EXHIBIT 10.1
================================================================================
CREDIT AGREEMENT
among
WESTPORT RESOURCES CORPORATION,
as Borrower
The Several Lenders
from Time to Time Parties Hereto
JPMORGAN CHASE BANK,
as Administrative Agent
CREDIT SUISSE FIRST BOSTON,
CAYMAN ISLAND BRANCH,
as Syndication Agent
FLEET NATIONAL BANK,
FORTIS CAPITAL CORP.,
and
U.S. BANK NATIONAL ASSOCIATION,
as Documentation Agents
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Senior Managing Agent
and
BMO NESBITT BURNS FINANCING, INC.
and
WELLS FARGO BANK, N.A.,
as Managing Agents
Dated as of December 17, 2002
================================================================================
Joint Arrangers and Book Runners
J.P. Morgan Securities Inc. Credit Suisse First Boston
TABLE OF CONTENTS
<Table>
SECTION 1 DEFINITIONS.............................................................................................1
1.1 Defined Terms..........................................................................................1
1.2 Other Definitional Provisions.........................................................................21
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS........................................................................22
2.1 Commitments...........................................................................................22
2.2 Procedure for Borrowing...............................................................................22
2.3 Repayment of Loans; Evidence of Debt..................................................................23
SECTION 3 LETTERS OF CREDIT......................................................................................23
3.1 The L/C Commitment....................................................................................23
3.2 Procedure for Issuance of Letters of Credit...........................................................24
3.3 Fees, Commissions and Other Charges...................................................................24
3.4 L/C Participations....................................................................................25
3.5 Reimbursement Obligation of the Borrower..............................................................26
3.6 Obligations Absolute..................................................................................26
3.7 Letter of Credit Payments.............................................................................27
3.8 L/C Applications......................................................................................27
SECTION 4 GENERAL PROVISIONS.....................................................................................27
4.1 Interest Rates and Payment Dates......................................................................27
4.2 Computation of Interest and Fees......................................................................28
4.3 Conversion and Continuation Options...................................................................28
4.4 Minimum Amounts; Maximum Number of Tranches...........................................................29
4.5 Prepayments and Commitment Reductions.................................................................29
4.6 Commitment Fee; Administrative Agent's Fee; Other Fees................................................30
4.7 Inability to Determine Interest Rate..................................................................31
4.8 Pro Rata Treatment and Payments.......................................................................31
4.9 Application and Computation of Borrowing Base.........................................................32
4.10 Borrowing Base Compliance.............................................................................34
4.11 Illegality............................................................................................35
4.12 Requirements of Law...................................................................................35
4.13 Taxes.................................................................................................36
4.14 Indemnity.............................................................................................37
4.15 Change of Lending Office..............................................................................38
SECTION 5 REPRESENTATIONS AND WARRANTIES.........................................................................39
5.1 Financial Condition...................................................................................39
5.2 No Change.............................................................................................40
5.3 Existence; Compliance with Law........................................................................40
5.4 Power; Authorization; Enforceable Obligations.........................................................40
5.5 No Legal Bar..........................................................................................40
5.6 No Material Litigation................................................................................41
5.7 No Default............................................................................................41
5.8 Ownership of Property; Liens..........................................................................41
5.9 Intellectual Property.................................................................................41
5.10 No Burdensome Restrictions............................................................................42
5.11 Taxes.................................................................................................42
5.12 Federal Reserve Regulations...........................................................................42
</Table>
i
<Table>
5.13 ERISA.................................................................................................42
5.14 Investment Company Act; Other Regulations.............................................................43
5.15 Subsidiaries..........................................................................................43
5.16 Purpose of Loans......................................................................................43
5.17 Environmental Matters.................................................................................43
5.18 No Material Misstatements.............................................................................44
5.19 Insurance.............................................................................................44
5.20 Future Commitments....................................................................................44
5.21 Pledge Agreement......................................................................................44
5.22 Subordinated Indebtedness; Refinancing of Existing Credit Facility....................................45
5.23 Acquisition Documents.................................................................................45
5.24 Solvency..............................................................................................46
SECTION 6 CONDITIONS PRECEDENT...................................................................................46
6.1 Conditions to Initial Extensions of Credit............................................................46
6.2 Conditions to Each Extension of Credit................................................................50
SECTION 7 AFFIRMATIVE COVENANTS..................................................................................50
7.1 Financial Statements..................................................................................50
7.2 Certificates; Other Information.......................................................................51
7.3 Payment of Obligations................................................................................53
7.4 Conduct of Business and Maintenance of Existence; Compliance with Law and Contractual Obligations.....53
7.5 Maintenance of Property; Insurance....................................................................53
7.6 Inspection of Property; Books and Records; Discussions................................................53
7.7 Notices...............................................................................................53
7.8 Environmental Laws....................................................................................54
7.9 Additional Collateral; Guarantors.....................................................................55
7.10 Maintenance and Operation of Property.................................................................56
7.11 Further Assurances....................................................................................56
7.12 Hedging Agreements....................................................................................56
7.13 Title Information.....................................................................................57
7.14 Mortgaged Properties..................................................................................57
7.15 Additional Collateral; Borrowing Base.................................................................58
SECTION 8 NEGATIVE COVENANTS.....................................................................................59
8.1 Financial Covenants...................................................................................59
8.2 Limitation on Indebtedness............................................................................60
8.3 Limitation on Liens...................................................................................61
8.4 Limitation on Guarantee Obligations...................................................................63
8.5 Limitation on Fundamental Changes.....................................................................63
8.6 Limitation on Sale of Assets..........................................................................63
8.7 Limitation on Restricted Payments.....................................................................64
8.8 Limitation on Investments, Loans and Advances.........................................................66
8.9 Limitation on Optional Payments and Modifications of Debt Instruments, Other Material Agreements......67
8.10 Limitation on Transactions with Affiliates............................................................68
8.11 Limitation on Sale and Leasebacks.....................................................................68
8.12 Limitation on Changes in Fiscal Year; Use of Proceeds.................................................68
8.13 Limitation on Negative Pledge Clauses.................................................................68
</Table>
ii
<Table>
8.14 Limitation on Lines of Business.......................................................................68
8.15 Forward Sales.........................................................................................69
8.16 Hedging Agreements....................................................................................69
8.17 Unrestricted Subsidiaries.............................................................................69
SECTION 9 EVENTS OF DEFAULT......................................................................................70
9.1 Events of Default.....................................................................................70
9.2 Application of Proceeds...............................................................................73
9.3 Disposition of Proceeds...............................................................................73
SECTION 10 THE AGENTS............................................................................................73
10.1 Appointment...........................................................................................73
10.2 Delegation of Duties..................................................................................74
10.3 Exculpatory Provisions................................................................................74
10.4 Reliance by Agents....................................................................................74
10.5 Notice of Default.....................................................................................75
10.6 Non-Reliance on Agents and Other Lenders..............................................................75
10.7 Indemnification.......................................................................................75
10.8 Agents in Their Individual Capacity...................................................................76
10.9 Successor Agents......................................................................................76
10.10 Enforcement of Loan Documents.........................................................................76
10.11 Issuing Bank..........................................................................................77
SECTION 11 MISCELLANEOUS.........................................................................................77
11.1 Amendments and Waivers................................................................................77
11.2 Notices...............................................................................................78
11.3 No Waiver; Cumulative Remedies........................................................................79
11.4 Survival of Representations and Warranties............................................................79
11.5 Payment of Expenses and Taxes.........................................................................79
11.6 Successors and Assigns................................................................................80
11.7 Adjustments; Set-off..................................................................................83
11.8 Counterparts..........................................................................................83
11.9 Severability..........................................................................................83
11.10 Integration...........................................................................................84
11.11 GOVERNING LAW.........................................................................................84
11.12 Submission To Jurisdiction; Waivers...................................................................84
11.13 Acknowledgments.......................................................................................84
11.14 WAIVERS OF JURY TRIAL.................................................................................85
11.15 Confidentiality.......................................................................................85
11.16 Letters of Credit Under Existing Credit Facility......................................................85
</Table>
iii
EXHIBITS AND SCHEDULES
Exhibit A - form of Promissory Note
Exhibit B-1 - form of Pledge Agreement
Exhibit B-2 - form of Subsidiary Guarantee
Exhibit C - form of Mortgage
Exhibit C-1 - form of Local Counsel Opinion
Exhibit D - form of Borrowing Certificate
Exhibit E - form of Assignment and Acceptance
Exhibit F - form of Non-U.S. Lender Statement
Schedule 1.1(a) - Lender Commitments
Schedule 1.1(b) - Approved Counterparties
Schedule 5.1 - Material Liabilities
Schedule 5.2 - Restricted Payments
Schedule 5.15 - List of Unrestricted Subsidiaries
Schedule 5.20 - Future Commitments
Schedule 5.21 - Filing Offices
Schedule 8.2(e) - Indebtedness
Schedule 8.3 - Liens
Schedule 8.4 - Guarantee Obligations
Schedule 8.8 - Investments
Schedule 8.10 - Transactions with Affiliates
Schedule 11.2 - Notices
Schedule 11.16 - Assumed Letters of Credit
iv
CREDIT AGREEMENT, dated as of December 17, 2002, is among WESTPORT
RESOURCES CORPORATION, a Nevada corporation (the "Borrower"), the several banks,
financial institutions and other entities from time to time parties to this
Agreement (the "Lenders"), CREDIT SUISSE FIRST BOSTON, CAYMAN ISLAND BRANCH, as
syndication agent for the Lenders (in such capacity, the "Syndication Agent"),
each of FLEET NATIONAL BANK, FORTIS CAPITAL CORP. and U.S. BANK NATIONAL
ASSOCIATION, as a documentation agent for the Lenders (in such capacity, the
"Documentation Agents"), WACHOVIA BANK, NATIONAL ASSOCIATION, as senior managing
agent (in such capacity, the "Senior Managing Agent"), each of BMO NESBITT BURNS
FINANCING, INC. and WELLS FARGO BANK, N.A., as a managing agent (in such
capacity, the "Managing Agent"), and JPMORGAN CHASE BANK, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent") and Issuing
Bank.
RECITALS
A. The Borrower has requested that the Lenders, and the Lenders have
agreed to, make certain loans to and make credit available on behalf of the
Borrower and the Restricted Subsidiaries on the terms and conditions set forth
herein.
B. Now, therefore, in consideration of the above premises and the
mutual covenants hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Acquisition": the acquisition of certain oil, gas and mineral
properties pursuant to the terms and conditions of the Acquisition Documents.
"Acquisition Documents": (i) the Purchase and Sale Agreement among El
Paso Production Oil & Gas Company, El Paso Drilling Company, El Paso Oil & Gas
Resources Company, L.P., El Paso Production Oil & Gas USA, L.P., El Paso Field
Operators Company, CIG Field Services Company and Noric, L.P., as Seller and
Borrower, as Buyer dated November 6, 2002, as amended by first and second
amendments each dated as of June 1, 2002, and (ii) all bills of sale,
assignments, agreements, instruments and documents executed and delivered in
connection therewith as amended.
"Acquisition Properties": shall mean the Oil and Gas Properties and
other properties acquired or to be acquired by the Borrower or any Guarantor
pursuant to the Acquisition Documents.
"Administrative Agent": as defined in the preamble to this Agreement.
"Administrative Questionnaire": an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors (or persons performing similar functions) of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise; provided that no Person shall be deemed to be
an Affiliate of a Person solely by virtue of being a director of such Person.
"Agents": the collective reference to the Syndication Agent, the
Documentation Agents and the Administrative Agent; and for purposes of Section
10 and subsections 11.5 and 11.15, shall include the Senior Managing Agent and
the Managing Agents.
"Aggregate Commitments": a collective reference to the aggregate
Commitments of all Lenders.
"Aggregate Exposure": as to any Lender at any time, an amount equal to
the sum of (a) the aggregate principal amount of all Loans made by such Lender
then outstanding and (b) such Lender's Commitment Percentage of the Letter of
Credit Outstandings at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Margin": for any day with respect to any Type of Loan, the
applicable per annum rate set forth below in the column for such Type of Loan
and opposite the Total Debt Leverage Ratio in effect on such day:
At all times when Borrower's senior unsecured long-term debt rating is
BBB- or better by S&P and Baa3 or better by Moody's:
<Table>
<Caption>
TOTAL DEBT LEVERAGE RATIO
Type of Loan <2.0 2.0< or = to x <3.0 > or = to 3.0
- ------------ ----- ------------------- -------------
ABR Loans 0.0% 0.0% 0.0%
Eurodollar Loans 1.0% 1.125% 1.25%
Commitment Fee Rate 0.25% 0.25% 0.25%
</Table>
At all other times when Borrower's senior unsecured long-term debt
rating is BB+ or better by S&P and Ba1 or better by Moody's:
<Table>
<Caption>
TOTAL DEBT LEVERAGE RATIO
Type of Loan <2.0 2.0 < or = to x <3.0 > or = to 3.0
- ------------ ------ -------------------- -------------
ABR Loans 0.0% 0.125% 0.375%
Eurodollar Loans 1.250% 1.375% 1.500%
Commitment Fee Rate 0.375% 0.375% 0.375%
</Table>
2
At all times when Borrower's senior unsecured long-term debt rating is
BB or lower (or there is no rating) by S&P or Ba2 or lower (or there is no
rating) by Moody's:
<Table>
<Caption>
TOTAL DEBT LEVERAGE RATIO
Type of Loan <2.0 2.0< or = to x <3.0 > or = to 3.0
- ------------ ------ ------------------- -------------
ABR Loans 0.125% 0.375% 0.625%
Eurodollar Loans 1.375% 1.625% 1.875%
Commitment Fee Rate 0.500% 0.500% 0.500%
</Table>
For the period from the Closing Date until delivery of financial
statements for the fiscal period ending December 31, 2002, the Applicable Margin
and Commitment Fee Rate will be based upon the relevant senior unsecured
long-term debt rating and a Total Debt Leverage Ratio of greater than or equal
to 3.0.
For purposes of the foregoing, (a) if the Borrower's senior unsecured
long-term debt ratings established by Moody's and S&P shall fall within
different levels, the applicable level shall be based on the lower of the two
ratings; (b) if the Borrower's senior unsecured long-term debt rating
established by Moody's and S&P shall be changed (other than as a result of a
change in the rating system of Moody's or S&P), such change shall be effective
as of the date on which it is first announced by the applicable rating agency,
irrespective of when notice of such change shall have been furnished by Borrower
to the Administrative Agent and the Lenders or otherwise; and (c) any change in
the Applicable Margin and Commitment Fee Rate will occur automatically without
prior notice upon any change in the Total Debt Leverage Ratio. Each change in
the Applicable Margin and Commitment Fee Rate shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change to the
Applicable Margin and Commitment Fee Rate.
"Approved Counterparty": (i) any Lender or any Affiliate of a Lender,
(ii) any other Person whose long term senior unsecured long-term debt rating is
A-/A3 by S&P or Moody's (or their equivalent) or higher or (iii) with regard to
Hedging Agreements in respect of commodities and subject to the conditions set
forth therein, any other Person listed on Schedule 1.1(b).
"Approved Fund": (a) a CLO and (b) with respect to any Lender that is a
fund which invests in bank loans and similar extensions of credit, any other
fund that invests in bank loans and similar extensions of credit and is managed
by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.
"Arrangers": J.P. Morgan Securities Inc. and Credit Suisse First Boston
and their successors.
3
"Assignee": as defined in subsection 11.6(b).
"Assignment and Acceptance": an assignment and acceptance in
substantially the form of Exhibit E, duly completed and executed by the parties
thereto.
"Available Commitment": as to any Lender at any time, an amount equal
to the excess, if any, of (a) such Lender's Commitment or, if the Borrowing Base
is then in effect, an amount equal to the lesser of (i) such Lender's Commitment
or (ii) such Lender's Commitment Percentage of the then effective Borrowing Base
over (b) such Lender's Aggregate Exposure.
"Base CD Rate": the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b) the C/D
Assessment Rate.
"Board": the Board of Governors of the Federal Reserve System of the
United States.
"Borrower": as defined in the recitals to this Agreement.
"Borrowing Base": at any time of determination, the amount then in
effect as determined in accordance with subsection 4.9.
"Borrowing Base Deficiency": as defined in subsection 4.10.
"Borrowing Base Period": (a) initially, the period commencing on the
Closing Date and ending on the next succeeding Redetermination Date and (b)
thereafter, each period commencing on the day after the last day of the
immediately preceding Borrowing Base Period (or if no Borrowing Base had
previously been in effect, the day on which a new Borrowing Base becomes
effective in accordance with subsection 4.9 following either the Borrower's
election to have availability under this Agreement governed by a borrowing base
or a change in the Borrower's senior unsecured long-term debt rating) and ending
on the next succeeding Redetermination Date.
"Borrowing Date": any Business Day specified in a notice pursuant to
subsection 2.2 or 3.2 as a date on which the Borrower requests the Lenders to
make Loans or the Issuing Bank to issue a Letter of Credit hereunder.
"Business Day": any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in Dollar deposits in the London interbank market.
"Capital Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation and any and
all equivalent ownership interests in a limited liability company, partnership,
joint venture or other Person (other than a corporation).
"Cash Equivalents": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States government or any agency
4
thereof, (b) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank (i) having capital and surplus
in excess of $500,000,000 or (ii) which has a short-term commercial paper rating
which satisfies the requirements set forth in clause (d) below, (c) repurchase
obligations of any Lender or of any commercial bank satisfying the requirements
of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued, fully guaranteed or insured by the United States
government or any agency thereof, (d) commercial paper of a domestic issuer
rated at least A-2 by S&P or P-2 by Moody's, (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition or (g) shares of money market
mutual or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member of the
Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the
"FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any successor)
for the FDIC's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board as in effect
from time to time) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Change of Control": the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of the
Borrower and its Subsidiaries taken as a whole to any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or group of related persons
(a "Group");
(ii) the consummation of any transaction (including, without
limitation, any purchase, sale, acquisition, disposition, merger or
consolidation) the result of which is that any "person" (as defined
above) or Group, other than one or more Designated Persons, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act) of more than 40% of the aggregate voting
power of all classes of Capital Stock of the Borrower having the right
to elect directors under ordinary circumstances;
(iii) the adoption of a plan relating to the liquidation or
dissolution of the Borrower; and
5
(iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of directors
of the Borrower (together with any new directors whose election by such
board of directors or whose nomination for election by the shareholders
of the Borrower was approved by a vote of a majority of the directors
of the Borrower then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the board of directors then in office.
"CLO": any entity (whether a corporation, partnership, trust or
otherwise) that is engaged in making, purchasing, holding or otherwise investing
in bank loans and similar extensions of credit in the ordinary course of its
business and is administered or managed by a Lender or an Affiliate of such
Lender.
"Closing Date": the date on which the conditions precedent set forth in
subsection 6.1 shall have been satisfied or waived by all Lenders.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment": as to any Lender, the obligation of such Lender to make
Loans to the Borrower hereunder and participate in Letters of Credit in an
aggregate principal amount at any one time outstanding not to exceed the lesser
of (i) the amount set forth opposite such Lender's name on Schedule 1.1(a), as
such amount may be changed from time to time in accordance with the provisions
of this Agreement and (ii) if a borrowing base is then in effect, such Lender's
Commitment Percentage of the then effective Borrowing Base.
"Commitment Fee Rate": for any day, the applicable per annum rate set
forth above under the definition of Applicable Margin.
"Commitment Percentage": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the Aggregate Commitments
(or, at any time after the Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Lender's Loans then
outstanding constitutes of the aggregate principal amount of the Loans then
outstanding).
"Commitment Period": the period from and including the Closing Date to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commodity Price Risk Management Agreement": a commodity price risk
management or purchase agreement or similar arrangement.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Consolidated EBITDAX": with respect to the Borrower, for any period,
Consolidated Net Income for that period, plus (a) to the extent deducted from
revenues in determining Consolidated Net Income for that period, (i) the
aggregate amount of Consolidated Interest Expense for that period,
6
(ii) the aggregate amount of letter of credit fees paid during that period,
(iii) the aggregate amount of income tax expense for that period and (iv) all
amounts attributable to depreciation, depletion, exploration, amortization and
other non-cash charges and expenses for that period, minus (b) to the extent
included in revenues in determining Consolidated Net Income for that period, all
non-cash extraordinary income during that period, in each case determined on a
consolidated basis in accordance with GAAP and without duplication of amounts.
For the purposes of calculating Consolidated EBITDAX for any period of
four consecutive fiscal quarters (each, a "Reference Period") pursuant to any
determination of the covenants set forth in subsection 8.1 and the Total Debt
Leverage Ratio for purposes of determining the Applicable Margin and Commitment
Fee Rate, (i) if at any time after the first day of such Reference Period the
Borrower or any Restricted Subsidiary shall have made any Material Disposition,
the Consolidated EBITDAX for such Reference Period shall be reduced by an amount
equal to the Consolidated EBITDAX (if positive) attributable to the Property
that is the subject of such Material Disposition for such Reference Period and
(ii) if at any time after the first day of such Reference Period the Borrower or
any Restricted Subsidiary shall have made a Material Acquisition, Consolidated
EBITDAX for such Reference Period shall be calculated after giving pro forma
effect thereto as if such Material Acquisition occurred on the first day of such
Reference Period.
"Consolidated Interest Expense": with respect to the Borrower and its
Restricted Subsidiaries on a consolidated basis for any period, the sum of (i)
gross interest expense (including all cash and accrued interest expense) of the
Borrower and its Restricted Subsidiaries for such period on a consolidated
basis, including to the extent included in interest expense in accordance with
GAAP (x) the amortization of debt discounts and (y) the portion of any payments
or accruals with respect to Capital Leases allocable to interest expense and
(ii) capitalized interest of the Borrower and its Restricted Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income": for any period, net income of the Borrower
and its Restricted Subsidiaries determined on a consolidated basis in accordance
with GAAP, provided that "Consolidated Net Income" shall not include (without
duplication) any (i) non-cash gains, losses or charges under FAS 133 resulting
from the net change in value of the Borrower's (or any Restricted Subsidiary's)
mark-to-market portfolio of commodity price risk management activities for that
period, (ii) any extraordinary or nonrecurring gain or loss together with any
related provision for taxes on such extraordinary or nonrecurring gain or loss
and (iii) all non-cash extraordinary expenses.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CSFB": Credit Suisse First Boston, Cayman Island Branch.
"Default": any of the events specified in Section 9, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Designated Persons": (1) Robert A. Belfer, Renee E. Belfer, Laurence
D. Belfer, Jack Saltz, Richard J. Haas, Robert A. Haas, Eugen von Liechtenstien
and Graham Garner, (2) The Robert A. and Renee E. Belfer Family Foundation,
Saltz Investment Group LLC, Westport Energy LLC and ERI Investments, Inc., (3)
the direct and indirect beneficial owners of the Persons described in clause
(2), (4) the spouses or descendants of such individuals described or listed
above, (5) the estates or
7
legal representatives of the individuals described or listed above, (6) trusts
created for the benefit of such Persons and (7) entities directly or indirectly
owned by any of the preceding Persons.
"Disqualified Stock": any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than Capital Stock, pursuant to a sinking
fund obligation or otherwise, is convertible or is exchangeable for Indebtedness
or Disqualified Stock or redeemable for any consideration other than Capital
Stock at the option of the holder thereof, in whole or in part on or prior to
the date that is ninety-one days after the earlier of (x) the Termination Date
or (y) the date on which there are no Loans, Reimbursement Obligations or other
obligations hereunder outstanding and the Aggregate Commitments are terminated.
"Documentation Agents": as defined in the preamble to this Agreement.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": any Restricted Subsidiary organized under the
laws of any jurisdiction within the United States of America (including
territories thereof).
"EBITDAX": with respect to any Unrestricted Subsidiary shall have the
same meaning as Consolidated EBITDAX, except as the determination of such
applies (including all definitions) to such Unrestricted Subsidiary, mutatis
mutandis, and not the Borrower.
"Environmental Laws": with respect to any Person, any and all laws,
rules, orders, regulations, statutes, ordinances, codes, decrees, or other
legally enforceable requirement (including, without limitation, common law) of
any foreign government, the United States, or any state, local, municipal or
other Governmental Authority, having jurisdiction over such Person or its
Properties and regulating, relating to or imposing liability or standards of
conduct concerning protection of the environment or of human health, as has
been, is now, or may at any time hereafter be, in effect.
"Environmental Permits": any and all permits, licenses, registrations,
notifications, approvals, exemptions and any other authorization required under
any Environmental Law.
"Equity Interests": Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a member bank of the
Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate per
annum for Dollar deposits with a maturity comparable to such Interest Period
which appears on the Telerate British Bankers Assoc. Interest
8
Settlement Rates Page at approximately 10:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period; provided that if there
shall no longer exist a Telerate British Bankers Assoc. Interest Settlement
Rates Page (or such page is not available on the relevant Business Day), the
Eurodollar Base Rate shall mean an interest rate per annum equal to the average
(rounded upward, if necessary, to the next 1/100th of 1%) of the respective
rates per annum notified to the Administrative Agent by each of the Reference
Banks as the average of the rates at which Dollar deposits (in an amount
comparable to the amount of JPMorgan's Eurodollar Loan to be outstanding during
such Interest Period and for a maturity comparable to such Interest Period) are
offered to such Reference Bank in immediately available funds by prime banks in
the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period. "Telerate
British Bankers Assoc. Interest Settlement Rates Page" shall mean the display
designated as Page 3750 on Teleratesystem Incorporated (or such other
replacement page thereof used to display London interbank offered rates of major
banks).
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Existing Credit Facility": the Credit Agreement dated as of August 21,
2002 among the Borrower, the Administrative Agent and others as lenders and
agents as amended, supplemented or waived.
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it in good
faith.
"Foreign Subsidiary": any Restricted Subsidiary which is organized and
existing under the laws of any jurisdiction outside of the United States of
America.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time; provided that for purposes of
determining compliance with the covenants contained in Section 8, "GAAP" shall
mean generally accepted accounting principles in the United States of America as
in effect on the date hereof and applied on a basis consistent with the
application used in the financial statements referred to in subsection 5.1;
provided further that if changes are made to or required by GAAP which
materially alter the calculations required under subsection 8.1 hereof, the
Borrower may request that the Administrative Agent and the Required Lenders
amend such subsection to reflect such changes in GAAP and to apply such new
accounting
9
principles in the preparation of its subsequent financial statements and the
parties hereto agree to negotiate in good faith to amend such subsections to
equitably reflect such changes with the desired result that the criteria for
evaluating the Borrower's financial condition shall be the same after such
amendment shall have been executed.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, and any securities exchange or self-regulatory
organization.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantors": each of the Restricted Subsidiaries which is a party to
the Subsidiary Guarantee on the Closing Date or which becomes a party thereto
pursuant to subsection 7.9(c), in each case unless and until released in
accordance with the terms hereof or thereof.
"Hedging Agreement": any Interest Rate Protection Agreement, Commodity
Price Risk Management Agreement, foreign currency exchange agreement, commodity
price protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement.
"Hydrocarbon Interests": all rights, titles, interests and estates now
owned or hereafter acquired in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee or lease
interests, farm-outs, overriding royalty and royalty interests, net profit
interests, oil payments, production payment interests and similar mineral
interests, including any reserved or residual interest of whatever nature.
10
"Hydrocarbons": oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons, all products refined, separated,
settled and dehydrated therefrom and all products refined therefrom, including,
without limitation, kerosene, liquefied petroleum gas, refined lubricating oils,
diesel fuel, drip gasoline, natural gasoline, helium, sulfur and all other
minerals.
"Indebtedness": of any Person at any date (without duplication) (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices and accrued current liabilities incurred in the ordinary course of
business), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under Capital Leases, (d) all obligations of such Person in respect of letters
of credit and acceptances issued or created for the account of such Person, (e)
all obligations of such Person under Hedging Agreements, (f) all obligations of
others of the type referred to in clauses (a) through (e) above and which are
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof, except that
the amount of any nonrecourse obligation shall be deemed to be the lesser of the
value of the property securing such obligation and the amount of such obligation
so secured and (g) all Guarantee Obligations with respect to the items described
in clauses (a) through (e) above; provided that, for purposes of calculating the
covenants set forth in subsection 8.1 and the Total Debt Leverage Ratio for
purposes of determining the Applicable Margin and the Commitment Fee Rate,
"Indebtedness" shall exclude obligations of the type referred to in clause (e)
above; and provided further that any application of FAS 133 which would have the
effect of increasing or decreasing the principal amount of any obligation for
borrowed money or other indebtedness under clauses (a) or (b) shall be
disregarded.
"indemnified liabilities": subsection 11.5.
"Indemnitee": subsection 11.5.
"Initial Reserve Report": (i) the Reserve Reports of the Borrower dated
as of July 19, 2002 and October 1, 2002 evaluating certain Oil and Gas
Properties of the Borrower and the Guarantors as of July 1, 2002 and October 1,
2002, respectively, (ii) the Reserve Report of Ryder Scott Company, L.P. dated
January 29, 2002 evaluating certain Oil and Gas Properties of the Borrower and
the Guarantors as of December 31, 2001, and (iii) the Reserve Report of the
Borrower of the Acquisition Properties dated November 25, 2002, which report was
audited by Ryder Scott Company, L.P., evaluating the Acquisition Properties as
of October 1, 2002.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 5.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December, commencing December 31, 2002, and the
Termination Date, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (c) as to any
Eurodollar Loan having an Interest Period longer than three months, each
11
day which is three months, or a whole multiple thereof, after the first day of
such Interest Period and the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six (or, to the extent available to
all Lenders, nine or twelve) months thereafter, as selected by the
Borrower in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six (or, to the extent available to all
Lenders, nine or twelve) months thereafter, as selected by the Borrower
by irrevocable notice to the Administrative Agent not later than 11:00
a.m. New York City time on the date that is three Business Days prior
to the last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(3) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Interest Rate Protection Agreement": an interest rate swap, cap or
collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.
"Investments": as defined in subsection 8.8.
"Issuing Bank": JPMorgan or any of its respective Affiliates, in its
capacity as issuer of a Letter of Credit hereunder.
"JPMorgan": JPMorgan Chase Bank.
"L/C Application": as defined in subsection 3.2.
"L/C Commitment": the Issuing Bank's obligation to issue Letters of
Credit pursuant to Section 3 of this Agreement.
"Lenders": as defined in the preamble to this Agreement.
12
"Letter of Credit Outstandings": at any time, the sum of (a) the
aggregate amount available for drawing under Letters of Credit then outstanding
and (b) the aggregate amount of Reimbursement Obligations at such time.
"Letters of Credit": as defined in subsection 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
"Loan": as defined in subsection 2.1(a).
"Loan Documents": this Agreement, the Notes, the Pledge Agreement, the
Subsidiary Guarantee, the L/C Applications, and, if applicable, the Mortgages.
"Loan Parties": the Borrower, the Guarantors and the Pledgors.
"Managing Agents": as defined in the preamble to this Agreement.
"Material Acquisition": any acquisition of Property or series of
related acquisitions of Property that involves the payment of consideration
(including, without limitation, the issuance of Equity Interests of the
Borrower) by the Borrower and its Restricted Subsidiaries in excess of
$25,000,000.
"Material Adverse Effect": a material adverse effect on (a) the
business, assets, property, condition (financial or otherwise) or prospects of
the Borrower and its Restricted Subsidiaries taken as a whole, (b) the ability
of the Loan Parties to perform their material obligations under the Loan
Documents taken as a whole or (c) the validity or enforceability of this or any
of the other Loan Documents or the rights and remedies of the Administrative
Agent and the Lenders hereunder or thereunder.
"Material Disposition": any sale, transfer or other disposition of
Property or series of related sales, transfers or other dispositions of Property
that yields gross proceeds to the Borrower or any Restricted Subsidiaries in
excess of $25,000,000.
"Material Domestic Subsidiary": as of any date, any Domestic Subsidiary
(i) that is a Wholly-Owned Restricted Subsidiary and (ii) that, together with
its Restricted Subsidiaries, owns assets having a fair market value of
$5,000,000 or more.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials, or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation, asbestos
or asbestos containing material, polychlorinated biphenyls, urea-formaldehyde
insulation, and any other substance that is regulated pursuant to or could give
rise to liability under any Environmental Law.
"Moody's": Moody's Investors Service, Inc.
13
"Mortgage": as defined in subsection 7.14.
"Mortgaged Property": as defined in subsection 7.14.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"97 Indenture": the Indenture, dated as of September 23, 1997, by and
among the Borrower (formerly known as Belco Oil & Gas Corp.), the subsidiary
guarantors parties thereto and The Bank of New York, as trustee, pursuant to
which the 97 Senior Subordinated Notes were issued, as supplemented by the
Supplemental Indenture dated as of February 25, 1998, the Second Supplemental
Indenture dated as of August 21, 2001, the Third Supplemental Indenture dated as
of December 31, 2001 and the Fourth Supplemental Indenture dated as of December
17, 2002.
"97 Senior Subordinated Notes": the 8-7/8% senior subordinated notes of
the Borrower (formerly known as Belco Oil & Gas Corp.) due 2007, issued pursuant
to the 97 Indenture.
"Non-Excluded Taxes": as defined in subsection 4.13(a).
"Non-Recourse Debt": Indebtedness (i) as to which neither the Borrower
nor any of its Restricted Subsidiaries (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness), or (b) is directly or
indirectly liable (as guarantor or otherwise); (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time, or both) any holder of any other Indebtedness of the
Borrower or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) the explicit terms of which provide that
there is no recourse against any of the assets of the Borrower or its Restricted
Subsidiaries.
"Non-U.S. Lender": as defined in subsection 4.13(b).
"Note": as defined in subsection 2.3(e).
"01 Indenture": the Indenture dated as of November 5, 2001, by and
among the Borrower, the subsidiary guarantors from time to time parties thereto
and The Bank of New York, as trustee, pursuant to which the 01 Senior
Subordinated Notes and the 02 Senior Subordinated Notes were or will be issued,
as supplemented by the First Supplemental Indenture dated as of December 31,
2001 and the Second Supplemental Indenture dated as of December 17, 2002.
"01 Senior Subordinated Notes": the $275,000,000 8 1/4% senior
subordinated notes of the Borrower due 2011, issued pursuant to the 01 Indenture
on November 5, 2001.
"02 Senior Subordinated Notes": the additional 8 1/4% senior
subordinated notes of the Borrower due 2011, issued or to be issued pursuant to
the 01 Indenture prior to the initial redetermination of the Borrowing Base.
"Oil and Gas Business": (a) the acquisition, exploration, exploitation,
development, operation and disposition of interests in Oil and Gas Properties
and Hydrocarbons, including the acquisition, ownership and disposition of
interests in Persons engaged in the Oil and Gas Business;
14
(b) the gathering, marketing, treating, processing, storage, selling and
transporting of any production from such interests or Properties, including,
without limitation, the marketing of Hydrocarbons obtained from unrelated
Persons; (c) any business relating to or arising from exploration for or
development, production, treatment, processing, storage, transportation or
marketing of Hydrocarbons; (d) any business relating to oilfield sales and
service, and (e) any activity that is ancillary or necessary or desirable to
facilitate the activities described in clauses (a) through (d) of this
definition.
"Oil and Gas Properties": Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any Governmental Authority having jurisdiction)
which may affect all or any portion of the Hydrocarbon Interests; all pipelines,
gathering lines, compression facilities, tanks and processing plants; all
interests held in royalty trusts whether presently existing or hereafter
created; all Hydrocarbons in and under and which may be produced, saved,
processed or attributable to the Hydrocarbon Interests, the lands covered
thereby and all Hydrocarbons in pipelines, gathering lines, tanks and processing
plants and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above, including any and all real
property, now owned or hereafter acquired, used or held for use in connection
with the operating, working or development of any of such Hydrocarbon Interests
or Property and including any and all surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing; all oil, gas and
mineral leasehold and fee interests, all overriding royalty interests, mineral
interests, royalty interests, net profits interests, net revenue interests, oil
payments, production payments, carried interests and any and all other interests
in Hydrocarbons; in each case whether now owned or hereafter acquired directly
or indirectly.
"Participant": as defined in subsection 11.6(c).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Permitted Business Acquisition": the formation of a new Subsidiary or
any acquisition of all or substantially all the assets of, or of all Equity
Interests in, a Person or division or line of business of a Person, if: (a) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (b) such acquired or newly formed corporation, partnership,
association or other business entity shall be a Restricted Subsidiary and all of
the Equity Interests of such acquired or newly formed Person are owned directly
by the Borrower or a Domestic Wholly-Owned Restricted Subsidiary and all actions
required to be taken, if any, with respect to such acquired or newly formed
Subsidiary under subsection 7.9 shall have been taken, (c) the Borrower shall be
in compliance, on a pro forma basis after giving effect to such acquisition or
formation, with the covenants contained in subsection 8.1 recomputed as at the
last day of the most recently ended fiscal quarter of the Borrower as if such
acquisition had occurred on the first day of each relevant period for testing
such compliance, and the Borrower shall have delivered to the Administrative
Agent a certificate from a Responsible Officer to such effect, together with all
relevant financial information for such Person or assets and (d) any acquired or
newly formed Subsidiary shall not have (except for Indebtedness and Guarantee
Obligations permitted by subsections 8.2 and 8.4) any liabilities
15
(contingent or otherwise), including, without limitation, liabilities under
Environmental Laws and liabilities with respect to any Plan, that could
reasonably be expected to have a Material Adverse Effect and the Borrower shall
have delivered to the Administrative Agent a certificate, signed by a
Responsible Officer, that to the best of such officer's knowledge, no such
liabilities exist.
"Permitted Business Investments": investments made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil
and Gas Business as a means of actively exploiting, exploring for, acquiring,
developing, processing, gathering, marketing, storing, treating, selling or
transporting oil and gas through agreements, transactions, interests or
arrangements which permit one to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of Oil and Gas Business jointly with third parties,
including, without limitation, the entry into or acquisition of operating
agreements, working interests, royalty interests, mineral leases, processing
agreements, farm-out and farm-in agreements, division orders, contracts for the
sale, transportation or exchange of oil or natural gas, unitization and pooling
declarations and agreements and area of mutual interest agreements, production
sharing agreements or other similar or customary agreements, transactions,
properties, interests, and investments and expenditures in connection therewith;
provided that an investment in Equity Interests in a Person shall not constitute
a Permitted Business Investment.
"Permitted Subordinated Refinancing Debt": Indebtedness of the Borrower
(and Guarantee Obligations of the Guarantors in respect thereof) issued in
exchange for, or the net proceeds of which are used to refinance, replace,
defease or refund, any Subordinated Indebtedness; provided that (a) the
principal amount of such Permitted Subordinated Refinancing Debt does not exceed
the principal amount (or accreted value, if applicable) of the Subordinated
Indebtedness so refinanced, replaced, defeased or refunded, plus the amount of
premiums, prepayment penalties and other amounts required to be paid in
connection therewith and the reasonable and customary fees and expenses incurred
in connection therewith, (b) the subordination provisions in such Permitted
Subordinated Refinancing Debt are either (i) no less favorable to the Lenders
than the subordination provisions contained in the Subordinated Indebtedness
being refinanced, replaced, defeased or refunded or (ii) substantially identical
to the subordination provisions contained in the 97 Indenture or the 01
Indenture, (c) the interest rate on such Permitted Subordinated Refinancing Debt
is no higher than the interest rate on the Subordinated Indebtedness being
refinanced, replaced, defeased or refunded, and (d) the timing and amounts of
principal repayments (including any sinking fund therefor) on, and final
maturity of, such Permitted Subordinated Refinancing Debt are no sooner and
greater, respectively, than the timing and amounts of principal repayments
under, and final maturity of, the Subordinated Indebtedness being refinanced,
replaced, defeased or refunded.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
subject to Title IV of ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement": the Pledge Agreement, to be executed and delivered
on the date hereof by each of the Pledgors, substantially in the form of Exhibit
B-1, as amended, modified or supplemented from time to time pursuant to
subsection 7.9 or otherwise.
16
"Pledged Securities": as defined in the Pledge Agreement.
"Pledged Stock": as defined in the Pledge Agreement.
"Pledgors": the Borrower and each of its Restricted Subsidiaries which
is a party to the Pledge Agreement on the Closing Date or which becomes a party
to a pledge agreement pursuant to subsection 7.9, in each case unless and until
released in accordance with the terms hereof or thereof.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by JPMorgan as its prime rate in effect at its principal office in
New York City (the Prime Rate not being intended to be the lowest rate of
interest charged by JPMorgan in connection with extensions of credit to
debtors).
"Properties": any kind of facility, fixture, property or asset, whether
real, personal or mixed, or tangible or intangible owned, leased or operated by
the Borrower or any Restricted Subsidiary.
"Proved Reserves": the estimated quantities of crude oil, condensate,
natural gas and natural gas liquids that adequate geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from proved reservoirs under existing economic and operating conditions (i.e.,
prices and costs as of the date the estimate is made).
"PV": as of any April 30 or October 31, the calculation of the present
value of future cash flows from Proved Reserves utilizing, at the Borrower's
discretion, either (i) the average of the Agents' customary discount rate and
price deck as of such date or (ii) the average of the five-year strip for crude
oil (WTI) and natural gas (Henry Hub), in each case quoted on the New York
Mercantile Exchange (or its successor), as of such date of determination and a
10% discount rate from the Oil and Gas Properties comprising the Borrowing Base
(as adjusted for basis differentials) based upon the most recently delivered
Reserve Report. For purposes of calculating the PV, a minimum of 70% of the PV
value will be required to be contributed by proved developed producing reserves
and the PV under either clauses (i) or (ii) shall be adjusted to give effect to
the Borrower's Commodity Price Risk Management Agreements then in effect. PV as
of any date other than April 30 or October 31 shall mean the PV as of the most
recent April 30 or October 31.
"Redetermination Date": each date that the redetermined Borrowing Base
becomes effective subject to the notice requirements specified in subsection
4.9.
"Redetermination Notice": a notice from the Borrower or the
Administrative Agent under subsection 4.9(d) to the other party requesting that
the Agents and the Supermajority Lenders redetermine the Borrowing Base.
"Reference Banks": four major banks in the London interbank market
selected by the Administrative Agent in good faith.
"Register": as defined in subsection 11.6(b)(iv).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligations": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.5 for amounts drawn under
Letters of Credit issued by the Issuing Bank in accordance with the terms of
this Agreement and the related L/C Applications.
17
"Related Parties": with respect to any specified Person, such Person's
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person's Affiliates.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under regulations issued by the PBGC.
"Required Lenders": at any time, Lenders the Commitment Percentages of
which aggregate greater than 50%.
"Requirement of Law": as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Report": a report prepared by the Borrower in form and with
attachments consistent with the Initial Reserve Report with respect to the Oil
and Gas Properties of the Borrower and the Restricted Subsidiaries and, for any
reserve report dated as of January 1, audited by Miller & Lents, Ltd., Ryder
Scott Company, Netherland, Sewell & Associates, Inc. or another independent
engineering firm selected by the Borrower and reasonably acceptable to the
Administrative Agent. Each Reserve Report shall be certified as materially
accurate by a Responsible Officer of the Borrower.
"Responsible Officer": of any Loan Party, the chief executive officer,
the president or any vice president of such Loan Party or, with respect to
financial matters, the chief financial officer or treasurer of such Loan Party
and, in either case, any other officer having substantially similar authority.
"Restricted Payments": as defined in subsection 8.7.
"Restricted Subsidiaries": the collective reference to any direct or
indirect Subsidiary of the Borrower that is not an Unrestricted Subsidiary under
this Agreement.
"S&P": Standard and Poor's Ratings Group.
"Senior Debt": as of any date of determination, all Indebtedness other
than Subordinated Indebtedness of the Borrower and the Restricted Subsidiaries
on a consolidated basis.
"Senior Managing Agent": as defined in the preamble to this Agreement.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Solvent": with respect to any Person at any time, a condition under
which (a) the fair saleable value of such Person's assets is, on the date of
determination, greater than the total amount of such Person's liabilities
(including contingent and unliquidated liabilities) at such time and
18
(b) such Person is able to pay all of its liabilities as such liabilities
mature. For purposes of this definition: (i) the amount of a Person's contingent
or unliquidated liabilities at any time shall be that amount which, in light of
all the facts and circumstances then existing, represents the amount which can
reasonably be expected to become an actual or matured liability, (ii) the "fair
saleable value" of an asset shall be the amount which may be realized within a
reasonable time either through collection or sale of such asset at its regular
market value and (iii) the "regular market value" of an asset shall be the
amount which a capable and diligent business person could obtain for such asset
from an interested buyer who is willing to purchase such asset under ordinary
selling conditions.
"Subordinated Indebtedness": the 97 Senior Subordinated Notes, the 01
Senior Subordinated Notes, the 02 Senior Subordinated Notes, any other
Indebtedness of the Borrower contractually subordinated to the prior payment in
full of the Loans, Reimbursement Obligations and any other obligations hereunder
either in a manner reasonably acceptable to the Required Lenders as evidenced by
their written approval or on terms substantially identical to those contained in
the 97 Indenture or the 01 Indenture and any Permitted Subordinated Refinancing
Debt in respect of any of the foregoing.
"Subordinated Note Documents": the collective reference to 97 Senior
Subordinated Notes, the 01 Senior Subordinated Notes, the 02 Senior Subordinated
Notes, the 97 Indenture, the 01 Indenture and each agreement, instrument and
document delivered in connection therewith or relating thereto or any other
Subordinated Indebtedness and any amendments, supplements or waivers thereof
permitted by subsection 8.9.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which more than 50% of the total voting
power of shares of stock or other equity ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to vote in the election
of directors, a managing general partner, or majority of general partners or
other managers or trustees thereof, is at the time owned or controlled, directly
or indirectly by such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof). Unless otherwise qualified, all references to
a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to any direct
or indirect Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantee": the Subsidiary Guarantee, to be executed and
delivered on the date hereof by each of the Guarantors, substantially in the
form of Exhibit B-2, as amended, modified or supplemented from time to time
pursuant to subsection 7.9 or otherwise.
"Supermajority Lenders": at any time, Lenders the Commitment
Percentages of which aggregate at least 66-2/3%.
"Syndication Agent": as defined in the preamble to this Agreement.
"Termination Date": December 16, 2006.
"Three-Month Secondary CD Rate": for any day, the secondary market rate
for three-month certificates of deposit reported as being in effect on such day
(or, if such day shall not be a Business Day, the next preceding Business Day)
by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or,
19
if such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day (or, if such day shall
not be a Business Day, on the next preceding Business Day) by the Administrative
Agent from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it in good faith.
"Total Debt": as of any date of determination, all Indebtedness of the
Borrower and the Restricted Subsidiaries on a consolidated basis.
"Total Debt Leverage Ratio": as of any date of determination, the ratio
of Total Debt as of such date of determination (including any Indebtedness
proposed to be incurred on such date of determination and the use of proceeds
thereof) to (b) Consolidated EBITDAX as of the last day of the most recently
ended period of four consecutive fiscal quarters preceding such date of
determination for which financial statements under subsection 7.1(a) or 7.1(b)
are available.
"Tranche": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Loans shall originally have been
made on the same day); Tranches may be identified as "Eurodollar Tranches".
"Transferee": as defined in subsection 11.6(d).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended, replaced or superceded from time to time.
"Unrestricted Subsidiary": (i) each Subsidiary listed on Schedule 5.15
hereof and designated an "Unrestricted Subsidiary", so long as such Subsidiary
satisfies the requirements of an Unrestricted Subsidiary set forth in the
proviso below, (ii) any Subsidiary of the Borrower which at the time of
determination shall be an Unrestricted Subsidiary (as designated by the board of
directors of the Borrower, as provided below) and (iii) any Subsidiary of an
Unrestricted Subsidiary; provided, that the board of directors of the Borrower
may designate any Subsidiary of the Borrower (including any newly acquired or
newly formed Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary or the
Borrower may designate a Subsidiary as an Unrestricted Subsidiary on Schedule
5.15 hereof only if (a) such Subsidiary does not own or hold any Lien on any
Property of any other Subsidiary of the Borrower which is not a Subsidiary of
the Subsidiary to be so designated an "Unrestricted Subsidiary"; (b) all the
Indebtedness of such Subsidiary shall, at the date of designation, and will at
all times thereafter, consist of Non-Recourse Debt; (c) the Borrower certifies
that such designation complies with the limitations of the covenants contained
in subsection 8.8 and subsection 8.17; (d) such Subsidiary, either alone or in
the aggregate with all other Unrestricted Subsidiaries, does not operate,
directly or indirectly, all or substantially all of the business of the Borrower
and its Subsidiaries; (e) such Subsidiary does not, directly or indirectly, own
any Indebtedness of or Equity Interests in, and has no Investments in, the
Borrower or any Restricted Subsidiary; (f) such Subsidiary is a Person with
respect to which neither the Borrower nor any of its Restricted Subsidiaries has
any direct or indirect obligation to maintain or preserve such Person's
financial condition or to cause such Person to
20
achieve any specified levels of operating results; and (g) on the date such
Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding with the Borrower
or any Restricted Subsidiary with terms substantially less favorable to the
Borrower or such Restricted Subsidiary than those that might have been obtained
from Persons who are not Affiliates of the Borrower. After the Closing Date, any
such designation by the board of directors of the Borrower shall be evidenced to
the Administrative Agent by filing with the Administrative Agent a resolution of
the board of directors of the Borrower giving effect to such designation and a
certificate of a Responsible Officer certifying that such designation complied
with the foregoing conditions. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred
as of such date.
"Wholly-Owned Restricted Subsidiary": a Restricted Subsidiary of the
Borrower, all of the outstanding Equity Interests of which (other than
directors' qualifying shares) are owned, directly or indirectly, by the Borrower
or one or more other Wholly-Owned Restricted Subsidiaries of the Borrower.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in any Loan Document or any
certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in any Loan Document, and any certificate or
other document made or delivered pursuant hereto or thereto, accounting terms
relating to the Borrower or any Subsidiary not defined in subsection 1.1 and
accounting terms partly defined in subsection 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP. References in this
Agreement or any other Loan Document to financial statements shall be deemed to
include all related schedules and notes thereto.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) References in this Agreement or any other Loan Document to
knowledge of any Loan Party of events or circumstances shall be deemed to refer
to events or circumstances of which a Responsible Officer has actual knowledge
or through the use of reasonable and customary diligence should have had
knowledge.
(f) For purposes of this Agreement, references to the ratings of either
S&P or Moody's are the references to their ratings levels as in effect on the
date hereof. If the rating system of either Moody's or S&P shall change, or if
any such rating agency shall cease to be in the business of rating corporate
debt obligations, the Borrower and the Lenders shall negotiate in good faith to
amend the references in the definitions of this Agreement, including the
definitions of "Approved Counterparty"
21
and "Applicable Margin", and subsections 4.9(a), 7.14, 8.1, 8.7(c) and 8.9(a) to
reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Margin and Commitment Fee Rate and the rights and obligations of the
parties under such subsections shall be determined by reference to the rating
most recently in effect prior to such change or cessation.
SECTION 2
AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments.
(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans ("Loans") to the Borrower from
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the amount of such Lender's Commitment,
provided that no Lender shall make any Loans if the sum of such Lender's Loans
and Commitment Percentage of Letter of Credit Outstandings (in each case, after
giving effect to the Loans requested to be made and the Letters of Credit
requested to be issued on such date) exceeds (i) if the Borrowing Base is in
effect on the date such Loan is to be made, the lesser of (x) such Lender's
Commitment and (y) such Lender's Commitment Percentage of the Borrowing Base
then in effect or (ii) if the Borrowing Base is not in effect on the date such
Loan is to be made, such Lender's Commitment. During the Commitment Period, the
Borrower may use the Aggregate Commitments by borrowing, prepaying the Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) The Loans may from time to time be (i) Eurodollar Loans,
(ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with subsections 2.2, 4.3 or
4.4, provided that no Loan shall be made as a Eurodollar Loan after the day that
is one month prior to the Termination Date.
2.2 Procedure for Borrowing. The Borrower may borrow under the
Aggregate Commitments during the Commitment Period on any Business Day, provided
that the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 11:00 a.m., New
York City time, (a) three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Loans initially are to be Eurodollar Loans
or (b) on the requested Borrowing Date, otherwise), specifying (i) the amount to
be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Aggregate Commitments shall
be in an amount consistent with the requirements set forth in subsection 4.4.
Upon receipt of any such notice from the Borrower, the Administrative Agent
shall promptly notify each Lender thereof. Each Lender will make the amount of
its pro rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent specified
in subsection 11.2 prior to 12:00 (noon), New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
no later than 2:00 p.m. New York City time by the Administrative Agent crediting
the account of the Borrower on the books of such office with the aggregate of
the amounts made
22
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
2.3 Repayment of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan of such Lender on the Termination Date (or such earlier date
on which the Loans become due and payable pursuant to Section 9). The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the Closing Date to but not including
the date the Loans are paid in full at the rates per annum, and on the dates,
set forth in subsection 4.1.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing Indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(b)(iii), and a subaccount therein for each Lender,
in which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.3(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of the Administrative Agent or any Lender to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) On the Closing Date and on any later date on which an
assignment under subsection 11.6 occurs, the Borrower will execute and deliver
to each Lender a promissory note in an aggregate principal amount equal to the
Commitment of such Lender as then in effect, substantially in the form of
Exhibit A, with appropriate insertions as to date (each a "Note").
SECTION 3
LETTERS OF CREDIT
3.1 The L/C Commitment.
(a) Subject to the terms and conditions hereof, the Issuing
Bank, in reliance on the agreements of the other Lenders set forth in subsection
3.4, agrees to issue letters of credit ("Letters of Credit") for the account of
the Borrower or any Restricted Subsidiary on any Business Day during the
Commitment Period in such form as may be approved from time to time by the
Issuing Bank; provided that the Issuing Bank shall not issue any Letter of
Credit if, after giving effect to such issuance and after giving effect to any
Loans requested to be made or Letters of Credit
23
requested to be issued on such date: (i) the Letter of Credit Outstandings would
exceed $200,000,000 or (ii) the sum of the Loans and Letter of Credit
Outstandings would exceed (A) if the Borrowing Base is in effect on the date
such Letter of Credit is to be issued, the lesser of (x) the Aggregate
Commitments and (y) the Borrowing Base then in effect or (B) if the Borrowing
Base is not in effect on the date such Letter of Credit is to be issued, the
Aggregate Commitments.
Each Letter of Credit shall (i) be issued to support obligations of the
Borrower or any of its Restricted Subsidiaries, contingent or otherwise, which
finance the working capital and business needs of the Borrower and its
Restricted Subsidiaries, and (ii) expire no later than the earlier of (x) one
year after the date of issuance and (y) five Business Days prior to the
Termination Date, provided that any Letter of Credit with a one-year tenor may
provide for the extension thereof for additional one-year periods (which shall
in no event extend beyond the date referred to in clause (y) above). Each Letter
of Credit shall be denominated in Dollars.
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Bank shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any other Lender to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank and the Administrative Agent at their respective
addresses for notices specified herein a letter of credit application in the
Issuing Bank's then customary form (an "L/C Application") completed to the
satisfaction of the Issuing Bank and such other certificates, documents and
other papers and information as may be customary and as the Issuing Bank may
reasonably request. Upon receipt of any L/C Application, the Issuing Bank will
process such L/C Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and, upon receipt by the Issuing Bank of confirmation from
the Administrative Agent that issuance of such Letter of Credit will not
contravene subsection 3.1, the Issuing Bank shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the L/C Application therefor and all such other certificates, documents and
other papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Bank and the Borrower. The Issuing Bank shall furnish a copy of such
Letter of Credit to the Borrower and the Administrative Agent promptly following
the issuance thereof, and, thereafter, the Administrative Agent shall promptly
furnish a copy thereof to the Lenders.
3.3 Fees, Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for
the account of (i) the Issuing Bank and the Lenders, a letter of credit
commission with respect to each Letter of Credit, computed for the period from
the date such Letter of Credit is issued to the date upon which the next payment
is due under this subsection (and, thereafter, from the date of payment under
this subsection to the date upon which the next payment is due under this
subsection) at the rate per annum equal to the Applicable Margin in effect from
time to time for Eurodollar Loans of the daily aggregate amount available to be
drawn under such Letter of Credit for the period covered by clause (i) above
24
during such period, and (ii) the Issuing Bank, a letter of credit commission
with respect to each Letter of Credit in an amount equal to the greater of (A)
0.125% per annum of the stated amount of such Letter of Credit and (B) $500. The
letter of credit commissions payable pursuant to clause (i) above shall be
payable quarterly in arrears on the last day of each March, June, September and
December, commencing December 31, 2002, and on the Termination Date. The letter
of credit commissions payable pursuant to clause (ii) above shall be payable on
the date of issuance and on each anniversary of such date for so long as such
Letter of Credit is outstanding.
(b) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Bank for such normal and customary
costs and expenses as are incurred or charged by the Issuing Bank in issuing,
effecting payment under, amending, negotiating or otherwise administering any
Letter of Credit.
(c) The Administrative Agent shall, promptly following its
receipt thereof, distribute to the Issuing Bank and the Lenders all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.4 L/C Participations.
(a) Effective on the date of issuance of each Letter of
Credit, the Issuing Bank irrevocably agrees to grant and hereby grants to each
Lender, and each Lender irrevocably agrees to accept and purchase and hereby
accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such Lender's own account and risk an undivided interest
equal to such Lender's Commitment Percentage in the Issuing Bank's obligations
and rights under each Letter of Credit issued by the Issuing Bank and the amount
of each draft paid by the Issuing Bank thereunder. Each Lender unconditionally
and irrevocably agrees with the Issuing Bank that, if a draft is paid under any
Letter of Credit for which such Issuing Bank is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such Lender shall pay
to the Administrative Agent, for the account of the Issuing Bank, upon demand at
the Administrative Agent's address specified in subsection 11.2, an amount equal
to such Lender's Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed. On the date that any Assignee becomes a
Lender party to this Agreement in accordance with subsection 11.6, participating
interests in any outstanding Letters of Credit held by the transferor Lender
from which such Assignee acquired its interest hereunder shall be
proportionately reallocated between such Assignee and such transferor Lender.
Each Lender hereby agrees that its obligation to participate in each Letter of
Credit, and to pay or to reimburse the Issuing Bank for its participating share
of the drafts drawn or amounts otherwise paid thereunder, is absolute,
irrevocable and unconditional and shall not be affected by any circumstances
whatsoever (including, without limitation, the occurrence or continuance of any
Default or Event of Default), and that each such payment shall be made without
offset, abatement, withholding or other reduction whatsoever.
(b) If any amount required to be paid by any Lender to the
Issuing Bank pursuant to subsection 3.4(a) is paid to the Issuing Bank within
three Business Days after the date such payment is due, such Lender shall pay to
the Administrative Agent, for the account of the Issuing Bank, on demand, an
amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
draft is paid to the date on which such payment is immediately available to the
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any Lender pursuant to subsection 3.4(a) is
25
not in fact made available to the Administrative Agent, for the account of the
Issuing Bank, within three Business Days after the date such payment is due, the
Issuing Bank shall be entitled to recover from such Lender, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans hereunder. A certificate of the Issuing Bank submitted
to any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has paid a
draft under any Letter of Credit and has received from any Lender its pro rata
share of such payment in accordance with subsection 3.4(a), the Issuing Bank
receives any reimbursement on account of such unreimbursed portion, or any
payment of interest on account thereof, the Issuing Bank will pay to the
Administrative Agent, for the account of such Lender, its pro rata share
thereof; provided, however, that in the event that any such payment received by
the Issuing Bank shall be required to be returned by the Issuing Bank, such
Lender shall return to the Administrative Agent for the account of the Issuing
Bank, the portion thereof previously distributed to it.
3.5 Reimbursement Obligation of the Borrower. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Bank shall notify
the Borrower and the Administrative Agent of the date and the amount thereof.
The Borrower agrees to reimburse the Issuing Bank (whether with its own funds
or, subject to the limitations on amounts set forth in subsection 2.2, with
proceeds of the Loans) on each date on which the Issuing Bank pays a draft so
presented under any Letter of Credit for the amount of (i) such draft so paid
and (ii) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Bank in connection with such payment. Each such payment shall be made to
the Issuing Bank at its address for notices specified herein in lawful money of
the United States of America and in immediately available funds. Interest shall
be payable on any and all amounts remaining unpaid by the Borrower under this
subsection from the date of payment of the applicable draft until payment in
full thereof, (x) for the period commencing on the date of payment of the
applicable draft to the date which is three days thereafter, at the ABR plus the
Applicable Margin for ABR Loans and (y) thereafter, at the ABR plus the
Applicable Margin for ABR Loans plus 2%.
3.6 Obligations Absolute.
(a) The Borrower's obligations under this Section 3 shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Borrower or any other
Person may have or have had against the Issuing Bank or any other Lender or any
beneficiary of a Letter of Credit. The Borrower also agrees with the Issuing
Bank that the Issuing Bank shall not be responsible for, and the Borrower's
obligations under subsection 3.5 shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or any dispute between or among the Borrower and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of the Borrower against any beneficiary of such Letter
of Credit or any such transferee. The Issuing Bank shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Letter of Credit or
the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards
26
of care specified in the Uniform Commercial Code of the State of New York,
including, without limitation, Article V thereof, shall be binding on the
Borrower and shall not result in any liability of such Issuing Bank to the
Borrower.
(b) Without limiting the generality of the foregoing, it is
expressly agreed that the absolute and unconditional nature of the Borrower's
obligations under this Section 3 to reimburse the Issuing Bank for each drawing
under a Letter of Credit will not be excused by the gross negligence or willful
misconduct of the Issuing Bank. However, the foregoing shall not be construed to
excuse the Issuing Bank from liability to the Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Issuing Bank's gross negligence
or willful misconduct in determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.
3.7 Letter of Credit Payments. Without limitation of subsection 3.6,
the responsibility of the Issuing Bank to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.8 L/C Applications. To the extent that any provision of any L/C
Application, including any reimbursement provisions contained therein, related
to any Letter of Credit is inconsistent with the provisions of this Section 3,
the provisions of this Section 3 shall prevail.
SECTION 4
GENERAL PROVISIONS
4.1 Interest Rates and Payment Dates.
(a) Each Eurodollar Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Eurodollar Rate determined for such Interest Period plus the Applicable
Margin in effect on such day.
(b) Each ABR Loan shall bear interest for each day such Loan
is outstanding at a rate per annum equal to the ABR in effect on such day plus
the Applicable Margin in effect on such day.
(c) If all or a portion of (i) any principal of any Loan, (ii)
any interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of any such overdue interest, commitment fee or other
amount, the ABR plus the effective Applicable Margin plus 2%, in each case from
the date of such non-payment until such overdue principal, interest, commitment
fee or other amount is paid in full (as well after as before judgment).
27
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to subsection 4.1(c)
shall be payable from time to time on demand.
4.2 Computation of Interest and Fees.
(a) Fees and interest, in the case of ABR Loans calculated on
the basis of the Prime Rate, shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed; and, otherwise,
interest shall be calculated on the basis of a 360-day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of each determination of a Eurodollar Rate. Any change
in the interest rate on a Loan resulting from a change in the ABR (as a result
of any change in the Prime Rate or the Federal Funds Effective Rate or any
component of the Three-Month Secondary CD Rate) or the Eurodollar Rate (as a
result of any change in the Eurocurrency Reserve Requirements) shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations and calculations used
by the Administrative Agent in determining any interest rate pursuant to
subsection 4.2(a).
4.3 Conversion and Continuation Options.
(a) The Borrower may elect from time to time to convert
Eurodollar Loans to ABR Loans by giving the Administrative Agent at least one
Business Day's prior irrevocable notice of such election (which notice must be
received by the Administrative Agent prior to 11:00 a.m., New York City time),
provided that any such conversion of Eurodollar Loans is subject to the terms of
subsection 4.14. The Borrower may elect from time to time to convert ABR Loans
to Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice (which notice must be received by the
Administrative Agent prior to 11:00 a.m., New York City time) of such election.
Any such notice of conversion to Eurodollar Loans shall specify the length of
the initial Interest Period or Interest Periods therefor. Upon receipt of any
such notice the Administrative Agent shall promptly notify each Lender thereof.
All or any part of outstanding Eurodollar Loans and ABR Loans may be converted
as provided herein, provided that (i) no Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Required Lenders have determined that such a
conversion is not appropriate and (ii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with clause
(ii) of the term "Interest Period" set forth in subsection 1.1, of the length of
the next Interest Period to be applicable to such Loans, provided that no
Eurodollar Loan may be continued as such (i) when any Event of Default has
occurred and is continuing and the Administrative Agent has or the Required
Lenders have determined that such a continuation is not appropriate or (ii)
after the date that is one month prior to the Termination Date and provided,
further, that if the Borrower shall fail to give such notice or if such
continuation is not permitted,
28
such Loans shall be automatically converted to ABR Loans on the last day of such
then expiring Interest Period.
4.4 Minimum Amounts; Maximum Number of Tranches. Each borrowing under
the Aggregate Commitments shall be in an amount equal to (x) in the case of ABR
Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the
then Available Commitments are less than $1,000,000, such lesser amount) and (y)
in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in
excess thereof. All conversions into and continuations of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of the Loans comprising each Eurodollar
Tranche shall be equal to $1,000,000 or a whole multiple of $500,000 in excess
thereof. In no event shall there be more than eight Eurodollar Tranches
outstanding at any time.
4.5 Prepayments and Commitment Reductions.
(a) The Borrower may, at any time and from time to time,
prepay the Loans, in whole or in part, without premium or penalty, by giving
irrevocable notice to the Administrative Agent, in the case of prepayments of
ABR Loans, not later than 11:00 a.m., New York City time on the date of
prepayment, and in the case of prepayments of Eurodollar Loans, not later than
11:00 a.m., New York City time on the date three Business Days prior to the date
of prepayment, in each case specifying the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, in each case if of a combination thereof, the amount allocable to
each; provided that any prepayment of a Eurodollar Loan is subject to the terms
of subsection 4.14 hereof. Upon receipt of any such notice the Administrative
Agent shall promptly notify each Lender thereof. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with all interest accrued and unpaid on such amount
and any amounts payable pursuant to subsection 4.14. Partial prepayments shall
be in an aggregate principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof; provided that if outstanding principal amount of a
Loan is less than $500,000, the Borrower may prepay the full amount of such
Loan.
(b) Subject to subsection 4.5(c), the Borrower shall have the
right, upon not less than three Business Days' notice to the Administrative
Agent, to terminate the Aggregate Commitments or, from time to time, to reduce
the amount of the Aggregate Commitments. Any such reduction shall be in an
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof and
shall reduce permanently the Aggregate Commitments then in effect. Termination
of the Aggregate Commitments shall also terminate the obligation of the Issuing
Bank to issue Letters of Credit.
(c) In the event of any termination of the Aggregate
Commitments, the Borrower shall on the date of such termination repay or prepay
all of its outstanding Loans (together with accrued and unpaid interest on the
Loans so prepaid), reduce the Letter of Credit Outstandings to zero and cause
all Letters of Credit to be canceled and returned to the Issuing Bank (or shall
cash collateralize the Letter of Credit Outstandings on terms and pursuant to
documentation reasonably satisfactory to the Issuing Bank and the Administrative
Agent). In the event of any partial reduction of the Aggregate Commitments, then
(i) at or prior to the effective date of such reduction, the Administrative
Agent shall notify the Borrower and the Lenders of the Aggregate Exposure of all
the Lenders and (ii) if the Aggregate Exposure of all the Lenders would exceed
the Aggregate
29
Commitments after giving effect to such reduction, then, prior to giving effect
to such reduction, the Borrower shall, on the date of such reduction, first,
repay or prepay Loans (together with accrued and unpaid interest on the Loans)
and, second, reduce the Letter of Credit Outstandings (or cash collateralize the
Letter of Credit Outstandings on terms and pursuant to documentation reasonably
satisfactory to the Issuing Bank and the Administrative Agent), in an aggregate
amount sufficient to eliminate such excess.
(d) In the event of a Borrowing Base Deficiency, the Loans
shall be repaid, and the Letter of Credit Outstandings shall be reduced or cash
collateralized, to the extent required by and in accordance with subsection
4.10.
(e) (i) In the event the amount of any prepayment of the Loans
required to be made above shall exceed the aggregate principal amount of the
outstanding ABR Loans (the amount of any such excess being called the "Excess
Amount"), the Borrower shall have the right, in lieu of making such prepayment
in full, to prepay all the outstanding applicable ABR Loans and to deposit an
amount equal to the Excess Amount with, and (ii) in the event that Letter of
Credit Outstandings are required to be cash collateralized, the Borrower shall
deposit an amount equal to the aggregate amount of Letter of Credit Outstandings
to be cash collateralized with the Administrative Agent in a cash collateral
account maintained (pursuant to documentation reasonably satisfactory to the
Administrative Agent) by and in the sole dominion and control of the
Administrative Agent for the ratable benefit of the Lenders. Any amounts so
deposited shall be held by the Administrative Agent as collateral for the
obligations of the Borrower under this Agreement and applied to the prepayment
of the applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto or to the payment of reimbursement obligations with respect
to Letter of Credit Outstandings, as the case may be, or, during an Event of
Default, to payment of any obligations under this Agreement (including
obligations in respect of the Letters of Credit). On any Business Day on which
(i) collected amounts remain on deposit in or to the credit of such cash
collateral account after giving effect to the payments made on such day pursuant
to this subsection 4.5(e) and (ii) the Borrower shall have delivered to the
Administrative Agent a written request or a telephonic request (which shall be
promptly confirmed in writing) that such remaining collected amounts be invested
in the Cash Equivalent specified in such request, the Administrative Agent shall
use its reasonable efforts to invest such remaining collected amounts in such
Cash Equivalent, provided, however, that the Administrative Agent shall have
continuous dominion and full control over any such investments (and over any
interest that accrues thereon) to the same extent that it has dominion and
control over such cash collateral account and no Cash Equivalent shall mature
after the end of the Interest Period (or the expiry date of the Letter of
Credit) for which it is to be applied. The Borrower shall not have the right to
withdraw any amount from such cash collateral account until the applicable
Eurodollar Loans and accrued interest thereon and Letter of Credit Outstandings
are paid in full (or such Letters of Credit have expired) or if a Default or
Event of Default then exists or would result. Any prepayment or
collateralization pursuant to this subsection 4.5(e) shall be applied in the
order set forth in clause (ii) of the second sentence of subsection 4.5(c).
4.6 Commitment Fee; Administrative Agent's Fee; Other Fees.
(a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee for the period from and including,
for each Lender, the Closing Date to but not including the Termination Date,
computed at the Commitment Fee Rate per annum on the average daily amount of the
Available Commitment of such Lender, during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June,
September and
30
December (commencing on December 31, 2002) and on the Termination Date or such
earlier date as the Aggregate Commitments shall terminate as provided herein.
Commitment fees shall be nonrefundable when paid.
(b) The Borrower shall pay to the Administrative Agent the
fees set forth in the Administrative Agent's fee letter agreement, dated as of
November 21, 2002, among the Borrower, JPMorgan and J.P. Morgan Securities Inc.,
on the dates specified therein.
4.7 Inability to Determine Interest Rate. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Required Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted on the last day of their current Interest Period to ABR Loans. Until
such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
4.8 Pro Rata Treatment and Payments.
(a) Each borrowing by the Borrower from the Lenders hereunder,
each payment by the Borrower on account of any commitment fee hereunder and any
reduction of the Aggregate Commitments shall be made pro rata according to the
respective Commitment Percentages of the Lenders. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the Loans
shall be made pro rata according to the respective outstanding principal amounts
of the Loans then held by the Lenders. All payments (including prepayments) to
be made by the Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim and shall be
made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Administrative
Agent's office specified in subsection 11.2, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. Subject to clause (1)
of the proviso in the definition of "Interest Period", if any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its
31
Commitment Percentage of such borrowing available to the Administrative Agent,
the Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the Administrative Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to the
Administrative Agent, on demand, such amount with interest thereon at a rate
equal to the daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Administrative Agent.
A certificate of the Administrative Agent submitted to any Lender with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Lender within three Business
Days after such Borrowing Date, the Administrative Agent shall also be entitled
to recover such amount with interest thereon at the rate per annum applicable to
ABR Loans plus the then Applicable Margin (if any) hereunder, on demand, from
the Borrower.
4.9 Application and Computation of Borrowing Base.
(a) If either (i) the Borrower's senior unsecured long-term
debt rating is BB or less (or there is no rating) by S&P or Ba2 or less (or
there is no rating) by Moody's, or (ii) the Borrower has otherwise elected in
accordance with subsection 4.9(f) to have availability under this Agreement
governed by a borrowing base as contemplated in subsections 4.9(b) and 4.10,
then availability under this Agreement shall be equal to the lesser of the
Aggregate Commitments or the then effective Borrowing Base. If the Borrower's
senior unsecured long-term debt rating is BB+ or better by S&P and Ba1 or better
by Moody's, then (unless the Borrower has elected in accordance with subsection
4.9(f) to have availability under this Agreement governed by a Borrowing Base)
no Borrowing Base shall be in effect and availability under this Agreement shall
equal the Aggregate Commitments.
(b) If the Borrowing Base is then applicable to govern
availability under this Agreement, the Borrowing Base in effect during such
period shall represent the maximum principal amount (subject to the Aggregate
Commitments) of Loans and Letter of Credit Outstandings that the Lenders will
allow to remain outstanding during the Commitment Period. The Borrowing Base
shall be determined in accordance with this subsection 4.9, subject to interim
adjustment or redetermination under subsection 4.9(g), subsection 6.1(m),
subsection 7.13(c), subsection 8.2(i) and subsection 8.6(f). The Borrowing Base
will be based upon the value of certain Proved Reserves attributable to the Oil
and Gas Properties of the Borrower and its Restricted Subsidiaries and other
assets of the Borrower and its Restricted Subsidiaries acceptable to the Agents
in their sole discretion, and will be determined by the Agents in accordance
with subsection 4.9(d), subject to approval by the Supermajority Lenders. During
the period from and after the Closing Date until the first Redetermination Date,
but subject to interim adjustment or redetermination under subsection 4.9(g),
subsection 6.1(m), subsection 7.13(c), subsection 8.2(i) and subsection 8.6(f),
the amount of the Borrowing Base shall be $500,000,000.
(c) Whether or not availability under this Agreement is to be
governed by a Borrowing Base, prior to April 30 and October 31 of each year
(commencing April 30, 2003), the Borrower shall furnish to the Agents and to
each Lender a Reserve Report, which Reserve Report shall be dated as of the
immediately preceding January 1 (in the case of the Reserve Report due on April
30) and July 1 (in the case of the Reserve Report due on October 31), and shall
set forth, among other things, (i) all of the Oil and Gas Properties then owned
by the Borrower and its
32
Restricted Subsidiaries (identifying, if applicable, those Oil and Gas
Properties, if any, then classified as Mortgaged Properties), (ii) the Proved
Reserves attributable to such Oil and Gas Properties and (iii) a projection of
the rate of production and net income of the Proved Reserves as of the date of
such Reserve Report, all in accordance with the guidelines published by the
Securities and Exchange Commission and such assumptions as the Agents shall
provide. Concurrently with the delivery of each Reserve Report, the Borrower
shall furnish to the Agents and to each Lender a certificate of a Responsible
Officer showing any additions to or deletions from the Oil and Gas Properties
listed in the Reserve Report, which additions or deletions were made by the
Borrower and its Restricted Subsidiaries since the date of the previous Reserve
Report.
(d) If availability under this Agreement is to be governed by
a borrowing base as provided by subsection 4.9(a) or the Borrower has given the
Agents and the Lenders a notice electing to have availability under this
Agreement governed by a borrowing base under subsection 4.9(f), the Borrowing
Base shall be re-determined in the manner set forth in this subsection 4.9: (i)
after receipt by the Agents of each scheduled Reserve Report, (ii) upon the
delivery of a Redetermination Notice by either the Borrower or the
Administrative Agent (in its discretion or at the request of the Required
Lenders) to the other party, provided no more than one such notice may be
delivered by either party during any period of 12 consecutive months (upon
delivery of a Redetermination Notice by either party, the Borrower shall deliver
to the Agents a Reserve Report dated as of the most recent date practicable) and
(iii) upon any change in the Borrower's senior unsecured long-term debt rating
which results in availability under this Agreement being subject to a borrowing
base as required by subsection 4.9(a). In the case of a redetermination under
clause (iii) of this paragraph, the Agents shall utilize the Reserve Report most
recently delivered under subsection 4.9(c), with any such adjustments and taking
into account any additional information as the Agents may deem appropriate, in
their sole discretion.
On or before the date which is: (i) 30 days after receipt of a
scheduled semi-annual Reserve Report, (ii) 30 days after receipt of a Reserve
Report in connection with a Redetermination Notice or (iii) as soon as
practicable, but in no event later than 30 days after any change in the
Borrower's senior unsecured long-term debt rating which results in availability
under this Agreement being subject to a borrowing base as required by subsection
4.9(a), the Agents shall evaluate the Oil and Gas Properties of the Borrower and
the Restricted Subsidiaries and propose to the Borrower and the Lenders a new
Borrowing Base. Within 10 days after receipt from the Agents of their proposal,
each Lender shall notify the Administrative Agent stating whether or not such
Lender agrees with that proposal. Failure of any Lender to give such notice
within such period of time shall be deemed to constitute an acceptance of such
proposal. If the Supermajority Lenders agree with that proposal, then the
Administrative Agent promptly shall notify the Borrower and the Lenders of the
Borrowing Base as so re-determined. If the Supermajority Lenders have not
approved or are not deemed to have approved the Borrowing Base within the 10 day
period following their receipt of the proposed amount, the Administrative Agent
shall poll the Lenders to ascertain the highest Borrowing Base then acceptable
to a number of Lenders sufficient to constitute the Supermajority Lenders and
such amount shall then become the Borrowing Base. Upon such approval, the
Administrative Agent promptly shall notify the Borrower and the Lenders of the
Borrowing Base as so re-determined. Each re-determination provided for by this
subsection 4.9(d) shall be made in accordance with the provisions of subsection
4.9(e). It is the intention of the Borrower and the Lenders that the Borrowing
Base be redetermined within 45 days after the furnishing of each Reserve Report
in the case of clauses (i) and (ii) of this paragraph and within 30 days after
the change in the Borrower's senior unsecured long-term debt rating(s) under
clause (iii) of this paragraph, subject to the provisions of this subsection
4.9(d).
33
(e) (i) All determinations and re-determinations by the Agents
provided for in this subsection 4.9 (and any determinations and decisions by
either or both of the Agents and the Supermajority Lenders in connection
therewith, including effecting any re-determination of the value of any
component contained in a Reserve Report) shall be made by the Agents and the
Lenders in their sole discretion and shall be made on a reasonable basis and in
good faith based upon the application by the Agents and the Lenders of their
respective normal oil and gas lending criteria as they exist at the time of
determination.
(ii) All re-determinations in the Borrowing Base referred to
in this subsection 4.9 shall become effective immediately upon the
delivery of notice by the Administrative Agent to the Borrower and the
Lenders of the approval or deemed approval of an amount proposed as the
new Borrowing Base, and shall remain effective until the Borrowing Base
is again re-determined as provided in subsection 4.9(d), subject to
interim adjustments or redeterminations as contemplated by this
Agreement or availability under this Agreement shall not be governed by
a borrowing base as contemplated by subsection 4.9(a).
(f) If availability under this Agreement is not governed by a
borrowing base as required by subsection 4.9(a), the Borrower may nevertheless
elect to have availability under this Agreement governed by the Borrowing Base
for the period between the next two successive scheduled Redetermination Dates
by giving the Agents and the Lenders written notice of its election no later
than 30 days prior to the delivery under subsection 4.9(c) of the next scheduled
semi-annual Reserve Report Once such election is made, the Borrower may not opt
out of its election until the end of such Borrowing Base Period. (g)
Notwithstanding the foregoing, if prior to the initial redetermination of the
Borrowing Base, the Borrower issues 02 Senior Subordinated Notes in an aggregate
principal amount of greater than $175,000,000, then the Borrowing Base will be
reduced by an amount equal to the product of one-quarter of an amount equal to
such excess less the amount of 97 Senior Subordinated Notes called for
redemption within five (5) Business Days after the Closing Date and which are
actually redeemed within 45 days after such notice of redemption is given with
proceeds from the sale of the 02 Senior Subordinated Notes, rounded to the
nearest $1,000,000. For purposes of this subsection 4.9(g), the "aggregate
principal amount" shall mean the stated face amount of the 02 Senior
Subordinated Notes without giving effect to any original issue discount.
4.10 Borrowing Base Compliance. If, upon any redetermination of the
Borrowing Base pursuant to subsection 4.9(d), the Aggregate Exposure of the
Lenders exceeds the Borrowing Base then in effect (any such excess, the
"Borrowing Base Deficiency"), the Borrower shall prepay the Loans and then cash
collateralize the Letter of Credit Outstandings in an amount equal to 50% of the
Borrowing Base Deficiency within 90 days after the effective date of the
redetermination resulting in such Borrowing Base Deficiency, and within the next
90 days prepay the Loans and then cash collateralize the Letter of Credit
Outstandings in an amount equal to the balance of such Borrowing Base Deficiency
in each case together with interest accrued to the date of such payment or
prepayment and any amounts payable under subsection 4.14; provided that if the
Borrowing Base has been redetermined pursuant to subsection 4.9 as the result of
a change in the Borrower's senior unsecured long-term debt rating(s), the
Borrower shall prepay the Loans and then cash collateralize the Letter of Credit
Outstandings in an amount equal to 50% of the Borrowing Base Deficiency within
75 days after the effective date of the redetermination resulting in such
Borrowing Base Deficiency, and within the next 75 days prepay the Loans and then
cash collateralize the Letter of Credit Outstandings in an amount equal to the
balance of such Borrowing Base Deficiency in each
34
case together with interest accrued to the date of such payment or prepayment
and any amounts payable under subsection 4.14. If at any other time there exists
a Borrowing Base Deficiency as the result of an interim adjustment or
redetermination under subsection 4.9(g), subsection 7.13(c), subsection 8.2(i),
subsection 8.6(f) or otherwise (other than subsection 4.9(d)), the Borrower
shall immediately prepay the Loans and then cash collateralize the Letter of
Credit Outstandings in an amount equal to 100% of such Borrowing Base Deficiency
together with interest accrued to the date of such payment or prepayment and any
amounts payable under subsection 4.14. Prepayments and collateralization
pursuant to this subsection 4.10 shall be made as set forth in subsection
4.5(c).
4.11 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof after the date hereof shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Agreement, then:
(a) the commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to ABR Loans on the respective
last days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to subsection 4.14.
4.12 Requirements of Law.
(a) If the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof after the date hereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any L/C
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 4.13, changes in the rate or
computation of tax on the overall net income of such Lender, franchise
taxes imposed in lieu of net income taxes and doing business taxes);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly, following receipt
of the certificate required in subsection 4.12(c), pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduced amount receivable.
35
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrower shall
promptly, following receipt of the certificate required in subsection 4.12(c),
pay to such Lender such additional amount or amounts as will compensate such
Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.12, it shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it has
become so entitled, such notice to include a description, in reasonable detail,
of the event giving rise to its claim for such additional amounts; provided that
the Borrower shall not be required to compensate a Lender pursuant to this
subsection for any additional costs incurred more than six months prior to the
date on which such Lender notifies the Borrower of such event giving rise to
such additional costs and of such Lender's intention to claim compensation
therefor; and provided, further, that, if any adoption or change of any
Requirement of Law or other event giving rise to such claim for additional
compensation is retroactive, then the six-month period referred to above shall
be extended to include the period of retroactive effect thereof. A certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender to the Borrower (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. The agreements in this subsection
4.12 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
4.13 Taxes.
(a) All payments made by the Borrower or any Loan Party under
this Agreement, any Note or any other Loan Document shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding taxes based upon
income, receipts or capital, franchise taxes and doing business taxes imposed on
the Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent or such Lender having executed, delivered
or performed its obligations or received a payment under, or enforced, this
Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties,
charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Administrative Agent or any Lender
hereunder or under any Note, the amounts so payable to the Administrative Agent
or such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that the Borrower shall
not be required to increase any such amounts payable to any Non-U.S. Lender if
such Non-U.S. Lender fails to comply with the requirements of subsection
4.13(b). Whenever any Non-Excluded Taxes are
36
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If, when the Borrower is
required by this subsection 4.13(a) to pay any Non-Excluded Taxes, the Borrower
fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority
or fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any such
failure.
(b) Each Lender (or Transferee) that is not a "U.S. Person" as
defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver
to the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit F and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this subsection 4.13(b), a Non-U.S. Lender shall not be
required to deliver any form pursuant to this subsection that such Non-U.S.
Lender is not legally able to deliver.
(c) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to the Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such
Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender's judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
(d) The agreements in this subsection 4.13 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.14 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of a Eurodollar Loan after the Borrower has given a
37
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of or conversion of Eurodollar Loans on a day which is
not the last day of an Interest Period with respect thereto. To be entitled to
such indemnity, such Lender shall provide the Borrower with a certificate
showing in reasonable detail calculations utilized to ascertain the amount of
such Lender's losses (which calculations shall be conclusive, absent manifest
error) and the Borrower shall, promptly following receipt of such certificate,
pay the Lender the amounts calculated therein; provided that the Borrower shall
not be required to compensate a Lender pursuant to this subsection for any loss
incurred more than six months prior to the date on which such Lender notifies
the Borrower of such event giving rise to such additional costs and of such
Lender's intention to claim compensation therefor. Such indemnification may
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or converted, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or conversion or of such failure to borrow, convert or continue to
the last day of the applicable Interest Period (or, in the case of a failure to
borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Eurodollar Loans provided for herein (excluding, however, the percentage
added to the Eurodollar Rate pursuant to subsection 4.1(a) to the extent
included therein) over (ii) the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. This subsection 4.14 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
4.15 Change of Lending Office.
(a) Each Lender agrees that if it makes any demand for payment
under subsection 4.12 or 4.13(a), or if any adoption or change of the type
described in subsection 4.11 shall occur with respect to it, it will use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, as
determined in its sole discretion) to designate a different lending office if
the making of such a designation would reduce or obviate the need for the
Borrower to make payments under subsection 4.12 or 4.13(a), or would eliminate
or reduce the effect of any adoption or change described in subsection 4.11.
(b) If any Lender shall assert that any adoption or change of
the type described in subsection 4.11 hereof has occurred with respect to it, or
if any Lender requests compensation under subsection 4.12, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to subsection 4.13, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to, and such Lender promptly shall,
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in subsection 11.6), all its interests, rights and
obligations under this Agreement and the other Loan Documents to an assignee who
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) if such assignee is not a Lender or
an Affiliate thereof, the Borrower shall have received the prior written consent
of the Administrative Agent and Issuing Bank which consents shall not
unreasonably be withheld or delayed, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and funded
participations in Letters of Credit not yet reimbursed by the Borrower or funded
as Loans under subsection 3.5, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder, from the assignee (at least to the extent
of such outstanding principal) and the Borrower (in the case of all other
amounts) and (iii) in the case of any such
38
assignment resulting from a claim for compensation under subsection 4.12 or
payments required to be made pursuant to subsection 4.13, such assignment will
result in a reduction in such compensation or payments compared to the
compensation or payments payable to the assigning Lender. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation no longer exist or cease to
apply.
SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce the Agents, the Issuing Bank and the Lenders to enter into
this Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Agents, the Issuing
Bank and each Lender that:
5.1 Financial Condition.
(a) The consolidated balance sheets of the Borrower and its
consolidated Subsidiaries at December 31, 2001 and the related consolidated
statements of operations, of stockholders' equity and of cash flows for the
fiscal year ended on such date, together with the related notes and schedules
thereto, reported on by Arthur Andersen LLP, copies of which have heretofore
been furnished to each Lender, present fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year then ended.
(b) The unaudited condensed consolidated balance sheet of the
Borrower and its consolidated Subsidiaries at September 30, 2002 and the related
unaudited condensed consolidated statements of operations, of stockholders'
equity and of cash flows for the 9-month period ended on such date, together
with the related notes and schedules thereto, copies of which have heretofore
been furnished to each Lender, present fairly in all material respects the
consolidated financial condition of each of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their respective
operations and their consolidated cash flows for the 9-month period then ended
(subject to normal year-end audit adjustments).
(c) All such financial statements referred to in this
subsection 5.1, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). On the Closing Date, except for this
Agreement, the other Loan Documents and the matters disclosed in Schedule 5.1
and 5.20, neither the Borrower nor any of its consolidated Subsidiaries have, at
the date of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any Hedging Agreements, which is not reflected in the financial
statements referred to in subsections 5.1(a) or (b) or in the notes thereto to
the extent required by GAAP. During the period from January 1, 2002 to and
including the date hereof, there has been no sale, transfer or other disposition
by the Borrower or any of its consolidated Subsidiaries of any material part of
its business or Property and no purchase or other acquisition of any business or
Property (including any Equity Interests of any other Person) material in
relation to the consolidated financial condition of the Borrower and its
39
consolidated Subsidiaries at January 1, 2002, other than the Acquisition or as
set forth on Schedule 5.1.
5.2 No Change. Since January 1, 2002, (a) there has been no
development, circumstance or event which has had or could reasonably be expected
to have a Material Adverse Effect, and (b) no dividends or other distributions
have been declared, paid or made upon the Capital Stock of the Borrower nor has
any of the Equity Interests of the Borrower been redeemed, retired, purchased or
otherwise acquired for value by the Borrower or any of its Subsidiaries, other
than, in each case, as set forth in Schedule 5.2.
5.3 Existence; Compliance with Law. Each of the Borrower and its
Restricted Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate, partnership or limited liability company (as the case may be) power
and authority, and the legal right, to own and operate its Property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of Property or the
conduct of its business requires such qualification except to the extent that
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect and (d) is in compliance with all applicable
Requirements of Law except to the extent that the failure to comply with such
Requirements of Law could not reasonably be expected to have, in the aggregate,
a Material Adverse Effect.
5.4 Power; Authorization; Enforceable Obligations. The Borrower and
each of the other Loan Parties has the corporate, partnership or limited
liability company (as the case may be) power and authority, and the legal right,
to make, deliver and perform the Loan Documents to which it is a party and, in
the case of the Borrower, to borrow hereunder and has taken all necessary
corporate, partnership or limited liability company (as the case may be) action
to authorize the execution, delivery and performance of the Loan Documents to
which it is a party. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or the delivery,
performance, validity or enforceability of the Loan Documents to which each Loan
Party is a party other than those which have been obtained and are in full force
and effect. This Agreement has been, and each other Loan Document to which any
Loan Party is a party will be, duly executed and delivered on behalf of such
Loan Party. This Agreement constitutes, and each other Loan Document to which
any Loan Party is a party when executed and delivered will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent transfer or conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
5.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any applicable Requirement of Law or Contractual Obligation of the
Borrower or of any of its Restricted Subsidiaries, to the extent such violation
could reasonably be expected to have a Material Adverse Effect and will not
result in, or require, the creation or imposition of any Lien on any of its or
their respective Properties or revenues pursuant to any such Requirement of Law
or Contractual Obligation, other than the Liens created pursuant to the Loan
Documents.
40
5.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Restricted Subsidiaries or against any of its or their respective Properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor any of its Restricted
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
5.8 Ownership of Property; Liens.
(a) Except for the Oil and Gas Properties, the Borrower and
its Restricted Subsidiaries each has good title in fee simple to, or a valid
leasehold interest in, all its material real Property and material interests in
real Property, and good title to, or a valid leasehold interest in, all its
other material Property, and none of such Property is subject to any Lien except
as permitted by subsection 8.3, including, after the Acquisition, any such
material real Property or other material Property acquired thereby.
(b) The Borrower and its Restricted Subsidiaries each has good
and defensible title to all of its material Oil and Gas Properties included in
the most recent Reserve Report which are not personal property and good title to
all such Oil and Gas Properties which are personal property and material to the
Borrower and its Restricted Subsidiaries taken as a whole, including, after the
Acquisition, any such material Property acquired thereby, except for (i) such
imperfections of title as do not in the aggregate materially detract from the
value thereof to, or the use thereof in, the business of the Borrower or any of
its Restricted Subsidiaries, (ii) Oil and Gas Properties disposed of since the
date of the most recent Reserve Report as permitted by subsection 8.6 hereof,
and (iii) Liens permitted by subsection 8.3 hereof. The quantum and nature of
the interest of the Borrower and its Restricted Subsidiaries in and to the Oil
and Gas Properties as set forth in each Reserve Report (including the Initial
Reserve Report) includes the entire interest of the Borrower and its Restricted
Subsidiaries in such Oil and Gas Properties as of the date of such Reserve
Report and are complete and accurate in all material respects as of the date of
such Reserve Report; and there are no "back-in" or "reversionary" interests held
by third parties which could materially reduce the interest of the Borrower and
its Restricted Subsidiaries in such Oil and Gas Properties except as expressly
set forth in such Reserve Report. The ownership of the Oil and Gas Properties by
the Borrower and its Restricted Subsidiaries shall not in any material respect
obligate any such Person to bear the costs and expenses relating to the
maintenance, development or operations of each such Oil and Gas Property in an
amount materially in excess of the working interest of such Person in each Oil
and Gas Property set forth in the most recent Reserve Report.
5.9 Intellectual Property. Each of the Borrower and its Restricted
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be
41
expected to have a Material Adverse Effect (the "Intellectual Property"). No
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does the Borrower know of any valid basis
for any such claim which could reasonably be expected to have a Material Adverse
Effect. The use of such Intellectual Property by the Borrower and its Restricted
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not be reasonably
expected to have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No applicable Requirement of Law or
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
5.11 Taxes. Each of the Borrower and its Subsidiaries has filed all
material tax returns which, to the knowledge of such Person, are required to be
filed by it and has paid or caused to be paid all taxes shown on said returns
and all material assessments, fees and other governmental charges levied upon it
or upon any of its Property or income which are due and payable, other than such
taxes, assessments, fees and other governmental charges, if any, as are being
diligently contested in good faith and by appropriate proceedings and with
respect to which there have been established adequate reserves on the books of
the Borrower or its Subsidiaries, as the case may be, in accordance with GAAP.
No tax Lien has been filed and, to the knowledge of the Borrower, no claim is
being asserted, with respect to any such taxes or material assessments, fees or
other governmental charges, other than claims which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are being maintained on the books of the Borrower or the applicable
Subsidiary, as the case may be, in conformity with GAAP.
5.12 Federal Reserve Regulations. No part of the proceeds of any Loans,
and no proceeds of any Letter of Credit issued hereunder, will be used for
"buying" or "carrying" any "margin stock" within the respective meanings of each
of the quoted terms under Regulation U as now and from time to time hereafter in
effect or for any purpose that violates the provisions of the regulations of the
Board. If requested by any Lender or the Administrative Agent, the Borrower will
furnish to the Administrative Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as
applicable, referred to in Regulation U.
5.13 ERISA. Except where the liability, failure or event described
below could not reasonably be expected to have a Material Adverse Effect: (a)
neither a Reportable Event nor an "accumulated funding deficiency" (within the
meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during
the five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied with the
applicable provisions of ERISA and the Code; (b) no termination of a Single
Employer Plan has occurred, and no Lien on property of the Borrower or any
Commonly Controlled Entity in favor of the PBGC or a Plan has arisen, during
such five-year period; (c) the present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits; (d) neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made; and (e) no such Multiemployer Plan is in
Reorganization or Insolvent.
42
5.14 Investment Company Act; Other Regulations. Neither the Borrower
nor any of its Subsidiaries is (a) an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
Neither the Borrower nor any of its Restricted Subsidiaries is subject to
regulation under any Federal or State statute or regulation (other than
Regulation U of the Board) which limits its ability to incur Indebtedness under
this Agreement or the other Loan Documents.
5.15 Subsidiaries. The Persons listed on Schedule 5.15 constitute all
the Subsidiaries of the Borrower at the date hereof. Such Schedule sets forth
the status of such Subsidiaries, as of the date hereof, as Restricted
Subsidiaries or Unrestricted Subsidiaries and sets forth the net book value of
the assets owned by each of the Unrestricted Subsidiaries listed on such
Schedule.
5.16 Purpose of Loans. The proceeds of the Loans and the Letters of
Credit will be used to refinance the Existing Credit Facility, to pay a portion
of the purchase price of the Acquisition, for working capital and for the
general corporate purposes of the Borrower and its Restricted Subsidiaries in
the ordinary course of business.
5.17 Environmental Matters. Other than exceptions to any of the
following that could not, individually or in the aggregate, reasonably be
expected to give rise to a Material Adverse Effect:
(a) each of the Borrower and its Restricted Subsidiaries: (i)
is, and within the period of all applicable statutes of limitation has been, in
compliance with all applicable Environmental Laws; (ii) holds or is entitled to
the benefits of all Environmental Permits (each of which is in full force and
effect) required for any of its current operations and holds or will hold or
otherwise be entitled to the benefits of all Environmental Permits for all of
its planned operations prior to the time at which such Environmental Permit is
necessary for such operation or for any Property owned, leased, or otherwise
operated by it; (iii) is, and within the period of all applicable statutes of
limitation has been, in compliance with all of its Environmental Permits; and
(iv) reasonably believes that the costs of complying with renewal or additional
Environmental Permits and any other Environmental Laws applicable to or
reasonably expected to apply to the Borrower and its Restricted Subsidiaries
will not exceed the Borrower's and its Subsidiaries' existing costs of complying
with Environmental Permits and Environmental Laws.
(b) Materials of Environmental Concern have not been
transported, disposed of, emitted, discharged, or otherwise released or
threatened to be released in violation of applicable Environmental Laws, to or
at any real property presently or formerly owned, leased or operated by the
Borrower or any Restricted Subsidiary during such time as the Borrower or any or
its Restricted Subsidiaries owned, leased or operated such real property or, to
the best knowledge of the Borrower, from any such real property to or at any
other location.
(c) no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating to
any Environmental Law to which the Borrower or any Restricted Subsidiary is, or
to the knowledge of the Borrower will be, named as a party is pending or, to the
knowledge of the Borrower, threatened.
(d) the Borrower has not received any written request for
information, or been notified that it or any Restricted Subsidiary is a
potentially responsible party under the federal
43
Comprehensive Environmental Response, Compensation, and Liability Act or any
similar Environmental Law, or with respect to any Materials of Environmental
Concern.
(e) neither the Borrower nor any Restricted Subsidiary has
entered into or agreed to any consent decree, order, or settlement or other
agreement, nor is subject to any judgment, decree, or order or other agreement,
in any judicial, administrative, arbitral, or other forum, relating to
compliance with or liability under any Environmental Law.
(f) neither the Borrower nor any Restricted Subsidiary has
assumed or retained, by contract or operation of law, any liabilities of any
kind, fixed, contingent or otherwise, under any Environmental Law.
5.18 No Material Misstatements.
(a) All written information, reports, financial statements,
exhibits and schedules furnished to any Agent or any Lender by or on behalf of
the Borrower or any of its Affiliates in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto, including the
Acquisition Documents, as amended, when taken as a whole, do not contain, and as
they may be amended, supplemented or modified from time to time, will not
contain, as of the date such statements will be made, any untrue statements of a
material fact and do not omit, and as they may be amended, supplemented or
modified from time to time, will not omit, to state as of the date such
statements will be made, any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were, are or will be made, not materially misleading.
(b) All projections and estimates concerning the Borrower and
its Subsidiaries that are or have been made available to any Agent or any Lender
by or on behalf of the Borrower or any of its Subsidiaries, have been or will be
prepared based on good faith estimates and based upon assumptions provided to
the Agents and the Lenders which were either required by applicable Requirements
of Law or believed by the Borrower to be reasonable at the time of such
preparation.
5.19 Insurance. Each of the Borrower and its Restricted Subsidiaries
carries and maintains with respect to its insurable properties insurance
(including, to the extent consistent with past practices, self-insurance) with
financially sound and reputable insurers of the types, to such extent and
against such risks as is customary with companies in the same or similar
businesses.
5.20 Future Commitments. As of the date hereof and as of the Closing
Date, except as set forth on Schedule 5.20, on a net basis there are no material
gas imbalances, take-or-pay or other prepayments with respect to any Oil and Gas
Property of the Borrower or any Restricted Subsidiary which would require the
Borrower or any Restricted Subsidiary to deliver Hydrocarbons produced from Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor.
5.21 Pledge Agreement.
(a) The provisions of the Pledge Agreement are effective to
create in favor of the Administrative Agent, for the ratable benefit of the
Lenders, a legal, valid and enforceable lien on, and security interest in, the
Pledged Securities and proceeds thereof; and with respect to the Pledged Stock,
upon delivery to the Administrative Agent of the stock certificates evidencing
the Pledged
44
Stock, and with respect to the other collateral described therein, upon the
filing of UCC-1 financing statements in the offices set forth in Schedule 5.21,
the Lien created pursuant to the Pledge Agreement will constitute a perfected
first priority lien on, and security interest in, all right, title and interest
of the Pledgor party therein in such Pledged Securities and the proceeds
thereof, enforceable in each case in accordance with its terms against all
creditors of such Pledgor and any Persons purporting to purchase any Collateral
from such Pledgor.
(b) As of the Closing Date, the shares of Capital Stock listed
on Schedule I to the Pledge Agreement will constitute all the issued and
outstanding Equity Interests of the issuers thereof listed on said Schedule
owned by the Loan Parties; all such shares have been duly and validly issued and
are fully paid and nonassessable; and the relevant Pledgor of said shares is the
record and beneficial owner of said shares.
5.22 Subordinated Indebtedness; Refinancing of Existing Credit
Facility. The execution, delivery and performance of the Loan Documents, the
incurrence of Indebtedness hereunder and the use of the proceeds thereof have
not violated and will not violate any applicable provision of any Subordinated
Note Document. The Notes, the Indebtedness evidenced hereby, the Subsidiary
Guarantee and the other obligations evidenced by the other Loan Documents are,
and are hereby designated as, "Senior Debt", "Designated Senior Debt",
"Guarantor Senior Indebtedness", "Senior Indebtedness" and "Designated Senior
Indebtedness" as such terms are defined in each of the 97 Indenture and the 01
Indenture, as applicable, for purposes of such Subordinated Note Documents and
any other Subordinated Note Documents evidencing other Subordinated
Indebtedness. This Agreement and the Loan Documents and the Indebtedness
evidenced hereby and thereby constitute a "refinancing, exchange or replacement"
of the Existing Credit Facility for purposes of the 97 Indenture and the 01
Indenture.
5.23 Acquisition Documents.
(a) The Borrower has the corporate power and authority, and
the legal right, to make, deliver and perform the Acquisition Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Acquisition Documents to which it is
a party. No consent or authorization of, filing with, notice to or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with the Acquisition or the delivery, performance, validity or
enforceability of the Acquisition Documents which has not been obtained and is
in full force and effect. Each Acquisition Document was duly executed and
delivered on behalf of the Borrower and, to the knowledge of the Borrower, each
seller under the Acquisition Documents, and constitutes a legal, valid and
binding obligation of each such Person enforceable against it in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent transfer
or conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(b) The execution, delivery and performance of the Acquisition
Documents does not violate any applicable Requirement of Law or Contractual
Obligation of the Borrower or of any of its Restricted Subsidiaries, to the
extent such violation could reasonably be expected to have a Material Adverse
Effect.
(c) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Borrower, threatened by or against
45
the Borrower or any of its Restricted Subsidiaries or against any of their
respective Properties or revenues which seeks to enjoin or prevent the
Acquisition or any of the transactions contemplated hereby or by the Acquisition
Documents.
(d) No party to the Acquisition Documents is in default
thereunder and the performance of the transactions contemplated by the
Acquisition Documents will not violate or result in a default with respect to
any Contractual Obligation of the Borrower or any of its Restricted
Subsidiaries, in each case, which could reasonably be expected to have a
Material Adverse Effect.
(e) The Borrower has delivered to the Lenders copies,
certified by a Responsible Officer as true and complete, of each material
Acquisition Document.
5.24 Solvency. Immediately after the consummation of the Acquisition
and immediately following the making of each Loan to be made on the Closing Date
and after giving effect to the application of the proceeds of such Loans: (a)
each Loan Party will not have unreasonably small capital with which to conduct
the business in which such Loan Party is engaged as such business is now
conducted and is proposed to be conducted following the Closing Date; and (b)
the Borrower and the Restricted Subsidiaries, on a consolidated basis, will be
Solvent.
SECTION 6
CONDITIONS PRECEDENT
6.1 Conditions to Initial Extensions of Credit. The agreement of each
Lender to make the initial Loan requested to be made by it and of the Issuing
Bank to issue the initial Letter of Credit to be issued by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
and the issuance of such Letter of Credit on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent) (i) this Agreement, executed and delivered by a duly
authorized Responsible Officer of the Borrower and each Agent, with a
counterpart for each Lender, (ii) the Pledge Agreement, executed and delivered
by a duly authorized Responsible Officer of each Loan Party thereto and (iii)
the Subsidiary Guarantee, executed and delivered by a duly authorized
Responsible Officer of each Loan Party thereto.
(b) Proceedings of the Loan Parties. The Administrative Agent
shall have received (with the number of original counterparts requested by the
Administrative Agent), a copy of the resolutions or other equivalent
authorization, in form and substance satisfactory to the Administrative Agent,
of the board of directors (or partners or members, as appropriate) of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Loan Documents to which it is a party and (ii) in the case of the
Borrower, the borrowings contemplated hereunder, certified by the Secretary or
an Assistant Secretary of such Loan Party (or of its general partner or managing
member, as appropriate) as of the Closing Date, which certificate shall be in
form and substance reasonably satisfactory to the Administrative Agent and shall
state that the resolutions (or other equivalent authorization) thereby certified
have not been amended, modified, revoked or rescinded.
46
(c) Loan Party Incumbency Certificates. The Administrative
Agent shall have received (with the number of original counterparts requested by
the Administrative Agent), a certificate of each Loan Party, dated as of the
Closing Date, as to the incumbency and signature of the officers of such Loan
Party (or of its general partner or managing member, as appropriate), executing
any Loan Document reasonably satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and the
Secretary or any Assistant Secretary (or by its general partner or managing
member, as appropriate) of such Loan Party.
(d) Constitutional Documents. The Administrative Agent shall
have received (with the number of original counterparts requested by the
Administrative Agent), true and complete copies of the constitutional documents
of each Loan Party, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary (or by its general
partner or managing member, as appropriate) of such Loan Party.
(e) Borrowing Certificate. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent), a certificate of the Borrower, dated the Closing Date,
substantially in the form of Exhibit D, with appropriate insertions and
attachments, satisfactory in form and substance to the Administrative Agent,
executed by a Responsible Officer of the Borrower.
(f) Consents, Licenses and Approvals. All governmental and
third party approvals (including consents) necessary or, in the discretion of
the Administrative Agent, advisable in connection with (i) the Acquisition and
the transactions to occur in connection therewith, (ii) the continuing
operations of the Borrower and its Restricted Subsidiaries and (iii) the
execution, delivery and performance of the Loan Documents, shall have been
obtained and be in full force and effect, and all applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose material and adverse
conditions on the Acquisition, the Acquisition Documents, this Agreement and the
other Loan Documents and the transactions contemplated hereby and thereby. The
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower as to the foregoing.
(g) Fees. Each of the Lenders, the Arrangers and the Agents
shall have received all fees and expenses required to be paid (including those
set forth in the JPMorgan and CSFB fee letters) on or before the Closing Date
for which invoices have been presented.
(h) Legal Opinions. The Administrative Agent shall have
received (i) an executed legal opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., counsel to the Borrower and each Loan Party, in form and substance
reasonably satisfactory to the Administrative Agent, and (ii) such other legal
opinions as the Administrative Agent may reasonably require, each satisfactory
in form and substance to the Administrative Agent. Such legal opinions shall
cover all matters incident to the transactions contemplated by this Agreement,
as the Administrative Agent may reasonably require.
(i) Pledged Securities. The Administrative Agent shall have
received: (i) the certificates representing the Pledged Stock, together with an
undated stock power for each such certificate executed in blank by a duly
authorized Responsible Officer of the Pledgor thereof, (ii) a control agreement
in form and substance reasonably satisfactory to the Administrative Agent for
all uncertificated Pledged Securities and (iii) a UCC-1 financing statement in
respect of all such Pledged Securities. It is contemplated that the Pledged
Securities will represent all of the Equity Interests of
47
each Domestic Subsidiary and 65% of the Equity Interests of each Foreign
Subsidiary directly owned by either the Borrower or a Domestic Subsidiary.
(j) Actions to Perfect Liens. The Administrative Agent shall
have received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including, without
limitation, the filing of duly executed financing statements on form UCC-1,
necessary or, in the opinion of the Administrative Agent, desirable to perfect
the Liens created by the Pledge Agreement shall have been completed.
(k) UCC Searches. The Administrative Agent shall have received
(i) the UCC searches in such jurisdictions as it may reasonably request, each
dated reasonably close to the Closing Date and (ii) evidence reasonably
satisfactory to the Administrative Agent that the Liens indicated by the
financing statements (or similar documents) in such UCC searches are permitted
by subsection 8.3 or either have been or will be released.
(l) Subordinated Note Documents. The Administrative Agent
shall have received true and correct copies, certified as such by a Responsible
Officer of the Borrower, of each Subordinated Note Document to which the
Borrower and its Restricted Subsidiaries is a party on the Closing Date,
including if any 02 Senior Subordinated Notes have been or will be issued on the
Closing Date, a copy of such note(s) and the documentation relating to the
issuance thereof, setting forth the stated face amount and outstanding principal
amount for each as of the Closing Date.
(m) Acquisition Documents; Consummation of Acquisition. The
Administrative Agent shall have received (i) a certificate of an authorized
officer of the Borrower certifying that: (A) not less than $175,000,000 in gross
proceeds has been received by the Borrower from the sale of 02 Senior
Subordinated Notes, (B) Borrower is concurrently consummating the Acquisition in
accordance with the terms of the Acquisition Documents (with all of the material
conditions precedent thereto having been satisfied in all material respects by
the parties thereto) and acquiring substantially all of the Oil and Gas
Properties contained in the package contemplated by the Acquisition Documents
and the final purchase price for the package after giving effect to all
adjustments as of Closing Date contemplated by the Acquisition Documents and
specifying, by category, the amount of such adjustment, (C) attached thereto is
a true and complete list of the Oil and Gas Properties which have been excluded
from the Acquisition pursuant to the terms of the Acquisition Documents,
specifying with respect thereto the basis of exclusion as (1) title defect, (2)
preferential purchase right, (3) environmental or (4) casualty loss, (D)
attached thereto is a true and complete list of all Oil and Gas Properties for
which any seller has elected to cure a title defect, (E) attached thereto is a
true and complete list of all Oil and Gas Properties for which any seller has
elected to remediate an adverse environmental condition, and (F) attached
thereto is a true and complete list of all Oil and Gas Properties which are
currently pending final decision by a third party regarding purchase of such Oil
and Gas Property in accordance with any preferential right (excluding such Oil
and Gas Properties that Borrower is unaware of the pendency of such decision,
provided that the aggregate value of all such Oil and Gas Properties does not
exceed $50,000); (ii) a true and complete executed copy of each of the
Acquisition Documents, each such agreement being in form and substance
reasonably satisfactory to the Administrative Agent; and (iii) such other
related documents and information as the Administrative Agent shall have
reasonably requested.
The Borrower recognizes and agrees that (1) it shall have delivered to
the Administrative Agent a preliminary draft of the certificate described herein
not less than one (1) day prior to the Closing Date identifying which
Acquisition Properties will be excluded from the Acquisition on the
48
Closing Date, and (2) if the aggregate value as reflected in the Initial Reserve
Report of the Acquisition Properties excluded under clause (i)(C) is less than
or equal to $20,000,000 but greater than $10,000,000, the Borrowing Base shall
be adjusted downward to reflect such exclusions by an amount to be determined in
good faith by the Administrative Agent. The Administrative Agent shall allocate
a Borrowing Base value for each such excluded Property and shall, promptly upon
making such allocation, notify the Borrower and each Lender of such allocation.
If the aggregate value as reflected in the Initial Reserve Report of Acquisition
Properties excluded under clause (i)(C) is less than or equal to $10,000,000,
the Borrowing Base will not be adjusted. If either the aggregate value as
reflected in the Initial Reserve Report of Acquisition Properties excluded under
clause (i)(C) is greater than $20,000,000 or any Acquisition Properties are
excluded for other reasons or any seller in respect thereof makes any adjustment
to the purchase price under the Acquisition Documents, then Administrative Agent
shall suggest to the Lenders a Borrowing Base value for each such excluded
Property or such Property subject of such adjustment and the Required Lenders
shall reach a consensus as to the allocation of value for each such Property.
Promptly upon the making by the Required Lenders of such allocation, the
Administrative Agent shall notify the Borrower and each Lender of such
allocation.
(n) Existing Credit Facility. The Administrative Agent shall
have received a certificate, signed by a Responsible Officer of Borrower,
stating that Borrower or its Subsidiaries have repaid in full and terminated the
Existing Credit Facility contemporaneously with the proceeds of the initial
Loans under this Agreement. The Administrative Agent shall have received
evidence satisfactory to it that all Liens associated with the Existing Credit
Facility have been released or terminated contemporaneously with the making of
such payments and that arrangements satisfactory to the Administrative Agent has
been made for recording and filing of such releases.
(o) Insurance Certificate. The Administrative Agent shall have
received a certificate of insurance demonstrating that the Borrower is in
compliance with subsection 7.5 as of the Closing Date.
(p) Commodity Price Hedges. The Administrative Agent shall
have received evidence that the Borrower has entered into commodity price hedges
and firm transportation contracts (such that after giving effect to all hedges
and transportation contracts then in effect, no commodity price basis
differential will remain other than basis differential from Mid-Continent) to
establish minimum fixed prices reasonably acceptable to the Administrative Agent
on a volume of Hydrocarbons equal to not less than 90% of projected PDP
production for 2003 and 2004 from Oil and Gas Properties subject of the
Acquisition with one or more Approved Counterparties.
(q) Initial Reserve Reports. The Administrative Agent shall
have received the Initial Reserve Reports.
(r) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents in respect
of any aspect or consequence of the transactions contemplated hereby or thereby
as it shall reasonably request.
The Administrative Agent shall notify the Borrower, the other Agents and the
Lenders of the satisfaction (or waiver by all Lenders) of the foregoing
conditions, and such notice shall be
49
conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived by all Lenders) at or prior to 3:00 p.m., New York City
time, on December 31, 2002 (and, in the event such conditions are not so
satisfied or waived, notwithstanding any other provision of this Agreement, the
Aggregate Commitments shall terminate at such time).
6.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Loan requested to be made by it on any date (including,
without limitation, its initial Loan on the Closing Date) or of the Issuing Bank
to issue any Letter of Credit (and the Lenders agreement to participate in such
Letter of Credit Outstandings) is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each Loan Party in or pursuant to the
Loan Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date (unless such representations and
warranties are stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date).
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or would occur after giving effect to
Loans requested to be made on such date or the Letters of Credit requested to be
issued.
Each borrowing by, and Letter of Credit issued on behalf of, the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date thereof that the conditions contained in (a) and (b) of
this subsection have been satisfied.
SECTION 7
AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Aggregate Commitments
remain in effect, any Loan, Note or Letter of Credit remains outstanding and
unpaid or any amount is owing to any Lender or Agent hereunder or under any
other Loan Document, the Borrower shall and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Restricted
Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent and to
each of the Lenders:
(a) as soon as available, but in any event in accordance with
then applicable law and not later than 90 days after the end of each fiscal year
of the Borrower, (i) a copy of the consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at the end of such year and the related
consolidated statements of operations, stockholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Required Lenders and (ii) a copy of the
consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at
the end of such year and the related consolidated
50
statements of operations, stockholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as fairly presenting such information
in all material respects; and
(b) as soon as available, but in any event in accordance with
applicable law and not later than 45 days after the end of each of the first
three quarterly fiscal periods of each fiscal year of the Borrower and its
consolidated Subsidiaries, (i) the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of operations, stockholders' equity
and cash flows of the Borrower and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through the end of such quarter and
(ii) the unaudited consolidated balance sheet of the Borrower and its Restricted
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Borrower and its Restricted Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a Responsible
Officer as fairly presenting such information in all material respects (subject
to normal year-end and audit adjustments and the absence of footnotes);
all such financial statements shall be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
7.2 Certificates; Other Information. Furnish to the Administrative
Agent and to each of the Lenders:
(a) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and 7.1(b), a certificate of a Responsible
Officer stating that, to the best of such officer's knowledge, during such
period (i) no Subsidiary has been formed or acquired (or, if any Restricted
Subsidiary has been formed or acquired, the Borrower and such Restricted
Subsidiary complied with the requirements of subsection 7.9 with respect
thereto) and (ii) the Borrower has observed or performed all of its covenants
(and setting forth the calculations used to determine compliance with the
covenants set forth in subsection 8.1) and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to be
observed, performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate;
(b) within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders,
and within five days after the same are filed, copies of all financial
statements and reports, if any, which the Borrower may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(c) promptly upon receipt thereof, copies of all reports and
management letters submitted to the Borrower or any Restricted Subsidiary by
independent public accountants in connection with any interim or special audit
of the books or operations of the Borrower or such Restricted Subsidiary made by
such accountants;
(d) In the event that after the Closing Date: (i) Borrower is
required or decides to purchase any of the Properties which had been excluded
from, or return any of the Properties which had been included in, the
Acquisition Properties in accordance with the terms of the Acquisition
Documents, (ii) Borrower is required to honor any preferential purchase right in
respect of any Acquisition
51
Property which has not been waived, (iii) any matter being disputed in
accordance with the terms of the Acquisition Documents is resolved or (iv)
Borrower and the sellers calculate and agree upon the "closing adjustment
statement" or "post-closing adjustment statement" as contemplated by the
Acquisition Documents, then, in each such case, the Borrower shall promptly give
the Administrative Agent notice in reasonable detail of such circumstances;
(e) deliver to the Administrative Agent within 30 days of
obtaining any renewal or replacement insurance policies as and when required by
subsection 7.5, certificates of insurance evidencing the Borrower's compliance
with subsection 7.5;
(f) promptly, such additional financial and other information
concerning the Borrower and its Subsidiaries as any Lender (acting through the
Administrative Agent) may from time to time reasonably request;
(g) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and 7.1(b), a certificate of a Responsible
Officer stating that all Loans made and Letters of Credit issued during such
period were permitted to be incurred under the terms of the Subordinated Note
Documents, and setting forth in reasonable detail any calculations necessary to
determine compliance with the applicable covenants therein;
(h) whether or not availability under this Agreement is to be
governed by a borrowing base, semi-annual Reserve Reports as contemplated by
subsection 4.9(c);
(i) any announcement by Moody's or S&P of, or any change in,
the senior, unsecured long-term debt rating of the Borrower or the rating of any
other Indebtedness of the Borrower or any of its Restricted Subsidiaries;
(j) if, at any time, all of the consolidated Subsidiaries of
the Borrower are not Restricted Subsidiaries and EBITDAX for all Unrestricted
Subsidiaries will exceed $1,000,000 during the fiscal quarter for which
financial information is being delivered under subsection 7.1(b) or during the
fourth fiscal quarter in the case of the financial information being delivered
under subsection 7.1(a), then with the delivery of such financial information,
consolidating spreadsheets that show all consolidated Unrestricted Subsidiaries
and the eliminating entries, in such form as would be presentable to the
auditors of the Borrower;
(k) in the event the Borrower intends to issue additional
Indebtedness or to refinance any existing Subordinated Indebtedness with
Permitted Subordinated Refinancing Debt as contemplated by subsections 8.2(c),
8.2(h) or 8.2(i), not less than five (5) Business Days prior written notice of
such intended offering therefor, the amount thereof and the anticipated date of
closing, together with a copy of the preliminary offering memorandum (if any)
and, when completed, the final offering memorandum;
(l) on any day on which the Borrower or any Restricted
Subsidiary incurs or otherwise becomes liable in respect of any Indebtedness or
makes any payment of principal on any Indebtedness, furnish to the
Administrative Agent, with a copy to the Lenders, a certificate of a Responsible
Officer setting forth calculations to determine its Total Debt Leverage Ratio as
of such date and setting forth the resulting Applicable Margin and Commitment
Fee Rate; and
52
(m) within 15 days of the Closing Date, original counterparts
or copies, certified as true and complete, of the assignments, deeds and leases
for all of the Acquisition Properties.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or the applicable Restricted Subsidiary, as the case
may be.
7.4 Conduct of Business and Maintenance of Existence; Compliance with
Law and Contractual Obligations. Continue to engage in business of the same
general type as now conducted by it and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except as otherwise permitted by subsection 8.5; comply
with all Contractual Obligations and Requirements of Law except to the extent
that failure to comply therewith could not reasonably be expected to have, in
the aggregate, a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all material Property
owned or leased by it that is useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted; maintain with
financially sound and reputable insurance companies insurance of such types, in
such amounts and against such risks as is customary to be maintained by
companies engaged in the same or a similar business in the same general area;
and furnish to the Administrative Agent, upon written request, full information
as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit, upon
reasonable prior notice, representatives of any Lender to visit, subject to
compliance with the terms of any applicable Requirements of Law or corporate
policy, and inspect any of its properties and examine and make abstracts from
any of its books and records during normal business hours and as often as may
reasonably be requested through the Administrative Agent and to discuss the
business, operations, Properties and financial and other condition of the
Borrower and its Subsidiaries with officers of the Borrower and its Subsidiaries
and with its independent certified public accountants.
7.7 Notices. Promptly give notice to the Administrative Agent of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Restricted Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time between the
Borrower or any of its Restricted Subsidiaries and any Governmental Authority,
which in each case could reasonably be expected to have, in the opinion of a
Responsible Officer, a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Restricted Subsidiaries which could reasonably be expected, in the
opinion of a Responsible Officer, to result in (i) an adverse judgment of
$2,500,000 or more not covered by insurance or (ii) injunctive or similar
53
relief against the Borrower or any of its Restricted Subsidiaries that could
reasonably be expected to have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof to the
extent any such event could reasonably be expected to have a Material Adverse
Effect: (i) the occurrence or expected occurrence of any Reportable Event with
respect to any Single Employer Plan, a failure by the Borrower or any Commonly
Controlled Entity to make any required contribution to a Plan, the creation of
any Lien on the property of the Borrower or any Commonly Controlled Entity in
favor of the PBGC or a Plan or any withdrawal by the Borrower or any Commonly
Controlled Entity from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of any
other action by the PBGC or the Borrower or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal by the Borrower or any
Commonly Controlled Entity from, or the terminating, Reorganization or
Insolvency of, any Plan; and
(e) any other event which could reasonably be expected to have
or has had, in the opinion of a Responsible Officer, a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what the Borrower and its Restricted Subsidiaries have taken or
propose to take with respect thereto.
7.8 Environmental Laws.
(a) (i) Comply with all Environmental Laws, and obtain, comply
with and maintain any and all Environmental Permits necessary for its operations
as conducted and as planned; and (ii) take commercially reasonable efforts to
ensure that all of its tenants, subtenants, contractors, subcontractors, and
invitees comply with all Environmental Laws, and obtain, comply with and
maintain any and all Environmental Permits, applicable to any of them insofar as
any failure to so comply, obtain or maintain reasonably could be expected to
have a Material Adverse Effect. For purposes of this subsection 7.8(a),
noncompliance by the Borrower or any of its Restricted Subsidiaries with any
applicable Environmental Law or Environmental Permit shall be deemed not to
constitute a breach of this covenant provided that, upon learning of any actual
or suspected noncompliance, the Borrower and its Restricted Subsidiaries shall
promptly undertake all reasonable efforts to achieve compliance, and provided
further that, in any case, such non-compliance, and any other noncompliance with
Environmental Law, individually or in the aggregate, could not reasonably be
expected to give rise to a Material Adverse Effect or materially and adversely
affect the value of any material Property considered for calculation of the
Borrowing Base.
(b) Comply with all orders and directives of all Governmental
Authorities regarding Environmental Laws, other than such orders and directives
as to which an appeal or other appropriate action to contest such order or
directive has been timely and properly taken in good faith, or where
non-compliance could not reasonably be expected to give rise to a Material
Adverse Effect.
(c) Prior to acquiring any ownership or leasehold interest in
real property or other interest in any real property that could give rise to the
Borrower being subject to potential significant liability under or violations of
any Environmental Law which potential liability or violations, if incurred,
could reasonably be expected to have a Material Adverse Effect: (i) notify the
Administrative Agent; and (ii) if requested by the Administrative Agent, provide
to the
54
Administrative Agent a written report by an environmental consultant reasonably
acceptable to the Administrative Agent assessing the presence or potential
presence of significant levels of any Materials of Environmental Concern on,
under, in, or about the property, or of other conditions that could give rise to
potentially significant liability or violations of any Environmental Law.
7.9 Additional Collateral; Guarantors.
(a) With respect to any Person that, subsequent to the Closing
Date, becomes a Restricted Subsidiary (other than a Foreign Subsidiary),
promptly: (i) cause all of the Equity Interests of such Person owned by the
Borrower and any Restricted Subsidiary to be pledged to the Administrative
Agent, for the ratable benefit of the Lenders, pursuant to a supplement to the
Pledge Agreement, and take all actions reasonably necessary or advisable to
cause the Lien thereon to be duly perfected in accordance with all applicable
Requirements of Law, and deliver any certificates representing such Equity
Interests to the Administrative Agent, together with undated stock powers
executed and delivered in blank by a duly authorized Responsible Officer of the
Borrower or such Restricted Subsidiary, as the case may be, and (ii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clause (i) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing
Date, becomes a Restricted Subsidiary and is a Foreign Subsidiary that is
directly owned by the Borrower or a Domestic Subsidiary, promptly: (i) execute
and deliver to the Administrative Agent a supplement to the Pledge Agreement to
grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the
Equity Interests of such Subsidiary which is owned by the Borrower or any
Domestic Subsidiary (provided that in no event shall more than 65% of the Equity
Interests of any such Foreign Subsidiary be required to be so pledged), (ii)
deliver to the Administrative Agent any certificates representing such Equity
Interests, together with undated stock powers executed and delivered in blank by
a duly authorized Responsible Officer of the Borrower or such Restricted
Subsidiary, as the case may be, and take or cause to be taken all such other
actions under the law of the jurisdiction of organization of such Foreign
Subsidiary as may be reasonably necessary or advisable to perfect such Lien on
such Equity Interests and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in clauses (i) and (ii) immediately preceding, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) In the event that (i) the Borrower determines that any
Restricted Subsidiary is a Material Domestic Subsidiary, (ii) any Wholly-Owned
Restricted Subsidiary which is a Domestic Subsidiary becomes the owner of a
Foreign Subsidiary which has total assets in excess of $5,000,000 or (iii) any
Wholly-Owned Restricted Subsidiary which is a Domestic Subsidiary creates,
incurs, assumes, suffers to exist or guarantees any Indebtedness, the Borrower
shall promptly cause such Restricted Subsidiary to guarantee the obligations of
the Borrower under this Agreement. In connection with any such guaranty, the
Borrower shall, or shall cause such Restricted Subsidiary to, (A) execute and
deliver a supplement to the Subsidiary Guarantee executed by a duly authorized
Responsible Officer of such Subsidiary and (B) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.
55
7.10 Maintenance and Operation of Property. To the extent that the
failure to comply could reasonably be expected to have a Material Adverse Effect
and consistent with the standards of a reasonably prudent operator:
(a) Maintain, develop, and operate Borrower's and its
Restricted Subsidiaries' Oil and Gas Properties and oil and gas gathering assets
in a good and workmanlike manner, and observe and comply with all of the terms
and provisions, express or implied, of all oil and gas leases relating to the
Properties so long as the oil and gas leases are capable of producing
Hydrocarbons in quantities and at prices providing for continued efficient and
profitable operation of business;
(b) Comply in all material respects with all contracts and
agreements applicable to or relating to Borrower's and its Restricted
Subsidiaries' Oil and Gas Properties or the production and sale of Hydrocarbons
therefrom;
(c) At all times, maintain, preserve, and keep all operating
equipment used with respect to Borrower's and its Restricted Subsidiaries' Oil
and Gas Properties and oil and gas gathering assets in proper repair, working
order and condition, and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the efficiency of the
operating equipment shall at all times be properly preserved and maintained,
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if Borrower or its Subsidiaries shall in good
faith determine that the action is not necessary or desirable for its continued
efficient and profitable operation of business.
(d) With respect to Borrower's and its Restricted
Subsidiaries' Oil and Gas Properties and oil and gas gathering assets which are
operated by operators other than Borrower or a Restricted Subsidiary, use
reasonable efforts to enforce in a manner consistent with the industry practice
the operators' contractual obligations to maintain, develop, and operate such
Properties subject to the applicable operating agreements.
7.11 Further Assurances. Upon the request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Collateral (as defined in the Pledge Agreement) that
are duly perfected in accordance with all applicable Requirements of Law or to
correct any error or omission in any of the Loan Documents.
7.12 Hedging Agreements.
(a) Together with the delivery of the financial statements to
be supplied under subsections 7.1(a) and (b), provide to the Administrative
Agent and the Lenders a report, in form and substance reasonably satisfactory to
the Administrative Agent, setting forth as of the last Business Day of such
fiscal quarter or fiscal year, a true and complete list of all Hedging
Agreements (including commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of the Borrower and each Restricted
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark to market
value therefor, any new
56
credit support agreements relating thereto not listed on Schedules 5.1 or 5.20,
any margin required or supplied under any credit support document, and the
counterparty to each such agreement.
(b) The Borrower shall maintain the hedged position
established by the Hedging Agreements required under subsection 6.1(p) during
the period specified therein and shall neither assign, terminate or unwind any
such Hedging Agreements nor sell any Hedging Agreements if the effect of such
action (when taken together with any other Hedging Agreements executed
contemporaneously with the taking of such action) would have the effect of
canceling or offsetting its positions under such Hedging Agreements required
hereby.
7.13 Title Information.
(a) On or before the delivery to the Administrative Agent and
the Lenders of each Reserve Report required by subsection 4.9, the Borrower will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the value of the Oil and Gas Properties evaluated
by such Reserve Report.
(b) The Borrower shall cure any title defects or exceptions
(including defects or exceptions as to priority) which are not permitted by
subsection 8.3 raised by such information, or substitute acceptable Oil and Gas
Properties with no title defects or exceptions except for liens which are
permitted by subsection 8.3 covering Oil and Gas Properties of an equivalent
value, within 60 days after a request by the Administrative Agent to cure such
defects or exceptions such that the Administrative Agent has satisfactory title
information on at least 80% of the value of the Oil and Gas Properties evaluated
by such Reserve Report.
(c) If the Borrower is unable to cure any title defect
requested by the Administrative Agent to be cured within the 60-day period or
the Borrower does not comply with the requirements to provide acceptable title
information covering 80% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default or an Event
of Default, but instead the Administrative Agent and the Lenders shall have the
right to exercise the following remedy in their sole discretion from time to
time, and any failure to so exercise this remedy at any time shall not be a
waiver as to future exercise of the remedy by the Administrative Agent or the
Lenders. To the extent that the Administrative Agent is not satisfied with title
to any Oil and Gas Properties after the time period in subsection 7.13(b) has
elapsed, such unacceptable Oil and Gas Properties shall not count towards the
80% requirement, and the Administrative Agent may send a notice to the Borrower
and the Lenders that the then outstanding Borrowing Base shall be reduced by an
amount as determined by the Supermajority Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 80%
of the value of the Oil and Gas Properties. This new Borrowing Base shall become
effective immediately after receipt of such notice.
7.14 Mortgaged Properties.If at any time after the Closing Date (a) the
Borrower creates, issues, assumes, or suffers to exists any Indebtedness (other
than Indebtedness permitted under subsections 8.2(a), 8.2(e), 8.2(f), 8.2(g) and
8.2(k) or under subsection 8.2(d), to the extent such Guarantee Obligation
relates to Indebtedness under any of the foregoing subsections) that is not
contractually subordinated in right of payment to the obligations of the
Borrower under this
57
Agreement on terms substantially similar to the 01 Senior Subordinated Notes or
otherwise reasonably acceptable to the Administrative Agent, (b) the Borrower or
any Restricted Subsidiary posts cash or other collateral (other than Letters of
Credit issued under this Agreement and cash or Cash Equivalents in an aggregate
amount not to exceed $10,000,000 at any time) to secure any Indebtedness of the
type described under subsections 8.2(f) or 8.2(g), whether or not permitted by
such subsections, (c) the Borrower's senior unsecured long-term debt rating is
BB- or less from S&P (or there is no rating) and Ba3 or less from Moody's (or
there is no rating), or (d) on December 31, 2003, the Borrower's senior
unsecured long-term debt rating is not BB+ or better from S&P and Ba1 or better
from Moody's, the Borrower shall, and shall cause each Guarantor to, grant to
the Lenders a first priority, perfected Lien (subject only to certain Liens
permitted under subsection 8.3, as more fully described below) on Oil and Gas
Properties and related assets of the Borrower and the Guarantors comprising not
less than 75% of the total value of the Oil and Gas Properties evaluated in the
Reserve Report most recently delivered to the Agents. Within 30 days after the
occurrence of either of (a), (b), (c) or (d) above, the Borrower will deliver,
or cause such Guarantor to deliver, a mortgage in substantially the form of
Exhibit C together with any reasonable changes suggested by local counsel for
each Oil and Gas Property and their related assets (each a "Mortgage"), which
shall be sufficient to subject such Oil and Gas Properties and other assets to a
first priority, perfected Lien (Liens of the type described in subsections
8.3(a), 8.3(b), 8.3(c), 8.3(d), 8.3(f), 8.3(g), 8.3(h), 8.3(m) and 8.3(p),
however, shall be permitted) in accordance with this subsection 7.14 (each such
Property, a "Mortgaged Property"), which documentation shall be reasonably
satisfactory to the Administrative Agent and its counsel. Such mortgages and
documentation will be accompanied with legal opinions from local counsel,
substantially in the form of C-1, and Borrower's counsel regarding such
additional matters as the Administrative Agent may reasonably request, and other
documentation as the Administrative Agent may reasonably request. For purposes
of subsections 7.14 and 7.15, the "total value of Oil and Gas Properties" shall
mean the calculation of the present value of future cash flows from Proved
Reserves utilizing Administrative Agent's usual and customary pricing for oil
and natural gas collateral as in effect from time to time based upon the most
recent delivered Reserve Report.
7.15 Additional Collateral; Borrowing Base. If the Borrower and the
Guarantors are obligated to grant Liens under subsection 7.14, then the Borrower
in connection with each redetermination of the Borrowing Base shall review the
Reserve Report delivered in connection with such redetermination and the list of
current Mortgaged Properties to ascertain whether the Mortgaged Properties
represent at least 75% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent at least
75% of such total value, then the Borrower shall, and shall cause the Guarantors
to, grant to the Administrative Agent a first-priority Lien interest (Liens of
the type described in subsections 8.3(a), 8.3(b), 8.3(c), 8.3(d), 8.3(f),
8.3(g), 8.3(h), 8.3(m) and 8.3(p), however, shall be permitted), on additional
Oil and Gas Properties and their related assets not already a Mortgaged Property
such that after giving effect thereto, the Mortgaged Properties will represent
at least 75% of such value. If a Restricted Subsidiary that is not a Guarantor
grants a Lien on any of its Mortgaged Properties, it will also become a
Guarantor. All such Liens will be created and perfected in the same manner as
set forth in subsection 7.14.
58
SECTION 8
NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note or any Letter of Credit remains outstanding and unpaid or
any amount is owing to any Lender or Agent hereunder or under any other Loan
Document, the Borrower shall not, and shall not (except with respect to
subsection 8.1) permit any Restricted Subsidiary to, directly or indirectly:
8.1 Financial Covenants.
(a) While Borrowing Base is in Effect: At all times while
availability under this Agreement is to be governed by a borrowing base as
required by subsection 4.9(a) (and whether or not a borrowing base has then been
established and approved by the Supermajority Lenders),
(i) Interest Coverage Ratio. Permit, for any period of four
consecutive fiscal quarters ending after the date hereof, the ratio of
Consolidated EBITDAX to Consolidated Interest Expense of the Borrower
and its Restricted Subsidiaries for such four consecutive fiscal
quarters to be less than 3.0 to 1.0; and
(ii) Current Ratio. Permit the ratio of current assets to
current liabilities at any time to be less than 1.0 to 1.0. For
purposes of this calculation, (i) current assets will include an amount
equal to the Available Commitments of the Lenders and (ii) both current
assets and current liabilities will exclude gains and losses resulting
from the mark-to-market of commodity price risk management transactions
in accordance with FAS 133, but to the extent cash collateral is
provided for under any Commodity Price Risk Management Agreement,
associated losses will be included in current liabilities and such cash
collateral will be included in current assets.
(b) While Borrowing Base is not in Effect: At all times while
availability under this Agreement is not then being governed by a borrowing
base,
(i) Interest Coverage Ratio. Fail to comply with clause (i) of
subsection 8.1(a);
(ii) Total Debt Leverage Ratio. Permit, as of any date of
determination, its Total Debt Leverage Ratio to be greater than 3.5 to
1.0;
(iii) Senior Debt Leverage Ratio. Permit, as of any date of
determination, the ratio of Senior Debt (as of such date of
determination) to Consolidated EBITDAX for any most recently ended
period of four consecutive fiscal quarters ending prior to such date of
determination for which financial statements under subsection 7.1(a) or
7.1(b) are available to be greater than 2.5 to 1.0;
(iv) PV to Total Debt Ratio. Subject to clause (c) of this
subsection 8.1, permit as of any date of determination, the ratio of PV
to Total Debt as of such date of determination to be less than 1.3 to
1.0; and
(v) PV to Senior Debt Ratio. Subject to clause (c) of this
subsection 8.1 permit as of any date of determination, the ratio of PV
to Senior Debt as of such date of determination to be less than 2.0 to
1.0.
59
(c) Inapplicability of PV Ratios. Notwithstanding the
foregoing, in the event that the Borrower's senior, unsecured long-term debt
rating is BBB- or greater by S&P and Baa3 or greater by Moody's, then the
Borrower shall not be obligated to comply with clauses (iv) and (v) of
subsection 8.1(b).
8.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower and the Loan Parties under
the Loan Documents;
(b) Indebtedness of the Borrower issued to any Wholly-Owned
Restricted Subsidiary and Indebtedness of any Wholly-Owned Restricted Subsidiary
issued to the Borrower or any other Wholly-Owned Restricted Subsidiary;
(c) Indebtedness of the Borrower evidenced by the 97 Senior
Subordinated Notes, the 01 Senior Subordinated Notes, the 02 Senior Subordinated
Notes and any Permitted Subordinated Refinancing Debt; provided if the stated
principal amount of the 02 Senior Subordinated Notes issued prior to the initial
redetermination of the Borrowing Base is greater than $175,000,000, then the
Borrowing Base shall be adjusted in accordance with subsection 4.9(g);
(d) Guarantee Obligations permitted by subsection 8.4;
(e) Indebtedness of the Borrower and its Wholly-Owned
Restricted Subsidiaries existing on the Closing Date and listed on Schedule
8.2(e), but not any extensions, renewals or replacements of such Indebtedness;
(f) Indebtedness of the Borrower or any Guarantor under
Interest Rate Protection Agreements permitted by subsection 8.16;
(g) Indebtedness of the Borrower or any Guarantor under
Commodity Price Risk Management Agreements permitted by subsection 8.16;
(h) if availability under this facility is not governed by a
borrowing base, other Indebtedness of the Borrower, provided that (i) after
giving effect to the incurrence of such Indebtedness (and any concurrent
repayment of Indebtedness with the proceeds of such incurrence), the Borrower is
in compliance with subsection 8.1 hereof, (ii) the final maturity of such
Indebtedness is no earlier than 90 days after the Termination Date and the
average life of such Indebtedness is no shorter than the average life of the
Loans hereunder and (iii) if such Indebtedness is Subordinated Indebtedness, its
subordination terms are either reasonably acceptable to the Required Lenders as
evidenced by their written approval or substantially identical to those
contained in the 97 Indenture or the 01 Indenture;
(i) if availability under this facility is governed by a
borrowing base, other Indebtedness of the Borrower, provided that (i) after
giving effect to the incurrence of such Indebtedness (and any concurrent
repayment of Indebtedness with the proceeds of such incurrence), the Borrower is
in compliance with subsection 8.1 hereof and (ii) the Supermajority Lenders
shall have the right to immediately adjust the amount of the Borrowing Base to
reflect such incurrence;
60
(j) additional Indebtedness of the Borrower or any Guarantor
not to exceed $30,000,000 in aggregate principal amount at any one time
outstanding; and
(k) Indebtedness in respect of Capital Leases in an aggregate
amount not to exceed $2,000,000 at any time.
8.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments, fees and other governmental
charges and claims that are not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or the applicable Restricted
Subsidiary, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, suppliers' mechanics',
materialmen's, vendors', repairmen's, landlords' and other like Liens arising in
the ordinary course of business securing obligations which are not overdue for a
period of more than 120 days or which are being contested in good faith by
appropriate proceedings;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance or
other kinds of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business (including lessee or operator obligations under statutes,
governmental regulations or instruments related to the ownership, exploration
and production of oil, gas and minerals on state or federal lands or waters);
(d) Liens constituting survey exceptions, encumbrances,
easements and reservations of, or rights of others for, rights-of-way, zoning
and other restrictions as to the use of real properties and other similar
encumbrances incurred in the ordinary course of business which, with respect to
all of the foregoing, do not secure the payment of Indebtedness of the type
described in clauses (a)-(d) of the definition thereof and which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value and use of the Property subject thereto or materially
interfere with the ordinary conduct of the business of the Borrower or any
Restricted Subsidiary;
(e) Liens existing on the date of this Agreement and listed on
Schedule 8.3, provided that no such Lien is amended after the date of this
Agreement to cover any additional Property (other than additions and accessions
thereto and proceeds thereof) or to secure additional Indebtedness;
(f) Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil and gas leases, farm-out and farm-in
agreements, division orders, contracts for the sale, transportation or exchange
of oil or natural gas, unitization and pooling declarations and agreements, area
of mutual interest agreements and other agreements that are customary in the Oil
and Gas Business; provided that the amount of any obligations secured thereby
that are delinquent, that are not diligently contested in good faith and for
which adequate reserves are not maintained by the Borrower or the applicable
Restricted Subsidiary, as the case may be, do not exceed, at any time
outstanding, the amount owing by the Borrower or any Restricted Subsidiary, as
61
applicable, for one month's billed operating expenses or other expenditures
attributable to such entity's interest in the Property covered thereby; and
further provided that such obligations secured thereby do not constitute
obligations in respect of borrowed money;
(g) Liens reserved in oil and gas mineral leases for bonus or
rental payments and for compliance with the terms of such leases, provided that
the amount of any obligations secured thereby that are delinquent, that are not
diligently contested in good faith and for which adequate reserves are not
maintained by the Borrower or the applicable Restricted Subsidiary, as the case
may be, do not exceed, at any time outstanding, the amount owing by the Borrower
or any Restricted Subsidiary, as applicable, for one month's payments as due
thereunder;
(h) Liens on pipeline or pipeline facilities that arise under
operation of law;
(i) Liens created pursuant to any Loan Document;
(j) Liens securing Indebtedness otherwise permitted by
subsection 8.2 not to exceed $10,000,000 in aggregate amount at any time
outstanding; provided that no such Liens under this subsection 8.3(j) shall
encumber any Equity Interest of any Restricted Subsidiary;
(k) Liens created pursuant to any Hedging Agreement, provided
that:
(i) such Lien is in the form of Letters of Credit deposited in
margin accounts; and
(ii) the aggregate amount of Letter of Credit Outstandings
under such Letters of Credit issued to support obligations under any
Hedging Agreement does not exceed $200,000,000;
(l) set-off, charge back and other rights of depositary and
collection banks and other regulated financial institutions with respect to
money or instruments of the Borrower or its Restricted Subsidiaries on deposit
with or in the possession of such institutions;
(m) Liens arising out of judgments or decrees not constituting
an Event of Default; provided that no action to enforce such Lien has commenced;
(n) Liens arising under indentures or other similar
instruments governing Indebtedness issued thereunder in favor of the trustees,
agents or representatives thereunder in their capacities as such (and not for
the benefit of the holders of such Indebtedness); provided that such Lien covers
only property constituting the trust estate or such property as may be collected
or held by such trustee, agent or representative in enforcing the payment of
such Indebtedness and amounts owed to such trustee, agent or representative;
(o) Liens arising from the deposit of money or securities in
trust for the purpose of defeasing Indebtedness of the Borrower or any
Restricted Subsidiary; provided that at the time such money or securities are
deposited and after giving effect thereto, the Borrower is in compliance with
subsection 8.9; and
(p) Liens to secure Capital Leases permitted by subsection
8.2(k); provided that such Liens do not extend to any Property (other than
additions and accessions thereto and proceeds thereof) not the subject of such
Capital Lease.
62
8.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations of any Guarantor with respect to the
97 Senior Subordinated Notes, the 01 Senior Subordinated Notes, the 02 Senior
Subordinated Notes and any Permitted Subordinated Refinancing Debt;
(b) Guarantee Obligations in existence on the date hereof and
listed on Schedule 8.4;
(c) other Guarantee Obligations of the Borrower or any
Guarantor of Indebtedness permitted by subsection 8.2, provided that if the
Indebtedness guaranteed is Subordinated Indebtedness, then such Guarantee
Obligation shall also be subordinated either in a manner reasonably acceptable
to the Required Lenders as evidenced by their written approval or on terms
substantially identical to those contained in the guarantees of the 97 Indenture
or the 01 Indenture; and
(d) Guarantee Obligations arising under the Loan Documents.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation as a constituent party, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
Property, business or assets, or make any material change in its present method
of conducting business except:
(a) (i) any Restricted Subsidiary of the Borrower (including a
Foreign Subsidiary) may be merged or consolidated with or into the Borrower
(provided that the Borrower shall be the continuing or surviving corporation) or
with or into any one or more Wholly-Owned Restricted Subsidiaries which are
Domestic Subsidiaries (provided that such Wholly-Owned Restricted Subsidiary or
Subsidiaries shall be the continuing or surviving Person) and (ii) any Foreign
Subsidiary of the Borrower may be merged or consolidated with or into any one or
more Wholly-Owned Restricted Subsidiaries which are Foreign Subsidiaries
(provided that such Wholly-Owned Restricted Subsidiary or Subsidiaries shall be
the continuing or surviving Person);
(b) (i) any Wholly-Owned Restricted Subsidiary (including a
Wholly-Owned Restricted Subsidiary which is a Foreign Subsidiary) of the
Borrower may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Wholly-Owned Restricted Subsidiary which is a Domestic Subsidiary and (ii) any
Wholly-Owned Restricted Subsidiary of the Borrower which is a Foreign Subsidiary
may sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to any Wholly-Owned Restricted Subsidiary
which is a Foreign Subsidiary; and
(c) any Wholly-Owned Restricted Subsidiary may be merged or
consolidated with any Person acquired in connection with a Permitted Business
Acquisition made in the ordinary course of the Oil and Gas Business, provided
the continuing or surviving Person shall be a Wholly-Owned Restricted
Subsidiary.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and
63
leasehold interests), whether now owned or hereafter acquired, or issue or sell
any shares of any Restricted Subsidiary's Equity Interests to any Person other
than the Borrower or any Domestic Wholly-Owned Restricted Subsidiary, except:
(a) the sale or discount without recourse of any accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof;
(b) the sale of Hydrocarbons in the ordinary course of
business as and when produced or after the production thereof;
(c) as permitted by subsection 8.5(b), subsection 8.8(f) or
subsection 8.15;
(d) the abandonment, farm-out, exchange, lease or sublease of
Oil and Gas Properties not containing Proved Reserves in the ordinary course of
business;
(e) the sale of Oil and Gas Properties in connection with tax
credit transactions complying with Section 29 of the Code or any other analogous
provision whether now existing or hereafter enacted, which sale does not result
in a reduction in the Borrower's or its Restricted Subsidiaries', as the case
may be, right to receive the cash flow from such Oil and Gas Properties and
which sale is on terms reasonably acceptable to the Administrative Agent;
(f) sales or other dispositions of Proved Reserves or Equity
Interests in any Restricted Subsidiary owning Proved Reserves, provided that (i)
if availability under this Agreement is then governed by a borrowing base, the
amount of all sales or other dispositions (including dispositions of Acquisition
Properties subject to preferential purchase rights) of Proved Reserves or of
Equity Interests in Restricted Subsidiaries owning Proved Reserves made pursuant
to this subsection 8.6(f) during any Borrowing Base Period may not exceed
$25,000,000, unless, simultaneously with any such sale or disposition which
(together with prior sales or other dispositions made pursuant to this
subsection 8.6(f) during such Borrowing Base Period) exceeds the foregoing
limit, the Borrowing Base is adjusted by an amount agreed to at the time by the
Supermajority Lenders pursuant to the procedures set forth in subsection 4.9,
and if availability under this Agreement is not then being governed by a
borrowing base, the amount of all sales and other dispositions (including
dispositions of Acquisition Properties subject to preferential purchase rights)
of Proved Reserves or of Equity Interests in Restricted Subsidiaries owning
Proved Reserves made pursuant to this subsection 8.6(f) during any twelve-month
period may not exceed $30,000,000; (ii) any sale or disposition of Equity
Interests in a Restricted Subsidiary must be of all Equity Interests owned,
directly or indirectly, by the Borrower; and (iii) any conversion of a
Restricted Subsidiary, which owns, directly or indirectly, Proved Reserves, to
an Unrestricted Subsidiary in conformity with subsection 8.17 shall be deemed to
be a sale of such Proved Reserves for purposes of this subsection 8.6;
(g) sales or other dispositions of Property not constituting
Oil and Gas Properties, accounts receivable or Equity Interests in any
Restricted Subsidiaries; and
(h) dispositions occurring as the result of a casualty event,
event of loss, condemnation or expropriation.
8.7 Limitation on Restricted Payments. Declare or pay any dividend on
(other than dividends payable solely in Equity Interests of the Borrower other
than Disqualified Stock), or make
64
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Equity Interests of the Borrower or any
Restricted Subsidiary, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or Property or in obligations of the Borrower or any Restricted Subsidiary (such
declarations, payments, setting apart, purchases, redemptions, defeasance,
retirements, acquisitions and distributions being herein called "Restricted
Payments"), except that:
(a) the Borrower or any Restricted Subsidiary may declare and
pay dividends to or make other Restricted Payments to the Borrower or to any
Wholly-Owned Restricted Subsidiary;
(b) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom and no Borrowing Base Deficiency exists
or would result from such Restricted Payment, the Borrower or any Restricted
Subsidiary may make a Restricted Payment if such Restricted Payment, together
with the aggregate of all other Restricted Payments made by the Borrower and its
Restricted Subsidiaries after the Closing Date pursuant to this subsection
8.7(b), is less than the sum of:
(i) 50% of the Consolidated Net Income of the Borrower and its
Restricted Subsidiaries for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the
Closing Date to the end of the Borrower's most recently ended fiscal
quarter for which financial statements have been delivered to the
Administrative Agent and the Lenders pursuant to subsection 7.1 at or
prior to the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit),
plus
(ii) 50% of (A) the aggregate net cash proceeds received from
the issue or sale after the Closing Date of Equity Interests in the
Borrower (other than (1) Equity Interests sold to a Subsidiary of the
Borrower, (2) Disqualified Stock and (3) Equity Interests sold on or
after the Closing Date pursuant to an offering commenced prior to the
Closing Date as a result of the exercise of "shoe" rights associated
with such offering) minus (B) the amount of any Restricted Payment made
under subsection 8.7(c)(B)(2) and any Subordinated Indebtedness repaid,
repurchased, redeemed or otherwise defeased under subsection
8.9(a)(iv), minus
(iii) the amount of Subordinated Indebtedness previously paid,
prepaid, redeemed, defeased or repurchased pursuant to subsection
8.9(a)(ii) and minus
(iv) the amount by which the sum of all Investments previously
made in Unrestricted Subsidiaries pursuant to subsection 8.8(g) exceeds
$10,000,000;
provided, however, that the foregoing clauses (i), (ii), (iii) and (iv) of this
paragraph shall not prohibit Restricted Payments, which together with the
aggregate of all other Restricted Payments made by the Borrower and its
Restricted Subsidiaries after the Closing Date pursuant to this subsection
8.7(b) (in addition to all amounts which are included in clauses (iii) and (iv)
immediately preceding) do not exceed $80,000,000. The amount of all Restricted
Payments (other than cash) under this subsection 8.7(b) shall be the fair market
value (as determined in good faith by the board of directors of the Borrower or
certified to the Administrative Agent by a Responsible Officer of the Borrower)
on the date of the proposed Restricted Payment.
65
(c) without limitation of the ability of the Borrower to
purchase, redeem, defease or otherwise acquire or retire any of its 6 1/2%
Convertible Preferred Stock under subsection 8.7(b), the Borrower may purchase,
redeem, defease or otherwise acquire or retire any of its 6 1/2% Convertible
Preferred Stock if (A) no Default or Event of Default has occurred and is
continuing or would result therefrom and (B) either (1) the Borrower's senior
unsecured long-term debt rating is BB+ or better by S&P and Ba1 or better by
Moody's or (2) such purchase, redemption, defeasance or other acquisition or
retirement is made with the proceeds of any issue or sale of Equity Interests
(other than Equity Interests sold to a Subsidiary of the Borrower and other than
Disqualified Stock).
8.8 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment (including by the issuance of
letters of credit) in (collectively, "Investments"), any Person except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) loans and advances to officers and employees of the
Borrower or any Restricted Subsidiary for travel, entertainment and relocation
expenses in the ordinary course of business in an aggregate amount for the
Borrower and its Restricted Subsidiaries not to exceed $2,000,000 at any one
time outstanding;
(d) Investments constituting Permitted Business Investments
made or entered into in the ordinary course of the Oil and Gas Business;
(e) Investments constituting Permitted Business Acquisitions
made or entered into in the ordinary course of the Oil and Gas Business;
(f) Investments by the Borrower in any Restricted Subsidiary
and Investments by any Restricted Subsidiary in the Borrower or in other
Restricted Subsidiaries or, if no Default or Event of Default has occurred and
is continuing or would result from such Investment, by either the Borrower or a
Restricted Subsidiary in a Person who after giving effect to such Investment
becomes a Restricted Subsidiary, provided that the net book value of Investments
made after the Closing Date in any Restricted Subsidiaries which (i) are
Domestic Subsidiaries but not Wholly-Owned Restricted Subsidiaries shall not
exceed $25,000,000 and (ii) are Foreign Subsidiaries shall not exceed 25% of the
net book value of the assets of the Borrower and its Restricted Subsidiaries in
the aggregate at any time outstanding after taking into account any return after
the Closing Date from dividends, distributions and repayments in respect of such
Investment;
(g) Investments by the Borrower or any Restricted Subsidiary
in Unrestricted Subsidiaries; provided that the aggregate amount of such
Investments (net of any cash received as dividends or distributions on such
Investments or from the sale of such Investments) does not exceed, at any one
time outstanding, $10,000,000, unless (after deducting that excess, pursuant to
subsection 8.7(b)(iv), from the amount of Restricted Payments permitted by
subsection 8.7(b)) the Borrower would be able to make, at such time, an
additional Restricted Payment pursuant to subsection 8.7(b); provided further
that the cumulative outstanding Investment in any Restricted Subsidiary on the
date that such Restricted Subsidiary is converted to an Unrestricted Subsidiary
in conformity with
66
subsection 8.17 shall be deemed an investment made on such conversion date in an
Unrestricted Subsidiary for purposes of determining compliance with this
subsection 8.8(g); and
(h) Investments by the Borrower or any Restricted Subsidiary
in securities which trade on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ Stock Market (including Investments existing on the
Closing Date and listed on Schedule 8.8 hereof, but excluding Investments in
Unrestricted Subsidiaries) in an aggregate amount (valued at cost) not to exceed
$25,000,000 at any one time outstanding.
The amount of all Investments (other than cash) (including, without
limitation, the re-characterization of a Restricted Subsidiary to be an
Unrestricted Subsidiary) shall be the fair market value (as determined in good
faith by the board of directors of the Borrower or certified to the
Administrative Agent by a Responsible Officer of the Borrower) on the date of
the proposed Investment.
8.9 Limitation on Optional Payments and Modifications of Debt
Instruments, Other Material Agreements.
(a) Make any voluntary or optional payment or prepayment on or
redemption, defeasance or purchase of any Subordinated Indebtedness; provided
that as long as no Default or Event of Default has occurred or is continuing or
would exist after giving effect thereto, the Borrower may redeem or repurchase
any Subordinated Indebtedness:
(i) through an incurrence of Permitted Subordinated
Refinancing Debt and/or with the proceeds of 02 Senior Subordinated
Notes or Indebtedness permitted to be issued pursuant to subsections
8.2(h) or (i), provided that such Indebtedness is Subordinated
Indebtedness;
(ii) to the extent that, after deducting the amount of the
proposed payment, prepayment, redemption, defeasance or repurchase,
pursuant to subsection 8.7(b)(iii), from the amount of Restricted
Payments permitted by subsection 8.7(b), the Borrower would be able to
make an additional Restricted Payment at such time pursuant to
subsection 8.7(b);
(iii) if the Borrower's senior unsecured long-term debt rating
is BB+ or better by S&P and Ba1 or better by Moody's; or
(iv) through the issue or sale of Equity Interests in the
Borrower (other than Equity Interests sold to a Subsidiary of the
Borrower and other than Disqualified Stock).
(b) Amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms (including the
subordination provisions) of any Subordinated Note Document other than (i) any
amendment, modification or change that, subject to the concurrence of the
Administrative Agent, causes such Subordinated Note Document to have terms
generally less restrictive than its terms immediately prior thereto; (ii) any
amendment, modification or change to a then-existing Subordinated Note Document
to conform the provisions thereof to the corresponding provisions of any
Subordinated Note Document governing newly issued Subordinated Indebtedness
permitted by this Agreement; (iii) any amendment, modification or change that
may be approved by the Borrower and the trustee (or agent or lenders, as
appropriate) under the indenture or other agreement governing such Subordinated
Indebtedness without the
67
consent of any holders of such Subordinated Indebtedness (other than changes to
provide additional rights or benefits to such holders or changes to modify or
remove terms of subordination) and (iv) any amendment or modification to issue
additional Subordinated Indebtedness, provided such issuance complies with this
Agreement.
(c) Except for this Agreement and the other Loan Documents,
designate any Indebtedness as "Designated Senior Debt" or any other similar or
analogous designation under any Subordinated Note Document or designate any
Guarantee Obligation as "Designated Guarantor Senior Debt" or any other similar
or analogous designation under any Subordinated Note Document.
8.10 Limitation on Transactions with Affiliates. Except as described in
Schedule 8.10, enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate (other than transactions between or among the Borrower and
its Restricted Subsidiaries) unless such transaction is (a) otherwise permitted
under this Agreement, (b) in the ordinary course of the Borrower's or the
applicable Restricted Subsidiary's business and (c) upon fair and reasonable
terms no less favorable to the Borrower or the applicable Restricted Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate or, in the event no
comparable transaction with an unaffiliated Person is available, on terms that
are fair from a financial point of view to the Borrower or the applicable
Restricted Subsidiary. For purposes of this subsection 8.10, "Affiliate" shall
include any Unrestricted Subsidiary.
8.11 Limitation on Sale and Leasebacks. Enter into any arrangement with
any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal Property which has been or is to be sold or
transferred by the Borrower or such Restricted Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of the Borrower or any
Restricted Subsidiary.
8.12 Limitation on Changes in Fiscal Year; Use of Proceeds. Permit the
fiscal year of the Borrower and its Restricted Subsidiaries to end on a day
other than December 31; or use the proceeds of any Loan or any Letter of Credit
for a purpose not contemplated by subsection 5.16.
8.13 Limitation on Negative Pledge Clauses. Enter into with any Person
any agreement which prohibits or limits the ability of the Borrower or any
Restricted Subsidiary to create, incur, assume or suffer to exist any Lien in
favor of any of the Administrative Agent, the Lenders under the Loan Documents
and their respective assignees under the Loan Documents or any Person
refinancing all or a portion of the Commitments hereunder (each, a "Negative
Pledge Clause"), upon any of its Property, assets or revenues, whether now owned
or hereafter acquired; provided that the foregoing shall not apply to a Negative
Pledge Clause to the extent such Negative Pledge Clause (a) (i) is contained in
an agreement which creates a Lien permitted by subsections 8.3(c), (f), (j), (k)
or (o) and (ii) only applies to the Property encumbered by such Lien, or (b) is
contained in a lease, license, asset sale agreement or other customary agreement
(not related to Indebtedness) that is entered into in the ordinary course of
business and relates only to the property subject of such lease, license, asset
sale agreement or other customary agreement.
8.14 Limitation on Lines of Business. Enter into any business, either
directly or through any Restricted Subsidiary, except for the Oil and Gas
Business and those businesses in which the Borrower and its Restricted
Subsidiaries are engaged on the date of this Agreement or which are directly
related thereto.
68
8.15 Forward Sales. Except in accordance with usual and customary
practice in the Oil and Gas Business and except for gas imbalances not in excess
of 5.0 billion cubic feet, enter into or permit to exist any advance payment
agreement or other arrangement pursuant to which the Borrower or any of its
Restricted Subsidiaries, having received full or substantial payment of the
purchase price for a specified quantity of Hydrocarbons upon entering such
agreement or arrangement, is required to deliver, in one or more installments
subsequent to the date of such agreement or arrangement, such quantity of
Hydrocarbons pursuant to and during the terms of such agreement or arrangement.
8.16 Hedging Agreements. Enter into any Hedging Agreement, other than
Hedging Agreements with Approved Counterparties entered into in the ordinary
course of business to achieve more predictable revenues and cash flows and
reduce interest rates or exposure to fluctuations in interest rates and oil and
gas prices to which the Borrower and its Restricted Subsidiaries are exposed in
the conduct of their business or the management of their liabilities, provided
that the aggregate amount of Hedging Agreements which are Commodity Price Risk
Management Agreements (exclusive of basis differential swaps) may not exceed the
following: (i) for oil, the total volumes to be hedged for any period shall not
exceed 80% of the aggregate expected oil production of the Borrower and its
Restricted Subsidiaries for the period during which such Hedging Agreement is in
effect, and (ii) for gas, the total volumes to be hedged for any period shall
not exceed 80% of the aggregate expected gas production of the Borrower and its
Restricted Subsidiaries for the period during which such Hedging Agreement is in
effect.
8.17 Unrestricted Subsidiaries.
(a) Create or otherwise designate any Subsidiary as an
Unrestricted Subsidiary unless subsections 8.6(f)(iii) and 8.8(g) and the terms
set forth in the definition of Unrestricted Subsidiary are complied with respect
to such Subsidiary and no Default would result from the designation, creation
and operation of such Unrestricted Subsidiary.
(b) Without the prior written consent of the Supermajority
Lenders, change the characterization of a Subsidiary from a Restricted
Subsidiary to an Unrestricted Subsidiary or an Unrestricted Subsidiary to a
Restricted Subsidiary; provided however, the prior written consent of the
Supermajority Lenders shall not be required to (i) change the characterization
of an Unrestricted Subsidiary to a Restricted Subsidiary if (A) no Default or
Event of Default shall have occurred and be continuing at such time or would
result therefrom, (B) after giving effect to such re-characterization, each of
the representations and warranties made by each Loan Party in or pursuant to the
Loan Documents shall be true and correct in all material respects as of the date
of such re-characterization, (C) such Subsidiary shall have complied with the
provisions of subsection 7.9 and (D) the Borrower provides the Administrative
Agent five days advance written notice of its intent to re-characterize such
Subsidiary or (ii) change the characterization of a Restricted Subsidiary to an
Unrestricted Subsidiary if (A) no Default or Event of Default shall have
occurred and be continuing or would result therefrom, assuming that such
re-characterization constitutes an Investment in an Unrestricted Subsidiary and
(B) the Borrower provides the Administrative Agent five days advance written
notice of its intent to re-characterize such Subsidiary. If any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in accordance with the
terms of this Agreement, the Administrative Agent shall, and the Lenders hereby
instruct the Administrative Agent to, release, upon the written request of the
Borrower, such Subsidiary from any Guarantee Obligations arising under the Loan
Documents, release the Equity Interests of such Subsidiary from the Liens
created under the Pledge Agreement and release the Properties of such Subsidiary
from any Mortgage;
69
provided that (i) such Subsidiary shall not have any Guarantee Obligations with
respect to, or Liens in favor of, any Subordinated Indebtedness that are not so
released and (ii) such release shall not cause a Borrowing Base Deficiency. The
Administrative Agent, at the Borrower's request and expense, shall execute such
releases, termination statements or agreements as may be reasonably necessary to
effect the release of Guarantee Obligations under the Loan Documents or Liens
created under the Pledge Agreement and, if applicable, the Mortgages.
(c) Permit any Unrestricted Subsidiary to fail to comply with
the requirements set forth in the definition of "Unrestricted Subsidiary."
(d) Permit the aggregate amount of Indebtedness outstanding at
all Unrestricted Subsidiaries to exceed at any time $25,000,000.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default. If any of the following events shall occur and
be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, within three Business Days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) The Borrower or any of its Restricted Subsidiaries shall
default in the observance or performance of any agreement applicable to it
contained in subsection 4.10 or Section 8 of this Agreement; or
(d) The Borrower or any of its Restricted Subsidiaries shall
default in the observance or performance of any other agreement applicable to it
contained in this Agreement or any other Loan Document (other than as provided
in paragraphs (a) through (c) of this Section 9), and such default shall
continue unremedied for a period of 30 consecutive days after the earlier of (i)
the Borrower's obtaining knowledge of such default or (ii) the receipt by the
Borrower of notice thereof from the Administrative Agent or any Lender; or
(e) The Borrower or any of its Restricted Subsidiaries shall
(i) default in any payment of principal of or interest of any Indebtedness
(other than the Loans), or in the payment of any Guarantee Obligation, in
excess, in the aggregate, of $10,000,000, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
70
shall occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required and the expiration of any
applicable grace period, such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable, provided that the
aggregate principal amount of all such Indebtedness and Guarantee Obligations
which would then become due and payable would equal or exceed $10,000,000; or
(f) (i) The Borrower or any of its Restricted Subsidiaries
shall commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any of its Restricted Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Restricted Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
90 days; or (iii) there shall be commenced against the Borrower or any of its
Restricted Subsidiaries any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 90 days from the entry thereof; or (iv) the
Borrower or any of its Restricted Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the
Borrower or any of its Restricted Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Single Employer Plan or any Lien in favor of the PBGC or a Plan shall arise on
the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall,
or in the reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if any, could have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any Restricted Subsidiary involving in the aggregate a liability
(to the extent not paid or covered by insurance) of $5,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days after the entry thereof; or
71
(i) Either (i) the Pledge Agreement, the Subsidiary Guarantee
or a Mortgage, if any, shall cease, for any reason, to be in full force and
effect or the Lien created by the Pledge Agreement or such Mortgage shall cease
to be enforceable and of the same effect and priority purported to be created
thereby and such cessation, in either case, shall continue for a period of five
days after the earlier of the Borrower's obtaining knowledge of such cessation
or the receipt by the Borrower of notice thereof from the Administrative Agent
or any Lender or (ii) any Pledgor or Guarantor shall so assert in writing; or
(j) Either (i) the subordination provisions contained in any
Subordinated Note Document shall cease, for any reason, to be in full force and
effect and such cessation shall continue for a period of five days after the
earlier of the Borrower's obtaining knowledge of such cessation or the receipt
by the Borrower of notice thereof from the Administrative Agent or any Lender or
(ii) any Person that is a party thereto or holders of at least 25% of the
aggregate principal amount of such Subordinated Indebtedness shall so assert in
writing; or
(k) A Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (f) of this Section 9, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued and unpaid interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all Letter of Credit Outstandings, whether or not the beneficiaries
of the then outstanding Letters of Credit shall have presented the documents
required thereunder) and the other Loan Documents shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by written notice to the Borrower,
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by written notice to the Borrower, declare the Loans
hereunder (with accrued and unpaid interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of Letter of
Credit Outstandings, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) and
the other Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then unexpired amount that is available to be drawn under such Letters
of Credit. The Borrower hereby grants to the Administrative Agent, for the
benefit of the Issuing Bank and the Lenders, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired, been canceled or been fully drawn upon, if any, shall
be applied to repay other obligations of the Borrower hereunder and under the
Notes. After all such Letters of Credit shall have expired, been canceled or
been fully drawn upon, all Reimbursement Obligations shall have been satisfied
and all other obligations of the Borrower hereunder and under the other Loan
Documents shall have been paid in full, the Administrative Agent is hereby
authorized to, and shall, release the balance, if any, in such
72
cash collateral account to the Borrower. The Borrower shall execute and deliver
to the Administrative Agent, for the account of the Issuing Bank and the
Lenders, such further documents and instruments as the Administrative Agent may
reasonably request to evidence the creation and perfection of the within
security interest in such cash collateral account. Except as expressly provided
above in this Section 9, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
9.2 Application of Proceeds. All proceeds realized from the liquidation
or other disposition of collateral or otherwise received after maturity of the
Notes, whether by acceleration or otherwise, shall be applied: first, to
reimbursement of expenses and indemnities provided for in this Agreement and the
Loan Documents; second, to accrued interest on the Notes and on any
Reimbursement Obligations; third, to fees, including Letter of Credit fees;
fourth, pro rata to principal outstanding on the Notes, all Reimbursement
Obligations and the termination payments under all Hedging Agreements then due
and owing to a Lender or an Affiliate of a Lender; fifth, to any other
obligations secured by the Loan Documents; sixth, to serve as cash collateral to
be held by the Administrative Agent to secure the maximum aggregate amount
available for drawing under Letters of Credit then outstanding; and any excess
shall be paid to the Borrower or as otherwise required by any Governmental
Authority.
9.3 Disposition of Proceeds. The Mortgage, if any, will contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower's or
each Guarantor's interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property,
including all as-extracted collateral as defined in the Uniform Commercial Code.
The Mortgage, if any, will further provide in general for the application of
such proceeds to the satisfaction of the Indebtedness and other obligations
described therein and secured thereby. Notwithstanding the assignment contained
in such Mortgage, until the occurrence and during the continuation of an Event
of Default, (a) the Administrative Agent and the Lenders agree that they will
neither notify the purchaser or purchasers of such production nor take any other
action to cause such proceeds to be remitted to the Administrative Agent or the
Lenders, but the Lenders will instead permit such proceeds to be paid to the
Borrower and its Restricted Subsidiaries and (b) the Lenders hereby authorize
and direct the Administrative Agent to take such actions (including, without
limitation, executing necessary division orders and other communications to
purchasers of production) as may be necessary to cause such proceeds to be paid
to the Borrower and/or such Restricted Subsidiaries.
SECTION 10
THE AGENTS
10.1 Appointment.
(a) Each Lender hereby irrevocably designates and appoints
JPMorgan as Administrative Agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably
73
incidental thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement, the Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
(b) Each Lender hereby designates and appoints CSFB, as
Syndication Agent, each of Fleet National Bank, Fortis Capital Corp. and U.S.
Bank National Association, as a Documentation Agent, Wachovia Bank, National
Association, as Senior Managing Agent and each of BMO Nesbitt Burns Financing,
Inc. and Wells Fargo Bank, N.A., as a Managing Agent; and each such Lender
irrevocably authorizes each such Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and to exercise such powers
and perform such duties as are expressly delegated to such Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement, none of the Syndication Agent, the Documentation Agents, the
Senior Managing Agent or the Managing Agents shall have any duties or
responsibilities, except those expressly set forth herein nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against such Agents.
10.2 Delegation of Duties. Any Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
10.3 Exculpatory Provisions. No Agent nor any officer, director,
employee, agent, attorney-in-fact or Affiliate of any Agent shall be (i) liable
for any action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other Loan Document (except for its
or such Person's own gross negligence or willful misconduct) or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by any Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Loan Party to perform its obligations hereunder or thereunder. No Agent
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party.
10.4 Reliance by Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Loan Parties), independent accountants and other
experts selected by such Agent. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. Each Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any
74
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders, Supermajority Lenders or, where unanimous consent of the
Lenders is expressly required hereunder, all Lenders as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders, the
Supermajority Lenders or, where unanimous consent of the Lenders is expressly
required hereunder, all Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
10.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
10.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that no Agent nor any officer, director, employee, agent,
attorney-in-fact or Affiliate of any Agent has made any representations or
warranties to it and that no act by any Agent hereafter taken, including any
review of the affairs of any Loan Party, shall be deemed to constitute any
representation or warranty by any such Agent to any Lender. Each Lender
represents to each Agent that it has, independently and without reliance upon
any Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each Loan Party and made its own decision to make its Loans,
participate in Letters of Credit issued hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon any 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
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of each Loan Party. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by an Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party which may come into
the possession of such Agent or any officer, director, employee, agent,
attorney-in-fact or Affiliate of such Agent.
10.7 Indemnification. The Lenders agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the obligations under this Agreement) be
imposed on, incurred by or asserted against such Agent in any way relating
75
to or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by such Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from such Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the payment
of all obligations under this Agreement and all other amounts payable hereunder.
10.8 Agents in Their Individual Capacity. Each Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent were not an Agent hereunder
and under the other Loan Documents. With respect to the extensions of credit
made by it, each Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include such Agent in its individual capacity.
10.9 Successor Agents. Each Agent may resign from its position as an
Agent upon 30 days' notice to the Borrower and the Lenders. If any Agent shall
resign as such under this Agreement and the other Loan Documents, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent, with the consent of the Borrower (such consent
not to be unreasonably withheld or delayed), shall succeed to the rights, powers
and duties of its predecessor hereunder; provided that if any Default or Event
of Default shall have occurred and be continuing, the Borrower's consent shall
not be required to appoint a successor agent. Effective upon such appointment
and approval, all references to any Agent shall mean such successor agent, and
the retiring Agent's rights, powers and duties as such shall be terminated,
without any other or further act or deed on the part of such retiring Agent or
any of the parties to this Agreement or any holders of the Loans. After any
retiring Agent's resignation from its position as an Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was an Agent under this Agreement and the other Loan
Documents.
10.10 Enforcement of Loan Documents.
(a) The Required Lenders may direct the time, method and place
of conducting any proceeding for any remedy available to the Administrative
Agent under any Loan Document or of exercising any power conferred on the
Administrative Agent. However, the Administrative Agent may refuse to follow any
direction that conflicts with law or this Agreement or would involve the
Administrative Agent in personal liability; provided, however, that the
Administrative Agent may take any other action deemed proper by the
Administrative Agent that is not inconsistent with such direction. Each Lender
shall have the independent right to enforce the right to receive payment of
principal or interest when due (or other amounts due to a Lender hereunder),
provided that no Lender shall have the independent right to enforce the Liens
granted to the Administrative Agent under the Loan Documents. A Lender may not
use this Agreement or any other Loan Document to prejudice the rights of another
Lender or to obtain a preference or priority over another Lender and the right
of each Lender to receive payment of principal of and interest on the Loans made
by such Lender, on or after the Termination Date or to bring suit for the
enforcement of any such payment shall not be impaired or affected without the
consent of such Lender.
76
(b) The Administrative Agent may maintain a proceeding even if
it does not possess any of the Notes or does not produce any of them in the
proceeding. The Administrative Agent may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Agents and the Lenders allowed in any judicial proceedings relative to
the Borrower or any Restricted Subsidiary or their respective creditors or
properties and, unless prohibited by law or applicable regulations, may vote on
behalf of the Lenders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any custodian in any such judicial proceeding
is hereby authorized by each Lender to make payments to the Administrative
Agent. In the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any
amount due it for the compensation, expenses, disbursements and advances of the
Administrative Agent, its agents and its counsel, and any other amounts due the
Administrative Agent under subsection 10.7.
10.11 Issuing Bank. The provisions of this Section 10 applicable to the
Administrative Agent shall apply to the Issuing Bank in the performance of its
duties under the Loan Documents, mutatis mutandis.
SECTION 11
MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the applicable
Loan Parties written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the applicable Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the principal amount of any Loan or
any Reimbursement Obligation or extend the Termination Date or the scheduled
date of any payment of principal hereunder, or reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof (including, without limitation, any payment required under subsection
4.10) or increase the amount or extend the expiration date of any Lender's
Commitment, in each case without the consent of each Lender affected thereby, or
(ii) amend, modify or waive any provision of this subsection or reduce the
percentage specified in the definition of Required Lenders or Supermajority
Lenders (or modify any provision of this Agreement or any other Loan Document to
provide that an action currently requiring the approval of or consent by the
Supermajority Lenders or all Lenders may be taken with the consent or approval
by a lower percentage of Lenders), or consent to the assignment or transfer by
any Loan Party of any of its rights and obligations under this Agreement and the
other Loan Documents or release of any of the Pledged Securities or any
Guarantor, other than in accordance with the terms of the applicable Loan
Documents, in each case without the written consent of all the Lenders and the
Borrower, or (iii) change subsection 4.8(a) or subsection 11.7(a) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (iv) amend, modify or waive any provision of
Section 10 without the written consent of the then Administrative Agent and
Issuing Bank and any other Agent then affected
77
by such action. Any such waiver and any such amendment, supplement or
modification shall be binding upon the Loan Parties, the Lenders, the Agents and
all future holders of the Loans. In the case of any waiver, the Loan Parties,
the Lenders and the Administrative Agent shall be restored to their former
positions and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by courier service, when delivered, (b) in the case of delivery by mail, three
Business Days after being deposited in the mails, postage prepaid, or (c) in the
case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 11.2 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto in writing:
the Borrower: Westport Resources Corporation
1670 Broadway Street, Suite 2800
Denver, Colorado 80202
Attention: Lon McCain
Fax: (303) 575-0172
Tel.: (303) 575-0119
the Administrative
Agent: JPMorgan Chase Bank
One Chase Manhattan Plaza, 8th Floor
New York, NY 10081
Attention: Loan and Agency Services,
Muniram Appanna
Fax: (212) 552-2261
Tel.: (212) 552-7943
With a copy to:
JPMorgan Chase Bank
600 Travis Street, 20th floor
Houston, Texas 77002
Attention: June Brand
Fax: (713) 216-4117
Tel.: (713) 216-4327
and for other correspondence other than borrowings, continuation, conversion and
Letter of Credit requests:
JPMorgan Chase Bank
600 Travis, 20th Floor
Houston, Texas 77002
Attention: Robert Mertensotto
Fax: (713) 216-4117
Tel: (713) 216-4147
78
provided that any notice, request or demand to or upon the Administrative Agent
or any Lender pursuant to subsection 2.2, 4.3, 4.5 or 4.8 shall not be effective
until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Agent, the Issuing Bank or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Administrative Agent, the Syndication Agent and their Affiliates
for all their reasonable and documented out-of-pocket costs and expenses
incurred in connection with the development, syndication, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable fees and
disbursements of one counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for all its reasonable and
documented costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent and the Lenders, (c) to
pay, indemnify, and hold each Lender, each Arranger and each Agent (and their
respective Affiliates and their respective directors, officers, employees and
agents) (each an "Indemnitee") harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Indemnitee harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents or
the use or the proposed use of proceeds contemplated by this Agreement,
including, without limitation, any of the foregoing relating to the Acquisition
or any violation of, noncompliance with or liability under, any Environmental
Law applicable to any Loan Party or any of the Properties (all the foregoing in
this subsection 11.5(d)), collectively, the "indemnified liabilities"); provided
that the Borrower shall have no obligation under subsection 11.5(d) to any
Indemnitee with respect to indemnified liabilities to the extent such
liabilities (A) are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee or (B) are asserted by any Indemnitee against
another Indemnitee; provided further that the Borrower shall not be liable under
this subsection 11.5(d) for the legal expenses of more than one primary firm or
more than one
79
local counsel in each state or other jurisdiction in which an indemnifiable
action is brought unless the use of one primary firm or one local counsel by the
indemnified parties would present such firm or counsel with a conflict of
interest. Without limiting the foregoing, and to the extent permitted by
applicable law, the Borrower agrees not to assert, and hereby waives, and to
cause each of its Restricted Subsidiaries not to assert and to so waive, all
rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. The
agreements in this subsection shall survive repayment of the Loans and all other
amounts payable hereunder and the termination of this Agreement.
11.6 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that (i) the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void) and (ii) no Lender may
assign or otherwise transfer its rights or obligations hereunder except in
accordance with this subsection 11.6. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), Participants
(to the extent provided in subsection 11.6(c)) and, to the extent expressly
contemplated hereby, Indemnitees and other Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in subsection
11.6(b)(ii), any Lender may assign to one or more assignees ("Assignee") all or
a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment, the Loans at the time owing to it and its interests
in Letter of Credit Outstandings) with the prior written consent (such consent
not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the
Borrower shall be required for an assignment to a Lender, an
Affiliate of a Lender, an Approved Fund or, if an Event of
Default has occurred and is continuing, any other assignee;
and
(B) the Administrative Agent, provided that no
consent of the Administrative Agent shall be required for an
assignment to an Assignee that is a Lender immediately prior
to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender
or an Affiliate of a Lender or an assignment of the entire
remaining amount of the assigning Lender's Commitment, the
amount of the Commitment of the assigning Lender subject to
each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000
unless each of the Borrower and the Administrative Agent
otherwise
80
consent, provided that no such consent of the Borrower shall
be required if an Event of Default has occurred and is
continuing;
(B) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning
Lender's rights and obligations under this Agreement;
(C) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and
Acceptance, together with a processing and recordation fee of
$3,500;
(D) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative
Questionnaire; and
(E) in the case of an assignment to a CLO, the
assigning Lender shall retain the sole right to approve any
amendment, modification or waiver of any provision of this
Agreement, provided that the Assignment and Acceptance between
such Lender and CLO may provide that such Lender will not,
without the consent of such CLO, agree to any amendment,
modification or waiver described in clauses (i) and (ii) of
the proviso to subsection 11.1.
(iii) Subject to subsection 11.6(b)(v) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Acceptance the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of
the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement other than subsection 11.15
(and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of subsection 4.11, subsection 4.12,
subsection 4.13, subsection 4.14, subsection 4.15 and subsection 11.5).
Any assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this subsection 11.6 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with
subsection 11.6(c).
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Loans and Letter of Credit
Outstandings owing to, each Lender pursuant to the terms hereof from
time to time (the "Register"). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent, the Issuing
Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, the Issuing
Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice. In connection with any changes to the
Register, if necessary, the Administrative Agent will reflect the
revisions on Schedule 1.1(a) and forward a copy of such revised
Schedule 1.1(a) to the Borrower, the Issuing Bank and each Lender.
81
(v) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the
assignee's completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation
fee referred to in subsection 11.6(b) and any written consent to such
assignment required by subsection 11.6(b), the Administrative Agent
shall accept such Assignment and Acceptance and record the information
contained therein in the Register. No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register
as provided in this subsection 11.6(b).
(c) (i) Any Lender may, without the consent of the Borrower,
the Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment, the Loans owing to it and its interests in Letter of Credit
Outstandings); provided that (A) such Lender's obligations under this Agreement
shall remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (C) the
Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the clauses (i) and (ii) of the proviso to
subsection 11.1 that affects such Participant. In addition such agreement must
provide that the Participant be bound by the provisions of subsection 11.15.
Subject to subsection 11.6(c)(ii), the Borrower agrees that each Participant
shall be entitled to the benefits of subsection 4.12, subsection 4.13,
subsection 4.14 and subsection 4.15 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to subsection 11.6(b). To
the extent permitted by law, each Participant also shall be entitled to the
benefits of subsection 11.7 as though it were a Lender, provided such
Participant agrees to be subject to subsection 11.7 as though it were a Lender.
(ii) A Participant shall not be entitled to receive any
greater payment under subsection 4.11, subsection 4.12 and subsection
4.13 than the applicable Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a
Non-U.S. Lender if it were a Lender shall not be entitled to the
benefits of subsection 4.13 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for
the benefit of the Borrower, to comply with subsection 4.13(b) as
though it were a Lender.
(d) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
any and all financial information in such Lender's possession concerning the
Loan Parties and their Affiliates which has been delivered to such Lender by or
on behalf of the Borrower pursuant to this Agreement or which has been delivered
to such Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Loan Parties and their Affiliates prior to becoming a
party to this Agreement; provided such Person agrees to maintain the
confidentiality of such information in accordance with subsection 11.15.
82
(e) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this subsection 11.6 shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
11.7 Adjustments; Set-off.
(a) If any Lender (a "Benefited Lender") shall at any time
receive any payment of all or part of its Loans or Reimbursement Obligations, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in paragraph (f) of Section 9 or otherwise), in a greater
proportion than any such payment to or collateral received by any other Lender,
if any, in respect of such other Lender's Loans or Reimbursement Obligations, or
interest thereon, such Benefited Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other Lender's
Loans or Reimbursement Obligations, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, during the continuation of an
Event of Default, without prior notice to the Borrower, any such notice being
expressly waived by the Borrower to the extent permitted by applicable law, upon
any amount becoming due and payable by the Borrower hereunder (whether at the
stated maturity, by acceleration or otherwise) to set-off and appropriate and
apply against such amount any and all deposits (general or special, time or
demand, provisional or final but excluding deposits held by the Borrower as a
fiduciary for others), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of the
Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower
and the Administrative Agent after any such set-off and application made by such
Lender, provided that, to the extent permitted by applicable law, the failure to
give such notice shall not affect the validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be kept by the Borrower and the
Administrative Agent.
11.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
83
11.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the other Loan Parties, the Agents and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 11.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential damages.
11.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) no Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between the Agents and
the Lenders, on one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Agents and the Lenders or among the Borrower, the Agents and the
Lenders.
84
11.14 WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY AND
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. Each of the Agents, the Issuing Bank and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this subsection 11.15, to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this subsection 11.15 or (ii) becomes available to
any Agent, the Issuing Bank or any Lender on a nonconfidential basis from a
source other than the Borrower. For the purposes of this subsection 11.15,
"Information" means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
an Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to
disclosure by the Borrower; provided that, in the case of information received
from the Borrower after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this subsection 11.15 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
11.16 Letters of Credit Under Existing Credit Facility.The letters of
credit listed on Schedule 11.16 are hereby deemed to have been issued under this
Agreement (except that no issuance fees shall be due under subsection
3.3(a)(ii)) and each Lender hereby acknowledges and agrees that it shall have
purchased a participation interest therein as contemplated by subsection 3.4.
[Remainder of page intentionally left blank]
85
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
WESTPORT RESOURCES CORPORATION
By: /s/ LON MCCAIN
-----------------------------------------
Lon McCain, Vice President, Treasurer and
Chief Financial Officer
SIGNATURE PAGE TO CREDIT AGREEMENT
1
JPMORGAN CHASE BANK, as
Administrative Agent, Issuing Bank
and as a Lender
By: /s/ RUSSELL A. JOHNSON
-------------------------------------
Russell A. Johnson
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
2
CREDIT SUISSE FIRST BOSTON, CAYMAN
ISLAND BRANCH, as
Syndication Agent and as a Lender
By: /s/ JAMES P. MORAN
-------------------------------------------
James P. Moran
Director
By: /s/ BRIAN T. CALDWELL
-------------------------------------------
Brian T. Caldwell
Director
SIGNATURE PAGE TO CREDIT AGREEMENT
3
FLEET NATIONAL BANK, as
Co-Documentation Agent and as a Lender
By: /s/ JEFFREY H. RATHKAMP
-------------------------------------------
Jeffrey H. Rathkamp
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
4
FORTIS CAPITAL CORP., as
Co-Documentation Agent and as a Lender
By: /s/ DAVID MONTGOMERY
------------------------------------------
David Montgomery
Senior Vice President
By: /s/ DARRELL W. HOLLEY
------------------------------------------
Darrell W. Holley
Managing Director
SIGNATURE PAGE TO CREDIT AGREEMENT
5
U.S. BANK NATIONAL ASSOCIATION, as
Co-Documentation Agent and as a Lender
By: /s/ KATHRYN A. GAITER
-----------------------------------------
Kathryn A. Gaiter
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
6
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Senior Managing Agent and as a Lender
By: /s/ PHILIP TRINDER
-------------------------------------
Philip Trinder
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
7
BMO NESBITT BURNS FINANCING, INC.,
as Managing Agent and as a Lender
By: /s/ JAMES B. WHITMORE
----------------------------------
James B. Whitmore
Managing Director
SIGNATURE PAGE TO CREDIT AGREEMENT
8
WELLS FARGO BANK, N.A., as Managing Agent
and as a Lender
By: /s/ LAURA BUMGARNER
------------------------------------
Laura Bumgarner
Relationship Manager
SIGNATURE PAGE TO CREDIT AGREEMENT
9
UNION BANK OF CALIFORNIA, N.A., as a Lender
By: /s/ RANDALL OSTERBERG
----------------------------------------
Randall Osterberg
Senior Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
10
BANK OF AMERICA, N.A., as a Lender
By: /s/ STEVEN A. MACKENZIE
--------------------------------
Steven A. MacKenzie
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
11
THE BANK OF NEW YORK, as a Lender
By: /s/ PETER W. KELLER
--------------------------------
Peter W. Keller
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
12
COMERICA BANK - TEXAS, N.A., as a Lender
By: /s/ THOMAS G. RAJAN
-----------------------------------
Thomas G. Rajan
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
13
BANK OF SCOTLAND, as a Lender
By: /s/ JOSEPH FRATUS
-------------------------------------
Joseph Fratus
First Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
14
NATEXIS BANQUES POPULAIRES,
as a Lender
By: /s/ DONOVAN BROUSSARD
------------------------------------------
Donovan Broussard
Vice President
By: /s/ RENAUD D'HERBES
------------------------------------------
Renaud d'Herbes
Senior Vice President and Regional Manager
SIGNATURE PAGE TO CREDIT AGREEMENT
15
UFJ BANK, as a Lender
By: /s/ L.J. PERENYI
--------------------------------
L.J. Perenyi
Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
16
COMPASS BANK, as a Lender
By: /s/ DOROTHY MARCHAND
--------------------------------
Dorothy Marchand
Senior Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
17