EXHIBIT 10.1
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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TIDE WEST OIL COMPANY
and
UNION BANK
as Agent
AND THE BANKS NAMED HEREIN AS LENDERS
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June 15, 1995
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TABLE OF CONTENTS
Page
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CREDIT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - Definitions and References . . . . . . . . . . . . . . . . . 1
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Section 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Exhibits and Schedules; Additional Definitions . . . . . 14
Section 1.3. Amendment of Defined Instruments . . . . . . . . . . . . 14
Section 1.4. References and Titles. . . . . . . . . . . . . . . . . . 14
Section 1.5. Calculations and Determinations. . . . . . . . . . . . . 15
ARTICLE II - The Loans . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 2.1. Advances . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.2. Requests for Advances. . . . . . . . . . . . . . . . . . 16
Section 2.3. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 17
Section 2.4. Extension of Commitment Period . . . . . . . . . . . . . 17
Section 2.5. Conversion . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.6. Rate Elections . . . . . . . . . . . . . . . . . . . . . 18
Section 2.7. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.8. Optional Prepayments . . . . . . . . . . . . . . . . . . 19
Section 2.9. Mandatory Prepayments. . . . . . . . . . . . . . . . . . 20
Section 2.10. Payments to Lenders. . . . . . . . . . . . . . . . . . . 21
Section 2.11. Lending Offices. . . . . . . . . . . . . . . . . . . . . 22
Section 2.12. Initial Borrowing Base . . . . . . . . . . . . . . . . . 22
Section 2.13. Subsequent Determinations of Borrowing Base. . . . . . . 22
Section 2.14. Borrower's Reduction of Borrowing Base . . . . . . . . . 23
Section 2.15. Capital Reimbursement. . . . . . . . . . . . . . . . . . 23
Section 2.16. Increased Cost of Fixed Rate Portions. . . . . . . . . . 23
Section 2.17. Availability . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.18. Funding Losses . . . . . . . . . . . . . . . . . . . . . 25
Section 2.19. Reimbursable Taxes . . . . . . . . . . . . . . . . . . . 25
ARTICLE IIA - The Letters of Credit . . . . . . . . . . . . . . . . . . 26
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Section 2A.1. Letters of Credit. . . . . . . . . . . . . . . . . . . . 26
Section 2A.2. Requesting Letters of Credit . . . . . . . . . . . . . . 27
Section 2A.3. Participation by Lenders . . . . . . . . . . . . . . . . 28
Section 2A.4. Reimbursement. . . . . . . . . . . . . . . . . . . . . . 28
Section 2A.5. Acceleration of LC Obligations . . . . . . . . . . . . . 29
Section 2A.6. Investment of LC Collateral. . . . . . . . . . . . . . . 30
Section 2A.7. Payment of Accelerated LC Obligations. . . . . . . . . . 30
Section 2A.8. Letter of Credit Reports . . . . . . . . . . . . . . . . 30
ARTICLE III - Conditions Precedent to Lending. . . . . . . . . . . . . . 31
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Section 3.1. Documents to be Delivered. . . . . . . . . . . . . . . . 31
Section 3.2. Additional Conditions Precedent. . . . . . . . . . . . . 32
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Section 3.3. Security Documents and Title Opinions. . . . . . . . . . . . 32
ARTICLE IV - Representations and Warranties. . . . . . . . . . . . . . . . . 33
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Section 4.1. Borrower's Representations and Warranties. . . . . . . . . . 33
Section 4.2. Representation by Lenders. . . . . . . . . . . . . . . . . . 39
ARTICLE V - Covenants of Borrower. . . . . . . . . . . . . . . . . . . . . . 39
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Section 5.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . 39
Section 5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI - Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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Section 6.1. The Security . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.2. Agreement to Deliver Security Documents. . . . . . . . . . . 51
Section 6.3. Perfection and Protection of Security Interests and Liens. . 51
Section 6.4. Bank Accounts; Offset. . . . . . . . . . . . . . . . . . . . 51
Section 6.5. Production Proceeds. . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII - Events of Default and Remedies . . . . . . . . . . . . . . . . 52
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Section 7.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . 52
Section 7.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.3. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VIII - Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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Section 8.1. Appointment and Authority. . . . . . . . . . . . . . . . . . 56
Section 8.2. Exculpation, Agent's Reliance, Etc.. . . . . . . . . . . . . 56
Section 8.3. Lenders' Credit Decisions. . . . . . . . . . . . . . . . . . 57
Section 8.4. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.5. Rights as Lender . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.6. Sharing of Set-Offs and Other Payments . . . . . . . . . . . 58
Section 8.7. Investments. . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.8. Benefit of Article VIII. . . . . . . . . . . . . . . . . . . 59
Section 8.9. Resignation. . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.10. Withholding and Withholding Certificates . . . . . . . . . . 59
ARTICLE IX - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 60
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Section 9.1. Waivers and Amendments; Acknowledgements . . . . . . . . . . 60
Section 9.2. Survival of Agreements; Cumulative Nature. . . . . . . . . . 62
Section 9.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.4. Joint and Several Liability; Parties in Interest . . . . . . 63
Section 9.5. Governing Law; Submission to Process . . . . . . . . . . . . 64
Section 9.6. Limitation on Interest . . . . . . . . . . . . . . . . . . . 65
Section 9.7. Termination; Limited Survival. . . . . . . . . . . . . . . . 66
Section 9.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. . . . . . . . . 67
Section 9.11. Restatement of Original Agreement. . . . . . . . . . . . . . 67
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SCHEDULE 1 - Disclosure Schedule (not included)
SCHEDULE 2 - Security Schedule (not included)
SCHEDULE 3 - Existing Liens(not included)
SCHEDULE 4 - Contracts (not included)
SCHEDULE 5 - Properties to be Mortgaged (not included)
EXHIBIT A - Form of Note
EXHIBIT B - Request for Advance (not included)
EXHIBIT C - Rate Election (not included)
EXHIBIT D - Certificate Accompanying Financial Statements (not included)
EXHIBIT E - Form of LC Application (not included)
EXHIBIT F-1 - Opinion of Conner & Winters (not included)
EXHIBIT F-2 - Opinion of Caton & Cathey (not included)
EXHIBIT G - Insurance Certificate (not included)
EXHIBIT H-1 - Assignment and Acceptance (not included)
EXHIBIT H-2 - Agreement to be Bound (not included)
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
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THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made as of June 15,
1995, by and among Tide West Oil Company, a Delaware corporation (herein
called "Borrower"), Union Bank (herein called "Agent") and the Lenders
referred to below. In consideration of the mutual covenants and agreements
contained herein the parties hereto agree as follows:
ARTICLE I - Definitions and References
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Section 1.1. Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given it in this Section 1.1 or in the
sections and subsections referred to below:
"Advance" has the meaning given it in Section 2.1.
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"Affiliate" means, as to any Person, each other Person that directly or
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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 10% 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.
"Agent" means Union Bank, as Agent hereunder, and its successors in such
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capacity.
"Agreement" means this Second Amended and Restated Credit Agreement.
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"Base Rate" means the per annum rate of interest equal to the sum of (a)
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the variable rate of interest per annum established from time to time by Agent
as its "reference rate" (which rate of interest may not be the lowest rate
charged on similar loans), plus (b) prior to the Conversion, zero for each day
on which the Borrowing Base Ratio is less than 60%, or one quarter of one
percent (.25%) for each day on which the Borrowing
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Base Ratio is equal to or greater than 60% or (c) for each day after the
Conversion, one quarter of one percent (.25%). The Base Rate shall in no event,
however, exceed the Highest Lawful Rate.
"Base Rate Portion" means that portion of the unpaid principal balance
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of the Loan which is not made up of Fixed Rate Portions.
"Borrower" means Tide West Oil Company, a Delaware corporation.
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"Borrowing Base" means, at the particular time in question, either the
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amount provided for in Section 2.12 or the amount determined by Agent in
accordance with the provisions of Section 2.13, as reduced by Borrower
pursuant to Section 2.14.
"Borrowing Base Ratio" means the percentage determined on a daily basis
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by dividing (a) the unpaid aggregate principal amount of the Loans at the end
of such day by (b) the Borrowing Base at the end of such day.
"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in Dallas, Texas and
Los Angeles, California. 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 judgment of Agent, significant transactions in
dollars are carried out in the interbank eurocurrency market.
"Cash Flow" means, for any period, revenues from operations in the
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ordinary course of business of Borrower during such period less (without
duplication) each of the following actually incurred by Borrower during such
period: direct operating expenses, general and administrative expenses,
production or severance taxes, landowner royalties on oil and gas leases,
required principal payments (including payment provided under Section 2.5 or
2.9 of this Agreement or under the Note) and interest payments under the Loan
Documents, and all workover, drilling, completion and development costs for
new or existing wells.
"Collateral" means all property of any kind which is subject to a Lien
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in favor of Lenders (or in favor of Agent for the benefit of Lenders) or
which, under the terms of any Security Document, is purported to be subject to
such a Lien.
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"Commitment Fee Rate" means (a) three-eighths of one percent (.375%) per
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annum for each day on which the Borrowing Base Ratio is less than 50%, and (b)
one-quarter of one percent (.25%) per annum for each day on which the
Borrowing Base Ratio is equal to or greater than 50%.
"Commitment Period" means the period from and including the date hereof
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until and including October 31, 1996 (or, if earlier, the day on which the
Notes first become due and payable in full); provided that Lenders may, at
their sole discretion, extend the Commitment Period as set forth in Section
2.4.
"Consolidated" refers to the consolidation of any Person, in accordance
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with GAAP, with its properly consolidated Subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated Subsidiaries.
"Contested Claim" means any Tax, Debt or other claim or liability, (i)
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the validity or amount of which is being contested by appropriate proceedings,
(ii) for which adequate reserves, as required by GAAP, have been established
and (iii) with respect to which any right to execute upon or sell any assets
of Borrower has not matured or has been and continues to be effectively
enjoined, superseded or stayed.
"Conversion" has the meaning given it in Section 2.5.
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"Debt" means, as to any Person, all indebtedness, liabilities and
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obligations 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 considered pursuant to GAAP.
"Default" means any Event of Default and any default, event or condition
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which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Determination Date" has the meaning given it in Section 2.13.
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"Disclosure Report" means either a notice given by Borrower under
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Section 5.1(d) or a certificate given by Borrower's chief financial officer
under Section 5.1(b)(ii).
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"Disclosure Schedule" means Schedule 1 hereto.
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"Engineering Report" means the Initial Engineering Report and each
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engineering report delivered pursuant to Sections 5.1(b)(iv) and (v).
"Environmental Laws" means any and all federal, state, local and foreign
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Laws, grants, franchises, licenses, or other governmental restrictions
relating to the environment or 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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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
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of ERISA maintained by any Related Person or any Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"Eurodollar Rate" means, with respect to each particular Fixed Rate
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Portion within a Tranche and with respect to the related Interest Period, the
rate of interest per annum determined by Agent in accordance with its
customary general practices to be representative of the rates at which
deposits of dollars are offered to Agent at approximately 11:00 a.m. Dallas,
Texas time two Business Days prior to the first day of such Interest Period
(by prime banks in the interbank eurocurrency market which have been selected
by Agent in accordance with its customary general practices) for delivery on
the first day of such Interest Period in an amount equal or comparable to the
amount of Agent's Fixed Rate Portion within such Tranche and for a period of
time equal or comparable to the length of such Interest Period. The
Eurodollar Rate determined by Agent with respect to a particular Fixed Rate
Portion shall be fixed at such rate for the duration of the associated
Interest Period. If Agent is unable so to determine the Eurodollar Rate for
any Fixed Rate Portion, Borrower shall be deemed not to have elected such
Fixed Rate Portion.
"Evaluation Date" means each of the following:
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(a) Each date which either Borrower or Majority Lenders, at
their respective options, specifies as a date as of which the Borrowing
Base is to be redetermined, provided that each such date must be the
first or last date of a current calendar month and that Lenders shall
not be entitled to request any such redetermination more than once
during any Fiscal Year; and
(b) June 1 and December 1 of each year, beginning December 1,
1995.
"Event of Default" has the meaning given it in Section 7.1.
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"Federal Funds Rate" means, for any day, the rate per annum (rounded
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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,
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 the
average rate charged to Agent on such day on such transactions as determined
by Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
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September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
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year.
"Fixed Rate" means, with respect to each particular Fixed Rate Portion
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and the associated Eurodollar Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Fixed Rate =
Eurodollar Rate + A
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100.0% - Reserve Percentage
where A means (a) for each day prior to the Conversion, one and one-quarter
percent (1.25%) for each day on which the Borrowing Base Ratio is less than
60%, and one and seven-eighths percent (1.875%) for each day on which the
Borrowing Base Ratio is equal
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to or greater than 60%, and (b) for each day after the Conversion, one and
seven-eighths percent (1.875%). The Fixed Rate for any Fixed Rate Portion shall
change whenever A changes, but if the Reserve Percentage changes during the
Interest Period for a Fixed Rate Portion, Agent may, at its option, either
change the Fixed Rate for such Fixed Rate Portion or leave it unchanged for the
duration of such Interest Period. The Fixed Rate shall in no event, however,
exceed the Highest Lawful Rate.
"Fixed Rate Portion" means any portion of the unpaid principal balance
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of a Loan which Borrower designates as such in a Rate Election.
"Funded Debt" means, as of any date, the sum of the following (without
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duplication): (i) the aggregate of all Debt for borrowed money of the Related
Persons as of such date, other than current liabilities, (ii) all Debt which
would be classified as "funded indebtedness" or "long-term indebtedness" (or
other similar classification) on a Consolidated balance sheet of Borrower
prepared as of the date, (iii) all Debt, whether secured or unsecured, of the
Related Persons, having a final maturity (or which is renewable or extendable
at the option of the obligor for a period ending) more than one year after the
date of creation thereof, notwithstanding the fact that payments in respect
thereof (whether installment, serial maturity or sinking fund payments, or
otherwise) are required to be made by the obligor less than one year after the
date of the creation, (iv) the aggregate of all Debt of the Related Persons
outstanding under any revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof over a period of more than one
year, notwithstanding the fact that any such Debt is created within one year
of the expiration of such agreement, (v) the present value (discounted at the
implicit rate, if known, or 10% per annum otherwise) of all obligations in
respect of capital leases of the Related Persons and (vi) all LC Obligations.
"GAAP" means those generally accepted accounting principles and
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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 Consolidated 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
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or practice, all reports and financial statements required hereunder with
respect to Borrower or with respect to Borrower and its Consolidated
subsidiaries 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 after notice of such change is given to each Lender and
Majority Lenders agree to such change insofar as it affects the accounting of
Borrower or of Borrower and its Consolidated Subsidiaries.
"Guaranty" of any Person means any contract, agreement or understanding
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of such Person pursuant to which such Person guarantees, or in effect
guarantees, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including without limitation:
(a) agreements to purchase such Debt or any property
constituting security therefor;
(b) agreements to advance or supply funds (i) for the purchase
or payment of such Debt, or (ii) to maintain working capital, equity
capital or other balance sheet conditions;
(c) agreements to purchase property, securities or services
primarily for the purpose of assuring the holder of such Debt of the
ability of the primary obligor to make payment of the Debt;
(d) letters or agreements commonly known as "comfort" or
"keepwell" letters or agreements; or
(e) any other agreements to assure the holder of the Debt of the
primary obligor against loss in respect thereof; except that "Guaranty"
shall not include the endorsement by Borrower in the ordinary course of
business of negotiable instruments or documents for deposit or
collection.
"Hazardous Materials" means any substances regulated under any
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Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means any futures transaction, swap agreement, cap,
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floor, collar, exchange transaction, forward agreement or other exchange or
protections agreements, whether relating to Hydrocarbons, interest rates,
currencies or other commodity, price or index, or any option with respect to
any such transaction now or hereafter entered into by Borrower.
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"Highest Lawful Rate" means, with respect to each Lender, the maximum
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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 Person to pay interest to any Lender at a rate in
excess of the Highest Lawful Rate applicable to such Lender.
"Horizon" means Horizon Gas Partners, L.P., a Delaware limited
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partnership.
"Hydrocarbons" means crude oil, natural gas or other hydrocarbons.
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"Hydrocarbon Exposure" means the amount of loss or cost to Borrower, if
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any, at any time, calculated by the Borrower in good faith based upon a
broker's market quotation, and approved by Agent and the Majority Lenders,
necessary to liquidate Borrower's present and future net obligations and
liabilities under a particular Hedging Contract in existence at such time
relating to Hydrocarbons.
"Initial Engineering Report" means the engineering report concerning oil
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and gas properties of Borrower dated December 31, 1994, prepared by
Netherland, Sewell & Associates as of December 31, 1994, and the internal
engineering report prepared by Borrower as of December 31, 1994.
"Initial Financial Statements" means (i) the audited annual Consolidated
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financial statements of Borrower dated as of December 31, 1994, and (ii) the
unaudited quarterly Consolidated financial statements of Borrower dated as of
March 31, 1995.
"Interest Period" means, with respect to each particular Fixed Rate
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Portion of a Loan, a period of 1, 2, 3 or 6 months, 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 ending on but not
including the same day of the month as the day on which it began (e.g., a
period beginning on the third day of one month shall end on but not include
the third day of another month), 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
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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.
"Late Payment Rate" means, at the time in question, four percent (4.0%)
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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
four percent (4.0%) per annum plus the related Fixed Rate. The Late Payment
Rate shall in no event, however, exceed the Highest Lawful Rate.
"Laws" means all applicable statutes, laws, ordinances, regulations,
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orders, judgments, writs, injunctions or decrees of any state, commonwealth,
nation, territory, possession, province, county, parish, town, township,
village, municipality or Tribunal; and "Law" means each of the foregoing.
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"LC Application" means any application for a letter of credit hereafter
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made by Borrower to Agent.
"LC Collateral" has the meaning given it in Sections 2.9(b) and 2A.5.
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"LC Obligations" means, at the time in question, the sum of the Matured
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LC Obligations plus the aggregate amounts which Agent might be called upon to
advance under all then outstanding Letters of Credit.
"Lenders" means each signatory hereto (other than Borrower), including
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Union Bank in its capacity as a lender hereunder rather than as Agent, and the
successors of each as holder of a Note.
"Letters of Credit" means any letter of credit issued by Agent at the
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application of Borrower.
"Lien" means, with respect to any property or assets, any right or
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interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt 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
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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.
"Loan" has the meaning given it in Section 2.1.
----
"Loan Documents" means this Agreement, the Notes, the Security
--------------
Documents, the LC Applications, the Letters of Credit, 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 contain information about
Borrower or its Affiliates, properties, business or prospects).
"Majority Lenders" means, at any time, Agent and one or more other
----------------
Lenders whose aggregate Percentage shares equal or exceed seventy-five percent
(75%).
"Matured LC Obligations" means all amounts paid by Agent on drafts or
----------------------
demands for payment drawn or made under or purported to be under any Letter of
Credit (or under or in connection with any LC Application) which have not been
repaid to Agent (with the proceeds of an Advance or otherwise).
"Note" means each "Note" as defined in Section 2.1, all renewals and
----
extensions thereof and replacements or substitutions therefor.
"Obligations" means all Debt from time to time owing by any of the
-----------
Related Persons to Agent or any Lender under or pursuant to any of the Loan
Documents. "Obligation" means any part of the Obligations.
----------
"Original Agreement" means that certain Amended and Restated Credit
------------------
Agreement dated as of September 1, 1992, among Borrower, Agent, and Union
Bank, Colorado National Bank and Den Norske Bank AS, as Lenders, as heretofore
modified, amended, supplemented, or restated.
"Percentage Share" means, with respect to any Lender (a) when used in
----------------
Sections 2.1 or 2.6, in any Request for Advance or when no Loans are
outstanding hereunder, the percentage set forth
- 10 -
opposite such Lender's name on the signature pages of this Agreement, 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 Distribution" means (a) Dividends from any Related Person to
----------------------
Borrower or other Related Person, and (b) in any Fiscal Quarter, any cash
Dividends to the stockholders of Borrower that, in the aggregate, do not
exceed (i) prior to the Conversion, thirty percent (30%) of Cash Flow for the
prior Fiscal Quarter, and (ii) after the Conversion, seventy percent (70%) of
Cash Flow for the prior Fiscal Quarter. As used in the foregoing definition
"Dividends" means, in respect of any corporation, cash distributions or any
---------
other distributions on, or in respect of, any class of capital stock of such
corporation, except for the contributions made solely in shares of stock of
the same class.
"Permitted Investments" means investments:
---------------------
(a) in open market commercial paper, maturing within 90 days
after acquisition thereof, which has the highest credit rating given by
two or more Rating Agencies.
(b) in marketable obligations, maturing within 90 days after
acquisition thereof, issued or unconditionally guaranteed by the United
States of America or an instrumentality or agency thereof and entitled
to the full faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including
certificates of deposit) maturing within 12 months from the date of
deposit thereof, with any office of any Lender or with a domestic office
of any national or state bank or trust company which is organized under
the Laws of the United States of America or any state therein, which has
capital, surplus and undivided profits of at least $250,000,000, and
whose certificates of deposit have at least the third highest credit
rating given by either Rating Agency.
(d) in any other Related Person (i) which is such on the date of
this Agreement or (ii) which becomes such after the date of this
Agreement, so long as the aggregate amount paid, contributed, lent, or
otherwise invested in all such Related Persons after the date of this
Agreement does not exceed $2,500,000.
- 11 -
(e) money market funds acceptable to Agent in its sole and
absolute discretion.
(f) in Horizon provided that the aggregate amount paid,
contributed, lent, or otherwise invested in Horizon during any period of
two consecutive Fiscal Quarters occurring between two Determination
Dates does not exceed $2,000,000, and provided further that no Default
or Event of Default is continuing at the time of each such investment or
would exist after giving effect thereto.
(g) by Borrower in Hedging Contracts, provided that such Hedging
Contract is permitted by Section 5.2(k) and that no Default or Event of
Default is continuing at the time of such investment or would exist
after giving effect thereto.
(h) by Borrower in any corporation, association, partnership,
joint venture, or other business or corporate entity, enterprise or
organization, so long as (i) the beneficial ownership interest of
Borrower in such Person does not exceed five percent (5%) of the
outstanding voting securities of such Person, measured by voting power
(including both common stock and any preferred stock or other equity
securities entitling the holders thereof to vote with the holders of
common stock in elections for directors or managing general partners of
such Person), (ii) the aggregate amount invested in all such Persons
after the date of this Agreement does not exceed $5,000,000, and (iii)
no Event of Default or Default is continuing at the time of such
investment or would exist after giving effect thereto.
As used in the foregoing definition (and elsewhere herein), "Rating Agency"
-------------
means either Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.)
or Moody's Investors Service, Inc., or their respective successors.
"Permitted Liens" means: (i) Liens granted to Agent to secure the
---------------
Obligations, (ii) Liens described on Schedule 3 and renewals and extensions
thereof so long as the Debt secured thereby and the interest rate payable
thereon is not increased or the maturity shortened, (iii) pledges or deposits
made to secure payment of worker's compensation insurance (or to participate
in any fund in connection with worker's compensation insurance), unemployment
insurance, pensions or social security programs, (iv) Liens imposed by
mandatory provisions of Law such as carrier's, materialmen's, mechanics',
warehousemen's, landlord's and other like Liens arising in the ordinary course
of business,
- 12 -
securing Debt not yet due or which qualifies as a Contested Claim, (v) Liens for
Taxes, if the same are not yet due and payable or qualify as a Contested Claim,
(vi) Liens arising in the ordinary course of business from pledges or deposits
to secure public or statutory obligations, deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the payment of
Taxes, (vii) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended, and none
of which are violated by existing or proposed structures or land use, and (viii)
Liens arising under operating agreements governing operation of the oil and gas
leases and fee properties owned by Borrower.
"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,
Tribunal, or any other legally recognizable entity.
"Prohibited Lien" means any Lien not expressly allowed under Section
---------------
5.2(b).
"Rate Election" has the meaning given it in Section 2.6.
-------------
"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 each present and future
--------------
Subsidiary of Borrower, except Horizon.
"Request for Advance" means a written request made by Borrower which
-------------------
meets the requirements of Section 2.2.
"Reserve Percentage" means, on any day with respect to each particular
------------------
Fixed Rate Portion in a Tranche, the maximum reserve requirement, as
determined by 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 to Agent under
Regulation D with respect to "Eurocurrency liabilities" (as such term is
defined in Regulation D) equal in amount to Agent's Fixed Rate Portion in such
Tranche, were Agent to have any such "Eurocurrency liabilities". If such
reserve requirement shall change after the date hereof, the Reserve Percentage
shall be automatically increased or decreased, as the case may be, from
- 13 -
time to time as of the effective time of each such change in such reserve
requirement.
"Restricted Debt" of any Person means Debt in any of the following
---------------
categories:
(a) Debt for borrowed money,
(b) Debt constituting an obligation to pay the deferred purchase
price of property,
(c) Debt evidenced by a bond, debenture, note or similar
instrument,
(d) Debt 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) Debt arising under Hedging Contracts,
(f) Debt constituting principal under leases capitalized in
accordance with GAAP,
(g) Debt arising under conditional sales or other title retention
agreements,
(h) Debt owing under any Guaranty,
(i) Debt (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Debt arises
out of or in connection with the sale of the same or similar securities
or property,
(j) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Debt with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time
of payment (including obligations under "take-or-pay" contracts to
deliver gas in return for payments already received and the undischarged
balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment),
or
--
- 14 -
(l) Debt with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on 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.
"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 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.
-----------------
"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 (through
one or more intermediaries) controlled by or owned fifty percent or more by
such Person.
"Taxes" means all taxes, assessments, fees, levies, imposts, duties,
-----
penalties, deductions, withholdings or other charges of any nature whatsoever
from time to time or at any time imposed by any Law or any Tribunal.
"Termination Event" means (a) the occurrence with respect to any ERISA
-----------------
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of
ERISA or (ii) any other reportable event described in Section 4043(b) 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
- 15 -
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.
"Tranche" has the meaning given it in Section 2.6.
-------
"Tribunal" means any government, and arbitration panel, and court or any
--------
governmental department, commission, board, bureau, agency or instrumentality
of the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
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 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". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular
- 16 -
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 fees and of interest shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a
year of 360 days. Each determination by Agent or a Lender of amounts to be
paid under Sections 2.15 through 2.19 or any other matters which are to be
determined hereunder by 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 Agent or any Lender hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP.
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
plus such Lender's LC Obligations plus such Lender's Percentage Share of
Borrower's Hydrocarbon Exposure in respect of Hedging Contracts described in
Section 5.2(k)(ii) at any time does not exceed such Lender's Percentage Share
of the Borrowing Base determined as of the date on which the requested Advance
is to be made. The aggregate amount of all Advances requested of all Lenders
in any Request for Advance must be greater than or equal to $100,000 or must
equal the unadvanced portion of the Borrowing Base. It is expressly
understood that Lenders' commitment to advance funds hereunder is determined
only by reference to the Borrowing Base from time to time in effect, and the
aggregate face amount of the Notes and the amount specified in the Security
Documents are specified at a greater amount only for the convenience of the
parties to avoid the necessity of preparing and recording supplements to the
Security Documents. 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
- 17 -
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 Agent of any
---------------------
requested Advance as follows, after which Agent shall give each Lender prompt
notice thereof:
(a) if all of such Advance is designated as a Base Rate Portion,
by 11:00 a.m., Dallas, Texas time, on the date such Advance is requested
to be made;
(b) if any part of such Advance is designated by Borrower as a
Fixed Rate Portion, by 11:00 a.m., Dallas, Texas time, on the second
Business Day preceding the date such Advance is requested to be made.
Each such written request or confirmation must be made in the form and
substance of the "Request for Advance" attached hereto as Exhibit B, duly
completed. Agent shall give prompt notice to each Lender of any Request for
Advance received by Agent. If all conditions precedent to such Advances have
been met, each Lender will on the date requested promptly remit to Agent at
Agent's office in Los Angeles, California 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, Agent shall promptly make the Advances
available to Borrower. Each Request for Advance shall be irrevocable and
binding on Borrower. Unless Agent shall have received prompt notice from a
Lender that such Lender will not make available to Agent such Lender's
Advance, Agent may in its discretion assume that such Lender has made such
Advance available to Agent in accordance with this section and 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 Agent, such Lender and Borrower severally agree to pay or repay
to Agent on demand the amount of such Advance together with interest thereon,
at the interest rate applicable at the time to the other Advances made on such
date. The failure of any Lender to make any Advance to be made by it
- 18 -
hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its Advance, but no Lender shall be responsible for the failure
of any other Lender to make any Advance to be made by such other Lender.
Section 2.3. Use of Proceeds. Borrower shall use all funds from
---------------
Advances to finance the acquisition and development of oil and gas properties,
for working capital purposes, Permitted Investments and any other purpose in
connection with or incidental to its present businesses and operations. In no
event shall the funds from any Advance or any Letter of Credit be used
directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" or any
"margin securities" (as such terms are defined respectively in Regulation U,
G, T or X promulgated by the Board of Governors of the Federal Reserve System)
or to extend credit to others directly or indirectly for the purpose of
purchasing or carrying any such margin stock or margin securities, except as
expressly provided herein. 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 such margin stock or margin securities.
Section 2.4. Extension of Commitment Period. Not more than ninety (90)
------------------------------
days and not less than thirty (30) days prior to each Determination Date,
Borrower may request that Lenders extend the Commitment Period. Lenders may,
in their sole discretion, elect to grant any such request and extension, in
which event (i) the terms and conditions of this Agreement will apply during
any such extension period, (ii) upon request by Agent, Borrower will execute
and deliver renewal Notes to Lenders and (iii) Borrower will execute and
deliver such additional documents as Agent may deem necessary to continue the
perfection of the Liens covering the Collateral. In the event any Lender
determines not to grant any such extension, Agent shall promptly so notify
Borrower.
Section 2.5. Conversion. At the end of the Commitment Period, the
----------
Loans shall be converted into term loans upon the terms and conditions set
forth in this Section 2.5 (the "Conversion"). Upon Conversion, Borrower
shall pay to Agent an amount equal to the sum of (i) the amount, if any, by
which the aggregate principal balance of the Loans is in excess of the
Borrowing Base then in effect, plus (ii) all accrued but unpaid interest. The
Conversion shall be evidenced by a term note (herein called a "Term Note")
made by Borrower to the order of each Lender dated as of the date of the
Conversion, which Term
- 19 -
Note shall (i) be dated as of the date of the Conversion, (ii) be in the
principal amount of the outstanding principal balance of such Lender's Loan at
the time of the Conversion and (iii) bear interest as set forth herein and
therein. Upon (i) the Conversion, the Term Notes shall be repaid on a three (3)
year amortization schedule (or such longer schedule as Lenders, in their sole
discretion, may permit based upon Lenders' evaluation of the Collateral at the
time of Conversion) or (ii) a conversion of the Loans into term loans pursuant
to Section 2.9(a), the amortization schedule for the Term Notes shall be
determined by Lenders in their sole discretion based upon Lenders' evaluation of
the Collateral at the time of Conversion, provided that the amortization
schedule will not be longer than three (3) years from the date of such
conversion.
Section 2.6. 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, 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 Agent not later than 11:00 a.m., Dallas, Texas
time, on the second 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, Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not
- 20 -
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 $100,000 or a higher integral multiple of $100,000. 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 four Tranches in effect at any time.
Section 2.7. Fees.
----
(a) Commitment Fees. In consideration of each Lender's
---------------
commitment to make Advances, Borrower will pay to Agent for the account
of each Lender a commitment fee determined on a daily basis by applying
the applicable Commitment Fee Rate to such Lender's Percentage Share of
the unused portion of the Borrowing Base on each day during the
Commitment Period, determined for each such day by deducting from the
amount of the Borrowing Base at the end of such day the sum of (i) the
aggregate unpaid principal balance of the Loans at the end of such day,
plus (ii) the amount of all LC Obligations outstanding at the end of
such day, plus (iii) Borrower's Hydrocarbon Exposure in respect of
Hydrocarbon Contracts described in Section 5.2(k)(ii). This commitment
fee shall be due and payable in arrears on the last day of each calendar
quarter and at the Conversion.
(b) Letter of Credit Fees. In consideration of Agent's issuance
---------------------
of any Letter of Credit, Borrower agrees to pay to Lender a letter of
credit fee for each Letter of Credit in the amount of one percent (1.0%)
per annum. Each such fee will be calculated on the face amount of such
Letter of Credit and be payable quarterly in arrears and at the
expiration or termination of such Letter of Credit. Agent shall pay to
each Lender from time to time at reasonable intervals (but in any event
at least quarterly), but only to the extent actually received from
Borrower, an amount equal to such Lender's Percentage Share of such
letter of credit fees in respect of each Letter of Credit, including any
such fee in respect of any period of any renewal or extension thereof.
In addition to such letter of credit fees, Borrower shall pay to Agent
for its own account the commissions and all charges, costs and expenses
customarily charged by Agent from time to time in like circumstances
with respect to the issuance of each Letter of Credit.
- 21 -
(c) Engineering Fees. Upon each request made by Borrower for a
----------------
redetermination of the Borrowing Base, Borrower shall pay to Agent for
the account of each Lender an engineering fee in the aggregate amount of
$10,000.
(d) Agent Fees. Borrower shall pay Agent such fees as are set
----------
forth in a separate letter between Borrower and Agent.
(e) Facility Fees. Borrower shall pay to Agent for the account
-------------
of each Lender such fees as are set forth in a separate letter among
Borrower, Agent and Lenders.
Section 2.8. Optional Prepayments. Borrower may, upon notice received
--------------------
by Agent not later than 1:00 p.m., Dallas, Texas time, from time to time and
without premium or penalty prepay the Notes, in whole or in part, so long as
the aggregate amounts of all partial prepayments of principal on the Notes
equals $100,000 or any higher integral multiple of $100,000, so long as
Borrower does not prepay any Fixed Rate Portion, and so long as Borrower does
not make any prepayments which would reduce the unpaid principal balance of
any Loan to less than $100,000 without first either (a) terminating this
Agreement or (b) providing assurance satisfactory to Agent in its discretion
that Lenders' legal rights under the Loan Documents are in no way affected by
such reduction. Each partial prepayment of principal made after the end of
the Commitment Period shall be applied to the regular installments of
principal due under the Notes in the inverse order of their maturities. 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.
Section 2.9. Mandatory Prepayments.
---------------------
(a) If the aggregate unpaid principal balance of the Loans plus
the aggregate amount of outstanding LC Obligations ever exceeds the
Borrowing Base Borrower shall, within thirty (30) days after Agent gives
notice of such fact to Borrower, either (a) prepay the principal of the
Loans in an amount at least equal to such excess or (b) grant Lenders
first perfected Liens in and to such additional Collateral satisfactory
to Agent, pursuant to documentation in form and substance satisfactory
to Agent to increase the Borrowing Base to an amount equal to the then
outstanding principal balance of the Loans plus the LC Obligations.
Each prepayment of principal under this section shall be accompanied by
all interest then accrued
- 22 -
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. During the Commitment Period, in the event Borrower
fails to comply with this Section 2.9, then upon the expiration of the
thirty (30) day period set forth in the first sentence of this section,
each Lender's Loan shall convert into a term loan upon the terms and
conditions set forth in Section 2.5.
(b) If prepayments are required under subsection (a) of this
section because of outstanding LC Obligations and if such prepayments
cannot be made because the principal balance of the Loans have already
been reduced to zero, then in lieu of such prepayments Borrower will
immediately pay to Agent an amount equal to the prepayment which would
otherwise be required. Agent will hold such amount as security for the
remaining LC Obligations (all such amounts held as security for LC
Obligations are herein collectively called "LC Collateral") until such
LC Obligations become Matured LC Obligations, at which time such LC
Collateral may
- 23 -
be applied to such Matured LC Obligations. This subsection shall not
limit or impair any rights which Agent or any Lender may have under any
other document or agreement relating to any Letter of Credit or LC
Obligation, including without limitation any LC Application.
Section 2.10. Payments to Lenders. Borrower will make each payment
-------------------
which it owes under the Loan Documents to Agent for the account of the Lender
to whom such payment is owed. Each such payment must be received by Agent not
later than 12:00 noon, Los Angeles, California 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 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 Agent's Note. When Agent collects or receives money on account of the
Obligations, Agent shall distribute all money so collected or received, and
Lenders shall apply all such money they receive from Agent, 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 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 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) last, for the payment or prepayment of any other Obligations.
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 Section 2.8. All
- 24 -
distributions of amounts described in any of subsections (b), (c) or (d) above
shall be made by Agent pro rata to Agent and each Lender then owed Obligations
described in such subsection in proportion to all amounts owed to Agent and
all Lenders which are described in such subsection.
Section 2.11. Lending Offices. Each Lender may (i) designate its
---------------
principal office or a foreign branch, subsidiary or affiliate as its Fixed
Rate lending office (and the office to whose account payments are to be
credited) for any Fixed Rate Portion, (ii) designate its principal office or a
domestic branch, subsidiary or affiliate as its domestic lending office (and
the office to whose account payments are to be credited) for any Base Rate
Portion and (iii) change its lending offices from time to time by notice to
Agent and Borrower. In such event, such Lender shall continue to hold the Note
evidencing its Loans for the benefit and account of such foreign branch,
subsidiary or affiliate. Nothing in this section, Section 2.16 or Section
2.17 shall be construed to cause any Advance or payment under this Agreement
to be made in a currency other than U.S. dollars or to provide compensation to
a Lender for costs or any losses in any conversion of payments by Borrower in
U.S. dollars to another currency.
Section 2.12. Initial Borrowing Base. During the period from the date
----------------------
hereof to the first Determination Date the Borrowing Base shall be
$80,000,000.
Section 2.13. Subsequent Determinations of Borrowing Base. On each
-------------------------------------------
Evaluation Date, Borrower shall furnish to each Lender all information,
reports and data as set forth in Section 5.1 which Agent has then requested
concerning the Related Persons' businesses and properties (including oil and
gas properties and interests and the reserves and production relating
thereto), together with the Engineering Report described in Section 5.1(b)(iv)
and (v). For each Evaluation Date specified by Borrower, Borrower shall pay
the engineering fee provided in Section 2.7(c). Within thirty (30) days after
each Evaluation Date, or as promptly thereafter as practicable, Majority
Lenders shall agree upon an amount for the Borrowing Base and Agent shall by
notice to Borrower designate such amount as the new Borrowing Base available
to Borrower hereunder, which designation shall take effect immediately on the
date such notice is sent (herein called a "Determination Date") and shall
remain in effect until but not including the next date as of which the
Borrowing Base is redetermined. If Borrower does not substantially furnish
all such information, reports and data by the date specified in the first
sentence of this section, Agent may nonetheless designate
- 25 -
the Borrowing Base at any amount which Majority Lenders determine and may
redesignate the Borrowing Base from time to time thereafter until each Lender
receives all such information, reports and data, whereupon Majority Lenders
shall designate a new Borrowing Base as described above. Majority Lenders shall
determine the amount of the Borrowing Base based upon the loan collateral value
which they in their discretion assign to the Collateral at the time in question
in accordance with their
- 26 -
respective customary practices and standards applied generally to their
substantial energy credits and based upon such other credit factors (including
without limitation the assets, liabilities, cash flow, business, properties,
prospects, management and ownership of Borrower and its Affiliates) as they in
their discretion deem significant. It is expressly understood that Lenders
and Agent have no obligation to agree upon or designate the Borrowing Base at
any particular amount except as provided in Section 2.12, whether in relation
to the aggregate face amount of the Notes or otherwise, and that Lenders'
commitments to advance funds hereunder is determined by reference to the
Borrowing Base from time to time in effect, which Borrowing Base shall be used
for calculating commitment fees under Section 2.7(a) and, to the extent
permitted by Law and regulatory authorities, for the purposes of Section 2.15.
Section 2.14. Borrower's Reduction of Borrowing Base. Until the
--------------------------------------
termination of the Commitment Period Borrower may at any time upon five (5)
Business Days' prior written notice to Agent reduce the Borrowing Base then in
effect to any lesser amount, provided that (i) each reduction must be in the
amount of $100,000 and (ii) each reduction must be accompanied by a prepayment
of the Notes in the amount by which the outstanding principal balance exceeds
the reduced Borrowing Base plus all then accrued but unpaid interest. Each
such notice shall take effect on the date specified therein and shall continue
in effect until the next date as of which the Borrowing Base is redetermined.
Section 2.15. Capital Reimbursement. If either (a) the introduction or
---------------------
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects
or would affect the amount of capital required or expected to be maintained by
any Lender or any corporation controlling any Lender, then, upon demand by
such Lender, Borrower will pay to Agent for the benefit of such Lender, from
time to time as specified by such Lender, such additional amount or amounts
which such Lender shall determine to be appropriate to compensate such Lender
or any corporation controlling such Lender in light of such circumstances, to
the extent that such Lender reasonably determines that the amount of any such
capital would be increased or the rate of return on any such capital would be
reduced by or in whole or in part based on the existence of the face amount of
such Lender's Loan, Letters of Credit or commitments under this Agreement.
- 27 -
Section 2.16. Increased Cost of Fixed Rate Portions. If any applicable
-------------------------------------
domestic or foreign Law, treaty, or rule (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 or Letter of Credit (other than Taxes imposed on the
overall net income of such Lender or any lending office of such Lender
by any jurisdiction in which such Lender or any such lending office is
located); or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any Fixed
Rate Portion or Letter of Credit of any Lender (excluding those for
which such Lender is fully compensated pursuant to adjustments made in
the definition of Fixed Rate) 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 or
Letter of Credit, the result of which is to increase the cost to any
Lender of funding or maintaining any Fixed Rate Portion or of issuing
any Letter of Credit or to reduce the amount of any sum receivable by
any Lender in respect of any Fixed Rate Portion or Letter of Credit by
an amount deemed by such Lender to be material,
then such Lender shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Lender
for such event (on an after-tax basis, taking into account any Taxes on such
compensation), whereupon (i) Borrower shall pay such amount to Agent for the
account of such Lender and (ii) Borrower may elect, by giving to 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 2.17. Availability. If (a) any change in applicable Laws,
------------
treaties, or rules or in the interpretation or administration thereof of or in
any jurisdiction whatsoever, domestic or foreign, shall make it unlawful or
impracticable for
- 28 -
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 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 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, interpretation or administration. Such indemnification shall be on an
after-tax basis, taking into account any Taxes imposed on the amounts paid as
indemnity.
Section 2.18. Funding Losses. In addition to its other obligations
--------------
hereunder, Borrower will indemnify Agent and each Lender against, and
reimburse Agent and each Lender on demand for, any loss or expense incurred or
sustained by 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 (a) 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, (b) 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, (c)
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 (d) 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. Such indemnification shall be on an after-tax basis, taking into
account any Taxes imposed on the amounts paid as indemnity.
- 29 -
Section 2.19. Reimbursable Taxes. Borrower covenants and agrees that:
------------------
(a) Borrower will indemnify Agent and each Lender against and
reimburse Agent and each Lender for all present and future income, stamp
and other Taxes whatsoever imposed, assessed, levied or collected on or
in respect of this Agreement or any Fixed Rate Portions or Letters of
Credit (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any Taxes imposed on or measured by the
overall net income of Agent or such Lender or any lending office of
Agent or such Lender by any jurisdiction in which Agent or such Lender
or any such lending office is located (all such non-excluded Taxes being
collectively called "Reimbursable 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 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 to make any such
deduction or withholding from any payment to 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 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 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
notice to Agent not later than 11:00 a.m. on the second Business Day
prior to the date of conversion to Base Rate, 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.
- 30 -
ARTICLE IIA - The Letters of Credit
---------------------
Section 2A.1. Letters of Credit. Subject to the terms and conditions
-----------------
hereof, Borrower may during the Commitment Period or any extension thereto,
request Agent to issue one or more Letters of Credit, provided that, after
taking such Letter of Credit into account:
(a) the sum of the aggregate amount of Advances outstanding at
such time plus the aggregate amount of LC Obligations at such time plus
Borrower's Hydrocarbon Exposure in respect of Hedging Contracts
described in Section 5.2(k)(ii) at such time, does not exceed the
Borrowing Base at such time; and
(b) the aggregate amount of LC Obligations at such time does not
exceed $10,000,000;
(c) the expiration date of such Letter of Credit does not extend
beyond the earlier of (i) one year from the date of issuance and (ii)
the end of the Commitment Period,
- 31 -
provided that Agent, in its sole discretion and with the approval of
Majority Lenders, may (i) issue Letters of Credit with an expiration
date beyond the end of the Commitment Period or (ii) extend the
expiration date of Letters of Credit beyond the Commitment Period for
those Letters of Credit issued prior to the expiration of the Commitment
Date;
and further provided that:
(d) such Letter of Credit is not directly or indirectly used to
assure payment of or otherwise support any Person's Restricted Debt
(other than Hedging Contracts);
(e) the issuance of such Letter of Credit will be in compliance
with all applicable governmental restrictions, policies, and guidelines
and will not subject Agent or any Lender to any cost not anticipated on
the date hereof;
(f) the terms of such Letter of Credit are acceptable to Agent in
the reasonable exercise of its discretion;
(g) if such Letter of Credit is to be issued for the account of or
in support of obligations of any Subsidiary of Borrower, then such
Subsidiary shall have executed and delivered to Agent an instrument in
form and substance reasonably satisfactory to Agent whereby each such
Subsidiary shall be jointly and severally liable with Borrower with
respect to the LC Obligations in respect of such Letter of Credit; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
Agent will honor any such request if the foregoing conditions (a) through (h)
(in the following Section 2A.2 called the "LC Conditions") have been met as of
the date of issuance of such Letter of Credit. Agent may choose to honor any
such request for any other Letter of Credit but has no obligation to do so and
may refuse to issue any other requested Letter of Credit for any reason which
Agent in its sole discretion deems relevant.
Section 2A.2. Requesting Letters of Credit. Borrower must make written
----------------------------
application for any Letter of Credit at least two Business Days before the
date on which Agent is requested to issue such Letter of Credit. Upon receipt
of any such application, Agent shall advise Lenders of the contents thereof.
By making any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions
- 32 -
described in Section 2A.1 will be met as of the date of issuance of such
Letter of Credit. Each such written application must be made in writing in
the form and substance of Exhibit E, the terms and provisions of which are
hereby incorporated herein by reference (or in such other form as may mutually
be agreed upon by Agent and Borrower). Two Business Days after the LC
Conditions for a Letter of Credit have been met as described in Section 2A.1
(or if Agent otherwise desires to issue such Letter of Credit), Agent will
issue such Letter of Credit at Agent's office in Los Angeles, California.
Provisions of any LC Application shall be deemed to apply only to the related
Letter of Credit. If any provisions of any LC Application conflict with any
provisions of this Agreement, the provisions of this Agreement shall govern
and control.
Section 2A.3. Participation by Lenders. On each day during the period
------------------------
commencing with the issuance by Agent of any Letter of Credit and until such
Letter of Credit shall have expired or been terminated, each Lender's
Percentage Share of the Borrowing Base shall be deemed to be utilized for all
purposes hereof in an amount equal to such Lender's Percentage Share of the
then undrawn face amount of such Letter of Credit. Each Lender agrees that it
shall, automatically, acquire a participation in Agent's liability under each
Letter of Credit issued hereunder in an amount equal to such Lender's
Percentage Share of such liability, and each Lender thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and shall be unconditionally obligated to Agent to pay and, discharge when
due, its Percentage Share of Agent's liability under such Letter of Credit.
Section 2A.4. Reimbursement.
-------------
(a) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment under such Letter of Credit, Agent shall promptly
notify Borrower of the amount to be paid by Borrower as a result of such
demand and the date on which payment is to be made to such beneficiary
in respect of such demand, specifying the time by which Borrower is to
reimburse Agent therefor. Borrower shall reimburse Agent for the amount
of each drawing under any Letter of Credit at or prior to the time of
each such drawing, without presentment, demand, protest or other
formalities of any kind.
(b) Forthwith upon its receipt of a notice referred to in
Section 2A.4(a), Borrower shall advise Agent whether or not Borrower
intends to borrow hereunder to finance its
- 33 -
obligation to reimburse Agent for the amount of the related drawing and, if
it does, submit a Request for Advance. In the event that Borrower fails to
so advise Agent, or if Borrower fails to reimburse Agent for a drawing
under a Letter of Credit by the time specified by Agent therefor, Agent
shall give each Lender prompt notice of the amount of the drawing,
specifying such Lender's Percentage Share of the amount of the related
drawing. Upon presentment of any Letter of Credit and Borrower's failure to
submit a Request for Advance for Advances or otherwise reimburse Agent for
any drawing under such Letter of Credit, Agent shall be entitled to cause
Advances to be made to reimburse Agent for payment under the Letter of
Credit whether or not Borrower would be entitled to an Advance pursuant to
Section 3.2, and each Lender shall be obligated for its Percentage Share of
each such Advance.
(c) Each Lender shall pay to Agent in immediately available
funds, the amount of such Lender's Percentage Share of any drawing under
a Letter of Credit upon notice by Agent to such Lender requesting such
payment and specifying such amount. Each Lender's obligation to make
such payments to Agent under this Section 2A.4(c), and Agent's right to
receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limiting the
effect of the foregoing, the failure of any other Lender to make its
payment under this clause (c) or the occurrence of a Default or an Event
of Default. Each such payment to Agent shall be made without any
offset, abatement, withholding or reduction whatsoever.
(d) Simultaneously with the mailing of each payment by a Lender
to Agent pursuant to Section 2A.4(c) in respect of any LC Obligation,
such Lender shall, automatically and without any further action on the
part of Agent or such Lender, be deemed to have made an Advance equal to
such Lender's Percentage Share of any drawings under any Letter of
Credit pursuant to Section 2A.4(b). Each payment (including by way of
setoff or application of proceeds of any collateral security) received
by Agent in respect of any Advances made pursuant to Section 2A.4(b)
shall be promptly paid by Agent to Lenders entitled thereto, pro rata in
accordance with the respective Percentage Shares. In the event any
payment received by Agent and so paid to Lenders hereunder is rescinded
or must otherwise be returned by Agent, each Lender shall, upon the
request of Agent, repay to Agent the amount of such payment paid to such
Lender, with interest at the rate specified in Section 2A.4(e).
- 34 -
(e) To the extent that any Lender fails to pay any amount to
Agent required to be paid pursuant to this Section 2A.4 on the due date
therefor, such Lender shall pay interest to Agent on such amount from
and including such due date to but excluding the date such payment is
made (i) during the period from and including such due date to but
excluding the date three Business Days thereafter, at a rate per annum
equal to the Federal Funds Rate (as in effect from time to time) and
(ii) thereafter, at the applicable rate of interest payable by Borrower
hereunder.
Section 2A.5. Acceleration of LC Obligations. If the Obligations or
------------------------------
any part thereof become immediately due and payable pursuant to Section 7.1
then, unless Agent otherwise specifically elects to the contrary (which
election may thereafter by retracted by Agent at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not
actual drawings or payments on the Letters of Credits have occurred, and
Borrower shall be obligated to pay Agent immediately an amount equal to the
aggregate LC Obligations which are then outstanding. All amounts so paid may,
as Agent elects, either be applied to Matured LC Obligations or held by Agent
as security for any remaining LC Obligations (all such amounts held as
security for LC Obligations are herein collectively called "LC Collateral")
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral may be applied to such Matured LC Obligations. This section shall
not limit or impair any rights which Agent may have under any other document
or agreement relating to any Letter of Credit or LC Obligation, including
without limitation any LC Application.
Section 2A.6. Investment of LC Collateral. LC Collateral shall be
---------------------------
invested by Agent in such investments as Agent may choose in its sole
discretion. All interest on such investments shall be reinvested for the
account of Borrower or applied to Matured LC Obligations. When all
Obligations have been satisfied in full, including all LC Obligations, all
Letters of Credit have expired or been terminated, and all of Borrower's
reimbursement obligations in connection therewith have been satisfied in full,
Agent shall release any remaining LC Collateral and any remaining proceeds
thereof. Borrower hereby assigns and grants to Agent a continuing security
interest in all LC Collateral paid by it to Agent, all investments purchased
with such LC Collateral, and all proceeds thereof to secure its Matured LC
Obligations and its Obligations under this Agreement, the Notes, and the other
Loan Documents. Borrower further agrees that Agent shall have all of the
rights and remedies of a secured party under the Uniform
- 35 -
Commercial Code as adopted in the State of Texas with respect to such security
interest and that an Event of Default under this Agreement shall constitute a
default for purposes of such security interest.
Section 2A.7. Payment of Accelerated LC Obligations. When Borrower is
-------------------------------------
required to provide LC Collateral and fails to do so on the day when required,
Agent may without notice to Borrower make such payment (whether by application
of proceeds of Collateral, by transfers from other accounts maintained with
Agent or otherwise) using any available funds of Borrower or any other Person
also liable to make such payments. Any such amounts which are required to be
provided as LC Collateral and which are not provided on the date required
shall, for purposes of each Security Document, be considered past due
Obligations owing hereunder, and Agent is hereby authorized to exercise its
respective rights under each Security Document to obtain such amounts.
Section 2A.8. Letter of Credit Reports. Promptly following the end of
------------------------
each Fiscal Quarter, Agent shall deliver to each Lender and Borrower a notice
describing the aggregate amount of all Letters of Credit outstanding at the
end of such Fiscal Quarter. Upon the request of any Lender from time to time,
Agent shall deliver any other information reasonably requested by such Lender
with respect to each Letter of Credit then outstanding.
ARTICLE III - Conditions Precedent to Lending
-------------------------------
Section 3.1. Documents to be Delivered. No Lender has any obligation
-------------------------
to make its first Advance or to issue the first Letter of Credit (whether or
not otherwise agreed to) unless Agent shall have received all of the
following, at Agent's office in Dallas, Texas, duly executed and delivered and
in form, substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall
contain the names and signatures of the
- 36 -
officers of Borrower authorized to execute Loan Documents and which
shall certify to the truth, correctness and completeness of the
following exhibits attached thereto: (1) 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, (2) a copy of the
charter documents of Borrower and all amendments thereto, certified by
the appropriate official of Borrower's state of organization, and (3)
a copy of any bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the
Board or President and of the chief financial officer of Borrower,
of even date with such Advance or Letter of Credit, 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) 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) A favorable opinion of Messrs. Conner & Winters, counsel for
Borrower, substantially in the form set forth in Exhibit F-1, together
with the certificate provided for in such Exhibit, and a favorable
opinion of Caton & Cathey, special counsel for Borrower, substantially
in the form set forth in Exhibit F-2.
(f) Certificates of Borrower's good standing and due
qualification to do business, issued by appropriate officials in any
states in which Borrower owns property subject to Security Documents.
(g) Endorsements naming Agent as an additional insured or loss
payee, as appropriate, on all liability insurance and all property
insurance policies of Borrower and a detailed schedule of all insurance
of Borrower attached hereto as Exhibit G.
(h) Reports from Borrower describing all pending or threatened
actions, suits or legal, equitable, arbitrative
- 37 -
or administrative proceedings by or against Borrower before any Tribunal,
domestic or foreign. There shall be no outstanding order or injunction
which would prohibit any of the transactions contemplated by the Loan
Documents.
(i) Federal Reserve Form U-1 provided for in Regulation U issued
by the Board of Governors of the Federal Reserve System, which shall
contain statements that, in the judgment of Agent, permit the
transactions contemplated hereby to be made in accordance with
Regulation U.
Section 3.2. Additional Conditions Precedent. No Lender has any
-------------------------------
obligation to make any Advance (including its first) or issue any Letter of
Credit 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
or Letter of Credit (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties had been made as of
the date of such Advance or Letter of Credit.
(b) No Default shall exist at the date of such Advance or Letter
of Credit.
(c) No material adverse change shall have occurred to Borrower's
individual or Consolidated financial condition or businesses since the
date of this Agreement.
(d) Each Related Person shall have performed and complied with
all agreements and conditions required in the Loan Documents to be
performed or complied with by it on or prior to the date of such Advance
or Letter of Credit.
(e) The making of such Advance or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any
Lender to any penalty or other onerous condition under or pursuant to
any such Law.
(f) Agent shall have received all documents and instruments which
Agent has then requested, in addition to those described in Section 3.1
(including opinions of legal counsel for Borrower and Agent; corporate
documents and records; documents evidencing governmental authorizations,
consents, approvals, licenses and exemptions; and
- 38 -
certificates of public officials and of officers and representatives of
Borrower and other Persons), as to (i) the accuracy and validity of or
compliance with all representations, warranties and covenants made by any
of the Related Persons in this Agreement and the other Loan Documents, (ii)
the satisfaction of all conditions contained herein or therein, and (iii)
all other matters pertaining hereto and thereto. All such additional
documents and instruments shall be satisfactory to Agent in form, substance
and date.
Section 3.3. Security Documents and Title Opinions. Within sixty days
-------------------------------------
from the date hereof, Borrower shall deliver to Agent, at Agent's office in
Dallas, Texas, duly executed and delivered and in form, substance and date
satisfactory to Agent:
(a) Each Security Document listed in the Security Schedule
covering the properties described in Schedule 5.
(b) Title opinions or other title data in form, substance and
authorship satisfactory to Agent and Borrower, concerning not less than
fifty percent (50%) of the aggregate value of the oil and gas properties
owned by Borrower; provided that if title opinions or title data has
previously been accepted by Agent, such title opinions or other title
data will continue to be accepted by Agent during the term of this
Agreement or any extension thereto.
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 Agent and each Lender to enter into
this Agreement, to make the Loans and to issue Letters of Credit, Borrower
represents and warrants to Agent and each Lender that:
(a) No Default. Borrower is not 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
- 39 -
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. 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 desirable.
(c) Authorization. Each Related Person has duly taken all
-------------
corporate 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) materially conflict with any
provision of (1) any domestic or foreign Law, (2) the articles or
certificate of incorporation, bylaws, charter, or partnership agreement
or certificate of any Related Person, or (3) any material agreement,
judgment, license, order or permit applicable to or binding upon any
Related Person, (ii) result in the acceleration of any Debt owed by any
Related Person, or (iii) result in or require the creation of any Lien
upon any assets or properties of any Related Person except as expressly
contemplated in the Loan Documents. Except as expressly contemplated in
the Loan Documents no consent, approval, authorization or order of, and
no notice to or filing with, any Tribunal or third party is required in
connection with the execution, delivery or performance by any Related
Person of any Loan Document or to consummate any transactions
contemplated by the Loan Documents.
(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
- 40 -
enforcement may be limited by bankruptcy, insolvency or similar Laws of
general application relating to the enforcement of creditors' rights.
(f) Initial Financial Statements. The Initial Financial
----------------------------
Statements fairly present Borrower's Consolidated financial position at
the respective dates thereof and the Consolidated results of Borrower's
operations and Borrower's Consolidated cash flows for the respective
periods thereof. Since the date of the audited annual Initial Financial
Statements no material adverse change has occurred in Borrower's
financial condition or businesses or in Borrower's Consolidated
financial condition or businesses, except as reflected in the quarterly
Initial Financial Statements or in the Disclosure Schedule. All Initial
Financial Statements were prepared in accordance with GAAP.
(g) Other Obligations and Restrictions. No Related Person has
----------------------------------
any outstanding Debt of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is, in
the aggregate, material to Borrower or material with respect to
Borrower's Consolidated financial condition 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 is
materially likely in the foreseeable future to materially and adversely
affect the businesses, properties, prospects, operations, or financial
condition of such Related Person or of Borrower on a Consolidated basis.
(h) Full Disclosure. To the best of Borrower's knowledge, no
---------------
certificate, statement or other information delivered herewith or
heretofore by any Related Person to 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, to
the best of Borrower's knowledge, (other than industry-wide risks
normally associated with the types of
- 41 -
businesses conducted by the Related Persons) that has not been disclosed to
Agent and each Lender in writing which could materially and adversely
affect Borrower's properties, business, prospects or condition (financial
or otherwise) or Borrower's Consolidated properties, businesses, prospects
or condition (financial or otherwise). There are no statements or
conclusions in any Engineering Report which are based upon or include
misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that each
Engineering Report is necessarily based upon professional opinions,
estimates and projections and that Borrower does not warrant that such
opinions, estimates and projections will ultimately prove to have been
accurate. Borrower has heretofore delivered to 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 a Disclosure Report: (i) there are no actions, suits
or legal, equitable, arbitrative or administrative proceedings pending,
or to the knowledge of any Related Person threatened, against any
Related Person before any Tribunal, domestic or foreign, and none of
such actions, suits or proceedings whether disclosed or undisclosed will
materially and adversely affect Borrower or, on a Consolidated basis,
Borrower and its properly Consolidated subsidiaries, their ownership or
use of any of their assets or properties, their businesses or financial
condition or prospects, or the right or ability of any Related Person to
enter into the Loan Documents to which it is a party or to consummate
the transactions contemplated thereby or to perform its obligations
thereunder and (ii) there are no outstanding judgments, injunctions,
writs, rulings or orders by any such governmental entity against any
Related Person or any Related Person's stockholders, partners, directors
or officers which have or may have any such effect.
(j) 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, 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"
- 42 -
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)
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
$500,000.
(k) Material Agreements. No Related Person is in default in any
-------------------
material respect under any material partnership agreement, indenture,
promissory note, contract, lease, loan agreement, mortgage, deed of
trust, security agreement, license, permit, franchise or other agreement
or obligation to which it is a party or by which any of its properties
is bound, and Borrower is not a party to or bound by any material
contracts or agreements other than those disclosed to Agent.
(l) Environmental and Other Laws. The Related Persons are
----------------------------
conducting their businesses in material compliance with all applicable
Laws. Except as disclosed in the Disclosure Schedule or a Disclosure
Report: no Related Person (i) has received notice or otherwise learned
of any claimed Environmental Liability which would, if adversely
determined, individually or in the aggregate have a material and adverse
effect as to the financial condition or business operations of Borrower
or as to the validity, performance, perfection or enforceability of any
Loan Documents, arising in connection with (A) any non-compliance with
or violation of the requirements of any Environmental Law or (B) the
release or threatened release of any Hazardous Materials into the
environment or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Materials, (ii) has not
had any threatened or actual liability in connection with the release or
threatened or actual liability in connection with the release or
threatened release of any Hazardous Materials, into the environment or
to the improper storage or disposal of any Hazardous Materials, which
would individually or in the aggregate have a material and adverse
effect as to the financial condition or business operations of Borrower
or as to the validity, performance, perfection or enforceability of any
Loan Documents or (iii) has not received notice or otherwise learned of
any federal or state investigation evaluating whether any remedial
action is needed to respond
- 43 -
to a release or threatened release of any Hazardous Materials into the
environment or to the improper storage or disposal of any Hazardous
Materials for which such Related Person is or may be liable. For purposes of
this section, the term "Environmental Liability" means any claim, demand,
obligation, cause of action, accusation, allegation, order, violation,
damage, injury, judgment, penalty or fine, cost of enforcement, cost of
remedial action or any other cost or expense whatsoever, including
reasonable attorneys' fees and disbursements, resulting from the violation
or alleged violation of any Environmental Law.
(m) Names and Places of Business. Borrower has not, during the
----------------------------
preceding five years, had, been known by, or used any other corporate,
trade, or fictitious name, except as disclosed in the Disclosure
Schedule. Except as otherwise indicated in the Disclosure Schedule or a
Disclosure Report, the chief executive office and principal place of
business of Borrower are (and for the preceding five years have been)
located at the address of Borrower set out in Section 9.3. Except as
indicated in the Disclosure Schedule or a Disclosure Report, Borrower
has no other office or place of business.
(n) Borrower's Subsidiaries. Borrower does not presently have
-----------------------
any Subsidiary or own any stock in any other corporation or association
except those listed in the Disclosure Schedule or a Disclosure Report.
Borrower is not a member of any general or limited partnership, joint
venture or association of any type whatsoever except those listed in the
Disclosure Schedule or a Disclosure Report. 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.
(o) Title to Properties. Each Related Person has good and
-------------------
defensible title to all of its material properties and assets, free and
clear of all Prohibited Liens and of all impediments to the use of such
properties and assets in such Related Person's business, except that 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.
(p) Government Regulation. Neither Borrower nor any other
---------------------
Related Person owing Obligations is subject to regulation under the
Public Utility Holding Company Act of
- 44 -
1935, the Federal Power Act, the Investment Company Act of 1940 (as any of
the preceding acts have been amended) or any other Law which regulates the
incurring by such Person of Debt, including Law relating to common contract
carriers or the sale of electricity, gas, steam, water or other public
utility services.
(q) Insider. Neither Borrower, nor any other Related Person,
-------
nor any Person having "control" (as that term is defined in 12 U.S.C.
(S) 375b(9) or in regulations promulgated pursuant thereto) of Borrower,
is a "director" or an "executive officer" or "principal shareholder" (as
those terms are defined in 12 U.S.C. (S) 375b(8) or (9) or in regulations
promulgated pursuant thereto) of Lender, of a bank holding company of
which Lender is a Subsidiary or of any Subsidiary of a bank holding
company of which Lender is a Subsidiary.
(r) Solvency. Upon giving effect to the issuance of the Notes,
--------
the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby, Borrower will be solvent (as such
term is used in applicable bankruptcy, liquidation, receivership,
insolvency or similar Laws).
(s) No Financing of Regulated Corporate Takeovers. No proceeds
---------------------------------------------
of any Advance will be used to acquire any security in any transaction
which is subject to Sections 13 or 14 of the Securities Exchange Act of
1934, including particularly (but without limitation) Sections 13(d) and
14(d) thereof.
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.
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 Agent and each Lender to enter into this Agreement,
make the Loans and to issue
- 45 -
the Letters of Credit, Borrower warrants, 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 and will
observe, perform and comply with every covenant, term and condition
expressed or implied in the Loan Documents. Borrower will cause the
other Related Persons to observe, perform and comply with every such
term, covenant and condition.
(b) Books, Financial Statements and Reports. Borrower and each
---------------------------------------
of its Subsidiaries 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 Agent and each Lender at
Borrower's expense:
(i) As soon as available, and in any event within ninety
(90) days after the end of each Fiscal Year, complete Consolidated
and consolidating financial statements of Borrower 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 Deloitte Touche, or
other independent certified public accountants selected by
Borrower and acceptable to Majority Lenders, stating that such
Consolidated financial statements have been so prepared. These
financial statements shall contain a Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of earnings, of cash
flows, and of changes in owners' equity for such Fiscal Year, each
setting forth in comparative form the corresponding figures for
the preceding Fiscal Year. In addition, within ninety (90) days
after the end of each Fiscal Year Borrower will furnish a report
signed by such accountants stating that they have read this
Agreement containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Year with the
requirements of Section 5.2(e), and further stating 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
- 46 -
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 sixty
(60) days after the end of the first three Fiscal Quarters in each
Fiscal Year, Borrower's Consolidated and consolidating balance
sheet as of the end of such Fiscal Quarter and Consolidated and
consolidating statements of Borrower's earnings and 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. 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 D signed by
the chief financial officer of Borrower stating that such
financial statements are accurate and complete, stating that he
has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter
with the requirements of Sections 5.2(e), and stating that no
Default exists at the end of such Fiscal Quarter or at the time of
such certificate or specifying the nature and period of existence
of any such Default.
(iii) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent
by any Related Person to its stockholders and all registration
statements, periodic reports and other statements and schedules
filed by any Related Person with any securities exchange, the
Securities and Exchange Commission or any similar governmental
authority.
(iv) By June 1 of each year, an engineering report prepared
by Netherland, Sewell & Associates, or other independent petroleum
engineers chosen by Borrower and acceptable to Majority Lenders,
concerning 70% of the present value of estimated future net cash
flow before income tax (discounted at 10%) of oil and gas
properties and interests owned by Borrower which are located in or
offshore of the United States and which have attributable to them
proved developed oil or gas reserves, and an engineering report
prepared by in-
- 47 -
house petroleum engineers of Borrower, concerning the all other such
oil and gas properties and interests owned by Borrower that are not
covered by the Netherland, Sewell & Associates report. These reports
shall be satisfactory to Agent. A separate report prepared by Borrower
shall be delivered in connection with such engineering reports setting
forth all gas balancing arrangements whether "over-produced" or "under-
produced" for such oil and gas properties. These reports shall
distinguish (or shall be delivered together with a certificate from an
appropriate officer of Borrower which distinguishes) those properties
treated in the reports which are Collateral from those properties
treated in the report which are not Collateral.
(v) By December 1 of each year, an engineering report
prepared by in-house petroleum engineers employed by Borrower,
concerning all oil and gas properties and interests owned by
Borrower which are located in or offshore of the United States and
which have attributable to them proved oil and gas reserves. This
report shall be substantially in the form and substance as the
reports delivered under subsection (b)(iv) above and otherwise
shall be satisfactory to Agent.
(vi) Within forty-five (45) days following request by
Agent, a report describing by lease or unit the gross volume of
production and sales attributable to production during such
periods as specified by Agent from the properties described in
subsection (b)(iv) above and describing the related severance
taxes, other taxes, leasehold operating expenses and capital costs
attributable thereto and incurred during such month.
(vii) On the 15th and 30th of each calendar month, Borrower
shall deliver to Agent a report providing Agent with detailed
information regarding Borrower's Hedging Contracts and providing
its computation of the Hydrocarbon Exposure; provided that in the
event any such report reflects a Hydrocarbon Exposure, Borrower
shall deliver such report to Agent each calendar week until such
Hydrocarbon Exposure has been eliminated.
(viii) Within fifteen (15) days after any material changes
in insurance coverage by Borrower, a
- 48 -
report describing such changes, and, within ninety (90) days after the
end of each Fiscal Year, a new insurance certificate, naming Agent as
an additional insured or loss payee, as appropriate.
(ix) Within ninety (90) days after the end of each Fiscal
Year, (i) complete reports by Borrower, describing all actions,
suits or legal, equitable, arbitrative or administrative
proceedings pending, or to the knowledge of Borrower, threatened
against any Borrower or any of its Subsidiaries before any
Tribunal, domestic or foreign, which Borrower is required to
disclose in it quarterly report submitted on Form 10Q with the
Securities and Exchange Commission and (ii) such additional
information regarding the matters disclosed in Borrower's report
as Agent may reasonably request. In addition, within forty-five
(45) days after the end of each Fiscal Quarter (except the last)
of each Fiscal Year in which a material change in any reported
action, suit or proceeding has occurred or any additional action,
suit or proceeding which may materially and adversely affect
Borrower or any other Related Person, has been threatened in
writing or commenced, reports by Borrower, describing such
material changes or additions. Provided, however, if the
foregoing matters are set forth in any Consolidated statements
provided to Agent by Borrower, then Borrower shall have no
obligation to provide separate reports hereunder.
(c) Other Information and Inspections. Borrower and each of its
Subsidiaries will furnish to Agent and each Lender such other
information concerning the Related Persons' businesses, operations or
financial condition as Agent may from time to time reasonably request.
During all business hours, Borrower and each of its Subsidiaries will
give any representative of Agent access to and permission for such
representative to examine, copy or make excerpts from any and all books,
records and documents in the possession of Borrower or such Subsidiary
that relate to its affairs, and to inspect any of the properties of
Borrower or any of its Subsidiaries.
(d) Notice of Material Events and Change of Address. Borrower
will promptly notify Agent and each Lender:
(i) of any material adverse change in Borrower's financial
condition or Borrower's Consolidated
- 49 -
financial condition or in the aggregate value of the Collateral,
(ii) of the occurrence of any Default,
(iii) of the acceleration of the maturity of any Debt owed
by Borrower or any of its Subsidiaries or of any default by
Borrower or such Subsidiary 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 might have a material adverse
effect upon Borrower's Consolidated financial condition or on the
value of any material part of the Collateral,
(iv) of the occurrence of any Termination Event,
(v) of any claim of $500,000 or more, any notice of
potential liability under any Environmental Laws which might
exceed such amount, or any other material adverse claim 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 could have a material
adverse effect upon any Related Person's financial condition,
business or operations or on the value of any Collateral.
Upon the occurrence of any of the foregoing the Related Persons will
take all necessary or appropriate steps to remedy promptly any such
material adverse change, Default, acceleration, default or Termination
Event, to protect against any such 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 Agent and Agent's counsel
in writing at least twenty 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 Agent and its
counsel to prepare the same.
(e) Maintenance of Properties. Each Related Person will
-------------------------
maintain, preserve, protect, and keep all Collateral and all other
property used or useful in the conduct of its
- 50 -
business in good condition and in compliance with all applicable Laws, and
will from time to time make all repairs, renewals and replacements in
accordance with prudent industry standards.
(f) Maintenance of Existence and Qualifications. Each Related
-------------------------------------------
Person which is a corporation or partnership will maintain and preserve
its corporate or partnership existence 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 will not have
any material adverse effect on Borrower.
(g) Payment of Trade Debt, Taxes, etc. Except for Contested
---------------------------------
Claims, each Related Person will (i) timely file all required tax
returns; (ii) timely pay all Taxes; (iii) within ninety (90) days after
the same becomes due pay all Debt 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 Debt now or hereafter owed by it; and (v) maintain
appropriate accruals and reserves for all of the foregoing in accordance
with GAAP.
(h) Insurance. Each Related Person will keep or cause to be kept
---------
adequately insured by financially sound and reputable insurers its
drilling rigs, surface equipment, vehicles and all other property of a
character usually insured by similar Persons engaged in the same or
similar businesses. Upon demand by Agent, any insurance policies
covering Collateral shall be endorsed (i) to provide for payment of
losses to 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 Agent, (iii) to provide for
any other matters specified in any applicable Security Document or which
Agent may reasonably require; and (iv) 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. Each Related Person shall at all
times maintain adequate insurance against its liability for injury to
persons or
- 51 -
property, which insurance shall be by financially sound and reputable
insurers.
(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 costs and expenses incurred by or on
behalf of (i) Agent (including attorneys' fees provided, however, an
estimated cap on attorneys' fees shall be satisfactory to and approved
in advance by Borrower) in connection with (1) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and
all consents, waivers or other documents or instruments relating
thereto, (2) 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 (3) the borrowings hereunder and
other action reasonably required in the course of administration hereof,
and (ii) Agent or any Lender (including attorneys' fees) in connection
with the defense or enforcement of the Loan Documents or the defense of
Agent's or any Lender's exercise of its rights thereunder (including
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, Agent may
pay the same. Borrower shall immediately reimburse Agent for any such
payments and each amount paid by Agent shall constitute an Obligation
owed hereunder which is due and payable on the date such amount is paid
by Agent.
(k) Interest. Borrower hereby promises to 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 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 material 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
- 52 -
party or by which it or any of its properties is bound. Borrower and each of
its Subsidiaries will conduct its business and affairs in compliance with
all Laws applicable thereto, including Environmental Laws.
(m) Evidence of Compliance. Each Related Person will furnish to
----------------------
each Lender at such Related Person's or Borrower's expense all evidence
which 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) ERISA Compliance. Each Related Person will (i) make prompt
----------------
payment of all contributions required under its ERISA Plans and required
to meet the minimum funding standard set forth in ERISA with respect to
its ERISA Plans, (ii) within 30 days after the filing thereof, furnish
to Agent and each Lender each annual report/return (Form 5500 Series),
as well as all schedules and attachments required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to
ERISA, and the regulations promulgated thereunder, in connection with
each of its ERISA Plans for each ERISA Plan year, and (iii) notify Agent
immediately of any fact, including, but not limited to, any Reportable
Event arising in connection with any of its ERISA Plans, which might
constitute grounds for termination thereof by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer such ERISA Plans,
together with a statement, if requested by Agent, as to the reason
therefor and the action, if any, proposed to be taken with respect
thereto.
(o) Subordination of Affiliate Obligations. Borrower agrees and
--------------------------------------
covenants that until such time as (i) Lenders have received full and
final payment of the Notes and (ii) all Obligations have been performed
in their entirety, all indebtedness, liability and obligations of any
type (the "Affiliate Obligations") of Borrower to any other Related
Person or any Affiliate of Borrower, shall be, and hereby are made,
subordinate and inferior to all Debt, Obligations and liability of
Borrower to Lenders. Upon the occurrence and continuation of an Event of
Default, no Affiliate Obligation may be paid by Borrower until the
Obligations have been repaid in full in cash. If, after the occurrence
and continuation of an Event of Default, any Related Person
- 53 -
or any Affiliate of Borrower receives payment on any Affiliate Obligations,
such Related Person or Affiliate shall hold such proceeds in trust for
Lenders and shall immediately remit same to Agent for application against
the Obligations.
(p) Liens on Mortgaged Properties Acquired or Completed in the
----------------------------------------------------------
Future. Within thirty (30) days following each Determination Date,
------
Borrower will execute and deliver documentation in form and substance
satisfactory to Agent, granting to Lenders or Agent on behalf of Lenders
first perfected Liens on and in the oil, gas and mineral lease(s)
covering each well (i) acquired or completed since the prior
Determination Date which is capable of production of oil, gas or other
hydrocarbons in paying quantities, insofar as such lease(s) cover the
proration unit assigned to such well, (ii) which is to be included in
the Borrowing Base, and (iii) the Lien on which is necessary to provide
Lenders a first perfected Lien on not less than seventy percent (70%) of
the aggregate value of all oil, gas and mineral leases owned by
Borrower. Prior to the granting of such Liens, Borrower will furnish to
Agent title opinions in form, substance and authorship satisfactory to
Agent and Borrower, concerning such properties as may be necessary to
provide title coverage of not less than fifty percent (50%) of the
aggregate value of the oil and gas properties owned by Borrower.
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 Agent and each Lender to enter into this Agreement,
make the Loans and issue Letters of Credit, Borrower warrants, 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) Restricted Debt. No Related Person will in any manner owe or
---------------
be liable for Restricted Debt except:
(i) the Obligations.
(ii) guaranties of Debt which is owed by Tide West Trading
& Transport Company to Lenders.
(iii) Debt outstanding under the instruments and agreements
described on the Disclosure Schedule, but excluding any renewals
or extensions of such Debt.
- 54 -
(iv) Debt in respect of Hedging Contracts permitted by
Section 5.2(k).
(v) Reserves for taxes and other contingent liabilities,
including intercompany payables.
(b) Limitation on Liens. No Related Person will create, assume
-------------------
or permit to exist any Lien upon any of the properties or assets which
it now owns or hereafter acquires:
(i) as to property which is Collateral, any Liens
expressly permitted to encumber such Collateral under any Security
Document covering such Collateral.
(ii) as to property which is not Collateral, Permitted
Liens.
(c) Limitation on Mergers. No Related Person will merge or
---------------------
consolidate with or into any other business entity or acquire by lease
or merger all or any substantial part of the assets or capital stock of
any Person other than another Related Person. For purposes of this
Section 5.2(c), the term "substantial part" means property or assets of
any Person with a fair market value in excess of ten percent (10%) of
the fair market value of all assets of such Person. Any Subsidiary of
Borrower may, however, be merged into or consolidated with Borrower, so
long as Borrower is the surviving business entity. No Subsidiary of
Borrower which is a partnership will allow any diminution of Borrower's
interest (direct or indirect) therein.
(d) Limitation on Sales of Collateral. No Related Person will
---------------------------------
sell, transfer, lease, exchange, alienate or dispose of any Collateral
or any material interest therein except, to the extent not otherwise
forbidden under the Security Documents:
(i) equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and value.
(ii) inventory (including oil and gas sold as produced and
seismic data) which is sold in the ordinary course of business on
ordinary trade terms.
- 55 -
(iii) contracts for the future sales of fixed quantities of
oil and gas at fixed prices, so long as the contracting party is
acceptable to Agent.
(iv) other property which is sold for fair consideration
not in the aggregate in excess of $500,000 in any Fiscal Year, the
sale of which will not materially impair or diminish Borrower's
Consolidated financial condition, business or operations.
Neither Borrower nor any other Related Person will sell, transfer or
otherwise dispose of capital stock of any of Borrower's Subsidiaries.
Borrower will not sell, transfer, pledge or otherwise dispose of its
limited partnership interest in Horizon. Borrower will not 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.
(e) Limitation on Dividends and Redemptions. No Related Person
---------------------------------------
will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership or other
interest in it except for Permitted Distributions; provided that no
dividend or other distribution which would have been a Permitted
Distribution may be declared or paid if a Default or Event of Default
has occurred and is continuing or would result from such declaration or
payment. No Related Person will directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any shares of the
capital stock of or partnership interests in any Related Person (whether
such interests are now or hereafter issued, outstanding or created), or
cause or permit any reduction or retirement of the capital stock of any
Related Person, except as expressly provided in this section. Such
contributions, purchases, redemptions, acquisitions, retirement or
reductions may be made by Borrower without limitations to Borrower, so
long as no Default or Event of Default is continuing or would exist
after giving effect thereto.
(f) Limitation on Investments and New Businesses. 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 or conduct any operations except in connection with or
incidental to its present businesses and operations, (iii)
- 56 -
make any acquisitions of or capital contributions to or other investments
in any Person, other than Permitted Investments, or (iv) make any
significant acquisitions or investments in any properties other than oil and
gas properties.
(g) Limitation on Credit Extensions. Except for Permitted
-------------------------------
Investments, no Related Person will extend credit, make advances or make
loans other than 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.
(h) Transactions with Affiliates. Neither Borrower nor any of
----------------------------
its Subsidiaries will engage in any material transaction with any of its
Affiliates on terms which are less favorable to it than those which
would have been obtainable at the time in arm's-length dealing with
Persons other than such Affiliates, provided that such restriction shall
not apply to transactions among Borrower and its wholly owned
Subsidiaries.
(i) Certain Contracts; Amendments; 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 Related Person to: (i) pay dividends or make other
distributions to Borrower, (ii) to redeem equity interests held in it by
Borrower, (iii) to repay loans and other indebtedness owing by it to
Borrower, (iv) to place Liens on any of its assets, or (v) to transfer
any of its assets to Borrower. Except for existing contracts set forth
in Schedule 4, 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. No Related Person
will amend or permit any amendment to any contract or lease which
releases, qualifies, limits, makes contingent or otherwise detrimentally
affects the rights and benefits of Agent or any Lender under or acquired
pursuant to any Security Documents. No Related Person will incur any
obligation to contribute to any "multiemployer plan" as defined in
Section 4001 of ERISA.
- 57 -
(j) Fiscal Year. No Related Person will change its fiscal year.
-----------
(k) Hedging Contracts. No Related Person will be a party to or
-----------------
in any manner be liable on any Hedging Contract, except:
(i) Hedging Contracts entered into by Borrower with the
purpose and effect of fixing prices on Hydrocarbons expected to be
produced by Borrower, provided that at all times the aggregate
monthly production covered by all such Hedging Contracts
(determined, in the case of contracts that are not settled on a
monthly basis, by a monthly proration acceptable to Agent) for any
single month does not in the aggregate exceed seventy-five percent
(75%) of the Related Persons' aggregate Projected Production
anticipated to be sold in the ordinary course of the Related
Persons' businesses for such month; as used in this subsection,
the term "Projected Production" means the projected production of
Hydrocarbons (measured by volume unit or BTU equivalent, not sales
price) for the term of the contracts or a particular month, as
applicable, from properties and interests owned by Borrower
attributable to proved developed producing reserves, after
deducting projected production from any properties or interests,
if any, otherwise subject to a fixed price sales contract;
(ii) Hedging Contracts entered into by Borrower with
respect to Hydrocarbons to be purchased by or delivered to
Borrower and Hedging Contracts in respect of Hydrocarbons expected
to be produced by Borrower which, for any single month
(determined, in the case of contracts that are not settled on a
monthly basis, by a monthly proration acceptable to Agent) exceed
seventy-five percent (75%) of Borrower's aggregate Projected
Production anticipated to be sold in the ordinary course of the
Related Persons' businesses for such month, provided that the sum
of the Hydrocarbon Exposures in respect to such Hedging Contracts
under this subparagraph (ii) shall never be greater than (A)
$4,000,000 or (B) the unadvanced portion of the Borrowing Base,
whichever is less.
(l) Funded Debt to Equity. Borrower's Consolidated Funded Debt
---------------------
will never exceed 250% of Borrower's equity.
- 58 -
(m) Contested Claims. The aggregate amount of Borrower's
----------------
Contested Claims (not covered by insurance satisfactory to Agent in its
sole discretion) will not exceed $500,000 at any time.
ARTICLE VI - Security
--------
Section 6.1. The Security. The Obligations will be secured by the
------------
Security Documents listed in the Security Schedule and any additional Security
Documents hereafter delivered by any Related Person and accepted by Agent.
Section 6.2. Agreement to Deliver Security Documents. Borrower agrees
---------------------------------------
to deliver and to cause its Subsidiaries to deliver, to further secure the
Obligations whenever requested by 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
Agent for the purpose of granting, confirming, and perfecting first and prior
liens or security interests in any real or personal property which is at such
time Collateral or which was intended to be Collateral pursuant to any
Security Document previously executed and not then released by Agent.
Borrower also agrees to deliver, whenever requested by Agent in its sole and
absolute discretion, favorable title opinions from legal counsel acceptable to
Agent with respect to Borrower's properties and interests designated by Agent,
based upon abstract or record examinations to dates acceptable to Agent and
(a) stating that Borrower has good and defensible title to such properties and
interests, free and clear of all Prohibited 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 Agent may request.
Section 6.3. Perfection and Protection of Security Interests and Liens.
---------------------------------------------------------
Borrower will from time to time deliver to Agent any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Borrower in form
and substance satisfactory to Agent, which Agent requests for the
- 59 -
purpose of perfecting, confirming, or protecting any Liens or other rights in
Collateral securing any Obligations.
Section 6.4. Bank Accounts; Offset. To secure the repayment of the
---------------------
Obligations Borrower hereby grants to Agent and each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of Agent or any Lender at common Law,
under the Loan Documents, or otherwise, and each of which shall be upon and
against (a) any and all moneys, securities or other property (and the proceeds
therefrom) of Borrower now or hereafter held or received by or in transit to
Agent or any Lender from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any
and all deposits (general or special, time or demand, provisional or final) of
Borrower with Agent or any Lender, and (c) any other credits and claims of
Borrower at any time existing against Agent or any Lender, including claims
under certificates of deposit. At any time and from time to time after the
occurrence of any Default, each of Agent and Lenders is hereby authorized to
foreclose upon, or to offset against the Obligations then due and payable (in
either case without notice to Borrower), any and all items hereinabove
referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.5. Production Proceeds. Notwithstanding that, by the terms
-------------------
of the various Security Documents, Borrower is and will be assigning to Agent
and Lenders all of the "Production Proceeds" (as defined therein) accruing to
the property covered thereby, so long as no Default has occurred Borrower 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 of a
Default, 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 Borrower or to receive directly from the
purchasers of production all other Production Proceeds. In no case shall any
failure, whether purposed or inadvertent, by 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 Agent or Lenders to Borrower
constitute a waiver, remission, or release of any other Production Proceeds or
of any rights of Agent or Lenders to collect other Production Proceeds
thereafter.
- 60 -
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) Borrower fails to pay any Obligation 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 "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied
within the applicable period of grace (if any) provided in such Loan
Document;
(c) Any Related Person fails to duly observe, perform or comply
with any covenant, agreement or provision of Section 5.1(d) or Section
5.2;
(d) Any Related Person fails (other than as referred to in
subsections (a), (b) or (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 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 Agent;
(f) Any Related Person (i) fails to pay any portion, when such
portion is due, of any of its Debt (excluding Contested Claims otherwise
permitted by Section 5.1(m)) in excess of $100,000, or (ii) breaches or
defaults in the performance of any agreement or instrument by which any
such Debt 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
- 61 -
of 1986, as amended) in excess of $500,000 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 $500,000 (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); and
(h) 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 thirty 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 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 part of the Collateral 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
- 62 -
(iv) suffers the entry against it of a final judgment
for the payment of money in excess of $500,000, unless the same is
discharged within thirty days after the date of entry thereof or
an appeal or appropriate proceeding for review thereof is taken
within such period and a stay of execution pending such appeal is
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 part of the Collateral, 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.
Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section 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. During the continuance of any other
Event of Default, Agent shall, upon written instructions from Majority
Lenders, without notice to Borrower or any other Related Person, 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. After any such acceleration
(whether automatic or due to any declaration by Agent), any obligation of any
Lender to make any further Advances shall be permanently terminated.
Section 7.2. Remedies. If any Default shall occur and be continuing,
--------
each Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender may
enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Agent and Lenders under the Loan Documents
- 63 -
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.
Section 7.3. Indemnity. Borrower agrees to indemnify Agent and each
---------
Lender, 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 Agent or such Lender growing out of, resulting from or in any other
way associated with any of the Collateral, 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, Agent or any Lender with respect
to Hazardous Materials found in or released into the environment). THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT OR ANY LENDER, PROVIDED ONLY
THAT NEITHER AGENT NOR ANY LENDER SHALL BE ENTITLED UNDER THIS SECTION TO
RECEIVE INDEMNIFICATION FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS
WHICH IS PROXIMATELY CAUSED BY ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT. If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or
willful misconduct by Agent or any Lender, the indemnification provided for in
this section shall nonetheless be paid upon demand, subject to later
adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the
alleged gross negligence or willful misconduct. As used in this section the
terms "Agent" and "Lender" shall refer not only to the Persons designated as
such in Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Person.
ARTICLE VIII - Agent
-----
- 64 -
Section 8.1. Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Agent, and 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 Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of
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 Agent a trustee or other fiduciary for any holder of any of the
Notes or of any participation therein nor to impose on 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 Agent,
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 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 Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from any Lender to Agent of any Default or
Event of Default, Agent shall promptly notify each Lender thereof.
Section 8.2. Exculpation, Agent's Reliance, Etc. Neither 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, Agent (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof in accordance with this
Agreement, signed by such payee and in form satisfactory to 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,
- 65 -
warranties or representations made in or in connection with the Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of 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 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 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. Each Lender agrees to indemnify Agent
---------------
(to the extent not reimbursed by Borrower within ten (10) days after demand)
from and against such Lender's Percentage Share of 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 Agent growing out of, resulting from or in any other way
associated with any of the Collateral, the Loan Documents and the transactions
and events (including the enforcement thereof) at any time associated
therewith or contemplated therein (including any violation or noncompliance
with any Environmental Laws by any Person or any liabilities or duties of any
Person with respect to Hazardous Materials found in or released into the
environment). THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
- 66 -
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT, PROVIDED ONLY
THAT NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY AGENT FOR
THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED
BY AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS
DETERMINED IN A FINAL JUDGMENT. Cumulative of the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for such Lender's Percentage
Share of any costs and expenses to be paid to Agent by Borrower under
Section 5.1(i) to the extent that Agent is not timely reimbursed for such
expenses by Borrower as provided in such section. As used in this section the
term "Agent" shall refer not only to the Person designated as such in Section
1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 8.5. Rights as Lender. In its capacity as a Lender, Agent
----------------
shall have the same rights and obligations as any Lender and may exercise such
rights as though it were not Agent. 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 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 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
Agent under Section 2.10, causes Agent or such Lender to have received more
than it would have received had such payment been received by Agent and
distributed pursuant to Section 2.10, then (a) it shall be deemed to have
simultaneously purchased and shall be obligated to purchase interests in the
Obligations as necessary to cause Agent and all Lenders to share all payments
as provided for in Section 2.10, and (b) such other adjustments shall be made
from time to time as shall be equitable to ensure that Agent and all Lenders
share all payments of Obligations as provided in Section 2.10; provided,
however, that nothing herein contained shall in any way affect the right of
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 such interest or other
participation in the Obligations, whether or not acquired
- 67 -
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 Agent in good faith determines that
-----------
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, 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 Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and 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
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 Agent or
any Lender. Agent and Lenders may waive or amend such provisions as they
desire without any notice to or consent of Borrower or any Related Person.
Section 8.9. Resignation. Agent may resign at any time by giving
-----------
written notice thereof to Lenders and Borrower. Each such notice shall set
forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Agent. A successor must
be appointed for any retiring Agent, and such Agent's resignation shall become
effective when such successor accepts such appointment. If, within thirty
days after the date of the retiring Agent's resignation, no successor Agent
has been appointed and has
- 68 -
accepted such appointment, then the retiring Agent may appoint a successor
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 and has a combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation 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 Agent under the Loan Documents.
Section 8.10. Withholding and Withholding Certificates. Lenders agree
----------------------------------------
that Agent shall deduct and withhold from payments made to Lenders such
amounts as are required under applicable United States federal income tax Laws
and state or local tax Laws. The amount to be deducted and withheld by Agent
may be reduced or eliminated if, prior to any payment, (i) in the case of a
Lender that is a non-United States Person, such Lender provides or has
provided Agent with a properly completed and currently effective (a) Form 4224
or Form 1001, and (B) Form W-8 or Form W-9, and (ii) in the case of a Lender
that is not a non-United States Person, such Lender provides or has provided
Agent with a properly completed and currently effective Form W-9.
ARTICLE IX - Miscellaneous
-------------
Section 9.1. Waivers and Amendments; Acknowledgements.
----------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by
----------------------
course of conduct or otherwise) by Agent or any Lender in exercising any
right, power or remedy which 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
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
- 69 -
Related Person to any other or further notice or demand in similar or other
circumstances. 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 with respect to the subject matter hereof and
thereof, and 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 Agent,
by Agent and (iii) if such party is a Lender, by such Lender or by 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, Agent shall not, without
the prior consent of each individual Lender, 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 Agent may in its
discretion withdraw any request it has made under Section 3.2(f)), (2)
increase the Percentage Share of such Lender or subject such Lender to any
additional obligations, (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
otherwise change the aggregate amount of Percentage Shares which is required
for Agent, Lenders or any of them to take any particular action under the
Loan Documents, or (6) release Borrower from its obligation to pay such
Lender's Note.
(b) Acknowledgements 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) it has made an independent decision to
enter into this Agreement and the other Loan Documents to which it is a
party, without reliance on any representation, warranty, covenant or
undertaking by Agent or any Lender, whether written, oral or implicit,
other than as expressly set out in this Agreement or in another Loan
Document delivered on or after the date hereof, (iii) there are no
representations, warranties, covenants, undertakings or agreements by
Agent or any Lender as to the Loan Documents except as expressly set out
in this Agreement or in another Loan Document delivered on or after the
date hereof, (iv)
- 70 -
neither Agent nor any Lender has any fiduciary obligation toward Borrower
with respect to any Loan Document or the transactions contemplated thereby,
(v) the relationship pursuant to the Loan Documents between Borrower, on one
hand, and Agent and each Lender, on the other hand, is and shall be solely
that of debtor and creditor, respectively, (vi) no partnership or joint
venture exists with respect to the Loan Documents between any of Borrower,
Agent and Lenders, (vii) Agent is not Borrower's Agent, but Agent for
Lenders, (viii) should an Event of Default or Default occur or exist 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, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by Agent or any Lender, or any
representative thereof, and no such representation or covenant has been
made, that 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, and (x) Agent and all Lenders have relied upon the truthfulness
of the acknowledgements in this section in deciding to execute and deliver
this Agreement and to make their Loans.
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 Agent and Lenders and all of 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 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,
- 71 -
indemnities, and covenants made by the Related Persons in the Loan Documents,
and the rights, powers, and privileges granted to 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 the benefit to 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 Agent may give telephonic notices to Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, 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 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 first attempted
delivery at the address provided herein, (b) in the case of telecopy or telex,
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 Advance or Rate Election shall become effective until actually received by
Agent.
Section 9.4. Joint and Several Liability; Parties in Interest.
------------------------------------------------
(a) All Obligations which are incurred by two or more Related Persons
shall be their joint and several obligations and liabilities. All grants,
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 Borrower may not assign or transfer any of
its rights or delegate any of its duties or obligations under
- 72 -
any Loan Document without the prior consent of Majority Lenders. Neither
Borrower nor any Affiliates of Borrower shall directly or indirectly purchase or
otherwise retire any Obligations owed to any Lender nor will any Lender 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 Borrower or any Affiliate of Borrower at any time purchases some but less
than all of the Obligations owed to Agent and all Lenders, such purchaser shall
not be entitled to any rights of Agent or Lender under the Loan Documents unless
and until Borrower or its Affiliates have purchased all of the Obligations.
(b) Any Lender may from time to time grant participations in all or any
part of the Obligations to any Person (a "Participant") on such terms and
conditions as may be determined by such Lender in its sole and absolute
discretion, provided that the grant of such participation shall not relieve
any Lender of its obligations hereunder nor create any additional obligations
of Borrower, provided further, that Borrower agrees that if any Obligations
are due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence and during the continuance of an Event of Default,
each Participant shall be deemed to have the right of setoff under Section 6.4
in respect of its participation interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents, provided
further, that such right of setoff shall be subject to the obligations of such
Participant to share with Lenders and Lenders agree to share with such
Participant. Borrower also agrees that each participant shall be entitled to
the benefits of Section 2.7, provided that no Participant shall be entitled to
receive any greater amount pursuant to such sections than the transferor
Lender would have been entitled to receive in respect of the amount of the
participating interest transferred by such transferor Lender to such
Participant had no such transfer occurred. Each Lender agrees that any
agreement between such Lender and any such Participant in respect of such
participating interest shall not restrict such Lender's right to agree to any
amendment, supplement, waiver or modification to this Agreement or any other
Loan Document, except for actions which would require the consent of all
Lenders under Section 9.1(a).
(c) Each Lender may at any time sell to one or more financial
institutions (a "Purchasing Lender") any part of its rights and obligations
under the Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit
- 73 -
H-1, appropriately completed, executed by such Purchasing Lender, such
transferor Lender and Agent; provide that such transferor Lender shall have
received the prior written consent thereto of Agent and Borrower (which consent
shall not be unreasonably withheld), and provided further that no Lender shall
hold an interest in Loans and Notes under this Agreement which in the aggregate
is less than $5,000,000. Upon (x) delivery to Agent of both an appropriately
completed Assignment and Acceptance and an appropriately completed Agreement to
Be Bound in the form of Exhibit H-2, (y) payment of a processing fee payable to
the Agent in the amount of $5,000, and (z) payment of the amount of its
participation, the Purchasing Lender shall for all purposes be a Lender party to
this Agreement and shall have all the rights and obligations of a Lender under
this Agreement, to the same extent as if it were an original party hereto with
the Percentage Share of the Loans set forth in the Assignment and Acceptance.
Upon the consummation of any transfer pursuant to this Section 9.4(c), the
transferor Lender, the Agent and Borrower shall make appropriate arrangements so
that, if required, replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchasing
Lender, in each case in principal amounts reflecting their respective Percentage
Shares of the Loans. Prior to selling or otherwise transferring any Note, Lender
shall endorse on such Note all Loans and all payments of principal and interest
that have been made in respect of such Note.
(d) Nothing contained in this Section 9.4 shall prevent or prohibit any
Lender from assigning or pledging all or any portion of its Loan and its 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.
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 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. The obligations
of Borrower for payments of all amounts due under this Agreement and the Loan
- 74 -
Documents are performable in Los Angeles County, California, and all other
obligations of Borrower under this Agreement and the Loan Documents are
performable in Dallas County, Texas. Borrower hereby irrevocably submits
itself to the jurisdiction of the state and federal courts sitting in the
State of Texas and agrees and consents that service of process may be made
upon it in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law. Any legal
proceeding arising out of or in any way related to any of the Loan Documents
shall be brought and litigated exclusively in the United States District Court
for the Northern District of Texas, Dallas Division, to the extent it has
subject matter jurisdiction, and otherwise in the Texas District Courts
sitting in Dallas County, Texas. The parties hereto hereby waive and agree
not to assert, by way of motion, as a defense or otherwise, that any such
proceeding is brought in an inconvenient forum or that the venue thereof is
improper. In furtherance thereof, Borrower and Lenders each hereby
acknowledge and agree that it was not inconvenient for them to negotiate and
receive funding of the transactions contemplated by this Agreement in such
county and that it will be neither inconvenient nor unfair to litigate or
otherwise resolve any disputes or claims in a court sitting in such county.
Section 9.6. Limitation on Interest. Agent, Lenders, the Related
----------------------
Persons and any other parties to the Loan Documents intend to contract in
strict compliance 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 to be charged
by applicable Law from time to time in effect. Neither any Related Person nor
any present or future guarantors, endorsers, 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 that may be lawfully charged under 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. Agent and Lenders expressly disavow any intention
to charge or collect excessive unearned interest or finance charges in the
event the maturity of any Obligation is accelerated. 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 legal maximum, or (c) Agent or any Lender
- 75 -
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 to be charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at Agent's or such Lender's or holder's option, 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, 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 legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Texas Revised
Civil Statutes Annotated article 5069-1.04, that ceiling shall be the indicated
rate ceiling 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 Agent to terminate this Agreement. Upon receipt
by 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
2.15 through 2.19, and any obligations which any Person may have to indemnify
or compensate Agent or any Lender shall survive any termination of this
Agreement or any other Loan Document. At the request and expense of Borrower,
Agent shall prepare and execute all necessary instruments to reflect and
effect such termination
- 76 -
of the Loan Documents. 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, PUNITIVE DAMAGES, ETC. EACH OF
--------------------------------------------
BORROWER, AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (a) 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 OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) 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 WAIVERS, AND (d)
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.
BORROWER HEREBY REPRESENTS AND ACKNOWLEDGES THAT IT IS A "BUSINESS CONSUMER"
FOR THE PURPOSES OF THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION
ACT, THAT IT HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, THAT IT HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF CREDIT TRANSACTIONS
GENERALLY AND OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS IN
PARTICULAR, AND THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
- 77 -
POSITION WITH RESPECT TO THE PARTIES TO AND THE TRANSACTIONS CONTEMPLATED BY
THE LOAN DOCUMENTS; BORROWER HEREBY WAIVES THE PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT (OTHER THAN SECTION 17.555
THEREOF), AS FROM TIME TO TIME AMENDED.
Section 9.11. Restatement of Original Agreement; Letters of Credit.
----------------------------------------------------
(a) This Agreement restates and amends the Original Agreement in its
entirety, effective as of the date hereof, and all of the terms and provisions
hereof shall supersede the terms thereof.
(b) All Letters of Credit outstanding under the Original Agreement on
the date hereof, shall be deemed to be Letters of Credit outstanding under
this Agreement for all purposes including, but not limited to, Section 2A.4(c)
and fees payable under Section 2.7(b) which shall be allocated accordingly
with respect to all letters of credit outstanding under the Original Agreement
on the date hereof for which fees have occurred but have not yet been paid,
such fees shall continue to accrue in accordance with the terms herein and
shall be paid as provided in Section 2.7(b).
- 78 -
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
TIDE WEST OIL COMPANY
Borrower
By: /s/ Philip B. Smith
-----------------------------------------
Philip B. Smith
President
Address:
6666 S. Sheridan
Suite 250
Tulsa, Oklahoma 74133
Attention: Philip B. Smith
Telephone: (918) 488-8962
Telecopy: (918) 481-0992
UNION BANK
Agent and Lender
Percentage
Share
----------
37.5% By: /s/ Michael E. Tregoning
-----------------------------------------
Michael E. Tregoning
Senior Vice President
By: /s/ Tony R. Weber
-----------------------------------------
Tony R. Weber
Vice President
Address:
Energy Capital Services
500 North Akard
4200 Lincoln Plaza
Dallas, Texas 75201
Attention: Tony Weber
Telephone: (214) 922-4200
Telecopy: (214) 922-4209
- 79 -
DEN NORSKE BANK AS,
Lender
25%
By: //s//
-----------------------------------------
Name: Nelvin Farstad
Title: Senior Vice President
By: //s//
-----------------------------------------
Name: Fran Meyers
Title: Vice President
Address:
600 Fifth Avenue, 16th Floor
New York, New York 10020
Attention: Customer Service Dept.
Telephone: (212) 315-6500
Telecopy: (212) 956-3161
With a copy to:
3 Allen Center
333 Clay, Suite 4890
Houston, Texas 77002
Attention: Charles E. Hall
Telephone: (713) 757-0083
Telecopy: (713) 757-1167
COLORADO NATIONAL BANK,
Lender
25%
By: //s//
-----------------------------------------
Kathryn A. Gaiter
Vice President
Address:
3rd Floor, Tower Building
950 Seventeenth Street
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P. O. Box 5168 T.A.
Denver, Colorado 80217
Attention: Kathryn A. Gaiter
Telephone: (303) 585-4210
Telecopy: (303) 585-4362
TEXAS COMMERCE BANK, NATIONAL
ASSOCIATION,
Lender
12.5%
By: /s/ Tim E. Perry
----------------------------------------
Tim E. Perry
Senior Vice President
Address:
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attention: Debbie Sowards
Telephone: (214) 922-2671
Telecopy: (214) 922-2389
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PROMISSORY NOTE EXHIBIT B
$10,000,000 Dallas, Texas June 15, 1995
FOR VALUE RECEIVED, the undersigned, TIDE WEST OIL COMPANY, a Delaware
corporation (herein called "Borrower"), hereby promises to pay to the order of
TEXAS COMMERCE BANK, NATIONAL ASSOCIATION (herein called "Lender"), the
principal sum of Ten Million Dollars ($10,000,000), 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 Agent under the Credit Agreement, 445 South Figueroa Street, Los
Angeles, California 90071 or at such other place within Los Angeles County,
California, 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 Amended
and Restated Credit Agreement of even date herewith among Borrower, Union
Bank, as Agent, and the lenders (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, (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, and (c) is secured by and
entitled to the benefits of certain Security Documents (as identified and
defined in the Credit Agreement). 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 and to the Security Documents
for a description of the nature and extent of the security thereby provided
and the rights of the parties thereto.
This Note is executed in renewal, increase and extension of, and in
substitution for (but not in extinguishment or novation of) that certain Fifth
Renewal Revolving Note dated March 10, 1994 made by Borrower payable to the
order of Lender in the stated principal amount of $_____________.
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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
calendar month, beginning June 30, 1995, 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
(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 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.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on October 31, 1996, or such other
date as set forth in the Credit Agreement.
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
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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 a
ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04, that
ceiling shall be the indicated rate ceiling 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 endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, 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
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GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT
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REGARD TO PRINCIPLES OF CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE
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GOVERNED BY APPLICABLE FEDERAL LAW.
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TIDE WEST OIL COMPANY
By:
-----------------------------------------
Philip B. Smith
President
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