--------------------------------------------------------------------------------
CREDIT AGREEMENT
BETWEEN
SHERIDAN CALIFORNIA ENERGY, INC.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION, AS
AGENT AND LENDER
AND
THE LENDERS SIGNATORY HERETO
JANUARY 21, 1999
----------------------------
REVOLVING LINE OF CREDIT OF UP TO $100,000,000
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION................................................ 1
1.1 Terms Defined Above..................................................... 1
1.2 Additional Defined Terms................................................ 1
1.3 Undefined Financial Accounting Terms.................................... 14
1.4 References.............................................................. 14
1.5 Articles and Sections................................................... 15
1.6 Number and Gender....................................................... 15
1.7 Incorporation of Exhibits............................................... 15
ARTICLE II TERMS OF FACILITY............................................................. 15
2.1 Revolving Line of Credit................................................ 15
2.2 Letter of Credit Facility............................................... 16
2.3 Use of Loan Proceeds and Letters of Credit.............................. 18
2.4 Interest................................................................ 18
2.5 Repayment of Loans and Interest......................................... 18
2.6 Outstanding............................................................. 19
2.7 Time, Place, and Method of Payments..................................... 19
2.8 Pro Rata Treatment; Adjustments......................................... 19
2.9 Borrowing Base Determinations........................................... 20
2.10 Mandatory Prepayments................................................... 21
2.11 Voluntary Prepayments and Conversions of Loans.......................... 21
2.12 Commitment Fee.......................................................... 21
2.13 Facility Fee............................................................ 22
2.14 Letter of Credit Fee.................................................... 22
2.15 Loans to Satisfy Obligations of Borrower................................ 22
2.16 Security Interest in Accounts; Right of Offset.......................... 22
2.17 General Provisions Relating to Interest................................. 23
2.18 Yield Protection........................................................ 23
2.19 Limitation on Types of Loans............................................ 26
2.20 Illegality.............................................................. 26
2.21 Regulatory Change....................................................... 26
2.22 Limitations on Interest Periods......................................... 27
2.23 Letters in Lieu of Transfer Orders...................................... 27
2.24 Power of Attorney....................................................... 27
ARTICLE III CONDITIONS.................................................................... 28
3.1 Receipt of Loan Documents and Other Items............................... 28
3.2 Each Loan and Letter of Credit.......................................... 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................................ 31
4.1 Due Authorization....................................................... 31
4.2 Existence............................................................... 32
4.3 Valid and Binding Obligations........................................... 32
4.4 Security Instruments.................................................... 32
4.5 Title to Assets......................................................... 32
4.6 No Material Misstatements............................................... 32
4.7 Liabilities, Litigation, and Restrictions............................... 32
4.8 Authorizations; Consents................................................ 33
4.9 Compliance with Laws.................................................... 33
4.10 ERISA................................................................... 33
4.11 Environmental Laws...................................................... 33
4.12 Compliance with Federal Reserve Regulations............................. 34
4.13 Investment Company Act Compliance....................................... 34
4.14 Public Utility Holding Company Act Compliance........................... 34
4.15 Proper Filing of Tax Returns; Payment of Taxes Due...................... 34
4.16 Refunds................................................................. 34
4.17 Gas Contracts........................................................... 34
4.18 Intellectual Property................................................... 34
4.19 Casualties or Taking of Property........................................ 35
4.20 Locations of Borrower................................................... 35
4.21 Subsidiaries............................................................ 35
ARTICLE V AFFIRMATIVE COVENANTS......................................................... 35
5.1 Maintenance and Access to Records....................................... 35
5.2 Quarterly Financial Statements; Compliance Certificates.................. 35
5.3 Annual Financial Statements............................................. 36
5.4 Oil and Gas Reserve Reports............................................. 36
5.5 Title Opinions; Title Defects........................................... 36
5.6 Notices of Certain Events............................................... 36
5.7 Letters in Lieu of Transfer Orders; Division Orders..................... 37
5.8 Additional Information.................................................. 38
5.9 Compliance with Laws.................................................... 38
5.10 Payment of Assessments and Charges...................................... 38
5.11 Maintenance of Existence and Good Standing.............................. 38
5.12 Payment of Notes; Performance of Obligations............................ 38
5.13 Further Assurances...................................................... 38
5.14 Initial Fees and Expenses of Counsel to Lender.......................... 38
5.15 Subsequent Fees and Expenses of Lender.................................. 39
5.16 Operation of Oil and Gas Properties..................................... 39
5.17 Maintenance and Inspection of Properties................................ 39
5.18 Maintenance of Insurance................................................ 39
5.19 INDEMNIFICATION......................................................... 40
5.20 Borrower's Year 2000 Compliance......................................... 41
5.21 Interest Rate Hedge..................................................... 42
5.22 Commodity Price Hedge.................................................... 42
ARTICLE VI NEGATIVE COVENANTS............................................................ 42
6.1 Indebtedness............................................................. 42
6.2 Contingent Obligations................................................... 42
6.3 Liens.................................................................... 43
6.4 Sales of Assets.......................................................... 43
6.5 Leasebacks............................................................... 43
6.6 Loans or Advances........................................................ 43
6.7 Investments.............................................................. 43
6.8 Dividends and Distributions.............................................. 43
6.9 Changes in Structure..................................................... 44
6.10 Transactions with Affiliates............................................. 44
6.11 Lines of Business........................................................ 44
6.12 General and Administrative Expenses...................................... 44
6.13 Debt Coverage Ratio...................................................... 44
6.14 Minimum Initial Capitalization........................................... 44
6.15 Capital Expenditures..................................................... 44
ARTICLE VII EVENTS OF DEFAULT............................................................. 45
7.1 Enumeration of Events of Default......................................... 45
7.2 Remedies................................................................. 46
ARTICLE VIII THE AGENT..................................................................... 47
8.1 Appointment.............................................................. 47
8.2 Waivers, Amendments...................................................... 48
8.3 Delegation of Duties..................................................... 48
8.4 Exculpatory Provisions................................................... 48
8.5 Reliance by Agent........................................................ 48
8.6 Notice of Default........................................................ 49
8.7 Non-Reliance on Agent and Other Lenders.................................. 49
8.8 Indemnification.......................................................... 50
8.9 Restitution.............................................................. 50
8.10 Agent in Its Individual Capacity......................................... 51
8.11 Successor Agent.......................................................... 51
8.12 Applicable Parties....................................................... 51
ARTICLE IX MISCELLANEOUS................................................................. 51
9.1 Assignments; Participations.............................................. 51
9.2 Survival of Representations, Warranties, and Covenants................... 53
9.3 Notices and Other Communications......................................... 53
9.4 Parties in Interest...................................................... 54
9.5 Rights of Third Parties.................................................. 54
9.6 Renewals; Extensions..................................................... 54
9.7 No Waiver; Rights Cumulative............................................. 54
9.8 Survival Upon Unenforceability........................................... 55
9.9 Amendments; Waivers...................................................... 55
9.10 Controlling Agreement.................................................... 55
9.11 Disposition of Collateral................................................ 55
9.12 GOVERNING LAW............................................................ 55
9.13 JURISDICTION AND VENUE................................................... 55
9.14 WAIVER OF RIGHTS TO JURY TRIAL........................................... 56
9.15 ENTIRE AGREEMENT......................................................... 56
9.16 Counterparts............................................................. 56
9.17 Confidentiality.......................................................... 56
LIST OF EXHIBITS
Exhibit I - Form of Notes
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Facility Amounts
Exhibit V - Form of Opinion of Counsel
Exhibit VI - Form of Opinion of Local Counsel
Exhibit VII - Form of Assignment Agreement
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is made and entered into this 21st day of
January, 1999, by and among SHERIDAN CALIFORNIA ENERGY, INC., a Delaware
corporation (the "Borrower"), each lender that is a signatory hereto or becomes
--------
a signatory hereto as provided in Section 9.1 (individually, together with its
successors and assigns, a "Lender" and collectively together with their
------
respective successors and assigns, the "Lenders"), and BANK ONE, TEXAS, NATIONAL
-------
ASSOCIATION, a national banking association, as agent for the Lenders (in such
capacity, together with its successors in such capacity pursuant to the terms
hereof, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual covenants and agreements herein
contained, the Borrower and the Lender hereby agree as follows:
ARTICLE I
----------
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
-------------------
"Agent," "Borrower," "Lender" and "Lenders" shall have the meaning assigned to
----- -------- ------ -------
them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each
------------------------
of the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Additional Costs" shall mean costs which the Lenders determine are
----------------
attributable to its obligation to make or its making or maintaining any
LIBO Rate Loan, or any reduction in any amount receivable by the Lenders in
respect of any such obligation or any LIBO Rate Loan, resulting from any
Regulatory Change which (a) changes the basis of taxation of any amounts
payable to the Lenders under this Agreement or the Note in respect of any
LIBO Rate Loan (other than taxes imposed on the overall net income of the
Lenders), (b) imposes or modifies any reserve, special deposit, minimum
capital, capital rates, or similar requirements relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of,
the Lender (including LIBO Rate Loans and Dollar deposits in the London
interbank market in connection with LIBO Rate Loans), or any commitments of
the Lenders hereunder, (c) increases the Assessment Rate, or (d) imposes
any other condition affecting this Agreement or any of such extensions of
credit, liabilities, or commitments.
"Adjusted LIBO Rate" shall mean, for any LIBO Rate Loan, an interest
------------------
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lenders to be equal to the sum of the LIBO Rate for such
Loan plus the Applicable Margin, but in no event exceeding the Highest
Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly controlling,
---------
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
(S)240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Agreement" shall mean this Credit Agreement, as it may be amended,
---------
supplemented, or restated from time to time.
"Applicable Lending Office" shall mean, for each type of Loan, the
-------------------------
lending office of the Lender (or an affiliate of the Lender) designated for
such type of Loan on the signature pages hereof or such other office of the
Lender (or an affiliate of the Lender) as the Lender may from time to time
specify to the Borrower as the office by which Loans of such type are to be
made and maintained.
"Applicable Margin" shall mean as to each LIBO Rate Loan, two and one-
-----------------
half percent (2.50%).
"Assessment Rate" shall mean, for any Interest Period, the average
---------------
rate (rounded upwards if necessary to the nearest 1/100 of 1%) charged by
the Federal Deposit Insurance Corporation (or any successor thereto) to the
Lender for deposit insurance for Dollar time deposits with the Lender at
the Principal Office during such Interest Period, as determined by the
Lender.
"Assignment Agreement" shall mean an Assignment Agreement,
--------------------
substantially in the form of Exhibit VII, with appropriate insertions.
-----------
"Available Commitment" shall mean, at any time, an amount equal to the
--------------------
remainder, if any, of (a) the Borrowing Base in effect at such time minus
-----
(b) the sum of the Loan Balance at such time plus the L/C Exposure at such
time.
"Base Rate" shall mean the interest rate announced or published by the
---------
Lender from time to time as its general reference rate of interest, which
Base Rate shall change upon any change in such announced or published
general reference interest rate and which Base Rate may not be the lowest
interest rate charged by the Lender.
"Benefitted Lender" shall have the meaning assigned to such term in
-----------------
Section 2.9(c).
--------------
"Borrowing Base" shall mean, at any time, the amount determined by the
--------------
Lender in accordance with Section 2.9 and then in effect.
"Borrowing Request" shall mean each written request, in substantially
-----------------
the form attached hereto as Exhibit II, by the Borrower to the Agent for a
borrowing, conversion, or prepayment pursuant to Sections 2.1 or 2.11, each
of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) when requesting a borrowing, be accompanied by a Compliance
Certificate;
(c) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business Day);
(d) when requesting a Floating Rate Loan, be delivered to the
Agent no later than 1:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the Business Day of the requested
borrowing, conversion, or prepayment;
(e) when requesting a LIBO Rate Loan, be delivered to the Agent
no later than 1:00 p.m., Central Standard or Daylight Savings Time, as
the case may be, two Business Days preceding the requested borrowing,
conversion, or prepayment and designate the Interest Period requested
with respect to such Loan.
"Business Day" shall mean (a) for all purposes other than as covered
------------
by clause (b) of this definition, a day other than a Saturday, Sunday,
legal holiday for commercial banks under the laws of the State of Texas, or
any other day when banking is suspended in the State of Texas, and (b) with
respect to all requests, notices, and determinations in connection with,
and payments of principal and interest on, LIBO Rate Loans, a day which is
a Business Day described in clause (a) of this definition and which is a
day for trading by and between banks for Dollar deposits in the London
interbank market.
"Cash Flow" shall mean net income plus depreciation, amortization,
---------
depletion and other non-cash expenses less preferred dividends paid in
cash, non-cash revenues, less mandatory capital expenditures of $300,000
per annum, which are included in the Lender's Borrowing Base determination.
In fiscal 1999,
acquisition costs up to $2,000,000 which have been expensed in such period
shall be added back to net income for purposes of this calculation.
"Closing Date" shall mean the effective date of this Agreement.
------------
"Collateral" shall mean the Mortgaged Properties and any other
----------
Property now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commitment Amount" shall mean, subject to the applicable provisions
-----------------
of this Agreement, at any time, the lesser of (a) the sum of the Facility
Amounts of the Lenders, or (b) the Borrowing Base in effect at such time.
"Commitment" shall mean the obligation of the Lenders, subject to
----------
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section 2.1 and to issue Letters of
Credit pursuant to Section 2.2.
"Commitment Fee" shall mean each fee payable to the Lender by the
--------------
Borrower pursuant to Section 2.12.
"Commitment Period" shall mean the period from and including the
-----------------
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean December 31, 2001.
---------------------------
"Commonly Controlled Entity" shall mean any Person which is under
--------------------------
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
----------------------
the form attached hereto as Exhibit III, executed by a Responsible Officer
of the Borrower and furnished to the Agent from time to time in accordance
with Sections 5.2 and 5.3.
"Contingent Obligation" shall mean, as to any Person, without
---------------------
duplication, any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, or other obligations of
any other Person (for purposes of this definition, a "primary obligation")
------------------
in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary obligation or any
Property constituting direct or indirect security therefor, (b) to advance
or supply funds (i) for the purchase or payment of any primary obligation,
or (ii) to maintain working or equity capital of any other Person in
respect of any primary obligation, or otherwise to maintain the net worth
or solvency of any other Person, (c) to purchase Property, securities or
services primarily for the purpose of assuring the
owner of any primary obligation of the ability of the Person primarily
liable for such primary obligation to make payment thereof, or (d)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
"Debt Service" shall mean the principal amount outstanding under the
------------
Note at the end of any fiscal quarter divided by 6, provided that for (i)
the quarter ended March 31, 1999, the divisor shall be 24, (ii) the quarter
ended June 30, 1999, the divisor shall be 18, and (iii) the quarter ended
September 30, 1999, the divisor shall be 12.
"Default" shall mean any event or occurrence which with the lapse of
-------
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Base
------------
Rate plus five percent (5%), but in no event exceeding the Highest Lawful
Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
------- -
States of America.
"Environmental Complaint" shall mean any written or oral complaint,
-----------------------
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety
matters affecting any Property of the Borrower or the business conducted
thereon.
"Environmental Laws" shall mean (a) the following federal laws as they
------------------
may be cited, referenced, and amended from time to time: the Clean Air
Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Endangered
Species Act, the Resource Conservation and Recovery Act, the Hazardous
Materials Transportation Act, the Superfund Amendments and Reauthorization
Act, and the Toxic Substances Control Act; (b) any and all equivalent
environmental statutes of any state in which Property of the Borrower is
situated, as they may be cited, referenced and amended from time to time;
(c) any rules or regulations promulgated under or adopted pursuant to the
above federal and state laws; and (d) any other equivalent federal, state,
or local statute or any requirement, rule, regulation, code, ordinance, or
order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
----------------
7.1.
"Facility Amount" shall mean, for each Lender, the amount set forth
---------------
opposite the name of such Lender on Exhibit IV under the caption "Facility
----------
Amounts," as modified from time to time to reflect assignments permitted by
Section 9.1 or otherwise pursuant to the terms hereof and to give effect to
-----------
any written request of the Borrower (any such request being irrevocable,
absent written agreement of the Agent and the Required Lenders, which
written agreement may be expressly conditioned on the payment of a fee
(other than with respect to a reduction) by the Borrower to the Agent, for
the account of the Lenders) to a reduction in the sum of the then existing
Facility Amounts of the Lenders.
"Facility Fee" shall mean the fee payable to the Lender by the
------------
Borrower pursuant to Section 2.13.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of Dallas, Texas, on the
Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to Lender on such day
on such transactions as determined by the Lender.
"Final Maturity" shall mean December 31, 2001.
--------------
"Financial Statements" shall mean statements of the financial
--------------------
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related statements
of operations, common stock and other stockholders' equity, and cash flows
for the Borrower and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants or
other independent certified public accountants acceptable to the Lender and
footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP consistently applied and in comparative form with
respect to the corresponding period of the preceding fiscal period.
"Floating Rate" shall mean an interest rate per annum equal to the
-------------
Base Rate from time to time in effect, but in no event exceeding the
Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
------------------
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Floating Rate, or which pursuant to
the terms hereof is otherwise required to bear interest at the Floating
Rate.
"GAAP" shall mean generally accepted accounting principles established
----
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time
to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
----------------------
territory, government, state, county, parish, municipality, or other
political subdivision and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Hazardous Substances" shall mean flammables, explosives, radioactive
--------------------
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic
substances" under the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Superfund Amendments and Reauthorization
Act, as amended, the Hazardous Materials Transportation Act, as amended,
the Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other law or regulation now or
hereafter enacted or promulgated by any Governmental Authority.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
-------------------
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
------------
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP
would be included in determining total liabilities as shown on the
liability side of a balance sheet, (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money,
and (d) all obligations of others, to the extent any such obligation is
secured by a Lien on the assets of such Person (whether or not such Person
has assumed or become liable for the obligation secured by such Lien).
(Provided, however, Indebtedness shall not include preferred stock).
"Insolvency Proceeding" shall mean application (whether voluntary or
---------------------
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the United
States, the State of Texas, or any other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
---------------------
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Interest Period" shall mean, subject to the limitations set forth in
---------------
Section 222, with respect to any LIBO Rate Loan, a period commencing on the
date such Loan is made or converted from a Loan of another type pursuant to
this Agreement or the last day of the next preceding Interest Period with
respect to such Loan and ending on the numerically corresponding day in the
calendar month that is one, two, three, or, subject to availability, six
months thereafter, as the Borrower may request in the Borrowing Request for
such Loan.
"Investment" in any Person shall mean any stock, bond, note, or other
----------
evidence of Indebtedness, or any other security (other than current trade
and customer accounts) of, investment or partnership interest in or loan
to, such Person.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
------------
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" shall mean any standby letter of credit issued by
----------------
the Lender for the account of the Borrower pursuant to Section 2.2.
"Letter of Credit Application" shall mean the standard letter of
----------------------------
credit application employed by the Lender from time to time in connection
with letters of credit, provided that in the event of a conflict between
the terms of each Letter of Credit Application and this Agreement, this
Agreement shall control.
"Letter of Credit Fee" shall mean each fee payable to the Lender by
--------------------
the Borrower pursuant to Section 2.14 upon or in connection with the
issuance of a Letter of Credit.
"LIBO Rate" shall mean, with respect to any Interest Period for any
---------
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall
not be available, any successor or similar service selected by the Lender
and the Borrower) as of approximately 11:00 a.m., Central Standard or
Daylight Savings Time, as the case may be, on the day two Business Days
prior to the first day of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and having
a term comparable to the Interest Period for such LIBO Rate Loan, or (b)
the Highest Lawful Rate. If neither such Telerate Page 3750 nor any
successor or similar service is available, the term "LIBO Rate" shall mean,
with respect to any Interest Period for any LIBO Rate Loan, the lesser of
(a) the rate per annum (rounded upwards if necessary, to the nearest 1/16
of 1%) quoted by the Lender at approximately 11:00 a.m., London time (or as
soon thereafter as practicable) two Business Days prior to the first day of
the Interest Period for such LIBO Rate Loan for the offering by the Lender
to leading banks in the London interbank market of Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and having
a term comparable to the Interest Period for such LIBO Rate Loan, or (b)
the Highest Lawful Rate.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
--------------
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Adjusted LIBO Rate and which is
permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation owed
----
to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute, or contract, and including,
but not limited to, the lien or security interest arising from a mortgage,
ship mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt, or a lease, consignment, or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for the purpose of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean, with respect to any Lender, any period
-----------------
while any amount remains owing on the Note payable to such Lender and
interest on such amount, calculated at the applicable interest rate, plus
any fees or other sums payable to such Lender under any Loan Document and
deemed to be interest under applicable law, would exceed the amount of
interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by any Lender to or for the benefit of
----
the Borrower pursuant to this Agreement and any payment made by the Lender
under a Letter of Credit.
"Loan Balance" shall mean, at any time, the outstanding principal
------------
balance of the Notes at such time.
"Loan Documents" shall mean this Agreement, the Note, the Letter of
--------------
Credit Applications, the Letters of Credit, the Security Instruments, and
all other documents and instruments now or hereafter delivered pursuant to
the terms of or in connection with this Agreement, the Note, the Letter of
Credit Applications, the Letters of Credit, or the Security Instruments,
and all renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in effect.
"Material Adverse Effect" shall mean (a) any material adverse effect
-----------------------
on the business, operations, properties, or condition (financial or
otherwise), of the Borrower and its Subsidiaries, taken as a whole, (b) any
adverse effect upon the business operations, properties, or condition
(financial or otherwise), of the Borrower and its Subsidiaries, taken as a
whole, which materially increases the risk that any of the Obligations will
not be repaid as and when due, or (c) any material adverse effect upon the
Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
--------------------
Borrower subject to a perfected first-priority Lien in favor of the Agent
for the benefit of the Lenders, subject only to Permitted Liens, as
security for the Obligations.
"Notes" shall mean, collectively, each of the promissory notes of the
-----
Borrower payable to a Lender in the amount of the Facility Amount of such
Lender in the form attached hereto as Exhibit I with all blanks in such
---------
form completed appropriately, together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
-----------
evidenced by the Note, (b) the Reimbursement Obligations, (c) the undrawn,
unexpired amount of all outstanding Letters of Credit, (d) the obligation
of the Borrower for the payment of Commitment Fees, Facility Fees, and
Letter of Credit Fees, (e)
Commodity Hedge Agreements, (f) interest rate xxxxxx, and (g) all other
obligations and liabilities of the Borrower to the Lenders, now existing or
hereafter incurred, under, arising out of or in connection with any Loan
Document, and to the extent that any of the foregoing includes or refers to
the payment of amounts deemed or constituting interest, only so much
thereof as shall have accrued, been earned and which remains unpaid at each
relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests
----------------------
in or under mineral estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States
or offshore from any State of the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests, and mineral
fee interests, together with contracts executed in connection therewith and
all tenements, hereditaments, appurtenances and Properties appertaining,
belonging, affixed, or incidental thereto.
"Percentage Share" shall mean, as to each Lender, the percentage such
----------------
Lender's Facility Amount constitutes of the sum of the Facility Amounts of
all Lenders.
"Permitted Liens" shall mean (a) Liens for taxes, fees, assessments,
---------------
or other governmental charges or levies not delinquent or remain payable
without penalty or which (if foreclosure, distraint, sale, or other similar
proceedings shall not have been initiated) are being contested in good
faith by appropriate proceedings, and such reserve as may be required by
GAAP shall have been made therefor, (b) Liens in connection with workers'
compensation, unemployment insurance or other social security (other than
Liens created by Section 4068 of ERISA), old-age pension, or public
liability obligations which are not delinquent or remain payable without
penalty or which are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been
made therefor, (c) Liens in favor of vendors, carriers, warehousemen,
repairmen, mechanics, workmen, materialmen, construction, landlords or
similar Liens arising by operation of law in the ordinary course of
business in respect of obligations which are not overdue by more than 45
days or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(d) Liens in favor of operators and non-operators under joint operating
agreements or similar contractual arrangements arising in the ordinary
course of the business of the Borrower or a Subsidiary to secure amounts
owing, which amounts are not yet overdue by more than 45 days or are being
contested in good faith by appropriate proceedings, if such reserve as may
be required by GAAP shall have been made therefor, (e) Liens under
production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver
hydrocarbons at some future date without receiving full payment therefor
within 90 days of delivery, (f) easements, rights of way, restrictions, and
other similar encumbrances, and minor defects in the chain of title which
are customarily accepted in the oil and gas financing industry, none of
which interfere with the ordinary conduct of the business of the Borrower
or a Subsidiary or materially detract from the value or use of the Property
to which they apply, (g) any Lien existing on property of the Borrower on
the Closing Date and set forth on Exhibit VI securing Indebtedness
outstanding on such date and all renewals, replacements and continuations
thereof, provided that any such renewal, replacement or continuation
thereof does not extend to any property not previously encumbered by such
Lien (other than after acquired title to or on such property and the
proceeds of the existing collateral in accordance with the instrument
creating the Lien) and the amount of the Indebtedness secured thereby is
not increased, (h) Liens consisting of judgment or judicial attachment
Liens, provided that the enforcement of such Liens is effectively stayed
and all such Liens in the aggregate at any time outstanding for the
Borrower and its Subsidiaries do not exceed $250,000, (i) purchase money
security interests (other than capital leases) on any property acquired or
held by the Borrower or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property provided
--------
that (1) any such Lien attaches to such property concurrently with the
----
acquisition thereof, (2) such Lien attaches solely to such property so
acquired, (3) the principal amount of the Indebtedness secured thereby does
not exceed 100% of the cost of such property, and (4) the principal amount
of the Indebtedness, excluding any amounts owed for installment payments
for property and liability insurance, secured by any and all such purchase
money security interests shall not at any time exceed, in the aggregate
$500,000, (j) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are
-------- ----
otherwise permitted hereunder, (k) Liens arising solely by virtue of any
statutory or common law provision relating to banker's liens, rights of
set-off or similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution provided that (1)
-------------
such deposit account is not a dedicated cash collateral account and it not
subject to restrictions against access by the Borrower or its Subsidiaries,
as applicable, in excess of those set forth by regulation promulgated by
the Federal Reserve Board, and (2) such deposit account is not intended by
the Borrower or any Subsidiary to provide collateral to the depository
institution, (l) Liens arising from precautionary Uniform Commercial Code
financing statement filings in respect of operating leases or consignment
arrangements otherwise permitted hereunder to be entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business, (m)
licenses, leases and subleases permitted under this Agreement and granted
to others that do not interfere in any material respect with the business
or operations of the Borrower or any of its Subsidiaries, and (n) Liens in
favor of the Agent and the Lenders and other Liens expressly permitted
under the Security Instruments.
"Person" shall mean an individual, corporation, partnership, trust,
------
unincorporated organization, limited liability company, government, any
agency or political subdivision of any government, or any other form of
entity.
"Plan" shall mean, at any time, any employee benefit plan (as defined
----
in Section 3(3) of ERISA, which is covered by ERISA and in respect of which
the Borrower or any 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.
"Principal Office" shall mean the principal office of the Agent in
----------------
Houston, Texas, presently located at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx
00000-0000.
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Regulation D" shall mean Regulation D of the Board of Governors of
------------
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Regulatory Change" shall mean the passage, adoption, institution, or
-----------------
amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date
and applying to a class of banks including the Lender or Lenders or their
Applicable Lending Offices.
"Reimbursement Obligation" shall mean the obligation of the Borrower
------------------------
to provide to the Lenders or reimburse the Lenders for any amounts payable,
paid, or incurred by the Lenders with respect to Letters of Credit.
"Release of Hazardous Substances" shall mean any material emission,
-------------------------------
spill, release, disposal, or discharge, except in accordance with a valid
permit, license, certificate, or approval of the relevant Governmental
Authority, of any Hazardous Substance into or upon (a) the air, (b) soils
or any improvements located thereon, (c) surface water or groundwater, or
(d) the sewer or septic system, or the waste treatment, storage, or
disposal system servicing any Property of the Borrower.
"Required Lenders" shall mean, Lenders (including the Agent) holding
----------------
at more than 66 2/3% of the then Loan Balance, or, if there is no Loan
Balance, Lenders (including the Agent) having more than 66 2/3% of the
aggregate amount of the Commitments.
"Requirement of Law" shall mean, as to any Person, the certificate or
------------------
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator,
court, or other Governmental Authority, including, without limitation,
rules, regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now exist
or may be hereafter amended and are 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" shall mean each report delivered to the Agent and
--------------
each Lender pursuant to Section 54, provided that Borrower shall not be
required to deliver more than three reports.
"Responsible Officer" shall mean, as to any Person, its President,
-------------------
Chief Executive Officer or any Vice President.
"Security Instruments" shall mean the security instruments executed
--------------------
and delivered in satisfaction of the condition set forth in Section 3.1(f),
and all other documents and instruments at any time executed as security
for all or any portion of the Obligations, as such instruments may be
amended, restated, or supplemented from time to time.
"Subsidiary" shall mean, as to any Person, a corporation of which
----------
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the Environmental
--------------
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"Transferee" shall mean any Person to which any Lender has sold,
----------
assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section 91, and any Person
acquiring, by purchase, assignment, transfer, or participation, from any
such purchaser, assignee, transferee, or participant, any part of such
Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
---
effect in the State of Texas.
"Year 2000 Compliance" shall mean, with regard to any entity, that all
--------------------
software, embedded microchips, and other processing capabilities utilized
by, and material to the business operations or financial condition of, such
entity are able to
interpret and manipulate data on and involving all calendar dates correctly
and without causing any abnormal ending scenario, including in relation to
dates in and after the year 2000.
1.3 Undefined Financial Accounting Terms. Undefined financial
------------------------------------
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 References. References in this Agreement to Exhibit, Article, or
----------
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which
such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has
---------------------
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference
-----------------
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this
-------------------------
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
----------
TERMS OF FACILITY
-----------------
2.1 Revolving Line of Credit. (a) Upon the terms and conditions
------------------------
(including, without limitation, the right of the Lenders to decline to make any
Loan so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, each Lender
severally agrees, during the Commitment Period, to make Loans, in immediately
available funds at the Applicable Lending Office or the Principal Office, to or
for the benefit of the Borrower in an aggregate principal amount not to exceed
at any time outstanding the lessor of the Facility Amount of such Lender or the
Percentage Share of such Lender of the Borrowing Base then in effect. Loans
shall be made from time to time on any Business Day designated by the Borrower
following receipt by the Agent of a Borrowing Request.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a different
Interest Period. Except for prepayments made pursuant to Section 2.10, each
borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $50,000. Each borrowing, prepayment, or conversion of
or into a Loan of a different type or, in the case of a LIBO Rate Loan, having a
different Interest Period, shall be deemed a separate borrowing, conversion, and
prepayment for purposes of the foregoing, one for each type of Loan or Interest
Period. Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBO Rate Loans having the same Interest Period
shall be at least equal to $100,000; and if any LIBO Rate Loan would otherwise
be in a lesser principal amount for any period, such Loan shall be a Floating
Rate Loan during such period.
(c) The Loans shall be made and maintained at the Applicable Lending
Office or the Principal Office and shall be evidenced by the Notes.
(d) Not later than 2:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the date specified for each borrowing, each Lender
shall make available an amount equal to its Percentage Share of the borrowing to
be made on such date to the Agent, at an account designated by the Agent, in
immediately available funds, for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions hereof, be made
available to the Borrower in immediately available funds at the Principal Office
by the end of that Business Day. All Loans by each Lender shall be maintained
at the Applicable Lending Office of such Lender and shall be evidenced by the
Note of such Lender.
(e) The failure of any Lender to make any Loan required to be made by
it hereunder shall not relieve any other Lender of its obligation to make any
Loan required to be made by it, and no Lender shall be responsible for the
failure of any other Lender to make any Loan.
(f) The face amounts of the Notes have been established as an
administrative convenience and do not commit any Lender to advance funds
hereunder in excess of the then current Borrowing Base.
2.2 Letter of Credit Facility. (a) Upon the terms and conditions and
-------------------------
relying on the representations and warranties contained in this Agreement, the
Agent, as issuing bank for the Lenders, agrees from the date of this Agreement
until the date which is thirty days prior to the Commitment Termination Date, to
issue on behalf of the Lenders in their respective Percentage Shares Letters of
Credit for the account of the Borrower and/or the benefit of any Subsidiary of
the Borrower and to renew and extend such Letters of Credit. Letters of Credit
shall be issued, renewed, or extended from time to time on any Business Day
designated by the Borrower following the receipt in accordance with the terms
hereof by the Agent of the written (or oral, confirmed promptly in writing)
request by a Responsible Officer of the Borrower and a Letter of Credit
Application. Letters of Credit shall be issued in such amounts as the Borrower
may request; provided, however, that (i) no Letter of Credit shall have an
expiration date which is more than 365 days after the issuance thereof or
subsequent to Final Maturity, (ii) each automatically renewable Letter of Credit
shall provide that it may be terminated by the Agent at its then current expiry
date by not less than 30 days' written notice by the Agent to the beneficiary of
such Letter of Credit, and (iii) the Agent shall not be obligated to issue any
Letter of Credit if (A) the face amount thereof would exceed the Available
Commitment, or (B) after giving effect to the issuance thereof, (B) the L/C
Exposure, when added to the Loan Balance then outstanding, would exceed
the Commitment Amount, or (C) the L/C Exposure would exceed $3,000,000, other
than with respect to required commodity and interest rate xxxxxx.
(b) Prior to any payment in respect of any Letter of Credit, each
Lender shall be deemed to be a participant through the Agent with respect to the
relevant Letter of Credit in the obligation of the Agent, as the issuer of such
Letter of Credit, in an amount equal to the Percentage Share of such Lender of
the maximum amount which is or at any time may become available to be drawn
thereunder. Upon delivery by such Lender of funds requested pursuant to Section
2.2(c), such Lender shall be treated as having purchased a participating
interest in an amount equal to such funds delivered by such Lender to the Agent
in the obligation of the Borrower to reimburse the Agent, as the issuer of such
Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as
the issuer of such Letter of Credit, with respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably liable,
without regard to the occurrence of any Default or Event of Default, to the
extent of the Percentage Share of such Lender at the time of issuance of each
Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such
Letter of Credit, for the amount of each Letter of Credit Payment under such
Letter of Credit. Each payment in respect of any Letter of Credit shall be
deemed to be a Floating Rate Loan by each Lender to the extent of funds
delivered by such Lender to the Agent with respect to such payment and shall to
such extent be deemed a Floating Rate Loan under and shall be evidenced by the
Note of such Lender.
(D) EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE
ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY
THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO),
RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE
OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH
LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF
SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES; PROVIDED THAT NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A
LETTER OF CREDIT) SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE WHETHER
SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER
OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.2(D) SHALL SURVIVE THE PAYMENT AND
PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
2.3 Use of Loan Proceeds and Letters of Credit. (a) Proceeds of all
------------------------------------------
Loans shall be used solely for the acquisition and development of oil and gas
properties, including the acquisition
of properties in the Sacramento Basin from Amerada Xxxx, and for general
purposes, including, without limitation, working capital.
(b) Letters of Credit shall be used solely for other general corporate
purposes and to support commodity price and interest rate xxxxxx.
2.4 Interest. Subject to the terms of this Agreement (including,
--------
without limitation, Section 2.17), interest on the Loans shall accrue and be
payable at a rate per annum equal to the Floating Rate for each Floating Rate
Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all
Floating Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as applicable, for the actual days elapsed (including the first day but
excluding the last day) during the period for which payable. Interest on all
LIBO Rate Loans shall be computed on the basis of a year of 360 days for the
actual days elapsed (including the first day but excluding the last day) during
the period for which payable. Notwithstanding the foregoing, interest on past-
due principal and, to the extent permitted by applicable law, past-due interest,
shall accrue at the Default Rate, computed on the basis of a year of 365 or 366
days, as the case may be, for the actual days elapsed (including the first day
but excluding the last day) during the period for which payable, and shall be
payable upon demand by the Lender at any time as to all or any portion of such
interest. In the event that the Borrower fails to select the duration of any
Interest Period for any LIBO Rate Loan within the time period and otherwise as
provided herein, such Loan (if outstanding as a LIBO Rate Loan) will be
automatically converted into a Floating Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment.
2.5 Repayment of Loans and Interest. Accrued and unpaid interest on
-------------------------------
each outstanding Floating Rate Loan shall be due and payable monthly commencing
on the first day of February, 1999, and continuing on the first day of each
calendar month thereafter while any Floating Rate Loan remains outstanding, the
payment in each instance to be the amount of interest which has accrued and
remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on
each outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third calendar month following the
commencement of such Interest Period corresponding to the day of the calendar
month on which such Interest Period commenced, the payment in each instance to
be the amount of interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and unpaid interest
thereon, shall be due and payable at Final Maturity. At the time of making each
payment hereunder or under the Note, the Borrower shall specify to the Lender
the Loans or other amounts payable by the Borrower hereunder to which such
payment is to be applied. In the event the Borrower fails to so specify, or if
an Event of Default has occurred and is continuing, the Lender may apply such
payment as it may elect in its sole discretion.
2.6 Outstanding The outstanding principal balance of the Notes
-----------
reflected by the notations by the Lenders on its records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Notes. The
liability for payment of principal and interest evidenced
by the Notes shall be limited to principal amounts actually advanced and
outstanding pursuant to this Agreement and interest on such amounts calculated
in accordance with this Agreement.
2.7 Time, Place, and Method of Payments. All payments required
-----------------------------------
pursuant to this Agreement or the Notes shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Agent on the Business Day received, or on the next Business Day
following receipt if such receipt is after 2:00 p.m., Central Standard or
Daylight Savings Time, as the case may be, on any Business Day, and shall be
made at the Principal Office. Except as provided to the contrary herein, if the
due date of any payment hereunder or under the Notes would otherwise fall on a
day which is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
2.8 Pro Rata Treatment; Adjustments. (a) Except to the extent
-------------------------------
otherwise expressly provided herein, (i) each borrowing pursuant to this
Agreement shall be made from the Lenders pro rata in accordance with their
respective Percentage Shares, (ii) each reduction of the sum of the Facility
Amounts of the Lenders at the request of the Borrower, as well as any subsequent
increase in the sum of the Facility Amounts of the Lenders at the request of the
Borrower and with written agreement of the Agent and the Required Lenders shall
serve to adjust the Facility Amounts of the Lenders pro rata in accordance with
the Facility Amounts of the Lenders in effect immediately prior to any such
adjustment, (iii) each payment by the Borrower of fees shall be made for the
account of the Lenders pro rata in accordance with their respective Percentage
Shares, (iv) each payment of principal of Loans shall be made for the account of
the Lenders pro rata in accordance with their respective shares of the Loan
Balance, and (v) each payment of interest on Loans shall be made for the account
of the Lenders pro rata in accordance with their respective shares of the
aggregate amount of interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received. In
the event that any payments made hereunder by the Borrower at any particular
time are insufficient to satisfy in full the Obligations due and payable at such
time, such payments shall be applied (i) first, to fees and expenses due
pursuant to the terms of this Agreement or any other Loan Document, (ii) second,
to accrued interest, (iii) third, to the Loan Balance, and (iv) last, to any
other Obligations.
(c) If any Lender (for purposes of this Section, a "Benefitted
----------
Lender") shall at any time receive any payment of all or part of its portion of
------
the Obligations, 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 Section 7.1(f) or Section 7.1(g), or otherwise) in an
-------------- --------------
amount greater than such Lender was entitled to receive pursuant to the terms
hereof, such Benefitted Lender shall purchase for cash from the other Lenders
such portion of the Obligations of such other Lenders, or shall provide such
other Lenders with the benefits of any such Collateral or the proceeds thereof,
as shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such Collateral or proceeds with each of the Lenders
according to the terms hereof. If all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded and the purchase price and benefits returned by such Lender,
to the
extent of such recovery, but without interest. The Borrower agrees that each
such Lender so purchasing a portion of the Obligations of another Lender may
exercise all rights of payment (including rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
If any Lender ever receives, by voluntary payment, exercise of rights of set-off
or banker's lien, counterclaim, cross-action or otherwise, any funds of the
Borrower to be applied to the Obligations, or receives any proceeds by
realization on or with respect to any Collateral, all such funds and proceeds
shall be forwarded immediately to the Agent for distribution in accordance with
the terms of this Agreement.
2.9 Borrowing Base Determinations. (a) The Borrowing Base as of
-----------------------------
November 1, 1998 is acknowledged by the Borrower and the Lenders to be
$43,000,000. Commencing as of February 1, 1999 and continuing thereafter on the
first day of each calendar month through the next Borrowing Base Determination
which is scheduled for May 1, 1999, the amount of the Borrowing Base shall be
reduced by $450,000.
(b) The Borrowing Base shall be redetermined semi-annually on the
basis of information supplied by the Borrower in compliance with the provisions
of this Agreement, including, without limitation, Reserve Reports, and all other
relevant information available to the Lenders. In addition, the Lenders shall,
in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base; provided, however, the Lenders shall not be
obligated to respond to more than four such requests during any calendar year,
and in no event shall the Lenders be required to redetermine the Borrowing Base
more than once in any two-month period, including, without limitation, each
scheduled semi-annual redetermination provided for above. Notwithstanding the
foregoing, the Lenders may at their discretion redetermine the Borrowing Base
and the amount by which the Borrowing Base shall be reduced each calendar month
as set forth in Section 2.9 (a) at any time and from time to time.
(c) Upon each determination of the Borrowing Base by the Lenders, the
Agent shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base and the monthly amount by
which the Borrowing Base shall be reduced so communicated to the Borrower shall
become effective upon such written notification and shall remain in effect until
the next subsequent determination of the Borrowing Base and the monthly amount
by which the Borrowing Base shall be reduced.
(d) The Borrowing Base shall represent the determination by the
Lenders, in accordance with the applicable definitions and provisions herein
contained and their customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the credit approval process of the
Lenders. Furthermore, the Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lenders.
2.10 Mandatory Prepayments. If at any time the sum of the Loan
---------------------
Balance and the L/C Exposure exceeds the Borrowing Base then in effect, the
Borrower shall, within 30 days of notice from the Lender of such occurrence, (a)
prepay, or make arrangements acceptable to the
Lenders for the prepayment of, the amount of such excess for application on the
Loan Balance, (b) provide additional collateral, of character and value
satisfactory to the Lenders in their reasonable discretion, to secure the
Obligations by the execution and delivery to the Lenders of security instruments
in form and substance satisfactory to the Lenders in the exercise of their
reasonable discretion, or (c) effect any combination of the alternatives
described in clauses (a) and (b) of this Section and acceptable to the Lenders
in their reasonable discretion. In the event that a mandatory prepayment is
required under this Section and the Loan Balance is less than the amount
required to be prepaid, the Borrower shall repay the entire Loan Balance and, in
accordance with the provisions of the relevant Letter of Credit Applications
executed by the Borrower or otherwise to the reasonable satisfaction of the
Lenders, deposit with the Lenders, as additional collateral securing the
Obligations, an amount of cash, in immediately available funds, equal to the L/C
Exposure minus the Borrowing Base. The cash deposited with the Lenders in
satisfaction of the requirement provided in this Section may be invested, at the
reasonable discretion of the Lenders and then only at the express direction of
the Borrower as to investment vehicle and maturity (which shall be no later than
the latest expiry date of any then outstanding Letter of Credit), for the
account of the Borrower in cash or cash equivalent investments offered by or
through the Lenders.
2.11 Voluntary Prepayments and Conversions of Loans. Subject to
----------------------------------------------
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Agent
notice of each such prepayment or conversion of all or any portion of a LIBO
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any LIBO Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan, (c) the Borrower shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (d) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.12 Commitment Fee. In addition to interest on the Note as provided
--------------
herein and all other fees payable hereunder and to compensate the Lender for
maintaining funds available, the Borrower shall pay to the Agent for the account
of the Lenders, in immediately available funds, on the first day of April, 1999,
and on the first day of each third calendar month thereafter during the
Commitment Period, a fee in the amount of 0.375% per annum, calculated on the
basis of a year of 365 or 366 days, as the case may be, for the actual days
elapsed (including the first day but excluding the last day), on the average
daily amount of the Available Commitment during the preceding quarterly period.
2.13 Facility Fee. In addition to interest on the Note as provided
------------
herein and all other fees payable hereunder and to compensate the Lenders for
the costs of the extension of credit hereunder, the Borrower shall pay to the
Agent for the account of the Lenders on the Closing Date, in immediately
available funds, a facility fee in the amount of $430,000. One-third of this
fee has been paid with the balance due on the Closing Date.
2.14 Letter of Credit Fee. In addition to interest on the Note as
--------------------
provided herein and all other fees payable hereunder, the Borrower agrees to pay
to the Lender, on the date of issuance of each Letter of Credit, a fee equal to
one percent (1%) per annum, calculated on the basis
of a year of 365 or 366 days, as the case may be, for the actual days elapsed
(including the first day but excluding the last day), on the face amount of such
Letter of Credit during the period for which such Letter of Credit is issued;
provided, however, in the event such Letter of Credit is canceled prior to its
original expiry date or a payment is made by the Lender with respect to such
Letter of Credit, the Lender shall, within 30 days after such cancellation or
the making of such payment, rebate to the Borrower the unearned portion of such
fee. The Borrower also agrees to pay to the Lender on demand its customary
letter of credit transactional fees, including, without limitation, amendment
fees, payable with respect to each Letter of Credit.
2.15 Loans to Satisfy Obligations of Borrower. The Lenders may, but
----------------------------------------
shall not be obligated to, but only if an Event of Default exists, make Loans
for the benefit of the Borrower and apply proceeds thereof to the satisfaction
of any condition, warranty, representation, or covenant of the Borrower
contained in this Agreement or any other Loan Document. Any such Loan shall be
evidenced by the Note and shall be made as a Floating Rate Loan.
2.16 Security Interest in Accounts; Right of Offset. As security for
----------------------------------------------
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent for the benefit of the Lenders and grants to
the Agent for the benefit of the Lenders a security interest in all funds of the
Borrower now or hereafter or from time to time on deposit with the Agent and
such Lender, with such interest of the Lender to be retransferred, reassigned,
and/or released by the Agent and each Lender, as the case may be, at the expense
of the Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable by the Lender during the existence of the occurrence of any Event
of Default, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, the Borrower hereby grants to the Agent and each Lender the right,
exercisable during the existence of an Event of Default, of offset or banker's
lien against all funds of the Borrower now or hereafter or from time to time on
deposit with the Agent and each Lender, regardless of whether the exercise of
any such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof, provided that such Obligation shall have matured, whether
by acceleration of maturity or otherwise.
2.17 General Provisions Relating to Interest. (a) It is the intention
---------------------------------------
of the parties hereto to comply strictly with the usury laws of the State of
Texas and the United States of America. In this connection, there shall never be
collected, charged, or received on the sums advanced hereunder interest in
excess of that which would accrue at the Highest Lawful Rate. For purposes of
Chapter 10 of Subtitle 1 of Title 79, Texas Revised Civil Statutes, the Borrower
agrees that the Highest Lawful Rate shall be the "weekly ceiling" as defined in
such Section, provided that the Lenders may also rely, to the extent permitted
by applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
the United States of America applicable to the Lenders, if greater.
(b) Notwithstanding anything herein or in the Notes to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Notes shall be the
Highest Lawful Rate, and the obligation, if any, of the Borrower for the payment
of fees or other charges deemed to be interest under applicable law shall be
suspended. During any period or periods of time following a Limitation Period,
to the extent permitted by applicable laws of the State of Texas or the United
States of America, the interest rate to be charged hereunder shall remain at the
Highest Lawful Rate until such time as there has been paid to the Lenders (i)
the amount of interest in excess of that accruing at the Highest Lawful Rate
that the Lenders would have received during the Limitation Period had the
interest rate remained at the otherwise applicable rate, and (ii) all interest
and fees otherwise payable to the Lenders but for the effect of such Limitation
Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts which by
law are deemed interest and which would exceed the amount permitted if the
Highest Lawful Rate were in effect, the Borrower stipulates that such payment
and collection will have been and will be deemed to have been, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, the result of mathematical error on the part of the Borrower and the
Lenders; and the Lenders shall promptly refund the amount of such excess (to the
extent only of such interest payments in excess of that which would have accrued
and been payable on the basis of the Highest Lawful Rate) upon discovery of such
error by the Lenders or notice thereof from the Borrower. In the event that the
maturity of any Obligation is accelerated, by reason of an election by the
Lenders or otherwise, or in the event of any required or permitted prepayment,
then the consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the Lenders on the principal amount of
the Obligations, or if the principal amount of the Obligations shall have been
paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lenders for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.18 Yield Protection. (a) Without limiting the effect of the other
----------------
provisions of this Section (but without duplication), the Borrower shall pay to
the Lenders from time to time such amounts as the Lenders may determine are
necessary to compensate it for any Additional Costs incurred by the Lenders.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders from
time to time on request such amounts as the Lenders may determine are necessary
to compensate the Lenders for any costs attributable to the maintenance by the
Lenders (or any Applicable Lending Office), pursuant to any Regulatory Change,
of capital in respect of the Commitment, such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of the Lenders (or any Applicable Lending Office) to a level below that
which the Lenders (or any Applicable Lending Office) could have achieved but for
such Regulatory Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), in the event that any Requirement of Law or
Regulatory Change or the compliance by the Lenders therewith shall (i) impose,
modify, or hold applicable any reserve, special deposit, or similar requirement
against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
impose upon the Lenders any other condition regarding any Letter of Credit or
obligation to issue Letters of Credit, and the result of any such event shall be
to increase the cost to the Lenders of issuing or maintaining any Letter of
Credit or obligation to issue Letters of Credit or any liability with respect to
payments by the Lender under Letters of Credit, or to reduce any amount
receivable in connection therewith, then within 15 days of demand by the
Lenders, the Borrower shall pay to the Lenders, from time to time as specified
by the Lender, additional amounts which shall be sufficient to compensate the
Lenders for such increased cost or reduced amount receivable.
(d) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders such
amounts as shall be sufficient in the reasonable opinion of the Lenders to
compensate them for any loss, cost, or expense incurred by and as a result of:
(i) any payment, prepayment, or conversion by the
Borrower of a LIBO Rate Loan on a date other than the
last day of an Interest Period for such Loan; or
(ii) any failure by the Borrower to borrow a LIBO
Rate Loan from the Lender on the date for such
borrowing specified in the relevant Borrowing Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed for the period from the date of such payment, prepayment, conversion,
or failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such Loan provided for herein over (B) the
interest component (as reasonably determined by the Lenders) of the amount (as
reasonably determined by the Lenders) the Lenders would have bid in the London
interbank market for Dollar deposits of amounts comparable to such principal
amount and maturities comparable to such period; provided, however, that the
Lenders shall be limited to recover their actual losses and not anticipated
profits.
(e) Determinations by the Lenders for purposes of this Section of the
effect of any Regulatory Change on capital maintained, their costs or rate of
return, maintaining Loans, issuing Letters of Credit, its obligation to make
Loans and issue Letters of Credit, or on amounts receivable by it in respect of
Loans, Letters of Credit, or such obligations, and the additional amounts
required to compensate the Lenders under this Section shall be rebuttable
presumptions of the additional amounts due, provided that such determinations
are made on a reasonable basis. The Lenders shall furnish the Borrower with a
certificate setting forth in reasonable detail the basis and amount of increased
costs incurred or reduced amounts receivable as a result of any such event, and
the
statements set forth therein shall be rebuttable presumptions of the additional
amounts due. The Lenders shall (i) notify the Borrower, as promptly as
practicable after the Lender obtains knowledge of any Additional Costs or other
sums payable pursuant to this Section and determines to request compensation
therefor, of any event occurring after the Closing Date which will entitle the
Lenders to compensation pursuant to this Section; provided that the Borrower
shall not be obligated for the payment of any Additional Costs or other sums
payable pursuant to this Section after the earlier of (A) the Final Maturity
(provided that the Obligations have been paid in full) and (B) the expiration of
the Commitment (provided that the Obligations have been paid in full) to the
extent such Additional Costs or other sums accrued more than 90 days prior to
the date upon which the Borrower was given such notice; and (ii) designate a
different Applicable Lending Office for the Loans of the Lenders affected by
such event if such designation will avoid the need for or reduce the amount of
such compensation and will not, in the sole opinion of the Lenders, be
materially disadvantageous to the Lenders. If the Lenders request compensation
from the Borrower under this Section, the Borrower may, by notice to the
Lenders, require that the Loans by the Lenders of the type with respect to which
such compensation is requested be converted into Floating Rate Loans in
accordance with Section 2.11. Any compensation requested by the Lenders pursuant
to this Section shall be due and payable to the Lender within fifteen days of
delivery of any such notice by the Lenders to the Borrower.
(f) The Lenders agree that they shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums payable
are also generally assessed by the Lenders against other customers of the
Lenders similarly situated where such customers are subject to documents
providing for such assessment.
(g) Upon the receipt by the Borrower from any Lender (an "Affected
Bank") of a claim for compensation under this Section 2.18, the Borrower may (i)
request the Affected Bank to use its best efforts to obtain a replacement bank
or financial institution satisfactory to the Borrower to acquire and assume all
or a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one or more of the other Lenders to acquire
and assume all or part of such Affected Bank's Loans and Commitment; or (iii)
designate a Replacement Bank under clause (i) or (iii) shall be subject to the
prior written consent of the Agent (which consent will not be unreasonably
withheld).
2.19 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, no more than 11 separate Loans shall be outstanding at any one
time, with, for purposes of this Section, all Floating Rate Loans constituting
one Loan and all LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any interest rate for any LIBO Rate Loan for any Interest
Period therefor:
(a) the Lenders determine (which determination shall be
conclusive) that quotations of interest rates for the
deposits referred to in the definition of "LIBO Rate" in
Section 1.2 are not being provided in the relevant amounts or
for the
relevant maturities for purposes of determining the rate of interest
for such Loan as provided in this Agreement; or
(b) the Lenders determine (which determination shall be
conclusive) that the rates of interest referred to in the definition
of "LIBO Rate" in Section 1.2 upon the basis of which the rate of
interest for such Loan for such Interest Period is to be determined do
not accurately reflect the cost to the Lenders of making or
maintaining such Loan for such Interest Period,
then the Lenders shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans,
and the Borrower shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert
such Loan into another type of Loan in accordance with Section 2.11. Before
giving such notice pursuant to this Section, the Lenders will designate a
different available Applicable Lending Office for LIBO Rate Loans or take such
other action as the Borrower may request if such designation or action will
avoid the need to suspend the obligation of the Lender to make LIBO Rate Loans
hereunder and will not, in the opinion of the Lenders, be materially
disadvantageous to the Lenders.
2.20 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for the Lenders or their
Applicable Lending Office to (a) honor its obligation to make any type of LIBO
Rate Loans hereunder, or (b) maintain any type of LIBO Rate Loans hereunder,
then the Lenders shall promptly notify the Borrower thereof; and the obligation
of the Lenders hereunder to make such type of LIBO Rate Loans and to convert
other types of Loans into LIBO Rate Loans of such type shall be suspended until
such time as the Lenders may again make and maintain LIBO Rate Loans of such
type, and the outstanding LIBO Rate Loans of such type shall be converted into
Floating Rate Loans in accordance with Section 2.11. Before giving such notice
pursuant to this Section, the Lenders will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other action as the
Borrower may request if such designation or action will avoid the need to
suspend the obligation of the Lenders to make LIBO Rate Loans and will not, in
the opinion of the Lenders, be disadvantageous to the Lenders.
2.21 Regulatory Change. In the event that by reason of any Regulatory
-----------------
Change, the Lenders (a) incur Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of the Lenders which includes deposits by reference to which the
interest rate on any LIBO Rate Loan is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lenders which
includes any LIBO Rate Loan, or (b) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, at
the election of the Lenders with notice to the Borrower, the obligation of the
Lenders to make such LIBO Rate Loans and to convert Floating Rate Loans into
such LIBO Rate Loans shall be suspended until such time as such Regulatory
Change ceases to be in effect, and all such outstanding LIBO Rate Loans shall be
converted into Floating Rate Loans in accordance with Section 2.11.
2.22 Limitations on Interest Periods. Each Interest Period selected
-------------------------------
by the Borrower (a) which commences on the last Business Day of a calendar month
(or, with respect to any LIBO Rate Loan, any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(b) which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day (or, with respect to any LIBO Rate Loan, if
such next succeeding Business Day falls in the next succeeding calendar month,
on the next preceding Business Day), (c) which would otherwise commence before
and end after Final Maturity shall end on Final Maturity, and (d) shall have a
duration of not less than one month, as to any LIBO Rate Loan, and, if any
Interest Period would otherwise be a shorter period, the relevant Loan shall be
a Floating Rate Loan during such period.
2.23 Letters in Lieu of Transfer Orders. The Agent agrees that none
----------------------------------
of the letters in lieu of transfer or division orders provided by the Borrower
pursuant to Section 3.1(f)(iii) or Section 5.7 will be sent to the addressees
thereof prior to the occurrence of an Event of Default, at which time the Agent
may, at its option and in addition to the exercise of any of its other rights
and remedies, send any or all of such letters but only to the extent such Event
of Default still exists.
2.24 Power of Attorney. The Borrower hereby designates the Agent as
-----------------
its agent and attorney-in-fact, to act in its name, place, and stead for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer orders delivered by
the Borrower to the Agent pursuant to Section 3.1(f)(iii) or Section 5.7,
including, without limitation, completing any blanks contained in such letters
and attaching exhibits thereto describing the relevant Collateral. The Borrower
hereby ratifies and confirms all that the Agent shall reasonably and lawfully do
or cause to be done by virtue of this power of attorney and the rights granted
with respect to such power of attorney. This power of attorney is coupled with
the interests of the Agent in the Collateral, shall commence and be in full
force and effect as of the Closing Date and shall remain in full force and
effect and shall be irrevocable so long as any Obligation remains outstanding or
unpaid or any Commitment exists. The powers conferred on the Agent by this
appointment are solely to protect the interests of the Lender under the Loan
Documents and shall not impose any duty upon the Agent to exercise any such
powers. The Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and shall not be responsible
to the Borrower or any other Person for any act or failure to act with respect
to such powers, except for negligence or willful misconduct or omission.
ARTICLE III
-----------
CONDITIONS
----------
The obligations of the Lenders to enter into this Agreement and to
make Loans and issue Letters of Credit are subject to the satisfaction of the
following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lenders shall
-----------------------------------------
have no obligation under this Agreement unless and until all matters incident to
the consummation of the
transactions contemplated herein, including, without limitation, the review by
the Agent or its counsel of the title of the Borrower to its Oil and Gas
Properties, shall be satisfactory to the Agent, and the Agent shall have
received, reviewed, and approved the following documents and other items,
appropriately executed when necessary and, where applicable, acknowledged by one
or more authorized officers of the Borrower, all in form and substance
satisfactory to the Agent and dated, where applicable, of even date herewith or
a date prior thereto and acceptable to the Agent:
(a) multiple counterparts of this Agreement, as requested by the
Lender;
(b) the Notes;
(c) copies of the Articles of Incorporation of the Borrower and all
amendments thereto, accompanied by a certificate dated the Closing Date
issued by the secretary or an assistant secretary or another authorized
representative of the Borrower to the effect that each such copy is correct
and complete;
(d) a certificate of incumbency dated the Closing Date, including
specimen signatures of all officers or other representatives of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, such certificate being executed by the manager or another
authorized representative of the Borrower;
(e) copies of resolutions, to the extent required under the Operating
Agreement of the Borrower, adopted by the board of directors of the
Borrower approving the Loan Documents to which the Borrower is a party and
authorizing the transactions contemplated herein and therein, accompanied
by a certificate dated the Closing Date issued by the manager or another
authorized representative of the Borrower to the effect that such copies
are true and correct copies of resolutions duly adopted and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or rescinded in any respect,
and are in full force and effect as of the date of such certificate;
(f) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security
Agreement, Assignment of Production, and Financing Statement from the
Borrower covering all Oil and Gas Properties of the Borrower and all
improvements, personal property, and fixtures related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(iii) undated letters, in form and substance satisfactory
to the Agent, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
make future payments attributable to production from the Mortgaged
Properties directly to the Agent;
(g) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower in its jurisdictions of
formation and in any other jurisdictions where it does business;
(h) results of searches of the UCC Records of the Secretary of State
of the State of California from a source acceptable to the Agent and
reflecting no Liens against any of the Collateral as to which perfection of
a Lien is accomplished by the filing of a financing statement other than in
favor of the Agent for the benefit of the Lenders;
(i) confirmation, acceptable to the Agent, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(j) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization, and
other material agreements relating to the Mortgaged Properties reasonably
requested by the Lender;
(k) engineering reports covering the Mortgaged Properties;
(l) the opinion of Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C., counsel to the
Borrower, in the form attached hereto as Exhibit IV, with such changes
thereto as may be approved by the Agent;
(m) the opinion of special counsel to the Borrower in each of the
state of California, in the form attached hereto as Exhibit , with such
changes thereto as may be approved by the Agent;
(n) certificates evidencing the insurance coverage required pursuant
to Section 51.8; and
(o) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
3.2 Each Loan and Letter of Credit. In addition to the conditions
------------------------------
precedent stated elsewhere herein, the Lender shall not be obligated to make any
Loan or issue any Letter of Credit unless:
(a) the Borrower shall have delivered to the Agent a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan, or a Letter of Credit Application at least three Business
Days prior to the requested issuance date for the relevant Letter of
Credit; and each statement or certification made in such Borrowing Request
or Letter of Credit Application, as the case may be, shall be true and
correct in all material respects on the requested date for such Loan or the
issuance of such Letter of Credit;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan or the issuance of the requested
Letter of Credit;
(c) if requested by the Agent, the Borrower shall have delivered
evidence satisfactory to the Agent substantiating any of the material
matters contained in this Agreement which are necessary to enable the
Borrower to qualify for such Loan or the issuance of such Letter of Credit;
(d) no event shall have occurred which, in the reasonable opinion of
the Agent or any of the Lenders, would have a Material Adverse Effect;
(e) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan or the issuance
of such Letter of Credit (except to the extent such representations and
warranties expressly refer to an earlier date, in which case, they shall be
true and correct as of such earlier date) provided, however, for purposes
of this Section 3.2, in each representation and warranty in Article IV that
makes reference to an Exhibit, the representation under this Section 3.2
that such representation and warranty in Article IV is true on and as of
the date of the making of such Loan or the issuance of such Letter of
Credit shall take into account (i) any subsequent amendments to any Exhibit
referred to therein, (ii) any exception contained in a written notice
received by the Agent which makes specific reference to the applicable
Exhibit, or (iii) any written disclosure made by the Borrower or any of its
Subsidiaries prior to the date as of which such representation or warranty
is made, provided that such amendment, exception or disclosure has been
consented to by the Required Banks if such amendment, exception or
disclosure amends or waives provisions of this Agreement or is otherwise
required under the terms of this Agreement.
(f) all of the Security Instruments shall be in full force and effect
and provide to the Lenders the security intended thereby;
(g) neither the consummation of the transactions contemplated hereby
nor the making of such Loan or the issuance of such Letter of Credit shall
contravene, violate, or conflict with any Requirement of Law;
(h) except as shown in Exhibit VI, the Borrower shall hold full legal
title to the Collateral and be the sole beneficial owner thereof;
(i) the Agent and the Lenders shall have received the payment of all
fees payable to the Agent and the Lenders hereunder and reimbursement from
the Borrower, or special legal counsel for the Agent shall have received
payment from the Borrower, for (i) all reasonable fees and expenses of
counsel to the Agent for which the Borrower is responsible pursuant to
applicable provisions of this Agreement and for which invoices have been
presented at least 15 days prior to the date of the relevant Loan or Letter
of Credit Application (otherwise the initial Borrowing which must be
presented at least five days prior to the Closing Date), and (ii) estimated
fees charged by filing officers and other public officials incurred or to
be incurred in connection with the filing and recordation of any Security
Instruments, for which invoices have been presented as of or prior to the
date of the requested Loan or Letter of Credit Application (otherwise the
initial Borrowing which must be presented at least five days prior to the
Closing Date); and
(j) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Agent and each Lender in
the exercise of their reasonable discretion.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans and issue Letters of Credit, the Borrower represents and
warrants to the Agent and each Lender (which representations and warranties
shall survive the delivery of the Notes) that:
4.1 Due Authorization. The execution and delivery by the Borrower
-----------------
of this Agreement and the borrowings hereunder, the execution and delivery by
the Borrower of the Notes, the repayment of the Notes and interest and fees
provided for in the Notes and this Agreement, the execution and delivery of the
Security Instruments by the Borrower and the performance of all obligations of
the Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) except as shown on
Exhibit VI, contravene or conflict with any indenture, instrument, or other
agreement to which the Borrower is a party or by which any Property of the
Borrower may be presently bound or encumbered, except where such contravention
or conflict would not individually or in the aggregate result in a Material
Adverse Effect, or (d) result in or require the creation or imposition of any
Lien in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 Existence. The Borrower is a corporation duly organized, legally
---------
existing, and in good standing under the laws of its state of organization and
is duly qualified as a foreign corporation and is in good standing in all
jurisdictions wherein the ownership of Property or the operation of its business
necessitates same, other than those jurisdictions wherein the failure to so
qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents, when duly
-----------------------------
executed and delivered by the Borrower, will be the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relative to enforceability.
4.4 Security Instruments. The provisions of each Security Instrument
--------------------
are effective to create in favor of the Lender, a legal, valid, and enforceable
Lien in all right, title, and interest of the Borrower in the Collateral
described therein, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relative to enforceability, which
Liens, assuming the accomplishment of recording and filing in accordance with
applicable laws prior to the intervention of rights of other Persons, shall
constitute fully perfected first-priority Liens on all right, title, and
interest of the Borrower in the Collateral described therein subject to
Permitted Liens.
4.5 Title to Assets. The Borrower has good and indefeasible title to
---------------
all of its interests in its Properties then owned by it, free and clear of all
Liens except Permitted Liens.
4.6 No Material Misstatements. As of the Closing Date, no
-------------------------
information, exhibit, statement, or report furnished to the Lender by or at the
direction of the Borrower in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the date
made or deemed made.
4.7 Liabilities, Litigation, and Restrictions. As of the Closing
-----------------------------------------
Date, other than as listed under the heading "Liabilities" on Exhibit VI
attached hereto, the Borrower has no liabilities, direct, or contingent, which
would result in a Material Adverse Effect, except as set forth under the heading
"Litigation" on Exhibit VI hereto, no litigation or other action of any nature
affecting the Borrower is pending before any Governmental Authority or, to the
best knowledge of the Borrower, threatened against or affecting the Borrower
which might reasonably be expected to result in any material impairment of its
ownership of any Collateral or have a Material Adverse Effect. To the best
knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, Requirement of Law, or
otherwise relative to the business or operations of the Borrower or the
ownership and operation of the Collateral would result in a Material Adverse
Effect, other than such as relate generally to Persons engaged in business
activities similar to those conducted by the Borrower.
4.8 Authorizations; Consents. Except as expressly contemplated by
------------------------
this Agreement, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other
Person is required to authorize or is otherwise
required in connection with the valid execution and delivery by the Borrower of
the Loan Documents or any instrument contemplated hereby, the repayment by the
Borrower of the Note and interest and fees provided in the Note and this
Agreement, or the performance by the Borrower of the Obligations.
4.9 Compliance with Laws. The Borrower and its Property, including,
--------------------
without limitation, the Mortgaged Property, are in compliance with all material
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.10 ERISA. As of the Closing Date, the Borrower does not maintain,
-----
nor has it maintained, any Plan. As of the Closing Date, the Borrower does not
currently contribute to or have any obligation to contribute to or otherwise
have any liability with respect to any Plan.
4.11 Environmental Laws. To the best knowledge and belief of the
------------------
Borrower, except as would not have a Material Adverse Effect, or as described on
Exhibit VI under the heading "Environmental Matters:"
(a) no Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any federal
or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
or from, affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.12 Compliance with Federal Reserve Regulations. No transaction
-------------------------------------------
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
4.13 Investment Company Act Compliance. The Borrower is not, nor is
---------------------------------
the Borrower directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.14 Public Utility Holding Company Act Compliance. The Borrower is
---------------------------------------------
not a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.15 Proper Filing of Tax Returns; Payment of Taxes Due. The Borrower
--------------------------------------------------
has duly and properly filed its United States income tax return and all other
tax returns which are required to be filed and has paid all taxes due except (i)
such as are being contested in good faith and as to which adequate provisions
and disclosures have been made, and (ii) taxes, assessments, levies or other
charges imposed by any Governmental Authority, other than income taxes imposed
by the United States of America, which respect of which the failure to make
payment could not, by reason of the amount thereof or of remedies attributable
to such Governmental Authorities, reasonably be expected to have a Material
Adverse Effect. The respective charges and reserves on the books of the
Borrower with respect to taxes and other governmental charges are adequate.
4.16 Refunds. Except as described on Exhibit VI under the heading
-------
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in the Borrower being required
to refund any material portion of the proceeds received or to be received from
the sale of hydrocarbons constituting part of the Mortgaged Property.
4.17 Gas Contracts. Except as described on Exhibit VI under the
-------------
heading "Gas Contracts," the Borrower (a) is not obligated in any material
respect by virtue of any prepayment made under any contract containing a "take-
or-pay" or "prepayment" provision or under any similar agreement to deliver
hydrocarbons produced from or allocated to any of the Mortgaged Property at some
future date without receiving full payment therefor within 90 days of delivery,
and (b) has not produced gas, in any material amount, subject to, and neither
the Borrower nor any of the Mortgaged Properties is subject to, balancing rights
of third parties or subject to balancing duties under governmental requirements,
except as to such matters for which the Borrower has established monetary
reserves adequate in amount to satisfy such obligations and has segregated such
reserves from other accounts.
4.18 Intellectual Property. The Borrower owns or is licensed to use
---------------------
all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person
with the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
4.19 Casualties or Taking of Property. Except as disclosed on Exhibit
--------------------------------
VI under the heading "Casualties," except as would not result in a Material
Adverse Effect, neither the business nor any Property of the Borrower has been
materially adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance,
embargo, requisition or taking of Property, or cancellation of contracts,
permits, or concessions by any Governmental Authority, riot, activities of armed
forces, or acts of God.
4.20 Locations of Borrower. The principal place of business and chief
---------------------
executive office of the Borrower is located at the address of the Borrower set
forth in Section 9.3 or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
4.21 Subsidiaries. As of the Closing Date, the Borrower has no
------------
Subsidiaries.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records, in
---------------------------------
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and within ten days following the reasonable request of the Agent, make such
records available for inspection by the Agent and, at the expense of the
Borrower, allow the Agent to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver
-------------------------------------------------------
to the Agent, (a) on or before the 45th day after the close of each of the first
three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited Financial Statements of the Borrower as at the close of such
quarterly period and from the beginning of such fiscal year to the end of such
period, such Financial Statements to be certified by a Responsible Officer of
the Borrower as having been prepared in accordance with GAAP consistently
applied and as a fair presentation of the condition of the Borrower, subject to
changes resulting from normal year-end audit adjustments, and (b) on or before
the 45th day after the close of each fiscal quarter, with the exception of the
last fiscal quarter, a Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the Agent, on or before
---------------------------
the 90th day after the close of each fiscal year of the Borrower, a copy of the
annual audited Financial Statements of the Borrower and a Compliance
Certificate.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the Agent and each
---------------------------
Lender no later than April 1 of each year during the term of this Agreement,
engineering reports in form and substance satisfactory to the Agent, certified
by any nationally- or regionally-recognized independent consulting petroleum
engineers acceptable to the Agent as fairly and accurately setting forth (i) the
proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves
(separately classified as such) attributable to the Mortgaged Properties as of
January 1 of the year for which such reserve reports are furnished, (ii) the
aggregate present value of the future net income with respect
to such Mortgaged Properties, discounted at a stated per annum discount rate of
proven and producing reserves, (iii) projections of the annual rate of
production, gross income, and net income with respect to such proven and
producing reserves, and (iv) information with respect to the "take-or-pay,"
"prepayment," and gas-balancing liabilities of the Borrower.
(b) Deliver to the Agent and each Lender no later than October 1 of
each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Agent prepared by or under the supervision of the
chief petroleum engineer of the Borrower evaluating the Mortgaged Properties as
of July 1, of the year for which such reserve reports are furnished and updating
the information provided in the reports pursuant to Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Agent and each Lender together with additional data concerning
pricing, quantities of production from the Mortgaged Properties, volumes of
production sold, purchasers of production, gross revenues, expenses, and such
other information and engineering and geological data with respect thereto as
the Lenders may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the reasonable
-----------------------------
request of the Agent, furnish to the Agent title opinions, in form and substance
and by counsel reasonably satisfactory to the Agent, or other confirmation of
title acceptable to the Agent, covering Oil and Gas Properties constituting not
less than 85% of the value, determined by the Agent in its reasonable
discretion, of the Mortgaged Properties; and within 60 days after notice by the
Agent of any defect, material in the opinion of the Lenders in value, in the
title of the Borrower to any of its Oil and Gas Properties, clear such title
defects, and, in the event any such title defects are not cured in a timely
manner, pay all related reasonable costs and fees incurred by the Agent to do
so.
5.6 Notices of Certain Events. Deliver to the Agent, within five
-------------------------
days of having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower, or any litigation, investigation, or proceeding between
the Borrower and any Governmental Authority which, in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Borrower as a
defendant or in which any Property of the Borrower is subject to a claim
and in which the amount involved is $500,000 or more and which is not
covered by insurance or which is material and in which injunctive or
similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint which,
if not cured or if adversely determined could reasonably be expected to
have a Material Adverse Effect;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of the Borrower or
adjacent to any Property of the Borrower following any allegation of a
violation of any Requirement of Law which could reasonably be expected to
result in a Material Adverse Effect;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent to any
Property of the Borrower except in accordance with applicable Requirements
of Law or the terms of a valid permit, license, certificate, or approval of
the relevant Governmental Authority, or the violation of any Environmental
Law, or the revocation, suspension, or forfeiture of or failure to renew,
any permit, license, registration, approval, or authorization which in each
case could reasonably be expected to have a Material Adverse Effect;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in the senior management of the Borrower; and
(i) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly
---------------------------------------------------
upon reasonable request by the Agent at any time and from time to time, execute
such letters in lieu of transfer orders, in addition to the letters signed by
the Borrower and delivered to the Agent in satisfaction of the condition set
forth in Section 3.1(f)(iii) and/or division and/or transfer orders as are
necessary or appropriate to transfer and deliver to the Agent proceeds from or
attributable to any Mortgaged Property.
5.8 Additional Information. Furnish to the Agent, promptly upon the
----------------------
reasonable request of the Agent, such additional financial or other information
concerning the assets, liabilities, operations, and transactions of the Borrower
as the Agent may from time to time request; and notify the Agent not less than
ten Business Days prior to the occurrence of any condition or event that may
change the proper location for the filing of any financing statement or other
public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in its name or the
location of its principal place of business or chief executive office; and upon
the request of the Agent, execute such additional Security Instruments as may be
necessary or appropriate in connection therewith.
5.9 Compliance with Laws. Except to the extent the failure to comply
--------------------
or cause compliance would not have a Material Adverse Effect, comply with all
applicable Requirements of Law, including, without limitation, (a) the Natural
Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
all permits, licenses, registrations, approvals, and authorizations (i) related
to any natural or environmental resource or media located on, above, within, in
the vicinity of, related to or affected by any Property of the Borrower, (ii)
required for the performance of the operations of the Borrower, or (iii)
applicable to the use, generation, handling, storage, treatment, transport, or
disposal of any Hazardous Substances; and cause all employees, crew members,
agents, contractors, subcontractors, and future lessees (pursuant to appropriate
lease provisions) of the Borrower, while such Persons are acting within the
scope of their relationship with the Borrower, to comply with all such
Requirements of Law as may be necessary or appropriate to enable the Borrower to
so comply.
5.10 Payment of Assessments and Charges. Pay all taxes, assessments,
----------------------------------
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except for Permitted Liens
and any of the foregoing being contested in good faith and as to which adequate
reserve in accordance with GAAP has been established or unless failure to pay
would not have a Material Adverse Effect.
5.11 Maintenance of Existence and Good Standing. Maintain its
------------------------------------------
existence or qualification and good standing in its jurisdictions of
organization and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
unless the failure to do so would not have a Material Adverse Effect.
5.12 Payment of Notes; Performance of Obligations. Pay the Notes
--------------------------------------------
according to the reading, tenor, and effect thereof, as modified hereby, and do
and perform every act and discharge all of its other Obligations.
5.13 Further Assurances. Promptly cure any defects in the execution
------------------
and delivery of any of the Loan Documents and all agreements contemplated
thereby, and execute, acknowledge, and deliver such other assurances and
instruments as shall, in the reasonable opinion of the Agent or any Lender, be
necessary to fulfill the terms of the Loan Documents.
5.14 Initial Fees and Expenses of Counsel to Lender. On the Closing
----------------------------------------------
Date, promptly reimburse the Agent for all reasonable fees and expenses of
Xxxxxxx Xxxxxx L.L.P., special counsel to the Agent, in connection with the
preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement. Xxxxxxx Xxxxxx L.L.P. will furnish a detailed
statement of services rendered and a statement for estimated recording fees one
day prior to the Closing Date.
5.15 Subsequent Fees and Expenses of Lender. Upon request by the
--------------------------------------
Agent, promptly reimburse the Agent (to the fullest extent permitted by law) for
all amounts reasonably expended, advanced, or incurred by or on behalf of the
Agent to satisfy any obligation of the Borrower under any of the Loan Documents
after the occurrence and during the continuance of an Event of Default; to
collect the Obligations; to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be; for the filing and recordation of Security
Instruments; to enforce the rights of the Agent under any of the Loan Documents;
and to protect the Properties or business of the Borrower, including, without
limitation, the Collateral, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to the Borrower by the Agent and which
amounts shall include, but not be limited to (a) all court costs, (b) reasonable
attorneys' fees, (c) reasonable fees and expenses of auditors and accountants
incurred to protect the interests of the Agent, (d) fees and expenses incurred
in connection with the participation by the Agent as a member of the creditors'
committee in a case commenced under any Insolvency Proceeding, (e) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
(S)362 Title 11 of the United States Code, and (f) fees and expenses incurred in
connection with any action pursuant to (S)1129 Title 11 of the United States
Code all reasonably incurred by the Agent in connection with the collection of
any sums due under the Loan Documents, together with interest at the per annum
interest rate equal to the Floating Rate, calculated on a basis of a calendar
year of 365 or 366 days, as the case may be, counting the actual number of days
elapsed, on each such amount from the date of notification that the same was
expended, advanced, or incurred by the Agent until the date it is repaid to the
Agent, with the obligations under this Section surviving the non-assumption of
this Agreement in a case commenced under any Insolvency Proceeding and being
binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator
of the Borrower appointed in any such case.
5.16 Operation of Oil and Gas Properties. Develop, maintain, and
-----------------------------------
operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
5.17 Maintenance and Inspection of Properties. Maintain all of its
----------------------------------------
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit any authorized representative of the
Lender to visit and inspect, at the expense of the Borrower, any tangible
Property of the Borrower at reasonable times and upon reasonable advance notice.
5.18 Maintenance of Insurance. Maintain insurance with respect to its
------------------------
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
reasonably acceptable to the Agent and, within 30 days of the Closing Date for
property damage insurance covering Collateral and business interruption
insurance, if any, maintained by Borrower, naming the Agent as loss payee, and,
upon any renewal of any such insurance and at other times upon request by the
Lender, furnish to the Lender evidence, satisfactory to the Lender, of the
maintenance of such insurance. From and during the existence of an Event of
Default or if the Borrowing Base is reduced because of such event, the Lender
shall have the right to collect, and the Borrower hereby assigns to the Agent,
any and all monies that may become payable under any policies of insurance
relating to business interruption or by reason of damage, loss, or destruction
of any of the Collateral. From and during the existence of an Event of Default
or if the Borrowing Base is reduced because of such event, the Agent may, at its
option, apply all such sums or any part thereof received by it toward the
payment of the Obligations, whether matured or unmatured, application to be made
first to interest and then to principal, and shall deliver to the Borrower the
balance, if any, after such application has been made. Provided that no Default
or
Event of Default has occurred and is continuing, the Agent shall deliver any
such proceeds received by it to the Borrower. In the event the Agent receives
insurance proceeds not attributable to Collateral or business interruption or
while no Event of Default exists, the Agent shall deliver any such proceeds to
the Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS
---------------
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT AND EACH LENDER UNDER
ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A
WRONGFUL DISHONOR BY THE LENDER OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY
OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY, EXCLUDING ANY OF THE FOREGOING IN THIS
SECTION ARISING FROM NEGLIGENCE OR WILFUL MISCONDUCT, WHETHER SOLE OR
CONCURRENT, ON THE PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE
FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE FOREGOING
INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT, UNLESS ALL SUCH OBLIGATIONS HAVE BEEN
SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY OF REALIZATION AGAINST
ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED THAT
--------
SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE LENDER WITH
RESPECT TO ANY PROPERTY SUBSEQUENT TO THE AGENT OR THE LENDERS BECOMING THE
OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS,
DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION,
OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO BY THE
AGENT OR THE LENDERS.
5.20 Borrower's Year 2000 Compliance.
-------------------------------
(A) Furnish such additional information, statements and other
reports with respect to Borrower's activities, course of action and progress
towards becoming Year 2000 Compliant as Agent may request from time to time.
(B) In the event of any change in circumstances that causes or will
likely cause any of Borrower's representations and warranties with respect to
its being or becoming Year 2000 Compliant to no longer be true (hereinafter,
referred to as a "Change in Circumstances") then Borrower shall promptly, and in
any event within ten (10) days of receipt of information regarding a Change in
Circumstances, provide Agent with written notice (the "Notice") that describes
in reasonable detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause Borrower's representations and
warranties with respect to being or becoming Year 2000 Compliant to no longer be
true. Borrower shall, within ten (10) days of a request, also provide Agent
with any additional information Agent requests of Borrower in connection with
the Notice and/or a Change in Circumstances.
(C) Give any representative of Lenders access during all business
hours to, and permit such representative to examine, copy or make excerpts from,
any and all books, records and documents in the possession of Borrower and
relating to its affairs, and to inspect any of the properties and Systems of
Borrower, and to project test the Systems to determine if they are Year 2000
Compliant in an integrated environment, all at the sole cost and expense of
Lenders.
5.21 Interest Rate Hedge. Enter into an interest rate hedge with a
-------------------
minimum of $20,000,000 for a period of not less than two (2) years. Such hedge
will be executed with the Lender or a third party reasonably acceptable to the
Lender.
5.22 Commodity Price Hedge. Enter into a Commodity Hedge Agreement
---------------------
(as hereinafter defined) with a minimum of 70% of the projected gas production
levels for a minimum of 36 months. All Commodity Hedge Agreements will be
executed with the Lender or a third party reasonably acceptable to the Lender.
The Lender will provide Letter of Credit support behind third party xxxxxx at an
agreeable support level.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower will not:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
------------
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 90 days beyond invoice date or are either (i) being
contested in good faith and as to which such reserve as is required by GAAP has
been made or (ii) less than $250,000 in the aggregate, (c) crude oil, natural
gas, or other hydrocarbon floor, collar, cap, price protection, or swap
agreements ("Commodity Hedge Agreements"), in form and substance and with a
Person reasonably acceptable to the Agent and each Lender, provided that (i)
each commitment issued under such agreement must also be approved by the Agent
and each Lender, which approvals are not unreasonably withheld or delayed, (ii)
such agreements shall not be entered into with respect to Mortgaged Properties
constituting more than 80% of monthly production of proven producing reserves as
forecast in Agent and each Lender's most recent engineering evaluation, (iii)
that the strike prices in such agreements are not less than the prices used by
the Agent and each Lender in the most recent Borrowing Base determination, and
(iv) the Agent for the benefit of each Lender shall receive a security interest
in the Commodity Hedge Agreements, (d) interest rate swap or other financial
hedging agreements, in form and substance and with a Person reasonably
acceptable to the Agent and each Lender, (e) Indebtedness in respect of
Permitted Liens, or (f) Indebtedness in respect of amounts owed for installment
payments for property and liability insurance.
6.2 Contingent Obligations. Create, incur, assume, or suffer to
----------------------
exist any Contingent Obligation; provided, however, the foregoing restriction
shall not apply to (a) indemnities, performance guarantees and performance
surety or other bonds provided in the ordinary course of business, (b) trade
credit incurred or operating leases entered into in the ordinary course of
business, (c) Contingent Obligations permitted pursuant to Section 6.1, or (c)
endorsements for collection or deposit in the ordinary course of business.
6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any
-----
of its Oil and Gas Properties or any other Property, whether now owned or
hereafter acquired; provided, however, the foregoing restrictions shall not
apply to Permitted Liens.
6.4 Sales of Assets. Without the prior written consent of the Agent
---------------
and each Lender, sell, transfer, or otherwise dispose of, in one or any series
of transactions, assets, whether now owned or hereafter acquired except for (a)
dispositions of excess, obsolete or worn out machinery, equipment or fixtures,
(b) other assets not to exceed in fair market value $500,000 in a calendar year,
(c) transfers resulting from casualty or condemnation of property or assets, (d)
intercompany sales or transfers of assets in the ordinary course of business, or
(e) sale of equipment to the extent such equipment is exchanged for credit
against the purchase price of similar equipment or the proceeds thereof are so
applied.
6.5 Leasebacks. Enter into any agreement to sell or transfer any
----------
Property and thereafter rent or lease as lessee such Property or other Property
intended for the same use or purpose as the Property sold or transferred.
6.6 Loans or Advances. Make or agree to make or allow to remain
-----------------
outstanding any loans or advances to any Person; provided, however, the
foregoing restrictions shall not apply to (a) advances or extensions of credit
in the form of accounts receivable incurred in the ordinary course of business
and upon terms common in the industry for such accounts receivable, or (b)
advances to employees of the Borrower for the payment of expenses in the
ordinary course of business.
6.7 Investments. Acquire Investments in, or purchase or otherwise
-----------
acquire all or substantially all of the assets of, any Person; provided,
however, the foregoing restriction shall not apply to the purchase or
acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof, with maturities of
no more than one year, (ii) commercial paper of a domestic issuer rated at the
date of acquisition at least P-2 by Xxxxx'x Investor Service, Inc. or A-2 by
Standard & Poor's Corporation and with maturities of no more than one year from
the date of acquisition, or (iii) repurchase agreements covering debt securities
or commercial paper of the type permitted in this Section, certificates of
deposit, demand deposits, eurodollar time deposits, overnight bank deposits and
bankers' acceptances, with maturities of no more than one year from the date of
acquisition, issued by or acquired from or through the Lender or any bank or
trust company organized under the laws of the United States or any state thereof
and having capital surplus and undivided profits aggregating at least
$100,000,000, (c) other short-term Investments similar in nature and degree of
risk to those described in clause (b) of this Section, (d) money-market funds,
or (e) Investments in or acquisitions of any Person whose assets consist
primarily of Oil and Gas Properties.
6.8 Dividends and Distributions. Declare, pay, or make, whether in
---------------------------
cash or Property of the Borrower, any dividend or distribution on, or purchase,
redeem, or otherwise acquire for value, any ownership interest of any class of
equity at any time that a Default or Event of Default exists; provided, however,
the foregoing restriction shall not apply to distributions paid in the form of
capital stock of the Borrower. Notwithstanding the foregoing, cash dividends on
any preferred stock will be allowed if Borrower maintains a minimum rate of Cash
Flow to Debt Service as determined pursuant to Section 6.1 of at least 1.20 to
1.00 and no Default or Event of Default exists and the payment of such dividends
would not result in an Event of Default.
6.9 Changes in Structure. Enter into any transaction of
--------------------
consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution), except (a) any Subsidiary may merge with
the Borrower, provided that the Borrower is the continuing or surviving
corporation, or with any one or more Subsidiaries provided then in any
transaction between a Subsidiary and a wholly-owned Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving corporation, (b) any Subsidiary
may sell all or substantially all of its assets (upon voluntary liquidation or
otherwise), to the Borrower or another wholly-owned Subsidiary, or (c) the
Borrower or any Subsidiary may merge with any entity acquired in accordance with
the provisions of Section 6.7, so long as the Borrower or such Subsidiary is the
surviving corporation.
6.10 Transactions with Affiliates. Directly or indirectly, enter
----------------------------
into any transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates, other than upon fair and
reasonable terms no less favorable than could be obtained in an arm's length
transaction with a Person which was not an Affiliate.
6.11 Lines of Business. Expand, on its own or through any
-----------------
Subsidiary, into any line of business other than those in which the Borrower is
engaged as of the Closing Date.
6.12 General and Administrative Expenses. Borrower shall not permit
-----------------------------------
general and administrative expenses paid in cash to be more than $2,000,000 as
determined on a rolling four quarter basis.
6.13 Debt Coverage Ratio. Permit at the close of any fiscal quarter,
-------------------
the ratio of Cash Flow to Debt Service to be less than 1.10 to 1.00, to be
tested on a rolling four quarters basis; provided that for (i) the quarter ended
March 31, 1999, the test shall be for such quarter only, (ii) the quarter ended
June 30, 1999, the test shall be for the first two quarters of 1999, and (iii)
for the quarter ended September 30, 1999, the test shall be for the first three
quarters of 1999.
6.14 Minimum Initial Capitalization. Borrower shall not have less
------------------------------
than a minimum initial capitalization of $17,000,000 (and will furnish the Agent
and each Lender with satisfactory proof of such fact).
6.15 Capital Expenditures. Make expenditures for capital or fixed
--------------------
assets in any fiscal year other than for domestic oil and gas properties and
related assets required in the ordinary course of business and not to exceed the
aggregate amount of $500,000.00.
ARTICLE VII
-----------
EVENTS OF DEFAULT
-----------------
7.1 Enumeration of Events of Default. Any of the following events
--------------------------------
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the payment
when due of any fee or other sum payable under any Loan Document and such
default as to interest or fees only shall have continued for five days;
(b) default shall be made by the Borrower in the due observance or
performance of any of its obligations under the Loan Documents, and such
default
shall continue for 30 days after the earlier of notice thereof to the
Borrower by the Lender or knowledge thereof by the Borrower;
(c) any representation or warranty made by the Borrower in any of the
Loan Documents proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate, or
data furnished or made to the Lender in connection herewith proves to have
been untrue in any material respect as of the date the facts therein set
forth were stated or certified;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture,
note, or other Indebtedness or under any credit agreement, loan agreement,
indenture, promissory note, or similar agreement or instrument executed in
connection with any of the foregoing regarding the payment of Indebtedness
in excess of $250,000, and such default shall remain unremedied for in
excess of 30 days;
(e) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Article III, the satisfaction or curing of which
is precedent to the right of the Borrower to obtain a Loan or the issuance
of a Letter of Credit, and such inability shall continue for a period in
excess of 30 days;
(f) the Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, or liquidator of it or all or a substantial part of
its assets, (ii) file a voluntary petition commencing an Insolvency
Proceeding, (iii) make a general assignment for the benefit of creditors,
(iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it in any Insolvency Proceeding;
(g) an order, judgment, or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian, or liquidator of it or all or any
substantial part of its assets, and such order, judgment, or decree shall
not be dismissed or stayed within 90 days;
(h) the levy against any significant portion of the Property of the
Borrower, or any execution, garnishment, attachment, sequestration, or
other writ or similar proceeding which is not permanently dismissed or
discharged within 90 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $500,000, and such order, judgment, or decree shall
not be dismissed or stayed within 90 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. (S)1961
et seq.), the result of which could be the forfeiture or transfer of any
-- ---
material Property of the Borrower subject to a Lien in favor of the Lender
without (i) satisfaction or provision for satisfaction of such Lien, or
(ii) such forfeiture or transfer of such Property being expressly made
subject to such Lien;
(k) the Borrower shall have (i) concealed, removed, or diverted, or
permitted to be concealed, removed, or diverted, any part of its Property,
with intent to hinder, delay, or defraud its creditors or any of them, (ii)
made or suffered a transfer of any of its Property which may be fraudulent
under any bankruptcy, fraudulent conveyance, or similar law, (iii) made any
transfer of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid (except pursuant to
the direction of the Lenders), or (iv) shall have suffered or permitted,
while insolvent, any creditor, other than the Lenders or the Agent, to
obtain a Lien upon any of its Property through legal proceedings or
distraint which is not vacated within 90 days from the date thereof;
(l) any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby, subject to Permitted Liens and dispositions
otherwise permitted by this Agreement;
(m) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Lender.
7.2 Remedies. (a) Upon the occurrence of an Event of Default
--------
specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lenders
in writing; and (iii) the Lenders are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lenders and any and
all other indebtedness at any time owing by the Lender to or for the credit or
account of the Borrower against any and all of the Obligations although such
Obligations may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Required Lenders may, by notice
to the Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which
are hereby expressly waived by the Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by the Lenders in
writing; and (iii) the Lenders are hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lenders and any and all other
indebtedness at any time owing by the Lenders to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lenders and the
Agent may, in addition to the foregoing in this Section, exercise any or all of
its rights and remedies provided by law or pursuant to the Loan Documents.
ARTICLE VII
-----------
THE AGENT
---------
8.1 Appointment. Each Lender hereby designates and appoints the
-----------
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender 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 Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities except those expressly set forth herein or in any
other Loan Document or any fiduciary relationship with any Lender; and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities on the part of the Agent shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent.
8.2 Waivers, Amendments. The provisions of this Agreement and of
-------------------
each other Loan Document may from time to time be amended, modified or waived,
if such amendment, modification, or waiver is in writing and consented to by the
Borrower and the Required Lenders; provided, however, that no such amendment,
modification or waiver would: (a) modify any requirement hereunder that any
particular action be taken by all of the Lenders or by the Required Lenders
unless consented to by each Lender; (b) modify this Section 8.2, change the
definition of "Required Lenders", or change the Commitment Amount or Percentage
Share of any Lender, reduce the fees described in Article II, extend the
Commitment Termination Date or Final Maturity, release any Security Instrument
or Lien, or initiate any foreclosure, enforcement or collection procedure
without the consent of each Lender; (c) extend the due date for, (or reduce the
amount of any scheduled repayment or prepayment of principal of or interest on
any Loan) without the consent of the holder of that Note evidencing such Loan;
(d) affect, adversely the interests, rights, or obligations of the Agent without
the consent of the Agent; or (e) to modify the Borrowing Base or modify the
monthly amount by which the Borrowing Base shall be reduced.
8.3 Delegation of Duties. The 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. The Agent shall not be responsible to any
Lender for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
8.4 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Required Lenders and contribution
by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b) 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 gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower 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 the 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 the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not 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 the Borrower.
8.5 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, 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
counsel to the Borrower), independent accountants and other experts selected by
the Agent. The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless and until a written notice of assignment,
negotiation, or transfer thereof shall have been received by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and
contribution by each Lender of its Percentage Share of costs reasonably expected
by the Agent to be incurred in connection therewith. The 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. Such request and any action taken or failure to act pursuant
thereto shall be binding upon the Lenders and all future holders of the Notes.
In no event shall the Agent be required to take any action that exposes the
Agent to personal liability or that is contrary to any Loan Document or
applicable Requirement of Law.
8.6 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the 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 Agent receives such
a notice, the Agent shall promptly give notice thereof to the Lenders. The 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 Agent shall have received such directions, subject to the provisions of
Section 7.2, the 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. In the
event that the officer of the Agent primarily responsible for the lending
relationship with the Borrower or the officer of any Lender primarily
responsible for the lending relationship with the Borrower becomes aware that a
Default or Event of Default has occurred and is continuing, the Agent or such
Lender, as the case may be, shall use its good faith efforts to inform the other
Lenders and/or the Agent, as the case may be, promptly of such occurrence.
Notwithstanding the preceding sentence, failure to comply with the preceding
sentence shall not result in any liability to the Agent or any Lender.
8.7 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent or any Lender to any other Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the 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, condition (financial and otherwise) and creditworthiness
of the Borrower and the value of the Collateral and other Properties of the
Borrower and has made its own decision to enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
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, condition (financial
and otherwise) and creditworthiness of the Borrower and the value of the
Collateral and other Properties of the Borrower. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial and otherwise), or creditworthiness
of the Borrower or the value of the Collateral or other Properties of the
Borrower which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
8.8 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE AGENT AND
---------------
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO
THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF
THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH
LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER DOCUMENT
CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES; 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 THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
8.9 Restitution. Should the right of the Agent or any Lender to
-----------
realize funds with respect to the Obligations be challenged and any application
of such funds to the Obligations be reversed, whether by Governmental Authority
or otherwise, or should the Borrower otherwise be entitled to a refund or return
of funds distributed to the Lenders in connection with the Obligations, the
Agent or such Lender, as the case may be, shall promptly notify the Lenders of
such fact. Not later than Noon, Central Standard or Central Daylight Savings
Time, as the case may be, of the Business Day following such notice, each Lender
shall pay to the Agent an amount equal to the ratable share of such Lender of
the funds required to be returned to the Borrower. The ratable share of each
Lender shall be determined on the basis of the percentage of the payment all or
a portion of which is required to be refunded originally distributed to such
Lender, if such percentage can be determined, or, if such percentage cannot be
determined, on the basis of the Percentage Share of such Lender. The Agent
shall forward such funds to the Borrower or to the Lender required to return
such funds. If any such amount due to the Agent is made available by any Lender
after Noon, Central Standard or Central Daylight Savings Time, as the case may
be, of the Business Day following such notice, such Lender shall pay to the
Agent (or the Lender required to return funds to the Borrower, as the case may
be) for its own account interest on such amount at a rate equal to the Federal
Funds Rate for the period from and including the date on which restitution to
the Borrower is made by the Agent (or the Lender required to return funds to the
Borrower, as the case may be) to but not including the date on which such Lender
failing to timely forward its share of funds required to be returned to the
Borrower shall have made its ratable share of such funds available.
8.10 Agent in Its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the agent hereunder.
With respect to any Note issued to the Lender serving as the Agent, the Agent
shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.11 Successor Agent. The Agent may resign as Agent upon ten days'
---------------
notice to the Lenders and the Borrower. If the Agent shall resign as Agent
under this Agreement and the other Loan Documents, Lenders for which the
Percentage Shares aggregate at least fifty-one percent (51%) shall appoint from
among the Lenders a successor agent for the Lenders, subject to the reasonable
consent of the Borrowers, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent. The term "Agent" shall mean such
successor agent effective upon its appointment. The rights, powers, and duties
of the former Agent as Agent shall be terminated, without any other or further
act or deed on the part of such former Agent or any of the parties to this
Agreement or any holders of the Notes. After the removal or resignation of any
Agent hereunder as Agent, the provisions of this Article VIII and those of any
------------
Section hereof relating to the Agent, including Section 5.14, Section 5.15 and
------------ ------------
Section 5.19 shall inure to its benefit as to any actions taken or omitted to be
------------
taken by it while it was Agent under this Agreement and the other Loan
Documents.
8.12 Applicable Parties. The provisions of this Article are solely
------------------
for the benefit of the Agent and the Lenders, and the Borrower shall not have
any rights as a third party beneficiary or otherwise under any of the provisions
of this Article. In performing functions and duties hereunder and under the
other Loan Documents, the Agent shall act solely as the agent of the Lenders and
does not assume, nor shall it be deemed to have assumed, any obligation or
relationship of trust or agency with or for the Borrower or any legal
representative, successor, and assign of the Borrower.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 Assignments; Participations. Each Lender may assign or sell
---------------------------
participations in its Loans and Commitments to one or more other Persons in
accordance with this Section 9.1.
(a) Assignments. Any Lender,
-----------
(i) with the written consent of the Borrower (in its sole discretion)
and the Agent (which consent shall not be unreasonably delayed or
withheld), may at any time, assign and delegate to one or more
commercial banks or other financial institutions, and
(ii) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any
of its Affiliates or to any other Lender
(each Person described in (i) or (ii) above as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Loans and
---------------
Commitments (which assignment and delegation shall be of a constant, and not a
varying percentage, of all the assigning Lender's Loans and Commitments), in a
minimum aggregate amount of $1,000,000 of such Lender's Percentage Share
of the Maximum Commitment Amount, if less; provided, however, that such Assignee
Lender will comply with all the provisions of this Agreement, and further,
provided, however, that the Borrower and Agent shall be entitled to continue to
deal solely and directly with such assigning Lender in connection with the
interests so assigned and delegated to an Assignee Lender until:
(iii) written notice of such assignment and delegation together with
payment instructions, addresses and related information with respect
to such Assignee Lender, shall have been given to the Borrower and the
Agent by such Lender and such Assignee Lender,
(iv) such Assignee Lender shall have executed and delivered to the
Borrower and the Agent a Lender Assignment Agreement, accepted by the
Borrower and the Agent and attached hereto as Exhibit VII, and
(v) the processing fees described below shall have been paid.
From and after the date that the Borrower and the Agent accept such
Lender Assignment Agreement, (a) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (b)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Agent (for delivery to the relevant Assignee Lender)
new Notes evidencing such Assignee Lender's assigned Loans and Commitments and,
if the assignor Lender has retained Loans and Commitments hereunder, replacement
Notes in the principal amount of the Loans and Commitments retained by the
assignor Lender hereunder (such Notes to be in exchange for, but not in payment
of, those Notes then held by such assignor Lender). Each such Note shall be
dated the date of the predecessor Notes. The assignor Lender shall xxxx the
predecessor Notes "exchanged" and deliver them to the Borrower. Accrued
interest on that part of the predecessor Notes evidenced by the new Notes, and
accrued fees, shall be paid as provided in the Lender Assignment Agreement.
Accrued interest on that part of the predecessor Notes evidenced by the
replacement Notes shall be paid to the assignor Lender. Accrued interest and
accrued fees shall be paid at the same time or times provided in the predecessor
Notes and in this Agreement. Such assignor Lender or such assignee Lender must
also pay a processing fee to the Agent upon delivery of any Lender Assignment
Agreement in the amount of $3,000. Any attempted assignment and delegation not
made in accordance with this Section 9.1 shall be null and void.
(b) Participations. Any Lender, with the prior written consent of the
--------------
Borrower in its sole discretion, may at any time sell to one or more commercial
banks (each of such commercial banks being herein called a "Participant")
-----------
participating interests in any of the Loans, Commitments, or other interests of
such Lender hereunder; provided, however, that (a) no participation
contemplated in this Section 9.1 shall relieve such Lender from its Commitments
or its other obligations hereunder or under any other Loan Document, (b) such
Lender shall remain solely responsible for the performance of its Commitments
and such other obligations, (c) the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Loan
Documents, (d) no Participant shall be entitled to require such Lender to take
or refrain from taking any action hereunder or under any other Loan Document.
9.2 Survival of Representations, Warranties, and Covenants. All
------------------------------------------------------
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.3 Notices and Other Communications. Except as to oral notices
--------------------------------
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt thereof is
acknowledged orally or by written confirmation report, addressed as follows:
(a) if to the Agent and Lender, to:
Bank One, Texas, National Association
910 Travis, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
(or for notice by mail, to:
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Telecopy: (000) 000-0000
(b) if to the Borrower, to:
Sheridan California Energy, Inc.
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
9.4 Parties in Interest. Subject to applicable restrictions
-------------------
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower, the Agent or the Lenders shall be binding upon and inure to the
benefit of the Borrower, the Agent or the Lenders, as the case may be, and their
respective legal representatives, successors, and assigns.
9.5 Rights of Third Parties. All provisions herein are imposed
-----------------------
solely and exclusively for the benefit of the Agent, Lenders and the Borrower.
No other Person shall have any right, benefit, priority, or interest hereunder
or as a result hereof or have standing to require satisfaction of provisions
hereof in accordance with their terms.
9.6 Renewals; Extensions. All provisions of this Agreement relating
--------------------
to the Notes shall apply with equal force and effect to each promissory note
hereafter executed which in whole or in part represents a renewal or extension
of any part of the Indebtedness of the Borrower under this Agreement, the Notes,
or any other Loan Document.
9.7 No Waiver; Rights Cumulative. No course of dealing on the part
----------------------------
of the Agent or the Lender, its officers or employees, nor any failure or delay
by the Agent or the Lender with respect to exercising any of its rights under
any Loan Document shall operate as a waiver thereof. The rights of the Agent or
the Lender under the Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right. Neither the making of any Loan nor the issuance of a Letter of Credit
shall constitute a waiver of any of the covenants, warranties, or conditions of
the Borrower contained herein. In the event the Borrower is unable to satisfy
any such covenant, warranty, or condition, neither the making of any Loan nor
the issuance of a Letter of Credit shall have the effect of precluding the
Lender from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
9.8 Survival Upon Unenforceability. In the event any one or more of
------------------------------
the provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.9 Amendments; Waivers. Neither this Agreement nor any provision
-------------------
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
9.10 Controlling Agreement. In the event of a conflict between the
---------------------
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
9.11 Disposition of Collateral. Notwithstanding any term or
-------------------------
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in
the sole discretion of the Lender; provided, however, that in no event shall the
Lender violate applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in equity.
9.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO
-------------
BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
----------------------
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, XXXXXX
COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, XXXXXX COUNTY, TEXAS, AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
9.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, AGENT AND THE
------------------------------
LENDERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT.
9.15 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
----------------
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS
AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
9.16 Counterparts. For the convenience of the parties, this Agreement
------------
may be executed in multiple counterparts, each of which for all purposes shall
be deemed to be an original, and all such counterparts shall together constitute
but one and the same Agreement.
9.17 Confidentiality. In the event that the Borrower provides to the
---------------
Agent or any Lender written confidential information belonging to Borrower, the
Agent and the Lenders shall thereafter maintain such information in confidence
in accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information. This obligation of confidence
shall not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Agent or the
Lenders breaching their obligations of confidence to Borrower, (iii) are
previously known by the Agent or the Lenders from some source other than
Borrower, (iv) are hereafter developed by the Agent or the Lenders without using
the Borrower's information, (v) are hereafter obtained by or made available to
the Agent or the Lenders from a third party who the Agent and the Lenders are
not aware owes an obligation of confidence to Borrower with respect to such
information or through any other means other than through disclosure by
Borrower, (vi) are disclosed with such Borrower's consent, (vii) must be
disclosed either pursuant to any governmental requirement or to Persons
regulating the activities of the Agent and the Lenders, or (viii) as may be
required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding. Further, the Agent and the
Lenders may disclose any such information to any independent certified public
accountants, and/or any legal counsel employed by the Agent or any Lender in
connection with this Agreement or any other Loan Document, including without
limitation, the enforcement or exercise of all rights and remedies thereunder,
or any assignee or participant (including prospective assignees and
participants) in the Loan; provided, however, that the Agent and the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Agent
and the Lenders hereunder. Notwithstanding anything to the contrary provided
herein, this obligation of confidence shall case three years from the date the
information was furnished, unless Borrower requests in writing at least 30 days
prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three year period.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of
the date first above written.
BORROWER:
SHERIDAN CALIFORNIA ENERGY, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Xxxxxxx Xxxxxx
--------------------------------
Xxxxxxx Xxxxxx
Senior Vice President
EXHIBIT I
---------
FORM OF NOTE
PROMISSORY NOTE
---------------
$100,000,000 Houston, Texas January 21, 1999
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker")
-----
promises to pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION ("Payee"),
-----
at its banking quarters in Houston, Xxxxxx County, Texas, the sum of ONE
HUNDRED MILLION DOLLARS ($100,000,000), or so much thereof as may be advanced
against this Note pursuant to the Credit Agreement dated of even date herewith
by and between Maker and Payee (as amended, restated, or supplemented from time
to time, the "Credit Agreement"), together with interest at the rates and
----------------
calculated as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable
as provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
Without being limited thereto or thereby, this Note is secured by the
Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.
SHERIDAN CALIFORNIA ENERGY, INC.
By:___________________________________________
Xxxxxxx X. Xxxxxxx
X-x
Vice President and Chief Financial Officer
I-ii
EXHIBIT II
----------
FORM OF BORROWING REQUEST
Bank One, Texas, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of January 21, 1999, by and between BANK
ONE, TEXAS, NATIONAL ASSOCIATION, as Agent, and the lenders signatory
thereto from time to time and SHERIDAN CALIFORNIA ENERGY, INC. (as
amended, restated, or supplemented from time to time, the "Credit
------
Agreement")
---------
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the
requests indicated below:
[_] 1. Loans
(a) Amount of new Loan: $________________
(b) Requested funding date: ___________, 19___
(c) $________________ of such Loan is to be a Floating Rate Loan;
$________________ of such Loan is to be a LIBO Rate Loan.
[_] (d) Requested Interest Period for LIBO Rate Loan: ____ months.
2. Continuation or conversion of LIBO Rate Loan maturing on __________:
(a) Amount to be continued as a LIBO Rate Loan is $______________________,
with an Interest Period of ____ months;
(b) Amount to be converted to a Floating Rate Loan is $______________; and
[_] 3. Conversion of Floating Rate Loan:
II-i
(a) Requested conversion date: __________, 19____.
(b) Amount to be converted to a LIBO Rate Loan is $________, with an
Interest Period of _____ months.
The undersigned certifies that she/he is the __________ of the
Borrower, has obtained all consents necessary, and as such she/he is authorized
to execute this request on behalf of the Borrower. The undersigned further
certifies, represents, and warrants on behalf of the Borrower that the Borrower
is entitled to receive the requested borrowing, continuation, or conversion
under the terms and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
SHERIDAN CALIFORNIA ENERGY, INC.
By:__________________________________________
Xxxxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
II-ii
EXHIBIT III
-----------
FORM OF COMPLIANCE CERTIFICATE
______________, 00__
Xxxx Xxx, Xxxxx, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of January 21, 1999, by and between BANK
ONE, TEXAS, NATIONAL ASSOCIATION, as Agent, and the lenders signatory
thereto from time to time and SHERIDAN CALIFORNIA ENERGY, INC. (as
amended, restated, or supplemented from time to time, the "Credit
------
Agreement")
---------
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
1. To the best of the knowledge of the undersigned, no Default or Event
of Default exists as of the date hereof or has occurred since the date of
our previous certification to you, if any.
1. To the best of the knowledge of the undersigned, the following
Defaults or Events of Default exist as of the date hereof or have occurred
since the date of our previous certification to you, if any, and the
actions set forth below are being taken to remedy such circumstances:
2. The compliance of the Borrower with the financial covenants of the
Credit Agreement, as of the close of business on ____________________, is
evidenced by the following:
(a) Section 6.12: General and Administrative Expenses. Borrower shall not
-----------------------------------
permit general and administrative expenses to be more than $2,000,000 as
determined on a rolling four quarter basis.
III-i
(b) Section 6.13: Debt Coverage Ratio. Permit at the close of any fiscal
-------------------
quarter, the ratio of Cash Flow to Debt Service to be less than 1.10 to
1.00, to be tested on a rolling four quarters basis; provided that for (i)
the quarter ended March 31, 1999, the test shall be for such quarter only,
(ii) the quarter ended June 30, 1999, the test shall be for the first two
quarters of 1999, and (iii) for the quarter ended September 30, 1999, the
test shall be for the first three quarters of 1999.
Required Actual
-------- ------
Not less than 1.10 to 1.00 ______ to 1.0
(c) Section 6.15: Capital Expenditures. Make expenditures for capital or
--------------------
fixed assets in any fiscal year other than for domestic oil and gas
properties and related assets required in the ordinary course of business
and not to exceed the aggregate amount of $500,000.00.
Required Actual
-------- ------
3. No Material Adverse Effect has occurred since the date of the
Financial Statements dated as of ______________________.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
SHERIDAN CALIFORNIA ENERGY, INC.
By: -------------------------------------------
Xxxxxxx X. Xxxxxxx
Vice President and Chief Financial Officer
III-ii
EXHIBIT IV
----------
FORM OF OPINION OF COUNSEL
Closing Date
Bank One, Texas, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of January 21, 1999, by and between BANK
ONE, TEXAS, NATIONAL ASSOCIATION, as Agent, and the lenders signatory
thereto from time to time and SHERIDAN CALIFORNIA ENERGY, INC. (as
amended, restated, or supplemented from time to time, the "Credit
------
Agreement")
---------
Ladies and Gentlemen:
We have acted as counsel to SHERIDAN CALIFORNIA ENERGY, INC. (the
"Borrower") in connection with the transactions contemplated in the Credit
---------
Agreement. This Opinion is delivered pursuant to Section 3.1(m) of the Credit
Agreement, and the Lender is hereby authorized to rely upon this Opinion in
connection with the transactions contemplated in the Credit Agreement. Each
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Credit Agreement.
In our representation of the Borrower, we have examined an executed
counterpart of each of the following (the "Loan Documents"):
--------------
(a) the Credit Agreement;
(b) the Note;
(c) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement dated of even date
herewith from the Borrower in favor of the Lender (the "Mortgage"); and
--------
(d) Financing Statements from the Borrower, as debtor, constituent to
the Mortgage (the "Financing Statement").
-------------------
IV-i
We have also examined the originals, or copies certified to our
satisfaction, of such other records of the Borrower, certificates of public
officials and officers of the Borrower, agreements, instruments, and documents
as we have deemed necessary as a basis for the opinions hereinafter expressed.
In making such examinations, we have, with your permission, assumed:
(a) the genuineness of all signatures to the Loan Documents other
than those of the Borrower;
(b) the authenticity of all documents submitted to us as originals
and the conformity with the originals of all documents submitted to us as
copies;
(c) the Lender is authorized and has the power to enter into and
perform its obligations under the Credit Agreement;
(d) the due authorization, execution, and delivery of all Loan
Documents by each party thereto other than the Borrower; and
(e) the Borrower has title to all Property covered or affected by the
Mortgage.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Borrower is a limited liability company duly organized,
legally existing, and in good standing under the laws of its state of
organization and is duly qualified as a foreign limited liability company
and is in good standing in all jurisdictions wherein the ownership of its
Property or the operation of its business necessitates same.
2. The execution and delivery by the Borrower of the Credit
Agreement and the borrowings thereunder, the execution and delivery by the
Borrower of the other Loan Documents to which the Borrower is a party, and
the payment and performance of all Obligations of the Borrower thereunder
are within the power of the Borrower, have been duly authorized by all
necessary corporate action, and do not (a) require the consent of any
Governmental Authority, (b) contravene or conflict with any Requirement of
Law, (c) to our knowledge after due inquiry, contravene or conflict with
any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the Borrower may be presently bound or
encumbered, or (d) result in or require the creation or imposition of any
Lien upon any Property of the Borrower other than as contemplated by the
Loan Documents.
IV-ii
3. The Loan Documents to which the Borrower is a party constitute
legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
4. The forms of the Mortgage and the Financing Statement and the
description of the Mortgaged Property (as such term is defined in the
Mortgage and so used herein) situated in the State of Texas (the "State")
-----
satisfy all applicable Requirements of Law of the State and are legally
sufficient under the laws of the State to enable the Lender to realize the
practical benefits purported to be afforded by the Mortgage.
5. The Mortgage creates a valid lien upon and security interest in
all Mortgaged Property situated in the State to secure the Indebtedness (as
such term is defined in the Mortgage and so used herein).
6. The Mortgage and the Financing Statement are in satisfactory form
for filing and recording in the offices described below.
7. The filing and/or recording, as the case may be, of (a) the
Mortgage in the office of the county clerk of each county in the State in
which any portion of the Mortgaged Property is located, and as a financing
statement and utility security instrument in the office of the Secretary of
State of the State, and (b) the Financing Statement in the Uniform
Commercial Code records in each county in the State in which any portion of
the Mortgaged Property is located are the only recordings or filings in the
State necessary to perfect the liens and security interests in the
Mortgaged Property created by the Mortgage or to permit the Lender to
enforce in the State its rights under the Mortgage. No subsequent filing,
re-filing, recording, or re-recording will be required in the State in
order to continue the perfection of the liens and security interests
created by the Mortgage except that (a) a continuation statement must be
filed with respect to the Mortgage filed as a financing statement in the
office of the Secretary of State of the State and with respect to the
Financing Statement in the Uniform Commercial Code records in each county
in the State in which any portion of the Mortgaged Property is located,
each within six months prior to the expiration of five years from the date
of the relevant initial financing statement filing, (b) a subsequent
continuation statement must be filed within six months prior to the
expiration of each subsequent five-year period from the date of each
initial financing statement filing, and (c) amendments or supplements to
the Mortgage filed as a financing statement and the Financing Statement
and/or additional financing statements may be required to be filed in the
event of a change in the name, identity, or structure of the Borrower or in
the event the financing statement filing otherwise becomes inaccurate or
incomplete.
IV-iii
8. To our knowledge after due inquiry, except as disclosed in
Exhibit VI to the Credit Agreement, no litigation or other action of any
nature affecting the Borrower is pending before any Governmental Authority
or threatened against the Borrower. To our knowledge after due inquiry, no
unusual or unduly burdensome restriction, restraint, or hazard exists by
contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership and operation of any Properties
of the Borrower other than such as relate generally to Persons engaged in
business activities similar to those conducted by the Borrower.
9. No authorization, consent, approval, exemption, franchise, permit
or license of, or filing (other than filing of Security Instruments in
appropriate filing offices) with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection with
the valid execution and delivery by the Borrower of the Loan Documents or
any instrument contemplated thereby, or the payment performance by the
Borrower of the Obligations.
10. No transaction contemplated by the Loan Documents is in violation
of any regulations promulgated by the Board of Governors of the Federal
Reserve System, including, without limitation, Regulations G, T, U, or X.
11. The Borrower is not, nor is the Borrower directly or indirectly
controlled by or acting on behalf of any Person which is, an "investment
company" or an "affiliated person" of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
12. The Borrower is not a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
The opinions expressed herein are subject to the following qualifications and
limitations:
A. We are licensed to practice law only in the State and other
jurisdictions whose laws are not applicable to the opinions expressed
herein; accordingly, the foregoing opinions are limited solely to the laws
of the State, applicable United States federal law, and the corporation
laws of the State of _______________.
B. The validity, binding effect, and enforceability of the Loan
Documents may be limited or affected by bankruptcy, insolvency, moratorium,
reorganization, or other similar laws affecting rights of creditors
generally, including, without limitation, statutes or rules of law which
limit the effect of waivers of rights by a debtor or grantor; provided,
however, that the limitations and other effects of such statutes or rules
of law upon the validity and binding effect of the Loan Docu-
IV-iv
ments should not differ materially from the limitations and other effects
of such statutes or rules of law upon the validity and binding effect of
credit agreements, promissory notes, and security instruments generally.
C. The enforceability of the respective obligations of the Borrower
under the Loan Documents is subject to general principles of equity
(whether such enforceability is considered in a suit in equity or at law).
This Opinion is furnished by us solely for the benefit of the Lender
in connection with the transactions contemplated by the Loan Documents and is
not to be quoted in whole or in part or otherwise referred to or disclosed in
any other transaction.
Very truly yours,
IV-v
EXHIBIT V
---------
FORM OF OPINION OF LOCAL COUNSEL
--------------------------------
Closing Date
Bank One, Texas, National Association
000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of January 21, 1999, by and between BANK
ONE, TEXAS, NATIONAL ASSOCIATION, as Agent, and the lenders signatory
thereto from time to time and SHERIDAN CALIFORNIA ENERGY, INC. (as
amended, restated, or supplemented from time to time, the "Credit
------
Agreement")
---------
Ladies and Gentlemen:
We have acted as special counsel in the State of California (the
"State") to SHERIDAN CALIFORNIA ENERGY, INC. (the "Borrower") in connection with
------ --------
the transactions contemplated in the Loan Documents described below which were
executed pursuant to the Credit Agreement. In such capacity, we furnish this
Opinion with the intention and understanding that it is to be relied upon by
________________ (the "Lender") in the closing of the transactions contemplated
------
in the Credit Agreement.
In our representation of the Borrower, we have examined an executed
counterpart of each of the following (the "Loan Documents"):
--------------
(a) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production and Financing Statement dated of even date
herewith from the Borrower in favor of the Lender (the "Mortgage"); and
--------
(b) Non-Standard Financing Statement constituent to the Mortgage (the
"Financing Statement").
-------------------
In making such examination, we have, with your permission, assumed:
(a) the genuineness of all signatures to the Loan Documents;
V-i
(b) the authenticity of all documents submitted to us as originals
and the conformity with the originals of all documents submitted to us as
copies;
(c) each party to any Loan Document is authorized and has the power
to enter into and perform its obligations under such Loan Document;
(d) the due authorization, execution, and delivery of all Loan
Documents by each party thereto;
(e) the Borrower is a duly organized and validly existing limited
liability company under the laws of the State of ___________; and
(f) the Borrower has title to all Mortgaged Property (as such term is
defined in the Mortgage and so used herein) situated in the State.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. No consent, approval, or other authorization of, or filing or
registration (other than as described in paragraph A.7 hereof) with, any
court, governmental agency, commission, or other authority of the State or
any subdivision thereof is required for the due execution and delivery of
the Loan Documents or for the enforceability, performance, or observance of
the terms thereof.
2. The execution and delivery by the Borrower of each Loan Document
to which it is a party, compliance with the provisions thereof, and the
consummation of the transactions contemplated thereby will not conflict
with or result in a violation of any law or governmental rule or regulation
of the State or any subdivision thereof.
3. The Loan Documents to which the Borrower is a party constitute
legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
4. The forms of the Mortgage and the Financing Statement and the
description of the Mortgaged Property situated in the State satisfy all
applicable laws of the State and are legally sufficient under the laws of
the State to enable the Lender to realize the practical benefits purported
to be afforded by the Mortgage.
5. The Mortgage (a) creates a lien upon and a security interest in
all Mortgaged Property situated in the State to secure the Indebtedness (as
such term is defined in the Mortgage and so used herein), and (b) provides
for nonjudicial foreclosure remedies customarily used in the State.
V-ii
6. The Mortgage and the Financing Statement are in satisfactory form
for filing and recording in the offices described below.
7. The filing and/or recording, as the case may be, of (a) the
Mortgage in the office of the county clerk of each county in the State in
which any portion of the Mortgaged Property is located and as a financing
statement in the office of the Secretary of State of the State, and (b) the
Financing Statement in the Uniform Commercial Code records in each county
in the State in which any portion of the Mortgaged Property is located are
the only recordings or filings in the State necessary to perfect the liens
and security interests in the Mortgaged Property created by the Mortgage or
to permit the Lender to enforce in the State its rights under the Mortgage.
No subsequent filing, re-filing, recording, or re-recording will be
required in the State in order to continue the perfection of the liens and
security interests created by the Mortgage except that (a) a continuation
statement must be filed with respect to the Mortgage filed as a financing
statement in the office of the Secretary of State of the State and with
respect to the Financing Statement in the Uniform Commercial Code records
in each county in the State in which any portion of the Mortgaged Property
is located, each within six months prior to the expiration of five years
from the date of the relevant initial financing statement filing, (b) a
subsequent continuation statement must be filed within six months prior to
the expiration of each subsequent five-year period from the date of each
initial financing statement filing, and (c) amendments or supplements to
the Mortgage filed as a financing statement and the Financing Statement
and/or additional financing statements may be required to be filed in the
event of a change in the name, identity, or structure of the Borrower or in
the event the financing statement filing otherwise becomes inaccurate or
incomplete.
8. No state or local mortgage recording tax, stamp tax, or other
similar fee, tax, or governmental charge (other than statutory filing and
recording fees to be paid upon filing) is required to be paid to the State
or any subdivision thereof in connection with the execution, delivery,
filing, or recording of any of the Loan Documents or the consummation of
the transactions contemplated therein.
9. It is not necessary for the Lender to qualify to do business in
the State or file in the State any designation for service of process or
reports solely by reason of the interests conveyed or assigned to it or for
its benefit under the Mortgage, nor will such conveyances or assignments
alone result in the imposition upon the Lender of any taxes by the State or
by any subdivision thereof, including, without limitation, franchise,
license, tax on interest received or income taxes, other than recording and
filing fees in connection with the filings referred to in paragraph A.7
above and taxes which the Lender may owe in the event it becomes the actual
and record owner of any Mortgaged Property situated in the State.
V-iii
10. The foreclosure of, or exercise of the power of sale under, the
Mortgage will not in any manner restrict, affect or impair the liability of
the Borrower with respect to the indebtedness or the rights and remedies of
the Lender with respect to the foreclosure or enforcement of any other
security interests or liens securing the Indebtedness to the extent any
deficiency remains unpaid after application to the Indebtedness of the
proceeds of such foreclosure or the exercise of such power of sale.
11. The priority of the liens and security interests created by the
Mortgage with respect to Indebtedness incurred by the Borrower on or before
the date on which the Mortgage is filed in the appropriate recording
offices referred to hereinabove will be determined by the date of such
filings. The priority of the lien created by the Mortgage with respect to
Indebtedness incurred by the Borrower after the date the Mortgage is
recorded will be determined by the dates the Mortgage is filed.
12. The priority of the lien created by the Mortgage will not be
affected by any prepayment of a portion, but less than all, of the
Indebtedness, or any reduction or increase of the outstanding amount of the
Indebtedness from time to time.
13. The limitations period for enforcement of the Mortgage in the
State is ______________.
The opinions expressed herein are subject to the following qualifications
and limitations:
A. We are licensed to practice law only in the State and other
jurisdictions whose laws are not applicable to the opinions expressed
herein; accordingly, the foregoing opinions are limited solely to the laws
of the State and applicable United States federal law.
B. The validity, binding effect, and enforceability of the Loan
Documents may be limited or affected by bankruptcy, insolvency, moratorium,
reorganization, or other similar laws affecting rights of creditors
generally, including, without limitation, statutes or rules of law which
limit the effect of waivers of rights by a debtor or grantor; provided,
---------
however, that the limitations and other effects of such statutes or rules
-------
of law upon the validity and binding effect of the Loan Documents should
not differ materially from the limitations and other effects of such
statutes or rules of law upon the validity and binding effect of
assignments and security instruments generally.
C. The enforceability of the respective obligations of the Borrower
under the Loan Documents to which it is a party is subject to general
principles of equity (whether such enforceability is considered in a suit
in equity or at law).
V-iv
This Opinion is furnished by us solely for the benefit of the Lender
in connection with the transactions contemplated by the Loan Documents and is
not to be quoted in whole or in part or otherwise referred to or disclosed in
any other transaction.
Very truly yours,
V-v
EXHIBIT VI
----------
DISCLOSURES
Section 1.2 Existing Liens None
Section 3.2 Title Encumbrances None
Section 4.1 Conflicts Certain of the provisions of the Certificate of Designations,
Preferences and Rights of Services N-A Preferred Stock require
mandatory redemption at times when such redemption may be prohibited by
Section 6.8
Section 4.7 Liabilities None
---------------------
Section 4.7 Litigation None
---------------------
Section 4.11 Environmental Matters None
---------------------
Section 4.16 Refunds None
---------------------
Section 4.17 Gas Contracts None
---------------------
Section 4.19 Casualties None
---------------------
VI-i
EXHIBIT VII
-----------
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
--------------------
This ASSIGNMENT AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time, this "Agreement") is dated as of __________________,
---------
__________, by and between ______________________________ (the "Assignor") and
--------
________________________________ (the "Assignee").
--------
RECITALS
--------
WHEREAS, the Assignor is a party to the Credit Agreement dated as of
January 21, 1999, (as amended, supplemented or restated from time to time, the
"Credit Agreement") by and among Sheridan California Energy, Inc., a Texas
----------------
limited liability company (the "Borrower"), each of the lenders that is or
--------
becomes a party thereto as provided in Section 9.1(b) of the Credit Agreement
(individually, together with its successors and assigns, a "Lender", and
------
collectively, together with their successors and assigns, the "Lenders"), and
-------
Bank One, Texas, National Association, a national banking association, as a
Lender (in such capacity, "Bank One") and as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent"); and
-----
WHEREAS, the Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor,
[ALL][A PORTION] of the Assignor's Facility Amount and its outstanding Loans,
all on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Definitions from Credit Agreement. All capitalized terms used but not
---------------------------------
defined herein have the respective meanings given to such terms in the Credit
Agreement.
1.2 Additional Defined Terms. As used herein, the following terms have
------------------------
the following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its capacity as a
-----------------
"Lender") rights and obligations (i) under the Credit Agreement and the
other Loan Documents in respect of [ALL OF] [THE PORTION OF THE] Facility
Amount of the Assignor in the principal amount equal
VII-i
to $_____________ and (ii) to make Loans under its Commitment up to such
amount referenced above and any right to receive payments for the Loans
currently outstanding under its Commitment in the principal amount of
$_____________ (the "Loan Balance"), plus the interest and fees which will
------------
accrue with respect thereto from and after the Assignment Date.
"Assignment Date" shall mean ________________, __________.
---------------
1.3 References. References in this Agreement to Schedule, Exhibit,
----------
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. Except as otherwise
indicated, references in this Agreement to statutes, sections, or regulations
are to be construed as including all statutory or regulatory provisions
consolidating, amending, replacing, succeeding, or supplementing the statute,
section, or regulation referred to. References in this Agreement to "writing"
include printing, typing, lithography, facsimile reproduction, and other means
of reproducing words in a tangible visible form. References in this Agreement
to agreements and other contractual instruments shall be deemed to include all
exhibits and appendices attached thereto and all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.
References in this Agreement to Persons include their respective successors and
permitted assigns.
1.4 Articles and Sections. This Agreement, for convenience only, has
---------------------
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.5 Number and Gender. Whenever the context requires, reference
-----------------
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.6 Negotiated Transaction. Each party to this Agreement affirms to
----------------------
the other that it has had the opportunity to consult, and discuss the provisions
of this Agreement with, independent counsel and fully understands the legal
effect of each provision.
VII-ii
ARTICLE II
SALE AND ASSIGNMENT
-------------------
2.1 Sale and Assignment. On the terms and conditions set forth herein,
-------------------
effective on and as of the Assignment Date, the Assignor hereby sells, assigns
and transfers to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, all of the right, title and interest of the Assignor in and
to, and all of the obligations of the Assignor in respect of, the Assigned
Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.
2.2 Assumption of Obligations. The Assignee agrees with the Assignor (for
-------------------------
the express benefit of the Assignor and the Borrower) that the Assignee will,
from and after the Assignment Date, assume and perform all of the obligations of
the Assignor in respect of the Assigned Interest. From and after the Assignment
Date: (a) the Assignor shall be released from the Assignor's obligations in
respect of the Assigned Interest, and (b) the Assignee shall be entitled to all
of the Assignor's rights, powers and privileges under the Credit Agreement and
the other Loan Documents in respect of the Assigned Interest.
2.3 Consent by Agent. By executing this Agreement as provided below, in
----------------
accordance with Section 9.1(b) of the Credit Agreement, the Agent hereby
acknowledges notice of the transactions contemplated by this Agreement and
consents to such transactions.
ARTICLE III
PAYMENTS
--------
3.1 Payments. As consideration for the sale, assignment and transfer
--------
contemplated by Section 2.1, the Assignee shall, on the Assignment Date, assume
-----------
Assignor's obligations in respect of the Assigned Interest and pay to the
Assignor an amount equal to the Loan Balance, if any, all accrued and unpaid
interest and fees with respect to the Assigned Interest as of the Assignment
Date. Except as otherwise provided in this Agreement, all payments hereunder
shall be made in Dollars and in immediately available funds, without setoff,
deduction or counterclaim.
3.2 Allocation of Payments. The Assignor and the Assignee agree that (i)
----------------------
the Assignor shall be entitled to any payments of principal with respect to the
Assigned Interest made prior to the Assignment Date, together with any interest
and fees with respect to the Assigned Interest accrued prior to the Assignment
Date, (ii) the Assignee shall be entitled to any payments of principal with
respect to the Assigned Interest made from and after the Assignment Date,
together with any and all interest and fees with respect to the Assigned
Interest accruing from and after the Assignment Date, and (iii) the Agent is
authorized and instructed to allocate payments received by it for the account of
the Assignor and the Assignee as provided in the foregoing clauses. Each party
hereto agrees that
VII-iii
it will hold any interest, fees or other amounts that it may receive to which
the other party hereto shall be entitled pursuant to the preceding sentence for
account of such other party and pay, in like money and funds, any such amounts
that it may receive to such other party promptly upon receipt.
3.3 Delivery of Notes. Promptly following the receipt by the Assignor of
-----------------
the consideration required to be paid under Section 3.1 hereof, the Assignor
-----------
shall, in the manner contemplated by Section 9.1(b) of the Credit Agreement, (i)
deliver to the Agent (or its counsel) the Note held by the Assignor and (ii)
notify the Agent to request that the Borrower execute and deliver new Notes to
the Assignor, if Assignor continues to be a Lender, and the Assignee, dated the
Assignment Date in respective principal amounts equal to the respective Facility
Amounts of the Assignor (if appropriate) and the Assignee after giving effect to
the sale, assignment and transfer contemplated hereby.
3.4 Further Assurances. The Assignor and the Assignee hereby agree to
------------------
execute and deliver such other instruments, and take such other actions, as
either party may reasonably request in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
The effectiveness of the sale, assignment and transfer contemplated hereby
is subject to the satisfaction of each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the Assignor and
the Assignee;
(b) the receipt by the Assignor of the payments required to be made
under Section 3.1; and
-----------
(c) the acknowledgment and consent by the Agent contemplated by
Section 2.3.
------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties of Assignor. The Assignor represents
------------------------------------------
and warrants to the Assignee as follows:
VII-iv
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
the Assignor and the delivery of all instruments required to be delivered
by it hereunder do not and will not violate any Requirement of Law
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all Liens,
claims, participations or other charges of any nature whatsoever; and
(f) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignor.
5.2 Disclaimer. Except as expressly provided in Section 5.1 hereof, the
---------- -----------
Assignor does not make any representation or warranty, nor shall it have any
responsibility to the Assignee, with respect to the accuracy of any recitals,
statements, representations or warranties contained in the Credit Agreement or
in any other Loan Document or for the value, validity, effectiveness,
genuineness, execution, legality, enforceability or sufficiency of the Credit
Agreement, the Notes or any other Loan Document or for any failure by the
Borrower or any other Person (other than Assignor) to perform any of its
obligations thereunder or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of the Borrower or
any other Person, or any other matter relating to the Credit Agreement or any
other Loan Document or any extension of credit thereunder.
5.3 Representations and Warranties of Assignee. The Assignee represents
------------------------------------------
and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
VII-v
(b) the execution, delivery and compliance with the terms hereof by
the Assignee and the delivery of all instruments required to be delivered
by it hereunder do not and will not violate any Requirement of Law
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignee has received copies of the Credit Agreement and the
other Loan Documents, as well as copies of all Financial Statements
previously provided by the Borrower in satisfaction of obligations under
the Credit Agreement.
(f) the Assignee has fully reviewed the terms of the Credit Agreement
and the other Loan Documents and has independently and without reliance
upon the Assignor, and based on such information as the Assignee has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement;
(g) if the Assignee is not incorporated under the laws of the United
States of America or a state thereof, the Assignee has contemporaneously
herewith delivered to the Agent and the Borrower such documents as are
required by Section 2.25(b) of the Credit Agreement; and
(h) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignee.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Notices. All notices and other communications provided for herein
-------
(including any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including by telecopy) to the
intended recipient at its "Address for Notices" specified below its name on the
signature pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party.
6.2 Amendment, Modification or Waiver. No provision of this Agreement may
---------------------------------
be amended, modified or waived except by an instrument in writing signed by the
Assignor and the Assignee, and consented to by the Agent.
VII-vi
6.3 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Agent, and the Assignee agrees
that the Agent is entitled to rely upon such representations and warranties.
6.4 Assignments. Neither party hereto may assign any of its rights or
-----------
obligations hereunder except in accordance with the terms of the Credit
Agreement.
6.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be identical and all of which, taken together,
shall constitute one and the same instrument, and each of the parties hereto may
execute this Agreement by signing any such counterpart.
6.6 Governing Law. THIS AGREEMENT (INCLUDING THE VALIDITY AND
-------------
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF.
6.7 Expenses. To the extent not paid by the Borrower pursuant to the
--------
terms of the Credit Agreement, each party hereto shall bear its own expenses in
connection with the execution, delivery and performance of this Agreement.
6.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
--------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
--------
_____________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address for Notices:
_____________________________________
VII-vii
_____________________________________
_____________________________________
Telecopier No.:_______________________________
Telephone No.:________________________________
Attention:____________________________________
ASSIGNEE
--------
_____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Address for Notices:
_____________________________________
_____________________________________
_____________________________________
Telecopier No.:________________________________
Telephone No.:_________________________________
Attention:_____________________________________
ACKNOWLEDGED AND CONSENTED TO:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
as Agent
By:__________________________________
Name:________________________________
Title:_______________________________
VII-viii
