EXHIBIT 10.3
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CREDIT AGREEMENT
BETWEEN
TENNECO VENTURES FINANCE CORPORATION
AND
COMPASS BANK-HOUSTON
June 7, 1996
REVOLVING LINE OF CREDIT OF UP TO $20,000,000
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above......................................... 1
1.2 Additional Defined Terms.................................... 1
1.3 Undefined Financial Accounting Terms........................ 15
1.4 References.................................................. 15
1.5 Articles and Sections....................................... 16
1.6 Number and Gender........................................... 16
1.7 Incorporation of Exhibits................................... 16
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit.................................... 16
2.2 Use of Loan Proceeds. ...................................... 17
2.3 Interest.................................................... 17
2.4 Repayment of Loans and Interest............................. 17
2.5 Outstanding Amounts......................................... 18
2.6 Time, Place, and Method of Payments......................... 18
2.7 Borrowing Base Determinations............................... 18
2.8 Mandatory Prepayments....................................... 19
2.9 Voluntary Prepayments and Conversions of Loans.............. 19
2.10 Commitment Fee.............................................. 20
2.11 Engineering Fee............................................. 20
2.12 Facility Fee................................................ 20
2.13 Loans to Satisfy Obligations of Borrower.................... 20
2.14 Security Interest in Accounts; Right of Offset.............. 20
2.15 General Provisions Relating to Interest..................... 21
2.16 Yield Protection............................................ 22
2.17 Limitation on Types of Loans................................ 24
2.18 Illegality.................................................. 24
2.19 Regulatory Change........................................... 25
2.20 Limitations on Interest Periods............................. 25
2.21 Letters in Lieu of Transfer Orders.......................... 25
2.22 Power of Attorney........................................... 26
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items................... 26
3.2 Each Loan................................................... 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization........................................... 30
4.2 Corporate Existence......................................... 31
4.3 Valid and Binding Obligations............................... 31
4.4 Security Instruments........................................ 31
4.5 Title to Assets............................................. 31
4.6 Scope and Accuracy of Proforma Balance Sheet................ 31
4.7 No Material Misstatements................................... 31
4.8 Liabilities, Litigation, and Restrictions................... 32
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4.9 Authorizations; Consents.................................... 32
4.10 Compliance with Laws........................................ 32
4.11 ERISA....................................................... 32
4.12 Environmental Laws.......................................... 33
4.13 Compliance with Federal Reserve Regulations................. 33
4.14 Investment Company Act Compliance........................... 34
4.15 Public Utility Holding Company Act Compliance............... 34
4.16 Proper Filing of Tax Returns; Payment of Taxes
Due......................................................... 34
4.17 Refunds..................................................... 34
4.18 Gas Contracts............................................... 34
4.19 Intellectual Property....................................... 34
4.20 Casualties or Taking of Property............................ 35
4.21 Locations of Borrower....................................... 35
4.22 Subsidiaries................................................ 35
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records........................... 35
5.2 Quarterly Financial Statements; Compliance
Certificates................................................ 35
5.3 Annual Financial Statements................................. 36
5.4 Oil and Gas Reserve Reports................................. 36
5.6 Title Opinions; Title Defects............................... 37
5.7 Notices of Certain Events................................... 37
5.8 Letters in Lieu of Transfer Orders; Division
Orders...................................................... 38
5.9 Additional Information...................................... 38
5.10 Compliance with Laws........................................ 39
5.11 Payment of Assessments and Charges.......................... 39
5.12 Maintenance of Corporate Existence and Good
Standing.................................................... 39
5.13 Payment of Notes; Performance of Obligations................ 39
5.14 Further Assurances.......................................... 39
5.15 Initial Fees and Expenses of Counsel to Lender.............. 40
5.16 Subsequent Fees and Expenses of Lender...................... 40
5.17 Operation of Oil and Gas Properties......................... 40
5.18 Inspection of Properties.................................... 41
5.19 INDEMNIFICATION............................................. 41
5.20 Ownership of Borrower....................................... 42
5.21 Lockbox Arrangement......................................... 42
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness................................................ 42
6.2 Contingent Obligations...................................... 42
6.3 Liens....................................................... 43
6.4 Sales of Assets............................................. 43
6.5 Leasebacks.................................................. 43
6.6 Loans or Advances........................................... 43
6.7 Dividends and Distributions................................. 43
6.8 Issuance of Stock; Changes in Corporate
Structure................................................... 43
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6.9 Transactions with Affiliates................................ 43
6.10 Lines of Business........................................... 44
6.11 ERISA Compliance............................................ 44
6.12 Tangible Net Worth.......................................... 44
6.13 Amendment of Production Payment Agreement................... 44
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default............................ 44
7.2 Remedies.................................................... 47
ARTICLE VIII MISCELLANEOUS
8.1 Transfers; Participations................................... 48
8.2 Survival of Representations, Warranties, and Covenants...... 48
8.3 Notices and Other Communications............................ 48
8.4 Parties in Interest......................................... 49
8.5 Rights of Third Parties..................................... 49
8.6 Renewals; Extensions........................................ 49
8.7 No Waiver; Rights Cumulative................................ 50
8.8 Survival Upon Unenforceability.............................. 50
8.9 Amendments; Waivers......................................... 50
8.10 Controlling Agreement....................................... 50
8.11 Disposition of Collateral................................... 50
8.12 GOVERNING LAW............................................... 50
8.13 JURISDICTION AND VENUE...................................... 51
8.14 ENTIRE AGREEMENT............................................ 51
8.15 Counterparts................................................ 51
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Opinion of Counsel
Exhibit V - Disclosures
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 7th day of June,
1996, by and between TENNECO VENTURES FINANCE CORPORATION, a Delaware
corporation (the "BORROWER"), and COMPASS BANK-HOUSTON, a Texas state chartered
banking institution (the "LENDER").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED ABOVE. As used in this Credit Agreement, the terms
"BORROWER" and "LENDER" shall have the meaning assigned to them hereinabove.
1.2 ADDITIONAL DEFINED TERMS. As used in this Credit Agreement, each
of the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"ADDITIONAL COSTS" shall mean costs which the Lender determines are
attributable to its obligation to make or its making or maintaining any
Fixed Rate Loan, or any reduction in any amount receivable by the Lender
in respect of any such obligation or any Fixed Rate Loan, resulting from
any Regulatory Change which (a) changes the basis of taxation of any
amounts payable to the Lender under this Agreement or the Note in respect
of any Fixed Rate Loan (other than taxes imposed on the overall net income
of the Lender), (b) imposes or modifies any reserve, special deposit,
minimum capital, capital rates, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, the Lender (including Fixed Rate Loans and Dollar deposits
in the London interbank market in connection with LIBO Rate Loans), or any
commitments of the Lender hereunder, (c) increases the Assessment Rate, or
(d) imposes any other condition affecting this Agreement or any of such
extensions of credit, liabilities, or commitments.
"ADJUSTED LIBO RATE" shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lender to be equal to the sum of the LIBO Rate for such
Loan plus the Applicable Margin, but in no event exceeding the Highest
Lawful Rate.
"AFFILIATE" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes any
Subsidiary of the Borrower and any "affiliate" of the Borrower within the
meaning of Reg. ss.240.12b-2 of the Securities Exchange Act of 1934, as
amended, with "control," as used in this definition, meaning possession,
directly or indirectly, of the power to direct or cause the direction of
management, policies or action through ownership of voting securities,
contract, voting trust, or membership in management or in the group
appointing or electing management or otherwise through formal or informal
arrangements or business relationships.
"AGREEMENT" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated
for such type of Loan on the signature pages hereof or such other office
of the Lender (or an affiliate of the Lender) as the Lender may from time
to time specify to the Borrower as the office by which Loans of such type
are to be made and maintained.
"APPLICABLE MARGIN" shall mean as to each LIBO Rate Loan, two and
one-quarter percent (2 1/4%).
"AVAILABLE COMMITMENT" shall mean, at any time, an amount equal to
the remainder, if any, of (a) the Borrowing Base in effect at such time
MINUS (b) the Loan Balance at such time.
"BORROWING BASE" shall mean, at any time, the amount determined by
the Lender in accordance with Section and then in effect.
"BORROWING REQUEST" shall mean each written request, in
substantially the form attached hereto as Exhibit II, by the Borrower to
the Lender for a borrowing, conversion, or prepayment pursuant to Sections
2.1 or 2.9, each of which shall:
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(a) be signed by a Responsible Officer of the Borrower;
(b) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business
Day);
(c) when requesting a Floating Rate Loan, be delivered to the
Lender no later than 10:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the Business Day of the
requested borrowing, conversion, or prepayment;
(d) when requesting a LIBO Rate Loan, be delivered to the
Lender no later than 10:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, two Business Days preceding the
requested borrowing, conversion, or prepayment and designate the
Interest Period requested with respect to such Loan.
"BUSINESS DAY" shall mean (a) for all purposes other than as covered
by clause (b) of this definition, a day other than a Saturday, Sunday,
legal holiday for commercial banks under the laws of the State of Texas,
or any other day when banking is suspended in the State of Texas, and (b)
with respect to all requests, notices, and determinations in connection
with, and payments of principal and interest on, LIBO Rate Loans, a day
which is a Business Day described in clause (a) of this definition and
which is a day for trading by and between banks for Dollar deposits in the
London interbank market.
"CODE" shall mean the United States Internal Revenue Code of 1986,
as amended from time to time.
"CLOSING DATE" shall mean the effective date of this
Agreement.
"COLLATERAL" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the payment
or performance of all or any portion of the Obligations.
"COMMITMENT" shall mean the obligation of the Lender, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section 2.1.
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"COMMITMENT AMOUNT" shall mean the amount equal to the Borrowing
Base.
"COMMITMENT FEE" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.10.
"COMMITMENT PERIOD" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" shall mean June 1, 1998.
"COMMONLY CONTROLLED ENTITY" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"COMPLIANCE CERTIFICATE" shall mean each certificate, substantially
in the form attached hereto as Exhibit , executed by a Responsible Officer
of the Borrower and furnished to the Lender from time to time in
accordance with Section 5.2.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "PRIMARY OBLIGATION") in any manner, whether
directly or indirectly, including, without limitation, any obligation of
such Person, regardless of whether such obligation is contingent, (a) to
purchase any primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain working
or equity capital of any other Person in respect of any primary
obligation, or otherwise to maintain the net worth or solvency of any
other Person, (c) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any primary obligation of the
ability of the Person primarily liable for such primary obligation to make
payment thereof, or (d) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof, with the
amount of any Contingent Obligation being deemed to be equal to the stated
or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
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"DEFAULT" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"DEFAULT RATE" shall mean a per annum interest rate equal to the
Index Rate plus five percent (5%), but in no event exceeding the Highest
Lawful Rate.
"DOLLARS" and "$" shall mean dollars in lawful currency of the
United States of America.
"ENGINEERING FEE" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.11.
"ENVIRONMENTAL COMPLAINT" shall mean any written complaint, order,
directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety
matters affecting any Property of the Borrower or the business conducted
thereon.
"ENVIRONMENTAL LAWS" shall mean (a) the following federal laws as
they may be cited, referenced, and amended from time to time: the Clean
Air Act, the Clean Water Act, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Resource Conservation and Recovery Act, the
Occupational Safety and Health Act, the Hazardous Materials Transportation
Act, the Superfund Amendments and Reauthorization Act, and the Toxic
Substances Control Act; (b) any and all equivalent environmental statutes
of any state in which Property of the Borrower is situated, as they may be
cited, referenced and amended from time to time; (c) any rules or
regulations promulgated under or adopted pursuant to the above federal and
state laws; and (d) any other equivalent federal, state, or local statute
or any requirement, rule, regulation, code, ordinance, or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"EVENT OF DEFAULT" shall mean any of the events specified in Section
7.1.
"FACILITY FEE" shall mean the fee payable to the Lender by the
Borrower pursuant to Section 2.12.
"FINAL MATURITY" shall mean June 1, 1998.
"FINANCIAL STATEMENTS" shall mean statements of the financial
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related
statements of operations, common stock and other stockholders' equity, and
cash flows for the Borrower (except that, in the case of the statements to
be delivered by the Borrower to the Lender pursuant to Section 5.2,
"FINANCIAL STATEMENTS" shall mean only the balance sheet and income
statement for the Borrower) and, when required by applicable provisions of
this Agreement to be audited, accompanied by the unqualified certification
of a nationally-recognized firm of independent certified public
accountants or other independent certified public accountants acceptable
to the Lender and footnotes to any of the foregoing, all of which shall be
prepared in accordance with GAAP consistently applied and in comparative
form with respect to the corresponding period of the preceding fiscal
period.
"FIXED RATE LOAN" shall mean a LIBO Rate Loan.
"FLOATING RATE" shall mean an interest rate per annum equal to the
Index Rate from time to time in effect, but in no event exceeding the
Highest Lawful Rate.
"FLOATING RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bear interest at the Floating Rate, or which pursuant to the
terms hereof is otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified
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Public Accountants and in effect in the United States from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality,
or other political subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or
related materials, petroleum, petroleum products, associated oil or
natural gas exploration, production, and development wastes, or any
substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," or "toxic substances" under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
"HIGHEST LAWFUL RATE" shall mean the maximum nonusurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"INDEBTEDNESS" shall mean, as to any Person, without duplication,
(a) all liabilities (excluding reserves for deferred income taxes,
deferred compensation liabilities, and other deferred liabilities and
credits) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet, (b)
all obligations of such Person evidenced by bonds, debentures, promissory
notes, or similar evidences of indebtedness, (c) all other indebtedness of
such Person for borrowed money, and (d) all obligations of others, to the
extent any such obligation is secured by a Lien on the assets of such
7
Person (whether or not such Person has assumed or become liable for the
obligation secured by such Lien).
"INDEX RATE" shall mean the prime rate established in THE WALL
STREET JOURNAL'S "MONEY RATES" or similar table. If multiple prime rates
are quoted in the table, then the highest prime rate will be the Index
Rate. In the event that the prime rate is no longer published by THE WALL
STREET JOURNAL in the "MONEY RATES" or similar table, then Lender may
select an alternative published index based upon comparable information as
a substitute Index Rate. Upon the selection of a substitute Index Rate,
the applicable interest rate shall thereafter vary in relation to the
substitute index. Such substitute index shall be the same index that is
generally used as a substitute by Lender on all Index Rate loans.
"INSOLVENCY PROCEEDING" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the
United States, the State of Texas, or any other jurisdiction.
"INSOLVENT" or "INSOLVENCY" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such
term as used in Section 4245 of ERISA.
"INTELLECTUAL PROPERTY" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"INTEREST PERIOD" shall mean, subject to the limitations set forth
in Section 2.20 , with respect to any LIBO Rate Loan, a period commencing
on the date such Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically
corresponding day in the calendar month that is one, two, three, or,
subject to availability, six months thereafter, as the Borrower may
request in the Borrowing Request for such Loan.
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"INVESTMENT" in any Person shall mean any stock, bond, note, or
other evidence of Indebtedness, or any other security (other than current
trade and customer accounts) of, investment or partnership interest in or
loan to, such Person.
"LIBO RATE" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall
not be available, any successor or similar service selected by the Lender
and the Borrower) as of approximately 11:00 a.m., Central Standard or
Daylight Savings Time, as the case may be, on the day two Business Days
prior to the first day of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and
having a term comparable to the Interest Period for such LIBO Rate Loan,
or (b) the Highest Lawful Rate. If neither such Telerate Page 3750 nor any
successor or similar service is available, the term "LIBO Rate" shall
mean, with respect to any Interest Period for any LIBO Rate Loan, the
lesser of (a) the rate per annum (rounded upwards if necessary, to the
nearest 1/16 of 1%) quoted by the Lender at approximately 11:00 a.m.,
London time (or as soon thereafter as practicable) two Business Days prior
to the first day of the Interest Period for such LIBO Rate Loan for the
offering by the Lender to leading banks in the London interbank market of
Dollar deposits in an amount comparable to the principal amount of such
LIBO Rate Loan and having a term comparable to the Interest Period for
such LIBO Rate Loan, or (b) the Highest Lawful Rate.
"LIBO RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bear interest at the Adjusted LIBO Rate and which is
permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
"LIEN" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of such Property,
whether such interest is based on common law, statute, or contract, and
including, but not limited to, the lien or security interest arising from
a mortgage, ship mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment, or bailment
for security purposes
9
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances
affecting Property which secure an obligation owed to, or a claim by, a
Person other than the owner of such Property (for the purpose of this
Agreement, the Borrower shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale agreement,
financing lease, or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes), and the filing or recording of any financing statement or other
security instrument in any public office.
"LIMITATION PERIOD" shall mean any period while any amount remains
owing on the Note and interest on such amount, calculated at the
applicable interest rate, plus any fees or other sums payable under any
Loan Document and deemed to be interest under applicable law, would exceed
the amount of interest which would accrue at the Highest Lawful Rate.
"LOAN" shall mean any loan made by the Lender to or for the benefit
of the Borrower pursuant to this Agreement.
"LOAN BALANCE" shall mean, at any time, the outstanding principal
balance of the Note at such time.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Security
Instruments, the Lockbox Agreement and all other documents and instruments
now or hereafter delivered pursuant to the terms of or in connection with
this Agreement, the Note, or the Security Instruments, the Lockbox
Agreement and all renewals and extensions of, amendments and supplements
to, and restatements of, any or all of the foregoing from time to time in
effect.
"LOCKBOX" shall mean X.X. Xxx 0000, Xxxxxxx, Xxxxx 00000,
established by the Borrower with the Lender, to which each purchaser of
production and disburser of the proceeds of production from or
attributable to the Mortgaged Properties shall be directed to make
remittance.
"LOCKBOX ACCOUNT" shall mean Account No. 2171232158 of the Borrower
established with the Lender, in association with the Lockbox and to which
the Borrower and the Lender shall have access by way of draft, check,
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wire transfer of funds, or otherwise to the extent specified in Section .
"LOCKBOX AGREEMENT" shall mean the lockbox agreement between the
Borrower and the Lender, relating to the Lockbox and being in form and
substance satisfactory to the Lender, as the same may be amended,
restated, or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" shall mean (a) any material adverse effect
on the business, operations, properties, condition (financial or
otherwise), or prospects of the Borrower, (b) any adverse effect upon the
business operations, properties, condition (financial or otherwise), or
prospects of the Borrower which materially increases the risk that any of
the Obligations will not be repaid as and when due, or (c) any material
adverse effect upon the Collateral.
"MORTGAGED PROPERTIES" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected first-priority Lien in favor of the
Lender, subject only to Permitted Liens, as security for the Obligations.
"MULTIEMPLOYER PLAN" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"NET INCOME" shall mean, for any period, the net income of the
Borrower for such period, determined in accordance with GAAP.
"NOTE" shall mean the promissory note of the Borrower, in the form
attached hereto as Exhibit , together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b) the obligation of the Borrower for the payment
of Commitment Fees, Facility Fees, and Engineering Fees, and (c) all other
obligations and liabilities of the Borrower to the Lender, now existing or
hereafter incurred, under, arising out of or in connection with any Loan
Document, and to the extent that any of the foregoing includes or refers
to the payment of amounts deemed or constituting interest, only so much
thereof as shall have accrued, been earned and which remains unpaid at
each relevant time of determination.
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"OIL AND GAS PROPERTIES" shall mean fee, leasehold, or other
interests in or under mineral estates or oil, gas, and other liquid or
gaseous hydrocarbon leases with respect to Properties situated in the
United States or offshore from any State of the United States, including,
without limitation, overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production payment interests, and
mineral fee interests, together with contracts executed in connection
therewith and all tenements, hereditaments, appurtenances and Properties
appertaining, belonging, affixed, or incidental thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of the
Borrower to secure amounts owing, which amounts are not yet due or are
being contested in good faith by appropriate proceedings, if such reserve
as may be required by GAAP shall have been made therefor, (e) Liens under
production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons
12
at some future date without receiving full payment therefor within 90 days
of delivery, (f) easements, rights of way, restrictions, and other similar
encumbrances, and minor defects in the chain of title which are
customarily accepted in the oil and gas financing industry, none of which
interfere with the ordinary conduct of the business of the Borrower or
materially detract from the value or use of the Property to which they
apply, and (g) Liens in favor of the Lender and other Liens expressly
permitted under the Security Instruments.
"PERSON" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"PLAN" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, or any Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PRINCIPAL OFFICE" shall mean the principal office of the Lender in
Houston, Texas, presently located at 00 Xxxxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000.
"PROHIBITED TRANSACTION" shall have the meaning assigned to such
term in Section 4975 of the Code.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented
from time to time.
"REGULATORY CHANGE" shall mean the passage, adoption, institution,
or amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing
Date and applying to a class of banks including the Lender or its
Applicable Lending Office.
13
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal
system servicing any Property of the Borrower, and that would result in a
violation, or the requirement for remedial action, under any Environmental
Law.
"REORGANIZATION" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in
Section 4241 of ERISA.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. ss.2615.
"REQUIREMENT OF LAW" shall mean, as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or
governing documents of such Person, and any applicable law, treaty,
ordinance, order, judgment, rule, decree, regulation, or determination of
an arbitrator, court, or other Governmental Authority, including, without
limitation, rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or authorizations, in each case as
such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"RESERVE REPORT" shall mean each report delivered to the Lender
pursuant to Section 5.4.
"RESPONSIBLE OFFICER" shall mean, as to any Person, its President,
Chief Executive Officer or any Vice President.
"SECURITY INSTRUMENTS" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section
3.1(g), and all other documents and instruments at any time executed as
security for all or any portion of the Obligations, as such instruments
may be amended, restated, or supplemented from time to time.
14
"SINGLE EMPLOYER PLAN" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"SUBSIDIARY" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person.
"SUPERFUND SITE" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"TANGIBLE NET WORTH" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared in accordance with
GAAP, exclusive of Intellectual Property, experimental or organization
expenses, franchises, licenses, permits, and other intangible assets,
treasury stock, unamortized underwriters' debt discount and expenses, and
goodwill minus (b) total liabilities, as would be reflected on a balance
sheet of the Borrower prepared in accordance with GAAP.
"TRANSFEREE" shall mean any Person to which the Lender has sold,
assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section , and any Person acquiring,
by purchase, assignment, transfer, or participation, from any such
purchaser, assignee, transferee, or participant, any part of such
Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 REFERENCES. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder"
15
and words of similar import shall be to this Agreement in its entirety and not
only to the particular Exhibit, Article, or Section in which such reference
appears.
1.5 ARTICLES AND SECTIONS. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 NUMBER AND GENDER. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 INCORPORATION OF EXHIBITS. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 REVOLVING LINE OF CREDIT. (a) Upon the terms and conditions
(including, without limitation, the right of the Lender to decline to make any
Loan so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, the Lender agrees,
during the Commitment Period, to make Loans, in immediately available funds at
the Applicable Lending Office or the Principal Office, to or for the benefit of
the Borrower, from time to time on any Business Day designated by the Borrower
following receipt by the Lender of a Borrowing Request; provided, however, no
Loan shall exceed the then existing Available Commitment.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a different
Interest Period. Except for prepayments made pursuant to Section , each
borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $100,000. Each borrowing, prepayment, or conversion of
or into a Loan of a different type or, in the case of
16
a Fixed Rate Loan, having a different Interest Period, shall be deemed a
separate borrowing, conversion, and prepayment for purposes of the foregoing,
one for each type of Loan or Interest Period. Anything in this Agreement to the
contrary notwithstanding, the aggregate principal amount of LIBO Rate Loans
having the same Interest Period shall be at least equal to $100,000; and if any
LIBO Rate Loan would otherwise be in a lesser principal amount for any period,
such Loan shall be a Floating Rate Loan during such period.
(c) The Loans shall be made and maintained at the Applicable Lending
Office or the Principal Office and shall be evidenced by the Note.
2.2 USE OF LOAN PROCEEDS. Proceeds of all Loans shall
be used solely to fund the purchase of production payments on Oil
and Gas Properties subsequent to the Closing Date.
2.3 INTEREST. Subject to the terms of this Agreement (including,
without limitation, Section ), interest on the Loans shall accrue and be payable
at a rate per annum equal to the Floating Rate for each Floating Rate Loan and
the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all Floating Rate
Loans shall be computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed (including the first day but excluding the last
day) during the period for which payable. Interest on all LIBO Rate Loans shall
be computed on the basis of a year of 360 days, and actual days elapsed
(including the first day but excluding the last day) during the period for which
payable. Notwithstanding the foregoing, interest on past-due principal and, to
the extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed (including the first day but excluding the last
day) during the period for which payable, and shall be payable upon demand by
the Lender at any time as to all or any portion of such interest. In the event
that the Borrower fails to select the duration of any Interest Period for any
Fixed Rate Loan within the time period and otherwise as provided herein, such
Loan (if outstanding as a Fixed Rate Loan) will be automatically converted into
a Floating Rate Loan on the last day of the then current Interest Period for
such Loan or (if outstanding as a Floating Rate Loan) will remain as, or (if not
then outstanding) will be made as, a Floating Rate Loan. Interest provided for
herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date or
dates of such advances until repayment.
2.4 REPAYMENT OF LOANS AND INTEREST. Accrued and unpaid interest on
each outstanding Floating Rate Loan shall be due and payable monthly commencing
on the first day of July, 1996, and
17
continuing on the first day of each calendar month thereafter while any Floating
Rate Loan remains outstanding, the payment in each instance to be the amount of
interest which has accrued and remains unpaid in respect of the relevant Loan.
Accrued and unpaid interest on each outstanding Fixed Rate Loan shall be due and
payable on the last day of the Interest Period for such Fixed Rate Loan and, in
the case of any Interest Period in excess of three months, on the day of the
third calendar month following the commencement of such Interest Period
corresponding to the day of the calendar month on which such Interest Period
commenced, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan. The Loan Balance,
together with all accrued and unpaid interest thereon, shall be due and payable
at Final Maturity. At the time of making each payment hereunder or under the
Note, the Borrower shall specify to the Lender the Loans or other amounts
payable by the Borrower hereunder to which such payment is to be applied. In the
event the Borrower fails to so specify, or if an Event of Default has occurred
and is continuing, the Lender may apply such payment as it may elect in its sole
discretion.
2.5 OUTSTANDING AMOUNTS. The outstanding principal balance of the
Note reflected by the notations by the Lender on its records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced and outstanding pursuant to this
Agreement and interest on such amounts calculated in accordance with this
Agreement.
2.6 TIME, PLACE, AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Note shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Lender on the next Business Day following receipt if such
receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as the
case may be, on any Business Day, and shall be made at the Principal Office.
Except as provided to the contrary herein, if the due date of any payment
hereunder or under the 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.
2.7 BORROWING BASE DETERMINATIONS. (a) The Borrowing Base as of the
Closing Date is acknowledged by the Borrower and the Lender to be $9,000,000.
(b) The Borrowing Base shall be redetermined semi-annually beginning
November 1, 1996, on the basis of information supplied by the Borrower in
compliance with the provisions of this Agreement, including, without limitation,
Reserve Reports, and all
18
other information available to the Lender. Notwithstanding the foregoing, the
Lender may at its discretion redetermine the Borrowing Base at any time and from
time to time.
(c) Upon each determination of the Borrowing Base by the Lender, the
Lender shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base so communicated to the
Borrower shall become effective upon such written notification and shall remain
in effect until the next subsequent determination of the Borrowing Base.
(d) The Borrowing Base shall represent the determination by the
Lender, in accordance with the applicable definitions and provisions herein
contained and its customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the credit approval process of the
Lender. Furthermore, the Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lender. The Borrowing Base shall be determined by using the
Lender's then current engineering and credit standards.
2.8 MANDATORY PREPAYMENTS. If at any time the Loan Balance exceeds
the Borrowing Base then in effect, the Borrower shall, within 45 days of notice
from the Lender of such occurrence, (a) prepay, or make arrangements acceptable
to the Lender for the prepayment of, the amount of such excess for application
on the Loan Balance, (b) provide additional collateral, of character and value
satisfactory to the Lender in its sole discretion, to secure the Obligations by
the execution and delivery to the Lender of security instruments in form and
substance satisfactory to the Lender, or (c) effect any combination of the
alternatives described in clauses (a) and (b) of this Section and acceptable to
the Lender in its sole discretion. In the event any prepayments are made on any
production payment, the Borrower will, within 5 business days of such
prepayment, reduce the amount outstanding hereunder by the principal amount so
prepaid. Such prepayments will not reduce the amount of the Borrowing Base.
2.9 VOLUNTARY PREPAYMENTS AND CONVERSIONS OF LOANS. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Lender
notice of each such prepayment or conversion of all or any portion of a Fixed
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any Fixed Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan,
19
(c) the Borrower shall pay all accrued and unpaid interest on the amounts
prepaid or converted, and (d) no such prepayment or conversion shall serve to
postpone the repayment when due of any Obligation.
2.10 COMMITMENT FEE. In addition to interest on the Note as provided
herein and the Engineering Fees and Facility Fees payable hereunder and to
compensate the Lender for maintaining funds available, the Borrower shall pay to
the Lender, in immediately available funds, on the first day of July, 1996, and
on the first day of each third calendar month thereafter during the Commitment
Period, a fee in the amount of one-half percent (1/2%) per annum, calculated 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), on the average
daily amount of the Available Commitment during the preceding quarterly period.
2.11 ENGINEERING FEE. In addition to interest on the Note as
provided herein and the Commitment Fees and Facility Fees payable hereunder and
to compensate the Lender for the costs of evaluating the Mortgaged Properties
and reviewing the Reserve Reports, the Borrower shall pay to the Lender, in
immediately available funds, on the date of each redetermination of the
Borrowing Base each November and June during the term hereof, an engineering fee
in the amount of $10,000 and on each additional redetermination of the Borrowing
Base the actual cost to Lender of such redetermination.
2.12 FACILITY FEE. In addition to interest on the Note as provided
herein and Commitment Fees and Engineering Fees payable hereunder and to
compensate the Lender for the costs of the extension of credit hereunder, the
Borrower shall pay to the Lender on the Closing Date, in immediately available
funds, a facility fee in the amount of $22,500. One-half of such fee was paid
upon the acceptance of the preliminary term sheet and the remaining one-half
shall be paid on the Closing Date.
2.13 LOANS TO SATISFY OBLIGATIONS OF BORROWER. The Lender may, but
shall not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower contained in this Agreement or any other Loan
Document. Any such Loan shall be evidenced by the Note and shall be made as a
Floating Rate Loan.
2.14 SECURITY INTEREST IN ACCOUNTS; RIGHT OF OFFSET. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grants to the Lender a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be retransferred,
20
reassigned, and/or released by the Lender, as the case may be, at the expense of
the Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable by the Lender upon the occurrence of any Event of Default,
regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof. Furthermore,
the Borrower hereby grants to the Lender the right, exercisable at such time as
any Obligation shall mature, whether by acceleration of maturity or otherwise,
of offset or banker's lien against all funds of the Borrower now or hereafter or
from time to time on deposit with the Lender, regardless of whether the exercise
of any such remedy would result in any penalty or loss of interest or profit
with respect to any withdrawal of funds deposited in a time deposit account
prior to the maturity thereof.
2.15 GENERAL PROVISIONS RELATING TO INTEREST. (a) It is the
intention of the parties hereto to comply strictly with the usury laws of the
State of Texas and the United States of America. In this connection, there shall
never be collected, charged, or received on the sums advanced hereunder interest
in excess of that which would accrue at the Highest Lawful Rate. For purposes of
Article 5069-1.04, Vernon's TEXAS CIVIL STATUTES, as amended, the Borrower
agrees that the Highest Lawful Rate shall be the "indicated (weekly) rate
ceiling" as defined in such Article, provided that the Lender may also rely, to
the extent permitted by applicable laws of the State of Texas or the United
States of America, on alternative maximum rates of interest under other laws of
the State of Texas or the United States of America applicable to the Lender, if
greater.
(b) Notwithstanding anything herein or in the Note to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Note shall be the Highest Lawful Rate, and the obligation, if
any, of the Borrower for the payment of fees or other charges deemed to be
interest under applicable law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Lender (i) the amount of interest in excess of that
accruing at the Highest Lawful Rate that the Lender would have received during
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Lender but for the
effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts which by
law are deemed interest and which would
21
exceed the amount permitted if the Highest Lawful Rate were in effect, the
Borrower stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable laws of the State of
Texas or the United States of America, the result of mathematical error on the
part of the Borrower and the Lender; and the Lender shall promptly refund the
amount of such excess (to the extent only of such interest payments in excess of
that which would have accrued and been payable on the basis of the Highest
Lawful Rate) upon discovery of such error by the Lender or notice thereof from
the Borrower. In the event that the maturity of any Obligation is accelerated,
by reason of an election by the Lender or otherwise, or in the event of any
required or permitted prepayment, then the consideration constituting interest
under applicable laws may never exceed the Highest Lawful Rate; and excess
amounts paid which by law are deemed interest, if any, shall be credited by the
Lender on the principal amount of the Obligations, or if the principal amount of
the Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.16 YIELD PROTECTION. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Lender from time to time such amounts as the Lender may determine are
necessary to compensate it for any Additional Costs incurred by the Lender.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lender such
amounts as shall be sufficient in the reasonable opinion of the Lender to
compensate it for any loss, cost, or expense incurred by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower of
a Fixed Rate Loan on a date other than the last day of an Interest
Period for such Loan; or
(ii) any failure by the Borrower to borrow a Fixed Rate Loan
from the Lender on the date for such borrowing specified in the
relevant Borrowing Request;
22
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed for the period from the date of such payment, prepayment, conversion,
or failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such Loan provided for herein over (B) the
interest component (as reasonably determined by the Lender) of the amount (as
reasonably determined by the Lender) the Lender would have bid in the London
interbank market for Dollar deposits of amounts comparable to such principal
amount and maturities comparable to such period.
(c) Determinations by the Lender for purposes of this Section of its
costs or rate of return, maintaining Loans, its obligation to make Loans, or on
amounts receivable by it in respect of Loans, or such obligations, and the
additional amounts required to compensate the Lender under this Section shall be
conclusive, absent manifest error, provided that such determinations are made on
a reasonable basis. The Lender shall furnish the Borrower with a certificate
setting forth in reasonable detail the basis and amount of increased costs
incurred or reduced amounts receivable as a result of any such event, and the
statements set forth therein shall be conclusive, absent manifest error. The
Lender shall (i) notify the Borrower, as promptly as practicable after the
Lender obtains knowledge of any Additional Costs or other sums payable pursuant
to this Section and determines to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Lender to compensation
pursuant to this Section; provided that the Borrower shall not be obligated for
the payment of any Additional Costs or other sums payable pursuant to this
Section to the extent such Additional Costs or other sums accrued more than 90
days prior to the date upon which the Borrower was given such notice; and (ii)
designate a different Applicable Lending Office for the Loans of the 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 the Lender, be
disadvantageous to the Lender. If the Lender requests compensation from the
Borrower under this Section, the Borrower may, by notice to the Lender, require
that the Loans by the Lender of the type with respect to which such compensation
is requested be converted into Floating Rate Loans in accordance with Section .
Any compensation requested by the Lender pursuant to this Section shall be due
and payable to the Lender within five days of delivery of any such notice by the
Lender to the Borrower.
(d) The Lender agrees that it shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar
23
additional costs and other sums payable are also generally assessed by the
Lender against other customers of the Lender similarly situated where such
customers are subject to documents providing for such assessment.
2.17 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, no more than six separate Loans shall be outstanding at any one
time, with, for purposes of this Section, all Floating Rate Loans constituting
one Loan, and all LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any interest rate for any LIBO Rate Loan for any Interest
Period therefor:
(a) the Lender determines (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for such Loan as provided in this
Agreement; or
(b) the Lender determines (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate" in
Section upon the basis of which the rate of interest for such Loan for
such Interest Period is to be determined do not accurately reflect the
cost to the Lender of making or maintaining such Loan for such Interest
Period,
then the Lender shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lender shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans,
and the Borrower shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert
such Loan into another type of Loan in accordance with Section . Before giving
such notice pursuant to this Section, the Lender will designate a different
available Applicable Lending Office for LIBO Rate Loans or take such other
action as the Borrower may request if such designation or action will avoid the
need to suspend the obligation of the Lender to make LIBO Rate Loans hereunder
and will not, in the opinion of the Lender, be disadvantageous to the Lender.
2.18 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender or its
Applicable Lending Office to (a) honor its obligation to make any type of Fixed
Rate Loans hereunder, or (b) maintain any type of Fixed Rate Loans hereunder,
then the Lender shall promptly notify the Borrower thereof; and the obligation
of the Lender
24
hereunder to make such type of Fixed Rate Loans and to convert other types of
Loans into Fixed Rate Loans of such type shall be suspended until such time as
the Lender may again make and maintain Fixed Rate Loans of such type, and the
outstanding Fixed Rate Loans of such type shall be converted into Floating Rate
Loans in accordance with Section 2.9. Before giving such notice pursuant to this
Section, the Lender will designate a different available Applicable Lending
Office for Fixed Rate Loans or take such other action as the Borrower may
request if such designation or action will avoid the need to suspend the
obligation of the Lender to make Fixed Rate Loans and will not, in the opinion
of the Lender, be disadvantageous to the Lender.
2.19 REGULATORY CHANGE. In the event that by reason of any
Regulatory Change, the Lender (a) 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 the Lender which includes deposits by reference to which
the interest rate on any Fixed Rate Loan is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lender
which includes any Fixed Rate Loan, or (b) becomes subject to restrictions on
the amount of such a category of liabilities or assets which it may hold, then,
at the election of the Lender with notice to the Borrower, the obligation of the
Lender to make such Fixed Rate Loans and to convert Floating Rate Loans into
such Fixed Rate Loans shall be suspended until such time as such Regulatory
Change ceases to be in effect, and all such outstanding Fixed Rate Loans shall
be converted into Floating Rate Loans in accordance with Section 2.9.
2.20 LIMITATIONS ON INTEREST PERIODS. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar month
(or, with respect to any LIBO Rate Loan, any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(b) which would otherwise end on a day which is not a Business Day shall end on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day), (c)
which would otherwise commence before and end after Final Maturity shall end on
Final Maturity, and (d) shall have a duration of not less than one month, as to
any LIBO Rate Loan, and, if any Interest Period would otherwise be a shorter
period, the relevant Loan shall be a Floating Rate Loan during such period.
2.21 LETTERS IN LIEU OF TRANSFER ORDERS. The Lender agrees that none
of the letters in lieu of transfer or division orders provided by the Borrower
pursuant to Section 3.1(g)(iii) or Section 5.8 will be sent to the addressees
thereof prior to the occurrence of an Event of Default, at which time the Lender
may, at
25
its option and in addition to the exercise of any of its other rights and
remedies, send any or all of such letters.
2.22 POWER OF ATTORNEY. The Borrower hereby designates the Lender as
its agent and attorney-in-fact, to act in its name, place, and stead for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer orders delivered by
the Borrower to the Lender pursuant to Section 3.1(g)(iii) or Section 5.8,
including, without limitation, completing any blanks contained in such letters
and attaching exhibits thereto describing the relevant Collateral. The Borrower
hereby ratifies and confirms all that the Lender shall lawfully do or cause to
be done by virtue of this power of attorney and the rights granted with respect
to such power of attorney. This power of attorney is coupled with the interests
of the Lender in the Collateral, shall commence and be in full force and effect
as of the Closing Date and shall remain in full force and effect and shall be
irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Lender by this appointment are
solely to protect the interests of the Lender under the Loan Documents and shall
not impose any duty upon the Lender to exercise any such powers. The Lender
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.
ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement and to
make Loans are subject to the satisfaction of the following conditions
precedent:
3.1 RECEIPT OF LOAN DOCUMENTS AND OTHER ITEMS. The Lender shall have
no obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Lender or its counsel of the title of the Borrower
to its Oil and Gas Properties, shall be satisfactory to the Lender, and the
Lender shall have received, reviewed, and approved the following documents and
other items, appropriately executed when necessary and, where applicable,
acknowledged by one or more authorized officers of the Borrower, all in form and
substance satisfactory to the Lender and dated, where applicable, of even date
herewith or a date prior thereto and acceptable to the Lender:
26
(a) multiple counterparts of this Agreement as
requested by the Lender;
(b) the Note;
(c) the Lockbox Agreement;
(d) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the Borrower, accompanied by a certificate issued by the
secretary or an assistant secretary of the Borrower, to the effect that
each such copy is correct and complete;
(e) certificates of incumbency and signatures of all officers of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, each such certificate being executed by the secretary or an
assistant secretary of the Borrower;
(f) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the board of directors of the Borrower, accompanied by certificates of
the secretary or an assistant secretary of the Borrower, to the effect
that such copies are true and correct copies of resolutions duly adopted
at a meeting or by unanimous consent of the board of directors of the
Borrower, and that such resolutions constitute all the resolutions adopted
with respect to such transactions, have not been amended, modified, or
revoked in any respect, and are in full force and effect as of the date of
such certificate;
(g) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the Borrower
covering all Oil and Gas Properties of the Borrower and all
improvements, personal property, and fixtures related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
27
(iii) undated letters, in form and substance satisfactory to
the Lender, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
make future payments attributable to production from the Mortgaged
Properties directly to the Lender;
(iv) notification letters, in form and substance satisfactory
to the Lender, from the Borrower to each purchaser of production and
disburser of proceeds of production from or attributable to the
Mortgaged Properties, together with additional undated letters with
the addressees left blank, authorizing and directing the addressees
to make future payments attributable to production from the
Mortgaged Properties directly to the Lockbox or the Lender, as
requested by the Lender;
(h) proforma balance sheet of the Borrower as of
April 30, 1996;
(i) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower in its jurisdiction of
incorporation and in any other jurisdictions where it does business;
(j) results of searches of the UCC Records of the Secretary of State
of the States of Louisiana, Oklahoma and Texas from a source acceptable to
the Lender and reflecting no Liens against any of the Collateral as to
which perfection of a Lien is accomplished by the filing of a financing
statement other than in favor of the Lender;
(k) confirmation, acceptable to the Lender, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(l) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization, and
other agreements relating to the Mortgaged Properties requested by the
Lender;
28
(m) engineering reports covering the Mortgaged Properties;
(n) the opinion of Xxxxxxx X. Xxxxx, Vice President and deputy
general counsel of Tenneco, Inc., in the form attached hereto as Exhibit ,
with such changes thereto as may be approved by the Lender; and
(o) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
3.2 EACH LOAN. In addition to the conditions precedent stated
elsewhere herein, the Lender shall not be obligated to make any Loan unless:
(a) the Borrower shall have delivered to the Lender a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan and each statement or certification made in such Borrowing
Request shall be true and correct in all material respects on the
requested date for such Loan;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(c) if requested by the Lender, the Borrower shall have delivered
evidence satisfactory to the Lender substantiating any of the matters
contained in this Agreement which are necessary to enable the Borrower to
qualify for such Loan;
(d) the Lender shall have received, reviewed, and approved such
additional documents and items as described in Section 3.1 as may be
requested by the Lender with respect to such Loan;
(e) no event shall have occurred which, in the reasonable opinion of
the Lender, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan;
(g) all of the Security Instruments shall be in full force and
effect and provide to the Lender the security intended thereby;
29
(h) neither the consummation of the transactions contemplated hereby
nor the making of such Loan shall contravene, violate, or conflict with
any Requirement of Law;
(i) the Borrower shall hold full legal title to the Collateral and
be the sole beneficial owner thereof;
(j) the Lender shall have received the payment of all Engineering
Fees, Facility Fees, and other fees payable to the Lender hereunder and
reimbursement from the Borrower, or special legal counsel for the Lender
shall have received payment from the Borrower, for (i) all reasonable fees
and expenses of counsel to the Lender for which the Borrower is
responsible pursuant to applicable provisions of this Agreement and for
which invoices have been presented as of or prior to the date of the
relevant Loan, and (ii) estimated fees charged by filing officers and
other public officials incurred or to be incurred in connection with the
filing and recordation of any Security Instruments, for which invoices
have been presented as of or prior to the date of the requested Loan; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Loans, the Borrower represents and warrants to the Lender (which representations
and warranties shall survive the delivery of the Note) that:
4.1 DUE AUTHORIZATION. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Note, the repayment of the Note and interest and fees provided
for in the Note and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) contravene or conflict
with any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the Borrower may be presently
30
bound or encumbered, or (d) result in or require the creation or imposition of
any Lien in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 CORPORATE EXISTENCE. The Borrower is a corporation duly
organized, legally existing, and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 VALID AND BINDING OBLIGATIONS. All Loan Documents when duly
executed and delivered by the Borrower, will be the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
4.4 SECURITY INSTRUMENTS. The provisions of each Security Instrument
are effective to create in favor of the Lender, a legal, valid, and enforceable
Lien in all right, title, and interest of the Borrower in the Collateral
described therein, which Liens, assuming the accomplishment of recording and
filing in accordance with applicable laws prior to the intervention of rights of
other Persons, shall constitute fully perfected first-priority Liens on all
right, title, and interest of the Borrower in the Collateral described therein.
4.5 TITLE TO ASSETS. The Borrower has good and indefeasible title to
all of its Properties, free and clear of all Liens except Permitted Liens.
4.6 SCOPE AND ACCURACY OF PROFORMA BALANCE SHEET. The proforma
balance sheet of the Borrower as of April 30, 1996, present fairly the financial
position of the Borrower in accordance with GAAP as at the relevant point in
time or for the period indicated, as applicable. No event or circumstance has
occurred since April 30, 1996, which could reasonably be expected to have a
Material Adverse Effect.
4.7 NO MATERIAL MISSTATEMENTS. No information, exhibit, statement,
or report furnished to the Lender by or at the direction of the Borrower in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not misleading as of the date made or deemed made.
4.8 LIABILITIES, LITIGATION, AND RESTRICTIONS. Other than as listed
under the heading "Liabilities" on Exhibit attached hereto, the Borrower has no
liabilities, direct, or contingent, which may materially and adversely affect
its business
31
or operations or its ownership of the Collateral. Except as set forth under the
heading "Litigation" on Exhibit hereto, no litigation or other action of any
nature affecting the Borrower is pending before any Governmental Authority or,
to the best knowledge of the Borrower, threatened against or affecting the
Borrower which might reasonably be expected to result in any impairment of its
ownership of any Collateral or have a Material Adverse Effect. To the best
knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, Requirement of Law, or
otherwise relative to the business or operations of the Borrower or the
ownership and operation of the Collateral other than such as relate generally to
Persons engaged in business activities similar to those conducted by the
Borrower.
4.9 AUTHORIZATIONS; CONSENTS. Except as expressly contemplated by
this Agreement, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection with the
valid execution and delivery by the Borrower of the Loan Documents or any
instrument contemplated hereby, the repayment by the Borrower of the Note and
interest and fees provided in the Note and this Agreement, or the performance by
the Borrower of the Obligations.
4.10 COMPLIANCE WITH LAWS. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.11 ERISA. No Reportable Event has occurred with respect to any
Single Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan maintained by the Borrower
or any Commonly Controlled Entity (based on the assumptions used to fund such
Plan) did not, as of the last annual valuation date applicable thereto, exceed
the value of the assets of such Plan allocable to such vested benefits. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any withdrawal
liability. As of the most recent valuation date applicable to any Multiemployer
Plan, neither the Borrower nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Borrower or such Commonly
32
Controlled Entity were to withdraw completely from such Multiemployer Plan.
Neither the Borrower nor any Commonly Controlled Entity has received notice that
any Multiemployer Plan is Insolvent or in Reorganization. To the best knowledge
of the Borrower, no such Insolvency or Reorganization is reasonably likely to
occur. Based upon GAAP existing as of the date of this Agreement and current
factual circumstances, the Borrower has no reason to believe that the annual
cost during the term of this Agreement to the Borrower and all Commonly
Controlled Entities for post-retirement benefits to be provided to the current
and former employees of the Borrower and all Commonly Controlled Entities under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA)
will, in the aggregate, have a Material Adverse Effect.
4.12 ENVIRONMENTAL LAWS. To the best knowledge and belief of the
Borrower, except as would not have a Material Adverse Effect, or as described on
Exhibit V under the heading "Environmental Matters:"
(a) no Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
or from, affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.13 COMPLIANCE WITH FEDERAL RESERVE REGULATIONS. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
4.14 INVESTMENT COMPANY ACT COMPLIANCE. The Borrower is not, nor is
the Borrower directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or
33
an "affiliated person" of an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.15 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. The Borrower is
not a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.16 PROPER FILING OF TAX RETURNS; PAYMENT OF TAXES DUE. The
Borrower has duly and properly filed its United States income tax return and all
other tax returns which are required to be filed and has paid all taxes due
except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and reserves
on the books of the Borrower with respect to taxes and other governmental
charges are adequate.
4.17 REFUNDS. Except as described on Exhibit under the heading
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in the Borrower being required
to refund any material portion of the proceeds received or to be received from
the sale of hydrocarbons constituting part of the Mortgaged Property.
4.18 GAS CONTRACTS. Except as described on Exhibit under the heading
"Gas Contracts," the Borrower (a) is not obligated in any material respect by
virtue of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor within 90 days of delivery, and (b) has
not produced gas, in any material amount, subject to, and neither the Borrower
nor any of the Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Borrower has established monetary reserves
adequate in amount to satisfy such obligations and has segregated such reserves
from other accounts.
4.19 INTELLECTUAL PROPERTY. The Borrower owns or is licensed to use
all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person with
the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the
34
Borrower does not infringe on the rights of any Person, except for such claims
and infringements as do not, in the aggregate, give rise to any material
liability on the part of the Borrower.
4.20 CASUALTIES OR TAKING OF PROPERTY. Except as disclosed on
Exhibit under the heading "Casualties," since April 30, 1996, neither the
business nor any Property of the Borrower has been materially adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property, or cancellation of contracts, permits, or concessions by any
Governmental Authority, riot, activities of armed forces, or acts of God.
4.21 LOCATIONS OF BORROWER. The principal place of business and
chief executive office of the Borrower is located at the address of the Borrower
set forth in Section or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
4.22 SUBSIDIARIES. The Borrower has no Subsidiaries except those
described on Exhibit V under the heading "Subsidiaries".
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower shall:
5.1 MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and promptly following the reasonable request of the Lender, make such records
available for inspection by the Lender and, at the expense of the Borrower,
allow the Lender to make and take away copies thereof.
5.2 QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES. Deliver
to the Lender, (a) on or before the 45th day after the close of each of the
first three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited Financial Statements of the Borrower as at the close of such quarterly
period and from the beginning of such fiscal year to the end of such period,
such Financial Statements to be certified by a Responsible Officer of the
Borrower as having been prepared in accordance with GAAP consistently applied
and as a fair presentation of the
35
condition of the Borrower, subject to changes resulting from normal year-end
audit adjustments, and (b) on or before the 45th day after the close of each
fiscal quarter, a Compliance Certificate.
5.3 ANNUAL FINANCIAL STATEMENTS. Deliver to the Lender, on or before
the 120th day after the close of each fiscal year of the Borrower, a copy of the
annual audited Financial Statements of the Borrower.
5.4 OIL AND GAS RESERVE REPORTS. (a) Deliver to the Lender no later
than April 1 of each year during the term of this Agreement, engineering reports
in form and substance satisfactory to the Lender, certified by the chief
petroleum engineer of the Borrower as fairly and accurately setting forth (i)
the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the Mortgaged
Properties as of January 1 of the year for which such reserve reports are
furnished, (ii) the aggregate present value of the future net income with
respect to such Mortgaged Properties, discounted at a stated per annum discount
rate of proven and producing reserves, (iii) projections of the annual rate of
production, gross income, and net income with respect to such proven and
producing reserves, and (iv) information with respect to the "take-or-pay,"
"prepayment," and gas-balancing liabilities of the Borrower.
(b) Deliver to the Lender no later than October 1 of each year
during the term of this Agreement, engineering reports in form and substance
satisfactory to the Lender prepared by or under the supervision of the chief
petroleum engineer of the Borrower evaluating the Mortgaged Properties as of
July 1 of the year for which such reserve reports are furnished and updating the
information provided in the reports pursuant to Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Lender together with additional data concerning pricing,
quantities of production from the Mortgaged Properties, volumes of production
sold, purchasers of production, gross revenues, expenses, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 PRODUCTION PAYMENT REPORTS. Furnish to Lender, within five days
of funding any production payment, (i) copies of all production payment
assignments, (ii) related contracts and (iii) engineering information in form
and substance satisfactory to the Lender and certified by the chief petroleum
engineer of the Borrower as fairly and accurately setting forth (a) the proven
and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves
(separately classified as such) attributable to the Mortgaged Properties as of
the first day of the month following the
36
month in which such production payment was made, (b) the aggregate present value
of the future net income with respect to such Mortgaged Properties, discounted
at a stated per annum discount rate of proven and producing reserves, (c)
projections of the annual rate of production, gross income, and net income with
respect to such proven and producing reserves, and (d) information with respect
to the "take-or-pay," "prepayment," and gas-balancing liabilities of the
Borrower.
5.6 TITLE OPINIONS; TITLE DEFECTS. Promptly upon the request of the
Lender, furnish to the Lender any available title information regarding any of
the Mortgaged Properties which are in form and substance satisfactory to legal
counsel of the Lender.
5.7 NOTICES OF CERTAIN EVENTS. Deliver to the Lender, immediately
upon having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower, or any litigation, investigation, or proceeding between
the Borrower and any Governmental Authority which, in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Borrower as a
defendant or in which any Property of the Borrower is subject to a claim
and in which the amount involved is $100,000 or more and which is not
covered by insurance or in which injunctive or similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of the Borrower
or adjacent to any Property of the Borrower following any allegation of a
violation of any Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property
37
of the Borrower or adjacent to any Property of the Borrower except in
accordance with applicable Requirements of Law or the terms of a valid
permit, license, certificate, or approval of the relevant Governmental
Authority, or the violation of any Environmental Law, or the revocation,
suspension, or forfeiture of or failure to renew, any permit, license,
registration, approval, or authorization which could reasonably be
expected to have a Material Adverse Effect;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in position of President of the Borrower;
(i) any Reportable Event or imminently expected Reportable Event
with respect to any Plan; any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan; the institution
of proceedings or the taking of any other action by the PBGC, the Borrower
or any Commonly Controlled Entity or Multiemployer Plan with respect to
the withdrawal from, or the termination, Reorganization or Insolvency of,
any Single Employer Plan or Multiemployer Plan; or any Prohibited
Transaction in connection with any Plan or any trust created thereunder
and the action being taken by the Internal Revenue Service with respect
thereto; and
(j) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
5.8 LETTERS IN LIEU OF TRANSFER ORDERS; DIVISION ORDERS. Promptly
upon request by the Lender at any time and from time to time, and without
limitation on the rights of the Lender pursuant to Sections 2.21 and 2.22,
execute such letters in lieu of transfer orders, in addition to the letters
signed by the Borrower and delivered to the Lender in satisfaction of the
condition set forth in Section 3.1(g)(iii) and/or division and/or transfer
orders as are necessary or appropriate to transfer and deliver to the Lender
proceeds from or attributable to any Mortgaged Property.
5.9 ADDITIONAL INFORMATION. Furnish to the Lender, promptly upon the
request of the Lender, such additional financial or other information concerning
the assets, liabilities, operations, and transactions of the Borrower as the
Lender may from time to time request; and notify the Lender not less than ten
Business Days prior to the occurrence of any condition or event that may change
the proper location for the filing of any financing
38
statement or other public notice or recording for the purpose of perfecting a
Lien in any Collateral, including, without limitation, any change in its name or
the location of its principal place of business or chief executive office; and
upon the request of the Lender, execute such additional Security Instruments as
may be necessary or appropriate in connection therewith.
5.10 COMPLIANCE WITH LAWS. Except to the extent the failure to
comply or cause compliance would not have a Material Adverse Effect, comply with
all applicable Requirements of Law, including, without limitation, (a) the
Natural Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws,
and (d) all permits, licenses, registrations, approvals, and authorizations (i)
related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any Property of the
Borrower, (ii) required for the performance of the operations of the Borrower,
or (iii) applicable to the use, generation, handling, storage, treatment,
transport, or disposal of any Hazardous Substances; and cause all employees,
crew members, agents, contractors, subcontractors, and future lessees (pursuant
to appropriate lease provisions) of the Borrower, while such Persons are acting
within the scope of their relationship with the Borrower, to comply with all
such Requirements of Law as may be necessary or appropriate to enable the
Borrower to so comply.
5.11 PAYMENT OF ASSESSMENTS AND CHARGES. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
5.12 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING. Maintain
its corporate existence or qualification and good standing in its jurisdictions
of incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
unless the failure to do so would not have a Material Adverse Effect.
5.13 PAYMENT OF NOTES; PERFORMANCE OF OBLIGATIONS. Pay the Note
according to the reading, tenor, and effect thereof, as modified hereby, and do
and perform every act and discharge all of its other Obligations.
5.14 FURTHER ASSURANCES. Promptly cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, and execute, acknowledge, and deliver such other assurances and
instruments as shall, in the opinion of the Lender, be necessary to fulfill the
terms of the Loan Documents.
39
5.15 INITIAL FEES AND EXPENSES OF COUNSEL TO LENDER. Upon request by
the Lender, promptly reimburse the Lender for all reasonable fees and expenses
of Xxxxxxx & Xxxxxx, L.L.P., special counsel to the Lender, in connection with
the preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement.
5.16 SUBSEQUENT FEES AND EXPENSES OF LENDER. Upon request by the
Lender, promptly reimburse the Lender (to the fullest extent permitted by law)
for all amounts reasonably expended, advanced, or incurred by or on behalf of
the Lender to satisfy any obligation of the Borrower under any of the Loan
Documents; to collect the Obligations; to ratify, amend, restate, or prepare
additional Loan Documents, as the case may be; for the filing and recordation of
Security Instruments; to enforce the rights of the Lender under any of the Loan
Documents; and to protect the Properties or business of the Borrower, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Lender
and which amounts shall include, but not be limited to (a) all court costs, (b)
reasonable attorneys' fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the Lender, (d) fees and
expenses incurred in connection with the participation by the Lender as a member
of the creditors' committee in a case commenced under any Insolvency Proceeding,
(e) fees and expenses incurred in connection with lifting the automatic stay
prescribed in ss.362 Title 11 of the United States Code, and (f) fees and
expenses incurred in connection with any action pursuant to ss.1129 Title 11 of
the United States Code all reasonably incurred by the Lender in connection with
the collection of any sums due under the Loan Documents, together with interest
at the per annum interest rate equal to the Floating Rate, calculated on a basis
of a calendar year of 365 or 366 days, as the case may be,, counting the actual
number of days elapsed, on each such amount from the date of notification that
the same was expended, advanced, or incurred by the Lender until the date it is
repaid to the Lender, with the obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such case.
5.17 OPERATION OF OIL AND GAS PROPERTIES. Enforce the terms of any
production payment contract, including, without limitation, any provisions
thereof that require (a) that the operator develops, maintains, and operates the
Borrower's Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards, and (b) that the operator maintains
insurance with respect to the Mortgaged Properties against such
40
liabilities, casualties, risks and contingencies as is customary in the oil and
gas industry.
5.18 INSPECTION OF PROPERTIES. Permit any authorized representative
of the Lender to visit and inspect, at the expense of the Borrower, any tangible
Property of the Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY
INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES,
LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS
AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF
ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY
OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS
SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY
PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND
WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER PERSON AT ANY TIME
OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF THE
BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN
CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT, OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, OTHER
THAN GROSS NEGLIGENCE OR WILFUL MISCONDUCT, WHETHER SOLE OR CONCURRENT, ON THE
PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE
LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING
SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
5.20 OWNERSHIP OF BORROWER. Tenneco Ventures Corporation or its
successor shall maintain beneficial ownership of not less than 50% of Borrower.
41
5.21 LOCKBOX ARRANGEMENT. Execute, maintain in full force and
effect, and comply in all respects with the provisions of such documentation as
may be reasonably required by the Lender to establish the Lockbox and the
Lockbox Account (including, without limitation, the Lockbox Agreement); direct
all purchasers of production from the Mortgaged Properties to make remittance to
the Lockbox; and deposit directly into the Lockbox Account all funds received by
the Borrower, if any, from purchasers of production from the Mortgaged
Properties. Funds received in the Lockbox shall be transferred daily by the
Lender to the Lockbox Account. Prior to the occurrence of an Event of Default,
the Borrower shall have full access to the Lockbox Account and the funds therein
by way of draft, check, wire transfer of funds, or otherwise. Upon the
occurrence of an Event of Default, access by the Borrower to the Lockbox Account
and the funds therein shall terminate, and the Lender may, at its option, apply
any or all of such funds to the Obligations, whether matured or unmatured.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower will not:
6.1 INDEBTEDNESS. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 60 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made, (c)
crude oil, natural gas, or other hydrocarbon floor, collar, cap, price
protection, or swap agreements, in form and substance and with a Person
acceptable to the Lender, provided that (i) if accomplished prior to the
inclusion of the related production payment in the Borrowing Base, (ii) such
agreements shall not be entered into with respect to Mortgaged Properties
constituting more than 75% of the monthly production of proven producing
reserves as forecast in Lender's most recent engineering evaluation, (iii) that
the strike prices in connection with option and swap agreements are not less
than the prices used by the Lender in its most recent Borrowing Base
determination, and (iv) the counter party is Tenneco Energy Resources
Corporation, Enron Capital & Trade Resources, Enron Oil Trading and
Transportation, NationsBank Energy Risk Management Division, or another party
acceptable to the Lender.
6.2 CONTINGENT OBLIGATIONS. Create, incur, assume, or suffer to
exist any Contingent Obligation; provided, however, the foregoing restriction
shall not apply to (a) performance guarantees
42
and performance surety or other bonds provided in the ordinary course of
business, or (b) trade credit incurred or operating leases entered into in the
ordinary course of business.
6.3 LIENS. Create, incur, assume, or suffer to exist any Lien on any
of its Oil and Gas Properties or any other Property, whether now owned or
hereafter acquired; provided, however, the foregoing restrictions shall not
apply to Permitted Liens.
6.4 SALES OF ASSETS. Without the prior written consent of the
Lender, sell, transfer, or otherwise dispose of assets, whether now owned or
hereafter acquired, enter into any agreement to do so, if such assets are
material to the operations of Borrower when taken as a whole.
6.5 LEASEBACKS. Enter into any agreement to sell or transfer any
Property and thereafter rent or lease as lessee such Property or other Property
intended for the same use or purpose as the Property sold or transferred.
6.6 LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding any loans or advances to any Person in excess of $100,000; provided,
however, the foregoing restrictions shall not apply to (a) advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business and upon terms common in the industry for such accounts
receivable, or (b) advances to employees of the Borrower for the payment of
expenses in the ordinary course of business. For the purposes of this covenant,
production payments will not be considered loans or advances.
6.7 DIVIDENDS AND DISTRIBUTIONS. Declare, pay, or make, whether in
cash or Property of the Borrower, any dividend or distribution on, or purchase,
redeem, or otherwise acquire for value, any share of any class of its capital
stock at any time that a Default or Event of Default exists or such payment
would cause an Event of Default, including, but not limited to violation of,
Section 6.12, provided, however, the foregoing restriction shall not apply to
dividends paid in capital stock of the Borrower.
6.8 ISSUANCE OF STOCK; CHANGES IN CORPORATE STRUCTURE. Issue or
agree to issue additional shares of capital stock, in one or any series of
transactions; enter into any transaction of consolidation, merger, or
amalgamation; liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution).
6.9 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter into
any transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates, other than upon fair and
reasonable terms no less
43
favorable than could be obtained in an arm's length transaction with a Person
which was not an Affiliate.
6.10 LINES OF BUSINESS. Expand, on its own or through any
Subsidiary, into any line of business other than those in which the Borrower is
engaged as of the date hereof.
6.11 ERISA COMPLIANCE. Permit any Plan maintained by it or any
Commonly Controlled Entity to (a) engage in any Prohibited Transaction, (b)
incur any "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, or (c) terminate in a manner which could result in the imposition
of a Lien on any Property of the Borrower pursuant to Section 4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multiemployer Plan.
6.12 TANGIBLE NET WORTH. Permit Tangible Net Worth as of the close
of any fiscal quarter to be less than $7,000,000, plus 100% of equity raised for
all fiscal periods ending subsequent to April 30, 1996.
6.13 AMENDMENT OF PRODUCTION PAYMENT AGREEMENT. Permit any
production payment contract to be materially amended after such property has
been included in the Borrowing Base without the Lender's prior written consent.
A material change shall be any change that affects the present worth of the cash
flow of the production payment as originally presented to the Lender.
ARTICLE VII
EVENTS OF DEFAULT
7.1 ENUMERATION OF EVENTS OF DEFAULT. Any of the following events
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the
payment when due of any fee or other sum payable under any Loan Document
and such default as to interest or fees only shall have continued for five
days;
(b) default shall be made by the Borrower in the due observance or
performance of any of its obligations under the Loan Documents, and such
default shall continue for 30 days after the earlier of notice thereof to
the Borrower by the Lender or the actual knowledge thereof by the
Borrower;
44
(c) any representation or warranty made by the Borrower in any of
the Loan Documents proves to have been untrue in any material respect or
any representation, statement (including Financial Statements),
certificate, or data furnished or made to the Lender in connection
herewith proves to have been untrue in any material respect as of the date
the facts therein set forth were stated or certified;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture,
note, or other Indebtedness or under any credit agreement, loan agreement,
indenture, promissory note, or similar agreement or instrument executed in
connection with any of the foregoing, and such default shall remain
unremedied for in excess of the period of grace, if any, with respect
thereto;
(e) the Borrower shall be unable to satisfy any condition or cure
any circumstance specified in Article , the satisfaction or curing of
which is precedent to the right of the Borrower to obtain a Loan and such
inability shall continue for a period in excess of 30 days;
(f) the Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee, or liquidator of it or all or a substantial part
of its assets, (ii) file a voluntary petition commencing an Insolvency
Proceeding, (iii) make a general assignment for the benefit of creditors,
(iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it in any Insolvency Proceeding;
(g) an order, judgment, or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian, or liquidator of it or all or any
substantial part of its assets, and such order, judgment, or decree shall
not be dismissed or stayed within 30 days;
(h) the levy against any significant portion of the Property of the
Borrower, or any execution, garnishment, attachment, sequestration, or
other writ or similar
45
proceeding which is not permanently dismissed or discharged within 30 days
after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $250,000, and such order, judgment, or decree shall
not be dismissed or stayed within 30 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
ss.1961 ET SEQ.), the result of which could be the forfeiture or transfer
of any material Property of the Borrower, subject to a Lien in favor of
the Lender without (i) satisfaction or provision for satisfaction of such
Lien, or (ii) such forfeiture or transfer of such Property being expressly
made subject to such Lien;
(k) the Borrower shall have (i) concealed, removed, or diverted, or
permitted to be concealed, removed, or diverted, any part of its Property,
with intent to hinder, delay, or defraud its creditors or any of them,
(ii) made or suffered a transfer of any of its Property which may be
fraudulent under any bankruptcy, fraudulent conveyance, or similar law,
(iii) made any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been
paid, or (iv) shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal
proceedings or distraint which is not vacated within 30 days from the date
thereof;
(l) any Security Instrument shall for any reason not create valid
and perfected first-priority Liens against the Collateral purportedly
covered thereby;
(m) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Lender; or
(n) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan; any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan for
which an excise tax is due or would be due in the absence of a waiver; a
Reportable Event shall occur with respect to, or proceedings shall
46
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in
the reasonable opinion of the Lender, likely to result in the termination
of such Plan for purposes of Title IV of ERISA; any Single Employer Plan
shall terminate for purposes of Title IV of ERISA; the Borrower or any
Commonly Controlled Entity shall incur, or in the reasonable opinion of
the Lender, be likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan; or any other event or condition shall occur or exist with respect to
a Plan and the result of such events or conditions referred to in this
Section 7.1 could subject the Borrower or any Commonly Controlled Entity
to any tax (other than an excise tax under Section 4980 of the Code),
penalty or other liabilities which taken in the aggregate would have a
Material Adverse Effect and any such circumstance shall exist for in
excess of 30 days.
7.2 REMEDIES. (a) Upon the occurrence of an Event of Default
specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing; and (iii) access by the Borrower to the Lockbox Account and all
funds therein shall terminate and the Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) held by the Lender,
including, without limitation, the funds of the Borrower held in the Lockbox or
Lockbox Account, and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of the Borrower against any and all of
the Obligations.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Lender may, by notice to the
Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless
47
and until reinstated by the Lender in writing; and (iii) access by the Borrower
to the Lockbox Account and all funds therein shall terminate and the Lender is
hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) held by the Lender, including, without limitation, the funds of the
Borrower held in the Lockbox or Lockbox Account, and any and all other
indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations.
(c) Upon the occurrence of any Event of Default, the Lender may, in
addition to the foregoing in this Section, exercise any or all of its rights and
remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 TRANSFERS; PARTICIPATIONS. The Lender may, at any time, sell,
transfer, assign, or grant participations in the Obligations or any portion
thereof; and the Lender may forward to each Transferee and prospective
Transferee all documents and information relating to such Obligations, whether
furnished by the Borrower or otherwise obtained, as the Lender determines
necessary or desirable. The Borrower agrees that each Transferee, regardless of
the nature of any transfer to it, may exercise all rights (including, without
limitation, rights of set-off) with respect to the portion of the Obligations
held by it as fully as if such Transferee were the direct holder thereof,
subject to any agreements between such Transferee and the transferor to such
Transferee.
8.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
8.3 NOTICES AND OTHER COMMUNICATIONS. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail, certified mail, return receipt
48
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed as
follows:
(a) if to the Lender, to:
Compass Bank-Houston
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Telecopy: (000) 000-0000
(b) if to the Borrower, to:
Tenneco Ventures Finance Corporation
c/o Tenneco Ventures Corporation
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
8.4 PARTIES IN INTEREST. Subject to the restrictions on changes in
corporate structure set forth in Section and other applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower or the Lender shall be binding upon and inure to the benefit of
the Borrower or the Lender, as the case may be, and their respective legal
representatives, successors, and assigns.
8.5 RIGHTS OF THIRD PARTIES. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrower. No other
Person shall have any right, benefit, priority, or interest hereunder or as a
result hereof or have standing to require satisfaction of provisions hereof in
accordance with their terms, and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.
8.6 RENEWALS; EXTENSIONS. All provisions of this Agreement relating
to the Note shall apply with equal force and effect to each promissory note
hereafter executed which in whole or in part represents a renewal or extension
of any part of the Indebtedness of the Borrower under this Agreement, the Note,
or any other Loan Document.
8.7 NO WAIVER; RIGHTS CUMULATIVE. No course of dealing on the part
of the Lender, its officers or employees, nor any
49
failure or delay by the Lender with respect to exercising any of its rights
under any Loan Document shall operate as a waiver thereof. The rights of the
Lender under the Loan Documents shall be cumulative and the exercise or partial
exercise of any such right shall not preclude the exercise of any other right.
The making of any Loan shall not constitute a waiver of any of the covenants,
warranties, or conditions of the Borrower contained herein. In the event the
Borrower is unable to satisfy any such covenant, warranty, or condition, the
making of any Loan shall not have the effect of precluding the Lender from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.
8.8 SURVIVAL UPON UNENFORCEABILITY. In the event any one or more of
the provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
8.9 AMENDMENTS; WAIVERS. Neither this Agreement nor any provision
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
8.10 CONTROLLING AGREEMENT. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
8.11 DISPOSITION OF COLLATERAL. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Lender; provided, however, that in no event shall the
Lender violate applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in equity.
8.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO
BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
8.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH,
50
OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING
SITUS IN HOUSTON, XXXXXX COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, XXXXXX
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN
ACCORDANCE WITH THIS SECTION.
8.14 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE
CORRESPONDENCE DATED MAY 2, 1996, FROM THE LENDER TO THE BORROWER AND THE TERM
SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE
OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG
THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
8.15 COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as
of the date first above written.
BORROWER:
TENNECO VENTURES FINANCE
CORPORATION
By: /s/ XXXXXXXXX X. XXXXX
Xxxxxxxxx X. Xxxxx
Vice President
LENDER:
COMPASS BANK-HOUSTON
By: /s/ XXXXXXX XXXXXXXX XXXXXX
Xxxxxxx Xxxxxxxx Xxxxxx
Vice President
51
EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$20,000,000 Houston, Texas June 7, 1996
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("MAKER")
promises to pay to the order of COMPASS BANK-HOUSTON ("PAYEE"), at its banking
quarters in Houston, Xxxxxx County, Texas, the sum of TWENTY MILLION DOLLARS
($20,000,000), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated of even date herewith by and between Maker and
Payee (as amended, restated, or supplemented from time to time, the "CREDIT
AGREEMENT"), together with interest at the rates and calculated as provided in
the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable
as provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
Without being limited thereto or thereby, this Note is secured by
the Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE
OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL STATUTES, ARTICLE 5069,
CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
TENNECO VENTURES FINANCE
CORPORATION
By:
Printed Name:
Title:
I-i
EXHIBIT II
[FORM OF BORROWING REQUEST]
Compass Bank-Houston
00 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Credit Agreement dated as of June 7, 1996, by and between Compass
Bank-Houston and Tenneco Ventures Finance Corporation (as amended,
restated, or supplemented from time to time, the "CREDIT AGREEMENT")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the
requests indicated below:
[ ] 1. Loans
(a) Amount of new Loan: $
(b) Requested funding date: , 19
(c) $ of such Loan is to be a Floating Rate
Loan;
$________________ of such Loan is to be a LIBO Rate Loan.
(d) Requested Interest Period for LIBO Rate Loan: ____
months.
[ ] 2. Continuation or conversion of LIBO Rate Loan maturing on
:
(a) Amount to be continued as a LIBO Rate Loan is $
, with an Interest Period of months;
(b) Amount to be converted to a Floating Rate Loan is $
; and
[ ] 3. Conversion of Floating Rate Loan:
(a) Requested conversion date: , 19 .
(b) Amount to be converted to a LIBO Rate Loan is $ ,
with an Interest Period of _____ months.
II-i
The undersigned certifies that [s]he is the [ ] of the Borrower, has
obtained all consents necessary, and as such [s]he is authorized to execute this
request on behalf of the Borrower. The undersigned further certifies,
represents, and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing, continuation, or conversion under the terms
and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
TENNECO VENTURE FINANCE
CORPORATION
By:
Printed Name:
Title:
II-ii
EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
, 19
Compass Bank-Houston
00 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Credit Agreement dated as of June 7, 1996, by and
between Compass Bank-Houston and Tenneco Ventures
Finance Corporation (as amended, restated, or
supplemented from time to time, the "CREDIT
AGREEMENT")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no
Default or Event of Default exists as of the date hereof or
has occurred since the date of our previous certification to
you, if any.]
[1. To the best of the knowledge of the undersigned, the following
Defaults or Events of Default exist as of the date hereof or have occurred
since the date of our previous certification to you, if any, and the
actions set forth below are being taken to remedy such circumstances:]
2. The compliance of the Borrower with the financial covenants of the
Credit Agreement, as of the close of business on , is evidenced by the
following:
(a) SECTION 6.14: TANGIBLE NET WORTH
Permit Tangible Net Worth as of the close of any fiscal quarter to
be less than $7,000,000, plus 100% of equity raised for all fiscal
periods ending subsequent to April 30, 1996.
ACTUAL
III-i
3. No Material Adverse Effect has occurred since the date of
the Financial Statements dated as of .
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
TENNECO VENTURES FINANCE
CORPORATION
By:
Printed Name:
Title:
III-ii
EXHIBIT IV
[FORM OF OPINION OF COUNSEL]
[Closing Date]
Compass Bank-Houston
00 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Credit Agreement dated as of June 7, 1996, by and between Compass
Bank-Houston and Tenneco Ventures Finance Corporation (as amended,
restated, or supplemented from time to time, the "CREDIT AGREEMENT")
Ladies and Gentlemen:
We have acted as counsel to Tenneco Ventures Finance Corporation
(the "BORROWER") in connection with the transactions contemplated in the Credit
Agreement. This Opinion is delivered pursuant to Section of the Credit
Agreement, and the Lender is hereby authorized to rely upon this Opinion in
connection with the transactions contemplated in the Credit Agreement. Each
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Credit Agreement.
In our representation of the Borrower, we have examined an executed
counterpart of each of the following (the "LOAN DOCUMENTS"):
(a) the Credit Agreement;
(b) the Note;
(c) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement dated of even date
herewith from the Borrower in favor of the Lender (the "MORTGAGE"); and
(d) Financing Statements from the Borrower, as debtor, constituent
to the Mortgage (the "FINANCING STATEMENT").
We have also examined the originals, or copies certified to our
satisfaction, of such other records of the Borrower, certificates of public
officials and officers of the Borrower
IV-i
agreements, instruments, and documents as we have deemed necessary as a basis
for the opinions hereinafter expressed.
In making such examinations, we have, with your permission, assumed:
(a) the genuineness of all signatures to the Loan Documents other
than those of the Borrower;
(b) the authenticity of all documents submitted to us as originals
and the conformity with the originals of all documents submitted to us as
copies;
(c) the Lender is authorized and has the power to enter into and
perform its obligations under the Credit Agreement;
(d) the due authorization, execution, and delivery of all Loan
Documents by each party thereto other than the Borrower; and
(e) the Borrower has title to all Property covered or affected by
the Mortgage.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Borrower is a corporation duly organized, legally existing,
and in good standing under the laws of its state of incorporation and is
duly qualified as a foreign corporation and is in good standing in all
jurisdictions wherein the ownership of its Property or the operation of
its business necessitates same.
2. The execution and delivery by the Borrower of the Credit
Agreement and the borrowings thereunder, the execution and delivery by the
Borrower of the other Loan Documents to which the Borrower is a party, and
the payment and performance of all Obligations of the Borrower thereunder
are within the power of the Borrower, have been duly authorized by all
necessary corporate action, and do not (a) require the consent of any
Governmental Authority, (b) contravene or conflict with any Requirement of
Law, (c) to our knowledge after due inquiry, contravene or conflict with
any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the Borrower may be presently bound or
encumbered, or (d) result in or require the creation or imposition of any
Lien upon any Property of the Borrower other than as contemplated by the
Loan Documents.
IV-ii
3. The Loan Documents to which the Borrower is a party constitute
legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
4. The forms of the Mortgage and the Financing Statement and the
description of the Mortgaged Property (as such term is defined in the
Mortgage and so used herein) situated in the State of Texas (the "STATE")
satisfy all applicable Requirements of Law of the State and are legally
sufficient under the laws of the State to enable the Lender to realize the
practical benefits purported to be afforded by the Mortgage.
5. The Mortgage creates a valid lien upon and security interest in
all Mortgaged Property situated in the State to secure the Indebtedness
(as such term is defined in the Mortgage and so used herein).
6. The Mortgage and the Financing Statement are in satisfactory form
for filing and recording in the offices described below.
7. The filing and/or recording, as the case may be, of (a) the
Mortgage in the office of the county clerk of each county in the State in
which any portion of the Mortgaged Property is located, and as a financing
statement and utility security instrument in the office of the Secretary
of State of the State, and (b) the Financing Statement in the Uniform
Commercial Code records in each county in the State in which any portion
of the Mortgaged Property is located are the only recordings or filings in
the State necessary to perfect the liens and security interests in the
Mortgaged Property created by the Mortgage or to permit the Lender to
enforce in the State its rights under the Mortgage. No subsequent filing,
re-filing, recording, or rerecording will be required in the State in
order to continue the perfection of the liens and security interests
created by the Mortgage except that (a) a continuation statement must be
filed with respect to the Mortgage filed as a financing statement in the
office of the Secretary of State of the State and with respect to the
Financing Statement in the Uniform Commercial Code records in each county
in the State in which any portion of the Mortgaged Property is located,
each within six months prior to the expiration of five years from the date
of the relevant initial financing statement filing, (b) a subsequent
continuation statement must be filed within six months prior to the
expiration of each subsequent five-year period from the date of each
initial
IV-iii
financing statement filing, and (c) amendments or supplements to the
Mortgage filed as a financing statement and the Financing Statement and/or
additional financing statements may be required to be filed in the event
of a change in the name, identity, or structure of the Borrower or in the
event the financing statement filing otherwise becomes inaccurate or
incomplete.
8. To our knowledge after due inquiry, except as disclosed in
Exhibit to the Credit Agreement, no litigation or other action of any
nature affecting the Borrower is pending before any Governmental Authority
or threatened against the Borrower. To our knowledge after due inquiry, no
unusual or unduly burdensome restriction, restraint, or hazard exists by
contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership and operation of any
Properties of the Borrower other than such as relate generally to Persons
engaged in business activities similar to those conducted by the Borrower.
9. No authorization, consent, approval, exemption, franchise, permit
or license of, or filing (other than filing of Security Instruments in
appropriate filing offices) with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan
Documents or any instrument contemplated thereby, or the payment
performance by the Borrower of the Obligations.
10. No transaction contemplated by the Loan Documents is in
violation of any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, T,
U, or X.
11. The Borrower is not, nor is the Borrower directly or indirectly
controlled by or acting on behalf of any Person which is, an "investment
company" or an "affiliated person" of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
12. The Borrower is not a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
The opinions expressed herein are subject to the following qualifications
and limitations:
IV-iv
A. We are licensed to practice law only in the State and other
jurisdictions whose laws are not applicable to the opinions expressed
herein; accordingly, the foregoing opinions are limited solely to the laws
of the State, applicable United States federal law, and the corporation
laws of the State of [_______________].
B. The validity, binding effect, and enforce-ability of the Loan
Documents may be limited or affected by bankruptcy, insolvency,
moratorium, reorganization, or other similar laws affecting rights of
creditors generally, including, without limitation, statutes or rules of
law which limit the effect of waivers of rights by a debtor or grantor;
provided, however, that the limitations and other effects of such statutes
or rules of law upon the validity and binding effect of the Loan Documents
should not differ materially from the limitations and other effects of
such statutes or rules of law upon the validity and binding effect of
credit agreements, promissory notes, and security instruments generally.
C. The enforceability of the respective obligations of the Borrower
under the Loan Documents is subject to general principles of equity
(whether such enforceability is considered in a suit in equity or at law).
This Opinion is furnished by us solely for the benefit of the Lender
in connection with the transactions contemplated by the Loan Documents and is
not to be quoted in whole or in part or otherwise referred to or disclosed in
any other transaction.
Very truly yours,
IV-v
EXHIBIT V
DISCLOSURES
Section 4.8 LIABILITIES
LITIGATION
Section 4.12 ENVIRONMENTAL MATTERS
Section 4.17 REFUNDS
Section 4.18 GAS CONTRACTS
Section 4.20 CASUALTIES
Section 4.22 SUBSIDIARIES
V-i
