and documents in the
ordinary course of business.
(e) Investments pursuant to Derivative Contracts which are permitted
under Section 5.2(g).
(f) Investments in Borrower.
(g) Investments in any Person which is a Restricted Subsidiary or
which thereby becomes a Restricted Subsidiary, provided that no Event of
Default, and no Default under Section 5.2, exists immediately after such
Investment is made.
(h) Investments in stock, obligations or securities received in
settlement of debts owing to a Related Person as a result of bankruptcy or
insolvency proceedings or upon the foreclosure, perfection or enforcement
of any Lien in favor of a Related Person, in each case as to debts owing to
such Related Person that arose in the ordinary course of its business.
21
(i) Investments made with Non-Redeemable Stock, but only to the
extent allocable to such Non-Redeemable Stock.
(j) Investments in production payments burdening the property of
others.
(k) contributions of some or all of the California Real Estate to one
or more Unrestricted Subsidiaries.
(l) Investments of any kinds not listed above in this definition in
amounts at any time outstanding which do not exceed $15,000,000.
"Restricted Payment" means:
(a) any dividend or other distribution declared by any Related Person
on or in respect of any Equity Interest in any Related Person, or
(b) any purchase, redemption, acquisition or retirement by any Related
Person of any Equity Interest in any Related Person, or
(c) any sale, issuance or entering into of any Allowed Puts by
Borrower (but not any payments made upon the exercise or repurchase of
Allowed Puts),
excluding only those dividends, distributions, purchases, redemptions,
acquisitions and retirements which either:
(i) are payable only in Non-Redeemable Common Stock, or
(ii) are payable to Borrower by any Restricted Subsidiary or payable
to any Restricted Subsidiary by any other Restricted Subsidiary, or
(iii) are Investments excluded from Restricted Investments pursuant to
subsection (g) of the above definition of "Restricted Investment".
For the purposes of this Agreement: (a) the amount of any Restricted Payment
made in property shall be the greater of (i) the fair market value of such
property (as determined in good faith by the board of directors (or equivalent
governing body) of the Person making such Restricted Payment) and (ii) the net
book value thereof on the books of such Person, in each case determined as of
the date on which such Restricted Payment is made, and (b) the amount of any
Restricted Payment attributable to the sale, issuance or entering into of any
Allowed Put is the amount (calculated as of the inception of such Allowed Put)
which Borrower would be required to pay to repurchase its stock at the exercise
or strike price provided in such Allowed Put; provided, that upon the
termination of any commitment to purchase such underlying capital stock under
any Allowed Put, such Allowed Put shall cease to be treated as a Restricted
Payment.
"Restricted Subsidiary" means any Subsidiary of Borrower, whether now
existing or hereafter created or acquired or coming into existence: (a) which is
controlled by Borrower, (b)
22
in which Borrower owns, directly or indirectly, a majority of the Equity
Interests (other than Permitted Preferred Trust Securities), and (c) which is
not, at the time in question, an Unrestricted Subsidiary.
"Security" means any rights, properties, or interests of Administrative
Agent or Lenders, under the Loan Documents or otherwise, which provide recourse
or other benefits to Administrative Agent or Lenders in connection with the
Obligations or the non-payment or non-performance thereof, including collateral
(whether real or personal, tangible or intangible) in which Administrative Agent
or Lenders have rights under or pursuant to any Loan Documents, guaranties of
the payment or performance of any Obligation, bonds, surety agreements, keep-
well agreements, letters of credit, rights of subrogation, rights of offset, and
rights pursuant to which other claims are subordinated to the Obligations.
"Security Documents" means the instruments listed in the Security Schedule
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Related Person to Administrative Agent in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Related
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill,
Inc.), or its successor at the time in question.
"Subordinated Indebtedness" means Indebtedness owing by Borrower (but no
other Related Person) which: (a) is owing under the 1996 Subordinated Notes, (b)
is owing under the 1998 Subordinated Notes, (c) is set forth on the Disclosure
Schedule as "Existing Subordinated Indebtedness", (d) is subordinated to the
Obligations on terms and conditions similar in form and substance to the terms
and conditions set forth in the 1998 Indenture and the 1998 Subordinated Notes,
and in an amount, term and tenor, and providing for mandatory and optional
payments, as Administrative Agent and Majority Lenders may consent, such consent
not to be unreasonably withheld, or (e) is otherwise subordinated to the
Obligations, and provides for mandatory and optional payments, on terms and
conditions reasonably satisfactory to Administrative Agent and Majority Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (i.e., through one or
more intermediaries) controlled by such Person or in which such Person directly
or indirectly owns more than fifty percent of the voting stock or other equity
interests, provided that associations, joint ventures or other relationships (a)
which are established pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of income taxation only, (b)
which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state law, and (c) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and
23
interests owned directly by the parties in such associations, joint ventures or
relationships, shall not be deemed to be "Subsidiaries" of such Person.
"Subsidiary Guarantor" means each Subsidiary of Borrower which has
guaranteed the Obligations by executing this Agreement (or a supplement hereto).
"Supermajority Lenders" means, at any time in question, Lenders then
collectively having Percentage Shares totaling at least seventy-five percent
(75%)
"TECONS" means those certain Trust Preferred Securities, issued by Nuevo
Trust pursuant to the TECON Declaration of Trust in the amount of $115,000,000.
"TECON Debentures" means those certain 5.75% Convertible Subordinated
Debentures due December 15, 2026, issued by Borrower to Nuevo Trust pursuant to
the TECON Indenture and subordinated to the Obligations, in the aggregate
principal amount of $118,556,700.
"TECON Declaration of Trust" means that certain Amended and Restated
Declaration of Trust dated December 23, 1996, between Borrower, Wilmington Trust
Company, as Delaware Trustee and Institutional Trustee, and the other trustees
named therein, pursuant to which the TECONS were issued..
"TECON Guaranty" means that certain Preferred Securities Guaranty Agreement
dated December 23, 1996, by Borrower in favor of the holders of the TECONS
issued pursuant to the TECON Indenture and subordinated to the Obligations,
guaranteeing certain payments to be made by Nuevo Trust pursuant to the TECONS.
"TECON Indenture" means that certain Subordinated Indenture dated November
25, 1996 by Borrower to Wilmington Trust Company, as Indenture Trustee, as
supplemented by that certain First Supplemental Subordinated Indenture dated as
of December 23, 1996, pursuant to which the TECON Debentures were issued.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(c) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or of any
Affiliate of any Related Person from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"Torch" means Torch Energy Advisors Incorporated, a Delaware corporation.
24
"Torch Agreements" means the following agreements: (i) Master Services
Agreement among Nuevo Energy Company and Torch Energy Advisors Incorporated,
Torch Operating Company, Torch Energy Marketing, Inc., and Novistar, Inc.,
effective January 1, 1999; (ii) Field Operating Services Agreement between Nuevo
Energy Company and Torch Operating Company, effective January 1, 1999; (iii) Oil
and Gas Administration Services Agreement between Nuevo Energy Company and
Novistar, Inc., effective January 1, 1999; (iv) Land Leasing Services Agreement
between Nuevo Energy Company and Torch Energy Advisors Incorporated, effective
January 1, 1999; (iv) Natural Gas Marketing Services Agreement between Nuevo
Energy Company and Torch Energy Marketing, Inc., effective January 1, 1999; (v)
Crude Oil Marketing Services Agreement between Nuevo Energy Company and Torch
Energy Marketing, Inc., effective January 1, 1999; (vi) Human Resources and
Office Administration Services Agreement between Nuevo Energy Company and Torch
Energy Advisors Incorporated, effective January 1, 1999; and (vii) Corporate
Administration Services Agreement between Nuevo Energy Company and Torch Energy
Advisors Incorporated, effective January 1, 1999.
"Tranche" has the meaning given it in Section 2.4.
"Unrestricted Subsidiary" means (a) The Congo Holding Company, The Nuevo
Congo Company, Nuevo Tunisia Ltd., and Nuevo Congo Ltd., (b) any other
Subsidiary of Borrower which is hereafter designated an Unrestricted Subsidiary
of Borrower by Borrower's Board of Directors in compliance with the following
sentence, and (c) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors of Borrower may hereafter designate any Subsidiary of Borrower as an
Unrestricted Subsidiary provided that (i) the Board concurrently determines the
amount of the Investment made as a result of such designation, (ii) no Default
or Borrowing Base Deficiency exists at the time of such designation, or after
taking such Investment into account and otherwise giving effect to such
designation, (iii) immediately after such designation, no Related Person has any
Liability to pay any Indebtedness of such Subsidiary, has in any way guaranteed
any Indebtedness of such Subsidiary, or has any assets or properties which are
subject to any Lien securing any Indebtedness of such Subsidiary, and (iv)
notice of any such designation, and of the amount of such Investment, is
promptly given to Agent and each Lender.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided
25
otherwise. Titles appearing at the beginning of any subdivisions are for
convenience only and do not constitute any part of such subdivisions and shall
be disregarded in construing the language contained in such subdivisions. The
words "this Agreement", "this instrument", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Phrases such as "known to Borrower" or "to the best knowledge of
Borrower" refer to the actual knowledge (as distinguished from constructive
knowledge) of any of the following: Borrower's President, Borrower's Chief
Executive Officer, Borrower's Chief Financial Officer, Borrower's general
counsel, Borrower's Treasurer, or any Vice President of Borrower. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Fixed Rate Portions
shall be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other calculations of interest
or of fees made under the Loan Documents shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Each determination by Administrative Agent or a
Lender of amounts to be paid under Sections 2.13 through 2.17 or any other
matters which are to be determined hereunder by Administrative Agent or a Lender
(such as any Eurodollar Rate, Fixed Rate, Business Day, Interest Period, or
Reserve Percentage) shall, in the absence of manifest error, be conclusive and
binding. Unless otherwise expressly provided herein or unless Majority Lenders
otherwise consent all financial statements and reports furnished to
Administrative Agent or any Lender hereunder shall be prepared and all financial
computations and determinations pursuant hereto shall be made in accordance with
GAAP, to the extent GAAP is applicable. References herein to the consolidation
of any accounts of Borrower and its Restricted Subsidiaries refer to the
consolidation of such Persons (excluding the Unrestricted Subsidiaries) in
accordance with GAAP, with all investments in Unrestricted Subsidiaries being
accounted for using the cost method of accounting (or, where provided herein,
being excluded from consideration) and the net income or loss of any
Unrestricted Subsidiary being excluded from consideration except to the extent
that Borrower or a Restricted Subsidiary has actually received cash during the
accounting period in question from dividends or distributions by such
Unrestricted Subsidiary (whether such dividends or distributions accrued during
such period or an earlier period).
ARTICLE II - The Loans
Section 2.1. Advances. Subject to the terms and conditions hereof,
each Lender agrees to make advances to Borrower (herein called such Lender's
"Advances") upon request from time to time during the Commitment Period so long
as (a) each Advance by such Lender does not exceed such Lender's Percentage
Share of the aggregate amount of Advances then requested from all Lenders, and
(b) the aggregate amount of such Lender's Advances outstanding at any time does
not exceed such Lender's Percentage Share of the Available Borrowing Base
determined as of the date on which the requested Advance is to be made. The
aggregate amount of all Advances
26
requested of all Lenders in any Request for Advances must be greater than or
equal to $3,000,000 or must equal the unadvanced portion of the Available
Borrowing Base. The obligation of Borrower to repay to each Lender the aggregate
amount of all Advances made by such Lender (herein called such Lender's "Loan"),
together with interest accruing in connection therewith, shall be evidenced by a
single promissory note (herein called such Lender's "Note") made by Borrower
payable to the order of such Lender in the form of Exhibit A with appropriate
insertions. The amount of principal owing on any Lender's Note at any given time
shall be the aggregate amount of all Advances theretofore made by such Lender
minus all payments of principal theretofore received by such Lender on such
Note. Interest on each Note shall accrue and be due and payable as provided
herein and therein. Subject to the terms and conditions hereof, Borrower may
borrow, repay, and reborrow hereunder.
Section 2.2. Requests for Advances. Borrower must give to
Administrative Agent written notice, or telephonic notice promptly confirmed in
writing, of any requested Advances, which notice must be received by
Administrative Agent not later than 10:00 a.m., Dallas, Texas time, on the date
of the requested Advances (or three Business Days prior to the date of the
requested Advances if Borrower is desires for all or any part of such Advances
to make up a Tranche of Fixed Rate Portions on such date). After receiving any
such notice Administrative Agent shall give each Lender prompt notice of the
requested Advances. Each such written request or confirmation must be made in
the form and substance of the "Request for Advances" attached hereto as Exhibit
B, duly completed. Each such telephonic request shall be deemed a
representation, warranty, acknowledgment and agreement by Borrower as to the
matters which are required to be set out in such written confirmation. If all
conditions precedent to such Advances have been met, each Lender will on the
date requested promptly remit to Administrative Agent at Administrative Agent's
office in Dallas, Texas the amount of such Lender's Advance in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any conditions precedent to such Advances have been neither met nor waived as
provided herein, Administrative Agent shall promptly make the Advances available
to Borrower. Each Request for Advances shall be irrevocable and binding on
Borrower. Unless Administrative Agent shall have received prompt notice from a
Lender that such Lender will not make available to Administrative Agent such
Lender's Advance, Administrative Agent may in its discretion assume that such
Lender has made such Advance available to Administrative Agent in accordance
with this section and Administrative Agent may if it chooses, in reliance upon
such assumption, make such Advance available to Borrower. If and to the extent
such Lender shall not so make its Advance available to Administrative Agent,
such Lender and Borrower severally agree to pay or repay to Administrative Agent
within three days after demand the amount of such Advance together with interest
thereon, for each day from the date such amount is made available to Borrower
until the date such amount is paid or repaid to Administrative Agent, at (i) the
Federal Funds Rate, in the case of such Lender, or (ii) the interest rate
applicable at the time to the other Advances made on such date, in the case of
Borrower. The failure of any Lender to make any Advance to be made by it
hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its Advance, but neither Administrative Agent, Documentation Agent,
nor any other Lender shall be responsible for the failure of such Lender to make
any Advance to be made by such Lender.
27
Section 2.3. Use of Proceeds. Borrower shall use all funds from
Advances for general corporate purposes. In no event shall the funds from any
Advance be used directly or indirectly by any Person for personal, family,
household or agricultural purposes. Borrower represents and warrants to Lender
that Borrower is not engaged principally, or as one of Borrower's important
activities, in the business of extending credit to others for the purpose of
purchasing or carrying any "margin stock" (as such term is defined in Regulation
U promulgated by the Board of Governors of the Federal Reserve System).
Section 2.4. Rate Elections. Borrower may from time to time designate
all or any portions of the Loans (including any yet to be made Advances which
are to be made prior to or at the beginning of the designated Interest Period
but excluding any portions of the Loans which are required to be repaid prior to
the end of the designated Interest Period) as a "Tranche", which term refers to
a set of Fixed Rate Portions with identical Interest Periods and with each
Lender participating in such Tranche in accordance with its Percentage Share.
Without the consent of Majority Lenders, Borrower may make no such election
during the continuance of a Default under Section 5.2 or of an Event of Default,
and Borrower may make such an election with respect to already existing Fixed
Rate Portions only if such election will take effect at or after the termination
of the Interest Period applicable thereto. Each election by Borrower of a
Tranche shall:
(a) Be made in writing in the form and substance of the "Rate Election"
attached hereto as Exhibit C, duly completed;
(b) Specify the aggregate amount of the Loans which Borrower desires to
designate as such Tranche, the first day of the Interest Period which is to
apply thereto, and the length of such Interest Period; and
(c) Be received by Administrative Agent not later than 10:00 a.m., Dallas,
Texas time, on the third Business Day preceding the first day of the
specified Interest Period.
Promptly after receiving any such election (herein called a "Rate Election")
which meets the requirements of this section, Administrative Agent shall notify
each Lender thereof. Each Rate Election shall be irrevocable. Borrower may
make no Rate Election which does not specify an Interest Period complying with
the definition of "Interest Period" in Section 1.1, and the aggregate amount of
the Tranche elected in any Rate Election must be $3,000,000 or more. Upon the
termination of each Interest Period the portion of each Loan within the related
Tranche shall, unless the subject of a new Rate Election then taking effect,
automatically become a part of the Base Rate Portion of such Loan and become
subject to all provisions of the Loan Documents governing such Base Rate
Portion. Borrower shall have no more than five Tranches in effect at any time.
Section 2.5. Facility Fees. In consideration of each Lender's
commitment to make Advances, Borrower will pay to Administrative Agent for the
account of each Lender a facility fee, determined on a daily basis, equal to (a)
the per annum percentage set forth in the first column of the following table
opposite the range set forth in the second column of such table in
28
which range is included the Borrowing Base Utilization, times (b) the Maximum
Loan Amount from time to time in effect:
Per Annum Rate Borrowing Base Utilization
0.25% less than 25%
0.375% 25% or more but less than 75%
0.5% 75% or more
provided that, if such Maximum Loan Amount exceeds the Borrowing Base in effect
at the same time, the facility fee for such excess shall be reduced to one-
eighth of one percent (0.125%) per annum and provided further that, upon any
increase in the Borrowing Base, Borrower shall pay an additional facility fee
equal to any unpaid facility fee which would have been due (at the applicable
full prorated rate of 0.25%, 0.375% or 0.5% per annum, as the case may be) had
such increased Borrowing Base been in effect for the one year period preceding
the date of such increase (or, if less, for the period from the beginning of the
Commitment Period to the date of such increase). These facility fees shall be
due and payable in arrears on the last day of each Fiscal Quarter and at the end
of the Commitment Period.
Section 2.6. Administrative Agent's Fees. In addition to all other
amounts due to Administrative Agent under the Loan Documents, Borrower will pay
certain fees to Administrative Agent in accordance with the Fee Letter or as
otherwise from time to time hereafter agreed by Administrative Agent and
Borrower.
Section 2.7. Optional Prepayments. Borrower may from time to time and
without premium or penalty make optional prepayments of the Notes, in whole or
in part, so long as the aggregate amounts of all partial prepayments of
principal on the Notes equals $3,000,000 or more and Borrower concurrently pays
all amounts then due under Section 2.16. Borrower shall give notice of any such
prepayment to Administrative Agent not later than 10:00 a.m., Dallas, Texas
time, on the date of such prepayment, provided that such notice must be given at
least three Business Days prior to such date if all or any part of Fixed Rate
Portions are to be prepaid. Each prepayment of principal under this section
shall be accompanied by all interest then accrued and unpaid on the principal so
prepaid (provided that Borrower may, if it wishes, defer payment of any such
interest on Base Rate Portions of Loans until the next "Base Rate Payment Date"
specified in the Notes). Any principal or interest prepaid pursuant to this
section shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Loan Documents at the time of such prepayment.
Section 2.8. Mandatory Prepayments.
(a) If at any time the aggregate unpaid principal balance of the
Loans exceeds the Maximum Loan Amount (whether due to a reduction in the Maximum
Loan Amount in accordance with this Agreement, or otherwise), Borrower shall
immediately upon demand prepay the principal of the Loans in an amount at least
equal to such excess.
29
(b) If at any time the aggregate unpaid principal balance of the
Loans is less than the Maximum Loan Amount but in excess of the Available
Borrowing Base (such excess being herein called a "Borrowing Base Deficiency")
Borrower shall, within five Business Days after Administrative Agent gives
notice of such fact to Borrower, either:
(i) prepay the principal of the Loans or (subject to Section 5.2(c)) the
principal of Additional Senior Indebtedness in an aggregate amount at least
equal to such Borrowing Base Deficiency, or
(ii) give notice to Administrative Agent electing to prepay the principal
of the Loans in up to six (or, at the option of Majority Lenders, up to
twelve) monthly installments in an aggregate amount at least equal to such
Borrowing Base Deficiency, with each such installment equal to or in excess
of the percentage of such Borrowing Base Deficiency equal to one divided by
the number of such scheduled installments, and with the first such
installment to be paid one month after the giving of such notice and the
subsequent installments to be due and payable at one month intervals
thereafter until such Borrowing Base Deficiency has been eliminated, or
(iii) give notice to Administrative Agent that Borrower desires to provide
Administrative Agent with deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other security documents in
form and substance satisfactory to Administrative Agent, granting,
confirming, and perfecting first and prior liens or security interests in
Oil and Gas Properties or other collateral acceptable to Majority Lenders,
to the extent needed to allow Majority Lenders to increase the Borrowing
Base (as they in their reasonable discretion deem consistent with prudent
oil and gas banking industry lending standards at the time) to an amount
which eliminates such Borrowing Base Deficiency, and then provide such
security documents within thirty days after Administrative Agent specifies
such Oil and Gas Properties or other collateral to Borrower. (If, prior to
any such specification by Administrative Agent, Majority Lenders determine
that the giving of such security documents will not serve to eliminate such
Borrowing Base Deficiency, then, within five Business Days after receiving
notice of such determination, Borrower will elect to make, and thereafter
make, the prepayments specified in either of the preceding subsections (i)
or (ii) of this subsection (b).)
(c) For so long as any Borrowing Base Deficiency has occurred and is
continuing, Borrower will keep account of all asset sales and other transactions
thereafter made by the Related Persons which are permitted under Section
5.2(f)(iii). At each time when the aggregate proceeds from such transactions
(net of transaction costs and taxes) equals or exceeds $3,000,000, Borrower
will, if such Borrowing Base Deficiency still exists, prepay the Loans in an
amount equal to such aggregate net proceeds. Such prepayments shall be applied
to any installments due under the preceding subsection (b)(ii) as directed by
Borrower.
(d) Each prepayment of principal under this section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid. Any
principal or interest prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
30
Section 2.9. Payments to Lenders. Borrower will make each payment
which it owes under the Loan Documents to Administrative Agent for the account
of Administrative Agent or the Lender to whom such payment is owed. Each such
payment must be received by Administrative Agent not later than 11:00 a.m.,
Dallas, Texas time, on the date such payment becomes due and payable, in lawful
money of the United States of America, without set-off, deduction or
counterclaim, and in immediately available funds. Any payment received by
Administrative Agent after such time will be deemed to have been made on the
next following Business Day. Should any such payment become due and payable on
a day other than a Business Day, the maturity of such payment shall be extended
to the next succeeding Business Day, and, in the case of a payment of principal
or past due interest, interest shall accrue and be payable thereon for the
period of such extension as provided in the Loan Document under which such
payment is due. Each payment under a Loan Document shall be due and payable at
the place provided therein and, if no specific place of payment is provided,
shall be due and payable at the place of payment of Administrative Agent's Note.
When Administrative Agent collects or receives money on account of the
Obligations or otherwise pursuant to the Security Documents, Administrative
Agent shall distribute all money so collected or received, and Lenders and
Administrative Agent shall apply all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 5.1(i) or (j) and
then to the partial payment of all other Obligations then due in proportion
to the amounts thereof, or as Supermajority Lenders shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) then, for the payment or prepayment of any other Obligations; and
(e) then, to the extent such money received is pursuant to the exercise of
remedies under the Security Documents only, for the pro rata payment of any
other indebtedness or obligations to Lenders secured by the Security
Documents, including without limitation any indebtedness or obligations
under any Derivative Contracts between any Related Person and any Lender;
and
(f) the remainder, if any, to Borrower.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.7 and 2.8. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Administrative Agent pro rata to
Administrative Agent and each Lender then owed Obligations described in such
subsection in
31
proportion to all amounts owed to Administrative Agent and all Lenders which are
described in such subsection.
Section 2.10. Initial Borrowing Base. During the period from the date
hereof to the first Determination Date the Borrowing Base shall be $200,000,000.
Section 2.11. Subsequent Determinations of Borrowing Base.
(a) By each Evaluation Date, Borrower shall furnish to each Lender
the Engineering Report described in Section 5.1(b)(iv), together with all
other information and data which Administrative Agent has then reasonably
requested concerning the Related Persons' businesses and properties. Within
thirty days after receiving such reports and other information and data, or
as promptly thereafter as practicable, Administrative Agent shall propose
to Lenders an amount for the Borrowing Base, and within thirty days
thereafter each Lender will notify Administrative Agent of whether or not
it accepts such proposed amount. Failure of any Lender to give such notice
within such time period shall be deemed to constitute acceptance of such
proposed amount by such Lender. If such proposed amount is not accepted by
Majority Lenders (or, if Administrative Agent has proposed an increase in
the Borrowing Base, by Supermajority Lenders), Administrative Agent and
Lenders shall continue to discuss a new Borrowing Base until such time as
Administrative Agent and Majority Lenders (or, if the Borrowing Base is to
be increased, Supermajority Lenders) shall have agreed upon an amount for
the new Borrowing Base, and promptly thereafter Administrative Agent shall
notify Borrower of such amount.
(b) Within five Business Days after receipt of such notice from
Administrative Agent, Borrower shall by notice to Administrative Agent
either accept such amount as the new Borrowing Base or reduce the Borrowing
Base from the amount proposed by Administrative Agent to any lesser amount.
(Failure by Borrower to take either such action within such five Business
Day period shall be deemed acceptance of such amount.) Upon any such
acceptance or deemed acceptance by Borrower, a new Borrowing Base in the
amount accepted shall take effect on such date (herein called a
"Determination Date") and shall remain in effect until but not including
the next Determination Date. Upon any such reduction by Borrower, a new
Borrowing Base in the reduced amount specified by Borrower shall take
effect on such date (herein also called a "Determination Date") and shall
remain in effect until but not including the next Determination Date.
(c) Whenever any of the following events occur:
(i) the Related Persons, in one or more transactions after the
Determination Date immediately preceding the time in question (or,
prior to the first Determination Date, after the date hereof) make
aggregate Borrowing Base Asset Sales of $50,000,000 or more, or
(ii) Borrower decides, as contemplated in Section 5.2(b)(iv), to
make any unscheduled payment of Subordinated Indebtedness, or
(iii) the Related Persons, in one or more transactions after the
Determination Date immediately preceding the time in question (or,
prior to the first Determination Date, after
32
the date hereof) make aggregate Forward Sales/Production Payments of
$10,000,000 or more,
then Borrower will promptly give notice of such event to Administrative Agent
and each Lender and, upon receipt of such notice, Majority Lenders (acting
through Administrative Agent) may, at their option, either (1) specify an
additional Evaluation Date as contemplated in subsection (d) of the definition
in Section 1.1 of "Evaluation Date" and thereafter receive the reports and
information, and make the determinations, contemplated above in this Section
2.11, or (2) request any supplemental information which they reasonably desire
from Borrower without requiring all such reports and other information, and then
designate a new Borrowing Base as they deem appropriate in light of such event
and such supplemental information (provided that any increase in the Borrowing
Base must be consented to by Supermajority Lenders). Upon any such designation,
a new Borrowing Base in the amount designated shall take effect on such date
(herein also called a "Determination Date") and shall remain in effect until but
not including the next Determination Date.
(d) If Borrower does not furnish all of the reports, information, and data
referred to in the first sentence of subsection (a) of this section by the date
specified in such sentence, or promptly furnish any supplemental information
which Administrative Agent requests as contemplated in clause (2) of subsection
(c) of this section, then Administrative Agent may designate the Borrowing Base
at any amount which Administrative Agent and Majority Lenders (or Supermajority
Lenders, in the case of an increase) determine and may redesignate the Borrowing
Base from time to time thereafter until each Lender receives all such
information, reports and data, whereupon Administrative Agent and Lenders shall
determine, and Borrower shall accept or reduce, a new Borrowing Base as
described in subsections (a), (b) and (c) of this section.
Section 2.12. Prudent Industry Lending Standards. Administrative
Agent and Majority Lenders (or Supermajority Lenders) shall determine the amount
of the Borrowing Base based upon the loan value which they in their reasonable
discretion assign to the various Borrowing Base Assets of the Related Persons at
the time in question and based upon such other credit factors as they in their
reasonable discretion deem consistent with prudent oil and gas banking industry
lending standards at the time (such as general market conditions, pricing
forecasts, and the assets, liabilities, cash flow, hedged and unhedged exposures
to product price and interest rate changes, business, properties, management and
ownership of Borrower and its Affiliates). It is expressly understood that
Lenders and Administrative Agent have no obligation to agree upon or designate
the Borrowing Base at any particular amount, whether in relation to the Maximum
Loan Amount or otherwise, and that Lenders' commitments to advance funds
hereunder are determined by reference to the Available Borrowing Base as from
time to time in effect.
Section 2.13. Capital Reimbursement. If at any time after the date
hereof, and from time to time, any Lender determines that the adoption or
modification of any applicable law, rule or regulation regarding such Lender's
required levels of reserves, deposits, insurance or capital (including any
allocation of capital requirements or conditions), or similar requirements, or
any interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of such Lender with any of such requirements, has
or would have the effect of (a) increasing such Lender's costs
33
relating to the Obligations owing to such Lender, or (b) reducing the yield or
rate of return of such Lender on such Obligations, to a level below that which
such Lender could have achieved but for the adoption or modification of any such
requirements, Borrower shall, within 30 days after any request sent by such
Lender to Borrower (with a copy to Administrative Agent), pay to Administrative
Agent for the account of such Lender such additional amounts as (in such
Lender's reasonable judgment, after reasonable computation) will compensate such
Lender for such increase in costs or reduction in yield or rate of return of
such Lender. Subject to Section 2.18(b), no failure by such Lender to
immediately demand payment of any additional amounts payable under this section
shall constitute a waiver of such Lender's right to demand payment of such
amounts at any subsequent time. Nothing herein contained shall be construed or
so operate as to require Borrower to pay any interest, fees, costs or charges
not permitted by Section 9.6.
Section 2.14. Increased Cost of Fixed Rate Portions. If the
introduction of or any change in any applicable domestic or foreign law, treaty,
rule or regulation (whether now in effect or hereinafter enacted or promulgated,
including Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of law):
(a) shall change the basis of taxation of payments to any Lender of any
principal, interest, or other amounts attributable to any Fixed Rate Portion or
otherwise due under this Agreement in respect of any Fixed Rate Portion (other
than franchise taxes or income taxes imposed on the overall net income, assets,
net worth or shareholders' capital of such Lender or of any lending office of
such Lender by any jurisdiction in which such Lender's principal office or any
such lending office is located); or
(b) shall change, impose, modify, apply or deem applicable any Reserve
Requirement or other reserve, special deposit or similar requirement in respect
of any Fixed Rate Portion of any Lender or against assets of, deposits with or
for the account of, or credit extended by, such Lender; or
(c) shall impose on any Lender or the interbank eurocurrency deposit market
any other condition affecting any Fixed Rate Portion, the result of which is to
increase the cost to any Lender of funding or maintaining any Fixed Rate Portion
or to reduce the amount of any sum receivable by any Lender in respect of any
Fixed Rate Portion by an amount deemed by such Lender to be material,
then such Lender shall promptly notify Administrative Agent and Borrower in
writing of the happening of such event and of the amount required to compensate
such Lender for such event, whereupon (i) Borrower shall pay such amount to
Administrative Agent for the account of such Lender and (ii) Borrower may elect,
by giving to Administrative Agent and Lender not less than three Business Days'
notice, to convert all (but not less than all) of any such Fixed Rate Portion
into a part of the Base Rate Portion.
Section 2.15. Availability. If (a) any change in applicable laws,
treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever,
34
domestic or foreign, shall make it unlawful or impracticable for any Lender to
fund or maintain Fixed Rate Portions, or shall materially restrict the authority
of any Lender to purchase or take offshore deposits of dollars (i.e.,
"eurodollars"), or (b) any Lender determines that matching deposits appropriate
to fund or maintain any Fixed Rate Portion are not available to it, or (c) any
Lender determines that the formula for calculating the Adjusted Eurodollar Rate
does not fairly reflect the cost to such Lender of making or maintaining loans
based on such rate, then, upon notice by such Lender to Borrower and
Administrative Agent, Borrower's right to elect Fixed Rate Portions of such
Lender's Loan shall be suspended to the extent and for the duration of such
illegality, impracticability or restriction and all Fixed Rate Portions of such
Lender's Loan (or portions thereof) which are then outstanding or are then the
subject of any Rate Election and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain part of the Base Rate
Portion of such Lender's Loan. Borrower agrees to indemnify Administrative Agent
and each Lender and hold it harmless against all costs, expenses, claims,
penalties, liabilities and damages which may result from any such change in law,
treaty, rule, regulation, interpretation or administration.
Section 2.16. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify Administrative Agent and each Lender against,
and reimburse Administrative Agent and each Lender on demand for, any loss or
expense incurred or sustained by Administrative Agent or such Lender (including
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by a Lender to fund or maintain Fixed Rate
Portions or Advances), as a result of any payment or prepayment (whether
authorized or required hereunder or otherwise) of all or a portion of a Fixed
Rate Portion on a day other than the day on which the applicable Interest Period
ends, any payment or prepayment, whether required hereunder or otherwise, of a
Loan made after the delivery, but before the effective date, of a Rate Election,
if such payment or prepayment prevents such Rate Election from becoming fully
effective, the failure of any Advance to be made or of any Rate Election to
become effective due to any condition precedent not being satisfied or due to
any other action or inaction of any Related Person, or any conversion (whether
authorized or required hereunder or otherwise) of all or any portion of any
Fixed Rate Portion into a Base Rate Portion or into a different Fixed Rate
Portion on a day other than the day on which the applicable Interest Period
ends.
Section 2.17. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify Administrative Agent and each Lender
against and reimburse Administrative Agent and each Lender for all present
and future income, stamp and other taxes, levies, costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of this
Agreement or any Fixed Rate Portions (whether or not legally or correctly
imposed, assessed, levied or collected), excluding, however, any franchise
taxes or income taxes imposed on or measured by the overall net income,
assets, net worth or shareholders' capital of Administrative Agent or such
Lender or any lending office of Administrative Agent or such Lender by any
jurisdiction in which Administrative Agent or such Lender or any such
lending office is located (all such non-excluded taxes, levies, costs and
charges being collectively called "Reimbursable
35
Taxes" in this section). Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as
indemnity.
(b) All payments on account of the principal of, and interest on, each
Lender's Loan and each Lender's Note, and all other amounts payable by
Borrower to Administrative Agent and each Lender hereunder, shall be made
in full without set-off or counterclaim and shall be made free and clear of
and without deductions or withholdings of any nature by reason of any
Reimbursable Taxes, all of which will be for the account of Borrower. In
the event of Borrower being compelled by law or other regulations to make
any such deduction or withholding from any payment to Administrative Agent
or any Lender, Borrower shall pay on the due date of such payment, by way
of additional interest, such additional amounts as are needed to cause the
amount receivable by Administrative Agent or such Lender after such
deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall
within 60 days thereafter forward to Administrative Agent or such Lender an
official receipt or other official document evidencing payment of such
deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Fixed Rate Portion, Borrower may elect, by giving to
Administrative Agent and each Lender not less than three Business Days'
notice, to convert all (but not less than all) of any such Fixed Rate
Portion into a part of the Base Rate Portion, but such election shall not
diminish Borrower's obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section, Borrower
shall be entitled, to the extent it is required to do so by law, to deduct
or withhold (and not to make any indemnification or reimbursement for)
income or other similar taxes imposed by the United States of America
(other than any portion thereof attributable to a change in federal income
tax laws effected after the date hereof) from interest, fees or other
amounts payable hereunder for the account of any Lender, other than a
Lender (i) who is a U.S. person for Federal income tax purposes or (ii) who
has the Prescribed Forms on file with Administrative Agent (with copies
provided to Borrower) for the applicable year to the extent deduction or
withholding of such taxes is not required as a result of the filing of such
Prescribed Forms, provided that if Borrower shall so deduct or withhold any
such taxes, it shall provide a statement to Administrative Agent and such
Lender, setting forth the amount of such taxes so deducted or withheld, the
applicable rate and any other information or documentation which such
Lender may reasonably request for assisting such Lender to obtain any
allowable credits or deductions for the taxes so deducted or withheld in
the jurisdiction or jurisdictions in which such Lender is subject to tax.
As used in this section, "Prescribed Forms" means such duly executed forms
or statements, and in such number of copies, which may, from time to time,
be prescribed by law and which, pursuant to applicable provisions of (x) an
income tax treaty between the United States and the country of residence of
the Lender providing the forms or statements, (y) the Internal Revenue Code
of 1986, as amended from time to time, or (z) any applicable
36
rules or regulations thereunder, permit Borrower to make payments hereunder
for the account of such Lender free of such deduction or withholding of
income or similar taxes.
Section 2.18. Change of Lending Office and Lender; Time Limit; etc.
(a) Each Lender agrees that, upon the occurrence of any event giving
rise to the operation of Sections 2.13 through 2.17 with respect to such Lender,
it will, if requested by Borrower, use reasonable efforts (subject to overall
policy considerations of such Lender) to designate another lending office for
its Loan (provided that such designation is made on such terms that such Lender
and its lending office suffer no economic, legal or regulatory disadvantage)
with the object of avoiding the consequence of the event giving rise to the
operation of any such section. Nothing in this subsection shall affect or
postpone any of the obligations of Borrower or the right of any Lender provided
in Sections 2.13 through 2.17.
(b) If any Lender elects to pass through to Borrower any charge or cost
under Sections 2.13 through 2.17 or elects to terminate the availability of
Fixed Rate Portions for any period of time, Borrower may elect to terminate such
Lender as a party to this Agreement; provided that, prior to or concurrently
with such termination, Borrower must either (i) if Administrative Agent and each
non-terminated Lender consent, pay to the terminated Lender all principal,
interest, fees, costs and other Obligations owed to such Lender and accrued
through the date of termination and terminate such Lender's commitment to make
Advances hereunder, in which event the Maximum Loan Amount shall be reduced by
the Percentage Share thereof of the terminated Lender, or (ii) arrange for one
or more Eligible Transferees to purchase the rights and duties of the terminated
Lender pursuant to Section 9.4(c), in which event the terminated Lender will
assign all of such rights and duties to such Eligible Transferees. Prior to
arranging for any Person other than an existing Lender to be such an Eligible
Transferee, Borrower shall notify the other Lenders of its intention to replace
the terminated Lender and, during the sixty day period after such notice, the
other Lenders shall have a right of first refusal to purchase the rights and
duties of the terminated Lender, pro rata in accordance with their Percentage
Shares.
(c) Notwithstanding anything to the contrary in Sections 2.13 through
2.17, Borrower shall not be required to reimburse or pay any costs or expenses
to any Lender as required under such sections which have accrued more than
ninety (90) days prior to such Lender's giving notice to Borrower that such
Lender has suffered or incurred such costs or expenses.
ARTICLE III - Conditions Precedent to Lending
Section 3.1. Documents to be Delivered. This Agreement shall not
become effective unless and until Administrative Agent shall have received all
of the following, at the office of Administrative Agent or its counsel in Dallas
or Houston, Texas, duly executed and delivered and in form, substance and date
satisfactory to Administrative Agent:
(a) This Agreement.
(b) Each Note,
37
(c) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of the
President or Chief Financial Officer of Borrower, which shall contain
the names and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits attached
thereto: a copy of resolutions duly adopted by the Board of Directors
of Borrower and in full force and effect at the time this Agreement is
entered into, authorizing the execution of this Agreement and the
other Loan Documents delivered or to be delivered in connection
herewith and the consummation of the transactions contemplated herein
and therein, a copy of the charter documents of Borrower and all
amendments thereto, certified by the appropriate official of
Borrower's state of organization, and a copy of any bylaws of
Borrower; and
(ii) A "Compliance Certificate" of the President or Chief
Executive Officer and of the Chief Financial Officer of Borrower, of
even date with such Advance, in which such officers certify to the
satisfaction of the conditions set out in subsections (a), (b), (c)
and (d) of Section 3.2.
(d) Copies of a certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization, issued by
the appropriate authorities of such jurisdiction.
(e) Favorable opinions of (1) Butler & Binion, L.L.P., counsel for the
Related Persons, substantially in the form set forth in Exhibit D-1, and (2) Tim
Lewy, special California counsel for Borrower, substantially in the form set
forth in Exhibit D-2.
(f) Copies of certificates of Borrower's good standing and due
qualification to do business in Texas, California, Alabama and Louisiana.
(g) Each Security Document listed on the Security Schedule.
(h) Payment of all fees required to be paid to Administrative Agent or any
Lender pursuant to the Fee Letter.
(i) Copies of any title abstracts, opinions or reports, if any, covering,
and copies of any environmental reports, if any, prepared with respect to, any
Oil and Gas Properties included within the Collateral.
Section 3.2. Additional Conditions Precedent. No Lender has any
obligation to make any Advance unless the following conditions precedent have
been satisfied:
(a) All representations and warranties made by any Related Person in any
Loan Document shall be true on and as of the date of such Advance (except (i) to
the extent that the facts upon which such representations are based have been
changed by the
38
extension of credit hereunder and (ii) representations that relate solely to an
earlier date) as if such representations and warranties had been made as of the
date of such Advance.
(b) No Default shall exist at the date of such Advance.
(c) No event or condition having a Material Adverse Effect shall have
occurred since the date of the financial statements most recently delivered
under Section 5.1(b) prior to the date of such Advance (or, prior to delivery of
the first such financial statements, since the date of this Agreement).
(d) The making of such Advance shall not be prohibited by any law or any
regulation or order of any court or governmental agency or authority and shall
not subject any Lender to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
(e) Administrative Agent shall have received all documents, instruments and
information which Administrative Agent has then requested and is entitled to
receive under the Loan Documents.
ARTICLE IV - Representations and Warranties
Section 4.1. Borrower's Representations and Warranties. To confirm each
Lender's understanding concerning Borrower and Borrower's business, properties
and obligations and to induce Administrative Agent and each Lender to enter into
this Agreement and to make the Loans, Borrower and each other Related Person
which is a party hereto represents and warrants to Administrative Agent and each
Lender that:
(a) No Default. No Related Person is in default in the performance of any
of the covenants and agreements contained herein. No event has occurred and is
continuing which constitutes a Default.
(b) Organization and Good Standing. Each Related Person which is a
corporation or partnership is duly organized, validly existing and in good
standing under the laws of its state of organization, having all corporate or
partnership powers required to carry on its business and enter into and carry
out the transactions contemplated hereby. Each such Related Person is duly
qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to so qualify, be in good
standing, or be authorized to do business has no material probability of having
a Material Adverse Effect. Each such Related Person has taken all actions and
procedures customarily taken in order to enter, for the purpose of conducting
business or owning property, each jurisdiction outside the United States wherein
the character of the properties owned or held by it or the nature of the
business transacted by it makes such actions and procedures prudent, except
where the failure to do so has no material probability of having a Material
Adverse Effect.
39
(c) Authorization. Each Related Person which is a corporation or
partnership has duly taken all corporate or partnership action necessary to
authorize the execution and delivery by it of the Loan Documents to which it is
a party and to authorize the consummation of the transactions contemplated
thereby and the performance of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and delivery by the various
Related Persons of the Loan Documents to which each is a party, the performance
by each of its obligations under such Loan Documents, and the consummation of
the transactions contemplated by the various Loan Documents, do not and will
not:
(i) conflict with the articles or certificate of incorporation,
bylaws, charter, or partnership agreement or certificate of any Related
Person,
(ii) conflict with any provision of any domestic or foreign law,
statute, rule or regulation, or with any agreement, judgment, license,
order or permit applicable to or binding upon any Related Person or any
Unrestricted Subsidiary,
(iii) result in the acceleration of any Liability owed by any Related
Person, or
(iv) result in or require the creation of any Lien upon any assets or
properties of any Related Person
in any way which causes a Default to occur hereunder, which has a material
probability of having a Material Adverse Effect, or which adversely affects the
enforceability of the Loan Documents. No consent, approval, authorization or
order of, and no notice to or filing with, any court or governmental authority
or third party (other than recording of Security Documents with appropriate
governmental authorities) is required in connection with the execution, delivery
or performance by any Related Person of any Loan Document to which it is a party
or to consummate any transactions contemplated by the Loan Documents, except for
those which, if not obtained, do not cause any Default to occur hereunder, do
not cause any Material Adverse Effect, and do not adversely affect the
enforceability of the Loan Documents. The Obligations evidenced by the Notes
constitute "Senior Indebtedness" of the Company as defined in the TECON
Debentures, "Specified Senior Indebtedness" as defined in the 1996 Indenture,
and equivalent "Senior Indebtedness" (regardless of how named) with respect to
any other Permitted Subordinated Trust Indebtedness and Permitted Preferred
Trust Securities. The Obligations of the Subsidiary Guarantors, if any, with
respect to the Notes constitute "Specified Guarantor Senior Indebtedness" as
defined in the 1996 Indenture. All borrowings made under the Notes are and will
be made in compliance with the restrictions contained in Section 10.12(a) of the
1996 Indenture.
(e) Enforceable Obligations. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general
40
application relating to the enforcement of creditors' rights or by the
discretionary application by a court of general principles of equity.
(f) Initial Financial Statements. The Initial Financial Statements fairly
present the matters addressed therein. Since the date of the audited annual
Initial Financial Statements no event or condition having a Material Adverse
Effect has occurred, except as reflected in the Disclosure Schedule or a
Disclosure Report. All Initial Financial Statements were prepared in accordance
with GAAP.
(g) Other Obligations and Restrictions. No Related Person has any
outstanding Liabilities of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to Borrower or material with respect to the consolidated
financial condition of Borrower and its Subsidiaries and not shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule or a
Disclosure Report. Except as shown in the Initial Financial Statements or
disclosed in the Disclosure Schedule or a Disclosure Report, no Related Person
is subject to or restricted by any franchise, contract, deed, charter
restriction, or other instrument or restriction which has a material probability
of having a Material Adverse Effect. On the date hereof, no Related Person has
any Permitted Priority Senior Indebtedness, other Additional Senior
Indebtedness, Subordinated Indebtedness, Permitted Subordinated Trust
Indebtedness, Allowed Puts or Non-Recourse Indebtedness, and no Forward
Sales/Production Payments exist or Permitted Preferred Trust Securities are
outstanding, except as listed in the Disclosure Schedule.
(h) Full Disclosure. No certificate, statement or other information
delivered herewith or heretofore by any Related Person to Administrative Agent
or any Lender in connection with the negotiation of this Agreement or in
connection with any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact known to any
Related Person (other than industry-wide risks normally associated with the
types of businesses conducted by the Related Persons) necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made. There is no fact known to any Related Person (other than industry-
wide risks normally associated with the types of businesses conducted by the
Related Persons) that has not been disclosed to Administrative Agent and each
Lender in writing which has a material probability of having a Material Adverse
Effect. All data and information which the Related Persons have furnished to the
Approved Petroleum Engineers or any Lender in connection with any Engineering
Report is true, correct and complete in all material respects, and, to the best
knowledge of Borrower, there are no statements or conclusions in any Engineering
Report which are based upon or include misleading data and information or fail
to take into account material data and information regarding the matters
reported therein. It is understood and agreed, however, that (i) each
Engineering Report is necessarily based upon economic assumptions and
professional opinions, estimates and projections, (ii) any financial projections
which the Related Persons have provided or may provide are similarly based on
economic assumptions, opinions and estimates, (iii) Borrower is not making any
representation or warranty that such assumptions, opinions, estimates and
projections will ultimately prove to have been accurate, (iv) Borrower is not
making any representation or warranty with respect to any price or cost
projections furnished by Administrative Agent or any Lender for use in preparing
any Engineering Report, and (v) Borrower's only representation and warranty with
41
respect to any financial projections that have been or will be provided by the
Related Persons is that such projections have been or will be prepared in good
faith based upon assumptions that Borrower's management believed or believes to
be reasonable at the time such projections were or are prepared. Borrower has
heretofore delivered to Administrative Agent and each Lender true, correct and
complete copies of the Initial Financial Statements and the Initial Engineering
Report.
(i) Litigation. Except as disclosed in the Initial Financial Statements or
in the Disclosure Schedule or a Disclosure Report: (i) to the best knowledge of
Borrower, there are no actions, suits or legal, equitable, arbitrative or
administrative proceedings pending or threatened against any Related Person or
Unrestricted Subsidiary before any federal, state, municipal or other court,
department, commission, body, board, bureau, agency, or instrumentality,
domestic or foreign, which have a material probability of having a Material
Adverse Effect, and (ii) there are no outstanding judgments, injunctions, writs,
rulings or orders by any such governmental entity against any Related Person,
any Unrestricted Subsidiary, or any Related Person's stockholders, partners,
directors or officers which have a material probability of having a Material
Adverse Effect.
(j) Labor Disputes and Acts of God. Except as disclosed in the Disclosure
Schedule or a Disclosure Report, since January 1, 1999, neither the business nor
the properties of any Related Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which has a material probability of
having a Material Adverse Effect.
(k) ERISA Liabilities. All currently existing ERISA Plans are listed in the
Disclosure Schedule or a Disclosure Report. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule or a Disclosure Report, to
the best knowledge of Borrower no Termination Event has occurred with respect to
any ERISA Plan and the Related Persons are in compliance with ERISA in all
material respects. No Related Person is required to contribute to, or has any
other absolute or contingent liability in respect of, any "multiemployer plan"
as defined in Section 4001 of ERISA. Except as set forth in the Disclosure
Schedule or a Disclosure Report: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as amended) in
excess of $1,000,000 exists with respect to any ERISA Plan, whether or not
waived by the Secretary of the Treasury or his delegate, and (ii) the current
value of each ERISA Plan's benefits does not exceed the current value of such
ERISA Plan's assets available for the payment of such benefits by more than
$1,000,000.
(l) Environmental and Other Laws. Except as disclosed in the Disclosure
Schedule or a Disclosure Report: (i) the Related Persons and Unrestricted
Subsidiaries are conducting their businesses in material compliance with all
applicable federal, state or local laws, including Environmental Laws, and have
and are in material compliance with all licenses and permits required under any
such laws; (ii) to the best knowledge of Borrower, none of the operations or
properties of any Related Person or Unrestricted Subsidiary is the subject of
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to an improper release of any Hazardous Materials
into the environment or to the improper storage or
42
disposal (including storage or disposal at offsite locations) of any Hazardous
Materials; (iii) no Related Person or Unrestricted Subsidiary (and to the best
knowledge of Borrower, no other Person) has filed any notice under any federal,
state or local law indicating that any Related Person or Unrestricted Subsidiary
is responsible for the improper release into the environment, or the improper
storage or disposal, of any material amount of any Hazardous Materials or that
any Hazardous Materials have been improperly released, or are improperly stored
or disposed of, upon any property of any Related Person or Unrestricted
Subsidiary; (iv) to the best knowledge of Borrower, no Related Person or
Unrestricted Subsidiary has any material Liability in connection with the
transportation of Hazardous Material to any location which is (1) listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, listed for possible
inclusion on such National Priorities List by the Environmental Protection
Agency in its Comprehensive Environmental Response, Compensation and Liability
Information System List, or listed on any similar state list or (2) the subject
of federal, state or local enforcement actions or other investigations which may
lead to claims against any Related Person or Unrestricted Subsidiary for clean-
up costs, remedial work, damages to natural resources or for personal injury
claims (whether under Environmental Laws or otherwise); and (v) to the best
knowledge of Borrower, no Related Person or Unrestricted Subsidiary otherwise
has any material Liability under any Environmental Laws or in connection with
the release into the environment, or the storage or disposal, of any Hazardous
Materials, except for plugging and abandonment responsibilities and other
routine Liabilities incurred in the ordinary course of business.
(m) Names and Places of Business. Neither Borrower nor any Subsidiary
Guarantor has, during the preceding five years, had, been known by, or used any
other corporate, partnership, trade, or fictitious name, except as disclosed in
the Disclosure Schedule or a Disclosure Report. Except as otherwise indicated in
the Disclosure Schedule or a Disclosure Report, the chief executive office and
principal place of business of Borrower and each Subsidiary Guarantor is located
at the address of Borrower set out in Section 9.3.
(n) Borrower's Subsidiaries. All of Borrower's Subsidiaries are either
Restricted Subsidiaries or Unrestricted Subsidiaries; as of the date hereof
Borrower has no Material Restricted Subsidiaries. Borrower does not have any
Unrestricted Subsidiary or any Restricted Subsidiary or own, directly or
indirectly, any stock or other Equity Interest in any other Person except those
listed in the Disclosure Schedule or a Disclosure Report. No Related Person is a
member of any general or limited partnership, joint venture or association of
any type whatsoever except (i) those listed in the Disclosure Schedule or a
Disclosure Report and (ii) associations, joint ventures or other relationships
(1) which are established pursuant to a standard form operating agreement or
similar agreement or which are partnerships for purposes of income taxation
only, (2) which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state law, and (3) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties and interests owned directly by the parties in such associations,
joint ventures or relationships. Except as otherwise revealed in a Disclosure
Report, Borrower owns, directly or indirectly, the Equity Interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
43
(o) Title to Properties; Licenses. Each Related Person has good and
defensible title to (i) all Collateral and all material Borrowing Base Assets
which it purports to possess, as of the time in question, and (ii) all of its
other material properties and assets in the United States, free and clear in all
cases of all Liens other than Permitted Liens and of all encumbrances which
interfere in any material respect with the ordinary conduct of the business of
the owner of the property or assets subject thereto, except that (1) no
representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed and (2) Borrower may be required, in connection with the California
Real Estate and other acquisitions, to obtain various post-closing consents to
assignments and transfers which are normally obtained in the ordinary course of
the oil and gas business following the acquisition of oil and gas properties.
Each Related Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property) which are
reasonably necessary to carry out its business as presently conducted and as
presently proposed to be conducted hereafter, and no Related Person is in
violation of the terms under which it possesses such intellectual property or
the right to use such intellectual property in any way which has a material
probability of having a Material Adverse Effect.
(p) Government Regulation. Neither Borrower nor any other Related Person
owing Obligations is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940
(as any of the preceding acts have been amended) or any other statute, law,
regulation or decree which restricts the incurring by such Person of any
Obligations, including statutes, laws, regulations or decrees relating to common
contract carriers or the sale of electricity, gas, steam, water or other public
utility services.
(q) Benefit to Guarantors. At such time as any Subsidiary Guarantor shall
become a party hereto pursuant to Section 6.1, and so long thereafter as any
Subsidiary Guarantor shall be a party hereto, Borrower, each Subsidiary
Guarantor, and the other Restricted Subsidiaries are mutually dependent on each
other in the conduct of their respective businesses under a holding company
structure, with the credit needed from time to time by each often being provided
by another or by means of financing obtained by one with the support of the
others for their mutual benefit, and the ability of each to obtain such
financing is dependent on the successful operations of the others. The board of
directors of each Subsidiary Guarantor has determined that such Subsidiary
Guarantor's execution, delivery and performance of this Agreement may reasonably
be expected to directly or indirectly benefit such Subsidiary Guarantor and are
in the best interests of such Subsidiary Guarantor.
(r) Reasonable Consideration for Guaranties. At such time as any Subsidiary
Guarantor shall become a party hereto pursuant to Section 6.1, and so long
thereafter as any Subsidiary Guarantor shall be a party hereto, the direct or
indirect value of the consideration received and to be received by each
Subsidiary Guarantor in connection herewith is reasonably worth at least as much
as the liability and obligations of such Subsidiary Guarantor hereunder, and the
incurrence of such liability and obligations in return for such consideration
may reasonably be expected to benefit such Subsidiary Guarantor, directly or
indirectly.
44
(s) No Insolvencies. Neither Borrower nor any Subsidiary Guarantor is
"insolvent" on the date hereof (that is, the sum of such Person's absolute and
contingent liabilities, including the Obligations, does not exceed the fair
market value of such Person's assets, including any rights of contribution,
reimbursement or indemnity). Each of Borrower and the Subsidiary Guarantors has
capital which is adequate for the businesses in which such Person is engaged and
intends to be engaged. Neither Borrower nor any Subsidiary Guarantor has
incurred (whether hereby or otherwise), nor does Borrower or any Subsidiary
Guarantor intend to incur or believe that it will incur, Liabilities which will
be beyond its ability to pay as such Liabilities mature.
Section 4.2. Representation by Lenders. Each Lender hereby represents that
it will acquire its Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents as set forth in Section 9.4.
ARTICLE V - Covenants of Borrower
Section 5.1. Affirmative Covenants. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Administrative Agent and each Lender to enter into this
Agreement and make the Loans, Borrower and each other Related Person which is a
party hereto covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Majority Lenders have
previously agreed otherwise:
(a) Payment and Performance. Borrower will pay all amounts due under the
Loan Documents in accordance with the terms thereof. Borrower and each
Subsidiary Guarantor will observe, perform and comply with every covenant, term
and condition expressed or implied in the Loan Documents. Borrower will cause
each of its Subsidiaries to observe, perform and comply with every such term,
covenant and condition which is applicable to such Subsidiary.
(b) Books, Financial Statements and Reports. Each Related Person will at
all times maintain full and accurate books of account and records. Borrower will
maintain and will cause its Subsidiaries to maintain a standard system of
accounting and will furnish the following statements and reports to
Administrative Agent and each Lender at Borrower's expense:
(i) As soon as available, and in any event within ninety days after
the end of each Fiscal Year, complete consolidated and consolidating
financial statements of Borrower and its Subsidiaries together with all
notes thereto, prepared in reasonable detail in accordance with GAAP,
together with an opinion, based on an audit using generally accepted
auditing standards, by KPMG Peat Marwick LLP, or other independent
certified public accountants selected by Borrower and acceptable to
Majority Lenders, stating that such consolidated financial statements
fairly present the matters addressed therein in accordance with GAAP. These
financial statements shall contain a consolidated and consolidating balance
sheet as of the end of such Fiscal Year, consolidated and consolidating
statements of operations for such Fiscal Year, and consolidated statements
45
of cash flows and of changes in stockholders' equity for such Fiscal Year,
each setting forth in comparative form the corresponding figures for the
preceding Fiscal Year. In addition, within ninety days after the end of
each Fiscal Year Borrower will furnish a report signed by such accountants
stating that they have read this Agreement and that in making the
examination and reporting on the consolidated financial statements
described above they did not conclude that any Default existed at the end
of such Fiscal Year or at the time of their report, or, if they did
conclude that a Default existed, specifying its nature and period of
existence.
(ii) As soon as available, and in any event within forty-five days
after the end of each Fiscal Quarter (A) a consolidated balance sheet of
Borrower and its Subsidiaries as of the end of such Fiscal Quarter,
consolidated statements of their operations, and consolidated statements of
their cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with GAAP, subject to changes resulting from normal
year-end adjustments, each setting forth in comparative form the
corresponding figures for the same Fiscal Quarter in the prior Fiscal Year,
and (B) upon request of Administrative Agent, consolidating work sheets
generated in connection with such consolidated balance sheet and
statements, which need not be prepared in full accordance with GAAP. In
addition Borrower will, together with each such set of financial statements
and each set of financial statements furnished under subsection (b)(i) of
this section, furnish a certificate in the form of Exhibit E, appropriately
completed and signed by the Chief Financial Officer of Borrower.
(iii) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by any Related
Person to its stockholders generally and all registration statements,
periodic reports and other statements and schedules (other than transmittal
letters) filed by any Related Person with any securities exchange, the
Securities and Exchange Commission or any similar governmental authority.
(iv) By (A) March 1 of each year, one or more engineering reports
prepared as of the preceding January 1 by (1) with respect to Oil and Gas
Properties consisting of Collateral, Approved Petroleum Engineers
(provided, if Borrower is maintaining a BBB/Baa2 Debt Rating, such reports
may be prepared by Borrower's or Torch's internal reserve engineers,
subject, at the sole option of Administrative Agent, to external audit) and
(2) with respect to Oil and Gas Properties not constituting Collateral,
Borrower's or Torch's internal reserve engineers, and audited by Approved
Petroleum Engineers (provided, if Borrower is maintaining a BBB/Baa2 Debt
Rating, such audit shall not be mandatory and shall be at the sole option
of Administrative Agent), and (B) by August 15 of each year (and within 45
days after any other Evaluation Date) an engineering report prepared by
Borrower's or Torch's internal reserve engineers, in each case concerning
all material Oil and Gas Properties owned by any Related Person which are
located in or offshore of the United States and which have proved oil or
gas reserves attributable thereto. Each report shall be satisfactory to
Administrative Agent, shall contain information and analysis comparable in
scope to that contained in the Initial Engineering
46
Report, shall be in accordance with the requirements of Regulation S-X
promulgated by the Securities and Exchange Commission (and, as to any
report prepared by Borrower's or Torch's internal reserve engineers, shall
utilize any pricing assumptions which may be provided to Borrower by
Administrative Agent), shall identify (or be accompanied by a schedule
identifying) any properties owned by any Restricted Subsidiary which is
obligated in any way for Non-Recourse Indebtedness, and shall take into
account (or be accompanied by a schedule showing) any "over-produced" or
"under-produced" status under gas balancing arrangements. Each report shall
also distinguish (or shall be delivered together with a certificate from an
appropriate officer of Borrower which distinguishes) those properties
treated in the report which are Collateral from those properties treated in
the report which are not Collateral.
(v) Promptly after entering into any Derivative Contracts (or any
unwinding of any Derivative Contracts), at or about the same time, which
together cover more than twenty-five percent (25%) of the Related Persons'
anticipated production of oil and gas in any calendar year, notice that
such contracts have been entered into and describing the general terms
thereof.
(c) Other Information; Inspections; Confidentiality. Each Related Person
will furnish to Administrative Agent and each Lender any information which
Administrative Agent may from time to time reasonably request in writing
concerning any covenant, provision or condition of the Loan Documents or any
matter in connection with the Related Persons' businesses and operations. Each
Related Person will permit representatives appointed by Administrative Agent
(including independent accountants, agents, attorneys, appraisers and any other
Persons) to visit and inspect any of such Related Person's property, including
its books of account, other books and records, and any facilities or other
business assets, and to make extra copies therefrom and photocopies and
photographs thereof, and to write down and record any information such
representatives obtain, and each Related Person shall permit Administrative
Agent or its representatives to investigate and verify the accuracy of the
information furnished to Administrative Agent or any Lender in connection with
the Loan Documents and to discuss all such matters with its officers, employees
and representatives, in each case during normal business hours. Each of
Administrative Agent and Lenders agrees that it will take all reasonable steps
to keep confidential any proprietary information given to it by any Related
Person, provided, however, that this restriction shall not apply to disclosures
of information: (i) made in connection with any enforcement or defense by
Administrative Agent or any Lender of its rights and remedies under the Loan
Documents, (ii) which has at the time in question entered the public domain,
(iii) which is required to be disclosed by law or by any order, rule or
regulation (whether valid or invalid) of any court or governmental agency or
authority, to (iv) Administrative Agent's or any Lender's Affiliates, auditors,
attorneys, advisors, or agents (provided that Administrative Agent and each
Lender shall be responsible for causing its own Affiliates, auditors, attorneys,
advisors, or agents to comply with the foregoing confidentiality provisions),
(v) or to any other Lender or to any purchaser or prospective purchaser of
participations or other interests in any Loan or Loan Document (provided that
any such purchaser or prospective purchaser has agreed to be bound by the
foregoing confidentiality provisions).
47
(d) Notice of Material Events and Change of Address. Borrower will
promptly notify Administrative Agent and each Lender:
(i) of any event or condition having a Material Adverse Effect,
(ii) of the occurrence of any Default or Borrowing Base Deficiency,
(iii) of the acceleration of the maturity of any Indebtedness owed by
any Related Person or of any default by any Related Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default has a material probability of having
a Material Adverse Effect,
(iv) of the occurrence of any Termination Event known to Borrower,
(v) of any claim of $1,000,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or
any other material adverse claim, which is asserted against any Related
Person or with respect to any Related Person's properties, and
(vi) of the filing of any suit or proceeding against any Related Person in
which an adverse decision would have a material probability of having a
Material Adverse Effect.
Upon the occurrence of any of the foregoing the Related Persons will take all
necessary or appropriate steps to remedy promptly any such Default,
acceleration, default or Termination Event, to protect against any such Material
Adverse Effect or adverse claim, to defend any such suit or proceeding, and to
resolve all controversies on account of any of the foregoing. Borrower will also
notify Administrative Agent and Thompson & Knight, P.C., Administrative Agent's
counsel (or such other counsel for Administrative Agent as may be designated by
Administrative Agent) in writing at least thirty Business Days prior to the date
that any Related Person changes its name or the location of its chief executive
office or principal place of business or the place where it keeps its books and
records concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Administrative Agent and its
counsel to prepare the same.
(e) Maintenance of Properties. Each Related Person will, in compliance with
prudent industry practices, maintain, preserve, protect, and keep all Collateral
and all of its other property in good condition and in material compliance with
all applicable laws, rules and regulations, and will from time to time make all
repairs, renewals and replacements needed to do the foregoing. Each Related
Person will operate, or cause to be operated, all of its material Oil and Gas
Properties in accordance with prudent industry practices.
(f) Maintenance of Existence and Qualifications. Each Related Person which
is a corporation or partnership will maintain and preserve its corporate or
partnership existence (except for any mergers or consolidations expressly
permitted by this Agreement and except for the dissolution of any Restricted
Subsidiaries which no longer have any significant business or
48
assets) and its rights and franchises in full force and effect and will qualify
to do business as a foreign corporation or partnership in all states or
jurisdictions where required by applicable law, except where the failure so to
qualify would not have a material probability of having a Material Adverse
Effect.
(g) Payment of Trade Liabilities, Taxes, etc. Each Related Person will (i)
timely file all required tax returns; (ii) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or property; (iii) within ninety (90) days after the same becomes due
pay all Liabilities owed by it on ordinary trade terms to vendors, suppliers and
other Persons providing goods and services used by it in the ordinary course of
its business; (iv) pay and discharge when due all other material Liabilities now
or hereafter owed by it; and (v) maintain appropriate accruals and reserves for
all of the foregoing in accordance with GAAP. Each Related Person may, however,
delay paying or discharging any of the foregoing so long as it is in good faith
contesting the validity thereof by appropriate proceedings and has set aside on
its books adequate reserves therefor.
(h) Insurance. Each Related Person will keep or cause to be kept adequately
insured by financially sound and reputable insurers its surface equipment,
vehicles and all other property of a character usually insured by similar
Persons engaged in the same or similar businesses in the relevant area of
operations. Each Related Person shall at all times maintain adequate insurance
against its liability for injury to persons or property, which insurance shall
be by financially sound and reputable insurers and shall provide the coverages
usually maintained by similar Persons in the relevant area of operations. Upon
written demand by Administrative Agent: (a) any insurance policies covering
Collateral shall be endorsed (i) to provide for payment of losses to
Administrative Agent for the account of Lenders as their interests may appear,
pursuant to a mortgage clause (without contribution) of standard form made part
of the applicable policy, (ii) to provide that such policies may not be
cancelled, reduced or affected in any manner for any reason without fifteen days
prior notice to Administrative Agent, (iii) to provide for insurance against
fire, casualty and any other hazards normally insured against, in the amount of
the full value (less a reasonable deductible not to exceed amounts customary in
the industry for similarly situated businesses and properties) of the property
insured, and (iv) to provide for any other matters which Administrative Agent
may reasonably require; and (b) any insurance policies covering liability for
injury to persons or property shall name Administrative Agent and Lenders as
additional insured.
(i) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay all reasonable out-
of-pocket costs and expenses (including reasonable attorneys' fees) incurred by
or on behalf of (i) Administrative Agent in connection with the negotiation,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, and the
filing, recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or re-recorded by the terms of any Loan Document, and (ii)
Administrative Agent or any Lender in connection with the defense or enforcement
of the Loan Documents or the defense of Administrative Agent's or any
49
Lender's exercise of its rights thereunder (including reasonable costs and
expenses of determining whether and how to carry out such defense or
enforcement).
(j) Performance on Borrower's Behalf. If any Related Person fails to pay
any taxes, insurance premiums, expenses, attorneys' fees or other amounts it is
required to pay under any Loan Document, Administrative Agent or any Lender may
pay the same. Borrower shall immediately reimburse Administrative Agent or any
such Lender for any such payments and each amount paid by Administrative Agent
or any such Lender shall constitute an Obligation owed hereunder which is due
and payable on the date such amount is paid by Administrative Agent or such
Lender.
(k) Interest. Borrower hereby promises to Administrative Agent and Lenders
to pay interest at the Late Payment Rate on all Obligations which Borrower has
in this Agreement promised to pay (including Obligations to pay fees or to
reimburse or indemnify Administrative Agent or any Lender) and which are not
paid when due. Such interest shall accrue from the date such Obligations become
due until they are paid.
(l) Compliance with Agreements and Law . Each Related Person will perform
all obligations it is required to perform under the terms of each indenture,
mortgage, deed of trust, security agreement, lease, franchise, agreement,
contract or other instrument or obligation to which it is a party or by which it
or any of its properties is bound, except where the failure to do so would not
have a material probability of having a Material Adverse Effect. Each Related
Person will conduct its business and affairs in compliance with all laws,
regulations, and orders applicable thereto, including Environmental Laws, except
where the failure to do so would not have a material probability of having a
Material Adverse Effect. Without limitation of the foregoing, no Related Person
will knowingly transport or arrange for the transportation or disposal of any
Hazardous Material in violation of any Environmental Laws, and no Related Person
will incur any material Liability under any Environmental Laws or in connection
with the release into the environment, or the storage or disposal, of any
Hazardous Materials.
(m) Evidence of Compliance. Borrower will at its own expense furnish to
each Lender all evidence which Administrative Agent from time to time reasonably
requests in writing as to the accuracy and validity of or compliance with all
representations, warranties and covenants made by any Related Person in the Loan
Documents, the satisfaction of all conditions contained therein, and all other
matters pertaining thereto.
(n) Agreement to Deliver Security Documents. Borrower agrees to deliver,
and to cause its Subsidiaries to deliver, to further secure the Obligations
whenever requested by Administrative Agent in its sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
Administrative Agent, for the purpose of granting, confirming, and perfecting
first and prior liens or security interests in Oil and Gas Properties with a
value (as reasonably determined by Administrative Agent based upon the most-
recent Engineering Report delivered by Borrower pursuant to Section 5.1(b)(iv))
at all times of not less than eighty-five percent (85%) of the aggregate value
of all Borrowing Base Assets, together with legal opinions in form and substance
reasonably satisfactory to Administrative Agent and its counsel confirming
50
that such Oil and Gas Properties are subject to Security Documents securing the
Obligations that constitute and create legal, valid and duly perfected deed of
trust or mortgage liens in such Oil and Gas Properties and assignments of and
security interests in the oil and gas attributable to such Oil and Gas
Properties and the proceeds thereof. Borrower also agrees to deliver, whenever
requested by Administrative Agent in its sole and absolute discretion upon the
occurrence and during the continuance of an Event of Default, favorable title
opinions from legal counsel acceptable to Administrative Agent with respect to
any such Oil and Gas Properties as may from time to time be designated by
Administrative Agent, based upon abstract or record examinations to dates
acceptable to Administrative Agent (a) stating that such Related Person has good
and defensible title to such properties and interests, free and clear of all
Liens other than Permitted Liens, (b) confirming that such properties and
interests are subject to Security Documents securing the Obligations that
constitute and create legal, valid and duly perfected first deed of trust or
mortgage liens in such properties and interests and first priority assignments
of and security interests in the oil and gas attributable to such properties and
interests and the proceeds thereof, and (c) covering such other matters as
Administrative Agent may request.
(o) Perfection and Protection of Security. Each Related Person will from
time to time Interests and Liens deliver to Administrative Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by the Related
Persons in form and substance satisfactory to Administrative Agent, which
Administrative Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in Collateral securing any Obligations.
(p) Production Proceeds. Notwithstanding that, by the terms of the various
Security Documents, Related Persons are and will be assigning to Administrative
Agent and Lenders all of the "Production Proceeds" (as defined therein) accruing
to the property covered thereby, so long as no Event of Default as described in
Section 7.1(a), (b), (h) or (i) has occurred and is continuing, Related Persons
may continue to receive from the purchasers of production all such Production
Proceeds, subject, however, to the Liens created under the Security Documents,
which Liens are hereby affirmed and ratified. Upon the occurrence and during the
continuance of an Event of Default as described in Section 7.1(a), (b), (h) or
(i), Administrative Agent and Lenders may exercise all rights and remedies
granted under the Security Documents, including the right to obtain possession
of all Production Proceeds then held by any Related Person or to receive
directly from the purchasers of production all other Production Proceeds. In no
case shall any failure, whether purposed or inadvertent, by Administrative Agent
or Lenders to collect directly any such Production Proceeds constitute in any
way a waiver, remission or release of any of their rights under the Security
Documents, nor shall any release of any Production Proceeds by Administrative
Agent or Lenders to any Related Person constitute a waiver, remission, or
release of any other Production Proceeds or of any rights of Administrative
Agent or Lenders to collect other Production Proceeds thereafter.
Section 5.2. Negative Covenants. To conform with the terms and conditions
under which each Lender is willing to have credit outstanding to Borrower, and
to induce Administrative Agent and each Lender to enter into this Agreement and
make the Loans, Borrower and each other Related Person which is a party hereto
covenants and agrees that until
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the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders have previously agreed otherwise:
(a) Guaranties and Indebtedness. No Restricted Subsidiary will at any time
have any Liability under any guaranty of any Indebtedness other than guaranties
of the Obligations and guaranties constituting Permitted Priority Senior
Indebtedness. No Related Person will guarantee any Liability of any Unrestricted
Subsidiary or of any Restricted Subsidiary which is obligated for Non-Recourse
Indebtedness. No Related Person will directly or indirectly create, incur,
assume, guarantee, or otherwise become or be liable with respect to any
Indebtedness except:
(i) the Obligations;
(ii) Permitted Priority Senior Indebtedness owing by any Related
Person;
(iii) Additional Senior Indebtedness owing by Borrower (but no other
Related Person) which is not Permitted Priority Senior Indebtedness;
(iv) Subordinated Indebtedness owing by Borrower (but no other Related
Person);
(v) Indebtedness owing by Borrower (but no other Related Person)
arising under Derivative Contracts, provided that such Derivative Contracts
are in compliance with Section 5.2(g);
(vi) Intercompany Indebtedness; and
(vii) Non-Recourse Indebtedness owing by any Restricted Subsidiary,
provided in each case that, both immediately before and after such Indebtedness
is created, incurred, assumed, guaranteed, or otherwise becomes a liability of
any such Related Person, no Borrowing Base Deficiency, Default under Section
5.2, or Event of Default exists (unless the proceeds of such Indebtedness are
applied in such a way that no Borrowing Base Deficiency or Default exists
immediately thereafter). For the purposes of this subsection, any Indebtedness
owing by a Person at the time it becomes a Restricted Subsidiary shall be deemed
to have been incurred at such time.
(b) Prepayments of Subordinated Indebtedness. No Related Person will make
any unscheduled payment on any Subordinated Indebtedness, except:
(i) unscheduled payments of any Subordinated Indebtedness in exchange
for, or out of the aggregate net cash proceeds of a substantially
concurrent issuance and sale (other than to another Related Person) of Non-
Redeemable Common Stock or of options or warrants giving the holders
thereof only the right to acquire Non-Redeemable Common Stock;
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(ii) unscheduled payments of any Subordinated Indebtedness in exchange
for, or out of the aggregate net cash proceeds of a substantially
concurrent incurrence (other than to another Related Person) of new
Subordinated Indebtedness of Borrower that is permitted under subsection
(iv) of the immediately preceding subsection (a), provided that such new
Subordinated Indebtedness has a stated interest rate that is the same or
less than the stated interest rate of the Subordinated Indebtedness being
paid, purchased, redeemed, defeased, acquired, or retired, and has a
weighted average life to maturity that is longer than the weighted average
life to maturity of the Subordinated Indebtedness being paid, purchased,
redeemed, defeased, acquired, or retired; and
(iii) other unscheduled payments of any Subordinated Indebtedness,
provided that Borrower must give Agent and each Lender at least forty-five
(45) days' advance notice of its decision to do so and must defer making
any such unscheduled payments until (1) Majority Lenders have determined
whether or not to designate a new Borrowing Base pursuant to Section
2.11(c), (2) any Borrowing Base Deficiency (whether resulting from such a
designation or previously existing) has been eliminated, and (3) no Default
exists.
Each Related Person will take all actions (such as, for example, reinvesting
asset sales proceeds or using asset sales proceeds to pay the Obligations or
Additional Senior Indebtedness) necessary to avoid becoming obligated to make
any unscheduled payment on any Subordinated Indebtedness except as provided
above. For the purpose of this subsection, Section 2.11, and the immediately
following subsection (c), "unscheduled payment" means any payment on or
purchase, redemption, defeasance, or other acquisition or retirement for value
of any Subordinated Indebtedness or Additional Senior Indebtedness, excluding
only principal payments and sinking fund payments which are scheduled to occur
at specified times in the documents governing such Indebtedness without regard
to the occurrence of any default, triggering event (such as asset sales, failure
to maintain financial ratios, or a change of control) or other contingency. For
the purpose of this subsection, the "weighted average life to maturity" of any
Subordinated Indebtedness means, as of any date of determination, the quotient
of (1) the sum of the products of (A) the number of years (and any portion
thereof) from such date of determination to the date of each successive
scheduled payment of principal on such Subordinated Indebtedness, times (B) the
amount of each such scheduled payment, divided by (2) the sum of all such
scheduled payments.
(c) Prepayments of Additional Senior Indebtedness. No Related Person will
make any unscheduled payment (as defined in the immediately preceding subsection
(b)) on any Additional Senior Indebtedness at any time when a Borrowing Base
Deficiency or Default exists (unless immediately after the making of such
unscheduled payment no Borrowing Base Deficiency or Default will exist) or if
such incurrence would cause any Borrowing Base Deficiency or Default to exist.
Each Related Person will take all actions necessary to avoid becoming obligated
to make any unscheduled payment on any Additional Senior Indebtedness in
violation of the preceding sentence.
(d) Limitation on Liens. No Related Person will create, assume or permit to
exist any Lien other than Permitted Liens upon any of the properties or assets
which it now owns or hereafter acquires.
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(e) Limitation on Mergers, Issuances of Securities. Except as expressly
provided in this subsection no Related Person will merge or consolidate with or
into any other business entity. Any Unrestricted Subsidiary may be merged into
or consolidated with another Unrestricted Subsidiary (including any Restricted
Subsidiary which in compliance herewith is designated as an Unrestricted
Subsidiary in anticipation of such merger) or any other Person that is not a
Related Person. Any Person may be merged into or consolidated with (i) a
Restricted Subsidiary, so long as a Restricted Subsidiary is the surviving
business entity and no Default is caused by such merger and any guaranties then
required by Article VI hereof are concurrently maintained or given, or (ii)
Borrower, so long as Borrower is the surviving business entity and no Default is
caused by such merger. Borrower will not hereafter issue any Equity Interests
other than shares of Non-Redeemable Common Stock and any options or warrants
giving the holders thereof only the right to acquire Non-Redeemable Common
Stock. No Restricted Subsidiary will hereafter issue any Equity Interests, other
than Permitted Preferred Trust Securities, and, to the extent not otherwise
forbidden under the terms hereof, Equity Interests issued to another Related
Person. Except as provided in Section 5.2(f), no Restricted Subsidiary which is
a partnership will allow any diminution of Borrower's interest (direct or
indirect) therein.
(f) Limitation on Sales of Property. No Related Person will sell, lease,
exchange, alienate, dispose of, or otherwise transfer any Collateral or any of
its material assets or properties or any material interest therein to any Person
other than a Related Person, except:
(i) equipment or other tangible personal property which is worthless
or obsolete or which is replaced by items of equal suitability and value.
(ii) oil, gas and other hydrocarbons which are sold in the ordinary
course of business after production or processing, and parcels of
California surface real estate (excluding mineral rights) which are sold in
the ordinary course of business.
(iii) other assets and properties (including (A) Forward
Sales/Production Payments, or (B) all, or any part, of the stock of or
partnership interests in any of Borrower's Subsidiaries) which are sold or
otherwise transferred on an arm's-length basis, provided that (1) the
receipt of any consideration therefor other than cash will be deemed the
making of an Investment by the Related Person which receives such
consideration, and such sale or other transfer may be made only if such
Investment can be made in compliance herewith after giving effect to such
sale or transfer, and (2) any sale or other transfer to any of such Related
Person's Affiliates must also be in compliance with Section 5.2(j).
No Related Person will otherwise sell, transfer or otherwise dispose of capital
stock of any Restricted Subsidiary except that any Restricted Subsidiary may
sell or issue its own capital stock to the extent permitted under Section
5.2(e). No Related Person will discount, sell, pledge or assign any notes
payable to it, accounts receivable or future income except to the extent
expressly permitted under the Loan Documents. So long as no Default then exists
or would be caused thereby, Administrative Agent will, at Borrower's request and
expense (and each Lender hereby irrevocably authorizes Administrative Agent to)
execute a release, satisfactory to Borrower and
54
Administrative Agent, of any Collateral so sold, leased, exchanged, alienated,
disposed or otherwise transferred pursuant to clause (iii) above.
(g) Derivative Contracts. No Restricted Subsidiary will be a party to or be
bound by any Derivative Contract. Borrower will not be a party to or bound by
any Derivative Contract, unless:
(i) such Derivative Contract, at the time it is entered into (A) is
not a speculative investment, and, unless it is a hedge of oil and gas
production, qualifies under GAAP as a hedge of floating or fixed rate
Indebtedness, or foreign currency needs, and (B) is entered into by
Borrower in the ordinary course of the Related Persons' businesses.
(ii) such Derivative Contract does not require any Related Person to
provide any Lien to secure Borrower's obligations thereunder, except for
Permitted Liens described in subsections (b) and (k) of the definition
thereof in Section 1.1.
(iii) all Derivative Contracts relating to the Related Persons'
anticipated total sales (measured in unit volumes, not by sales price) of
oil and gas in the ordinary course of their businesses (excluding any such
production committed to fixed price sales contracts) do not, in the
aggregate, cover amounts greater than the percentages of the Related
Persons' production (determined looking only to anticipated production from
reserves which are proved, developed producing reserves at the time in
question and excluding any such production committed to fixed price sales
contracts) for terms which are longer than those set out in the following
table:
Percentage of Anticipated Production Length of Contract Terms
0% to but not including 20% up to 7 years
20% to but not including 40% up to 5 years
40% to but not including 60% up to 3 years
60% to but not including 80% up to 1 year
over 80% up to 3 months
(h) Restricted Payments and Investments. No Related Person will incur any
Liability to make any Investment in any Restricted Subsidiary which is obligated
for Non-Recourse Indebtedness. No Related Person will make any Investment in any
Restricted Subsidiary which is obligated for Non-Recourse Indebtedness at any
time when, either immediately before or after giving effect to such Investment,
any Borrowing Base Deficiency, Default under Section 5.2, or Event of Default
would exist. No Related Person will declare, make or incur any Liability to make
any Restricted Payment or any Restricted Investment (including the sale,
issuance or entering into of any Allowed Put), unless both immediately before
and after giving effect to such action:
(i) no Borrowing Base Deficiency, Default under Section 5.2, or Event
of Default would exist, and
55
(ii) the sum of the aggregate amount of Restricted Investments
(valued immediately after such action), plus the aggregate amount of
Restricted Payments of the Related Persons declared or made during the
period commencing on January 1, 1996, and ending on the date such
Restricted Payment or Restricted Investment is declared or made, inclusive,
would not exceed the sum of
(1) $10,000,000, plus
(2) 50% of Adjusted Net Income for such period (or minus 100% of
Adjusted Net Income for such period if Adjusted Net Income for such
period is a loss), plus
(3) twenty-five percent (25%) of the aggregate proceeds (whether
or not in cash, but net of transaction costs) in excess of
$130,000,000 received after December 31, 1995 and prior to January 1,
1998 from sales, exchanges, conversions or other issuances of Equity
Interests of any kind, including the TECONS and other Permitted
Preferred Trust Securities, by Borrower or any of its Restricted
Subsidiaries (other than from issuances to each other which are
permitted hereunder), plus
(4) fifty percent (50%) of the aggregate proceeds (whether or not
in cash, but net of transaction costs) received on or after January 1,
1998 and through the end of such period from sales, exchanges,
conversions or other issuances of Equity Interests of any kind,
including Permitted Preferred Trust Securities, by Borrower or any of
its Restricted Subsidiaries (other than from issuances to each other
which are permitted hereunder), plus
(5) the aggregate net cash proceeds received during such period
by the Related Persons, after elimination of inter-company
transactions between themselves, constituting a return of capital from
any Restricted Investment
Notwithstanding the foregoing subsection (ii), Borrower may make the
following Restricted Payments and Restricted Investments (which will
nonetheless be included in all calculations thereafter made under such
subsection (ii)):
(A) the payment of any dividend on any other capital stock of any
Related Person within 60 days after the date of declaration thereof, if at
such declaration date such declaration complied with the foregoing
subsections (i) and (ii) (and such payment shall be deemed to have been
paid on such date of declaration for purposes of any calculation required
by the provisions of such subsection (ii)).
(i) Limitation on Acquisitions, New Businesses, and Margin Stock. No
Related Person will: (i) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business, (ii) engage directly or indirectly in any business other
than the Oil and Gas Business, the development or sale of California surface
real estate (excluding mineral rights) currently owned or as part of future
56
acquisitions of Oil and Gas Properties in California, or activities ancillary to
the foregoing, (iii) make any significant acquisitions of or investments in any
properties other than Oil and Gas Properties, the foregoing California real
estate, and ancillary properties used or useful in the Oil and Gas Business.
Borrower will not at any time, directly or indirectly, own "margin stock" (as
such term is defined in Regulation U promulgated by the Board of Governors of
the Federal Reserve System) which constitute more than twenty-five percent of
the value of Borrower's assets, and Borrower will not use the proceeds of any
Advances to acquire five percent or more of any class of publicly-traded Equity
Interests issued by any Person.
(j) Transactions with Affiliates. No Related Person will engage in any
material transaction (including any series of related transactions, but
excluding any extension of credit to employees which is described in subsection
(c) of the definition herein of "Restricted Investment") with any of its
Affiliates (other than another Related Person) unless (i) the terms of such
transaction are at least as favorable to it as those which would be obtainable
at the time in arm's-length dealings with Persons who are not its Affiliates,
and (ii) if such transaction involves payments in excess of $5,000,000, a
majority of those members of Borrower's Board of Directors who are not related
to such Affiliate have approved such transaction.
(k) Certain Prohibited Contracts; Torch Agreements; Multiemployer ERISA
Plans. Except as expressly provided for in the Loan Documents, no Related
Person will, directly or indirectly, enter into, create, or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Restricted Subsidiary to: (i) pay dividends or make other distributions to
Borrower or another Restricted Subsidiary, (ii) redeem Equity Interests held in
it by Borrower or another Restricted Subsidiary, (iii) repay loans and other
Indebtedness owing by it to Borrower or another Restricted Subsidiary, or (iv)
transfer any of its assets to Borrower or another Restricted Subsidiary (other
than leased assets or licenses which require the lessor's or licensor's consent
to any transfer). No Related Person will enter into any "take-or-pay" contract
or other contract or arrangement for the purchase of goods or services which
obligates it to pay for such goods or service regardless of whether they are
delivered or furnished to it. Borrower will (1) promptly notify Administrative
Agent and each Lender in writing not less than thirty days prior to any proposed
amendment or supplement to or replacement or termination of the Torch Agreements
or any related marketing agreement, and (2) from time to time upon request of
Administrative Agent or any Lender, permit representatives appointed by
Administrative Agent or such Lender to visit Borrower's offices and review any
such proposed or final amendment, supplement or replacement. No Related Person
will incur any obligation to contribute to any "multiemployer plan" as defined
in Section 4001 of ERISA.
(l) Unrestricted Subsidiaries. Borrower will not have any Subsidiary that
is neither a Restricted Subsidiary nor an Unrestricted Subsidiary. Borrower will
insure that no Unrestricted Subsidiary creates, incurs, assumes or otherwise
becomes liable with respect to any Indebtedness other than Non-Recourse
Indebtedness. Borrower will (without violating Section 5.2(h) or any other
provision of any Loan Document) insure that each Unrestricted Subsidiary
complies with each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to which
such Unrestricted Subsidiary is a party or by which it or any of its properties
is bound, and with all laws, regulations, and orders applicable to such
Unrestricted Subsidiary or its properties, business and affairs, including
Environmental Laws, if
57
such Unrestricted Subsidiary's failure so to comply would impose any Liability
on any Related Person, require any Related Person to pay or perform any
Liability owing by any Unrestricted Subsidiary, or otherwise have a material
probability of having a Material Adverse Effect. Borrower will (without
violating Section 5.2(h) or any other provision of any Loan Document) insure
that no Unrestricted Subsidiary takes, or omits to take, any action if such
action or omission would cause Borrower to be unable to remake its
representations and warranties hereunder.
(m) EBITDAX to Fixed Charges. At the end of any Fiscal Quarter, either:
(i) the EBITDAX/Fixed Charge Ratio will not be less than 2.0 to 1 or
(ii) if such Fiscal Quarter ends on or prior to March 31, 2000, the
Adjusted EBITDAX/Fixed Charge Ratio will not be less than 2.5 to 1.
(n) Indebtedness to Capitalization. The Debt to Capitalization Ratio shall
not exceed 0.65 to 1 at any time.
ARTICLE VI - Subsidiary Guaranties and Subordination
Section 6.1 Subsidiary Guarantors. Any Subsidiary of Borrower, whether now
existing or hereafter created or acquired or otherwise coming into existence
after the date hereof, that shall at any time qualify as a Material Restricted
Subsidiary hereunder shall promptly become a party to this Agreement by
executing and delivering to Administrative Agent a supplement hereto in the form
attached hereto as Exhibit G, with such modifications therein as Administrative
Agent shall from time to time reasonably specify. Each such Material Restricted
Subsidiary shall deliver to Administrative Agent, simultaneously with its
delivery of such supplement, written evidence satisfactory to Administrative
Agent and its counsel that such Material Restricted Subsidiary has taken all
corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance thereof and of any other documents which it
is required to execute.
Section 6.2. Guaranty.
(a) Each Subsidiary Guarantor, by becoming a party to this Agreement,
irrevocably, absolutely, and unconditionally guarantees to Administrative Agent
and each Lender the prompt, complete, and full payment when due, and no matter
how the same shall become due, of (i) each Note, including all principal, all
interest thereon and all other sums payable thereunder, and (ii) all other sums
payable under this Agreement and the other Loan Documents, whether for
principal, interest, fees or otherwise. Without limiting the generality of the
foregoing, each Subsidiary Guarantor's liability hereunder shall extend to and
include all post-petition interest, expenses, and other duties and liabilities
of Borrower described above in this subsection (a), or below in the following
subsection (b), which would be owed by Borrower but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization, or similar proceeding involving Borrower.
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(b) Each Subsidiary Guarantor hereby irrevocably, absolutely, and
unconditionally guarantees to Administrative Agent and each Lender the prompt,
complete and full performance, when due, and no matter how the same shall become
due, of all obligations and undertakings of Borrower to Administrative Agent or
Lenders under, by reason of, or pursuant to any of the Loan Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
each Subsidiary Guarantor will, forthwith upon demand by Administrative Agent,
pay such Obligation in full to Administrative Agent for the benefit of
Administrative Agent or the Lenders to whom such Obligation is owed. If
Borrower shall for any reason fail to perform promptly any Obligation, each
Subsidiary Guarantor will, forthwith upon demand by Administrative Agent, cause
such Obligation to be performed or, if specified by Administrative Agent,
provide sufficient funds, in such amount and manner as Administrative Agent
shall in good faith determine, for the prompt, full and faithful performance of
such Obligation by Administrative Agent or such other Person as Administrative
Agent shall designate.
(d) If either Borrower or any Subsidiary Guarantor fails to pay or perform
any Obligation as described in the immediately preceding subsections (a), (b),
or (c), each Subsidiary Guarantor will incur the additional obligation to pay to
Administrative Agent, and each Subsidiary Guarantor will forthwith upon demand
by Administrative Agent pay to Administrative Agent, the amount of any and all
expenses, including reasonable fees and disbursements of Administrative Agent's
counsel and of any experts or agents retained by Administrative Agent, which
Administrative Agent may incur as a result of such failure.
(e) It is the intention of all parties that the guarantees by each
Subsidiary Guarantor under this Article VI not constitute fraudulent transfers
or fraudulent conveyances for purposes of the federal Bankruptcy Code, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any
similar federal or state law. Therefore, and notwithstanding any provision to
the contrary in this Agreement, the obligations of each Subsidiary Guarantor
from time to time owing under this Agreement shall be limited to the maximum
amount as will (after giving effect to all other Liabilities of such Subsidiary
Guarantor, including any Liability under any guarantee of the 1996 Notes or the
1998 Notes, if any, and any adjustments to such Liability from time to time
under Section 13.4 of the 1996 Indenture or Section 13.4 of the 1998 Indenture,
and after giving effect to all assets of such Subsidiary Guarantor consisting of
rights to subrogation, reimbursement, indemnity, exoneration or contribution)
result in such obligations of such Subsidiary Guarantor not constituting such a
fraudulent conveyance or fraudulent transfer.
Section 6.3. Unconditional Guaranty.
(a) No action which Administrative Agent or any Lender may take or omit to
take in connection with any of the Loan Documents, any of the Obligations (or
any other Liabilities owing by Borrower to Administrative Agent or any Lender),
or any Security, and no course of dealing of Administrative Agent or any Lender
with any Related Person or any other Person, shall release or diminish any
Subsidiary Guarantor's obligations, liabilities, agreements or duties
59
hereunder or afford any Subsidiary Guarantor any recourse against Administrative
Agent or any Lender, regardless of whether any such action or inaction may
increase any risks to or liabilities of Administrative Agent or any Lender or
any Related Person or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, each Subsidiary Guarantor hereby
expressly agrees that Administrative Agent and Lenders may, from time to time,
without notice to or the consent of any Subsidiary Guarantor, do any or all of
the following:
(i) consent to, or participate in making, any amendment, change or
modification, in whole or in part, to any one or more of the Loan
Documents, and give or refuse to give any waivers or other indulgences with
respect thereto.
(ii) neglect, delay, fail, or refuse to take or prosecute any action
for the collection or enforcement of any of the Obligations, to foreclose
or take or prosecute any action in connection with any Security or Loan
Document, to bring suit against any Related Person or any other Person, or
to take any other action concerning the Obligations or the Loan Documents.
(iii) accelerate, change, rearrange, extend, or renew the time, rate,
terms, or manner for payment or performance of any one or more of the
Obligations (whether for principal, interest, fees, expenses,
indemnifications, affirmative or negative covenants, or otherwise).
(iv) compromise or settle any unpaid or unperformed Obligation or any
other obligation or amount due or owing, or claimed to be due or owing,
under any one or more of the Loan Documents.
(v) take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations, accept
additional or substituted Security therefor, and perfect or fail to perfect
Administrative Agent's or Lenders' rights in any or all Security.
(vi) discharge, release, substitute or add Subsidiary Guarantors or
other guarantors of the Obligations.
(vii) apply all amounts received from the Related Persons or others,
or from any Security for any of the Obligations, as required herein or as
Administrative Agent or Lenders may otherwise determine, without in any way
being required to marshall Security or assets or to apply all or any part
of such amounts upon any particular Obligations.
(b) No action or inaction of any Related Person or any other Person, and no
change of law or circumstances, shall release or diminish any Subsidiary
Guarantor's obligations, liabilities, agreements, or duties hereunder or afford
any Subsidiary Guarantor any recourse against Administrative Agent or any
Lender. Without limiting the foregoing, the obligations, liabilities,
agreements, and duties of each Subsidiary Guarantor under this Agreement shall
not be released, diminished, impaired, reduced, or affected by the occurrence of
any or all of the following from
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time to time, even if occurring without notice to or without the consent of any
Subsidiary Guarantor:
(i) any voluntary or involuntary liquidation, dissolution, sale of all
or substantially all assets, marshalling of assets or liabilities,
receivership, conservatorship, assignment for the benefit of creditors,
insolvency, bankruptcy, reorganization, arrangement, or composition of any
Related Person or any other proceedings involving any Related Person or any
of the assets of any Related Person under laws for the protection of
debtors, or any discharge, impairment, modification, release, or limitation
of the liability of, or stay of actions or lien enforcement proceedings
against, any Related Person, any properties of any Related Person, or the
estate in bankruptcy of any Related Person in the course of or resulting
from any such proceedings.
(ii) the failure by Administrative Agent or any Lender to file or
enforce a claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which any
Related Person is a party.
(iii) the release by operation of law of any Related Person from any
of the Obligations or any other obligations to Administrative Agent or any
Lender.
(iv) the invalidity, deficiency, illegality, or unenforceability of
any of the Obligations or the Loan Documents, in whole or in part, any bar
by any statute of limitations or other law of recovery on any of the
Obligations, or any defense or excuse for failure to perform on account of
force majeure, act of God, casualty, impossibility, impracticability, or
other defense or excuse whatsoever.
(v) the failure of any Related Person or any other Person to sign any
guaranty or other instrument or agreement within the contemplation of any
Related Person, Administrative Agent or any Lender.
(vi) without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence of
this provision would or might constitute or afford a legal or equitable
discharge or release of or defense to a guarantor or surety other than the
actual, full and final payment and performance of the Obligations in
accordance with their terms or the release of such Subsidiary Guarantor
pursuant to Section 6.8.
(c) Administrative Agent and Lenders may invoke the benefits of this
Agreement against any one or more Subsidiary Guarantors before pursuing any
remedies against any Related Person or any other Person and before proceeding
against any Security now or hereafter existing for the payment or performance of
any of the Obligations. Administrative Agent and Lenders may maintain an action
against any Subsidiary Guarantor without joining any other Related Person
therein and without bringing a separate action against any other Related Person.
(d) If any payment to Administrative Agent or any Lender by any Related
Person is held to constitute a preference or a voidable transfer under
applicable state or federal laws, or if for
61
any other reason Administrative Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Administrative Agent or such Lender shall not constitute a
release of any Subsidiary Guarantor from any liability hereunder, and each
Subsidiary Guarantor agrees to pay such amount to Administrative Agent or such
Lender on demand and agrees and acknowledges that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, to the extent of any
such payment or payments. Any transfer by subrogation which is made as
contemplated in Section 6.6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Administrative Agent and Lenders.
(e) This Article VI constitutes a continuing guaranty and shall apply to
and cover all Obligations and renewals and extensions thereof and substitutions
therefor from time to time.
Section 6.4. Waivers. Each Subsidiary Guarantor hereby waives, with
respect to the Obligations, this Agreement, and the other Loan Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice of
any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) each Subsidiary Guarantor shall take full
responsibility for informing itself of such matters, (ii) neither Administrative
Agent nor any Lender shall have any responsibility of any kind to inform any
Subsidiary Guarantor of such matters, and (iii) Administrative Agent and Lenders
are hereby authorized to assume that each Subsidiary Guarantor, by virtue of its
relationships with Borrower, has full and complete knowledge of such matters
whenever Lenders extend credit to Borrower or take any other action which may
change or increase any Subsidiary Guarantor's liabilities or losses hereunder).
(b) notice that Administrative Agent, any Lender, any Related Person, or
any other Person has taken or omitted to take any action under any Loan Document
or any other agreement or instrument relating thereto or relating to any
Obligation.
(c) notice of acceptance of the guarantee provided in this Article VI, and
all rights of any Subsidiary Guarantor under (S)3.605 or (S)34.02 of the Texas
Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following section or otherwise), and all other notices of any kind whatsoever.
Section 6.5. Exercise of Remedies. Administrative Agent and Lenders shall
have the right to enforce, from time to time and in any order, any rights,
powers and remedies which they may have under the Loan Documents or otherwise,
including judicial foreclosure, the exercise of rights of power of sale, the
taking of a deed or assignment in lieu of foreclosure, the appointment
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of a receiver to collect rents, issues and profits, the exercise of remedies
against personal property, or the enforcement of any assignment of leases,
rentals, oil or gas production, or other properties or rights, whether real or
personal, tangible or intangible; and each Subsidiary Guarantor shall be liable
to Administrative Agent and each Lender hereunder for any deficiency resulting
from the exercise by Administrative Agent or any Lender of any such right or
remedy even though any rights which such Subsidiary Guarantor may have against
Borrower or others may be destroyed or diminished by exercise of any such right
or remedy. No failure on the part of Administrative Agent or any Lender to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right preclude any other or further exercise thereof or the
exercise of any other right. The rights, powers and remedies of Administrative
Agent and each Lender provided herein and pursuant to the other Loan Documents
are cumulative and are in addition to, and not exclusive of, any other rights,
powers or remedies provided by law or in equity. The rights of Administrative
Agent and each Lender hereunder are not conditional or contingent on any attempt
by Administrative Agent or any Lender to exercise any of its rights under any
other Loan Document against any Related Person or any other Person.
Section 6.6. Delayed Subrogation. Until all of the Obligations have been
paid and performed in full, no Subsidiary Guarantor shall have any right to
exercise any right of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which it may now or hereafter have against or to
any Related Person or any Security in connection with this Agreement (including
any right of contribution or subrogation under (S)3.116 or (S)34.04 of the Texas
Business and Commerce Code), and each Subsidiary Guarantor hereby waives any
rights to enforce any remedy which any Subsidiary Guarantor may have against
Borrower or any other Subsidiary Guarantor and any right to participate in any
Security until such time. If any amount shall be paid to any Subsidiary
Guarantor on account of any such subrogation or other rights, any such other
remedy, or any Security at any time when all of the Obligations and all other
expenses guaranteed pursuant hereto shall not have been paid in full, such
amount shall be held in trust for the benefit of Administrative Agent and
Lenders, shall be segregated from the other funds of such Subsidiary Guarantor,
and shall forthwith be paid over to Administrative Agent to be held by
Administrative Agent as collateral for, or then or at any time thereafter
applied in whole or in part by Administrative Agent against, all or any portion
of the Obligations, whether matured or unmatured, in such order as
Administrative Agent shall elect. If any Subsidiary Guarantor shall make payment
to Administrative Agent of all or any portion of the Obligations and if all of
the Obligations shall be finally paid in full, Administrative Agent will, at
such Subsidiary Guarantor's request and expense, execute and deliver to such
Subsidiary Guarantor (without recourse, representation or warranty) appropriate
documents necessary to evidence the transfer by subrogation to such Subsidiary
Guarantor of an interest in the Obligations resulting from such payment by such
Subsidiary Guarantor, provided that such transfer shall be subject to Section
6.3(d).
Section 6.7. Subordination. Each Restricted Subsidiary which at any time
is a party hereto hereby subordinates and makes inferior to the Obligations any
and all Liabilities now or at any time hereafter owed by Borrower to such
Restricted Subsidiary. Each Restricted Subsidiary agrees that during the
continuance of any Event of Default it will neither permit Borrower to repay
such Liabilities or
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any part thereof nor accept payment from Borrower of such Liabilities or any
part thereof. If any such Restricted Subsidiary receives any such payment, the
amount so paid shall be held in trust for the benefit of Lenders, shall be
segregated from the other funds of such Restricted Subsidiary, and shall
forthwith be paid over to Administrative Agent to be held by Administrative
Agent as collateral for, or then or at any time thereafter applied in whole or
in part by Administrative Agent against, all or any portions of the Obligations
in such order as Administrative Agent and Majority Lenders shall elect.
Section 6.8. Release of Guarantor. (a) Upon any sale or disposition (by
merger or otherwise) of a Subsidiary Guarantor to a Person other than Borrower
or another Subsidiary Guarantor, pursuant to a transaction that is otherwise
permitted by and in compliance with the Loan Documents, such Subsidiary
Guarantor shall automatically and without further action by Administrative Agent
or any Lender be released from its obligations as a Subsidiary Guarantor
hereunder. The Administrative Agent shall (and each Lender hereby irrevocably
authorizes Administrative Agent to) deliver an appropriate instrument evidencing
such release upon (i) compliance with all provisions of the Loan Documents with
respect to such sale or disposition and (ii) receipt of a request from Borrower
certifying such compliance.
(b) Each Subsidiary Guarantor that may from time to time be designated as
an Unrestricted Subsidiary in accordance with the provisions of this Agreement
shall be released from its guarantee as a Subsidiary Guarantor hereunder for so
long as it remains an Unrestricted Subsidiary. The Administrative Agent shall
(and each Lender hereby irrevocably authorizes Administrative Agent to) deliver
an appropriate instrument evidencing such release upon (i) the satisfaction of
all requirements hereunder with respect to any such designation and (ii) receipt
by Administrative Agent of certified resolutions of Borrower's Board of
Directors designating such Subsidiary Guarantor as an Unrestricted Subsidiary.
(c) If at any time any Subsidiary Guarantor shall no longer qualify as a
Material Restricted Subsidiary, then, provided that an Event of Default shall
not have occurred and be continuing, upon the request of Borrower to
Administrative Agent, Administrative Agent shall (and each Lender hereby
irrevocably authorizes Administrative Agent to) release such Subsidiary
Guarantor from its obligations as a Subsidiary Guarantor hereunder.
ARTICLE VII - Events of Default and Remedies
Section 7.1. Events of Default. Each of the following events constitutes an
Event of Default under this Agreement:
(a) Any Related Person fails to pay the principal amount of any Obligation
owed by it when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise;
(b) Any Related Person fails to pay any interest or other amounts
(excluding principal) constituting Obligations owed by it within five days after
when such interest or other Obligation is due and payable, whether at a date
specified for the payment thereof or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise;
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(c) Any Related Person fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 5.1(d)(ii) or of Sections 5.2(m) or
(n);
(d) Any Related Person fails (other than as referred to in subsections (a),
(b) and (c) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of any Loan Document, and such failure remains
unremedied for a period of thirty (30) days after notice of such failure is
given by Administrative Agent to Borrower;
(e) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Related Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 4.1(e) for any reason
other than its release or subordination by Administrative Agent;
(f) Any Related Person (i) fails to pay any portion, when such portion is
due, of any Indebtedness (other than the Obligations) owing by it (whether as
principal, guarantor or otherwise) in an aggregate amount in excess of
$5,000,000, or (ii) breaches or defaults in the performance of any agreement or
instrument by which any such Indebtedness is issued, evidenced, governed, or
secured, and any such failure, breach or default continues beyond any applicable
period of grace provided therefor;
(g) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $5,000,000
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, or (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets available
for the payment of such benefit liabilities by more than $5,000,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer's proportionate share of such excess exceeds such
amount);
(h) any Change of Control occurs; and
(i) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of sixty days;
or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
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such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any Collateral with an
aggregate value in excess of $5,000,000 in a proceeding brought against or
initiated by it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof, or
such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the payment
of money in excess of $5,000,000 (not covered by insurance satisfactory to
Administrative Agent in its discretion), and either (1) enforcement
proceedings upon such judgment are commenced prior to such judgment being
stayed, or (2) sixty days elapse after the date of entry of such judgment
without an appeal or appropriate proceeding for review thereof being taken
and a stay of enforcement pending such appeal being obtained; or
(v) suffers a writ or warrant of attachment or any similar process to
be issued by any court against all or any substantial part of its assets or
any Collateral with an aggregate value in excess of $5,000,000, and such
writ or warrant of attachment or any similar process is not stayed or
released within thirty days after the entry or levy thereof or after any
stay is vacated or set aside.
Section 7.2 Acceleration; Other Remedies. Upon the occurrence of an
Event of Default described in subsection (i)(i), (i)(ii) or (i)(iii) of Section
7.1 with respect to Borrower, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each Related Person who at any time ratifies or approves this Agreement.
Upon any such acceleration, any obligation of any Lender to make any further
Advances shall be terminated. During the continuance of any other Event of
Default, Administrative Agent may (provided it has received the consent of
Majority Lenders), at any time and from time to time and without notice to
Borrower or any other Related Person, do either or both of the following:
(a) terminate any obligation of Lenders to make Advances hereunder,
and
(b) declare any or all of the Obligations immediately due and payable,
and all such Obligations shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration
of any kind, all of which are hereby expressly waived by Borrower and each
Related Person who at any time ratifies or approves this Agreement.
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After the occurrence of any Event of Default Administrative Agent may, on behalf
of itself and Lenders (i) protect and enforce their rights under the Loan
Documents by any appropriate proceedings, including proceedings to obtain
specific performance of any covenant or agreement contained in any Loan Document
or to enforce any other legal or equitable right, and (ii) enforce and foreclose
on the Liens upon Collateral evidenced by the Security Documents in any manner
provided therein or provided for by law. All rights, remedies and powers
conferred upon Administrative Agent and Lenders under the Loan Documents shall
be deemed cumulative and not exclusive of any other rights, remedies or powers
available under the Loan Documents or at law or in equity; provided that no
Lender shall individually give any notice to any holder of Subordinated
Indebtedness (or any trustee for such holders) which would have the effect of
suspending payments on such Subordinated Indebtedness, and any such notice shall
be given only by Administrative Agent with the consent of Majority Lenders.
Section 7.3. Indemnity. As used in this section the term "Indemnified
Parties" refers to Administrative Agent, Documentation Agent, each Lender, and
each director, officer, agent, attorney, employee, representative and Affiliate
of Administrative Agent, Documentation Agent or any Lender. Borrower hereby
agrees to indemnify each Indemnified Party, upon demand, from and against any
and all liabilities, obligations, claims, losses, damages, penalties, fines,
actions, judgments, suits, settlements, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this section collectively called "liabilities
and costs") which to any extent (in whole or in part) may be imposed on,
incurred by, or asserted against such Indemnified Party growing out of,
resulting from or in any other way associated with any of the Loan Documents and
the transactions and events (including the enforcement or defense thereof) at
any time associated therewith or contemplated therein (including any violation
or noncompliance with any Environmental Laws by any Related Person or any
liabilities or duties of any Related Person or any Indemnified Party with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS, OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR
BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ONE OR MORE OF THE
INDEMNIFIED PARTIES,
unless and only to the extent that it shall be judicially determined (including
without limitation by agreed alternative dispute resolution) that such
liabilities and costs were proximately caused by the gross negligence or willful
misconduct of any Indemnified Party, in which event the foregoing indemnities
(a) shall continue for the benefit of the other Indemnified Parties in all
respects, and (b) shall also continue for the benefit of such Indemnified Party
but shall only extend to those portions of the liabilities and costs that are
67
not determined to have been proximately caused by the gross negligence or
willful misconduct of such Indemnified Party.
Section 7.4. Bank Accounts; Offset. In this section Borrower and Subsidiary
Guarantors which are parties hereto are each called a "Grantor". To secure the
repayment of the Obligations, each Grantor hereby grants to Administrative Agent
and to each Lender a right of offset, which shall be in addition to all other
interests and rights of Administrative Agent or any Lender at common law, under
the Loan Documents, or otherwise, and which shall be upon and against (a) any
and all moneys, securities or other property (and the proceeds therefrom) of
such Grantor now or hereafter held or received by or in transit to
Administrative Agent or any Lender from or for the account of such Grantor,
whether for safekeeping, custody, pledge, transmission, collection or otherwise,
(b) any and all deposits (general or special, time or demand, provisional or
final) of such Grantor with Administrative Agent or any Lender, and (c) any
other credits and claims of such Grantor at any time existing against
Administrative Agent or any Lender, including claims under certificates of
deposit. At any time and from time to time during the continuation of any Event
of Default, each of Administrative Agent and Lenders is hereby authorized to
offset against the Obligations then due and payable (in either case without
notice to such Grantor) any and all items hereinabove referred to. If
Administrative Agent or any Lender ever exercises such right of offset, it shall
give Borrower (or the other affected Grantor) notice of such offset promptly
thereafter, but failure or delay in giving such notice shall in no way affect
the validity or enforceability of such offset.
ARTICLE VIII - Administrative Agent
Section 8.1. Appointment and Authority. Each Lender hereby irrevocably
authorizes Administrative Agent, and Administrative Agent hereby undertakes, to
receive payments of principal, interest and other amounts due hereunder as
specified herein and to take all other actions and to exercise such powers under
the Loan Documents as are specifically delegated to Administrative Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Administrative Agent to Lenders is only that of one
commercial bank acting as administrative agent for others, and nothing in the
Loan Documents shall be construed to constitute Administrative Agent a trustee
or other fiduciary for any holder of any of the Notes or of any participation
therein nor to impose on Administrative Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Administrative Agent, Administrative
Agent shall not be required to exercise any discretion or take any action, and
it may request instructions from Lenders with respect to any such matter, in
which case it shall be required to act or to refrain from acting (and shall be
fully protected and free from liability to all Lenders in so acting or
refraining from acting) upon the instructions of Majority Lenders (including
itself), provided, however, that Administrative Agent shall not be required to
take any action which exposes it to a risk of personal liability that it
considers unreasonable or which is contrary to the Loan Documents or to
applicable law. Upon receipt by Administrative Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Administrative Agent of any Default or Event of Default,
Administrative Agent shall promptly notify each Lender thereof.
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Section 8.2. Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative Agent nor any of its directors, officers, agents, attorneys, or
employees shall be liable for any action taken or omitted to be taken by any of
them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE
OF ANY KIND, except that each shall be liable for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with the Loan Documents, or for the
adequacy, accuracy or completeness of any title, environmental or other review
or evidence referred to in Article III; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of the Loan Documents on the part of any Related Person or to
inspect the property (including the books and records) of any Related Person;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Loan Document
or any instrument or document furnished in connection therewith; (f) may rely
upon the representations and warranties of the Related Persons and the Lenders
in exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 8.3. Lenders' Credit Decisions. Each Lender acknowledges that it
has, independently and without reliance upon Administrative Agent or any other
Lender, made its own analysis of Borrower and the transactions contemplated
hereby and its own independent decision to enter into this Agreement and the
other Loan Documents. Each Lender also acknowledges that it will, independently
and without reliance upon Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents.
Section 8.4. Indemnification. As used in this section the term "Indemnified
Parties" refers to Administrative Agent and each director, officer, agent,
attorney, employee, representative and Affiliate of Administrative Agent. Each
Lender hereby agrees to indemnify each Indemnified Party, upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against such Indemnified Party growing out
of, resulting from or in any other way associated with any of the Loan Documents
and the transactions and events (including the enforcement or defense thereof)
at any time associated therewith or
69
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Related Person or any liabilities or duties of any
Related Person or any Indemnified Party with respect to Hazardous Materials
found in or released into the environment).
THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS, OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR
BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ONE OR MORE OF THE
INDEMNIFIED PARTIES,
unless and only to the extent that it shall be judicially determined (including
without limitation by agreed alternative dispute resolution) that such
liabilities and costs were proximately caused by the gross negligence or willful
misconduct of any Indemnified Party, in which event the foregoing indemnities
(a) shall continue for the benefit of the other Indemnified Parties in all
respects, and (b) shall also continue for the benefit of such Indemnified Party
but shall only extend to those portions of the liabilities and costs that are
not determined to have been proximately caused by the gross negligence or
willful misconduct of such Indemnified Party.
Section 8.5. Rights as Lender. In its capacity as a Lender, Administrative
Agent shall have the same rights and obligations as any Lender and may exercise
such rights as though it were not Administrative Agent. Administrative Agent may
accept deposits from, lend money to, act as Trustee under indentures of, and
generally engage in any kind of business with any of the Related Persons or
their Affiliates, all as if it were not Administrative Agent hereunder and
without any duty to account therefor to any other Lender.
Section 8.6. Sharing of Set-Offs and Other Payments. Each of Administrative
Agent and Lender agrees that if it shall, whether through the exercise of rights
under security documents or rights of banker's lien, set off, or counterclaim
against Borrower or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Administrative Agent under Section 2.9, causes Administrative Agent or such
Lender to have received more than it would have received had such payment been
received by Administrative Agent and distributed pursuant to Section 2.9, then
(a) it shall be deemed to have simultaneously purchased and shall be obligated
to purchase interests in the Obligations as necessary to cause Administrative
Agent and all Lenders to share all payments as provided for in Section 2.9, and
(b) such other adjustments shall be made from time to time as shall be equitable
to ensure that Administrative Agent and all Lenders share all payments of
Obligations as provided in Section 2.9; provided, however, that nothing herein
contained shall in any way affect the right of Administrative Agent or any
Lender to obtain payment (whether by exercise of rights of banker's lien, set-
off or counterclaim or otherwise) of indebtedness other than the Obligations.
Borrower expressly consents to the foregoing arrangements and agrees that any
holder of any
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such interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to court order to be paid on
account of the possession of such funds prior to such recovery.
Section 8.7. Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that there is any dispute among Lenders about how such funds should be
distributed, Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent
in good faith believes that the uncertainty or dispute will not be promptly
resolved, or if Administrative Agent is otherwise required to invest funds
pending distribution to Lenders, Administrative Agent shall invest such funds
pending distribution; all interest on any such investment shall be distributed
upon the distribution of such investment and in the same proportion and to the
same Persons as such investment. All moneys received by Administrative Agent
for distribution to Lenders (other than to the Person who is Administrative
Agent in its separate capacity as a Lender) shall be held by Administrative
Agent pending such distribution solely as Administrative Agent for such Lenders,
and Administrative Agent shall have no equitable title to any portion thereof.
Section 8.8. Benefit of Article VIII. The provisions of this Article
(other than the following Section 8.9) are intended solely for the benefit of
Administrative Agent and Lenders, and no Related Person shall be entitled to
rely on any such provision or assert any such provision in a claim or defense
against Administrative Agent or any Lender. Administrative Agent and Majority
Lenders may waive or amend such provisions (other than the following Section
8.9) as they desire without any notice to or consent of Borrower or any Related
Person.
Section 8.9. Resignation. Administrative Agent may resign at any time
by giving written notice thereof to Lenders and Borrower, which notice shall set
forth the date of such resignation. Administrative Agent may be removed at any
time, with or without cause, by action of Majority Lenders. Upon any such
resignation or removal, Borrower may, with the written concurrence of Majority
Lenders, designate a successor Administrative Agent. If within fifteen days
after the date of such resignation or removal Borrower makes no such designation
or such written concurrence is not given, Majority Lenders shall have the right
to appoint a successor Administrative Agent. A successor must be appointed for
any retiring or removed Administrative Agent, and such Administrative Agent's
resignation or removal shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the Administrative
Agent's resignation or removal, no successor Administrative Agent has been
appointed and has accepted such appointment, then the retiring or removed
Administrative Agent may appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Administrative Agent hereunder
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by a successor Administrative Agent, the retiring or removed Administrative
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any resignation or removal of an
Administrative Agent hereunder, the provisions of this Article VIII shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under the Loan Documents.
ARTICLE IX - Miscellaneous
Section 9.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by Administrative Agent or any Lender in exercising any
right, power or remedy which Administrative Agent or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by
Administrative Agent or such Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person shall in
any case of itself entitle any Related Person to any other or further notice or
demand in similar or other circumstances. No waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if
such party is Administrative Agent, by Administrative Agent and (iii) if such
party is a Lender, by such Lender or by Administrative Agent on behalf of
Lenders with the written consent of Majority Lenders (which consent has already
been given as provided in Section 9.7). Notwithstanding the foregoing or
anything to the contrary herein, Administrative Agent shall not, without the
prior consent of each individual Lender affected thereby, execute and deliver on
behalf of such Lender any waiver or amendment which would: (1) waive any of the
conditions specified in Article III (provided that Administrative Agent may in
its discretion withdraw any request it has made under Section 3.2(f)), (2)
increase any Lender's commitment to make Advances to any amount greater than its
Percentage Share of $400,000,000, (3) reduce any fees hereunder, or the
principal of, or interest on, such Lender's Note, (4) postpone any date fixed
for any payment of any fees hereunder, or principal of, or interest on, such
Lender's Note, (5) amend the definition herein of "Majority Lenders" or
"Supermajority Lenders", or otherwise change the aggregate amount of Percentage
Shares which is required for Administrative Agent, Lenders or any of them to
take any particular action under the Loan Documents, or amend this Section
9.1(a), (6) release Borrower from its obligation to pay such Lender's Note or
(except as provided in Section 6.8) release any Subsidiary Guarantor from its
guaranty of such payment, or (7) release any Collateral, except such releases
relating to sales of property as permitted under Section 5.2(f).
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) neither Administrative Agent nor any
72
Lender has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (iii) the relationship
pursuant to the Loan Documents between Borrower, on one hand, and Administrative
Agent and each Lender, on the other hand, is and shall be solely that of debtor
and creditor, respectively, (iv) no partnership or joint venture exists with
respect to the Loan Documents between any of Borrower, Administrative Agent and
Lenders, (v) Administrative Agent is not Borrower's Administrative Agent, but
Administrative Agent for Lenders, (vi) should an Event of Default or Default
occur or exist Administrative Agent and each Lender will determine in its sole
discretion and for its own reasons what remedies and actions it will or will not
exercise or take at that time, (vii) and without limiting any of the foregoing,
Borrower is not relying upon any representation or covenant by Administrative
Agent or any Lender, or any representative thereof, and no such representation
or covenant has been made, that Administrative Agent or any Lender will, at the
time of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents.
(c) Integration. This Agreement and the other Loan Documents set forth the
entire understanding between the parties hereto with respect to the transactions
contemplated herein and therein and supersede all prior discussions and
understandings, written or oral, with respect to the subject matter hereof and
thereof, and there are no representations, warranties, covenants, undertakings
or agreements by any of the parties hereto relating to the subject matter hereof
except as expressly set out in this Agreement or in another Loan Document.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.2. Survival of Agreements; Cumulative Nature. All of the Related
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other Loan
Documents, and shall further survive until all of the Obligations are paid in
full to Administrative Agent and Lenders and all of Administrative Agent's and
Lenders' obligations to Borrower are terminated. All statements and agreements
contained in any certificate or other instrument delivered by any Related Person
to Administrative Agent or any Lender under any Loan Document shall be deemed
representations and warranties by Borrower or agreements and covenants of
Borrower under this Agreement. The representations, warranties, indemnities, and
covenants made by the Related Persons in the Loan Documents, and the rights,
powers, and privileges granted to Administrative Agent and Lenders in the Loan
Documents, are cumulative, and, except for expressly specified waivers and
consents, no Loan Document shall be construed in the context of another to
diminish, nullify, or otherwise reduce
73
the benefit to Administrative Agent or any Lender of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar representation, warranty, indemnity, or covenant contained in any
other Loan Document, and each such similar representation, warranty, indemnity,
or covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.
Section 9.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to Borrower and the Related
Persons at the address of Borrower specified on the signature pages hereto and
to Administrative Agent and the other Lenders at their addresses specified on
the signature pages hereto (unless changed by similar notice in writing given by
the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of delivery at the address provided
herein, (b) in the case of telecopy, upon receipt, or (c) in the case of
registered or certified United States mail, three days after deposit in the
mail; provided, however, that no Request for Advances or Rate Election shall
become effective until actually received by Administrative Agent.
Section 9.4. Joint and Several Liability; Parties in Interest. All
Obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities. All grants, rights, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Related Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior consent of all Lenders. Neither any Related Person nor any Affiliate of
any Related Person shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender knowingly accept any offer to
do so, unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If any
Related Person or any Affiliate of any Related Person at any time purchases some
but less than all of the Obligations owed to Administrative Agent and all
Lenders, such purchaser shall not be entitled to any rights under the Loan
Documents unless and until such Persons and their Affiliates have purchased all
of the Obligations.
(b) No Lender shall sell any participation interest in its commitment to
make Advances or any of its rights under its Loan or under the Loan Documents to
any Person other than an Eligible Transferee, and then only if the agreement
between such Lender and such participant at all times provides:
(i) that such participation exists only as a result of the agreement
between such participant and such Lender and that such transfer does not
give such participant any right
74
to vote as a Lender or any other direct claims or rights against any Person
other than such Lender,
(ii) that such participant is not entitled to payment from any Related
Person under Sections 2.13 through 2.17 of amounts in excess of those
payable to such Lender under such sections (determined without regard to
the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that
such participant shall not be entitled to require such Lender to take any
action under any Loan Document or to obtain the consent of such participant
prior to taking any action under any Loan Document, except for actions
which would require the consent of all Lenders under subsection (a) of
Section 9.1.
No Lender selling such a participation shall, as between the other parties
hereto and such Lender, be relieved of any of its obligations hereunder as a
result of the sale of such participation. Each Lender which sells any such
participation to any Person (other than an Affiliate of such Lender) shall give
prompt notice thereof to Administrative Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Lender shall make any assignment or transfer of any kind of
its commitment to make Advances or any of its rights under its Loan or under the
Loan Documents, except for assignments to an Eligible Transferee, and then only
if such assignment is made in accordance with the following requirements:
(i) Each such assignment:
(1) shall apply to all Obligations owing to the assignor Lender
under this Agreement and to the unused portion of the assignor
Lender's commitment to make Advances, so that after such assignment is
made the assignor Lender shall have a fixed (and not a varying)
Percentage Share (which shall be zero percent (0%) in the case of a
total assignment) and be committed to make that Percentage Share of
all future Advances and the assignee shall have a fixed (and not a
varying) Percentage Share and be committed to make that Percentage
Share of all future Advances, and
(2) shall be in such an amount that, after such assignment is
made, neither the assignor Lender nor the assignee will have interests
in Loans and Notes under this Agreement which, together with their
respective unused commitments to make Advances (and any other Loans
which may be held by them hereunder), will be less than $15,000,000 in
the aggregate (provided that such $15,000,000 limit shall not apply to
any assignment made during the existence of any Event of Default).
(ii) The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit F,
75
appropriately completed, together with the Note subject to such assignment
and a processing fee payable to Administrative Agent of $3500. Upon such
execution, delivery, and payment and upon the satisfaction of the
conditions set out in such Assignment and Acceptance, then (1) Borrower
shall issue new Notes to such assignor (if appropriate) and assignee, and
(2) as of the "Settlement Date" specified in such Assignment and Acceptance
the assignee thereunder shall be a party hereto and a Lender hereunder and
Administrative Agent shall thereupon deliver to Borrower and each Lender a
schedule showing the revised Percentage Shares of such assignor Lender and
such assignee Lender and the Percentage Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended) for Federal income tax purposes, shall (to the extent it
has not already done so) provide Administrative Agent and Borrower with the
"Prescribed Forms" referred to in Section 2.17(d).
(d) Nothing contained in this section shall prevent or prohibit any Lender
from assigning or pledging all or any portion of its Loan and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance, each assignee
Lender thereunder will be confirming to and agreeing with Administrative Agent
and each other Lender hereunder that such assignee understands and agrees to the
terms of this Agreement, including Section 2.11 and Article VIII hereof.
(f) Administrative Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of the
Lenders and the commitment to make Advances of, and principal amount of the Loan
owing to, each Lender from time to time (in this section called the "Register").
The entries in the Register shall be conclusive, in the absence of manifest
error, and Borrower, Administrative Agent and Lenders may treat each person
whose name is recorded in the Register as a Lender hereunder for all purposes.
The Register shall be available for inspection by Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
Section 9.5. Governing Law; Submission to Process. Except to the extent
that the law of another jurisdiction is expressly elected in a Loan Document,
the Loan Documents shall be deemed contracts and instruments made under the laws
of the State of Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the United States of
America, without regard to principles of conflicts of law. Chapter 346 of the
Texas Finance Code, as amended (formerly Chapter 15 of Texas Revised Civil
Statutes Annotated Article 5069) (which regulates certain revolving credit loan
accounts and revolving tri-party accounts) does not apply to this Agreement or
to the Notes. Borrower hereby irrevocably submits itself and each other Related
Person to the non-exclusive jurisdiction of the state and federal courts sitting
in the State of Texas and agrees and consents that service of
76
process may be made upon it or any of the Related Persons in any legal
proceeding relating to the Loan Documents or the Obligations by any means
allowed under Texas or federal law.
Section 9.6. Limitation on Interest. Administrative Agent, Lenders, the
Related Persons and any other parties to the Loan Documents intend to comply
strictly with applicable usury law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted by applicable law from time to time in
effect. Neither any Related Person nor any present or future guarantors,
indorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount permitted by
applicable law from time to time in effect, and the provisions of this section
shall control over all other provisions of the Loan Documents which may be in
conflict or apparent conflict herewith. Administrative Agent and Lenders
expressly disavow any intention to contract for, receive, charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated or any Obligation is prepaid. If (a) the maturity of
any Obligation is accelerated for any reason, (b) any Obligation is prepaid and
as a result any amounts held to constitute interest are determined to be in
excess of the maximum amount permitted by applicable law then in effect, or (c)
Administrative Agent or any Lender or any other holder of any or all of the
Obligations shall otherwise collect moneys which are determined to constitute
interest which would otherwise increase the interest on any or all of the
Obligations to an amount in excess of that permitted by applicable law then in
effect, then all sums determined to constitute interest in excess of the maximum
amount then permitted by applicable law shall, without penalty, be promptly
applied to reduce the then outstanding principal of the related Obligations or,
if all Obligations have been paid in full or if Administrative Agent or such
Lender or holder otherwise prefers, promptly returned to Borrower or the other
payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, Administrative Agent, Lenders and the
Related Persons (and any other payors thereof) shall to the greatest extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest throughout the entire contemplated term of
the instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum lawful rate of interest
from time to time in effect under applicable law. In the event applicable law
provides for an interest ceiling under Chapter 303 of the Texas Finance Code
(the "Texas Finance Code") and Chapter 1D of Title 79, Tex. Rev. Civ. Stats.
1925 ("Chapter 1D") as amended, respectively for that day, the ceiling shall be
the "indicated rate ceiling" or "weekly ceiling" as defined in the Texas Finance
Code and Chapter 1D and shall be used when appropriate in determining the
Highest Lawful Rate. As used in this section the term "applicable law" means the
laws of the State of Texas or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Section 9.7. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to
77
Administrative Agent to terminate this Agreement. Upon receipt by Administrative
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Related Person in any Loan Document, any Obligations under Sections 2.13
through 2.17, and any obligations which any Person may have to indemnify or
compensate Administrative Agent or any Lender shall survive any termination of
this Agreement or any other Loan Document. At the request and expense of
Borrower, Administrative Agent shall prepare and execute all necessary
instruments to reflect and effect such termination of the Loan Documents.
Administrative Agent is hereby authorized to execute all such instruments on
behalf of all Lenders, without the joinder of or further action by any Lender.
Section 9.8. Severability. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 9.9. Counterparts. This Agreement may be separately executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Agreement.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS, BEFORE OR AFTER MATURITY;
CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, AND ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION.
Section 9.11. Restatement. Borrower has heretofore been indebted to
Lenders under the Original Agreement. Upon the execution and delivery of this
Agreement by each of the parties hereto: (a) any loans made under the Original
Agreement and outstanding as of the date hereof shall be deemed Loans made
hereunder as of the date hereof and shall be deemed made under, and evidenced
by, the Notes and subject to the terms and conditions hereof and thereof, (b)
the "Base Rate Portion" (as defined in the Original Agreement) of any such
outstanding loan shall constitute a Base Rate Portion hereunder, and (c) each
"Fixed Rate Portion" and related "Interest Period" (as defined in the Original
Agreement) of any such outstanding loan shall carryover and continue as a Fixed
Rate Portion hereunder, with an Interest Period ending on the last day of such
78
related "Interest Period", and in no event shall such carrying over and
continuing of such Fixed Rate Portions (i) constitute a payment or prepayment of
all or a portion of any "Fixed Rate Portion" or (ii) entitle any Lender to any
reimbursement under Section 2.16 of the Original Agreement or Section 2.16
hereof with respect thereto. This Agreement amends and restates the Original
Agreement in its entirety, and upon the effectiveness hereto, all terms and
provisions hereof shall supersede the terms and provisions thereof.
79
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
NUEVO ENERGY COMPANY
Borrower
/s/ ROBERT M. KING
By:------------------------------------------
Robert M. King
Senior Vice President and
Chief Financial Officer
Borrower's Address:
1331 Lamar, Suite 1600
Houston, Texas 77010-3039
Attention: Mr. Robert King
Telephone: (713) 753-1342
Telecopy: (713) 756-1744
80
NATIONSBANK, N.A.,
as Administrative Agent and a Lender
/s/ JAMES ALLRED
By:------------------------------------------
James Allred, Managing Director
Address:
Houston Main Banking Center
Energy Finance Division
700 Louisiana, 8th Floor
Houston, Texas 77002
Attention: Mr. Jim Allred
Telephone: (713) 247-6327
Telecopy: (713) 247-6432
with a copy to:
NationsBank Plaza
Syndications Unit
901 Main Street, 66th Floor
Dallas, Texas 75202
Attention: Mr. Jeff Susman
Telephone: (214) 209-0964
Telecopy: (214) 209-2881
81
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent and a Lender
/s/ JOHN KOWALCZUK
By:------------------------------------------
Name: John Kowalczuk
Title: Vice President
Address:
60 Wall Street
New York, New York 10260-0060
Attention: John Kowalczuk
Telephone: (212) 648-0381
Telecopy: (212) 648-5416
82
BANK OF MONTREAL,
a Lender
/s/ J.B. WHITMORE
By:------------------------------------------
Name: J.B. Whitmore
Title: Diector
Address:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Frank Russo
Telephone: (713) 546-9760
Telecopy: (713) 223-0477
83
PARIBAS, a Lender
/s/ BARTON D. SCHOUEST
By:------------------------------------------
Name: Barton D. Schouest
Title: Managing Director
/s/ DOUGLAS R. LIFTMAN
By:------------------------------------------
Name: Douglas R. Liftman
Title: Director
Address:
1200 Smith, Suite 3100
Houston, Texas 77002
Attention: Douglas Liftman/Barton Schouest
Telephone: (713) 659-4811
Telecopy: (713) 659-3832
84
BANKBOSTON, N.A.,
a Lender
/s/ TERRENCE RONAN
By:------------------------------------------
Terrence Ronan, Director
Address:
100 Federal Street
Mailstop: 01-08-04
Boston, Massachusetts 02110
Attention: Terrence Ronan
Telephone: (617) 434-5472
Telecopy: (617) 434-3652
85
BANKERS TRUST COMPANY,
a Lender
/s/ CALLI S. HAYES
By:------------------------------------------
Name: Calli S. Hayes
Title: Managing Director
Address:
130 Liberty Street, MS 2344
New York, New York 10006
Attention: Marcus M. Tarkington
Telephone: (212) 250-7684
Telecopy: (212) 250-8693
86
CIBC INC.,
a Lender
/s/ ROGER COLDEN
By:------------------------------------------
Name: Roger Colden
Title: Authorized Signatory
Address:
2 Paces West #1200
2727 Pacesferry Road
Atlanta, Georgia 30339
Attention: Pluria Howell
Telephone: (770) 319-4814
Telecopy: (770) 319-4950
with a copy to:
1600 Smith, 30th Floor
Houston, Texas 77002
Attention: Paul Jordan
Telephone: (713) 650-2589
Telecopy: (713) 650-7675
87
SOCIETE GENERALE,
a Lender
/s/ RICHARD A. ERBERT
By:------------------------------------------
Name: Richard A. Erbert
Title: Vice President
Address:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Richard Erbert
Telephone: (713) 759-6318
Telecopy: (713) 650-0824
88
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, a Lender
/s/ ROBERT C. MERTENSOTTO
By:------------------------------------------
Name: Robert C. Mertensotto
Title: Managing Director
Address:
600 Travis, 20th Floor
Houston, Texas 77002
Attention: Bob Mertensotto
Telephone: (713) 216-4147
Telecopy: (713) 216-4295
89
CHRISTIANIA BANK OG KREDITKASSE,
a Lender
/s/ WILLIAM S. PHILLIPS
By:------------------------------------------
Name: William S. Phillips
Title: First Vice President
/s/ PETER M. DODGE
By:------------------------------------------
Name: Peter M. Dodge
Title: Senior Vice President
Address:
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: Peter Dodge/Steve Phillips
Telephone: (212) 827-4835/4836
Telecopy: (212) 827-4888
90
THE FIRST NATIONAL BANK OF CHICAGO,
a Lender
/s/ JEFF DALTON
By:------------------------------------------
Name: Jeff Dalton
Title: Assistant Vice President
Address:
910 Travis, 6th Floor
Houston, Texas 77002
Attention: Jeff Dalton
Telephone: (713) 751-6227
Telecopy: (713) 751-7894
Address for Operational Notices:
One First National Plaza, Suite 0634
Chicago, Illinois 60670
Attention: Mattie Reed
Telephone: (312) 732-5219
Telecopy: (312) 732-4840
91
ABN AMRO BANK N.V.,
a Lender
/s/ ROBERT J. CUNNINGHAM
By:------------------------------------------
Name: Robert J. Cunningham
Title: Group Vice President
/s/ JAMIE A. CONN
By:------------------------------------------
Name: Jamie A. Conn
Title: Vice President
Address:
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Robert Cunningham
Telephone: (713) 964-3351
Telecopy: (713) 961-1699
with a copy to:
208 South LaSalle, Suite 1500
Chicago, Illinois 60604-1003
Attention: Loan Administration
Telephone: (312) 992-5110
Telecopy: (312) 992-5111
92
DEN NORSKE BANK ASA,
a Lender
/s/ CHARLES E. HALL
By:------------------------------------------
Charles E. Hall, Senior Vice President
/s/ J. MORTEN KREUTZ
By:------------------------------------------
Name: J. Morten Kreutz
Title: Vice President
Address:
Three Allen Center
333 Clay Street, Suite 4890
Houston, Texas 77002
Attention: Charles E. Hall
Telephone: (713) 844-9255
Telecopy: (713) 757-1167
with a copy to:
200 Park Ave., 31st Floor
New York, New York 10166
Attention: Cathleen Buckley
Telephone: (212) 681-3824
Telecopy: (212) 681-3900
93
LENDER SCHEDULE
Lender Percentage Share Maximum Loan Amount
NationsBank, N.A. 11.25% $45,000,000
Morgan Guaranty Trust Company of New York 10.0% $40,000,000
Bank of Montreal 8.25% $33,000,000
Paribas 8.25% $33,000,000
BankBoston, N.A. 7.0% $28,000,000
Bankers Trust Company 7.0% $28,000,000
CIBC Inc. 7.0% $28,000,000
Societe Generale 7.0% $28,000,000
Chase Bank of Texas, National Association 7.0% $28,000,000
Christiania Bank og Kreditkasse 7.0% $28,000,000
The First National Bank of Chicago 7.0% $28,000,000
ABN AMRO Bank, Houston Agency 7.0% $28,000,000
Den norske Bank ASA 6.25% $25,000,000
====== ============
TOTAL 100.0% $400,000,000
94
SCHEDULE 1
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this
Schedule is a part, Borrower hereby makes the following disclosures:
1. Section 4.1(f) Material Adverse Effects Occurring since the date of the
Audited Annual Initial Financial Statements:
None
2. Section 4.1(g) Other Obligations and Restrictions:
Existing Additional Senior Indebtedness as of April 30, 1999 (Section 4.1(g))
Description Obligor Original Outstanding Interest Maturity Date
Principal Principal Rate
- ----------------------------------------------------------------------------------------------------------------------------------
Uncommitted Line of Credit Nuevo Energy Company $ 20,000,000 $ 20,000,000 Agreed to at time 05/31/2000
with NationsBank, N.A. Company of each Advance
Existing Subordinated Indebtedness (Section 4.1(g))
Senior Subordinated Notes due Nuevo Energy Company $160,000,000 $160,000,000 9.50% 04/01/2006
2006 with State Street Bank and
Trust Company, as Trustee
Senior Subordinated Notes due $100,000,000 $100,000,000 8.875% 06/01/2008
2008 with State Street Bank and
Trust Company, as Trustee
TECON Debentures issued to Nuevo Energy Company $118,556,700 $118,556,700 5.75% 12/15/2026
Nuevo Financing I
TECONS Nuevo Financing I $115,000,000 $115,000,000 5.75%
Existing Non-Recourse Indebtedness (Section 4.1(g))
Finance Agreement dated The Nuevo Congo Company $ 25,000,000 $ 2,976,563 Libor + .2% 06/24/1999
12/28/94 among The Congo
Holding Company, The Nuevo
Congo Company and The
Overseas Private Investment
Corporation
Permitted Production Payments (Sections 4.1(g) and 1.1 - definition of "Permitted Production Payments")
None.
OTHER MATERIAL LIABILITIES (contingent obligations, tax assessments, and unusual
forward or long term commitments)
- --------------------------------------------------------------------------------
(Section 4.1(g))
a. Contingent liability of approximately $1,787,000 for royalties payable
to the Minerals Management Service as a result of a potential settlement
involving whether tariffs for transporting production were properly
deducted in calculating royalty payments, assumed by Nuevo Energy
Company in connection with the acquisition of the Point Pedernales
properties
b. Guarantee of Performance dated February 24, 1995 by Nuevo Energy Company
of the obligations of The Nuevo Congo Company and The Congo Holding
Company under the Stock Purchase Agreement dated June 30, 1994 with
respect to the acquisition of the Congo properties ("Stock Purchase
Agreement").
c. Contingent Payment payable as part of the consideration for Nuevo Energy
Company's acquisition of properties from Union Oil Company of California
as described in the Prospectus under the heading "Business and
Properties - Pending Acquisitions."
d. Contingent Payment (contingent purchase price caps) payable as part of
the consideration for Torch California Company's, Torch Inland Company's
and Nuevo Energy Company's acquisition of the Point Pedernales
properties described in (i) Abstention Agreement dated July 8, 1994
between John M. Hall, Burdett A. Ogle, Thomas Wachtell, Rodney C. Hall,
Roland G. Heck and M. William Lightner by Torch Energy Advisors
Incorporated; (ii) Agreement to Purchase and Sale dated July 7, 1994
between Amoco Production Company (Seller) and TEAI et al (Buyer); (iii)
Agreement to Purchase and Sale dated July 7, 1994 between Chevron U.S.A.
Inc. et al (Seller) and TEAI et al (Buyer: (iv) Agreement to Purchase
and Sell dated July 7, 1994 between Elf Exploration, Inc. et al (Seller
and Torch California Company et al (Buyer); (v) Agreement to Purchase
and Sell dated July 12, 1993 but effective July 1, 1993 between Exxon
Corporation et al (Seller) and TEAI et al (Buyer); (vi) Agreement to
Purchase and Sale effective June 1, 1994 between Mobil Exploration and
Producing North America Inc. et al (Seller) and TEAI et al (Buyer);
(viii) Agreement for Purchase and Sale dated July 8, 1994 between
Burdette A. Ogle (Seller) and TEAI et al (Buyer); and (viii) Abstention
Agreement dated July 8, 1994 between TEAI (Buyer) and Merit Energy, Inc.
e. Preferred Securities Guarantee Agreement (the "Guarantee Agreement")
dated December 23, 1996, between Nuevo Energy Company (the "Company")
and Wilmington Trust Company, as guarantee trustee (the "Guarantee
Trustee"), the Company has agreed irrevocably to pay in full to the
holders of the Trust Preferred Securities ("TECONS") the Guarantee
Payments (as defined below as and when due, except to the extent that
such amounts are paid by or on behalf of Nuevo Financing I (the
"Trust"), regardless of any defense, right of set-off or counterclaim
that the Trust may have or assert. The following payments are subject to
the Guarantee (the "Guarantee Payments"); (i) any accrued and unpaid
distributions which are required to be paid on the TECONS, to the extent
the Trust has funds available therefor, (ii) the redemption price,
including all accrued and unpaid distributions with respect to the
TECONS called for redemption by the Trust, to the extent the Trust has
funds available therefor, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in
connection with the conversion of all of the TECONS into common stock or
the distribution of convertible debentures to the holders of TECONS),
the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the TECONS) to the date of the
payment, to the extent the Trust has funds available therefor and (b)
the amount of assets of the Trust remaining available for distribution
to holders of the TECONS in liquidation of the Trust. The Guarantee
constitutes an unsecured obligation of the Company that ranks (i)
subordinate and junior in right of payment to all other liabilities of
the Company, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii)
senior to its common stock.
3. OUTSTANDING LIENS (Section 1.1, definition of "Permitted Liens")
None.
- -----------------
/1/ The obligations guaranteed by Nuevo Energy Company under this agreement are
the obligations of The Nuevo Congo Company and the Congo Holding Company to
pay (i) the Royalty Adjustment pursuant to Section 4(D) of the Stock
Purchase Agreement and the Production Payment pursuant to Section 4(A) of
the Stock Purchase Agreement (for any production, net of royalties, sold at
a price exceeding $13.164 per barrel, subject to adjustment) to Amoco
Production Company, and (ii) certain contingent obligations under the Tax
Agreement described in Note 11 to the Initial Financial Statements.
-2-
4. Section 4.1(i) Litigation:
Cause No. 96-08-07451CV; Gloria Garcia Lopez and Husband, Hector S.
Lopez, Individually, and as successors to Galo Land & Cattle Company v.
Mobil Producing Texas & New Mexico, et al.; In the 79th Judicial
District Court of Brooks County, Texas. Plaintiffs allege (i)
underpayment of royalties and claim damages, on a gross basis against
all working interest owners, of $27.7 million plus $26.2 million in
interest for the period from 1985 to date; (ii) that their production
was improperly commingled with gas produced from an adjoining lease,
resulting in damages, including interest, of $40.8 million on a gross
basis; (iii) failure to develop the lease and claim damages, on a gross
basis, of $59.7 million plus $20.0 million in interest; and (iv)
numerous other claims, including claims for drainage, conversion, fraud,
emotional distress, lease termination, and exemplary damages, resulting
in unspecified damages. Defendants deny these allegations and are
vigorously defending these claims. The Borrower could be liable for up
to 20% of any adverse judgment. The Borrower does not believe that this
matter has a material probability of having a Material Adverse Effect
but is including this matter on this Disclosure Schedule out of an
abundance of caution.
5. Section 4.1(j) Labor Disputes and Acts of God
None.
6. Section 4.1(k) Erisa Liabilities
None.
7. Section 4.1(l) Environmental and Other Laws
All matters shown in the ENSR Consulting and Engineering Report, Due
Diligence Investigation as part of the Torch Energy Advisors Acquisition
of Unocal's Upstream Assets in Central and Coastal California, dated
December 1996 (6758-005-100)
8. Section 4.1(m) and 9.3 Names and Places of Business:
Since August, 1996, the offices of Nuevo Energy Company are and have
been located at 1331 Lamar Street, Houston, Texas 77010 and prior to
August, 1996, the offices of Nuevo Energy Company were located at 1221
Lamar Street; Houston, Texas 77010.
9. Section 4.1(m) Borrower's Subsidiaries and Equity Holdings:
Unrestricted Subsidiaries:
The Congo Holding Company
The Nuevo Congo Company
Nuevo Tunisia Ltd.
Nuevo Congo Ltd.
-3-
Restricted Subsidiaries:
Nuevo Liquids Inc.
Rubicon Ventures, Inc.
The Rubicon Company, L.P.
Nuevo Financing I
Nuevo Ghana Inc.
The Los Angeles Oil Company
Sepulveda Oil & Gas Company
Nuevo International Inc.
Nuevo International Holdings Ltd.
Other Equity Holdings:
None
-4-
SCHEDULE 2
SECURITY SCHEDULE
Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement by Nuevo Energy Company in favor of Marcia
Bateman, Trustee, and NationsBank, N.A., as Agent.
UCC-1 Financing Statements naming Borrower as debtor and
Administrative Agent, as secured party, covering the Collateral in the above-
described Deed of Trust.
SCHEDULE 3
CALIFORNIA REAL ESTATE
AS OF 4/1/99
Land (L) / Building (B)
Kings County
Kettlemen City L
Western Share Huffman Lease L
Fresno County
Coalinga L
Pleasant Valley L
Guajarral Hills L
Santa barbara County
Orcutt Office B
Orcutt Hills L
Santa Maria Valley L
Ventura County
Ventura Business Park and Lot 19 B
Lot 18 L
Simi Fee L
Orange County
Brea Olinda L
Coyote Hills East L
Richfield L
Fort Apache L
Los Angeles County
Sansinena L
Las Cienegas L
Kern County
Cynric L
Belgian Anticline L
McKittrick L
North Belridge L
South Belridge L
Midway Sunset L
Mt. Poso L
Buena Vista L
Taft Office B
SCHEDULE 4
INITIAL ENGINEERING REPORTS
Consulting Firm Date of Evaluation
Ryder Scott Company 1/1/99
EXHIBIT A
PROMISSORY NOTE
$_________________ Dallas, Texas ____________, _____
FOR VALUE RECEIVED, the undersigned, Nuevo Energy Company, a Delaware
corporation (herein called "Borrower"), hereby promises to pay to the order of
______________________________________________________ (herein called "Lender"),
the principal sum of ________________________________________________ Dollars
($________________), or, if greater or less, the aggregate unpaid principal
amount of the Loan made under this Note by Lender to Borrower pursuant to the
terms of the Credit Agreement (as hereinafter defined), together with interest
on the unpaid principal balance thereof as hereinafter set forth, both principal
and interest payable as herein provided in lawful money of the United States of
America at the offices of the Administrative Agent under the Credit Agreement,
901 Main Street, Dallas, Texas or at such other place within Dallas County,
Texas, as from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Second Restated
Credit Agreement dated June 30, 1999 among Borrower, certain of its Subsidiaries
from time to time a party thereto, NationsBank, N.A., as Administrative Agent,
and the financial institutions (including Lender) referred to therein (herein,
as from time to time supplemented, amended or restated, called the "Credit
Agreement"), and is a "Note" as defined therein, and (b) is subject to the terms
and provisions of the Credit Agreement, which contains provisions for payments
and prepayments hereunder and acceleration of the maturity hereof upon the
happening of certain stated events. Payments on this Note shall be made and
applied as provided herein and in the Credit Agreement. Reference is hereby
made to the Credit Agreement for a description of certain rights, limitations of
rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each March, June,
September and December, beginning June 30, 1999, and (ii) any day on which
past due interest or principal is owed hereunder and is unpaid. If the
terms hereof or of the Credit Agreement provide that payments of interest
or principal hereon shall be deferred from one Base Rate Payment Date to
another day, such other day shall also be a Base Rate Payment Date.
"Fixed Rate Payment Date" means, with respect to any Fixed Rate
Portion: (i) the day on which the related Interest Period ends (and, if
such Interest Period is three months or longer, the three-month anniversary
of the first day of such Interest Period), and (ii) any day on which past
due interest or past due principal is owed hereunder with respect to such
Fixed Rate Portion and is unpaid. If the terms hereof or of the Credit
Agreement
1
provide that payments of interest or principal with respect to such Fixed
Rate Portion shall be deferred from one Fixed Rate Payment Date to another
day, such other day shall also be a Fixed Rate Payment Date.
Upon the occurrence of certain events as set forth in the Credit Agreement,
all or a portion of the principal amount of this Note may be subject to
mandatory prepayment. The principal amount of this Note, together with all
interest accrued hereon, shall be due and payable in full on April 1, 2003.
The Base Rate Portion of the Loan (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Base Rate in effect on such day. On each Base Rate Payment
Date, Borrower shall pay to the holder hereof all unpaid interest which has
accrued on the Base Rate Portion to but not including such Base Rate Payment
Date. Each Fixed Rate Portion of the Loan (exclusive of any past due principal
or interest) shall bear interest on each day during the related Interest Period
at the related Fixed Rate in effect on such day. On each Fixed Rate Payment
Date relating to such Fixed Rate Portion, Borrower shall pay to the holder
hereof all unpaid interest which has accrued on such Fixed Rate Portion to but
not including such Fixed Rate Payment Date. All past due principal of and past
due interest on the Loan shall bear interest on each day outstanding at the Late
Payment Rate in effect on such day, and such interest shall be due and payable
daily as it accrues. Notwithstanding the foregoing provisions of this
paragraph: (a) this Note shall never bear interest in excess of the Highest
Lawful Rate, and (b) if at any time the rate at which interest is payable on
this Note is limited by the Highest Lawful Rate (by the foregoing clause (a) or
by reference to the Highest Lawful Rate in the definitions of Base Rate, Fixed
Rate, and Late Payment Rate), this Note shall bear interest at the Highest
Lawful Rate and shall continue to bear interest at the Highest Lawful Rate until
such time as the total amount of interest accrued hereon equals (but does not
exceed) the total amount of interest which would have accrued hereon had there
been no Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be charged on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations on
how interest accrues hereon. In the event applicable law provides for an
interest ceiling under Chapter303 of the Texas Finance Code (the "Texas Finance
Code") and Chapter 1D of Title 79, Tex. Rev. Civ. Stats. 1925 ("Chapter 1D") as
amended, respectively for that day, the ceiling shall be the "indicated rate
ceiling" or "weekly ceiling" as defined in the Texas Finance Code and Chapter 1D
and shall be used in this Note for calculating the Highest Lawful Rate and for
all other purposes. The term "applicable law" as used in this Note shall mean
the laws of the State of Texas or the laws of the United States, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all indorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
2
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all indorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be governed
by the laws of the State of Texas (without regard to principles of conflicts of
law), except to the extent the same are governed by applicable federal law.
NUEVO ENERGY COMPANY
By: ____________________________________
Name:
Title:
3
EXHIBIT B
REQUEST FOR ADVANCES
Reference is made to that certain Second Restated Credit Agreement dated
as of June 30, 1999 (as from time to time amended, the "Agreement"), by and
among Nuevo Energy Company, certain of its Subsidiaries from time to time a
party thereto, NationsBank, N.A., as Administrative Agent, and certain financial
institutions. Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. Pursuant to the terms of the Agreement
Borrower hereby requests Lenders to make Advances to Borrower in the aggregate
principal amount of $ __________ and specifies ____________, ____, as the date
Borrower desires for Lenders to make such Advances and for Administrative Agent
to deliver to Borrower the proceeds thereof.
To induce Lenders to make such Advances, Borrower hereby represents,
warrants, acknowledges, and agrees to and with Administrative Agent and each
Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth in
the Agreement and the other Loan Documents are true and correct on and as
of the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension
of credit under the Agreement), with the same effect as though such
representations and warranties had been made on and as of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Advances requested
hereby. Borrower will use the Advances hereby requested in compliance with
Section 2.3 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 9.1(a) of the Agreement, Borrower has performed and complied with
all agreements and conditions in the Agreement required to be performed or
complied with by Borrower on or prior to the date hereof, and each of the
conditions precedent to Advances contained in the Agreement remains
satisfied.
(e) The aggregate unpaid principal balances of the Loans, after
the making of the Advances requested hereby, will not be in excess of (i)
the Borrowing Base on the date requested for the making of such Advances
minus (ii) the outstanding amount of Additional Senior Indebtedness as of
such date.
1
(f) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________,
____.
NUEVO ENERGY COMPANY
By: ________________________________________
Name:
Title:
2
EXHIBIT C
RATE ELECTION
Reference is made to that certain Second Restated Credit Agreement dated
as of June 30, 1999 (as from time to time amended, the "Agreement"), by and
among Nuevo Energy Company, certain of its Subsidiaries from time to time a
party thereto, NationsBank, N.A., as Administrative Agent, and certain financial
institutions. Terms which are defined in the Agreement and which are used but
not defined herein are used herein with the meanings given them in the
Agreement. Pursuant to the terms of the Agreement, Borrower hereby elects a
Tranche of Fixed Rate Portions in the aggregate amount of $ __________ with an
Interest Period beginning on __________________ and continuing for a period of
__________________.
To meet the conditions set out in the Agreement for the making of such
election, Borrower hereby represents, warrants, acknowledges and agrees that:
(a) The officer of Borrower signing this instrument is a duly
elected, qualified and acting ____________ of Borrower, having all
necessary authority to act for Borrower in making the election herein
contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF this instrument is executed as of __________________.
NUEVO ENERGY COMPANY
By: _________________________________________
Name:
Title:
1
EXHIBIT D-1
FORM OF OPINION OF
BUTLER & BINION, COUNSEL FOR RELATED PERSONS
2
BUTLER & BINION, L.L.P.
SUITE 1600 WASHINGTON, D.C.
1000 LOUISIANA (202) 466-6900
ATTORNEYS AT LAW HOUSTON, TEXAS 77002-5093 --
DALLAS
-- (713)237-3111 (214) 220-3100
--
TELECOPIER (713)237-3202 SAN ANTONIO
(210) 227-2200
June 30, 1999
NationsBank, N.A.,
as Administrative Agent
Houston Main Banking Center
Energy Finance Division
700 Louisiana, 8th Floor
Houston, Texas 77002
Attention: Mr. James Ducote
Morgan Guaranty Trust Company of New York,
as Documentation Agent
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Each Lender Named in
Annex I Attached Hereto
Re: Nuevo Energy Company
Ladies and Gentlemen:
This opinion letter is being delivered to you pursuant to Section 3.1(e) of
the Second Restated Credit Agreement dated as of June 30, 1999 (the
"Agreement"), by and among Nuevo Energy Company, a Delaware corporation
("Borrower"), NationsBank, N.A., as Administrative Agent, Morgan Guaranty Trust
Company of New York, as Documentation Agent, and the Lenders named therein
("Lenders"). Except as otherwise indicated herein, capitalized terms used in
this opinion letter are defined as set forth in the Agreement.
We have acted as counsel for Borrower in connection with the loan
transactions provided for in the Agreement. As such counsel we have assisted in
the negotiation of the Agreement and the other Loan Documents. We have examined
executed counterparts (or, where indicated, photostatic copies of executed
counterparts) of the documents listed in Annex II (attached hereto). (The
documents listed in Annex II are hereinafter referred to as the "Principal
Documents".) We have discussed the matters addressed in this opinion with
officers and representatives of the Borrower to the extent we have deemed
appropriate to enable us to render this opinion letter.
In preparing this opinion letter we have also examined (subject to the
qualification confirmed in lettered paragraph (c) below) original counterparts
or photostatic or certified copies of all other instruments, agreements,
certificates, records and other documents
NationsBank, N.A., as Administrative Agent
Morgan Guaranty Trust Company of New York,
as Documentation Agent
Each of the Lenders Named in Annex I
June 30, 1999
Page 2
(whether of the borrower, its officers, directors, shareholders and
representatives, public officials, or other persons) which we have considered
relevant to the opinions hereinafter expressed. In making this examination we
have assumed, with respect to all documents which we have examined: the
genuineness of all signatures thereon, the authenticity of all documents
submitted to us as originals, the conformity to the originals of all documents
submitted to us as copies, the authenticity of the originals of such copies and
the completeness of all such documents and copies. As to certain questions of
fact material to such opinions we have, where such facts were not otherwise
verified or established, relied upon the factual representations contained in
the Agreement and the other Loan Documents and on the certificates attached
hereto as Annex III made by officers of the Borrower.
Based upon the foregoing, and subject to the qualifications and limitations
hereinafter set forth, we are of the opinion that:
1. The Borrower is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware.
2. The Borrower has the corporate power and authority to execute and
deliver each Principal Document and to perform its obligations thereunder. Each
Principal Document has been duly authorized, executed and delivered by the
Borrower.
3. Each Principal Document is enforceable against the Borrower.
4. The execution and delivery by the Borrower of the Principal Documents,
and the consummation of the loan transactions contemplated by the Principal
Documents, do not
(a) violate any provision of the charter of bylaws of the Borrower, or
(b) to our knowledge, breach or result in a default under or result in
the maturing of any Indebtedness pursuant to any material agreement to which the
Borrower is a party and which has been filed by the Borrower as an exhibit to
any filing of the Borrower with the Securities and Exchange Commission, or
(c) violate applicable provisions of statutory law or regulation or, to
our knowledge, any material judgment, order, decree, determination or award of
any court or governmental authority which is now in effect and applicable to the
Borrower or any of its properties.
5. Except for any which have been obtained or completed, to our knowledge
no consent, approval, waiver, license, authorization or action by or filing with
any court or governmental authority is or was required for the execution and
delivery by the Borrower of any of the Principal Documents, or the consummation
of the loan transactions contemplated thereby (other than such filings and other
actions as may be necessary to perfect the liens and security interests
contemplated thereby).
NationsBank, N.A., as Administrative Agent
Morgan Guaranty Trust Company of New York,
as Documentation Agent
Each of the Lenders Named in Annex I
June 30, 1999
Page 3
6. The Borrower is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 (as any of the preceding acts have been amended).
7. The Deed of Trust creates in favor of the Administrative Agent, for the
ratable benefit of the Lenders, a security interest in all of the Borrower's
right, title and interest in those items and types of Collateral described in
the Deed of Trust in which a security interest may be created under Article 9 of
the Uniform Commercial Code as in effect in the State of Texas (the "Texas
UCC").
8. The filing of the Texas Financing Statement in the Office of the
Secretary of State of Texas will result in the perfection of the security
interests (the "Texas Security Interests") in all Collateral (as such term is
defined in the Deed of Trust) with respect to which (i) a security interest has
been created under the Deed of Trust, (ii) perfection would, under the Texas
UCC, be governed by the laws of the State of Texas, and (iii) a security
interest may be perfected by the filing of a financing statement under the Texas
UCC.
9. The acceptance of the Deed of Trust and the Texas Financing Statement by
the Administrative Agent, its possession and retention of its rights thereunder
and its presentation of the Texas Financing Statement for filing and recording
as described in paragraph 8 hereof will not require the Administrative Agent or
any Lender to pay or otherwise subject the Administrative Agent or any Lender to
any Texas documentary, stamp or similar tax, fee or other charge, except the
uniform fees prescribed under the Texas UCC.
This opinion letter is limited by, subject to and based on the following:
(a) This opinion is limited in all respects to the General Corporation
Law of the State of Delaware, the laws of the State of Texas and applicable
federal law. As you are aware, we are not members of the bar of the State of
Delaware and our knowledge of the General Corporation Law of the State of
Delaware is derived from a reading of those statutes without consideration of
any judicial or administrative interpretations thereof.
(b) In rendering this opinion we have assumed that each of the Principal
Documents in which Administrative Agent's Documentation Agent's or any Lender's
execution is provided for has been duly authorized, executed and delivered by
such Person, and that each Lender is concurrently herewith advancing funds to
Borrower or otherwise "giving value" as contemplated in Section 9.203 of the
Code.
(c) The qualification of any opinion or statement herein by the use of
the words "to our knowledge" or "known to us" means that during the course of
our representation as described in this opinion letter, no information has come
to the attention of the attorneys in this firm involved in the loan transactions
described which would give such attorneys current actual knowledge of the
existence of the facts so qualified. We have not undertaken any review of court
or other public records or other investigation to determine the existence of any
facts or the accuracy or completeness of any representations, warranties, data
or other information, written or oral, made or furnished to
NationsBank, N.A., as Administrative Agent
Morgan Guaranty Trust Company of New York,
as Documentation Agent
Each of the Lenders Named in Annex I
June 30, 1999
Page 4
us or to you, and no inference as to our knowledge thereof shall be drawn from
the fact of our representation of any party or otherwise.
(d) Our opinion set forth in numbered paragraph 3 above is subject in
all respects to the General Qualifications (i.e., the Bankruptcy and Insolvency
Exception, the Equitable Principles Limitation and the Other Common
Qualifications) as set forth, and as defined, in the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991). In addition to being
subject to the General Qualifications as set forth in the Accord, our opinion as
to the enforceability of the documents specified therein is subject to the
further qualification that we give no opinion as to the enforceability of:
(i) provisions restricting access to courts or to legal or
equitable remedies or purporting to affect the jurisdiction or venue of
courts;
(ii) provisions purporting to establish evidentiary standards for
suits or proceedings to enforce the Principal Documents;
(iii) provisions purporting to waive rights to notice, legal
defenses, statutes of limitations or other benefits that cannot be waived
under applicable law;
(iv) provisions granting powers of attorney or authority to
execute documents or to act by power of attorney on behalf of the Borrower;
(v) self-help remedies provided for in the documents;
(vi) provisions providing that remedies are cumulative;
(vii) provisions that decisions by a party are conclusive;
(viii) provisions purporting to grant to or limit rights of third
parties;
(ix) provisions purporting to create a trust or constructive trust
without compliance with applicable trust law;
(x) provisions regarding contractual rights of set-off greater
than such rights under applicable law;
(xi) provisions purporting to impose restrictions on the
alienation of property; and
(xii) provisions purporting to establish standards for service of
process in suits or proceedings to enforce the Principal Documents.
(e) No opinion is expressed as to any usury savings provision in the
Agreement or the other Loan Documents to the extent that it (i) purports to
permit the cure of any violation of applicable usury laws by the rescission of
any demand or charge, or the
NationsBank, N.A., as Administrative Agent
Morgan Guaranty Trust Company of New York,
as Documentation Agent
Each of the Lenders Named in Annex I
June 30, 1999
Page 5
refunding,or the crediting against principal, of any interest that has been
charged or received in violation of any applicable usury law or (ii)
characterizes any non-principal payment as an expense, fee or premium rather
than as interest or excludes voluntary prepayments and the effects thereof.
(f) The opinions given herein as the creation and perfection of security
interests do not cover real property or other property or transactions excluded
from the coverage of the Texas UCC, nor timber to be cut, or minerals or the
like or accounts subject to Subsection (e) of Section 9.103 of the Texas UCC or
goods which are or are to become fixtures.
(g) We express no opinion regarding the accuracy or completeness of any
property descriptions contained in the Loan Documents, or the title to any
assets pledged by the Borrower or the priority of any security interests created
under the Loan Documents.
(h) We express no opinion with respect to the enforceability of the Deed
of Trust to the extent it purports to govern the creation, perfection or
enforcement of any liens, security interests or other rights or remedies with
respect to real property or related interests, including without limitation
leases, fixtures and production and proceeds arising therefrom.
(i) We call your attention to, and our opinions are further limited by,
the facts that:
(i) the continuation of any security interest and perfection of
any security interest in Collateral consisting of proceeds is limited to
the extent set forth in (S)9.306 of the Texas UCC; and
(ii) continuation statements complying with the Texas UCC must be
filed with the filing offices in which each Texas Financing Statement was
filed not more than six months prior to the expiration of a five year period
dating from the date of filing of the Texas Financing Statement (or
otherwise within the time permitted by (S)9.403 of the Texas UCC) and
subsequent continuation statements must be filed within six months prior to
the end of each subsequent five year period and amendments or supplements to
the Texas Financing Statements and or additional financing statements may be
required to be filed in the event of a change of name, identity or corporate
structure of the debtor or if the debtor changes the jurisdiction of its
place of business (or, if it has more than one place of business, its chief
executive office) or the jurisdiction in which collateral is located.
(j) Our opinions concerning the perfection and enforceability of
security interests in the Collateral are in all cases limited to the
Obligations. No opinion is expressed as to the effectiveness of the Loan
Documents to grant and create a security interest with respect to any
indebtedness other than the Obligations.
We hereby confirm to you, pursuant to your request, that, except as
disclosed in the Initial Financial Statements or in the Disclosure Schedule, to
our knowledge, there are no actions, suits or proceedings against the Borrower,
of which the Borrower has received
NationsBank, N.A., as Administrative Agent
Morgan Guaranty Trust Company of New York,
as Documentation Agent
Each of the Lenders Named in Annex I
June 30, 1999
Page 6
formal notice, pending, or overtly threatened in writing, before any court,
governmental agency or arbitrator (i) seeking to affect the enforceability or
performance by the Borrower of any Principal Document or (ii) which are
otherwise required to be disclosed under Section 4.1(i) of the Agreement.
The opinions herein expressed are for the benefit of the Administrative
Agent, the Documentation Agent, and the Lenders named in Annex I attached
hereto, may be relied upon by the Administrative Agent, the Documentation Agent,
and the said Lenders only in connection with the loan transactions provided for
in the Agreement, and by Thompson & Knight, P.C. in connection with any opinion
delivered by it to the Administrative Agent of even date herewith with respect
to the loan transactions provided for in the Agreement, and may not be used or
relied upon by you or such counsel or any other Person for any purpose
whatsoever without in each instance our prior written consent. A copy of this
opinion letter may be delivered by you to other Persons who from time to time
become Lenders in accordance with the terms of the Agreement in connection with
their becoming parties thereto, and such Persons (subject to and with the advice
of their own legal counsel experienced in third-party opinion practice) may rely
on this opinion letter as if it were addressed and had been delivered to them on
the date hereof.
This opinion letter (i) has been furnished to you at your request, and we
consider it to be a confidential communication which, except as expressly
provided in the preceding paragraph, may not be furnished, reproduced,
distributed or disclosed to anyone without our prior written consent, (ii) is
rendered as of the date hereof, and we undertake no, and hereby disclaim any,
obligation to advise you or any other person receiving a copy hereof in
accordance herewith of any changes or any new developments which might affect
any matters or opinions set forth herein, and (iii) is limited to the matters
stated herein and no opinions may be inferred or implied beyond the matters
expressly stated herein.
Respectfully submitted,
BUTLER & BINION, L.L.P.
ANNEX I
Lenders
NationsBank, N.A.
Morgan Guaranty Trust Company of New York
Bank of Montreal
Paribas
BankBoston, N.A.
Bankers Trust Company
CIBC, Inc.
Societe Generale
Chase Bank of Texas, National Association
Christiania Bank og Kreditkasse
The First National Bank of Chicago
ANB AMRO Bank, Houston Agency
Den norske Bank ASA
ANNEX II
Principal Documents
1. Second Restated Credit Agreement dated as of June 30, 1999, by and among
Nuevo Energy Company, a Delaware corporation, NationsBank, N.A., as
Administrative Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and the Lenders named therein.
2. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of NationsBank, N.A., in the principal amount of $45,000,000.
3. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Morgan Guaranty Trust Company of New York, in the principal amount of
$40,000,000.
4. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Bank of Montreal, in the principal amount of $33,000,000.
5. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Paribas, in the principal amount of $33,000,000.
6. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of BankBoston, N.A. in the principal amount $28,000,000.
7. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Bankers Trust Company, in the principal amount $28,000,000.
8. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of CIBC, Inc., in the principal amount of $28,000,000.
9. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Societe Generale, in the principal amount of $28,000,000.
10. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Chase Bank of Texas, National Association, in the principal amount of
$28,000,000.
11. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Christiania Bank og Kreditkasse, in the principal amount of
$28,000,000.
12. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of The First National Bank of Chicago, in the principal amount of
$28,000,000.
13. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of ABN AMRO Bank, Houston Agency, in the principal amount of $28,000,000.
14. Promissory Note, dated June 30, 1999, made by Borrower, payable to the
order of Den norske Bank ASA, in the principal amount of $25,000,000.
15. Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and Financing Statement dated as of June 30, 1999, by Borrower in favor of
Marcia Bateman, Trustee, and NationsBank, N.A., as Agent (the "Deed of Trust").
16. UCC Financing Statement naming Borrower as debtor and Administrative
Agent, as secured party, covering the Collateral described in the Deed of Trust
(the "Texas Financing Statement").
ANNEX III
Officers' Certificates
(see attached)
EXHIBIT D-2
FORM OF OPINION OF
CALIFORNIA COUNSEL FOR BORROWER
3
EXHIBIT D-2
[LETTERHEAD OF TIMOTHY J. LEWY APPEARS HERE]
August 3, 1999
NationsBank, N.A., as Administrative Agent
700 Louisiana, 8th Floor
Houston, Texas 77002
Attn: Energy Finance Division
Re: Nuevo Energy Company
Gentlemen:
We have acted as counsel in the State of California for Nuevo Energy Company
("Borrower") in connection with the Security Documents (as defined below). All
capitalized terms used and not defined herein shall have the same meanings as
set forth in the Security Documents.
We have examined executed copies of the following documents (the "Security
Documents"):
(1) Second Restated Credit Agreement, dated June 30, 1999, by and among
Borrower, Administrative Agent and the Lenders named therein (the
"Credit Agreement").
(2) Deed of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and Financing Statement, dated June 30, 1999, from Borrower to Marcia
Bateman, Trustee, and NationsBank, N.A., Agent ("Administrative Agent")
(the "Mortgage").
NationsBank, N.A.
August 3, 1999
Page 2
(3) UCC-1 Financing Statement showing Borrower, as Debtor, and
Administrative Agent, as Secured Party (the "Financing Statement").
Based upon the foregoing (and further subject to the qualifications and
assumptions set forth below), we are of the opinion that:
(1) The Security Documents constitute legal, valid and binding obligations of
the Borrower, enforceable by the Administrative Agent, individually and as
agent for the benefit of the Lenders, in accordance with their respective
terms, to the extent that the laws of the State of California are
applicable.
(2) The forms of the Mortgage and the Financing Statement comply with all
applicable laws and regulations of the State of California, including all
applicable recording, filing and registration laws and regulations, and are
adequate and legally sufficient under the laws and regulations of the State
of California for the purposes intended to be accomplished thereby.
(3) The Mortgage creates, to secure the indebtedness described in the Mortgage,
a lien on the "Mortgaged Property" (as defined in the Mortgage) in favor of
the Administrative Agent, individually and as agent for the ratable benefit
of the Lenders, located in the State of California, and a security interest
in the "Collateral" (as such term is defined in the Mortgage), and the
proceeds of the "Collateral" in favor of the Administrative Agent,
individually and as agent for the ratable benefit of the Lenders, with
respect to which a security interest can be created under the California
Uniform Commercial Code (the "Code").
(4) The following filings and recordations should be made:
(A) A fully executed counterpart of the Mortgage, with the applicable
portion of Exhibit "A" attached, is required to be recorded in the
appropriate real property records of the Office of the County Recorder
of each County in California in which all or any portion of the Mortgage
Property is located; and
NationsBank, N.A.
August 3, 1999
Page 3
(B) A fully executed copy of the Financing Statement is required to be
filed in the Office of the California Secretary of State and recorded
in the appropriate real property records in the Office of the County
Recorder of each County in California in which all or any portion of
the Mortgaged Property is located.
Once such Documents are filed and recorded, no further or subsequent filing
or recording will be necessary in the State of California in order to
perfect or continue the lien and security interest created by the Mortgage
and the Financing Statement (or to continue the perfection of the lien and
security interest created thereby which are covered by this Opinion),
except that:
(a) In the event that any of the indebtedness secured by the Mortgage has
not been paid before ten (10) years after the stated maturity date of
any Note described therein, then an extension agreement providing for
the renewal and extension of such indebtedness should be entered into
and recorded in the records of the County(s) where the Mortgage has
been recorded;
(b) A continuation statement with respect to the Financing Statement must
be filed under the Code in the Office of the California Secretary of
State within six (6) months prior to the expiration of five (5) years
from the date of the original filing in such Office, and subsequent
continuation statements must be filed within six (6) months prior to
the end of each subsequent five (5) year period; and
(c) Amendments or supplements to the Financing Statement and/or additional
financing statements may be required to be filed in the event of the
change of name, identity, or corporate structure of the Debtor, or in
the event that the Financing Statement otherwise becomes inaccurate or
incomplete.
(5) The acceptance of the Security Documents by the Administrative Agent, the
possession and retention of rights thereunder, and the presentation of such
NationsBank, N.A.
August 3, 1999
Page 4
instruments for filing and recording, as described in Paragraph 4 hereof,
will not require the Administrative Agent or any Lender to pay, or otherwise
subject the Administrative Agent or any Lender to, any tax, fee or other
charge except the customary fee charged by each filing or recording officer
on a per page or per instrument basis. Neither the Administrative Agent nor
any Lender is required to qualify to do business in the State of California
or otherwise to register or make any filing (other than those described in
Paragraph 4 hereof) with any state or local official in the State of
California solely as a result of the acceptance of such instruments, the
possession and retention of rights thereunder, or the filing or recording
thereof.
The opinions expressed herein are subject to the following qualifications and
assumptions:
(1) This Opinion is limited to the laws of the State of California, and
applicable federal law. We express no opinion as to the laws of any other
jurisdiction. The Mortgage provides that it is to be governed by the laws of
the State of Texas, except to the extent that the laws of another state
where the Mortgaged Property (as defined in the Mortgage) is located
necessarily, or appropriately, govern; we express no opinion as to such
choice of Texas law, and have assumed, for purposes of this Opinion, that
the Mortgage is to be interpreted and governed by the laws of the State of
California. California securities laws are hereby expressly excepted from
this Opinion.
(2) We have considered the Security Documents solely from the point of view of
their sufficiency under presently existing California law. This Opinion is
intended to apply only to those presently existing facts, elements and
consequences of such Documents, and to the transactions contemplated
thereunder, as governed by presently existing California law. We undertake
no responsibility for subsequent changes in any facts, elements or
consequences of such Documents, or in any aspect of applicable law,
including statutory and decisional law.
(3) We have assumed that the Borrower and the Administrative Agent each are duly
formed and validly existing, that the Borrower and the Administrative
NationsBank, N.A.
August 3, 1999
Page 5
Agent each has all requisite power and authority to enter into and perform
its obligations under the Security Documents, and that the Borrower has duly
authorized the execution and delivery, and has duly executed and delivered,
the Security Documents. We have assumed that the Borrower is duly qualified
to do business in the State of California, and is in good standing under all
of the rules and regulations of the California Department of Corporations
and the California Franchise Tax Board.
(4) We have assumed that the Credit Agreement and the Notes are valid, binding
and enforceable in accordance with their terms, and that loans have been or
will be made to Borrower thereunder, which loans are intended to be secured
by the Mortgage.
(5) We have made no examination of, and express no opinion with respect to (i)
the title to, or (except as to adequacy as to form) the descriptions of the
properties described in the Mortgage, (ii) the priority of the liens created
by the Mortgage or whether there are any other liens, security interests,
charges or encumbrances on the properties described in the Mortgage, or
(iii) whether the properties described in the Mortgage are the properties
and interests intended to be covered thereby.
(6) The obligations of Borrower under the Security Documents, and the
availability of certain remedies provided for therein, may be affected by
applicable bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally (including, without
limitation, applicable fraudulent transfer laws) and/or by general
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether such
enforceability is considered in a proceeding of equity or at law). Certain
rights, remedies and waivers contained in the Security Documents may be
limited or rendered ineffective by applicable laws governing such rights,
remedies or waivers, and the exercise of certain rights, remedies or waivers
contained in the Security Documents may affect the validity or
enforceability of the Security Documents. Default, acceleration, termination
and repossession under the Security Documents may all be subject to
equitable supervision and, accordingly, may be based only upon material
breaches.
NationsBank, N.A.
August 3, 1999
Page 6
However, in our view, the Security Documents contain adequate remedies, if
properly invoked, for the practical realization of the security afforded
thereby (except for the consequences of procedural delay that may result
therefrom).
(7) The obligations of Borrower under the Security Documents, and the
availability of certain remedies provided for therein, may be affected by
California's so-called "anti-deficiency" and "one action" statutes which
appear to be fundamental state policies. Because the "anti-deficiency" and
"one action" statutes have a long history in California of judicial
protection, it is doubtful that the Administrative Agent or Lenders could
avoid the fair value hearing requirements of California Code of Civil
Procedure Sections 580a and 726 (if suit were brought in California for a
deficiency judgment) or the one action requirements of Section 726 (if suit
were brought in California directly on any Note secured by California real
property, or if suit were brought in another state obtaining a personal
money judgment against Borrower prior to the foreclosure of the California
real property security), even if there is a foreign state choice of law
provision in the Note or Security Documents and the foreign state permits
deficiency judgments and direct actions on the Note, and even if the parties
are domiciled in the foreign state and the Note is to be paid in the foreign
state. On the basis of the foregoing, caution should be taken not to file an
action or obtain a judgment in any state against the Borrower prior to the
non-judicial foreclosure of the Mortgage in California.
(8) Administrative Agent and Lenders should also be aware that Sections 2924 and
2924b of the California Civil Code provide that a power of sale contained in
a deed of trust or mortgage may not be exercised until after the recordation
of a notice of default (identifying the mortgage or deed of trust and
stating, among other things, the nature of the default), and that within ten
(10) days following recordation of the notice of default a copy of such
notice must be delivered to each trustor or mortgagor and to each party who
has previously recorded a request for such a copy. Section 2924c of the
California Civil Code provides, in pertinent part, that whenever the
maturity of an obligation secured by a deed of trust or mortgage is
accelerated by reason of default in the payment of interest or of any
installment of principal or other sum secured thereby, the trustor or
mortgagor and certain other entitled persons have the right, at any
NationsBank, N.A.
August 3, 1999
Page 7
time within the period commencing with the date of recordation of the
notice of default under such deed of trust and ending on the date that is
five (5) business days prior to the date of foreclosure sale set forth in
the initial recorded notice of sale, to cure such default by paying the
entire amount then due (including certain reasonable costs and expenses
incurred in enforcing such obligations, but excluding any amount that would
not otherwise be due but for such acceleration) and thereby to reinstate
such deed of trust or mortgage and the obligations secured thereby to the
same effect as if no such acceleration had occurred.
(9) We express no opinion with respect to any security interest in the
Collateral, or the proceeds of the Collateral, other than the Collateral,
or the proceeds of the Collateral, with respect to which a security
interest can be created under the Code and perfected by the filing of a
financing statement in the State of California. To the extent that any
Security Document purports to create a security interest, we have assumed
(without opining) that Borrower has rights in the applicable Collateral,
that sufficient value has been given for the security interest, and that no
agreement exists postponing attachment of the security interest.
(10) In the case of proceeds of the Collateral, continuation or perfection of
the security interest therein is limited to the extent set forth in Section
9-306 of the Code.
(11) The definition of the Mortgaged Property in the Mortgage has been broadly
drafted. The opinions expressed herein relating to the enforceability of
the Mortgage and the creation of a mortgage lien with respect to the
portion of the Mortgaged Property which is real property only apply to the
interests of Borrower in and to leases and other interests described in
Exhibit "A" to the Mortgage which Borrower had acquired prior to the
execution of the Mortgage. We express no opinion with respect to any after
acquired or other types of real property included in the description of the
Mortgaged Property contained in the Mortgage.
NationsBank, N.A.
August 3, 1999
Page 8
(12) In the event that the Administrative Agent takes over the operation or
control of any of the Mortgaged Property and/or any related Collateral in
the State of California, pursuant to the Mortgage, or if the Mortgage is
foreclosed, various filings and other acts may be required in the State of
California in connection with the use or operation of such Mortgaged
Properties and the related Collateral. The opinions expressed in Paragraph
5 above do not extend to any such filings or acts.
This Opinion is solely for the benefit of the Administrative Agent and the
Lenders, and may not be used or relied upon by any other person except the
Administrative Agent and the Lenders, their successors and assigns, and by
Thompson & Knight, P.C., counsel to Administrative Agent, without our express
written consent. This Opinion is subject to future changes in applicable law.
Very truly yours
_______________________________________
TIMOTHY J. LEWY
EXHIBIT E
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Second Restated Credit Agreement dated
as of June 30, 1999 (as from time to time amended, the "Agreement"), by and
among Nuevo Energy Company, certain of its Subsidiaries from time to time a
party thereto, NationsBank, N.A., as Administrative Agent, and certain financial
institutions, which Agreement is in full force and effect on the date hereof.
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.
This Certificate is furnished pursuant to Section 5.1(b)(ii) of the
Agreement. Together herewith Borrower is furnishing to Administrative Agent and
each Lender Borrower's *[audited/unaudited] financial statements (the "Financial
Statements") as at ____________ (the "Reporting Date"). Borrower hereby
represents, warrants, and acknowledges to Administrative Agent and each Lender
that:
(a) the officer of Borrower signing this instrument is the duly
elected, qualified and acting ____________ of Borrower and as such is
Borrower's chief financial officer;
(b) the Financial Statements are accurate and complete and
satisfy the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing
Borrower's compliance as of the Reporting Date with the requirements of
Sections [5.2(h), (m) and (n)] of the Agreement [and Borrower's non-
compliance as of such date with the requirements of Section(s) ____________
of the Agreement];
(c) attached hereto are one or more schedules showing (i) all of
Borrower's Derivative Contracts and Allowed Puts on the Reporting Date,
(ii) the outstanding principal amount on the Reporting Date (determined in
accordance with GAAP) of all of the Related Persons' Permitted Priority
Senior Indebtedness, other Additional Senior Indebtedness, Non-Recourse
Indebtedness, Permitted Subordinated Trust Indebtedness and Subordinated
Indebtedness and of all of the Unrestricted Subsidiaries' Non-Recourse
Indebtedness, and (iii) the undischarged balance on the Reporting Date of
all Forward Sales/Production Payments;
(d) on the Reporting Date Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements of Section
5.1(d) of the Agreement, and no Default otherwise existed on the Reporting
Date or otherwise exists on the date of this instrument *[except for
Default(s) under Section(s) ____________ of the Agreement, which [is/are]
more fully described on a schedule attached hereto].
1
(e) [Unless otherwise disclosed on a schedule attached hereto,]
The representations and warranties of Borrower set forth in the Agreement
and the other Loan Documents are true and correct on and as of the date
hereof (except to the extent that the facts on which such representations
and warranties are based have been changed by the extension of credit under
the Agreement), with the same effect as though such representations and
warranties had been made on and as of the date hereof.
The officer of Borrower signing this instrument hereby certifies that he has
reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above representations, warranties and
acknowledgments of Borrower and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, ____.
NUEVO ENERGY COMPANY
By: ___________________________________________
Name:
Title:
2
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date __________, ____
Reference is made to that certain Second Restated Credit Agreement dated
as of June 30, 1999, (as from time to time amended, the "Agreement"), by and
among Nuevo Energy Company, certain of its Subsidiaries from time to time a
party thereto, NationsBank, N.A., as Administrative Agent, and certain financial
institutions, which Agreement is in full force and effect on the date hereof.
Terms defined in the Agreement are used herein with the meanings given them in
the Agreement. ________ ("Assignor") and __________ ("Assignee") hereby agree as
follows:
1. Assignor hereby sells and assigns to Assignee without recourse and
without representation or warranty (other than as expressly provided herein),
and Assignee hereby purchases and assumes from Assignor, that interest in and to
all of Assignor's rights and duties under the Agreement as of the date hereof
which represents the percentage interest specified in Item 3 of Annex I hereto
(the "Assigned Share") of all of the outstanding rights and obligations of all
Lenders under the Agreement, including, without limitation, all rights and
obligations with respect to the Assigned Share in Assignor's Loan and Note.
After giving effect to such sale and assignment, Assignee's Percentage Share of
the Maximum Loan Amount (and Assignor's remaining Percentage Share of the
Maximum Loan Amount) will be as set forth in Item 3 of Annex I hereto.
2. Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or any other Related Person or the performance
or observance by any of them of any of their respective obligations under the
Agreement, the other Loan Documents, or any other instrument or document
furnished pursuant thereto.
3. Assignee: (i) confirms that it has received a copy of the
Agreement, together with copies of the financial statements most recently
delivered thereunder and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own analysis of Borrower
and the transactions contemplated by the Agreement and its own independent
decision to enter into this Assignment and Assumption Agreement; (ii) agrees
that it will, independently and without reliance upon Administrative Agent,
Assignor or any other
2
Lender 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 Agreement; (iii) confirms that it is a _______________________
and therefore is an Eligible Transferee under the Agreement; (iv) appoints and
authorizes Administrative Agent to take such action as agent on its behalf and
to exercise such powers under the Agreement and the other Loan Documents as are
specifically delegated to Administrative Agent, together with all other powers
reasonably incidental thereto; and (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Agreement are
required to be performed by it as a Lender (including the obligation to make
future Advances)[; and (vi) attaches the "Prescribed Forms" described in Section
2.17(d) of the Agreement.]
4. Following the execution of this Assignment and Assumption Agreement
by Assignor and Assignee, an executed original hereof (together with all
attachments) will be delivered to Administrative Agent. The effective date of
this Assignment and Assumption Agreement (the "Settlement Date") shall be the
date specified in Item 4 of Annex I hereto; provided that this Assignment and
Assumption Agreement shall not be deemed to have taken effect unless (i) the
consent hereto of Administrative Agent and Borrower has been obtained (to the
extent required in the Agreement in the definition of "Eligible Transferee"),
(ii) Administrative Agent has received a fully executed original hereof, and
(iii) Administrative Agent has received the processing fee referred to in
Section 9.4(c) of the Agreement.
5. Upon the satisfaction of the foregoing conditions, then as of the
Settlement Date: (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its duties under the
Agreement and the other Loan Documents.
6. All interest, fees and other amounts that would otherwise accrue
pursuant to the Agreement and Assignor's Note for the account of Assignor from
and after the Settlement Date shall, instead accrue for the account of, and be
payable to, Assignor and Assignee, as the case may be, in accordance with their
respective interests as reflected in Item 3 to Annex I hereto. All payments of
principal that would otherwise be payable from and after the Settlement Date to
or for the account of Assignor pursuant to the Agreement and Assignor's Note
shall, instead, be payable to or for the account of Assignor and Assignee, as
the case may be, in accordance with their respective interests as reflected in
Item 3 to Annex I hereto. On the Settlement Date, Assignee shall pay to Assignor
an amount specified by Assignor in writing which represents the portion of
Assignor's Loan which is being assigned and which is outstanding on the
Settlement Date, net of any closing costs. Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
7. Each of the parties to this Assignment and Assumption Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may
3
reasonably request in order to effect the purposes of this Assignment and
Assumption Agreement.
8. This Assignment and Assumption Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written.
[NAME OF ASSIGNOR]
as Assignor
By:_________________________________
Title:
[NAME OF ASSIGNEE]
By:__________________________________
Title:
3
*CONSENTED TO AND ACKNOWLEDGED:
NUEVO ENERGY COMPANY
By: ______________________________
Title
NATIONSBANK, N.A., as Administrative Agent
By: ______________________________
Title:
*Consent required only if Assignee not Lender or Affiliate thereof
and no payment Event of Default
4
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. Borrower: Nuevo Energy Company
2. Date of Assignment Agreement: __________, _____
3. Amounts (as of date of item #2 above):
Assignor Assignee
(as Revised) (New)
a. Percentage Share(1) __________% _________%
b. Percentage Share of
Maximum Loan Amount $__________ $_________
c. Percentage Share of Loans
Outstanding on Settlement Date $__________ $_________
4. Settlement Date: __________, ____
5. Notice:
ASSIGNEE:
____________________
____________________
____________________
Attention:
Telephone:
Telecopy:
6. Wiring Instructions:
_________
(1) Percentage taken to 7 decimal places.
EXHIBIT G
SUPPLEMENT TO CREDIT AGREEMENT
FOR ADDITIONAL SUBSIDIARY GUARANTOR
THIS SUPPLEMENT TO CREDIT AGREEMENT (herein called this "Supplement") is
executed as of _____________, _____ by ____________________, a _____________
(herein called "New Guarantor") for the benefit of NationsBank, N.A. , as
Administrative Agent ("Administrative Agent"), Morgan Guaranty Trust Company of
New York, as Documentation Agent ("Documentation Agent"), and each of the
"Lenders" (as therein defined and herein so called) who are parties to that
certain Second Restated Credit Agreement dated as of June 30, 1999 (as
heretofore, now or hereafter amended, modified or supplemented, the "Credit
Agreement") by and among Nuevo Energy Company, as Borrower (herein called
"Borrower"), certain subsidiaries of Borrower from time to time a party thereto,
as Subsidiary Guarantors, Administrative Agent, Documentation Agent, and
Lenders.
RECITALS:
1. The Credit Agreement contains various restrictions upon the ability of
Borrower to make loans or other investments, but these restrictions generally do
not apply to loans to or other investments in subsidiaries of Borrower which
have become parties to the Credit Agreement as "Subsidiary Guarantors" (as
therein defined and herein so called).
2. New Guarantor is a [wholly-owned // majority-owned] subsidiary of
Borrower. New Guarantor desires to be able to receive such loans and
investments to the maximum extent permitted under the Credit Agreement, and New
Guarantor will require such loans and investments from time to time in order to
carry out its business. The [board of directors] of New Guarantor has
determined that New Guarantor's execution, delivery and performance of this
Supplement, and its becoming a Subsidiary Guarantor pursuant hereto, may
reasonably be expected to be of material benefit, direct and indirect, to New
Guarantor and that the consummation of the transactions contemplated by this
Supplement is in the best interests of New Guarantor.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Credit Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Lenders to advance funds hereafter under
the Credit Agreement, New Guarantor, Borrower, the other Subsidiary Guarantors,
and Administrative Agent (on behalf of itself, Documentation Agent, and Lenders)
hereby agree as follows:
Section 1. Terms Defined in the Credit Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Credit Agreement shall have the same meanings whenever used in
this Supplement.
Section 2. Addition of New Guarantor as Party to Credit Agreement. New
Guarantor is hereby added as a party to the Credit Agreement. Each reference to
the term "Subsidiary Guarantor" or "Subsidiary Guarantors" in the Credit
Agreement shall be deemed to include New Guarantor. New Guarantor hereby makes
and confirms its irrevocable, absolute and unconditional guarantee, pursuant to
Section 6.2 and the other provisions of Article VI of the Credit Agreement, of
each Note, of all other sums payable under the Credit Agreement and the other
Loan Documents, and of all obligations and undertakings of Borrower to
Administrative Agent or Lenders under, by reason of, or pursuant to any of the
Loan Documents. Such guarantee shall be subject in all respects to Section
6.2(e) of the Credit Agreement.
Section 3. Representations and Warranties of New Guarantor. Each of
Borrower, New Guarantor, and the other Subsidiary Guarantors hereby confirms,
represents and warrants to Administrative Agent, Documentation Agent and Lenders
that all of the representations and warranties of Borrower and each Subsidiary
Guarantor set forth in the Credit Agreement and the other Loan Documents are
true and correct at and as of the time of effectiveness of this Supplement and
after giving effect hereto (except to the extent that the facts on which such
representations and warranties are based have been changed by the extension of
credit under the Credit Agreement), with the same effect as though such
representations and warranties had been made as of such time, and that the
recitals at the beginning of this Supplement are true and correct in all
respects.
Section 4. Ratification. The Credit Agreement as supplemented hereby is
ratified and confirmed in all respects, and the obligations and covenants of
Borrower and each Subsidiary Guarantor thereunder are unimpaired hereby and
shall remain in full force and effect. Any reference to the Credit Agreement in
any Loan Document shall be deemed to be a reference to the Credit Agreement as
hereby supplemented. The execution, delivery and effectiveness of this
Supplement shall not operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under the Credit Agreement or any other Loan
Document nor constitute a waiver of any provision of the Credit Agreement or any
other Loan Document.
Section 5. Effectiveness; Survival. This Supplement shall take effect
upon its execution and delivery by all parties hereto. All representations,
warranties, covenants and agreements herein of Borrower, New Guarantor, and each
other Subsidiary Guarantor shall survive the execution and delivery of this
Supplement and the performance hereof, and the making or granting of the Loans,
and shall further survive until all of the Obligations are paid in full, subject
to the provisions for release contained in Section 6.8 of the Credit Agreement.
Section 6. Loan Document. This Supplement is a Loan Document, and all
provisions in the Credit Agreement pertaining to Loan Documents shall apply
hereto. This Supplement shall be governed by and construed in accordance with
the laws of the State of Texas and any applicable laws of the United States of
America in all respects, including construction, validity and performance.
Section 7. Counterparts. This Supplement may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Supplement.
IN WITNESS WHEREOF, this Supplement is executed as of the date first above
written.
____________________________, as
New Guarantor
By:________________________________
Name:
Title:
NUEVO ENERGY COMPANY
By:________________________________
Name:
Title:
[Add signatures of other Subsidiary Guarantors]
NATIONSBANK, N.A., as Administrative Agent acting
on behalf of itself, the Documentation Agent, and
the Lenders
By:________________________________
Name:
Title: