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CREDIT AGREEMENT
Dated as of August 1, 1997
Among
QUEEN SAND RESOURCES, INC.
as Borrower,
BANK OF MONTREAL,
as Agent,
and
The Lenders Signatory Hereto
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above........................................................................1
Section 1.02 Certain Defined Terms......................................................................1
Section 1.03 Accounting Terms and Determinations.......................................................14
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit...............................................................14
Section 2.02 Borrowings, Continuations, Conversions and Letters of Credit..............................15
Section 2.03 Changes of Commitments....................................................................16
Section 2.04 Fees......................................................................................17
Section 2.05 Several Obligations.......................................................................18
Section 2.06 Notes.....................................................................................18
Section 2.07 Prepayments...............................................................................18
Section 2.08 Borrowing Base............................................................................19
Section 2.09 Assumption of Risks.......................................................................20
Section 2.10 Obligation to Reimburse and to Prepay.....................................................21
Section 2.11 Lending Offices...........................................................................22
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans........................................................................22
Section 3.02 Interest..................................................................................22
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments..................................................................................23
Section 4.02 Pro Rata Treatment........................................................................24
Section 4.03 Computations..............................................................................24
Section 4.04 Non-receipt of Funds by the Agent.........................................................24
Section 4.05 Setoff, Sharing of Payments, Etc. ........................................................24
Section 4.06 Taxes.....................................................................................25
Section 4.07 Disposition of Proceeds...................................................................28
ARTICLE V
YIELD MAINTENANCE; CAPITAL ADEQUACY
Section 5.01 Additional Costs..........................................................................28
Section 5.02 Limitation on Eurodollar Loans............................................................30
Section 5.03 Illegality................................................................................30
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03..................................30
Section 5.05 Compensation..............................................................................30
Section 5.06 Replacement Lenders.......................................................................31
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding...........................................................................32
Section 6.02 Initial and Subsequent Loans..............................................................33
Section 6.03 Conditions Relating to Letters of Credit..................................................34
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence.......................................................................34
Section 7.02 Financial Condition.......................................................................35
Section 7.03 Litigation................................................................................35
Section 7.04 No Breach.................................................................................35
Section 7.05 Authority.................................................................................36
Section 7.06 Approvals.................................................................................36
Section 7.07 Use of Loans..............................................................................36
Section 7.08 ERISA.....................................................................................36
Section 7.09 Taxes.....................................................................................37
Section 7.10 Titles, etc...............................................................................37
Section 7.11 No Material Misstatements.................................................................38
Section 7.12 Investment Company Act....................................................................38
Section 7.13 Public Utility Holding Company Act........................................................38
Section 7.14 Subsidiaries and Partnerships.............................................................39
Section 7.15 Location of Business and Offices..........................................................39
Section 7.16 Defaults..................................................................................39
Section 7.17 Environmental Matters.....................................................................39
Section 7.18 Compliance with the Law...................................................................40
Section 7.19 Insurance.................................................................................40
Section 7.20 Hedging Agreements........................................................................41
Section 7.21 Restriction on Liens......................................................................41
Section 7.22 Gas Imbalances............................................................................41
Section 7.23 Material Agreements.......................................................................41
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Financial Statements......................................................................42
Section 8.02 Litigation................................................................................44
Section 8.03 Maintenance, Etc..........................................................................44
Section 8.04 Environmental Matters.....................................................................45
Section 8.05 Further Assurances........................................................................45
Section 8.06 Performance of Obligations................................................................46
Section 8.07 Engineering Reports.......................................................................46
Section 8.08 Title Information.........................................................................47
Section 8.09 Additional Collateral.....................................................................48
Section 8.10 ERISA Information and Compliance..........................................................48
Section 8.11 Hedging Program...........................................................................49
Section 8.12 Management; Capitalization................................................................49
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt......................................................................................49
Section 9.02 Liens.....................................................................................50
Section 9.03 Investments, Loans and Advances...........................................................50
Section 9.05 Sales and Leasebacks......................................................................52
Section 9.06 Nature of Business........................................................................52
Section 9.07 Limitation on Leases......................................................................52
Section 9.08 Mergers, Etc..............................................................................52
Section 9.09 Proceeds of Notes.........................................................................52
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Section 9.10 ERISA Compliance...........................................................................52
Section 9.11 Sale or Discount of Receivables............................................................54
Section 9.12 Current Ratio..............................................................................54
Section 9.13 Accounts Payable...........................................................................54
Section 9.14 Interest Coverage Ratio....................................................................54
Section 9.15 Sale of Oil and Gas Properties.............................................................54
Section 9.16 Environmental Matters......................................................................55
Section 9.17 Transactions with Affiliates...............................................................55
Section 9.18 Subsidiaries and Partnerships..............................................................55
Section 9.19 Negative Pledge Agreements.................................................................55
Section 9.20 Gas Imbalances, TakeorPay or Other Prepayments.............................................55
Section 9.21 Material Contracts.........................................................................56
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default.........................................................................56
Section 10.02 Remedies..................................................................................58
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities.......................................................58
Section 11.02 Reliance by Agent........................................................................59
Section 11.03 Defaults.................................................................................59
Section 11.04 Rights as a Lender.......................................................................59
Section 11.05 INDEMNIFICATION..........................................................................60
Section 11.06 Non-Reliance on Agent and other Lenders..................................................60
Section 11.07 Action by Agent..........................................................................60
Section 11.08 Resignation or Removal of Agent..........................................................61
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver...................................................................................61
Section 12.02 Notices..................................................................................61
Section 12.03 Payment of Expenses, Indemnities, etc. ..................................................61
Section 12.04 Amendments, Etc..........................................................................63
Section 12.05 Successors and Assigns...................................................................64
Section 12.06 Assignments and Participations...........................................................64
Section 12.07 Invalidity...............................................................................65
Section 12.08 Counterparts.............................................................................65
Section 12.09 References...............................................................................65
Section 12.10 Survival.................................................................................65
Section 12.11 Captions.................................................................................66
Section 12.12 NO ORAL AGREEMENTS.......................................................................66
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION................................................66
Section 12.14 Interest.................................................................................67
Section 12.15 Confidentiality..........................................................................68
Section 12.16 EXCULPATION PROVISIONS...................................................................68
Section 12.17 Designated Senior Indebtedness...........................................................69
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Annex I - List of Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Gas Imbalances
Schedule 7.23 - Material Agreements
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS CREDIT AGREEMENT dated as of August 1, 1997 is among:
QUEEN SAND RESOURCES, INC., a corporation formed under the laws of the State of
Nevada (the "Borrower"); each of the lenders that is a signatory hereto or which
becomes a signatory hereto as provided in Section 12.06 (individually, together
with its successors and assigns, a "Lender" and, collectively, the "Lenders");
and BANK OF MONTREAL, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans to
and extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement,
the terms "Agent," "Borrower," "Lender," and "Lenders" shall have the meanings
indicated above.
Section 1.02 Certain Defined Terms. As used herein, the
following terms shall have the following meanings (all terms defined in this
Article I or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term
in Section 5.01(a).
"Affected Loans" shall have the meaning assigned such term in
Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly
or indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean any Person which owns directly or indirectly 10% or
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person.
"Agreement" shall mean this Credit Agreement, as the same may
from time to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount
calculated in accordance with Section 2.03(a) hereof.
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"Aggregate Maximum Credit Amounts" at any time shall equal the
sum of the Maximum Credit Amounts of the Lenders, as the same may be reduced
pursuant to Sections 2.03(b).
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the lending office of such Lender (or an Affiliate of
such Lender) designated for such Type of Loan on the signature pages hereof or
such other offices of such Lender (or of an Affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Borrower as the office
by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean:
a) with respect to any Loan outstanding during the Revolving Credit
Period, for each day such Loan is outstanding, the following rate per annum
based upon the Percentage Usage of the available Borrowing Base as is
applicable:
Percentage Usage Applicable Margin for Applicable Margin for
Eurodollar Loans Base Rate Loans
---------------- ---------------- ---------------
Greater than 90% 2.25% 0.00%
Less than or equal to 90%
and greater than or equal 2.00% 0.00%
to 75%
Less than 75% and 1.50% 0.00%
greater than 40%
Less than or equal to 40% 1.00% 0.00%.
b) with respect to any Loan outstanding during the Term Loan Period,
for each day such Loan is outstanding, (i) 2.50% per annum for Eurodollar Loans
and (ii) .25% per annum for Base Rate Loans.
"Assignment" shall have the meaning assigned such term in
Section 12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan,
for any day, the higher of (i) the Federal Funds Rate for any such day plus 1/2
of 1% or (ii) the Prime Rate for such day. Each change in any interest rate
provided for herein based upon the Base Rate resulting from a change in the Base
Rate shall take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates
based upon the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the
amount determined in accordance with Section 2.08.
"Business Day" shall mean any day other than a day on which
commercial banks are authorized or required to close in Chicago, Illinois and,
where such term is used in the definition of "Quarterly Date" or if such day
relates to a borrowing or continuation of, a payment or prepayment of
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principal of or interest on, or a conversion of or into, or the Interest Period
for, a Eurodollar Loan or a notice by the Borrower with respect to any such
borrowing or continuation, payment, prepayment, conversion or Interest Period,
any day which is also a day on which dealings in Dollar deposits are carried out
in the London interbank market.
"Closing Date" shall mean August 1, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and any successor statute.
"Xxxxxxx and Xxxx Acquisition" shall mean the purchase of
certain Oil and Gas Properties pursuant to that certain Purchase and Sale
Agreement among Xxxxxxx & Xxxx, Inc., as seller, and the Borrower and the Parent
Company, as the same has been amended or modified through the Closing Date, and
as the same may be further amended, modified or supplemented pursuant to Section
9.21.
"Commitment" shall mean, for any Lender, its obligation to
make Loans up to the lesser of such Lender's Maximum Credit Amount or the
Lender's Percentage Share of the then effective Borrowing Base and to
participate in the Letters of Credit as provided in Section 2.01(b).
"Consolidated Net Income" shall mean with respect to the
Parent Company and its Consolidated Subsidiaries, for any period, the aggregate
of the net income (or loss) of the Parent Company and its Consolidated
Subsidiaries after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (i) the net income of any Person in which the Parent Company or any
Consolidated Subsidiary has an interest (which interest does not cause the net
income of such other Person to be consolidated with the net income of the Parent
Company and its Consolidated Subsidiaries in accordance with GAAP), except to
the extent of the amount of dividends or distributions actually paid in such
period by such other Person to the Parent Company or to a Consolidated
Subsidiary, as the case may be; (ii) the net income (but not loss) of any
Consolidated Subsidiary to the extent that the declaration or payment of
dividends or similar distributions or transfers or loans by that Consolidated
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (iv) any extraordinary gains or losses, including gains or
losses attributable to Property sales not in the ordinary course of business;
(v) the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or writedowns of assets; and (vi) any writedowns
of non-current assets, provided however, that any ceiling limitation writedowns
under SEC guidelines shall be treated as capitalized costs, as if such
writedowns had not occurred.
"Consolidated Subsidiaries" shall mean each Subsidiary of the
Parent Company or other Person owned by the Parent Company, whether now existing
or hereafter created or acquired, the financial statements of which shall be (or
should have been) consolidated with the financial statements of the Parent
Company in accordance with GAAP.
"Debt" shall mean, for any Person the sum of the following
(without duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar
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instruments (including principal, interest, fees and charges); (ii) all
obligations of such Person (whether contingent or otherwise) in respect of
bankers' acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred purchase
price of Property or services (other than for borrowed money); (iv) all
obligations under leases which shall have been, or should have been, in
accordance with GAAP, recorded as capital leases in respect of which such Person
is liable (whether contingent or otherwise); (v) all Debt and other obligations
of others secured by a Lien on any asset of such Person, whether or not such
Debt is assumed by such Person; (vi) all Debt and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the debtor or obligations of others; (vii) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others
(other than the purchase of Property in the ordinary course of business); (viii)
the undischarged balance of any production payment created by such Person or for
the creation of which such Person directly or indirectly received payment; and
(ix) the net xxxx to market value of all obligations of such Person under
Hedging Agreements.
"Default" shall mean an Event of Default or an event which
with notice or lapse of time or both would become an Event of Default.
"DEM Subordinated Debt" shall mean the Series A DEM 5,000,0000
12% notes issued by the Parent Company and being due and payable on July 15,
2000, and any renewals, extensions or replacements (but not increases in
principal amount) thereof.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"EBITDA" shall mean, for any period, the sum, determined
(without duplication) for the Parent Company and its Consolidated Subsidiaries
of (i) Consolidated Net Income plus (ii) Interest Expense for such period to the
extent deducted in the determination of Consolidated Net Income plus (iii)
depreciation, amortization and other similar non-cash items to the extent
deducted in the determination of Consolidated Net Income plus (iv) all taxes
accrued for such period on or measured by income to the extent deducted in the
determination of Consolidated Net Income.
"Engineering Reports" shall have the meaning assigned such
term in Section 2.08.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to health, safety or the environment in effect in any
and all jurisdictions in which the Parent Company, the Borrower or any of its
Subsidiaries is conducting or at any time has conducted business, or where any
Property of any such Person is located, including without limitation, the Oil
Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and other environmental conservation or
protection laws. The term "oil" shall have the meaning specified in OPA, the
terms "hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective
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date of such amendment and (ii) to the extent the laws of the state in which any
Property of the Parent Company, the Borrower or any of its Subsidiaries is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether
or not incorporated) which together with the Parent Company, the Borrower or any
of its Subsidiaries would be deemed to be a "single employer" within the meaning
of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section
414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal
of the Parent Company, the Borrower or any of its Subsidiaries or ERISA
Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, (iv) the institution of proceedings to
terminate a Plan by the PBGC or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Eurodollar Loans" shall mean Loans the interest rates on
which are determined on the basis of rates referred to in the definition of
"Eurodollar Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) quoted by the Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two (2) Business Days prior to the first day of the
Interest Period for such Loan for the offering by the Agent to leading banks in
the London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
Eurodollar Loan to be made by the Lenders for such Interest Period.
"Event of Default" shall have the meaning assigned such term
in Section 10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments
or other governmental charges or levies not yet due or which are being contested
in good faith by appropriate action and for which appropriate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which appropriate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such
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Lien for the purposes for which such Property is held by the Parent Company, the
Borrower or any of its Subsidiaries or materially impair the value of such
Property subject thereto; and (v) encumbrances (other than to secure the payment
of borrowed money or the deferred purchase price of Property or services),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any rights of way or other Property of the Parent Company,
the Borrower or any of its Subsidiaries for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
rights of way and other Property are held by any such Person or materially
impair the value of such Property subject thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and any successor act thereto.
"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 a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date 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 (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Financial Statements" shall mean the financial statement or
statements of the Parent Company described or referred to in Section 7.02(a).
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person
or such Person's Property, and any court, agency, department, commission, board,
bureau or instrumentality of any of them including monetary authorities which
exercises valid jurisdiction over any such Person or such Person's Property.
Unless otherwise specified, all references to Governmental Authority herein
shall mean a Governmental Authority having jurisdiction over, where applicable,
the Parent Company, the Borrower, its Subsidiaries or any of their Properties or
the Agent, any Lender or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
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"Guarantor" shall mean each of Northland Operating Co., a
Nevada corporation, Corrida Resources, Inc., a Nevada corporation, and all
future Subsidiaries of the Parent Company other than the Borrower and
Non-Recourse Subsidiaries.
"Hedging Agreements" shall mean any commodity, interest rate
or currency swap, rate cap, rate floor, rate collar, forward agreement or other
exchange, price or rate protection agreements or any option with respect to any
such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender,
the maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the Notes or
on other Indebtedness under laws applicable to such Lender which are presently
in effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles,
interests and estates now or hereafter acquired in and to oil and gas leases,
oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases,
mineral fee interests, overriding royalty and royalty interests, net profit
interests and production payment interests, including any reserved or residual
interests of whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"Indebtedness" shall mean any and all amounts owing or to be
owing by the Borrower to the Agent and/or Lenders in connection with the Loan
Documents and the Letter of Credit Agreements, and any Hedging Agreements now or
hereafter arising between the Borrower and any Lender, and all renewals,
extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such
term in Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a Person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans
or issuance of the initial Letters of Credit pursuant to Section 6.01 hereof.
"Initial Reserve Report" shall mean collectively: (i) the
report of Xxxxxx & Associates, Inc. dated August 25, 1996 with respect to the
Oil and Gas Properties set forth therein as of June 30, 1996, (ii) the report of
Xxxxxx & Associates, Inc., dated December 18, 1996, with respect to the Oil and
Gas Properties set forth therein, as of January 1, 1997, (iii) the report of the
Borrower dated October 8, 1996 with respect to the Oil and Gas Properties set
forth therein as of October 1, 1996, (iv) the report of Netherland, Xxxxxx &
Associates dated October 21, 1996 with respect to the Oil and Gas Properties set
forth therein as of August 1, 1996, (v) the report of Mohajir & Associates, Inc.
dated June 17, 1996 with respect to the Oil and Gas Properties set forth therein
as of April 1, 1996, and (vi) the report of
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Xxxxxx & Associates, Inc. dated January 29, 1997 with respect to the Oil and Gas
Properties set forth therein as of January 1, 1997 in each case, copies of which
have been delivered to the Agent.
"Interest Expense" shall mean, for any period, the sum
(determined without duplication) of the aggregate amount of interest expense
accruing during such period on Debt of the Parent Company and its Subsidiaries
on a consolidated basis, including the interest portion of payments under
capitalized leases and any capitalized interest, but excluding amortization of
debt discount and expense.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, the period commencing on the date such Eurodollar Loan is made and ending
on the numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may select as provided in Section 2.02 (or such
longer period as may be requested by the Borrower and agreed to by the Majority
Lenders), except that each Interest Period which commences on the last Business
Day of a calendar month (or on 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.
Notwithstanding the foregoing: (i) no Interest Period may
commence before and end after the Maturity Date; (ii) no Interest Period for any
Eurodollar Loan may end after any scheduled payment date occurring during the
Term Loan Period to the extent that such Eurodollar Loan would need to be
prepaid prior to the end of such Interest Period in order to give effect to such
payment; (iii) each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (or, if such
next succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and (iv) no Interest Period shall have a duration
of less than one month and, if the Interest Period for any Eurodollar Loans
would otherwise be for a shorter period, such Loans shall not be available
hereunder.
"LC Commitment" at any time shall mean $5,000,000.
"LC Exposure" at any time shall mean the aggregate face amount
of all undrawn and uncancelled Letters of Credit and the aggregate of all
amounts drawn under all Letters of Credit and not yet reimbursed.
"Letter of Credit Agreements" shall mean the written
agreements with the Agent, as issuing lender for any Letter of Credit, executed
or hereafter executed in connection with the issuance by the Agent of the
Letters of Credit, such agreements to be on the Agent's customary form for
letters of credit of comparable amount and purpose as from time to time in
effect or as otherwise agreed to by the Borrower and the Agent.
"Letters of Credit" shall mean the letters of credit issued
pursuant to Section 2.01(b) and all reimbursement obligations pertaining to any
such letters of credit, and "Letter of Credit" shall mean any one of the Letters
of Credit and the reimbursement obligations pertaining thereto.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or contract,
and whether such obligation or claim is fixed or contingent, and including but
not limited to (i) the lien or security interest arising from a mortgage,
charge, encumbrance, pledge, lien (statutory or otherwise), security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes, or preferential arrangement of any kind or nature whatsoever
(including, any
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agreement to give or xxxxx x xxxx), or (ii) production payments and the like
payable out of Oil and Gas Properties. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of this Agreement, the Parent Company, the
Borrower or any of its Subsidiaries shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person in a
transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes and the
Security Instruments.
"Loans" shall mean the loans as provided for by Section
2.01(a).
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Commitments and, at any time while Loans are outstanding,
Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding aggregate principal amount of the Loans (without regard to any sale
by a Lender of a participation in any Loan under Section 12.06(c)).
"Material Adverse Effect" shall mean any material and adverse
effect on (i) the assets, liabilities, financial condition, business,
operations, prospects or affairs of the Parent Company and its Consolidated
Subsidiaries taken as a whole different from those reflected in the financial
statements most recently delivered pursuant to Sections 7.02(a) or 8.01 hereof,
or from the facts represented or warranted in this Agreement or any Security
Instrument, or (ii) the ability of the Parent Company and its Consolidated
Subsidiaries, taken as a whole, to carry out its business as at the Closing Date
or as proposed as of the Closing Date to be conducted or meet its obligations
under the Loan Documents on a timely basis.
"Material Agreements" shall mean each of the instruments,
contracts or agreements described in Schedule 7.23 (as such Schedule may be
updated from time to time to include the contracts entered into pursuant to
Section 8.12(a)), as the same may be amended, modified or replaced from time to
time in accordance with the terms of Section 9.21.
"Maturity Date" shall mean, unless the Notes are sooner
accelerated pursuant to Section 10.02 hereof, August 1, 2003.
"Maximum Credit Amount" shall mean, as to each Lender, the
amount set forth opposite such Lender's name on Annex I under the caption
"Maximum Credit Amounts" (as the same may be reduced pursuant to Section 2.03(b)
pro rata to each Lender based on its Percentage Share), as modified from time to
time to reflect any assignments permitted by Section 12.06(b) or amendments to
this Agreement.
"Mortgaged Property" shall mean the Property owned by the
Borrower and which is subject to the Liens existing and to exist under the terms
of the Security Instruments.
"Multiemployer Plan" shall mean a Plan defined as such in
Section 3(37) or 4001(a)(3) of ERISA.
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"Non-Recourse Subsidiary" shall mean any Subsidiary of the
Parent Company organized or acquired after the Closing Date as to which all of
the following conditions apply: (i) neither such Subsidiary nor any of its
Subsidiaries provides credit support for any of the Indebtedness or any other
Debt of the Parent Company, the Borrower or any Guarantor; (ii) neither the
Parent Company, the Borrower nor any Guarantor is liable, directly or
indirectly, with respect to any Debt of such Subsidiary; and (iii) the Board of
Directors of the Parent Company shall have designated such Subsidiary to be a
Non-Recourse Subsidiary on or prior to the date of its organization or
acquisition. Any such designation by the Board of Directors of the Parent
Company shall be evidenced to the Agent by delivering to it a resolution giving
effect to such designation and an officers' certificate certifying that such
designation complies with the foregoing conditions. The Board of Directors of
the Parent Company may (i) designate any of its Subsidiaries as a Non-Recourse
Subsidiary or (ii) designate any Non-Recourse Subsidiary to be a Guarantor;
provided that, in either such case, no Default or Event of Default would occur
or be continuing after giving effect to such designation. Any Subsidiary of a
Non-Recourse Subsidiary shall be a Non-Recourse Subsidiary for purposes of this
Agreement.
"Non-Recourse Debt" shall mean Debt of any Non-Recourse
Subsidiary (i) as to which neither the Parent Company, the Borrower nor any
Guarantor is directly or indirectly liable (by virtue of such Person or any
Guarantor being the primary obligor on, guarantor of, or otherwise liable in any
respect to, such Debt); (ii) which, upon the occurrence of a default with
respect thereto, does not result in, or permit any holder of any Debt of the
Parent Company, the Borrower or any Guarantor to declare a default on such Debt
of such Person or cause the payment thereof to be accelerated or payable prior
to its stated maturity; and (iii) that is not secured by a Lien upon any
Property of the Parent Company, the Borrower or any Guarantor other than the
stock of a Non-Recourse Subsidiary or any guarantee by another Non-Recourse
Subsidiary.
"Notes" shall mean the Notes provided for by Section 2.06,
together with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil xxxxx, gas xxxxx, injection xxxxx or other xxxxx,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods,
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surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and
all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in
Section 4.06(b).
"Parent Company" shall mean Queen Sand Resources, Inc., a
Delaware corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b) or amendments to this Agreement.
"Percentage Usage" shall mean, as of any date of
determination, the quotient (expressed as a percentage) obtained by dividing the
balance of all Loans and the LC Exposure at the close of business on such date
by the available Borrowing Base at the close of business on such date. The
Applicable Margin for a Type of Loan shall change on the same day as any change
in the Percentage Usage.
"Person" shall mean any individual, corporation, limited
liability company, voluntary association, partnership, joint venture, trust,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA, which (i) is currently or hereafter sponsored,
maintained or contributed to by the Borrower or any of its Subsidiaries or an
ERISA Affiliate or (ii) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by the Parent Company, the Borrower or
any of its Subsidiaries or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount payable by the Borrower under this Agreement or any
Note which is not paid when due (whether at stated maturity, by acceleration or
otherwise), a rate per annum during the period commencing on the due date until
such amount is paid in full or the default is cured or waived equal to .75% per
annum above the Base Rate, but in no event to exceed the Highest Lawful Rate
provided that, if such amount in default is principal of a Eurodollar Loan, the
"Post-Default Rate" for such principal shall be, for the period commencing on
the due date and ending on the last day of the Interest Period therefor, 3% per
annum above the Eurodollar Rate for such Loan, but in no event to exceed the
Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Agent at the Principal Office as its prime commercial
lending rate. Such rate is set by the Agent as a general reference rate of
interest, taking into account such factors as the Agent may deem appropriate, it
being understood that many of the Agent's commercial or other loans are priced
in relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer and that the Agent may make various commercial
or other loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the
Agent, presently located at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
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"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Proved Reserves" shall mean those Oil and Gas Properties
designated as "proved" (in accordance with the Definitions for Oil and Gas
Reserves established by the Society for Petroleum Engineers from time to time)
in the Reserve Report and used in establishing the Borrowing Base.
"Quarterly Dates" shall mean the last day of each March, June,
September and December, in each year, the first of which shall be September 30,
1997; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"Redetermination Date" shall have the meaning assigned such
term in Section 2.08(a).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
amended or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender,
any change after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of lenders (including such Lender or
its Applicable Lending Office) of or under any Governmental Requirement (whether
or not having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Required Payment" shall have the meaning assigned such term
in Section 4.04.
"Reserve Report" shall mean a report, in form and substance
satisfactory to the Agent, setting forth, as of each June 30 or December 31, as
applicable (or such other date in the event of an unscheduled redetermination);
(i) the oil and gas reserves attributable to Oil and Gas Properties to comprise
the Borrowing Base together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the pricing assumptions consistent
with SEC reporting requirements at the time and (ii) such other information as
the Agent may reasonably request. The term "Reserve Report" shall also include
the information to be provided by the Borrower by February 15 of each year
pursuant to Section 8.07(a).
"Responsible Officer" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and, with
respect to financial matters, the term "Responsible Officer" shall include the
Chief Financial Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer of
the Parent Company or the Borrower, as applicable.
"Revolving Credit Period" shall mean the period commencing on
the Closing Date and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean, unless the
Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof,
August 1, 1999.
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"Xxxxxxxxx Notes" shall mean (i) that certain $375,000
promissory note issued by Corrida Resources, Inc. as of February 5, 1997 in
favor of Xxxxxxxxx'x Oil & Gas, Inc., a Louisiana corporation, Pelican
Resources, Inc., a Louisiana corporation, and Xxxxx X. Xxxxxxxxx, as modified
and amended pursuant to that certain Modification of Note and Agreement on
Substitution of Collateral dated July 31, 1997; and (ii) that certain $1,625,000
promissory note issued by Corrida Resources, Inc. as of February 5, 1997 in
favor of D&R Petroleum, Inc., a Louisiana corporation, Black Gold Productions
Services, Inc., a Louisiana corporation, and Xxxxx Xxxxxxxxx, as modified and
amended pursuant to that certain Modification of Note and Agreement on
Substitution of Collateral dated July 31, 1997, as the same may be amended,
supplemented or modified in accordance with Section 9.21.
"Scheduled Redetermination Date" shall have the meaning
assigned such term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SEC Value" shall mean the future net revenues before income
taxes from Proved Reserves, estimated assuming that oil and natural gas prices
and production costs remain instant, then discounted at the rate of 10% per year
to obtain the present value.
"Security Instruments" shall mean the Letters of Credit, the
Letter of Credit Agreements, the agreements or instruments described or referred
to in Exhibit D, and any and all other agreements or instruments now or
hereafter executed and delivered by the Parent Company, the Borrower or any
other Person (other than Assignments, participation or similar agreements
between any Lender and any other lender or creditor with respect to any
Indebtedness pursuant to this Agreement) in connection with, or as security for
the payment or performance of the Notes, this Agreement, or reimbursement
obligations under the Letters of Credit, as such agreements may be amended,
supplemented or restated from time to time.
"Subsidiary" shall mean, for any Person, any Person of which
at least a majority of the outstanding shares of stock or other equity interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors or manager of such Person (irrespective of whether or not at
the time stock or other interests of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Person or one or more of its Subsidiaries or by such Person and one or more of
its Subsidiaries.
"Taxes" shall have the meaning assigned such term in Section
4.06(a).
"Term Loan Period" shall mean the period commencing on the day
next succeeding the Revolving Credit Termination Date and ending on the Maturity
Date.
"Type" shall mean, with respect to any Loan, a Base Rate Loan
or a Eurodollar Loan.
Section 1.03 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Agent or the Lenders hereunder
shall be prepared, in accordance
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with GAAP, applied on a basis consistent with the audited financial statements
of the Borrower referred to in Section 7.02 (except for changes concurred with
by the Borrower's independent public accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the Revolving Credit Period in
an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of such Lender's Commitment as then in effect; provided,
however, that the sum of (i) aggregate principal amount of all such Loans by all
Lenders hereunder at any one time outstanding plus (ii) the LC Exposure plus
(iii) the amount by which the US Dollar equivalent (converted as of the relevant
borrowing date by the Agent using good faith and customary methods and taking
into account the effect of any applicable Hedging Agreements) of the DEM
Subordinated Debt exceeds $2,400,000, shall not exceed the Aggregate
Commitments. Subject to the terms of this Agreement, during the Revolving Credit
Period, the Borrower may borrow, repay and reborrow the amount described in this
Section 2.01(a).
(b) Letters of Credit. During the Revolving Credit Period, the
Agent, as issuing bank for the Lenders, agrees to extend credit for the account
of the Borrower at any time and from time to time by issuing renewing, extending
or reissuing Letters of Credit; provided however, the LC Exposure at any one
time outstanding shall not exceed the lesser of (i) the LC Commitment or (ii)
the Aggregate Commitments, as then in effect, minus the sum of (1) aggregate
principal amount of all Loans then outstanding, and (2) the amount by which the
US Dollar equivalent (converted as of the relevant date of issuance by the Agent
using good faith and customary methods and taking into account the effect of any
applicable Hedging Agreements) of the DEM Subordinated Debt exceeds $2,400,000.
The Lenders shall participate in such Letters of Credit according to their
respective Percentage Shares.
(c) Limitation on Types of Loans. Subject to the other terms
and provisions of this Agreement, at the option of the Borrower, the Loans may
be Base Rate Loans or Eurodollar Loans; provided that, without the prior written
consent of the Majority Lenders, no more than ten (10) Eurodollar Loans may be
outstanding at any time.
Section 2.02 Borrowings, Continuations, Conversions and
Letters of Credit.
(a) Borrowings. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such borrowing,
the Type and the date (which shall be a Business Day) of the Loans to be
borrowed and (in the case of Eurodollar Loans) the duration of the Interest
Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $500,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $500,000 in excess thereof, and
all Eurodollar Loans shall be in amounts of at least $1,000,000 or any whole
multiple of $1,000,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions
shall require advance written notice to the Agent (which shall promptly notify
the Lenders) in the form of Exhibit B hereto (or
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telephonic notice promptly confirmed by such a written notice), which in
each case shall be irrevocable, from the Borrower to be received by the Agent
not later than 11:00 a.m. Houston time on the date (which shall be a Business
Day) of each Base Rate Loan borrowing and at least three Business Days prior to
the date of each Eurodollar Loan borrowing, continuation or conversion. Without
in any way limiting the Borrower's obligation to confirm in writing any
telephonic notice, the Agent may act without liability upon the basis of
telephonic notice believed by the Agent in good faith to be from the Borrower
prior to receipt of written confirmation. In each such case, the Borrower hereby
waives the right to dispute the Agent's record of the terms of such telephonic
notice except in the case of manifest error, gross negligence or willful
misconduct by the Agent.
(d) Continuation Options. Subject to the provisions made in
this Section 2.02(d), the Borrower may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to the
Agent (which shall promptly notify the Lenders) of such election, specifying the
amount of such Loan to be continued and the Interest Period therefor. In the
absence of such a timely and proper election, the Borrower shall be deemed to
have elected to convert such Eurodollar Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any Eurodollar Loan may be continued as
provided herein, provided that (i) any continuation of any such Loan shall be
(as to each Loan as continued for an applicable Interest Period) in amounts of
at least $1,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default shall have
occurred and be continuing, each Eurodollar Loan shall be converted to a Base
Rate Loan on the last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all
or any part of any Eurodollar Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice to the
Agent (which shall promptly notify the Lenders) of such election. Subject to the
provisions made in this Section 2.02(e), the Borrower may elect to convert all
or any part of any Base Rate Loan at any time and from time to time to a
Eurodollar Loan by giving advance notice as provided in Section 2.02(c) to the
Agent (which shall promptly notify the Lenders) of such election. All or any
part of any outstanding Loan may be converted as provided herein, provided that
(i) any conversion of any Base Rate Loan into a Eurodollar Loan shall be (as to
each such Loan into which there is a conversion for an applicable Interest
Period) in amounts of at least $1,000,000 or any whole multiple of $1,000,000 in
excess thereof and (ii) no Default shall have occurred and be continuing. If a
Default shall have occurred and be continuing, no Base Rate Loan may be
converted into a Eurodollar Loan.
(f) Advances. Not later than 11:00 a.m. Houston time on the
date specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan to be made by it on such date to the Agent, to an account
which the Agent shall specify, in immediately available funds, for the account
of the Borrower. The amounts so received by the Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower, designated by the Borrower and maintained at the Principal Office.
(g) Letters of Credit. The Borrower shall give the Agent
(which shall promptly notify the Lenders of such request and their Percentage
Share of such Letter of Credit) advance notice to be received by the Agent not
later than 11:00 a.m. Houston time not less than three (3) Business Days prior
thereto of each request for the issuance, the renewal or extension of a Letter
of Credit hereunder which request shall specify the amount of such Letter of
Credit, the date (which shall be a Business Day) such
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Letter of Credit is to be issued, renewed or extended, the duration thereof, the
name and address of the beneficiary thereof, the form of the Letter of Credit
and such other information as the Agent may reasonably request all of which
shall be reasonably satisfactory to the Agent. Subject to the terms and
conditions of this Agreement, on the date specified for the issuance, renewal or
extension of a Letter of Credit, the Agent shall issue such Letter of Credit to
the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower, shall execute a Letter of Credit Agreement. In the event of any
conflict between any provision of a Letter of Credit Agreement and this
Agreement, the Borrower, the Agent and the Lenders hereby agree that the
provisions of this Agreement shall govern.
The Agent will send to the Borrower and each Lender,
immediately upon issuance of any Letter of Credit, or an amendment thereto, a
true and complete copy of such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to
the lesser of (i) the Aggregate Maximum Credit Amounts after adjustments
resulting from reductions pursuant to Sections 2.03(b) or (ii) the Borrowing
Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to
reduce the amount of the Aggregate Maximum Credit Amounts at any time or from
time to time upon not less than three (3) Business Days' prior notice to the
Agent (which shall promptly notify the Lenders) of each such termination or
reduction, which notice shall specify the effective date thereof and the amount
of any such reduction (which shall not be less than $2,000,000 or any whole
multiple of $1,000,000 in excess thereof) and shall be irrevocable and effective
only upon receipt by the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 Fees.
(a) The Borrower shall pay to the Agent for the account of
each Lender a commitment fee on the daily average unused amount of the Aggregate
Commitments during the Revolving Credit Period at a rate per annum equal to
0.35%. Accrued commitment fees shall be payable quarterly on each Quarterly Date
in arrears and on the earlier of the date the Aggregate Commitments are
terminated or the Revolving Credit Termination Date.
(b) The Borrower agrees to pay the Agent, for the account of
each Lender, commissions for issuing the Letters of Credit on the daily average
outstanding of the maximum liability of the Agent existing from time to time
under such Letter of Credit (calculated separately for each Letter of Credit) at
the rate per annum equal to the then Applicable Margin for Eurodollar Loans,
provided that each Letter of Credit shall bear a minimum commission of $300.00
and that each Letter of Credit shall be deemed to be outstanding up to the full
face amount of the Letter of Credit until the earlier of the expiry date thereof
or the date the Agent has received the canceled Letter of Credit or a written
cancellation of the Letter of Credit from the beneficiary of such Letter of
Credit in form and substance acceptable to the Agent, or for any reductions in
the amount of the Letter of Credit (other than from a
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drawing), written notification from the Borrower. Such commissions are payable
quarterly on each Quarterly Date in arrears and on the earlier of the date the
Aggregate Commitments are terminated or the Revolving Credit Termination Date.
(c) In addition to the above commission, if at any time, there
are two or more Lenders party hereto, the Borrower agrees to pay the Agent for
its own account 1/8 of 1% on the face amount of each Letters of Credit issued
hereunder payable quarterly at the issuance of such Letter of Credit as an
issuing fee.
(d) Upon each transfer of any Letter of Credit to a successor
beneficiary in accordance with its terms, the Borrower shall pay the sum of $500
to the Agent for its own account.
(e) Upon each amendment of any Letter of Credit, the Borrower
shall pay the sum of $500 to the Agent for its own account.
(f) The Borrower shall pay such other amounts as are set forth
in that certain letter agreement of even date herewith between the Borrower and
Bank of Montreal.
Section 2.05 Several Obligations. The failure of any Lender to
make any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide funds on
such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender or to provide funds to be
provided by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit A hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to its Maximum Credit Amount as originally in effect
and otherwise duly completed. The date, amount, Type, interest rate and Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Note,
and, prior to any transfer, endorsed by such Lender on the schedule attached to
such Note or any continuation thereof. Such records shall be presumed correct;
provided that the failure of any Lender to make any such notation on its Note
shall not affect the Borrower's obligations in respect of its Loan from such
Lender.
Section 2.07 Prepayments.
(a) The Borrower may prepay the Base Rate Loans upon not less
than one (1) Business Day's prior notice to the Agent (which shall promptly
notify the Lenders), which notice shall specify the prepayment date (which shall
be a Business Day) and the amount of the prepayment (which shall be at least
$500,000 or the remaining aggregate principal balance outstanding on the Notes)
and shall be irrevocable and effective only upon receipt by the Agent, provided
that interest on the principal prepaid, accrued to the prepayment date, shall be
paid on the prepayment date. The Borrower may prepay Eurodollar Loans on the
same condition as for Base Rate Loans, and in addition, such prepayments of
Eurodollar Loans shall be subject to the terms of Section 5.05 and shall be in
amounts equal to all of the Eurodollar Loans for the Interest Period being
prepaid. Any prepayments made during the Term Loan Period shall be applied to
reduce pro rata the remaining scheduled payments.
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(b) If, after giving effect to any termination or reduction of
the Aggregate Maximum Credit Amounts pursuant to Sections 2.03(b), the
outstanding aggregate principal amount of the Loans plus the LC Exposure exceeds
the Aggregate Maximum Credit Amounts, the Borrower shall (i) prepay the Loans on
the date of such termination or reduction in an aggregate principal amount equal
to the excess, together with interest on the principal amount paid accrued to
the date of such prepayment and (ii) if any excess remains after prepaying all
of the Loans, pay to the Agent on behalf of the Lenders an amount equal to the
remaining excess to be held as cash collateral as provided in Section 2.10(b)
hereof.
(c) Upon any redetermination of the amount of the Borrowing
Base in accordance with Section 2.08 or adjustment in accordance with Section
8.08(b), if the redetermined Borrowing Base is less than the sum of (i) the
aggregate outstanding principal amount of the Loans, plus (ii) the LC Exposure,
plus (iii) the amount by which the US Dollar equivalent (converted as of the
relevant Redetermination Date by the Agent using good faith and customary
methods and taking into account the effect of any applicable Hedging Agreements)
of the DEM Subordinated Debt exceeds $2,400,000, then the Borrower shall within
thirty (30) days of receipt of written notice thereof: either (i) prepay the
Loans (and/or provide cash collateral) in an aggregate principal amount equal to
such excess, together with interest on the principal amount paid accrued to the
date of such prepayment or (ii) notify the Agent of its election to eliminate
such Borrowing Base deficiency by making six (6) consecutive monthly payments
equal to such excess divided by six (6), the first of such payments being due
and payable immediately and each subsequent payment being due at thirty (30) day
intervals thereafter. Any scheduled payments of principal made during such
deficiency period shall be applied to such deficiency payments in direct order
of maturity; provided that in the event of an acceleration of the maturity of
the Notes pursuant to Section 10.02, such acceleration shall also accelerate the
maturity of the monthly deficiency payments.
(d) Prepayments permitted or required under this Section 2.07
shall be without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Loans. Any prepayment may be reborrowed subject to the
then effective Aggregate Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with
Section 2.08(b) by the Agent with the concurrence of the Lenders and is subject
to redetermination in accordance with Section 2.08(d). Upon any redetermination
of the Borrowing Base, such redetermination shall remain in effect until the
next successive Redetermination Date. "Redetermination Date" shall mean the date
that the redetermined Borrowing Base becomes effective subject to the notice
requirements specified in Section 2.08(e) both for scheduled redeterminations
and unscheduled redeterminations. So long as any of the Commitments are in
effect or any LC Exposure or Loans are outstanding hereunder, this facility
shall be governed by the then effective Borrowing Base. During the period from
and after the Closing Date until the first Redetermination Date to occur after
the Closing Date, unless redetermined pursuant to Section 2.08(d) or adjusted
pursuant to Section 8.08(b), the amount of the Borrowing Base shall be
$17,000,000.
(b) Upon receipt of the reports required by Section 8.07 and
such other reports, data and supplemental information as may from time to time
be reasonably requested by the Agent (the "Engineering Reports"), the Agent will
redetermine the Borrowing Base. Such redetermination will be in accordance with
its normal and customary procedures for evaluating oil and gas reserves and
other related assets as such exist at that particular time, including assessing
the effect of any Hedging Agreements or fixed price sales contracts with
investment grade counterparties or purchasers. The
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Agent may make adjustments to the rates, volumes and prices and other
assumptions set forth therein in accordance with its normal and customary
procedures for evaluating oil and gas reserves and other related assets as such
exist at that particular time. The Agent shall propose to the Lenders a new
Borrowing Base by no later than the earlier of (i) 30 days following receipt by
the Agent and the Lenders of the Engineering Reports or (ii) 10 days prior to
the next Scheduled Redetermination Date, in each case assuming receipt of the
Engineering Reports in a timely and complete manner. After having received
notice of such proposal by the Agent, the Lenders shall have 10 days to agree or
disagree with such proposal. If at the end of the 10 days, the Lenders have not
communicated their approval or disapproval, such silence shall be deemed to be
an approval and the Agent's proposal shall be the new Borrowing Base. If
however, the Lenders notify Agent within 10 days of their disapproval, the
Borrowing Base shall be set at the lower of the Agent's proposal or the amount
of the then current Borrowing Base; and the Borrowing Base shall remain at such
level until the Lenders agree on a new Borrowing Base, which each Lender agrees
to do within a reasonable period of time.
(c) The Agent may exclude any Oil and Gas Property or portion
of production therefrom or any income from any other Property from the Borrowing
Base, at any time, because title information is not reasonably satisfactory or
such Property is not Mortgaged Property.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, on or around the 15th Business Day of
each March and September, commencing March 15, 1998 (each being a "Scheduled
Redetermination Date"), the Lenders shall redetermine the amount of the
Borrowing Base in accordance with Section 2.08(b). In addition, the Majority
Lenders may initiate two unscheduled redetermination of the Borrowing Base
during any consecutive twelve (12) month period by specifying in writing to the
Borrower the date on which the Borrower is to furnish a Reserve Report in
accordance with Section 8.07(b) and the date on which such redetermination is to
occur, and the Borrower may request one unscheduled redetermination during any
consecutive twelve (12) month period.
(e) The Agent shall promptly notify in writing the Borrower
and the Lenders of the new Borrowing Base. Any redetermination of the Borrowing
Base shall not be in effect until written notice is received by the Borrower.
Section 2.09 Assumption of Risks. The Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither the
Agent (except in the case of gross negligence, willful misconduct or bad faith
on the part of the Agent or any of its employees), its correspondents nor any
Lender shall be responsible for the validity, sufficiency or genuineness of
certificates or other documents or any endorsements thereon, even if such
certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
the failure of any beneficiary or any transferee of any Letter of Credit to
comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Agent's
control or the control of the Agent's correspondents. In addition, neither the
Agent nor any Lender shall be responsible for any error, neglect, or default of
any of the Agent's correspondents; and none of the above shall affect, impair or
prevent the vesting of any of the Agent's
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or any Lender's rights or powers hereunder or under the Letter of Credit
Agreements, all of which rights shall be cumulative. The Agent and its
correspondents may accept certificates or other documents that appear on their
face to be in order, without responsibility for further investigation of any
matter contained therein regardless of any notice or information to the
contrary. In furtherance and not in limitation of the foregoing provisions, the
Borrower agrees that any action, inaction or omission taken or not taken by the
Agent or by any correspondent for the Agent in good faith in connection with any
Letter of Credit, or any related drafts, certificates, documents or instruments,
shall be binding on the Borrower and shall not put the Agent or its
correspondents under any resulting liability to the Borrower (except in the case
of gross negligence, willful misconduct or bad faith on the part of the Agent or
any of its employees).
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Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Agent is made under any Letter of
Credit, and no Default under this Agreement shall have occurred and be
continuing, the Company may elect to have the amount of such disbursement,
subject to the then available Aggregate Commitment and the other terms and
conditions set forth in this Agreement (including the provisions relating to
minimum amounts), treated as a Base Rate Loan to the Company as provided in
Section 2.01(a) hereof. With respect to any disbursement under a Letter of
Credit for which no election is made, or after and during the continuance of a
Default, the Borrower shall pay to the Agent within two (2) Business Days after
notice of any such disbursement is received by the Borrower, the amount of such
disbursement made by the Agent under the Letter of Credit (if such payment is
not sooner effected as may be required under this Section 2.10 or under other
provisions of the Letter of Credit), together with interest on the amount
disbursed from and including the date of disbursement until payment in full of
such disbursed amount at a varying rate per annum equal to (i) the then
applicable interest rate for Base Rate Loans through the second Business Day
after notice of such disbursement is received by the Borrower and (ii)
thereafter, the Post-Default Rate for Base Rate Loans (but in no event to exceed
the Highest Lawful Rate) for the period from and including the Business Day
following the date of such disbursement to and including the date of repayment
in full of such disbursed amount. The obligations of the Borrower under this
Agreement and each Letter of Credit shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with the terms
of this Agreement under all circumstances whatsoever, including, without
limitation, but only to the fullest extent permitted by applicable law, the
following circumstances: (i) any lack of validity or enforceability of this
Agreement, any Letter of Credit or any of the Security Instruments; (ii) any
amendment or waiver of (including any default), or any consent to departure from
this Agreement (except to the extent permitted by any amendment or waiver), any
Letter of Credit or any of the Security Instruments; (iii) the existence of any
claim, set-off, defense or other rights which the Borrower may have at any time
against the beneficiary of any Letter of Credit or any transferee of any Letter
of Credit (or any Persons for whom any such beneficiary or any such transferee
may be acting), the Agent, any Lender or any other Person, whether in connection
with this Agreement, any Letter of Credit, the Security Instruments, the
transactions contemplated hereby or any unrelated transaction; provided however,
the foregoing shall not constitute a waiver, release or estoppel with respect to
any such claim, setoff, defense or other rights which the Borrower may have at
any time against the beneficiary of such Letter of Credit or any transferee of
such Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Agent, any Lender or any other Person, whether in
connection with this Agreement, any Letter of Credit, the Security Instruments,
the transactions contemplated hereby or any unrelated transaction; (iv) any
statement, certificate, draft, notice or any other document presented under any
Letter of Credit proves to have been forged, fraudulent, insufficient or invalid
in any respect or any statement therein proves to have been untrue or inaccurate
in any respect whatsoever; and (v) payment by the Agent under any Letter of
Credit against presentation of a draft or certificate which appears on its face
to comply, but does not comply, with the terms of such Letter of Credit.
Notwithstanding anything in this Agreement to the contrary, the
Borrower will not be liable for payment or performance that results from the
gross negligence or willful misconduct of the Agent, except where the Borrower
or any of its Subsidiaries actually recovers the proceeds for itself or the
Agent of any payment made by the Agent in connection with such gross negligence
or willful misconduct.
(b) In the event of the occurrence of any Event of Default or
the maturity of the Notes, whether by acceleration or otherwise, an amount equal
to the LC Exposure shall be deemed to be forthwith due and owing by the Borrower
to the Agent and the Lenders as of the date of any such
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occurrence; and the Borrower's obligation to pay such amount shall be absolute
and unconditional, without regard to whether any beneficiary of any such Letter
of Credit has attempted to draw down all or a portion of such amount under the
terms of a Letter of Credit, and, to the fullest extent permitted by applicable
law, shall not be subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which the Borrower may now or hereafter have against
any such beneficiary, the Agent, the Lenders or any other Person for any reason
whatsoever. Such payments (together with all interest accruing thereon) shall be
held by the Agent on behalf of the Lenders as cash collateral securing the LC
Exposure in an interest bearing account or accounts at the Principal Office; and
the Borrower hereby grants to the Agent a security interest in such cash
collateral. In the event of any such payment by the Borrower of amounts
contingently owing under outstanding Letters of Credit and in the event that
thereafter drafts or other demands for payment complying with the terms of such
Letters of Credit are not made prior to the respective expiration dates thereof,
the Agent agrees, if no Event of Default has occurred and is continuing or if no
other amounts are outstanding under this Agreement, the Notes or the Security
Instruments, to remit to the Borrower amounts for which the contingent
obligations evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it
shall promptly reimburse the Agent an amount equal to such Lender's Percentage
Share of any disbursement made by the Agent under any Letter of Credit that is
not reimbursed according to this Section 2.10.
Section 2.11 Lending Offices. The Loans of each Type made by
each Lender shall be made and maintained at such Lender's Applicable Lending
Office for Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. The Borrower will pay to the
Agent, for the account of each Lender, the principal payments required by this
Section 3.01. Commencing on the last day of the calendar month immediately
following the Revolving Credit Termination Date, the aggregate principal amount
of the Notes outstanding on the Revolving Credit Termination Date shall be
payable in forty-eight (48) equal consecutive monthly installments sufficient to
amortize the outstanding principal amount equally over the Term Loan Period with
final payment of the remaining principal balance on the Notes due on the
Maturity Date.
Section 3.02 Interest.
(a) The Borrower will pay to the Agent, for account of each
Lender, interest on the unpaid principal amount of each Loan made by such Lender
for the period commencing on the date such Loan is made to but excluding the
date such Loan shall be paid in full, at the following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan, for each Interest
Period relating thereto, the Eurodollar Rate for such Loan plus the
Applicable Margin, but in no event to exceed the Highest Lawful Rate.
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(b) Notwithstanding the foregoing, the Borrower will pay to
the Agent, for the account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, and (to the
fullest extent permitted by law) on any other amount payable by the Borrower
hereunder, under any Security Instrument or under any Note held by such Lender
to or for account of such Lender, which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise), for the period
commencing on the due date thereof until the same is paid in full.
(c) Accrued interest on Base Rate Loans shall be payable on
each Quarterly Date commencing on September 30, 1997 and on the Maturity Date,
and accrued interest on each Eurodollar Loan shall be payable on the last day of
the Interest Period therefor and, if such Interest Period is longer than three
months at three-month intervals following the first day of such Interest Period,
except that interest payable at the Post-Default Rate shall be payable from time
to time on demand and interest on any Eurodollar Loan that is converted into a
Base Rate Loan (pursuant to Section 5.04) shall be payable on the date of
conversion (but only to the extent so converted).
(d) Promptly after the determination of any interest rate
provided for herein or any change therein, the Agent shall notify the Lenders to
which such interest is payable and the Borrower thereof. Each determination by
the Agent of an interest rate or fee hereunder shall, except in cases of
manifest error, be final, conclusive and binding on the parties.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement, the Notes and the Letter of Credit Agreements
shall be made in Dollars, in immediately available funds, to the Agent at such
account as the Agent shall specify by notice to the Borrower from time to time,
not later than 1:00 p.m. Houston time on the date on which such payments shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day). Such payments shall be
made without (to the fullest extent permitted by applicable law) defense,
set-off or counterclaim, but shall not constitute a waiver, release or estoppel
with respect to any such defense, set-off or counterclaim. Each payment to be
made to the Agent under this Agreement or any Note for account of a Lender shall
be paid promptly to such Lender in immediately available funds. Except as
provided in the definition of "Interest Period", if the due date of any payment
under this Agreement or any Note 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. At the time of each payment to the Agent of any principal of or
interest on any borrowing, the Borrower shall notify the Agent of the Loans to
which such payment shall apply. In the absence of such notice the Agent may
specify the Loans to which such payment shall apply, but to the extent possible
such payment or prepayment will be applied first to the Loans comprised of Base
Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent
otherwise provided herein each Lender agrees that: (i) each borrowing from the
Lenders under Section 2.01 shall be made from the Lenders pro rata in accordance
with their Percentage Share, each payment of commitment fee or other fees under
Sections 2.04(a) and (b) shall be made for account of the Lenders pro rata in
accordance with their Percentage Share, and each termination or reduction of the
amount of the Aggregate Maximum
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Credit Amounts under Section 2.03(b) shall be applied to the Commitment of each
Lender, pro rata according to the amounts of its respective Commitment; (ii)
each payment of principal of Loans by the Borrower shall be made for account of
the Lenders pro rata in accordance with the respective unpaid principal amount
of the Loans held by the Lenders; (iii) each payment of interest on Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with
the amounts of interest due and payable to the respective Lenders; and (iv) each
reimbursement by the Borrower of disbursements under Letters of Credit shall be
made for account of the Agent or, if funded by the Lenders, pro rata for the
account of the Lenders in accordance with the amounts of reimbursement
obligations due and payable to each respective Lender.
Section 4.03 Computations. Interest on Eurodollar Loans and
fees shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which such interest is payable, unless such calculation would exceed
the Highest Lawful Rate, in which case interest shall be calculated on the per
annum basis of a year of 365 or 366 days, as the case may be. Interest on Base
Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Lender or the Borrower prior to the date on
which such notifying party is scheduled to make payment to the Agent (in the
case of a Lender) of the proceeds of a Loan or a payment under a Letter of
Credit to be made by it hereunder or (in the case of the Borrower) a payment to
the Agent for account of one or more of the Lenders hereunder (such payment
being herein called the "Required Payment"), which notice shall be effective
upon receipt, that it does not intend to make the Required Payment to the Agent,
the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until but excluding the date the Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to
the Federal Funds Rate, and for the Borrower as recipient, will be equal to the
Base Rate plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, after the occurrence and during the continuation of an Event of
Default, each Lender shall have the right and be entitled (after consultation
with the Agent), at its option, to offset balances held by it or by any of its
Affiliates for account of the Borrower at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Lender's
Loans, or any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to the Borrower), in
which case it shall promptly notify the Borrower and the Agent thereof, provided
that such Lender's failure to give such notice shall not affect the validity
thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement through the
exercise of any right of set-off, banker's
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lien or counterclaim or similar right or otherwise, and, as a result of such
payment, such Lender shall have received a greater percentage of the principal
or interest then due hereunder by the Borrower to such Lender than the
percentage received by any other Lenders, it shall promptly (i) notify the Agent
and each other Lender thereof and (ii) purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans made by such other Lenders (or in interest due thereon,
as the case may be) in such amounts, and make such other adjustments from time
to time as shall be equitable, to the end that all the Lenders shall share the
benefit of such excess payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loans held by each
of the Lenders. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Borrower agrees that any
Lender so purchasing a participation (or direct interest) in the Loans made by
other Lenders (or in interest due thereon, as the case may be) may exercise all
rights of set-off, banker's lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender were a direct holder of Loans in
the amount of such participation. Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness or obligation of the Borrower. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a set-off to which this Section 4.05 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
4.05 to share the benefits of any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4.01, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, taxes imposed on
its income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which the Agent or such
Lender, as the case may be, is a citizen or resident or in which such Lender has
an Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Agent or such Lender is organized, or (iii)
any jurisdiction (or political subdivision thereof) in which such Lender or the
Agent is presently doing business which taxes are imposed solely as a result of
doing business in such jurisdiction (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lenders or the
Agent (i) the sum payable shall be increased by the amount necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.06) such Lender or the Agent (as
the case may be) shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant taxing
authority or other Governmental Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted
by applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Assignment or any Security Instrument (hereinafter referred to as "Other
Taxes").
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(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE
FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER
THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF OR ON
BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO,
WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED
UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH
LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION
SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER OR THE AGENT, AS
THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER OR THE AGENT
RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH
SUCH LENDER OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL
PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT
HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A
REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO
SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO
REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH
LENDER OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES,
INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER
OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
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(i) Each Lender represents that it is either (i) a corporation
organized under the laws of the United States of America or any state
thereof or (ii) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement (A) under an
applicable provision of a tax convention to which the United States of
America is a party or (B) because it is acting through a branch, agency
or office in the United States of America and any payment to be
received by it hereunder is effectively connected with a trade or
business in the United States of America. Each Lender that is not a
corporation organized under the laws of the United States of America or
any state thereof agrees to provide to the Borrower and the Agent on
the Closing Date, or on the date of its delivery of the Assignment
pursuant to which it becomes a Lender, and at such other times as
required by United States law or as the Borrower or the Agent shall
reasonably request, two accurate and complete original signed copies of
either (A) Internal Revenue Service Form 4224 (or successor form)
certifying that all payments to be made to it hereunder will be
effectively connected to a United States trade or business (the "Form
4224 Certification") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit of a
provision of a tax convention to which the United States of America is
a party which completely exempts from United States withholding tax all
payments to be made to it hereunder (the "Form 1001 Certification"). In
addition, each Lender agrees that if it previously filed a Form 4224
Certification, it will deliver to the Borrower and the Agent a new Form
4224 Certification prior to the first payment date occurring in each of
its subsequent taxable years; and if it previously filed a Form 1001
Certification, it will deliver to the Borrower and the Agent a new
certification prior to the first payment date falling in the third year
following the previous filing of such certification. Each Lender also
agrees to deliver to the Borrower and the Agent such other or
supplemental forms as may at any time be required as a result of
changes in applicable law or regulation in order to confirm or maintain
in effect its entitlement to exemption from United States withholding
tax on any payments hereunder, provided that the circumstances of such
Lender at the relevant time and applicable laws permit it to do so. If
a Lender determines, as a result of any change in either (i) a
Governmental Requirement or (ii) its circumstances, that it is unable
to submit any form or certificate that it is obligated to submit
pursuant to this Section 4.06, or that it is required to withdraw or
cancel any such form or certificate previously submitted, it shall
promptly notify the Borrower and the Agent of such fact. If a Lender is
organized under the laws of a jurisdiction outside the United States of
America, unless the Borrower and the Agent have received a Form 1001
Certification or Form 4224 Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Agent (in
consultation with the Borrower) shall withhold taxes from such payments
at the applicable statutory rate. Each Lender agrees to indemnify and
hold harmless from any United States taxes, penalties, interest and
other expenses, costs and losses incurred or payable by (i) the
Borrower or the Agent as a result of such Lender's failure to submit
any form or certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Borrower or the Agent as a result of their
reliance on any such form or certificate which such Lender has provided
to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed
to provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; provided, however, that
should
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a Lender, which is otherwise exempt from or subject to a reduced rate
of withholding tax becomes subject to taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps
as such Lender shall reasonably request to assist such Lender to
recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Agent or to change the
jurisdiction of its Applicable Lending Office or to contest any tax
imposed if the making of such a filing or change or contesting such tax
would avoid the need for or reduce the amount of any such additional
amounts that may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to such
Lender.
Section 4.07 Disposition of Proceeds. The Security Instruments
contain an assignment unto and in favor of the Agent for the benefit of the
Lenders of all production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged Property, and the Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby. Notwithstanding the assignment contained in such Security
Instruments, until the occurrence of an Event of Default, the Lenders agree that
they will neither notify the purchaser or purchasers of such production nor take
any other action to cause such proceeds to be remitted to the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower. In
addition, until the occurrence of an Event of Default, the Lenders will, upon
written request of the Borrower given to the Agent, execute and deliver, at the
Borrower's expense, such transfer orders and other instruments reasonably
necessary to allow payment of production proceeds directly to the Borrower.
ARTICLE V
YIELD MAINTENANCE; CAPITAL ADEQUACY
Section 5.01 Additional Costs.
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(a) Eurodollar Regulations, etc. The Borrower shall pay
directly to each Lender from time to time such amounts as such Lender may
determine to be necessary to compensate such Lender for any costs which it
determines are attributable to its making or maintaining of any Eurodollar Loans
or issuing or participating in Letters of Credit hereunder or its obligation to
make any Eurodollar Loans or issue or participate in any Letters of Credit
hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any of such Eurodollar Loans, Letters of Credit or such obligation
(such increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to such Lender under this
Agreement or any Note in respect of any of such Eurodollar Loans or Letters of
Credit (other than taxes imposed on the overall net income of such Lender or of
its Applicable Lending Office for any of such Eurodollar Loans by the
jurisdiction in which such Lender has its principal office or Applicable Lending
Office); or (ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of such
Lender (including any of such Eurodollar Loans or any deposits referred to in
the definition of "Eurodollar Rate" in Section 1.02 hereof), or the Commitment
of such Lender or the Eurodollar interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such extensions of
credit or liabilities) or such Lender's Commitment. Each Lender will notify the
Agent and the Borrower of any event occurring after the Closing Date which will
entitle such Lender to compensation pursuant to this Section 5.01(a) as promptly
as practicable after it obtains knowledge thereof and determines to request such
compensation, and will designate a different Applicable Lending Office for the
Loans of such Lender 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 such Lender, be disadvantageous to such Lender, provided that such
Lender shall have no obligation to so designate an Applicable Lending Office
located in the United States. If any Lender requests compensation from the
Borrower under this Section 5.01(a), the Borrower may, by notice to such Lender,
suspend the obligation of such Lender to make additional Loans of the Type with
respect to which such compensation is requested until the Regulatory Change
giving rise to such request ceases to be in effect (in which case the provisions
of Section 5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the
provisions of Section 5.01(a), in the event that, by reason of any Regulatory
Change or any other circumstances arising after the Closing Date affecting such
Lender, the Eurodollar interbank market or such Lender's position in such
market, any Lender either (i) incurs 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 such Lender which includes deposits by reference to which
the interest rate on Eurodollar Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lender
which includes Eurodollar Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Borrower, the obligation of such Lender
to make additional Eurodollar Loans shall be suspended until such Regulatory
Change or other circumstances ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without duplication), the
Borrower shall pay directly to any Lender from time to time on request such
amounts as such Lender may reasonably determine to be necessary to compensate
such Lender or its parent or holding company for any costs which it determines
are attributable to the maintenance by such Lender or its parent or holding
company (or any Applicable Lending Office), pursuant to any Governmental
Requirement following any Regulatory Change, of capital in respect of
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its Commitment, its Note, its Loans or any interest held by it in any Letter of
Credit, such compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of such Lender or its parent
or holding company (or any Applicable Lending Office) to a level below that
which such Lender or its parent or holding company (or any Applicable Lending
Office) could have achieved but for such Governmental Requirement. Such Lender
will notify the Borrower that it is entitled to compensation pursuant to this
Section 5.01(c) as promptly as practicable after it determines to request such
compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower
of the incurrence of additional costs under this Section 5.01 shall in such
notice to the Borrower and the Agent set forth in reasonable detail the basis
and amount of its request for compensation. Determinations and allocations by
each Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to Section 5.01(a) or (b), or of the effect of capital
maintained pursuant to Section 5.01(c), on its costs or rate of return of
maintaining Loans or its obligation to make Loans or issue Letters of Credit, or
on amounts receivable by it in respect of Loans or Letters of Credit, and of the
amounts required to compensate such Lender under this Section 5.01, shall be
conclusive and binding for all purposes, provided that such determinations and
allocations are made on a reasonable basis. Any request for additional
compensation under this Section 5.01 shall be paid by the Borrower within thirty
(30) days of the receipt by the Borrower of the notice described in this Section
5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein
to the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(i) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar
Rate" in Section 1.02 are not being provided in the relevant amounts or
for the relevant maturities for purposes of determining rates of
interest for Eurodollar Loans as provided herein; or
(ii) the Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.02 upon
the basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not sufficient to adequately
cover the cost to the Lenders of making or maintaining Eurodollar
Loans;
then the Agent 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 additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision
of this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make Eurodollar Loans shall be suspended until such
time as such Lender may again make and maintain Eurodollar Loans (in which case
the provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02
and 5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Lender shall
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be made instead as Base Rate Loans (and, if an event referred to in Section
5.01(b) or Section 5.03 has occurred and such Lender so requests by notice to
the Borrower, all Affected Loans of such Lender then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as (or
converted into) Base Rate Loans, all payments of principal which would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each
Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for requesting
such amounts and which shall be conclusive and binding for all purposes provided
that such determinations are made on a reasonable basis), such amount or amounts
as shall compensate it for any loss, cost, expense or liability which such
Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.01) on a date other than the last day of the Interest Period for
such Loan; or
(ii) any failure by the Borrower for any reason (including but
not limited to, the failure of any of the conditions precedent
specified in Article VI to be satisfied) to borrow, continue or convert
a Eurodollar Loan from such Lender on the date for such borrowing,
continuation or conversion specified in the relevant notice given
pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the 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 specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower (i) that it has or
will incur additional costs under Section 5.01, (ii) that the making or
maintaining of Eurodollar Loans is or will be illegal under Section 5.03, or
(iii) has required the Borrower to make payments for Taxes under Section 4.06,
then the Borrower may, unless such Lender has notified the Borrower that the
circumstances giving rise to such notice no longer apply, terminate, in whole
but not in part, the Commitment of any Lender (other than the Agent) (the
"Terminated Lender") at any time upon five (5) Business Days' prior written
notice to the Terminated Lender and the Agent (such notice referred to herein as
a "Notice of Termination").
(b) In order to effect the termination of the Commitment of
the Terminated Lender, the Borrower shall: (i) obtain an agreement with one or
more Lenders to increase their Commitment or Commitments and/or (ii) request any
one or more other banking institutions to become parties to this Agreement in
place and instead of such Terminated Lender and agree to accept a Commitment or
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Commitments; provided, however, that such one or more other banking institutions
are reasonably acceptable to the Agent and become parties by executing an
Assignment (the Lenders or other banking institutions that agree to accept in
whole or in part the Commitment of the Terminated Lender being referred to
herein as the "Replacement Lenders"), such that the aggregate increased and/or
accepted Commitments of the Replacement Lenders under clauses (i) and (ii) above
equal the Commitment of the Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Termination Date"),
and the Replacement Lender or Replacement Lenders to which the Terminated Lender
will assign its Commitment and, if there will be more than one Replacement
Lender, the portion of the Terminated Lender's Commitment to be assigned to each
Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall
by execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or Replacement Lenders (pro rata, if there is more than one
Replacement Lender, in proportion to the portion of the Terminated Lender's
Commitment to be assigned to each Replacement Lender) indicated in the Notice of
Termination and shall assign to the Replacement Lender or Replacement Lenders
each of its Loans (if any) then outstanding and participation interests in
Letters of Credit (if any) then outstanding pro rata as aforesaid), (ii) the
Borrower will pay the Terminated Lender the compensation or Taxes accrued and
owing prior to the Termination Date, (iii) the Terminated Lender shall endorse
its Note, payable without recourse, representation or warranty to the order of
the Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iv) the
Replacement Lender or Replacement Lenders shall purchase the Note held by the
Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid
principal amount thereof plus interest and facility and other fees accrued and
unpaid to the Termination Date, and (v) the Replacement Lender or Replacement
Lenders will thereupon (pro rata as aforesaid) succeed to and be substituted in
all respects for the Terminated Lender with like effect as if becoming a Lender
pursuant to the terms of Section 12.06(b), and the Terminated Lender will have
the rights and benefits of an assignor under Section 12.06(b). To the extent not
in conflict, the terms of Section 12.06(b) shall supplement the provisions of
this Section 5.06(d).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding. The obligation of the Lenders to
make the Initial Funding is subject to the receipt by the Agent and the Lenders
of all fees payable pursuant to Section 2.04(f) on or before the Closing Date or
otherwise under this Agreement and the following documents and satisfaction of
the other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary
of the Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers of the Borrower (y) who are authorized to
sign the Loan Documents to which Borrower is a party and (z) who will, until
replaced by another officer or officers duly authorized for that purpose, act as
its representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized officers, and
(iv) the articles or certificate of
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incorporation and bylaws of the Borrower, certified as being true and complete.
The Agent and the Lenders may conclusively rely on such certificate until the
Agent receives notice in writing from the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary
of the Parent Company and each Guarantor setting forth (i) resolutions of its
board of directors with respect to the authorization of such Person to execute
and deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) its officers (y) who are
authorized to sign the Loan Documents to which it is a party and (z) who will,
until replaced by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and the
transactions contemplated hereby, (iii) specimen signatures of the authorized
officers, and (iv) the articles or certificate of incorporation and bylaws of
such Person, certified as being true and complete. The Agent and the Lenders may
conclusively rely on such certificate until the Agent receives notice in writing
from the Borrower to the contrary.
(c) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of the Parent Company,
the Borrower and each Guarantor.
(c) A compliance certificate which shall be substantially in
the form of Exhibit C, duly and properly executed by a Responsible Officer and
dated as of the date of the Initial Funding.
(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on
Exhibit D, duly completed and executed in sufficient number of counterparts for
recording, if necessary.
(f) An opinion of Xxxxxx and Xxxxx, L.L.P., special counsel to
the Borrower, in form and substance reasonably satisfactory to the Agent.
(g) A certificate of insurance coverage of the Borrower
evidencing that the Borrower and its Subsidiaries are carrying insurance in
accordance with Section 7.19 hereof.
(h) The Agent and the Lenders shall be reasonably satisfied
with the environmental condition of the Properties of the Borrower.
(i) Multiple originals of the Security Instruments and
accompanying financing statements covering the Mortgaged Property for filing and
recordation in the appropriate offices to establish and perfect the liens and
security interests created thereby; and the Agent shall be reasonably satisfied
that, upon such filing and recordation and the filing and recordation of
releases of the Liens securing the Xxxxxxxxx Notes and the Debt being refinanced
with the proceeds of the Loans, the Security Instruments create valid and
perfected, first priority Liens on not less than 85% of each of proved producing
and the total proved SEC Value of the Oil and Gas Properties included in the
Initial Reserve Report.
(j) The Agent shall have been furnished with appropriate UCC
search certificates reflecting the filing of all financing statements required
to perfect the security interests granted by the Security Instruments and
reflecting no prior liens or security interests.
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(k) the Initial Reserve Reports.
(l) The DEM Subordinated Debt shall be in form and substance
reasonably acceptable to the Lenders.
(m) A certificate of a Responsible Officer certifying that
attached thereto are true and complete copies of all material documentation
relating to the Xxxxxxx and Xxxx Acquisition, including the purchase agreement;
and the Agent shall be reasonably satisfied with the form and substance of such
documents.
(o) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans. The obligation of
the Lenders to make Loans to the Borrower upon the occasion of each borrowing
hereunder and to issue, renew, extend or reissue Letters of Credit for the
account of the Borrower (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans and after giving
effect thereto: (i) no Default shall have occurred and be continuing; (ii) no
Material Adverse Effect shall have occurred; and (iii) the representations and
warranties made by the Borrower and its Subsidiaries in Article VII and in the
Security Instruments shall be true on and as of the date of the making of such
Loans or issuance, renewal, extension or reissuance of a Letter of Credit with
the same force and effect as if made on and as of such date and following such
new borrowing, except to the extent such representations and warranties are
expressly limited to an earlier date or the Majority Lenders may expressly
consent in writing to the contrary.
Section 6.03 Conditions Relating to Letters of Credit. In
addition to the satisfaction of all other conditions precedent set forth in this
Article VI, the issuance, renewal, extension or reissuance of the Letters of
Credit referred to in Section 2.01(b) hereof is subject to the following
conditions precedent:
(a) At least three (3) Business Days prior to the date of the
issuance, renewal, extension or reissuance of each Letter of Credit, the Agent
shall have received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by the
Agent, (ii) contain such terms and provisions as are reasonably required by the
Agent, (iii) be for the account of the Borrower and (iv) expire not later than
the earlier of one (1) year from the date of the issuance or renewal thereof or
the Revolving Credit Termination Date.
(c) The Borrower shall have duly and validly executed and
delivered to the Agent a Letter of Credit Agreement pertaining to the Letter of
Credit.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing and
issuance, renewal, extension or reissuance of a Letter of Credit as provided in
Section 6.02, except that the representations contained in Section 7.02 shall be
deemed to be made with respect to the most recent financial statements delivered
to the Agent pursuant to Section 8.01):
Section 7.01 Corporate Existence. Each of the Parent Company,
the Borrower and its Subsidiaries: (i) is a corporation duly organized, legally
existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition.
(a) The audited consolidated balance sheet of the Parent
Company and its Consolidated Subsidiaries, as at June 30, 1996 and the related
consolidated statement of operations, stockholders' equity and cash flow of the
Parent Company and its Consolidated Subsidiaries, for the fiscal year ended on
said date, with the opinion thereon of KPMG Peat Marwick, L.L.P. heretofore
furnished to each of the Lenders, and the unaudited consolidated balance sheet
of the Parent Company and its Consolidated Subsidiaries as at March 31, 1997 and
their related consolidated statements of operations, stockholders' equity and
cash flow of the Parent Company and its Consolidated Subsidiaries for the 9
month period ended on such date heretofore furnished to the Lenders are complete
and correct and fairly present the consolidated financial condition of the
Parent Company and its Consolidated Subsidiaries as at said dates and the
results of its operations for the fiscal year and the 9 month period on said
dates, all in accordance with GAAP, as applied on a consistent basis (subject,
in the case of the interim financial statements, to normal year-end
adjustments).
(b) The financial statements referred to in Section 7.02(a)
present fairly, in all material respects, the financial position of the Parent
Company and its Consolidated Subsidiaries as of such date, in conformity with
GAAP, except as otherwise noted therein.
(c) Neither the Parent Company, the Borrower nor any of its
Subsidiaries has on the Closing Date any material Debt, contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the financial statements referred to in Section
7.02(a) or in Schedule 7.02 which could reasonably be expected to have a
Material Adverse Effect. Since June 30, 1996, there has been no change or event
having a Material Adverse Effect. Since June 30, 1996, neither the business nor
the Properties of the Parent Company, the Borrower or any of its Subsidiaries
have been materially and 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 or of any public enemy.
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Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Parent Company, the Borrower or any of its Subsidiaries which
involves the possibility of any judgment or liability against the Parent
Company, Borrower or any of its Subsidiaries not fully covered by insurance
(except for normal deductibles), and which would have a Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of
the Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date or which if not obtained would have a
Material Adverse Effect under, the respective charter or by-laws of the Parent
Company, the Borrower or any of its Subsidiaries, or any Governmental
Requirement or any agreement or instrument to which the Parent Company, the
Borrower or any of its Subsidiaries is a party or by which it is bound or to
which it or its Properties are subject, or constitute a default under any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any of the revenues or assets of the Parent Company, the Borrower or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument other
than the Liens created by the Loan Documents.
Section 7.05 Authority. The Parent Company, the Borrower and
each of its Subsidiaries have all necessary corporate power and authority to
execute, deliver and perform its obligations under the Loan Documents to which
it is a party; and the execution, delivery and performance by the Parent
Company, the Borrower and each of its Subsidiaries of the Loan Documents to
which it is a party, have been duly authorized by all necessary corporate action
on its part; and the Loan Documents constitute the legal, valid and binding
obligations of the Parent Company, the Borrower and each Subsidiary, enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency or
similar laws and general principles of equity.
Section 7.06 Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any Governmental Authority
are necessary for the execution, delivery or performance by the Parent Company,
the Borrower or any of its Subsidiaries of the Loan Documents or for the
validity or enforceability thereof, except for the recording and filing of the
Security Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be
used for refinancing certain existing Debt, general working capital purposes
including the acquisition and development of oil and gas properties and the
making of intercompany loans, investments and dividends to the extent permitted
by this Agreement. The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation G, U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan hereunder will
be used to buy or carry any margin stock.
Section 7.08 ERISA.
(a) The Parent Company, the Borrower and each of its
Subsidiaries and ERISA Affiliates have complied in all material respects with
ERISA and, where applicable, the Code regarding each Plan.
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(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) To the best knowledge of the Borrower, no act, omission or
transaction has occurred which could result in imposition on the Parent Company,
the Borrower or any of its Subsidiaries or ERISA Affiliates (whether directly or
indirectly) of (i) either a civil penalty assessed pursuant to section 502(c),
(i) or (l) of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the
Code or (ii) breach of fiduciary duty liability damages under section 409 of
ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September 2, 1974.
No liability to the PBGC (other than for the payment of current premiums which
are not past due) by the Parent Company, the Borrower or any of its Subsidiaries
or ERISA Affiliates has been or is expected by the Parent Company, the Borrower
or any of its Subsidiaries or ERISA Affiliates to be incurred with respect to
any Plan. No ERISA Event with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which
the Parent Company, the Borrower or any of its Subsidiaries or ERISA Affiliates
is required under the terms of each Plan or applicable law to have paid as
contributions to such Plan, and no accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Title IV of ERISA does not, as of the end of
the Parent Company's most recently ended fiscal year, exceed the current value
of the assets (computed on a plan termination basis in accordance with Title IV
of ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA.
(g) None of the Parent Company, the Borrower or any of its
Subsidiaries or ERISA Affiliates sponsors, maintains, or contributes to an
employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the Parent Company,
the Borrower or any of its Subsidiaries or ERISA Affiliates in its sole
discretion at any time without any material liability.
(h) None of the Parent Company, the Borrower or any of its
Subsidiaries or ERISA Affiliates sponsors, maintains or contributes to, or has
at any time in the preceding six calendar years, sponsored, maintained or
contributed to, any Multiemployer Plan.
(i) None of the Parent Company, the Borrower or any of its
Subsidiaries or ERISA Affiliates is required to provide security under section
401(a)(29) of the Code due to a Plan amendment that results in an increase in
current liability for the Plan.
Section 7.09 Taxes. Each of the Parent Company, the Borrower
and its Subsidiaries has filed all United States Federal income tax returns and,
to the best of the Borrower's knowledge, all other tax returns which are
required to be filed by them and have paid all material taxes due pursuant to
such returns or pursuant to any assessment received by the Parent Company, the
Borrower or any of its Subsidiaries, except for those being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. The charges, accruals and reserves
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on the books of the Parent Company, the Borrower and its Subsidiaries in respect
of taxes and other governmental charges are, in the opinion of the Borrower,
adequate. No tax Lien has been filed and, to the knowledge of the Borrower, no
claim is being asserted with respect to any such tax, fee or other charge which
could reasonably be expected to have a Material Adverse Effect.
Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Parent
Company, the Borrower and its Subsidiaries has good and defensible title to its
material (individually or in the aggregate) Properties, free and clear of all
Liens except Liens permitted by Section 9.02. Except as set forth in Schedule
7.10, after giving full effect to the Excepted Liens, the Parent Company, the
Borrower and its Subsidiaries, as applicable, owns the net interests in
production attributable to the lands and leases reflected in the most recently
delivered Reserve Report and the ownership of such Properties shall not in any
material respect obligate such Person to bear the costs and expenses relating to
the maintenance, development and operations of each such Property in an amount
in excess of the working interest of each Property set forth in the most
recently delivered Reserve Report. All information contained in the most
recently delivered Reserve Report is true and correct in all material respects
as of the date thereof.
(b) All material leases and agreements necessary for the
conduct of the business of the Parent Company, the Borrower and its Subsidiaries
are valid and subsisting and are in full force and effect. There exists no
default or event or circumstance which with the giving of notice or the passage
of time or both would give rise to a default under any such lease or leases
which would affect in any material respect the conduct of the business of the
Parent Company, the Borrower and its Subsidiaries taken as a whole or which
would have a Material Adverse Effect.
(c) The rights, properties and other assets presently owned,
leased or licensed by the Parent Company, the Borrower and its Subsidiaries
including, without limitation, all easements and rights of way, include all
rights, Properties and other assets reasonably necessary to permit the Parent
Company, the Borrower and its Subsidiaries to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the Closing Date.
(d) All of the assets and Properties of the Parent Company,
the Borrower and its Subsidiaries which are reasonably necessary for the
operation of its business are in good working condition and are maintained in
accordance with prudent business standards.
Section 7.11 No Material Misstatements. No written
information, statement, exhibit, certificate, document or report furnished to
the Agent and the Lenders (or any of them) by the Parent Company, the Borrower
or any of its Subsidiaries in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein not materially
misleading in the light of the circumstances in which made. There is no fact
known to the Borrower which has a Material Adverse Effect or in the future is
reasonably likely to have (so far as the Borrower can now foresee) a Material
Adverse Effect and which has not been set forth in this Agreement or the other
documents, certificates and statements furnished to the Agent by or on behalf of
the Parent Company, the Borrower or any of its Subsidiaries prior to, or on, the
Closing Date in connection with the transactions contemplated hereby. The
Borrower has delivered to the Agent true and complete copies of each of the
Agreements evidencing the DEM Subordinated Debt.
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Section 7.12 Investment Company Act. Neither the Parent
Company, the Borrower nor any of its Subsidiaries is an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
Section 7.13 Public Utility Holding Company Act. Neither the
Parent Company, the Borrower nor any of its Subsidiaries is a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 7.14 Subsidiaries and Partnerships. Except as set
forth on Schedule 7.14, the Borrower has no Subsidiaries and has no interest in
any partnerships. Schedule 7.14 sets forth the principal place of business of
each such Subsidiary and the ownership interest of the Borrower in such
Subsidiary.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 7.14.
Section 7.16 Defaults. Neither Parent Company, the Borrower
nor any of its Subsidiaries is in default nor has any event or circumstance
occurred which, but for the expiration of any applicable grace period or the
giving of notice, or both, would constitute a default under any material
agreement or instrument to which any such Person is a party or by which any such
Person is bound which default would have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in
Schedule 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) Neither any Property of the Parent Company, the Borrower
or any of its Subsidiaries nor the operations conducted thereon violate any
order or requirement of any court or Governmental Authority or any Environmental
Laws.
(b) Without limitation of clause (a) above, no Property of the
Parent Company, the Borrower or any of its Subsidiaries nor the operations
currently conducted thereon or, to the best knowledge of the Borrower, by any
prior owner or operator of such Property or operation, are in violation of or
subject to any existing, pending or (to the knowledge of the Borrower)
threatened action, suit, investigation, inquiry or proceeding by or before any
court or Governmental Authority or to any remedial obligations under
Environmental Laws.
(c) All notices, permits, licenses or similar authorizations,
if any, required to be obtained or filed in connection with the operation or use
of any and all Property of the Parent Company, the Borrower and each of its
Subsidiaries, including without limitation past or present treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed, and the Parent Company, the
Borrower and each of its Subsidiaries are in compliance with the terms and
conditions of all such notices, permits, licenses and similar authorizations.
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(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all Property of
the Parent Company, the Borrower or any of its Subsidiaries have in the past
been transported, treated and disposed of in accordance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to public health
or welfare or the environment, and, to the best knowledge of the Borrower, all
such transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or (to the
knowledge of the Borrower) threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws.
(e) The Borrower has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid waste, or oil
and gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous substances on
or to any Property of the Parent Company, the Borrower or any of its
Subsidiaries except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment.
(f) To the extent applicable, all Property of the Parent
Company, the Borrower and each of its Subsidiaries currently satisfies all
design, operation, and equipment requirements imposed by the OPA or scheduled as
of the Closing Date to be imposed by OPA during the term of this Agreement, and
the Parent Company, the Borrower does not have any reason to believe that such
Property, to the extent subject to OPA, will not be able to maintain compliance
with the OPA requirements during the term of this Agreement.
(g) Neither the Parent Company, the Borrower nor any of its
Subsidiaries has any known contingent liability in connection with any release
or threatened release of any oil, hazardous substance or solid waste into the
environment.
Section 7.18 Compliance with the Law. Neither the Parent
Company, the Borrower nor any of its Subsidiaries has violated any Governmental
Requirement or failed to obtain any license, permit, franchise or other
governmental authorization necessary for the ownership of any of its Properties
or the conduct of its business, which violation or failure would have (in the
event such violation or failure were asserted by any Person through appropriate
action) a Material Adverse Effect. Except for such acts or failures to act as
would not have a Material Adverse Effect, the Oil and Gas Properties (and
properties unitized therewith) have been maintained, operated and developed in a
good and workmanlike manner and in substantial conformity with all applicable
laws and all rules, regulations and orders of all duly constituted authorities
having jurisdiction and in substantial conformity with the provisions of all
leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of the Oil and Gas
Properties; specifically in this connection, (i) after the Closing Date, no Oil
and Gas Property is subject to having allowable production reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time)
prior to the Closing Date and (ii) none of the xxxxx comprising a part of the
Oil and Gas Properties (or properties unitized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, and such xxxxx are, in fact, bottomed under and are producing from,
and the well bores are wholly within, the Oil and Gas Properties (or in the case
of xxxxx located on properties unitized therewith, such unitized properties).
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Section 7.19 Insurance. Schedule 7.19 attached hereto contains
an accurate and complete description of all material policies of fire,
liability, workmen's compensation and other forms of insurance owned or held by
the Parent Company, the Borrower and each of its Subsidiaries. All such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date of the closing have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for substantial compliance with all
requirements of law and of all agreements to which the Parent Company, the
Borrower or any of its Subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Parent Company, the Borrower and each of its Subsidiaries; will remain in full
force and effect through the respective dates set forth in Schedule 7.19 without
the payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 7.19 identifies all material risks, if any, which the Parent
Company, the Borrower and its Subsidiaries and their respective Board of
Directors or officers have designated as being self insured. Neither the Parent
Company, the Borrower nor any of its Subsidiaries has been refused any insurance
with respect to its assets or operations, nor has its coverage been limited
below usual and customary policy limits, by an insurance carrier to which it has
applied for any such insurance or with which it has carried insurance during the
last three years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as
of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Parent Company, the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net xxxx to market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied), and the counterparty to each such agreement.
Section 7.21 Restriction on Liens. Neither the Parent Company,
the Borrower nor any of its Subsidiaries is a party to any agreement or
arrangement (other than this Agreement and the Security Instruments), or subject
to any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to other Persons on or in respect of their
respective assets of Properties, except for such restrictions as are contained
in the documents and agreements evidencing the DEM Subordinated Debt.
Section 7.22 Gas Imbalances. As of the Closing Date, except as
set forth on Schedule 7.22 or on the most recent certificate delivered pursuant
to Section 8.07(c), on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to the Parent Company, the Borrower's and its
Subsidiaries' Oil and Gas Properties which would require such Person to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding 4,000 mcf
of gas in the aggregate.
Section 7.23 Material Agreements. Set forth on Schedule 7.23
hereto is a complete and correct list of all material credit agreements,
indentures, purchase agreements, obligations in respect of letters of credit,
guarantees, joint venture agreements, and other instruments in effect or to be
in effect as of the Closing Date (other than Hedging Agreements) providing for,
evidencing, securing or otherwise relating to any Debt of the Parent Company,
the Borrower or any of its Subsidiaries, and such list
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correctly sets forth the names of the debtor or lessee and creditor or lessor
with respect to the Debt or lease obligations outstanding or to be outstanding
and the property subject to any Lien securing such Debt or lease obligation.
Also set forth on Schedule 7.23 hereto is a complete and correct list of all
material agreements and other instruments of the Parent Company, the Borrower
and its Subsidiaries relating to the purchase, transportation by pipeline, gas
processing, marketing, sale and supply of natural gas and other Hydrocarbons,
but in any event, any such agreement or other instrument that will account for
more than 20% of the sales of the Parent Company, the Borrower and its
Subsidiaries during the Parent Company's current fiscal year. The Borrower has
heretofore delivered to the Bank a complete and correct copy of the relevant
documents for the Xxxxxxx and Xxxx Acquisition and all such material credit
agreements, indentures, purchase agreements, contracts, letters of credit,
guarantees, joint venture agreements, or other instruments, including any
modifications or supplements thereto, as in effect on the Closing Date.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 Financial Statements. The Borrower shall deliver,
or shall cause to be delivered, to the Agent with sufficient copies of each for
the Lenders:
(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Parent Company, the audited
consolidated statements of operations, stockholders' equity, changes in
financial position and cash flow of the Parent Company and its Consolidated
Subsidiaries for such fiscal year, and the related consolidated and
consolidating balance sheets of the Parent Company and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each case
in comparative form the corresponding figures for the preceding fiscal year, and
accompanied by the related opinion of independent public accountants of
recognized national standing acceptable to the Agent which opinion shall state
that said financial statements fairly present, in all material respects, the
consolidated financial condition and results of operations of the Parent Company
and its Consolidated Subsidiaries as at the end of, and for, such fiscal year
and that such financial statements have been prepared in accordance with GAAP
except for such changes in such principles with which the independent public
accountants shall have concurred and such opinion shall not contain a "going
concern" or like qualification or exception.
(b) As soon as available and in any event within 60 days after
the end of each of the first three fiscal quarterly periods of each fiscal year
of the Parent Company, consolidated statements of operations, stockholders'
equity, changes in financial position and cash flow of the Parent Company and
its Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and the
related consolidated balance sheets as at the end of such period, and setting
forth in each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, accompanied by the
certificate of a Responsible Officer, which certificate shall state that said
financial statements fairly present the consolidated financial condition and
results of operations of the Parent Company and its Consolidated Subsidiaries in
accordance with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
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(c) Promptly after the Parent Company or the Borrower knows
that any Default or any Material Adverse Effect has occurred, a notice of such
Default or Material Adverse Effect, describing the same in reasonable detail and
the action the Parent Company or the Borrower proposes to take with respect
thereto.
(d) Promptly upon receipt thereof, a copy of each other
material report or letter submitted to the Parent Company by its independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Parent Company and its Consolidated Subsidiaries and a copy
of any response by the Parent Company or its Board of Directors to such letter
or report.
(e) Promptly upon its becoming available, each financial
statement, report, notice or proxy statement sent by the Parent Company or the
Borrower to stockholders generally and each regular or periodic report and any
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Parent Company with or
received by the Parent Company in connection therewith from any securities
exchange or the SEC or any successor agency.
(f) From time to time such other information regarding the
business, affairs or financial condition of the Parent Company, the Borrower or
any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be filed
under ERISA) as any Lender or the Agent may reasonably request.
(g) As soon as available and in any event within ten (10)
Business Days after each Quarterly Date, a report, in form and substance
satisfactory to the Agent, setting forth as of the last Business Day of such
Quarterly Date, a summary of its hedging positions under all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Parent Company, the Borrower and each of its
Subsidiaries, including the type, term, effective date, termination date and
notional principal amounts or volumes, the hedged price(s), interest rate(s) or
exchange rates(s), as applicable, and any new credit support agreements relating
thereto not listed on Schedule 7.20.
(h) Within two (2) Business Days following receipt by the
Parent Company or the Borrower, a copy of the notice from the Joint Energy
Development Investments Limited Partnership of its intent to sell, or otherwise
dispose of, to any Person its interests in the Parent Company if such sale or
disposition reduces its aggregate remaining interest in the Parent Company below
75% of its investment in the Parent Company as of the Closing Date.
The Parent Company and the Borrower will furnish to the Agent, at the
time it furnishes each set of financial statements pursuant to paragraph (a) or
(b) above, a certificate substantially in the form of Exhibit C hereto executed
by a Responsible Officer (i) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail), and (ii)
setting forth in reasonable detail the computations necessary to determine
whether the Parent Company and the Borrower are in compliance with Sections
9.12, 9.13 and 9.14 as of the end of the respective fiscal quarter or fiscal
year.
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Section 8.02 Litigation. The Borrower shall promptly give to
the Agent notice of all legal or arbitral proceedings, and of all proceedings
before any Governmental Authority affecting the Parent Company, the Borrower or
any of its Subsidiaries, except proceedings which, if adversely determined,
would not have a Material Adverse Effect. The Borrower will, and will cause each
of its Subsidiaries to, promptly notify the Agent and each of the Lenders of any
claim, judgment, Lien or other encumbrance affecting any Property of the Parent
Company, the Borrower or any of its Subsidiaries if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$250,000.
Section 8.03 Maintenance, Etc.
(a) The Borrower shall and shall cause each of its
Subsidiaries to: preserve and maintain its corporate existence and all of its
material rights, privileges and franchises; keep books of record and account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities in accordance with GAAP;
comply with all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; upon reasonable notice, permit
representatives of the Agent or any Lender, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect its
Properties, and to discuss its business and affairs with its officers, all to
the extent reasonably requested by such Lender or the Agent (as the case may
be); and keep, or cause to be kept, insured by financially sound and reputable
insurers all Property of a character usually insured by Persons engaged in the
same or similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such Persons and carry such
other insurance as is usually carried by such Persons including, without
limitation, environmental risk insurance to the extent reasonably available.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year, the
Borrower will furnish or cause to be furnished to the Agent and the Lenders a
certificate of insurance coverage from the insurer in form and substance
satisfactory to the Agent and, if requested, will furnish the Agent and the
Lenders copies of the applicable policies.
(c) The Parent Company and the Borrower will and will cause
each of its Subsidiaries to operate its Properties or cause such Properties to
be operated in a careful and efficient manner in accordance with the usual and
customary practices of the industry and in substantial compliance with all
applicable contracts and agreements and in compliance in all material respects
with all Governmental Requirements.
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(d) The Parent Company and the Borrower will and will cause
each of its Subsidiaries to, at its own expense, do or cause to be done all
things reasonably necessary to preserve and keep in good repair, working order
and efficiency all of its Oil and Gas Properties and other material Properties
including, without limitation, all equipment, machinery and facilities, and from
time to time will make all the reasonably necessary repairs, renewals and
replacements so that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and maintained,
except to the extent a portion of such Properties is no longer capable of
producing Hydrocarbons in economically reasonable amounts. The Parent Company
and the Borrower will and will cause each of its Subsidiaries to promptly: (i)
pay and discharge, or make reasonable and customary efforts to cause to be paid
and discharged, all delay rentals, royalties, expenses and indebtedness accruing
under the leases or other agreements affecting or pertaining to its Oil and Gas
Properties, (ii) perform or make reasonable and customary efforts to cause to be
performed, in accordance with usual and customary industry standards, the
obligations required by each and all of the assignments, deeds, leases,
sub-leases, contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties, (iii) will and will cause each of its
Subsidiaries to do all other things necessary to keep unimpaired, except for
Liens described in Section 9.02, its rights with respect thereto and prevent any
forfeiture thereof or a default thereunder, except to the extent a portion of
such Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Parent Company and the Borrower will and will cause each
of its Subsidiaries to operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause such Oil
and Gas Properties and other material Properties to be operated in a careful and
efficient manner in accordance with the usual and customary practices of the
industry and in substantial compliance with all applicable contracts and
agreements and in compliance in all material respects with all Governmental
Requirements.
Section 8.04 Environmental Matters.
(a) The Parent Company and the Borrower will and will cause
each of its Subsidiaries to establish and implement such procedures as may be
reasonably necessary to continuously determine and assure that any failure of
the following does not have a Material Adverse Effect: (i) all Property of such
Persons and the operations conducted thereon are in compliance with and do not
violate the requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or to any
Property owned by any such party except in compliance with Environmental Laws,
(iii) no hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting pursuant
to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and
production wastes or hazardous substance is released on or to any such Property
so as to pose an imminent and substantial endangerment to public health or
welfare or the environment.
(b) The Borrower will promptly notify the Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in connection with
any Environmental Laws, excluding routine testing and corrective action.
(c) The Parent Company and the Borrower will and will cause
each of its Subsidiaries to provide environmental audits and tests in accordance
with American Society of Testing and Mechanics standards as reasonably requested
by the Agent and the Lenders or as otherwise required to be obtained by the
Agent or the Lenders by any Governmental Authority in connection with any future
acquisitions of Oil and Gas Properties or other material Properties.
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Section 8.05 Further Assurances. The Borrower will and will
cause each of its Subsidiaries to cure promptly any defects in the creation and
issuance of the Notes and the execution and delivery of the Security Instruments
and this Agreement. The Borrower at its expense will and will cause each of its
Subsidiaries to promptly execute and deliver to the Agent upon request all such
other documents, agreements and instruments to comply with or accomplish the
covenants and agreements of the Borrower or any of its Subsidiaries, as the case
may be, in the Security Instruments and this Agreement, or to further evidence
and more fully describe the collateral intended as security for the Notes, or to
correct any omissions in the Security Instruments, or to state more fully the
security obligations set out herein or in any of the Security Instruments, or to
perfect, protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be reasonably necessary or appropriate in connection
therewith.
Section 8.06 Performance of Obligations. The Borrower will pay
the Notes according to the reading, tenor and effect thereof; and the Borrower
will and will cause each of its Subsidiaries to do and perform every act and
discharge all of the obligations to be performed and discharged by them under
the Security Instruments and this Agreement, at the time or times and in the
manner specified.
Section 8.07 Engineering Reports.
(a) No later than 30 days prior to each Scheduled
Redetermination Date, commencing with the Scheduled Redetermination Date to
occur on March 15, 1998, the Borrower shall furnish to the Agent and the Lenders
a Reserve Report. The June 30 Reserve Report of each year shall be prepared by
certified independent petroleum engineers or other independent petroleum
consultant(s) acceptable to the Agent and the December 31 Reserve Report of each
year shall be prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
proceeding June 30 Reserve Report; provided that the Agent reserves the right to
require that the Reserve Report prepared for the Scheduled Redetermination Date
to occur on March 15, 1998 be prepared by certified independent petroleum
engineers or other independent petroleum consultant(s) acceptable to the Agent.
On or before August 30, 1997, the Borrower shall deliver an updated report with
respect to the Oil and Gas Properties evaluated in the Initial Reserve Reports,
setting forth as of a recent date, the information required in the definition of
"Reserve Report", which report shall be certified by independent petroleum
engineers or other independent petroleum consultant(s) reasonably acceptable to
the Agent.
(b) In the event of an unscheduled redetermination, the
Borrower shall, at the Agent's request, furnish to the Agent and the Lenders a
Reserve Report prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding Reserve Report. For any unscheduled redetermination requested by the
Agent (or as requested by the Lenders pursuant to Section 2.08(d)), the Borrower
shall provide such Reserve Report with an "as of" date as required by the
Majority Lenders as soon as possible, but in any event no later than 45 days
following the receipt of the request by the Agent.
(c) With the delivery of each Reserve Report, the Borrower
shall provide to the Agent and the Lenders, a certificate from a Responsible
Officer certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in the Reserve Report and any other
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information delivered in connection therewith is true and correct, (ii) the
Parent Company, the Borrower or a Guarantor, as applicable, owns good and
defensible title to its Oil and Gas Properties evaluated in such Reserve Report
and such Properties are free of all Liens except for Liens permitted by Section
9.02, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances, take or pay or other prepayments with respect to
its Oil and Gas Properties evaluated in such Reserve Report which would require
the Borrower to deliver Hydrocarbons produced from such Oil and Gas Properties
at some future time without then or thereafter receiving full payment therefor,
(iv) none of its Oil and Gas Properties have been sold since the date of the
last Borrowing Base determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties sold
and in such detail as reasonably required by the Majority Lenders, (v) attached
to the certificate is a list of its Oil and Gas Properties added to and deleted
from the immediately prior Reserve Report and a list of all Persons disbursing
proceeds to the Parent Company, the Borrower or a Guarantor, as applicable, from
its Oil and Gas Properties, (vi) except as set forth on a schedule attached to
the certificate all of the Oil and Gas Properties evaluated by such Reserve
Report are Mortgaged Property and (vii) any change in working interest or net
revenue interest in its Oil and Gas Properties occurring and the reason for such
change.
(d) As soon as available and in any event within 45 days after
the end of fiscal quarter, the Borrower shall provide (i) a production report,
in the form currently prepared internally by the Borrower and which has been
approved by the Agent, and (ii) a summary of all general and administrative
costs of the Parent Company and its Consolidated Subsidiaries for such quarter
which are not reflected in the Consolidated Net Income for such quarter, for its
Oil and Gas Properties, which reports shall include quantities or volume of
production, revenue, realized product prices, operating expenses, taxes, capital
expenditures and lease operating costs which have accrued to the account of the
Parent Company, the Borrower or any Guarantor in such period, and such other
information with respect thereto as the Agent or any Lender may reasonably
require.
(e) With the delivery of the December 31, 1997 Reserve Report,
the Borrower shall also provide projections and budgets of the Borrower and its
Subsidiaries for the forthcoming fiscal year, which shall include, on a monthly
basis for the forthcoming fiscal year, an operating and capital budget, income
and cash flow statements and balance sheets, in each case together with the
analysis and discussion of management of such projections, all certified by a
Responsible Officer of the Borrower as being prepared based on the assumptions
and assessments believed by the Borrower to be reasonable and appropriate both
as of the date of such projections and as of the date of submission thereof to
the Agent.
Section 8.08 Title Information.
(a) On or before the delivery to the Agent and the Lenders of
each Reserve Report required by Section 8.07(a), the Borrower will deliver title
information in form and substance reasonably satisfactory to the Agent covering
the Oil and Gas Properties evaluated by such Reserve Report and included in the
Borrowing Base that were not included in the immediately preceding Borrowing
Base evaluation, so that the Agent shall have received together with title
information previously delivered to the Agent, satisfactory title information on
at least 85% of the SEC Value of the Oil and Gas Properties evaluated by such
Reserve Report and included in the Borrowing Base. The Borrower shall cure any
title defects or exceptions which are not Excepted Liens raised by the title
information within 60 days after a request by the Agent or the Lenders to cure
such defects or exceptions.
(b) If the Borrower is unable to cure any title defect
requested by the Agent or the Lenders to be cured within the 60 day period, such
default shall not be a Default or an Event of Default,
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but instead the Agent and the Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any failure to
so exercise this remedy at any time shall not be a waiver as to future exercise
of the remedy by the Agent or the Lenders. To the extent that the Agent or the
Lenders are not satisfied with title to any Mortgaged Property after the time
period in Section 8.08(a) has elapsed, such unacceptable Mortgaged Property
shall not count towards the 85% requirement, and the Agent may send a notice to
the Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by all of the Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on 85% of the SEC Value of the Oil and Gas Properties included in the Borrowing
Base. This new Borrowing Base shall become effective immediately after receipt
of such notice.
Section 8.09 Additional Collateral.
(a) The Parent Company and the Borrower will, and will cause
each Guarantor to, grant to the Agent as security for the Indebtedness a
first-priority Lien interest (subject only to Excepted Liens) on such Person's
interest in any Oil and Gas Properties not already subject to a Lien of the
Security Instruments such that the Mortgaged Property shall include at least 85%
of its and such Subsidiaries' SEC Value of each of proved producing and the
total Proved Reserves at all times, which Lien will be created and perfected by
and in accordance with the provisions of deeds of trust, security agreements and
financing statements, or other Security Instruments, all in form and substance
satisfactory to the Agent in its sole discretion and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 8.09(a) above, the Borrower will (i) provide to the Agent
title information in form and substance satisfactory to the Agent in its sole
discretion with respect to the Borrower's interests in such Oil and Gas
Properties; and (ii) promptly after the filing of any new Security Instrument in
any state, upon the reasonable request of the Agent, provide to the Agent an
opinion addressed to the Agent for the benefit of the Lenders in form and
substance satisfactory to the Agent in its sole discretion from counsel
acceptable to Agent, stating that the Security Instrument is valid, binding and
enforceable in accordance with its terms and in legally sufficient form for such
jurisdiction.
Section 8.10 ERISA Information and Compliance. The Parent
Company and the Borrower will promptly furnish and will cause its Subsidiaries
and ERISA Affiliates to promptly furnish to the Agent with sufficient copies to
the Lenders (i) promptly after the filing thereof with the United States
Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by a Responsible Officer specifying the
nature thereof, what action the Parent Company, the Borrower, its Subsidiaries
or ERISA Affiliate is taking or proposes to take with respect thereto, and, when
known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (iii) immediately upon
receipt thereof, copies of any notice of the PBGC's intention to terminate or to
have a trustee appointed to administer any Plan. With respect to each Plan
(other than a Multiemployer Plan), the Parent Company and the Borrower will, and
will cause each of its Subsidiaries and ERISA Affiliates to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without
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regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.11 Hedging Program.
(a) On or before November 15, 1997, the Borrower shall
formulate and present to the Agent and the Lenders a hedging strategy to
mitigate and control its and its Subsidiaries' exposure to adverse commodity
price and interest rate fluctuations.
(b) On or before September 1, 1997, the Borrower shall enter
into one or more Hedging Agreements with one or more Lenders or Affiliates of
Lenders (or with any other investment grade counterparties, rated BBB+ or better
or their equivalent) the effective term of such Hedging Agreements commence no
later than September 1, 1997 and expire no earlier than August 1, 1998, and the
aggregate notional volumes of Hydrocarbons subject of such Hedging Agreements
constitute, at all times during the term thereof not less than thirty percent
(30%) of forecasted production for such period. The Borrower agrees to, and
shall cause its Subsidiaries to, permit each Lender the right (without having
any obligation) to bid on all proposed Hedging Agreements.
Section 8.12 Management; Capitalization.
(a) On or before November 15, 1997, the Parent Company and/or
the Borrower shall have executed long-term management and employment agreements
with its key management personnel (for purposes of this Section being: Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxxx, and V. Xx Xxxxxx, or a person of
reasonably equivalent qualification reasonably acceptable to the Agent), such
agreements to be in duration, form and substance reasonably satisfactory to the
Agent.
(b) During the period commencing on April 1, 1997 and ending
on December 31, 1997, the Parent Company shall have received in consideration
for the issuance and sale of additional common equity securities not less than
$5,400,000 in cash proceeds.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of Loans hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder,
without the prior written consent of the Majority Lenders:
Section 9.01 Debt. Neither the Borrower nor any of its
Subsidiaries will incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness or any guaranty of or
suretyship arrangement for the Notes or other Indebtedness;
(b) the Xxxxxxxxx Notes and the Debt of the Borrower existing
on and not repaid on the Closing Date which is disclosed in Schedule 9.01, and
any renewals or extensions (but not increases) thereof;
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(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course of
business which, if greater than 90 days past the invoice or billing date, are
being contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on
the financial statements of the Borrower pursuant to GAAP) and other Debt not
otherwise permitted under this Section 9.01 in an aggregate principal amount not
to exceed $500,000 at any one time outstanding;
(e) Debt of the Borrower under Hedging Agreements either with
any Lender, investment grade counterparties or as disclosed in Section 7.20;
(f) Debt associated with bonds or surety obligations required
by Governmental Requirements in connection with the operation of the Oil and Gas
Properties;
(g) the DEM Subordinated Debt;
(h) intercompany Debt to the extent permitted by Section 9.03;
(i) Debt arising from or related to any of the Liens described
in clauses (iii) to (v) of the definition of "Excepted Liens"; and
(j) Non-Resource Debt of any Non-Recourse Subsidiary.
Section 9.02 Liens. Neither the Borrower nor any of its
Subsidiaries will create, incur, assume or permit to exist any Lien on any of
its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing capital leases (but not other Debt) allowed
under Section 9.01(d) but only on the Property under lease;
(d) Liens disclosed on Schedule 9.02; and
(e) Liens on cash or securities of the Borrower securing the
Debt described in Section 9.01(f).
Section 9.03 Investments, Loans and Advances. Neither the
Borrower nor any of its Subsidiaries will make or permit to remain outstanding
any loans or advances to or investments in any Person, except that the foregoing
restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business;
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(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency thereof,
in each case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within 180 days from the date of
creation thereof rated in the highest grade by Standard & Poors Ratings Group or
Xxxxx'x Investors Service, Inc.;
(e) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by, any Lender
or any office located in the United States or any other bank or trust company
which is organized under the laws of the United States or any state thereof, has
capital, surplus and undivided profits aggregating at least $100,000,000.00 (as
of the date of such Lender's or bank or trust company's most recent financial
reports) and has a short term deposit rating of no lower than A2 or P2, as such
rating is set forth from time to time, by Standard & Poors Corporation or
Xxxxx'x Investors Service, Inc., respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made by (i) the Borrower in
or to any Guarantor or (ii) any Subsidiary of the Parent Company in or to any
Guarantor or the Borrower;
(h) investments by the Borrower in direct ownership interests
in additional Oil and Gas Properties and gas gathering systems related thereto
in an amount not to exceed 10% of the amount of the Borrowing Base at the time
of such investment;
(i) advances to operators under operating agreements entered
into by the Borrower or any of its Subsidiaries in the ordinary course of
business;
(j) expenditures for fixed or capital assets; provided that
during the Term Loan Period, the aggregate amount of all capital expenditures
shall not to exceed $500,000 during any twelve month period;
(k) investments, loans or advances made by (i) the Borrower or
any Guarantor to any Non-Recourse Subsidiary not to exceed at any one time
outstanding $100,000 in the aggregate, or (ii) a Non-Recourse Subsidiary to any
other Non-Recourse Subsidiary; and
(l) loans or advances to officers and employees of the
Borrower or any Subsidiary in the ordinary course of business not to exceed
$100,000 in the aggregate outstanding at any time.
Section 9.04 DEM Subordinated Debt. The Borrower will not, in
any material respect, amend, supplement or modify or prepay the DEM Subordinated
Debt without the prior written consent of the Majority Lenders.
Section 9.05 Sales and Leasebacks. Neither the Parent Company,
the Borrower nor any of its Subsidiaries will enter into any arrangement,
directly or indirectly, with any Person whereby the Parent Company, the Borrower
or any of its Subsidiaries shall sell or transfer any of its Property, whether
now owned or hereafter acquired, and whereby the Parent Company, the Borrower or
any of its Subsidiaries shall then or thereafter rent or lease as lessee such
Property or any part thereof or other
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Property which the Parent Company, the Borrower or any of its Subsidiaries
intends to use for substantially the same purpose or purposes as the Property
sold or transferred.
Section 9.06 Nature of Business. Neither the Parent Company,
the Borrower nor any of its Subsidiaries will allow any material change to be
made in the character of its business as an independent oil and gas exploration
and production company.
Section 9.07 Limitation on Leases. Neither the Parent Company,
the Borrower nor any of its Subsidiaries will create, incur, assume or suffer to
exist any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal, including capital leases but excluding leases of
Hydrocarbon Interests and leases directly related to oil and gas field
operations), under leases or lease agreements which would cause the aggregate
amount of all payments made by such Persons pursuant to such leases or lease
agreements to exceed $500,000 in any period of twelve consecutive calendar
months in the aggregate. Neither the Parent Company, the Borrower nor any of its
Subsidiaries will create, incur, assume or suffer to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or
personal, including capital leases but excluding royalty payments under leases
of Hydrocarbon Interests), for oil and gas field operations under leases or
lease agreements (other than leases for any drilling, workover or other rig
related activities) which would cause the aggregate amount of all payments made
by such Persons pursuant to such leases or lease agreements to exceed $8,000,000
in any period of twelve consecutive calendar months.
Section 9.08 Mergers, Etc. Neither the Borrower nor any of its
Subsidiaries will merge into or with or consolidate with any other Person, or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any other
Person; provided that (i) any Guarantor may merge with any other Guarantor or
may merge with the Borrower so long as the Borrower is the surviving entity,
(ii) the Borrower or any Guarantor may merge with the Parent Company, and (iii)
any Non-Recourse Subsidiary may merge with any Person; provided that if such
Non-Recourse Subsidiary merges with the Parent Company, the Borrower or any
Guarantor, no Default or Event of Default would occur or be continuing after
giving effect to such merger and the Parent Company, the Borrower or such
Guarantor, as the case may be, shall be the surviving entity.
Section 9.09 Proceeds of Notes. The Borrower will not permit
the proceeds of the Notes to be used for any purpose other than those permitted
by Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Parent Company and the
Borrower will not at any time:
(a) Engage in, or permit any of its Subsidiaries or ERISA
Affiliates to engage in, any transaction in connection with which the Parent
Company, the Borrower or any of its Subsidiaries or ERISA Affiliates could be
subjected to either a civil penalty assessed pursuant to section 502(c), (i) or
(l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any of its Subsidiaries or ERISA
Affiliates to terminate, any Plan in a manner, or take any other action with
respect to any Plan, which could reasonably be
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expected result in any liability to the Parent Company, the Borrower or any of
its Subsidiaries or ERISA Affiliates to the PBGC in excess of $100,000;
(c) Fail to make, or permit any of its Subsidiaries or ERISA
Affiliates to fail to make, full payment when due of all amounts which, under
the provisions of any Plan, agreement relating thereto or applicable law, the
Parent Company, the Borrower or any of its Subsidiaries or ERISA Affiliates is
required to pay as contributions thereto;
(d) Permit to exist, or allow any of its Subsidiaries or ERISA
Affiliates to permit to exist, any accumulated funding deficiency within the
meaning of Section 302 of ERISA or section 412 of the Code in excess of
$100,000, whether or not waived, with respect to any Plan;
(e) Permit, or allow any of its Subsidiaries or ERISA
Affiliates to permit, the actuarial present value of the benefit liabilities
under any Plan maintained by the Parent Company, the Borrower or any of its
Subsidiaries or ERISA Affiliates which is regulated under Title IV of ERISA to
exceed the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities in an amount which exceeds $100,000. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in section
4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any of its Subsidiaries or ERISA Affiliates to contribute to or assume an
obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any of its Subsidiaries or ERISA
Affiliates to acquire, an interest in any Person that causes such Person to
become an ERISA Affiliate with respect to the Parent Company, the Borrower, any
of its Subsidiaries or ERISA Affiliates if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such acquisition
has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or
(2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities in an
amount which exceeds $100,000;
(h) Incur, or permit any of its Subsidiaries or ERISA
Affiliates to incur, a liability to or on account of a Plan under sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA in an amount which exceeds $100,000;
(i) Contribute to or assume an obligation to contribute to, or
permit any of its Subsidiaries or ERISA Affiliates to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not be
terminated by such entities in their sole discretion at any time without any
material liability; or
(j) Amend or permit any of its Subsidiaries or ERISA
Affiliates to amend, a Plan resulting in an increase in current liability such
that the Parent Company, the Borrower, any of its Subsidiaries or ERISA
Affiliates is required to provide security to such Plan under section 401(a)(29)
of the Code.
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Section 9.11 Sale or Discount of Receivables. Neither the
Parent Company, the Borrower nor any of its Subsidiaries will discount or sell
(with or without recourse) any of its notes receivable or accounts receivable.
Section 9.12 Current Ratio. The Parent Company's ratio of (i)
consolidated current assets plus unused availability under the Aggregate
Commitments to (ii) consolidated current liabilities (excluding current
maturities of the Notes) shall not be less than 1.0 to 1.0 at any time.
Section 9.13 Accounts Payable. The Parent Company, the
Borrower and its Subsidiaries will pay their respective trade account payables
when due in accordance with their terms and usual and customary industry
practices (which shall not, in any event exceed 90 days from the date of
invoice), except for such payable which are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate reserves under
GAAP are being maintained. The Parent Company, the Borrower and its Subsidiaries
will not permit the weighted average maturity of their trade accounts payables
(excluding payables being contested pursuant to the foregoing sentence) to
exceed 75 days (measured quarterly as of the last day of each fiscal quarter).
Section 9.14 Interest Coverage Ratio. The Parent Company's
Interest Coverage Ratio as of the end of any fiscal quarter shall be at not less
than the following for the period then applicable:
(i) for the three month period ending on September 30, 1997, 2.25
to 1.0;
(ii) for the six month period ending on December 31, 1997, 2.5 to
1.0;
(iii) for the three month period ending on March 31, 1998, 4.0 to
1.0;
(iv) for the six month period ending on June 30, 1998, 4.0 to 1.0;
(v) for the nine month period ending on September 30, 1998, 4.0 to
1.0;
(vi) for the twelve month period ending on December 31, 1998, 4.0
to 1.0; and
(vii) for each rolling four fiscal quarters thereafter, 4.0 to 1.0.
For the purposes of this Section 9.14, "Interest Coverage Ratio" shall mean the
ratio of EBITDA to Interest Expense.
Section 9.15 Sale of Oil and Gas Properties. The Parent
Company, the Borrower will not, and will not permit any Subsidiary to, sell,
assign, farm-out, convey or otherwise transfer any Oil and Gas Property or any
interest in any Oil and Gas Property except for (i) sales of Hydrocarbons in the
ordinary course of business, (ii) sales of assets which are worn-out or obsolete
and are not material to the continuation of its business, (iii) sales or other
dispositions from the Parent Company, the Borrower or any of its Subsidiaries to
the Parent Company or any other Subsidiary of the Borrower or the Parent Company
(other than Non-Recourse Subsidiaries), (iv) dispositions of equipment when
substantially similar equipment has been or will be acquired, and (v) sales of
Oil and Gas Properties or other assets which shall not exceed $500,000 in the
aggregate in any fiscal year.
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Section 9.16 Environmental Matters. Neither the Parent
Company, the Borrower nor any of its Subsidiaries will cause or permit any of
its Property to be in violation of, or do anything or permit anything to be done
which will subject any such Property to any remedial obligations under any
Environmental Laws, assuming disclosure to the applicable Governmental Authority
of all relevant facts, conditions and circumstances, if any, pertaining to such
Property where such violations or remedial obligations would have a Material
Adverse Effect.
Section 9.17 Transactions with Affiliates. Neither the Parent
Company, the Borrower nor any Subsidiary will enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of Property
or the rendering of any service, with any Affiliate (other than the Parent
Company, the Borrower or any Guarantor) unless such transactions are in the
ordinary course of its business and are upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's length transaction
with a Person not an Affiliate.
Section 9.18 Subsidiaries and Partnerships. Without the prior
written consent of the Agent, the Borrower shall not, and shall not permit any
of its Subsidiaries to, create any additional Subsidiaries or partnerships,
unless such Subsidiary or partnership becomes a Guarantor hereunder or is
designated by the Borrower to be Non-Recourse Subsidiary. The Borrower shall not
and shall not permit any of its Subsidiaries to sell any stock of one of its
Subsidiaries or any interest in a partnership except to the Parent Company or
any of its Subsidiaries (other than Non-Recourse Subsidiaries). The Borrower
shall not permit any of its Subsidiaries to issue any stock except to the Parent
Company or any of its Subsidiaries (other than Non-Recourse Subsidiaries) and
except in compliance with Section 9.03.
Section 9.19 Negative Pledge Agreements. Neither the Parent
Company, the Borrower nor any of its Subsidiaries will create, incur, assume or
suffer to exist any contract, agreement or understanding (other than this
Agreement, the Security Instruments and the documents and agreements evidencing
the DEM Subordinated Debt) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property or
restricts any of its Subsidiaries from paying dividends to the Borrower, or
which requires the consent of or notice to other Persons in connection
therewith.
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments.
The Parent Company and the Borrower will not, and will not permit any Guarantor
to, enter into any contracts or agreements which warrant production of
Hydrocarbons (other than Hedging Agreements otherwise permitted hereunder) and
will not hereafter allow gas imbalances, take-or-pay or other prepayments with
respect to their Oil and Gas Properties which would require such Person to
deliver Hydrocarbons produced on Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor to exceed 4,000 mcf
of gas in the aggregate on a net basis.
Section 9.21 Material Contracts. The Parent Company and the
Borrower shall not, and shall not permit any Subsidiary to, amend or modify in
any material respect or terminate any of the Material Agreements.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following
events shall constitute an "Event of Default":
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(a) the Borrower shall default in the payment or prepayment
when due of any principal of or interest on any Loan, or any reimbursement
obligation for a disbursement made under any Letter of Credit, or any fees or
other amount payable by it hereunder or under any Security Instrument and such
default, other than a default of a payment or prepayment of principal, shall
continue unremedied for a period of three (3) Business Days; or
(b) the Parent Company, the Borrower or any Guarantor shall
default in the payment when due of any principal of or interest on any of its
Debt (including the DEM Subordinated Debt) aggregating $100,000 or more, or any
event specified in any note, agreement, indenture or other document evidencing
or relating to any such Debt shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to permit
the holder or holders of such Debt (or a trustee or agent on behalf of such
holder or holders) to cause, such Debt to become due prior to its stated
maturity;
(c) any representation, warranty or certification made or
deemed made herein or in any Security Instrument by the Parent Company, the
Borrower or any Guarantor, or any certificate furnished to any Lender or the
Agent pursuant to the provisions hereof or any Security Instrument, shall prove
to have been false or misleading as of the time made or furnished in any
material respect; or
(d) the Borrower shall default in the performance of any of
its obligations or any requirement shall not be complied with under Article IX;
or the Parent Company, the Borrower or any Guarantor shall default in the
performance of any of its obligations under Article VIII, under any other
Article of this Agreement other than under Article VIII or any Security
Instrument (other than the payment of amounts due which shall be governed by
Section 10.01(a)) and such default shall continue unremedied for a period of
thirty (30) days after the earlier to occur of (i) notice thereof to the
Borrower by the Agent or any Lender (through the Agent), or (ii) the Borrower
otherwise becoming aware of such default; or
(e) the Parent Company or the Borrower shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) the Parent Company or the Borrower shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Parent Company or the Borrower, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the like of
either the Parent Company or the Borrower of all or any substantial part of its
assets, or (iii) similar relief in respect of such Person under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree
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approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days; or (iv) an order for relief
against either the Parent Company or the Borrower shall be entered in an
involuntary case under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess
of $100,000 in the aggregate shall be rendered by a court against the Parent
Company, the Borrower or any Guarantor and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within thirty (30) days from the date of entry thereof
and the Borrower or such Subsidiary shall not, within said period of 30 days, or
such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) the Security Instruments after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby,
except to the extent permitted by the terms of this Agreement, or the Parent
Company, the Borrower, any Guarantor or any Person on their behalf shall so
state in writing; or
(j) any Guarantor takes, suffers or permits to exist any of
the events or conditions referred to in paragraphs (e), (f), (g) or (h) hereof;
or
(k) The Borrower discontinues its usual business; or any
Person or two or more Persons (other than Joint Energy Development Investments
Limited Partnership, Enron Corp. or its Affiliates) or the controlling persons
thereof, in each case on the date of this Agreement) acting as a group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934) of
30% or more of the outstanding shares of voting stock of the Parent Company; or
individuals who, as of the date hereof, constitute the Board of Directors of the
Parent Company (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the Parent Company; provided,
however, that any individual becoming a director of the Parent Company
subsequent to the Closing Date whose election, or nomination for election by the
Parent Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board, shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors of the Parent
Company; or, except as permitted in Section 9.08, the Parent Company shall cease
to directly or indirectly own 100% of each class of stock of the Borrower
(except directors' qualifying shares).
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Section 10.02 Remedies. If any Event of Default shall have
occurred and be continuing, then:
(a) in the case of an Event of Default other than one referred
to in clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the extent it
relates to clauses (e), (f) or (g), the Agent may and, upon request of the
Majority Lenders, shall, by notice to the Borrower, cancel the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower hereunder
and under the Notes (including without limitation the payment of cash collateral
to secure the LC Exposure as provided in Section 2.10(b) hereof) to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
(b) in the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (j) to the
extent it relates to clauses (e), (f) or (g), the Commitments shall be
automatically canceled and the principal amount then outstanding of, and the
accrued interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the Notes (including without limitation the payment of cash
collateral to secure the LC Exposure as provided in Section 2.10(b) hereof)
shall become automatically immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.
(c) All proceeds received after maturity of the Notes, whether
by acceleration or otherwise shall be applied first to reimbursement of expenses
and indemnities provided for in this Agreement and the Security Instruments;
second to accrued interest on the Notes; third to fees; fourth pro rata to
principal outstanding on the Notes and other Indebtedness; fifth to serve as
cash collateral to be held by the Agent to secure the LC Exposure; and any
excess shall be paid to the Borrower or as otherwise required by any
Governmental Requirement.
ARTICLE XI
THE AGENT
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Section 11.01 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the Security Instruments with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the
Security Instruments, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
Section 11.05 and the first sentence of Section 11.06 shall include reference to
its Affiliates and its and its Affiliates' officers, directors, employees,
attorneys, accountants, experts and agents): (i) shall have no duties or
responsibilities except those expressly set forth in this Agreement, and shall
not by reason of this Agreement be a trustee or fiduciary for any Lender; (ii)
makes no representation or warranty to any Lender and shall not be responsible
to the Lenders for any recitals, statements, representations or warranties
contained in this Agreement, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, or for the
value, validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Borrower or any
other Person (other than the Agent) to perform any of its obligations hereunder
or thereunder or for the existence, value, perfection or priority of any
collateral security or the financial or other condition of the Borrower, its
Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section
11.07 shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (iv) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith including its own
ordinary negligence, except for its own gross negligence or willful misconduct.
The Agent may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted
to be taken in good faith by it in accordance with the advice of such agents,
accountants, attorneys or experts. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall have been
filed with the Agent.
Section 11.02 Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Agent has received notice from a Lender or the
Borrower specifying such Default and stating that such notice is a "Notice of
Default." In the event that the Agent receives such a notice of the occurrence
of a Default, the Agent shall give prompt notice thereof to the Lenders. In the
event of a payment Default, the Agent shall give each Lender prompt notice of
each such payment Default.
Section 11.04 Rights as a Lender. With respect to its
Commitments and the Loans made by it and its participation in the issuance of
Letters of Credit, Bank of Montreal (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. Bank of
Montreal (and any successor acting as Agent) and its Affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to
and generally engage in any kind
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of banking, trust or other business with the Borrower (any and of its
Affiliates) as if it were not acting as the Agent, and Bank of Montreal and its
Affiliates may accept fees and other consideration from the Borrower for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY
THE AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED
HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each
Lender acknowledges and agrees that it has, independently and without reliance
on the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and 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 analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of this Agreement, the Notes, the Security
Instruments or any other document referred to or provided for herein or to
inspect the properties or books of the Borrower. Except for notices, reports and
other documents and information 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 affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates.
Section 11.07 Action by Agent. Except for action or other
matters expressly required of the Agent hereunder, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Majority Lenders specifying the action to
be taken, and (ii) be indemnified to its satisfaction by the Lenders against any
and all liability and expenses which may be incurred by it by reason of taking
or continuing to take any such action. The instructions of the Majority Lenders
and any action taken or failure to act pursuant thereto by the Agent shall be
binding on all of the Lenders. If a Default has occurred and is continuing, the
Agent shall take such action with respect to such Default as shall be directed
by the Majority Lenders in the written instructions (with indemnities) described
in this Section 11.07, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default as
it shall deem advisable in the best
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interests of the Lenders. In no event, however, shall the Agent be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement and the Security Instruments or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders and approved by the Borrower and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation or the Majority Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent (which successor Agent must be approved by the Borrower, such
approval not to be unreasonably withheld or delayed). Upon the acceptance of
such appointment hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article XI and
Section 12.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications
provided for herein and in the Security Instruments (including, without
limitation, any modifications of, or waivers or consents under, this Agreement
or the Security Instruments) shall be given or made by telecopy, courier or U.S.
Mail or in writing and telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Security Instruments or, as to any party, at such other address
as shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the Security Instruments, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, delivered to the telegraph or cable office or personally delivered
or, in the case of a mailed notice, three (3) Business Days after the date
deposited in the mails, postage prepaid, in each case given or addressed as
aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The
Borrower agrees:
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(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent (both before and after
the execution hereof and including reasonable attorneys' fees in connection with
the negotiation, syndication, investigation, preparation, execution and delivery
of, recording or filing of, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or consent
relating thereto (including, without limitation, travel, photocopy, mailing,
courier, telephone and other similar expenses of the Agent, allocated internal
collateral examination and monitoring charges, cost of environmental audits, the
reasonable fees and disbursements of counsel for the Agent and in the case of
enforcement for any of the Lenders); and promptly reimburse the Agent for all
amounts expended, advanced or incurred by the Agent or the Lenders to satisfy
any obligation of the Borrower under this Agreement or any Security Instrument;
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND
AGENTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS
WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR
NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR
IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF
THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO
COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH
OF ANY WARRANTY OF THE BORROWER SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY
UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER
OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND CERTIFICATION(S), (VIII) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING
ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY
INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON
OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY
ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH
ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY OF THEIR PROPERTIES, INCLUDING
WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF
THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE
BORROWER OR ANY OF ITS SUBSIDIARIES, (III) DUE TO PAST OWNERSHIP BY THE BORROWER
OR ANY OF ITS SUBSIDIARIES OF ANY OF THEIR PROPERTIES
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OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY
PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT
ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE
AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF ANY PROPERTY FOR ANY
OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING
THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not reasonably withhold
consent to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding and
asserted against the indemnitor at that time, including the maximum potential
claims against the Indemnified Party to be indemnified pursuant to this Section
12.03.
(e) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such claim or
demand being made against the Indemnified Party and the Borrower shall have the
non-exclusive right to join in the defense against any such claim or demand
provided that if the Borrower provides a defense, the Indemnified Party shall
bear its own cost of defense unless there is a conflict between the Borrower and
such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement
or any Security Instrument may be amended, modified or waived with the
Borrower's and the Majority Lenders' prior written consent; provided that (i) no
amendment, modification or waiver which extends the maturity of the Loans,
increases the Aggregate Maximum Credit Amounts, modifies the Borrowing Base,
forgives the principal amount of any Indebtedness outstanding under this
Agreement, releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
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generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or
modifies the definition of "Majority Lenders" shall be effective without consent
of all Lenders; (ii) no amendment, modification or waiver which increases the
Maximum Credit Amount of any Lender shall be effective without the consent of
such Lender; and (iii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Agent shall be effective without the
consent of the Agent.
Section 12.05 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.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the prior consent
of all of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent and
the Borrower (which consent will not be unreasonably withheld), assign to one or
more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit E (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of at least $5,000,000 or such lesser amount to which the
Borrower has consented and (ii) the assignee shall pay to the Agent a processing
and recordation fee of $2,000 for each assignment. Any such assignment will
become effective upon the execution and delivery to the Agent of the Assignment
and the consent of the Agent. Promptly after receipt of an executed Assignment,
the Agent shall send to the Borrower a copy of such executed Assignment. Upon
receipt of such executed Assignment, the Borrower, will, at its own expense,
execute and deliver new Notes to the assignor and/or assignee, as appropriate,
in accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 12.06(b), the assignee
will become a "Lender," if not already a "Lender," for all purposes of this
Agreement and the Security Instruments. The assignor shall be relieved of its
obligations hereunder to the extent of such assignment (and if the assigning
Lender no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a "Lender" hereunder except that its rights
under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The Agent will
prepare on the last Business Day of each month during which an assignment has
become effective pursuant to this Section 12.06(b), a new Annex I giving effect
to all such assignments effected during such month, and will promptly provide
the same to the Borrower and each of the Lenders.
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(c) Each Lender may transfer, grant or assign participations
in all or any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Lender shall remain a "Lender"
for all purposes of this Agreement and the transferee of such participation
shall not constitute a "Lender" hereunder; and (ii) no participant under any
such participation shall have rights to approve any amendment to or waiver of
any of the Loan Documents except to the extent such amendment or waiver would
(x) extend the Revolving Credit Termination Date, (y) reduce the interest rate
(other than as a result of waiving the applicability of any post-default
increases in interest rates) or fees applicable to any of the Commitments or
Loans or Letters of Credit in which such participant is participating, or
postpone the payment of any thereof, or (z) release all or substantially all of
the collateral (except as expressly provided in the Security Instruments)
supporting any of the Commitments or Loans or Letters of Credit in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the
Security Instruments (the participant's rights against the granting Lender in
respect of such participation to be those set forth in the agreement with such
Lender creating such participation), and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
provided that such participant shall be entitled to receive additional amounts
under Article V on the same basis as if it were a Lender and be indemnified
under Section 12.03 as if it were a Lender. In addition, each agreement creating
any participation must include an agreement by the participant to be bound by
the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the
Borrower in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided that,
such Persons agree to be bound by the provisions of Section 12.15 hereof.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal Reserve Bank
or the United States Treasury as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve System and/or such Federal Reserve Bank. No such
assignment and/or pledge shall release the assigning and/or pledging Lender from
its obligations hereunder.
(f) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any Lender
or any grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of
the provisions contained in any of the Loan Documents or the Letters of Credit,
the Letter of Credit Agreements shall, for any reason, be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any
Security Instrument.
Section 12.08 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
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Section 12.09 References. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular article, section or
subsection. Any reference herein to a Section shall be deemed to refer to the
applicable Section of this Agreement unless otherwise stated herein. Any
reference herein to an exhibit or schedule shall be deemed to refer to the
applicable exhibit or schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under
Section 4.06, Article V, and Sections 11.05 and 12.03 shall survive the
repayment of the Loans and the termination of the Commitments. To the extent
that any payments on the Indebtedness or proceeds of any collateral are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver or other
Person under any bankruptcy law, common law or equitable cause, then to such
extent, the Indebtedness so satisfied shall be revived and continue as if such
payment or proceeds had not been received and the Agent's and the Lenders'
Liens, security interests, rights, powers and remedies under this Agreement and
each Security Instrument shall continue in full force and effect. In such event,
each Security Instrument shall be automatically reinstated and the Borrower
shall take such action as may be reasonably requested by the Agent and the
Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES (INCLUDING, BUT NOT LIMITED
TO, THE VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. TEX. REV. CIV.
STAT. XXX. ART. 0000, XX. 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR
THE NOTES.
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(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF
AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE THE PARTIES FROM OBTAINING JURISDICTION OVER OTHER PARTIES
IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY
(30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY
LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER
IN ANY OTHER JURISDICTION.
(e) EACH OF THE BORROWER AND EACH LENDER HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;
(III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL
FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE SECURITY INSTRUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such
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Lender to the Borrower); and (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Agent or the Lenders written confidential information belonging
to the Borrower, if the Borrower shall denominate such information in writing as
"confidential", 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 obligation of confidence
to the Borrower, (iii) are previously known by the Agent or the Lenders from
some source other than the Borrower, (iv) are hereafter developed by the Agent
or the Lenders without using the Borrower's information, (v) are hereafter
obtained by or available to the Agent or the Lenders from a third party who owes
no obligation of confidence to the Borrower with respect to such information or
through any other means other than through disclosure by the Borrower, (vi) are
disclosed with the Borrower's consent, (vii) must be disclosed either pursuant
to any Governmental Requirement or to Persons regulating the activities of the
Agent or 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 or a Lender may disclose any such information to
any other Lender, any independent petroleum engineers or consultants, any
independent certified public accountants or any legal counsel employed by such
Person in connection with this Agreement or any Security Instrument, 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 Loans; provided, however, that the Agent or Lender imposes
on the Person to whom such information is disclosed the same obligation to
maintain the confidentiality of such information as is imposed upon it
hereunder. Notwithstanding anything to the contrary provided herein, this
obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period. The
Borrower
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waives any and all other rights it may have to confidentiality as against the
Agent and the Lenders arising by contract, agreement, statute or law except as
expressly stated in this Section 12.15.
Section 12.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES
HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE
OTHER SECURITY INSTRUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER SECURITY INSTRUMENTS;
THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL
NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT;
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE
OTHER SECURITY INSTRUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN
ENTERING INTO THIS AGREEMENT AND THE OTHER SECURITY INSTRUMENTS; AND THAT IT
RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER SECURITY
INSTRUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS
OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR
KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
Section 12.17 Designated Senior Indebtedness. The Borrower
hereby designates all Indebtedness outstanding under this Agreement, the Note
and the other Loan Documents to be "Designated Senior Indebtedness" (as defined
in the Offering Memorandum dated July 15, 1995 relating to the DEM Subordinated
Debt) for purposes of the DEM Subordinated Debt.
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The parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
BORROWER: QUEEN SAND RESOURCES, INC., a Nevada corporation
By:________________________________
Xxxxxx X. Xxxxxxx
Vice President
By:________________________________
Xxxxxx Xxxx
Vice President and Treasurer
Address for Notices:
Queen Sand Resources, Inc.
0000 Xxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copy to:
Queen Sand Resources, Inc.
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxx XXX 5Y7
Attention: Xx. Xxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Boeing
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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The Parent Company joins in the execution of this Agreement for the
purpose of (i) acknowledging the representations, warranties, covenants and
agreements set forth herein which relate to it, (ii) confirming the accuracy of
the representations and warranties set forth herein which relate to it, and
(iii) agreeing to be bound by the covenants and agreements set forth herein
which relate to it.
PARENT COMPANY: QUEEN SAND RESOURCES, INC., a Delaware corporation
By:________________________________
Xxxxxx X. Xxxxxxx
Chief Operating Officer
By:________________________________
Xxxxxx Xxxx
Chief Financial Officer
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AGENT: BANK OF MONTREAL, as Agent
By:_____________________________
Xxxxxx X. Xxxxxxx
Director, U.S. Corporate Banking
Address for Notices:
000 Xxxxx XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No: (000) 000-0000
with copy to:
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Client Services Group
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LENDER: BANK OF MONTREAL
By:_____________________________
Xxxxxx X. Xxxxxxx
Director, U.S. Corporate Banking
Applicable Lending Office for Base Rate and
Eurodollar Loans
000 Xxxxx XxXxxxx Xx.
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No: (000) 000-0000
Address for Notices:
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Client Services Group
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