EXHIBIT 10.21
SENIOR REDUCING REVOLVING
CREDIT FACILITY
dated as of
April __, 1997
among
Bellwether Exploration Company,
The Guarantors Party Hereto,
The Banks Party Hereto,
The LC Issuing Banks Referred to Herein
and
Xxxxxx Guaranty Trust Company of New York,
as Agent
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.......................................1
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS..............22
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS....................23
ARTICLE 2
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND..............................23
SECTION 2.02. METHOD OF BORROWING..............................23
SECTION 2.03. MATURITY OF LOANS................................25
SECTION 2.04. INTEREST RATES...................................25
SECTION 2.05. METHOD OF ELECTING INTEREST RATES................26
SECTION 2.06. FEES.............................................28
SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS..........29
SECTION 2.08. OPTIONAL PREPAYMENTS.............................29
SECTION 2.09. MANDATORY PREPAYMENTS............................30
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS................30
SECTION 2.11. FUNDING LOSSES...................................31
SECTION 2.12. COMPUTATION OF INTEREST AND FEES.................32
SECTION 2.13. NOTES............................................32
SECTION 2.14. REGULATION D COMPENSATION........................32
SECTION 2.15. BORROWING BASE...................................33
SECTION 2.16. LETTERS OF CREDIT................................34
ARTICLE 3
CONDITIONS
SECTION 3.01. CLOSING..........................................40
SECTION 3.02. BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT....43
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. CORPORATE EXISTENCE AND POWER....................43
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION....................................43
PAGE
SECTION 4.03. BINDING EFFECT...................................44
SECTION 4.04. FINANCIAL INFORMATION............................44
SECTION 4.05. LITIGATION.......................................44
SECTION 4.06. COMPLIANCE WITH ERISA............................45
SECTION 4.07. ENVIRONMENTAL COMPLIANCE.........................45
SECTION 4.08. TAXES............................................46
SECTION 4.09. SUBSIDIARIES.....................................47
SECTION 4.10. NO REGULATORY RESTRICTIONS ON BORROWING..........47
SECTION 4.11. FULL DISCLOSURE..................................47
SECTION 4.12. REPRESENTATIONS OF GUARANTORS....................48
SECTION 4.13. OWNERSHIP OF PROPERTY, LIENS.....................48
SECTION 4.14. REPRESENTATIONS IN PURCHASE AND SALE AGREEMENT
TRUE AND CORRECT.................................49
SECTION 4.15. RESERVE DATA AND PROJECTIONS.....................49
ARTICLE 5
COVENANTS
SECTION 5.01. INFORMATION......................................49
SECTION 5.02. RESERVE REPORTS..................................52
SECTION 5.03. PAYMENT OF OBLIGATIONS...........................52
SECTION 5.04. MAINTENANCE OF PROPERTY INSURANCE................52
SECTION 5.05. CONDUCT OF BUSINESS AND MAINTENANCE OF
EXISTENCE........................................53
SECTION 5.06. COMPLIANCE WITH LAWS.............................54
SECTION 5.07. INSPECTION OF PROPERTY, BOOKS AND RECORDS........54
SECTION 5.08. MERGERS AND SALES OF ASSETS......................54
SECTION 5.09. USE OF PROCEEDS..................................54
SECTION 5.10. NEGATIVE PLEDGE..................................55
SECTION 5.11. LIMITATION ON DEBT...............................56
SECTION 5.12. DEBT OF SUBSIDIARIES.............................57
SECTION 5.13. CASH INTEREST COVERAGE RATIO.....................57
SECTION 5.14. MINIMUM CONSOLIDATED TANGIBLE NET WORTH..........57
SECTION 5.15. RESTRICTED PAYMENTS..............................58
SECTION 5.16. INVESTMENTS......................................58
SECTION 5.17. TRANSACTIONS WITH AFFILIATES.....................59
SECTION 5.18. ADDITIONAL GUARANTORS............................59
SECTION 5.19. PRICE HEDGE......................................59
SECTION 5.20. AMENDMENTS OF THE ACQUISITION DOCUMENTS..........59
SECTION 5.21. EXTRAORDINARY BORROWING BASE REDETERMINATIONS....59
ii
PAGE
ARTICLE 6
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT................................62
SECTION 6.02. NOTICE OF DEFAULT................................65
SECTION 6.03. CASH COVER.......................................65
ARTICLE 7
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION....................65
SECTION 7.02. AGENTS AND AFFILIATES............................65
SECTION 7.03. ACTION BY AGENT..................................66
SECTION 7.04. CONSULTATION WITH EXPERTS........................66
SECTION 7.05. LIABILITY OF AGENT...............................66
SECTION 7.06. INDEMNIFICATION..................................66
SECTION 7.07. CREDIT DECISION..................................67
SECTION 7.08. SUCCESSOR AGENT..................................67
SECTION 7.09. AGENT'S FEE......................................67
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR...........................................67
SECTION 8.02. ILLEGALITY.......................................68
SECTION 8.03. INCREASED COST AND REDUCED RETURN................69
SECTION 8.04. TAXES............................................70
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-
DOLLAR LOANS.....................................72
SECTION 8.06. SUBSTITUTION OF BANK.............................72
ARTICLE 9
GUARANTY
SECTION 9.01. THE GUARANTY.....................................73
SECTION 9.02. GUARANTY UNCONDITIONAL...........................73
SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES...........74
SECTION 9.04. WAIVER BY EACH GUARANTOR.........................74
iii
SECTION 9.05. SUBROGATION AND CONTRIBUTION.....................74
SECTION 9.06. STAY OF ACCELERATION.............................74
SECTION 9.07. LIMIT OF LIABILITY...............................75
SECTION 9.08. RELEASE UPON SALE................................75
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. NOTICES.........................................75
SECTION 10.02. NO WAIVERS......................................75
SECTION 10.03. EXPENSES; INDEMNIFICATION.......................76
SECTION 10.04. SHARING OF SET-OFFS.............................76
SECTION 10.05. AMENDMENTS AND WAIVERS..........................77
SECTION 10.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS......77
SECTION 10.07. NO RELIANCE ON MARGIN STOCK.....................79
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION.......79
SECTION 10.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS........79
SECTION 10.10. WAIVER OF JURY TRIAL............................80
SECTION 10.11. APPOINTMENT OF AGENT FOR SERVICES OF PROCESS....80
SECTION 10.12. JUDGMENT CURRENCY...............................80
SECTION 10.13. MAXIMUM INTEREST RATE...........................81
EXHIBITS AND SCHEDULES
Exhibit A - Note
Exhibit B - Opinion of Counsel for the Borrower
Exhibit C - Opinion of Special Counsel for the Agent
Exhibit D - Assignment and Assumption Agreement
Commitment Schedule
Schedule 4.05 - Litigation
Schedule 4.07 - Environmental Liabilities
Schedule 4.09 - Subsidiaries
Schedule 5.04 - Insurance
Schedule 5.12 - Debt
Schedule 5.17 - Investments
AGREEMENT dated as of April __, 1997 among BELLWETHER EXPLORATION COMPANY,
the GUARANTORS party hereto, the BANKS party hereto, the LC ISSUING BANKS
referred to herein and XXXXXX GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, the Borrower and Acquisition Corp., a wholly-owned Subsidiary of
the Borrower, are acquiring the Torch Acquired Properties from the Sellers
pursuant to the Acquisition Documents (in each case as defined below) on and as
of the date hereof;
WHEREAS, the Borrower intends to fund the cash obligations with respect to
the Acquisition by using the proceeds of (i) one or more Borrowings under this
Agreement and (ii) a Qualifying Junior Financing (in each case as defined
below), and lending a portion of the proceeds of the foregoing to Acquisition
Corp.; and
WHEREAS, on the Closing Date, following the acquisition of the Torch
Acquired Properties, Acquisition Corp. will be merged with and into the
Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"ACQUISITION" means the acquisition by the Borrower and Acquisition
Corp. of the Torch Acquired Properties on and as of the Closing Date pursuant to
the Acquisition Documents.
"ACQUISITION CORP." means Program Acquisition Company, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
"ACQUISITION DOCUMENTS" means the Purchase and Sale Agreement and the
assignments and conveyances entered into in connection therewith.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent, completed by
such Bank and returned to the Agent (with a copy to the Borrower).
1
"AFFILIATE" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "CONTROLLING PERSON") or (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As used herein, the term
"CONTROL" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means Xxxxxx Guaranty Trust Company of New York in its capacity as
agent for the Banks hereunder, and its successors in such capacity.
"AGGREGATE LC EXPOSURE" means, at any time, the sum, without duplication,
of (i) the aggregate amount that is (or may thereafter become) available for
drawing under all Letters of Credit outstanding at such time and (ii) the
aggregate unpaid amount of all LC Reimbursement Obligations at such time.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
case of its Base Rate Loans and its participations in Letters of Credit, its
Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its
Euro-Dollar Lending Office.
"APPROVED PETROLEUM ENGINEERS" means (i) X. X. Xxxx & Associates, (ii)
Xxxxxx & Xxxxx, Ltd., (iii) Netherland, Sewell, & Associates, Inc., (iv) Xxxxx
Xxxxx Company, (v) Xxxxxxxxxx Petroleum Consultants, Inc. or (vi) any other
independent petroleum engineers that, prior to the submission of any relevant
Reserve Report hereunder, has been selected by the Borrower by notice to the
Agent and approved in writing by the Required Banks. In addition, if the
Borrower furnishes a Reserve Report in the form of multiple reports covering
different Borrowing Base Properties and if one or more of such multiple reports
is prepared by other independent petroleum engineering firms or by the
Borrower's or Torch's internal reserve engineers, such other firms or internal
reserve engineers shall also be considered to be "APPROVED PETROLEUM ENGINEERS"
for the purposes of such report; PROVIDED that the Borrowing Base Properties
which are covered by the reports prepared by any of such Persons do not, in the
aggregate, have present values as shown in such reports which exceed ten percent
of the aggregate present values of all Borrowing Base Properties covered by such
Reserve Report taken as a whole.
"ASSET SALE" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation and any condemnation
of property (or any transfer or disposition of property in lieu of condemnation
for which the Borrower or any of its Subsidiaries receives a condemnation award
or
2
other compensation)) by the Borrower or any of its Subsidiaries of any asset,
including without limitation any sale-leaseback transaction, whether or not
involving a Capitalized Lease, but excluding (i) dispositions of oil, gas and
other Hydrocarbons after severance, other inventory, cash, Temporary Cash
Investments and obsolete, unused or unnecessary equipment and undeveloped real
estate, in each case in the ordinary course of business, (ii) dispositions of
any Property to the Borrower or a Guarantor and (iii) mineral leases by the
Borrower and its Subsidiaries entered into in the ordinary course of their
respective businesses.
"ASSIGNEE" has the meaning set forth in Section 10.06(c).
"BANK" means (i) each bank listed on the Commitment Schedule and (ii) each
Assignee which becomes a Bank pursuant to Section 10.06(c) and (iii) their
respective successors.
"BANK PARTIES" means the Banks, the LC Issuing Banks and the Agent.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% PLUS the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Loan which bears interest at the Base Rate, as
provided in Section 2.04 and pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election or the provisions of Section 2.05(a) or Article
8.
"BORROWER" means Bellwether Exploration Company, a Delaware corporation,
and its successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for the Fiscal Year ended June 30, 1996, as filed with the SEC pursuant to
the Exchange Act.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the Fiscal Quarter ended December 31, 1996, as filed with the SEC
pursuant to the Exchange Act.
"BORROWING" means a borrowing hereunder consisting of Loans made to the
Borrower on the same day pursuant to Article 2, all of which Loans are of the
same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period; PROVIDED that neither the continuation of
any Euro-Dollar Loan nor the conversion of any Loan shall be deemed to be a
Borrowing. A Borrowing is a Base Rate Borrowing if such Loans are Base Rate
Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans.
3
"BORROWING BASE" means, on any date, the lesser of (i) the aggregate
amount of the Commitments at such time and (ii) the amount that is determined in
accordance with Section 2.15 or Section 5.21 and that is specified in the most
recent Borrowing Base Notice received by the Borrower, as reduced by the
Borrower pursuant to Section 2.15(e).
"BORROWING BASE CERTIFICATE" means a certificate from the President,
Treasurer, Controller or Chief Financial Officer of the Borrower that, to the
best of his or her knowledge and in all material respects, (i) the information
contained in the most recent Reserve Report is true and correct (subject to the
qualifications set forth in Section 4.11(a) with respect to the information
contained in such Reserve Report), (ii) except as set forth on an exhibit to the
certificate, either of the Borrower or a Subsidiary owns good and marketable
title to the Properties evaluated in such Reserve Report free and clear of all
Liens except for Liens permitted under Section 5.11, and (iii) except as set
forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments in excess of $__________ at any one
time outstanding with respect to the Borrower's or any Subsidiary's Oil and Gas
Properties which would require the Borrower or any Subsidiary to deliver
Hydrocarbons produced from the Borrower's or any Subsidiary's Oil and Gas
Properties in the future without receiving full payment therefor substantially
contemporaneously with such delivery.
A "BORROWING BASE EXCESSION" exists at any date if and to the extent that
the Total Outstanding Amount exceeds the Borrowing Base at such date.
"BORROWING BASE NOTICE" means a written notice sent to the Borrower by the
Agent pursuant to Section 2.15 or 5.21, notifying the Borrower of the Borrowing
Base.
"BORROWING BASE PROPERTIES" means at any time the Properties of the
Borrower or any Subsidiary evaluated by the Banks and to which the Banks gave
loan value in determining the most recent Borrowing Base.
"CAPITAL COSTS" means, with respect to any Oil and Gas Property, all
Consolidated Capital Expenditures incurred in connection with (i) the conversion
or attempted conversion of such Property from Proved Undeveloped Reserves to
Proved Developed Reserves and (ii) the maintenance of such Property as Proved
Developed Reserves.
"CAPITALIZED LEASE" means, as applied to any Person, any lease (including,
without limitation, any financial lease) of any property (whether real, personal
or mixed) of which the discounted present value of the rental obligations of
such
4
Person as lessee would be required to be capitalized on the balance sheet of
such Person if such balance sheet were prepared in accordance with GAAP; and
"CAPITALIZED LEASE OBLIGATIONS" means, for any Capitalized Lease, the discounted
present value of the rental obligations under such lease.
"CASH INTEREST COVERAGE RATIO" means at any date the ratio of (i)
Consolidated EBITDA for the four consecutive fiscal quarters of the Borrower and
its Consolidated Subsidiaries ending on such date to (ii) the sum of (x)
Consolidated Cash Interest Expense for such period, PLUS (y) any dividends or
other distributions for such period (1) on any shares of preferred stock of the
Borrower and (2) on account of the purchase, redemption, retirement or
acquisition of any shares of the preferred stock of the Borrower or any option,
warrant or other right to acquire shares of the preferred stock of the Borrower.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder.
"CLOSING DATE" means the date on or after the Effective Date on which the
Agent shall have received all the documents specified in or pursuant to Section
3.01.
"COMMITMENT" means (i) with respect to each Bank listed on the Commitment
Schedule, the amount set forth opposite such Bank's name on the Commitment
Schedule, and (ii) with respect to any Assignee which becomes a Bank pursuant to
Section 10.06(c), the amount of the transferor Bank's Commitment assigned to it
pursuant to Section 10.06(c), in each case as such amount may be changed from
time to time pursuant to Article 2 or 10.06(c).
"COMMITMENT FEE RATE" means for any day a rate per annum equal to the
amount set forth in the column opposite the pricing level that applies on such
day:
PERIOD RATE
------ ----
For any day on which Level I Pricing applies 0.250%
For any day on which Level II Pricing applies 0.375%
For any day on which Level III Pricing applies 0.375%
"COMMITMENT PERCENTAGE" means, with respect to any Bank at any time, the
percentage which the amount of its Commitment at such time represents of the
aggregate amount of all the Commitments at such time. At any time after the
Commitments shall have terminated, the term "COMMITMENT PERCENTAGE" shall refer
to a Bank's Commitment Percentage immediately before such termination, adjusted
to reflect any subsequent assignments pursuant to Section 10.06(c).
5
"COMMITMENT REDUCTION DATE" means each date on which the Commitments are
to be reduced pursuant to Section 2.07, including without limitation the
Maturity Date.
"COMMITMENT SCHEDULE" means the Commitment Schedule attached hereto.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the additions
to property, plant and equipment and other capital expenditures of the Borrower
and its Consolidated Subsidiaries for such period, as the same are or would be
set forth in a consolidated statement of cash flows of the Borrower and its
Consolidated Subsidiaries for such period.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, the
Consolidated Interest Expense paid in cash during such period.
"CONSOLIDATED DEBT" means, at any date, the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED EBIT" means, for any period, the sum of (i) Consolidated Net
Income for such period PLUS (ii) to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of (A)
Consolidated Interest Expense and (B) income tax expense.
"CONSOLIDATED EBITDA" means, for any period, the sum of (i) Consolidated
EBIT for such period PLUS (ii) to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of depreciation,
amortization and other similar non-cash charges.
"CONSOLIDATED FUNDED DEBT" means, at any date, Consolidated Debt of the
types referred to in items (i), (ii), (iv), (vi) and (vii) of the definition of
Debt, that has a scheduled maturity date of more than a year from the date of
the original issuance thereof, including without limitation the short term
portion of any obligations with respect to such Consolidated Debt.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries (including
amortization of debt discounts, net cost under interest rate contracts and all
of the interest but not the principal component of rentals in respect of
Capitalized Lease Obligations) determined on a consolidated basis for such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
for
6
such period, adjusted to exclude the effect of any extraordinary or other
non-recurring gain (but not loss).
"CONSOLIDATED RENTAL EXPENSE" means, for any period, the aggregate rental
expense of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis for such period.
"CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries MINUS
their consolidated Intangible Assets, all determined as of such date, PLUS to
the extent deducted in determining such consolidated stockholders' equity at
such date, the aggregate amount of non-cash write-downs of the book value of
[SPECIFY CERTAIN LONG-TERM ASSETS WITH RESPECT TO WHICH WRITE-DOWNS WILL BE
ADDED BACK] taken after [January 1, 1996]. As used herein, "INTANGIBLE ASSETS"
means the amount (to the extent reflected in determining such consolidated
stockholders' equity) of (i) all write-ups (except write-ups resulting from
foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business, but
in such case net of any write-downs with respect to such business added back in
the immediately preceding sentence in determining Consolidated Tangible Net
Worth) in the book value of any asset owned by the Borrower or a Consolidated
Subsidiary, (ii) all Investments in unconsolidated Subsidiaries and all equity
Investments in Persons which are not Subsidiaries and (iii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, anticipated future benefit of tax loss
carry-forwards, copyrights, organization or developmental expenses and other
intangible assets.
"CREDIT EVENT" has the meaning set forth in Section 3.02.
"CREDIT EXPOSURE" means, with respect to any Bank at any time, (i) the
amount of its Commitment (whether used or unused) at such time or (ii) if the
Commitments have terminated in their entirety, such Bank's Outstanding Amount.
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business,
7
(iv) all obligations of such Person under Capitalized Leases, (v) all
non-contingent obligations (and, for purposes of Section 5.10 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit (including a Letter of Credit) or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the amount of such other Person's Debt
Guaranteed thereby); PROVIDED, HOWEVER, that the Debt of any Person shall not
include (i) any liability for gas balancing that was incurred by such Person in
the ordinary course of business, or (ii) any Production Payments and Reserve
Sales.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DETERMINATION DATE" means (i) each date that is five Domestic Business
Days after the date on which the Agent shall present a Borrowing Base Notice to
the Borrower (as set forth in Section 2.15(d)) and (ii) the date that is five
Domestic Business Days after the date of the consummation of the sale of any
Permitted Subordinated Debt (other than Debt issued in the Senior Subordinated
Securities Sale).
"DISCOUNTED PRESENT VALUE OF FUTURE NET REVENUE" means, with respect to
all Borrowing Base Properties and as of any specified date, an amount equal to
the present value of Future Net Revenue from such Borrowing Base Properties
(determined before tax, general and administrative and interest expense),
determined by discounting the stated amount of such Future Net Revenue (LESS the
adjustments noted in the immediately preceding parenthetical) from the date on
which such amount is expected to be realized to such specified date at the
applicable discount rate used for the purposes of the computations contained in
the most recent Reserve Report covering such Borrowing Base Properties, computed
8
on a simple interest basis for years of 365 days (or 366 days in a leap year)
and otherwise in accordance with customary and prudent oil and gas lending
practices.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 10.09.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, licenses and other governmental restrictions relating to the
environment or the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including (without limitation) ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ENVIRONMENTAL LIABILITIES" means all liabilities in connection with or
relating to the business, assets, presently or previously owned, leased or
operated property, activities (including, without limitation, off-site disposal)
or operations of the Borrower and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws (including without limitation
any matter disclosed or required to be disclosed in Schedule 4.07 hereto).
"EQUITY SALE" means any public or private sale(s) of Non-Redeemable Stock
of the Borrower by the Borrower that occurs prior to, or as part of, the
consummation by the Borrower of a Qualifying Junior Financing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
9
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"EURO-DOLLAR LOAN" means a Loan which bears interest at a Euro-Dollar Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.04(b).
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to Section
2.04(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "EUROCURRENCY LIABILITIES" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXISTING CREDIT FACILITY" means the Credit Agreement dated as of October
15, 1996 among the Borrower, the guarantors party thereto, the banks party
thereto and The Chase Manhattan Bank, as agent for such banks.
10
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, PROVIDED that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Xxxxxx Guaranty Trust Company of New York on
such day on such transactions as determined by the Agent.
"FINANCING DOCUMENTS" means this Agreement and the Notes.
"FISCAL QUARTER" means a fiscal quarter of the Borrower.
"FISCAL YEAR" means a fiscal year of the Borrower.
"FUTURE NET REVENUE" means, with respect to any Hydrocarbon Interests and
for any period, the future gross revenue from such Hydrocarbon Interest for such
period as estimated in the then most recent Reserve Report LESS the sum of (in
each case, without duplication) (i) any royalties payable in connection with
such Property during such period, (ii) any overriding royalties, net profits
interests and production payments payable in connection with such Property
during such period, (iii) all production, ad valorem and severance taxes
relating to such Property and payable during such period and (iv) Capital Costs
and Production Expenses relating to such Property during such period necessary
to provide such future gross revenue.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
the Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks, subject to Section 1.02.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time, PROVIDED that, if a Euro-Dollar
Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant
to Article 8, such Loan shall be included in the same Group or Groups of Loans
from time to time as it would have been in if it had not been so converted or
made.
11
"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), (ii)
to reimburse a bank for amounts drawn under a letter of credit for the purpose
of paying such Debt or (iii) entered into for the purpose of assuring in any
other manner the holder of such Debt or other obligation of the payment thereof
or to protect such holder against loss in respect thereof (in whole or in part),
PROVIDED that the term "GUARANTEE" shall not include obligations under gas
balancing arrangements or endorsements for collection or deposit, in each case
in the ordinary course of business. The term "GUARANTEE" used as a verb has a
corresponding meaning.
"GUARANTOR" means, subject to Sections 5.18 and 9.08, each Person who has
executed this Agreement as a guarantor.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
Hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"HYDROCARBON INTERESTS" of any Person means all rights, titles, interests
and estates of such Person in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interests and production
payment interests, including any reserved or residual interest of whatever
nature.
"HYDROCARBONS" mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all
products refined from the foregoing and all other minerals.
"INDEMNITEE" has the meaning set forth in Section 10.03(b).
"INFORMATION MEMORANDUM" means the confidential Information Package dated
March 19, 1997 furnished to the Banks in connection with the transactions
contemplated hereby.
"INITIAL RESERVE REPORTS" means the reserve reports as of June 30, 1996
referred to in the Registration Statement of the Borrower on Form S-3 with
12
respect to the Equity Sale and/or the Senior Subordinated Securities Sale or, in
lieu of, or in addition to, such reserve reports, such other reserve reports as
may be agreed between the Borrower and the Sellers, in form and substance
satisfactory to the Agent in its sole good faith discretion and in accordance
with the standards set forth in Section 2.15(c).
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in such notice, PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a Commitment Reduction Date
(determined on the first day of such Interest Period) but does not end on
such date, then (i) the principal amount (if any) of each Euro-Dollar Loan
required to be repaid on such date shall have an Interest Period ending on
such Commitment Reduction Date and (ii) the remainder (if any) of each
such Euro-Dollar Loan shall have an Interest Period determined as set
forth above.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, Guarantee, time deposit or otherwise (but
not including any demand deposit).
"LC EXPOSURE" means, with respect to any Bank at any time, an amount equal
to its Commitment Percentage of the Aggregate LC Exposure at such time.
"LC INDEMNITEES" has the meaning set forth in Section 2.16.
13
"LC ISSUING BANK" means Xxxxxx Guaranty Trust Company of New York, in its
capacity as an issuer of Letters of Credit (and any other Bank which, at the
Borrower's request, shall have agreed to issue Letters of Credit hereunder and
confirmed such agreement in a notice to the Agent), each in its capacity as an
LC Issuing Bank under the Letter of Credit facility described in Section 2.16.
"LC OFFICE" means, with respect to any LC Issuing Bank, the office at
which it books any Letter of Credit issued by it.
"LC PAYMENT DATE" has the meaning set forth in Section 2.16.
"LC REIMBURSEMENT DUE DATE" has the meaning set forth in Section 2.16.
"LC REIMBURSEMENT OBLIGATIONS" means, at any time, all obligations of the
Borrower to reimburse the LC Issuing Banks for amounts paid by the LC Issuing
Banks in respect of drawing under Letters of Credit, including any portion of
any such obligations to which a Bank has become subrogated pursuant to Section
2.16(i)(i).
"LETTER OF CREDIT" means a letter of credit issued hereunder by an LC
Issuing Bank.
"LETTER OF CREDIT FEE RATE" means for any date a rate equal to the
Euro-Dollar Margin for such date.
"LEVEL I PRICING" applies on any date on which the Total Outstanding
Amount is less than 50% of the Borrowing Base then in effect.
"LEVEL II PRICING" applies on any date on which the Total Outstanding
Amount is greater than or equal to 50% but less than or equal to 75% of the
Borrowing Base then in effect.
"LEVEL III PRICING" applies on at any date on which the Total Outstanding
Amount exceeds 75% of the Borrowing Base then in effect.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset (including any production payment,
any obligation to deliver Hydrocarbons in the future in satisfaction of an
advance payment previously received or any similar arrangement which gives a
creditor preferential access to minerals in place). For purposes hereof, the
Borrower or any
14
Subsidiary shall be deemed to own subject to a Lien (i) any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement or other title retention agreement relating to such
asset (other than a Hydrocarbon Interest consisting of a royalty interest) or
any Capital Lease or (ii) any account receivable transferred by it with recourse
for collectibility (including any such transfer subject to a holdback or similar
arrangement which effectively imposes the risk of collectibility upon the
transferor).
"LOAN" means a loan made by a Bank pursuant to Section 2.01; PROVIDED that
if any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term "LOAN" shall refer to
the combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.04(b).
"LONG TERM JUNIOR FINANCING" means (i) the Senior Subordinated Securities
Sale (if any) together with (ii) the Equity Sale (if any).
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect upon the
financial condition, results of operations, properties, assets or business of
the Borrower and its Subsidiaries, taken as a whole; (ii) a material adverse
effect on the ability of the Borrower or any other Person to consummate the
transactions contemplated hereby to occur on the Closing Date; (iii) a material
adverse effect on the ability of the Borrower to perform under the Financing
Documents or (iv) a material adverse effect on the rights and remedies of the
Agent and the Banks under the Financing Documents.
"MATERIAL DEBT" means Debt (other than the Loans and LC Reimbursement
Obligations) of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate principal or face
amount exceeding $5,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of Debt
(other than the Loans and LC Reimbursement Obligations) and/or payment or
collateralization obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $5,000,000.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
15
"MATERIAL SUBSIDIARY" means, at any time, any Subsidiary that, together
with its Subsidiaries, (a) accounted for more than 5% of the revenue of the
Borrower and its Subsidiaries determined on a consolidated basis for the then
most recently completed Fiscal Year, or (b) was the owner of more than 5% of the
assets of the Borrower and its Subsidiaries determined on a consolidated basis
at the end of such Fiscal Year, all as shown in the case of (a) and (b) on the
consolidated financial statements of the Borrower and its Subsidiaries for such
Fiscal Year. [DOES THIS INCLUDE ALL OF THE TORCH ACQUIRED PROPERTIES?]
"MATURITY DATE" means March 31, 2002.
"MULTIEMPLOYER PLAN" means, at any time, an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NET CASH PROCEEDS" means, with respect to any transaction or event, an
amount equal to the cash proceeds received by the Borrower or any or its
Subsidiaries from or in respect of such transaction or event (including any cash
proceeds received as income or other proceeds of any noncash proceeds of any
Asset Sale), LESS (x) any expenses reasonably incurred by such Person in respect
of such transaction or event and (y) if such transaction or event is an Asset
Sale, (i) the amount of any Debt secured by a Lien on any asset disposed of in
such Asset Sale and discharged from the proceeds thereof and (ii) any taxes
actually paid or to be payable by such Person (as estimated by a senior
financial or accounting officer of the Borrower, giving effect to the overall
tax position of the Borrower) in respect of such Asset Sale.
["NGL-TORCH GAS PLANT VENTURE" means NGL-Torch Gas Plant Venture, a
general partnership organized under the laws of the State of Texas.]
"NON-REDEEMABLE STOCK" means capital stock issued by the Borrower,
PROVIDED that neither the Borrower nor any of its Subsidiaries has any
obligation to redeem or purchase such stock or to exchange such stock for, or
convert such stock to, any other security (other than Non-Redeemable Common
Stock), whether such obligation arises pursuant to the terms of such stock or of
any agreement relating thereto or otherwise and whether or not such obligation
exists in all circumstances or only upon the occurrence of a particular event or
condition or upon the passage of time or otherwise. "NON-REDEEMABLE COMMON
STOCK" means Non-Redeemable Stock that is common stock issued by Borrower.
16
"NOTES" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the Borrower's obligation to repay the Loans,
and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.05.
"OBLIGOR" means the Borrower and each Guarantor.
"OIL AND GAS PROPERTIES" means all of a Person's interest in and to
Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with
Hydrocarbon Interests; all presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any governmental body or agency having jurisdiction) which may affect
all or any portion of the Hydrocarbon Interests; all operating agreements,
contracts and other agreements which relate to any of the Hydrocarbon Interests
or the production, sale, purchase, exchange or processing of Hydrocarbons from
or attributable [and saved] to such Hydrocarbon Interests; all Hydrocarbons in
and under and which may be produced and saved or attributable [and saved] to the
Hydrocarbon Interests, the lands covered thereby and all oil in tanks and all
rents, issues, profits, proceeds, products, revenues and other income from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any way appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, Properties, rights, titles, interests
and estates described or referred to above, including any and all Property, real
or personal, now owned or hereafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil xxxxx, gas xxxxx, injection xxxxx or other xxxxx, building,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitude together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.
"OUTSTANDING AMOUNT" means, with respect to any Bank at any time, the sum
of (i) the aggregate outstanding principal amount of its Loans and (ii) its LC
17
Exposure, all determined at such time after giving effect to any prior
assignments by or to such Bank pursuant to Section 10.06(c).
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 10.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED SUBORDINATED DEBT" means Debt issued in the Senior Subordinated
Securities Sale and any other subordinated debt issued by the Borrower or its
Subsidiaries which in each case contains terms and conditions, including
subordination provisions, approved by the Required Banks in accordance with
Section 5.21(c).
"PERSON" means an individual, a corporation, a limited liability company,
a partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means, at any time, an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRICE HEDGE" has the meaning set forth in Section 5.19.
"PRIME RATE" means the rate of interest publicly announced by Xxxxxx
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"PRODUCTION EXPENSES" means, with respect to any Oil and Gas Property, all
cash costs and expenses incurred for or payable in connection with the lifting,
producing, gathering, separating, treating, compressing, storing, processing,
marketing, transporting or otherwise handling Hydrocarbons from such Property,
or developing, reworking, equipping, operating, maintaining and plugging and
abandoning such Property.
18
"PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer to any
Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar dominated), master limited partnership
interest or other interest in Oil and Gas Properties, reserves or the right to
receive all or a portion of the production or the proceeds from the sale of
production attributable to such Properties where the holder of such interest has
recourse solely to such production or proceeds of production, subject to the
obligation of the grantor or transferor to operate and maintain, or cause the
subject interests to be operated and maintained, in a reasonably prudent manner
or other customary standard or subject to the obligation of the grantor or
transferor to indemnify for environmental, title or other matters customary in
the oil and gas business.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PROVED DEVELOPED RESERVES" means "proved developed oil and gas reserves"
as specified under Rule 4-10(a)(3) of Regulation S-X of the Exchange Act.
"PROVED RESERVES" means Proved Developed Reserves and Proved
Undeveloped Reserves.
"PROVED UNDEVELOPED RESERVES" means "proved undeveloped oil and gas
reserves" as specified under Rule 4-10(a)(4) of Regulation S-X of the Exchange
Act.
"PURCHASE AND SALE AGREEMENT" means the Acquisition and Consolidation
Agreement dated as of March 31, 1997 by and among the Borrower, Acquisition
Corp. and the Sellers for the purchase and sale of the Torch Acquired
Properties.
"QUALIFYING JUNIOR FINANCING" means a Long Term Junior Financing, if the
gross proceeds from any Senior Subordinated Securities Sale and Equity Sale
included therewith are in an aggregate amount such that, the sum of (i) the
Borrowing Base PLUS (ii) the gross proceeds of such Long Term Junior Financing,
is not less than $180,000,000.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30 and
December 31.
"REFERENCE BANKS" means the principal London offices of _______________,
_______________ and Xxxxxx Guaranty Trust Company of New York, and "REFERENCE
BANK" means any one of such Reference Banks.
19
"REGULATED ACTIVITY" means any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substance.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"RELEASE" means any discharge, emission or release, including a Release as
defined in CERCLA at 42 U.S.C. Section 9601(22). The term "RELEASED" has a
corresponding meaning.
"REQUIRED BANKS" means, at any time, Banks having at least 66-2/3% of the
aggregate amount of the Credit Exposures at such time.
"RESERVE REPORT" means a report prepared and delivered in accordance with
Section 5.02.
"RESPONSIBLE OFFICER" means, as to any Person, its Chairman, Vice
Chairman, President, or any Vice President duly authorized to act on behalf of
such Person.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of Non-Redeemable Stock), (ii) any payment on account of (A) the
purchase, redemption, retirement or acquisition of (1) any shares of the
Borrower's capital stock or (2) any option, warrant or other right to acquire
shares of the Borrower's capital stock (but not including payments of principal,
premium (if any) or interest made pursuant to the terms of convertible debt
securities prior to conversion) or (B) the settlement of any Derivative
Obligation the terms of which were tied to or based upon the movement in the
trading price of the capital stock of the Borrower on the NASDAQ during any
period, or (iii) any payment of principal on, or on account of, the purchase,
redemption, retirement or other acquisition, in each case prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment of, any
Permitted Subordinated Debt.
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but excluding the last Commitment Reduction Date.
"SEC" means the Securities and Exchange Commission.
"SELLERS" means each of the entities described as a Seller pursuant to the
Purchase and Sale Agreement.
20
"SENIOR SUBORDINATED SECURITIES SALE" means any public or private sale by
the Borrower of subordinated debt securities of the Borrower containing terms
and conditions, including subordination provisions, approved by the Required
Banks, that occurs as part of a Qualifying Junior Financing.
["XXXXXX GAS PLANT VENTURE" means Xxxxxx Gas Plant Venture, a general
partnership organized under the laws of the State of Texas.]
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" means a Subsidiary of the Borrower [; PROVIDED
that associations, joint ventures or other relationships (a) which are
established pursuant to a standard form operating agreement or similar agreement
or which are partnerships for purposes of income taxation only, (b) which are
not corporations or partnerships (or subject to the Uniform Partnership Act)
under applicable state law, and (c) whose businesses are limited to the
exploration, development and operation of Oil and Gas Properties and interests
owned directly by the parties in such associations, joint ventures or
relationships, shall not be deemed to be "SUBSIDIARIES" of such Person.] [PLEASE
EXPLAIN NEED FOR CARVEOUT.]
[NOTE: although Xxxxxx Gas Plant Venture and NGL-Torch Gas Plant Venture are
Subsidiaries of the Borrower, they are not permitted to be Guarantors] [PLEASE
EXPLAIN NEED FOR CARVEOUT.]
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct obligations
of the United States or any agency thereof or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A-1 by
Standard & Poor's Ratings Services and P-1 by Xxxxx'x Investors Service, Inc.,
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized or licensed under the laws of the United States or any State thereof
and, either itself or its holding company, has capital, surplus and undivided
profits aggregating at least $400,000,000 or (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with an office
of a bank or trust company meeting the criteria specified in clause (iii) above,
PROVIDED in each case that such Investment matures within one year after it is
acquired by the Borrower or a Subsidiary.
"TORCH" means Torch Energy Advisors Incorporated, a Delaware corporation.
21
"TORCH ACQUIRED PROPERTIES" means the following Properties included in the
Torch Consolidated Programs and acquired by the Borrower and/or Acquisition
Corp., as applicable, on the Closing Date pursuant to the Acquisition Documents:
the outstanding capital stock of Black Hawk Oil Company, a Delaware corporation,
and TEAI Oil & Gas Company, a Delaware corporation, and the partnership
interests of TEAI VIII-A Limited Partnership, a Texas limited partnership, and
1989-I TEAI Limited Partnership, a Texas limited partnership.
"TORCH CONSOLIDATED PROGRAMS" means [certain Oil and Gas Properties owned
by the Sellers and managed or sponsored by Torch] [NEED A BETTER DESCRIPTION].
"TOTAL OUTSTANDING AMOUNT" means, at any time, the sum of (i) the
aggregate outstanding principal amount of the Loans and (ii) the Aggregate LC
Exposure.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America.
"VALUE" means, with respect to any Oil and Gas Property, the Discounted
Present Value of Future Net Revenue from such Oil and Gas Property as set forth
in the then most recent Reserve Report.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
PROVIDED that, if the Borrower notifies the Agent that the Borrower wishes to
amend any provision hereof to eliminate the effect of any change in GAAP (or if
the Agent notifies the Borrower that the Required Banks wish to amend any
provision hereof for such purpose), then such provision shall be applied on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such provision is amended in
a manner satisfactory to the Borrower and the Required Banks.
22
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any of the terms defined in Section 1.01 may, unless the
context otherwise requires, be used in the singular or plural depending on the
reference. "Include", "includes" and "including" shall be deemed to be followed
by "without limitation" whether or not they are in fact followed by such words
or words of like import. "Writing", "written" and comparable terms refer to
printing, typing and other means of reproducing words in a visible form.
References to any agreement or contract are to such agreement or contract as
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof.
ARTICLE 2
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make loans to the Borrower
from time to time during the Revolving Credit Period; PROVIDED that immediately
after each such Loan is made, (i) the aggregate outstanding principal amount of
such Bank's Loans shall not exceed its Commitment and (ii) the Total Outstanding
Amount shall not exceed the Borrowing Base at such time. Each Borrowing under
this Section shall be in an aggregate principal amount of $1,000,000 or any
larger multiple of $500,000 (except that any such Borrowing may be in the
aggregate amount of the unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, prepay Loans to
the extent permitted by Section 2.08 and reborrow at any time during the
Revolving Credit Period under this Section.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the Agent
notice (a "NOTICE OF BORROWING") not later than 11:00 A.M. (New York City time)
on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
23
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
(b) Promptly after receiving a Notice of Borrowing, the Agent shall notify
each Bank of the contents thereof and of such Bank's ratable share of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower. The Borrower shall not give a Notice of Borrowing at any time if,
after giving effect thereto, more than [8] Groups of Loans would be outstanding.
(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the Agent
at its address specified in or pursuant to Section 10.01. Unless the Agent
determines that any applicable condition specified in Article 3 has not been
satisfied, the Agent will make the funds so received from the Banks available to
the Borrower at the Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Bank before the date
of any Borrowing that such Bank will not make available to the Agent such Bank's
share of such Borrowing, the Agent may assume that such Bank has made such share
available to the Agent on the date of such Borrowing in accordance with
subsection (b) of this Section and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (i) if such amount is repaid by
the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.04 and (ii) if such
amount is repaid by such Bank, the Federal Funds Rate. If such Bank shall repay
to the Agent such corresponding amount, the Borrower shall not be required to
repay such amount and the amount so repaid by such Bank shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.03. MATURITY OF LOANS. Each Loan shall mature, and the principal
amount thereof shall be due and payable (together with interest accrued
thereon), on the Maturity Date.
24
SECTION 2.04. INTEREST RATES. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, from the date such Loan is made
until it becomes due for each day at a rate per annum equal to the Base Rate.
Such interest shall be payable quarterly in arrears on each Quarterly Payment
Date. Any overdue principal of or interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% PLUS the interest rate otherwise applicable to such Base Rate
Loan for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day PLUS
the London Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"EURO-DOLLAR MARGIN" means for any day the amount set forth below in the
column opposite the pricing level that applies on such day:
DATE MARGIN
----- --------
For any day on which Level I Pricing applies 0.875%
For any day on which Level II Pricing applies 1.00%
For any day on which Level III Pricing applies 1.25%
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the arithmetic mean (rounded upwards, if necessary, to the next higher
1/16 of 1%) of the offered rates for deposits in Dollars quoted as of 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period on Telerate Page 3750 in an amount approximately equal to the
principal amount of the Euro-Dollar Loans to which such Interest Period is to
apply and for the approximate duration of such Interest Period; PROVIDED that if
there are more than six of such rates quoted then the highest and lowest rates
shall be eliminated for these purposes; and PROVIDED FURTHER that if no, or only
one, such offered quotation appears, the relevant arithmetic mean (calculated as
mentioned above) shall be determined (i) on the basis of the offered rates for
deposits in Dollars on the Reuters Screen LIBO Page and (ii) if such rate or
rates do not appear on either Telerate Page 3750 or the Reuters Screen LIBO
Page, on the basis of the respective rates per annum at which deposits in
Dollars are offered to each Reference Bank in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Reference Bank to which such
Interest Period is to apply and for a period of time comparable to such Interest
Period.
25
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 2% PLUS the Euro-Dollar Margin for such day PLUS
the London Interbank Offered Rate applicable to such Loan on the day before such
payment was due and (ii) the sum of 2% PLUS the Euro-Dollar Margin for such day
PLUS a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by DIVIDING (x) the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per
annum at which one day (or, if such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period of time not longer than
three months as the Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Reference Banks
are offered to such Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 MINUS the Euro-Dollar
Reserve Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% PLUS the
Base Rate for such day).
(d) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall promptly notify the Borrower and the participating
Banks of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis for the reasons set forth in clause (a) or (b) of Section 8.01,
the provisions of Section 8.01 shall apply.
SECTION 2.05. METHOD OF ELECTING INTEREST RATES. (a) The Loans included in
each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject to subsection (d) of this Section and the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day
and
26
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day or
elect to continue such Loans as Euro-Dollar Loans for an additional
Interest Period, subject to Section 2.11 if any such conversion is
effective on any day other than the last day of an Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Agent not later than 11:00 A.M. (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected in such notice is to be effective. A Notice of Interest Rate Election
may, if it so specifies, apply to only a portion of the aggregate principal
amount of the relevant Group of Loans; PROVIDED that (A) such portion is
allocated ratably among the Loans comprising such Group, (B) the portion to
which such Notice applies, and the remaining portion to which it does not apply,
are each at least $1,000,000 (unless such portion is comprised of Base Rate
Loans) and (C) immediately after giving effect to such Notice, there shall be
not more than 8 Groups of Loans outstanding. If no such notice is timely
received before the end of an Interest Period for any Group of Euro-Dollar
Loans, the Borrower shall be deemed to have elected that such Group of Loans be
converted to Base Rate Loans at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if the Loans resulting from such conversion are to
be Euro-Dollar Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
27
(c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall notify each Bank of
the contents thereof and such notice shall not thereafter be revocable by the
Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans to, or
continue any Loans for an additional Interest Period as, Euro-Dollar Loans if
(i) the aggregate principal amount of any Group of Euro-Dollar Loans created or
continued as a result of such election would be less than $1,000,000.00 or (ii)
a Default shall have occurred and be continuing when the Borrower delivers
notice of such election to the Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.
SECTION 2.06. FEES. (a) The Borrower shall pay to the Agent, for the
account of the Banks ratably in proportion to their respective Commitment
Percentages, a commitment fee at the Commitment Fee Rate on the daily average
amount by which the aggregate amount of the Commitments exceeds the Total
Outstanding Amount. Such commitment fee shall accrue from and including the
Effective Date to but excluding the date on which the Commitments terminate in
their entirety.
(b) The Borrower shall pay to the Agent, for the account of the Banks
ratably in proportion to their Commitment Percentages, a letter of credit fee
calculated for each day at the Letter of Credit Fee Rate for such day on the
aggregate amount available for drawing under all Letters of Credit at the close
of business on such day.
(c) The Borrower shall pay to each LC Issuing Bank fronting fees and other
charges in the amounts and at the times agreed between the Borrower and such LC
Issuing Bank.
(d) Fees accrued for the account of the Banks under subsections (a) and (b)
of this Section shall be payable quarterly in arrears on each Quarterly Payment
Date and on the day on which the Commitments terminate in their entirety and, in
the case of clause (b), on the first date thereafter on which there is no
Aggregate LC Exposure.
(e) The Borrower shall pay to the Agent such other fees in amounts, and at
the time and in the manner, previously agreed upon between the Borrower and the
Agent in the letter dated February [12], 1997 from Xxxxxx Guaranty Trust
28
Company of New York and X.X. Xxxxxx Securities, Inc. and agreed to by
Bellwether Exploration Company.
SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS. (a) VOLUNTARY
REDUCTION. The Borrower may, upon at least three Domestic Business Days' notice
to the Agent, (i) terminate the Commitments at any time, if there are no
Outstanding Amounts at such time, or (ii) ratably reduce from time to time by an
aggregate amount of $5,000,000 or a larger multiple of $1,000,000, the aggregate
amount of the Commitments on such date in excess of the Total Outstanding
Amount. Promptly after receiving a notice pursuant to this subsection, the Agent
shall notify each Bank of the contents thereof.
(b) MANDATORY SCHEDULED REDUCTION. The aggregate amount of the Commitments
shall be reduced (x) on December 31, 1998, by the aggregate amount by which the
Commitments on such date are greater than the Borrowing Base in effect on such
date and (y) on each Quarterly Date thereafter until the Maturity Date, by an
aggregate amount equal to the product of 1/12 TIMES the aggregate amount of the
Commitments on December 31, 1998 after giving effect to the reduction on such
date pursuant to clause (x) above.
(c) APPLICATION OF REDUCTIONS. Each reduction of Commitments under this
Section 2.07 shall be applied to reduce the Commitments of the Banks pro rata in
accordance with the respective amounts thereof.
(d) TERMINATION. Unless previously terminated, the Commitments shall
terminate in their entirety on the Maturity Date.
SECTION 2.08. OPTIONAL PREPAYMENTS. (a) Subject in the case of Euro-Dollar
Loans to Section 2.11, the Borrower may, upon at least one Domestic Business
Day's notice to the Agent, prepay any Group of Base Rate Loans or, upon at least
three Euro-Dollar Business Days' notice to the Agent, prepay any Group of
Euro-Dollar Loans, in each case in whole at any time, or from time to time in
part in amounts aggregating $1,000,000 or any larger multiple of $500,000, by
paying the principal amount to be prepaid together with interest accrued thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Agent shall notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment, and such notice shall not thereafter be
revocable by the Borrower.
29
SECTION 2.09. MANDATORY PREPAYMENTS. (a) Upon the date of any reduction of
Commitments pursuant to Section 2.07, the Borrower shall prepay an amount of
Loans and provide cash cover for outstanding Letters of Credit in accordance
with Section 6.03 in such amounts as may be necessary so that immediately after
giving effect to such payment and/or collateralization, (i) the Total
Outstanding Amount LESS the amount of collateral so deposited with respect to
Aggregate LC Exposure is not greater than (ii) the aggregate amount of the
Commitments as so reduced.
(b) Without limitation of clause (a) above, if at any time the Agent shall
determine that a Borrowing Base Excession exists, the Agent shall forthwith
notify the Banks and the Borrower. On or before the date falling 6 months after
the inception of a Borrowing Base Excession, the Borrower shall remedy such
Borrowing Base Excession by (i) prepaying such principal amount of the Loans as
may be necessary to reduce the outstanding principal amount thereof to the
Borrowing Base at the date of prepayment, (ii) providing cash cover for
Aggregate LC Exposure in accordance with Section 6.03, (iii) increasing the
Borrowing Base through the addition of Borrowing Base Properties in accordance
with Sections 2.15, 5.02 and 5.21; PROVIDED that, the value of any such
Borrowing Base Properties and whether such value is sufficient to remedy such
Borrowing Base Excession shall be determined by the Required Banks, in their
good faith discretion and in a manner that is consistent with the standards set
forth in Section 2.15(c), or (iv) a combination of (i), (ii) and/or (iii).
(c) Each repayment or prepayment of Loans pursuant to this Section 2.09
shall be made together with accrued interest to the date of payment, and shall
be applied ratably to payment of the Loans of the several Banks in proportion to
their Commitments (or, if the Commitments have been terminated, to the aggregate
outstanding principal amounts of their Loans). Within the foregoing limits of
this Section 2.09, each required payment or prepayment shall be made with
respect to such outstanding Group or Groups of Loans as the Borrower may
designate to the Agent not less than three Euro-Dollar Business Days prior to
the date required for such payment or prepayment or, failing such designation by
the Borrower, as the Agent may specify by notice to the Borrower and the Banks.
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and LC
Reimbursement Obligations and each payment of fees hereunder (other than fees
payable directly to the LC Issuing Banks) not later than 1:00 P.M. (New York
City time) on the date when due, in Federal or other funds immediately available
in New York City, to the Agent at its address specified in or pursuant to
Section 10.01. The Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Agent for the account of the Banks.
Whenever any
30
payment of principal of, or interest on, the Base Rate Loans or LC Reimbursement
Obligations or any payment of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Agent before the date on which any
payment is due to the Banks hereunder that the Borrower will not make such
payment in full, the Agent may assume that the Borrower has made such payment in
full to the Agent on such date and the Agent may, in reliance on such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent that the Borrower
shall not have so made such payment, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate.
SECTION 2.11. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.05(b), or if the Borrower fails to borrow, prepay,
convert or continue any Euro-Dollar Loans after notice has been given to any
Bank in accordance with Section 2.02(b), 2.05(c) or 2.08(b), the Borrower shall
reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after such payment or conversion or failure to borrow,
prepay, convert or continue; PROVIDED that such Bank shall promptly have
delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.12. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the
31
first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.13. NOTES. (a) The Borrower's obligation to repay the Loans
of each Bank shall be evidenced by a single Note payable to the order of such
Bank for the account of its Applicable Lending Office.
(b) Each Bank may, by notice to the Borrower and the Agent, request that
the Borrower's obligation to repay such Bank's Loans of a particular type be
evidenced by a separate Note. Each such Note shall be in substantially the form
of Exhibit A hereto with appropriate modifications to reflect the fact that it
relates solely to Loans of the relevant type. Each reference in this Agreement
to the "Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
(c) Promptly after it receives each Bank's Note pursuant to Section
3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount and type of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
PROVIDED that a Bank's failure to make (or any error in making) any such
recordation or endorsement shall not affect the Borrower's obligations hereunder
or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
SECTION 2.14. REGULATION D COMPENSATION. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one MINUS the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after such Bank gives
such notice and (y) shall notify the Borrower at least five Euro-Dollar Business
Days before each date on which interest is payable on the Euro-Dollar Loans of
the amount then due it under this Section.
32
SECTION 2.15. BORROWING BASE. (a) INITIAL BORROWING BASE. During the
period from the Closing Date until the next Determination Date, the Borrowing
Base shall (subject to redetermination on or prior to the Closing Date, as
applicable, in accordance with Section 3.01(m)) be [(i)] $90,000,000, [in the
event that the principal amount of the debt securities sold in the Senior
Subordinated Securities Sale prior thereto or simultaneously therewith is in an
aggregate amount equal to $100,000,000 or (ii) in an amount determined by the
Required Banks in a manner that is consistent with the standards set forth in
Section 2.15(c), in the event that the principal amount of the debt securities
sold in the Senior Subordinated Securities Sale is in an aggregate amount other
than $100,000,000.]
(b) BORROWING BASE REDETERMINATIONS PURSUANT TO SECTION 5.02. Within 30
days after the receipt of (i) any reports delivered pursuant to Section 5.02,
(such reports together with the Initial Reserve Report, the "RESERVE REPORTS"),
together with (ii) the Borrowing Base Certificate, the Agent shall notify the
Company and the Banks of a proposed Borrowing Base (such date, the "BB PROPOSAL
DATE"). Within 30 days after the BB Proposal Date, if any Bank disapproves of
the proposed Borrowing Base, such Bank shall submit to the Agent in writing, its
disapproval of the proposed Borrowing Base which disapproval shall state the
maximum Borrowing Base acceptable to such Bank. The Borrowing Base proposed by
the Agent shall become the new Borrowing Base after the close of business on the
thirtieth day following the BB Proposal Date (or the next succeeding Domestic
Business Day if such date is not a Domestic Business Day) unless, on or prior to
such time, (i) the Agent shall have received the written consent of the Required
Banks to such proposed Borrowing Base, in which case the Agent shall notify the
Borrower of the determination of the Borrowing Base by the Banks or (ii) Banks
having more than 33 1/3% of the Credit Exposure at such time shall have
expressed their disapproval to the Agent in the manner set forth in the previous
sentence, in which case, until the next Determination Date, the Borrowing Base
shall be the lowest determination agreed to by the Required Banks and the Agent
shall notify the Borrower of such determination.
(c) BORROWING BASE REDETERMINATION STANDARDS. Each redetermination of the
Borrowing Base pursuant to this Section 2.15, Section 3.01(m) and Section 5.21
below shall be made in good faith by all of the Banks and the Agent, in the
exercise of their sole reasonable discretion and in accordance with their
respective customary and prudent standards for oil and gas lending and credit
transactions as they exist at such time; PROVIDED that each of the Borrower, the
Banks and the Agent agree that the Banks will only give loan value to any
Property that is subject to a Lien or Production Payments and Reserve Sales if,
and to the extent that, the value of such Property exceeds the value of such
Lien or such Production Payments and Reserve Sales.
33
(d) BORROWING BASE ELECTION. Within five Domestic Business Days after
receipt of a Borrowing Base Notice from the Agent, the Borrower shall by notice
to the Agent either accept such amount as the new Borrowing Base or reduce the
Borrowing Base from the amount proposed by the Agent to any lesser amount.
Failure by the Borrower to take either such action within such five Domestic
Business Day period shall be deemed acceptance of such amount. Upon any such
acceptance or deemed acceptance by the Borrower, a new Borrowing Base in the
amount accepted shall take effect on such date (herein called a "DETERMINATION
DATE") and shall remain in effect until but not including the next Determination
Date. Upon any such reduction by the Borrower, a new Borrowing Base in the
reduced amount specified by the Borrower shall take effect on such date (herein
also called a "DETERMINATION DATE") and shall remain in effect until but not
including the next Determination Date.
(e) OTHER BORROWING BASE REDETERMINATIONS. The Borrowing Base shall
also be adjusted as provided in Section 5.21.
SECTION 2.16. LETTERS OF CREDIT. (a) ISSUANCE. Each LC Issuing Bank
agrees, on the terms and conditions set forth in this Agreement, to issue
standby or financial (but not trade or documentary) letters of credit hereunder,
with a minimum stated amount for each such letter of credit of $1,000,000, at
the request of the Borrower from time to time prior to the date that is 30 days
before the Maturity Date; PROVIDED that, immediately after each such Letter of
Credit is issued and participations therein are sold to the Banks as provided in
this subsection:
(i) the Aggregate LC Exposure shall not exceed 15,000,000;
(ii) in the case of each Bank, its Outstanding Amount shall not
exceed its Commitment; and
(iii) the Total Outstanding Amount shall not exceed the amount of
the Borrowing Base at such time.
Whenever an LC Issuing Bank issues a Letter of Credit hereunder, such LC Issuing
Bank shall be deemed, without further action by any party hereto, to have sold
to each Bank, and each Bank shall be deemed, without further action by any party
hereto, to have purchased from such LC Issuing Bank, a participation in such
Letter of Credit, on the terms specified in this Section, equal to such Bank's
Commitment Percentage thereof
(b) NOTICE OF PROPOSED ISSUANCE. With respect to each Letter of Credit,
the Borrower shall give the relevant LC Issuing Bank and the Agent at least
three
34
Domestic Business Days' (or such shorter time as the LC Issuing Bank may agree
in a particular instance) prior notice (i) specifying the date such Letter of
Credit is to be issued and (ii) describing the proposed terms of such Letter of
Credit and the nature of the transactions to be supported thereby. Promptly
after it receives such notice, the Agent shall notify each Bank of the contents
thereof.
(c) CONDITIONS TO ISSUANCE. No LC Issuing Bank shall issue any letter of
credit under this Section unless:
(i) such proposed Letter of Credit is a standby or financial letter
of credit, and not a documentary or trade letter of credit, and shall have
a stated amount not less than $1,000,000,
(ii) such proposed Letter of Credit is otherwise satisfactory in
form and substance to such LC Issuing Bank,
(iii) the Borrower shall have executed and delivered such other
instruments and agreements relating to such proposed Letter of Credit as
such LC Issuing Bank shall have reasonably requested,
(iv) such LC Issuing Bank shall have confirmed with the Agent on the
date of such issuance that the limitations specified in subsection (a) of
this Section will not be exceeded immediately after such proposed Letter
of Credit is issued, and
(v) such LC Issuing Bank shall not have been notified in writing by
the Borrower or the Agent expressly to the effect that any condition
specified in Section 3.02(c) or Section 3.02(d) is not satisfied at the
time such proposed Letter of Credit is to be issued.
(d) NOTICE OF ACTUAL ISSUANCE. Promptly after it issues any Letter of
Credit, the relevant LC Issuing Bank shall notify the Agent of the date, face
amount, beneficiary or beneficiaries and expiry date of such Letter of Credit.
Promptly after it receives such notice, the Agent shall notify each Bank of the
contents thereof and the amount of such Bank's participation in such Letter of
Credit. Promptly after it issues any Letter of Credit, the relevant LC Issuing
Bank shall send a copy of such Letter of Credit to the Agent.
(e) EXPIRY DATES. No Letter of Credit shall have an expiry date later than
the fifth Domestic Business Day before the Maturity Date. Subject to the
preceding sentence, each Letter of Credit issued hereunder shall expire on or
before the first anniversary of the date of such issuance; PROVIDED that,
subject to the first sentence of this clause (e), the expiry date of any Letter
of Credit may be
35
extended from time to time at the Borrower's request, so long as such extension
is for a period not exceeding one year and is granted (or the last day on which
notice can be given to prevent such extension occurs) no earlier than three
months before the then existing expiry date thereof.
(f) NOTICE OF PROPOSED EXTENSIONS OF EXPIRY DATES. The relevant LC Issuing
Bank shall give the Agent at least three Domestic Business Days' notice before
such LC Issuing Bank extends (or allows an automatic extension of) the expiry
date of any Letter of Credit issued by it. Such notice shall identify such
Letter of Credit, the date on which it is to be extended (or the last day on
which notice can be given to prevent such extension) and the date to which it is
to be extended. Promptly after it receives such notice, the Agent shall notify
each Bank of the contents thereof. No LC Issuing Bank shall extend (or allow the
extension of) the expiry date of any Letter of Credit if:
(i) such extension does not comply with subsection (e) of this
Section, or
(ii) such LC Issuing Bank shall have been notified by the Borrower
or the Agent expressly to the effect that any condition specified in
Section 3.02(c) or Section 3.02(d) is not satisfied at the time of such
proposed extension.
If any Letter of Credit is not extended after notice of a proposed extension
thereof has been given to the Banks, the relevant LC Issuing Bank shall promptly
notify the Agent of such failure to extend. Promptly after it receives such
notice, the Agent shall notify each Bank thereof.
(g) DRAWINGS. If an LC Issuing Bank receives a demand for payment under any
Letter of Credit issued by it and determines that such demand should be honored,
such LC Issuing Bank shall (i) promptly notify the Borrower and the Agent as to
the amount to be paid by such LC Issuing Bank as a result of such demand and the
date of such payment (an "LC PAYMENT DATE") and (ii) make such payment in
accordance with the terms of such Letter of Credit.
(h) REIMBURSEMENT BY THE BORROWER.
(i) If any amount is drawn under any Letter of Credit, the Borrower
irrevocably and unconditionally agrees to reimburse the relevant LC
Issuing Bank for such amount, together with any and all reasonable charges
and expenses which such LC Issuing Bank may pay or incur relative to such
drawing. Such reimbursement shall be due and payable on the relevant LC
Payment Date or the date on which such LC Issuing Bank
36
notifies the Borrower of such drawing, whichever is later; PROVIDED that,
if such notice is given after 12:00 noon (New York City time) on the later
of such dates, such reimbursement shall be due and payable on the next
following Domestic Business Day (the date on which it is due and payable
being an "LC REIMBURSEMENT DUE DATE").
(ii) In addition, the Borrower agrees to pay, on the applicable LC
Reimbursement Due Date, interest on each amount drawn under a Letter of
Credit, for each day from and including the date such amount is drawn to
but excluding such LC Reimbursement Due Date, at the Base Rate for such
day. The Borrower also agrees to pay, on demand, interest on any overdue
amount (including any overdue interest) payable under this subsection (h),
for each day from and including the day such amount becomes due to but
excluding the day such amount is paid in full, at a rate per annum equal
to the sum of 2% PLUS the Base Rate for such day.
(iii) Each payment by the Borrower pursuant to this subsection (h)
shall be made to the relevant LC Issuing Bank in Federal or other funds
immediately available to it at its address specified in or pursuant to
Section 10.01.
(i) PAYMENTS BY BANKS.
(i) If the Borrower fails to pay any LC Reimbursement Obligation in
full when due, the relevant LC Issuing Bank may notify the Agent of the
unreimbursed amount and request that the Banks reimburse such LC Issuing
Bank for their respective Commitment Percentages thereof. Promptly after
it receives any such notice, the Agent shall notify each Bank of the
unreimbursed amount and such Bank's Commitment Percentage thereof. Upon
receiving such notice from the Agent, each Bank shall make available to
such LC Issuing Bank, at its address specified in or pursuant to Section
10.01, an amount equal to such Bank's Commitment Percentage of such
unreimbursed amount, in Federal or other funds immediately available to
such LC Issuing Bank, by 3:00 P.M. (New York City time) (A) on the day
such Bank receives such notice if it is received at or before 12:00 Noon
(New York City time) on such day or (B) on the next Domestic Business Day
if such notice is received after 12:00 Noon (New York City time) on the
date of receipt, in each case together with interest on such amount for
each day from and including the relevant LC Payment Date to but excluding
the day such payment is due from such Bank at the Federal Funds Rate for
such day. Upon payment in full thereof, such Bank shall be subrogated to
the rights of such LC Issuing Bank against the Borrower to the extent of
such Bank's Commitment
37
Percentage of the related LC Reimbursement Obligation (including interest
accrued thereon).
(ii) If any Bank fails to pay when due any amount to be paid by it
pursuant to clause (i) of this subsection, interest shall accrue on such
Bank's obligation to make such payment, for each day from and including
the date such payment became due to but excluding the date such Bank makes
such payment, at a rate per annum equal to (x) for each day from the day
such payment is due to the third succeeding Domestic Business Day,
inclusive, the Federal Funds Rate for such day and (y) for each day
thereafter the sum of 2% PLUS the Base Rate for such day.
(iii) If the Borrower shall reimburse any LC Issuing Bank for any
drawing with respect to which any Bank shall have made funds available to
such LC Issuing Bank in accordance with clause (i) of this subsection,
such LC Issuing Bank shall promptly upon receipt of such reimbursement
distribute to such Bank its Commitment Percentage thereof, including
interest, to the extent received by such LC Issuing Bank.
(j) EXCULPATORY PROVISIONS. The obligations of the Borrower and the Banks
under this Section shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower or any Bank may have or have had against any LC Issuing Bank,
any Bank, any beneficiary of any Letter of Credit or any other Person. The
Borrower assumes all risks of the acts or omissions of any beneficiary of any
Letter of Credit with respect to the use of such Letter of Credit by such
beneficiary. None of the LC Issuing Banks, the Banks and their respective
officers, directors, employees and agents shall be responsible for, and the
obligations of each Bank to make payments to each LC Issuing Bank and of the
Borrower to reimburse each LC Issuing Bank for drawings pursuant to this Section
shall not be excused or affected by, among other things, (i) the use which may
be made of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (ii) the validity, sufficiency or
genuineness of documents presented under any Letter of Credit or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (iii) payment by
any LC Issuing Bank against presentation of documents to it which do not comply
with the terms of the relevant Letter of Credit or (iv) any dispute between or
among the Borrower, any beneficiary of any Letter of Credit or any other Person
or any claims or defenses whatsoever of the Borrower or any other Person against
any beneficiary of any Letter of Credit. No LC Issuing Bank shall be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit. Any action taken or omitted by any LC Issuing Bank in
38
connection with any Letter of Credit and the related drafts and documents shall
be binding upon the Borrower and shall not place any LC Issuing Bank or any Bank
under any liability to the Borrower. Notwithstanding the foregoing, the
provisions of this subsection (j) shall not relieve any LC Issuing Bank from
responsibility for its own gross negligence or willful misconduct.
(k) INDEMNIFICATION BY BORROWER. The Borrower agrees to indemnify and hold
harmless each Bank, each LC Issuing Bank and the Agent (collectively, the "LC
INDEMNITEES") from and against any and all claims and damages, losses,
liabilities, costs or expenses (including, without limitation, the reasonable
fees and disbursements of counsel) which such LC Indemnitee may reasonably incur
(or which may be claimed against such LC Indemnitee by any Person whatsoever) by
reason of or in connection with any execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit or any actual or proposed
use of any Letter of Credit; PROVIDED that the Borrower shall not be required to
indemnify any LC Indemnitee for any such claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (i) its own
willful misconduct or gross negligence or (ii) its failure to pay under any
Letter of Credit issued by it after the presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit. Nothing in
this subsection is intended to limit the obligations of the Borrower under any
other provision of this Section.
(l) INDEMNIFICATION BY BANKS. The Banks shall, ratably in proportion to
their Commitment Percentages, indemnify each LC Issuing Bank (to the extent not
reimbursed by the Borrower) against any claims, damages, losses, liabilities,
reasonable costs and reasonable expenses (including, without limitation,
reasonable fees and disbursements of counsel) that any such Indemnitee may
suffer or incur in connection with this Section or any action taken or omitted
by such indemnitee under this Section; PROVIDED that the Banks shall not be
required to indemnify any LC Issuing Bank for any such claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(i) its own gross negligence or willful misconduct, (ii) its failure to pay
under any Letter of Credit issued by it after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit, (iii) its failure to comply with subsection (e) of this Section, (iv)
its liabilities under any Letter of Credit issued by it in contravention of
clause (iii) (to the extent that the limitations referred to therein were in
fact exceeded) or clause (iv) of subsection (c) of this Section or (v) its
liabilities under any Letter of Credit extended (or allowed to be automatically
extended) by it in contravention of clause (ii) of subsection (f) of this
Section.
(m) LIABILITY FOR DAMAGES. Nothing in this Section shall preclude the
Borrower or any Bank from asserting against any LC Issuing Bank any claim for
39
damages suffered by the Borrower or such Bank to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of such LC
Issuing Bank or (ii) such LC Issuing Bank's failure to pay under any Letter of
Credit issued by it after the presentation to it of a request strictly complying
with the terms and conditions thereof.
(n) DUAL CAPACITIES. In its capacity as a Bank, each LC Issuing Bank
shall have the same rights and obligations under this Section as any other Bank.
(o) INFORMATION TO BE PROVIDED TO AGENT. Each LC Issuing Bank shall furnish
to the Agent upon request such information as the Agent shall reasonably request
in order to calculate (i) the Aggregate LC Exposure existing from time to time
and (ii) the amount of any fee payable for the account of the Banks under
Section 2.06(b).
ARTICLE 3
CONDITIONS
SECTION 3.01. CLOSING. The closing hereunder shall occur when all the
following conditions have been satisfied:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
facsimile, telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party) and the Schedules hereto;
(b) receipt by the Agent of a duly executed Note for the account of each
Bank dated on or before the Closing Date and complying with the provisions of
Section 2.13;
(c) receipt by the Agent of (i) the Acquisition Documents duly executed by
each of the parties thereto, (ii) evidence satisfactory to the Agent in its
reasonable discretion (A) of the satisfaction (without waiver) of all of the
terms and conditions to the closing of the Acquisition on the Closing Date and
(B) that all transactions contemplated to take place by the Acquisition
Documents will take place prior to or simultaneously with the Borrowing(s) to be
made on the Closing Date and (iii) each opinion, report and other document
required to be delivered pursuant to the Acquisition Documents in connection
with the Acquisition, [with a letter from each Person delivering any such
opinion, report and other document
40
authorizing reliance thereon by the Agent and the Banks, in each case all in
form and substance reasonably satisfactory to the Required Banks];
(d) receipt by the Agent, for its own account and that of the Banks, of
all fees and any other amounts due and payable hereunder on the Closing Date;
(e) receipt by the Agent of an opinion of Xxxxxx & Xxxxxx, L.L.P., counsel
for the Obligors, substantially in the form of Exhibit B hereto, dated the
Closing Date and covering such additional matters relating to the transactions
contemplated hereby as the Agent may reasonably request;
(f) receipt by the Agent of an opinion of Xxxxx Xxxx & Xxxxxxxx, special
counsel for the Agent, substantially in the form of Exhibit C hereto, dated the
Closing Date and covering such additional matters relating to the transactions
contemplated hereby as the Agent may reasonably request;
(g) receipt by the Agent of an environmental audit by a third party
environmental consultant acceptable to the Agent, such audit to be in form and
substance acceptable to the Agent;
(h) the Agent shall have received evidence satisfactory to it of the prior
or contemporaneous closing of a Long Term Junior Financing, in form and
substance and with terms (including without limitation the terms of
subordination of all obligations thereunder to all obligations of the Borrower
and the Guarantors under the Financing Documents) satisfactory to the Required
Banks, with the contemporaneous receipt by the Borrower of the gross proceeds
thereunder, in an amount necessary such that it is a Qualifying Junior
Financing;
(i) receipt by the Agent of an Amended and Restated Administrative Services
Agreement between Torch and the Borrower, in form and substance satisfactory to
the Agent;
(j) receipt by the Agent of (i) (A) the financial statements referred to in
Section 4.04 and (B) the statements of assets acquired and liabilities for the
Torch Consolidated Programs for the fiscal years ended on December 31, 1995 and
1996, and the statements of revenues and direct operating expenses for the Torch
Consolidated Programs for the fiscal years ended on December 31, 1994, 1995 and
1996 and (ii) payment instructions with respect to each wire transfer to be made
by the Agent or the Borrower on the Closing Date setting forth the amount of
such transfer, the purpose of such transfer, the name and number of the account
to which such transfer is to be made, the name and ABA number of the bank or
other financial institution where such account is located and the name and
telephone number of an individual that can be contacted to confirm receipt of
such transfer;
41
(k) receipt by the Agent of evidence satisfactory to it in its sole good
faith discretion that all outstanding obligations of the Borrower under, or with
respect to, the Existing Credit Agreement have been paid in full, all
commitments thereunder have been terminated and all Liens securing such
obligations and all Guarantees thereof have been released;
(l) the Agent shall not have received notice from Banks holding at least
331/3% of the Commitments (which notices so received shall not have been
rescinded) to the effect that (i) such Banks have not completed, or are not
satisfied in their sole good faith discretion with the scope and results of,
their due diligence review of financial, legal, tax, litigation, insurance,
ERISA, Environmental Liabilities, other contingent liabilities and other matters
concerning the Borrower and its Subsidiaries or (ii) such Banks have determined
in their sole good faith discretion that, since December 31, 1996, there has
been a material adverse change in the business, financial position, results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or in the Torch Acquired Properties, considered as a
whole;
(m) the Borrower shall have delivered (i) to the Agent and each Bank, the
Initial Reserve Reports and (ii) evidence satisfactory to the Agent and the
Required Banks that the Future Net Revenues of proved reserves attributable to
the Hydrocarbon Interests included in the Torch Acquired Properties represent
not less than 95% of the Value of all Proved Reserves attributable to all
Properties in the Torch Consolidated Programs, excluding the interests therein
owned by the IBM Retirement Plan Trust; PROVIDED that if such amount is greater
than or equal to 95% but less than 100%, the Agent, with the consent of the
Required Banks, may redetermine the Borrowing Base in accordance with Section
2.15; and
(n) receipt by the Agent of all documents the Agent may reasonably request
relating to the existence of the Obligors, the corporate authority for and the
validity of this Agreement and the Notes, and any other matters relevant hereto
and thereto, all in form and substance satisfactory to the Agent.
Promptly after the Closing Date occurs, the Agent shall notify the Borrower and
the Banks thereof, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT. The
obligation of any Bank to make a Loan on the occasion of any Borrowing, and the
obligation of any LC Issuing Bank to issue (or extend or allow an extension of
the expiry date of) any Letter of Credit (any such event, a "CREDIT EVENT"), is
subject to the satisfaction of the following conditions:
42
(a) receipt by the Agent of a Notice of Borrowing as required by Section
2.02, or receipt by the relevant LC Issuing Bank of a notice of proposed
issuance or extension as required by Section 2.16(b) or 2.16(f), as the case may
be;
(b) the fact that, immediately before and after such Credit Event, no
Default shall have occurred and be continuing;
(c) the fact that, immediately after such Credit Event, the Total
Outstanding Amount will not exceed the Borrowing Base at such time; and
(d) the fact that the representations and warranties of the Obligors
contained in the Financing Documents shall be true on and as of the date of such
Credit Event.
Each Credit Event Borrowing and each issuance or extension of a Letter of Credit
hereunder shall be deemed to be a representation and warranty by the Borrower on
the date of such Credit Event as to the facts specified in clauses (c) and (d)
of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and, as to the matters set forth in
Section 4.12, each Guarantor represents and warrants, with respect to itself
only, that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, consents, authorizations and approvals required to carry
on its business as now conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the Borrower of the Financing
Documents are within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the Borrower's certificate of incorporation or by-laws or of any agreement or
other instrument evidencing Debt for borrowed money or of any other material
agreement, judgment, injunction, order, decree or other material instrument
43
binding upon the Borrower or any Subsidiary or result in the creation or
imposition of any Lien on any asset of the Borrower or any Subsidiary.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of June 30, 1996 and the
related consolidated statements of income, cash flows and changes in
stockholders' equity for the Fiscal Year then ended, reported on by Deloitte &
Touche LLP and set forth in the Borrower's 1996 Form 10-K, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with GAAP,
the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1996 and the related unaudited
consolidated statements of income, cash flows and changes in stockholders'
equity for the six months then ended, set forth in the Borrower's Latest Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such six-month period (subject to normal year-end
adjustments).
(c) Since December 31, 1996, there has been no material adverse change in
the business, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole, or in the Torch Acquired
Properties, considered as a whole.
SECTION 4.05. LITIGATION. Except as disclosed on Schedule 4.05, there is
no action, suit or proceeding pending against, or to the Borrower's knowledge
threatened against or affecting, the Borrower or any Subsidiary before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could have a Material
Adverse Effect.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of ERISA
44
and the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii) incurred any material liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. ENVIRONMENTAL COMPLIANCE. (a) Except (x) as disclosed on
Schedule 4.07 or (z) to the extent that the Environmental Liabilities of the
Borrower and its Subsidiaries, taken as a whole, that relate to or could result
from the matters referred to in clauses (i) through (vi), inclusive, would not
exceed $500,000 for any one occurrence or $1,000,000 in the aggregate:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending, or to the Borrower's knowledge, threatened by any governmental or
other entity with respect to any (A) alleged violation by the Borrower or
any Subsidiary of any Environmental Law, (B) alleged failure by the
Borrower or any Subsidiary to have any environmental permit, certificate,
license, approval, registration or authorization required in connection
with the conduct of its business, (C) Regulated Activity or (D) Release of
Hazardous Substances;
(ii) other than generation in material compliance with all
applicable Environmental Laws, (A) neither the Borrower nor any Subsidiary
has engaged in any Regulated Activity and (B) no Regulated Activity has
occurred at or on any property now or previously owned, leased or operated
by the Borrower or any Subsidiary;
(iii) other than in material compliance with all applicable
Environmental Laws and in a manner which would not reasonably be expected
to result in any Environmental Liabilities, no polychlorinated biphenyls,
radioactive material, urea formaldehyde, lead, asbestos,
asbestos-containing material or underground storage tank (active or
abandoned) is or has been present at any property now or previously owned,
leased or operated by the Borrower or any Subsidiary;
45
(iv) no Hazardous Substance has been Released (and no written
notification of such Release has been received or filed by the Borrower)
or is present at, on or under any property now or previously owned, leased
or operated by the Borrower or any Subsidiary;
(v) no property now or previously owned, leased or operated by the
Borrower or any Subsidiary or any property to which the Borrower or any
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances, is listed or, to the
Borrower's knowledge, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or
on any similar federal, state or foreign list of sites requiring
investigation or clean-up; and
(vi) there are no liens under Environmental Laws on any of the real
property owned or leased by the Borrower or any Subsidiary, no government
actions have been taken or are in process which could subject any of such
properties or assets to such liens and neither the Borrower nor any
Subsidiary would be required to place any notice or restriction relating
to Hazardous Substances at any property owned by it in any deed to such
property.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Borrower has knowledge in
relation to the current or prior business of the Borrower or any property or
facility now or previously owned, leased or operated by the Borrower or any
Subsidiary, which has not been made available for review to the Banks at least
five days prior to the Effective Date.
(c) For purposes of this Section, the terms "Borrower" and "Subsidiary"
shall include any business or business entity (including a corporation) which is
a predecessor, in whole or in part, of the Borrower or any Subsidiary.
SECTION 4.08. TAXES. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary except those which are diligently contested in good faith by
appropriate proceedings. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the Borrower's opinion, adequate.
46
SECTION 4.09. SUBSIDIARIES. Part I of 4.09 lists all of the Subsidiaries
on the Closing Date and Part II of Schedule 4.09 lists all Material Subsidiaries
on the Closing Date. Each of the Borrower's corporate Subsidiaries is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.10. NO REGULATORY RESTRICTIONS ON BORROWING. The Borrower is not
(i) an "investment company" within the meaning of the Investment Company Act of
1940, as amended or (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 4.11. FULL DISCLOSURE. (a) All information, including, without
limitation, the Information Memorandum, other than the Projections (as defined
below), which has been or is hereafter prepared or made available by the
Borrower or by any of the Borrower's respective representatives (including
Torch) to any Bank or the Agent, in connection with this Agreement and the
transactions contemplated hereby (including without limitation all information
given at information meetings for potential syndicate members and supplied or
approved by the Borrower) (such information collectively, the "INFORMATION") is,
or in the case of Information made available after the date hereof will be,
true, complete and correct in all material respects, and does not and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein, in the light of the
circumstances under which such statements were or are made, not misleading. It
is understood and agreed, however, that (i) each Reserve Reports is necessarily
based upon economic assumptions and professional opinions, estimates and
projections, (ii) any financial projections (the "PROJECTIONS") which the
Borrower or any of the Borrower's representatives (including Torch) has provided
or may provide in connection with the transactions contemplated hereby
(including the Reserve Reports) and the Information Memorandum are similarly
based on economic assumptions, opinions and estimates, (iii) the Borrower is not
making any representation or warranty that such assumptions, opinions, estimates
and Projections will ultimately prove to have been accurate, (iv) the Borrower
is not making any representation or warranty with respect to any price or cost
Projections furnished by the Agent or any Bank for use in preparing any Reserve
Report, and (v) the Borrower's only representation or warranty with respect to
any Projections that have been or will be provided by the Borrower or any of its
representatives or Subsidiaries is that such Projections have been or will be,
as the case may be, prepared in good faith based upon assumptions that
Borrower's management reasonably believed or believes, as the case may be, to be
reasonable at the time such Projections were or
47
are prepared. The Borrower has disclosed to the Banks in writing any and all
facts which may have a Material Adverse Effect.
(b) Since the respective dates as of which information is stated in the
Information Memorandum, no event has occurred and no condition has come into
existence which has had, or is reasonably likely to have, a Material Adverse
Effect or which would have caused the Projections therein to be materially
misleading.
SECTION 4.12. REPRESENTATIONS OF GUARANTORS. Each Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. The execution, delivery and
performance by each Guarantor of each Financing Document to which such Guarantor
is a party are within such Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of such Guarantor
or of any agreement or instrument evidencing Debt for borrowed money or of any
other material agreement, judgment, injunction, order, decree or other
instrument binding upon such Guarantor or result in the creation or imposition
of any Lien on any asset of such Guarantor. This Agreement constitutes a valid
and binding agreement of each Guarantor, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
SECTION 4.13. OWNERSHIP OF PROPERTY, LIENS. Except to an extent which
could not reasonably be expected to have a Material Adverse Effect: the Borrower
and its Subsidiaries have good and marketable title to and are in lawful
possession of, or have valid leasehold interests in, all material Properties
purported to be owned by the Borrower and its Subsidiaries or to be leased by
the Borrower and its Subsidiaries (as the case may be), and none of such
material Properties is subject to any Liens, except Liens permitted under
Section 5.10, all of such material Properties are in good working order and
condition, ordinary wear and tear excepted, and the Borrower and its
Subsidiaries have received all deeds, assignments, bills of sale and other
documents and duly effected all recordings, filings and other actions necessary
or appropriate to establish, protect and perfect its right, title and interest
in and to all such material Properties.
SECTION 4.14. REPRESENTATIONS IN PURCHASE AND SALE AGREEMENT TRUE AND
CORRECT. Each of the representations and warranties of the Borrower contained in
the Purchase and Sale Agreement was true and correct in all material respects on
48
the date when made, and, if this representation and warranty is being made (or
deemed made) on the date that the relevant Acquisition thereunder is being
consummated, is true and correct in all material respects on such date. The
Purchase and Sale Agreement has not been modified or amended in any respect and
no provision or condition contained therein has been waived, except as permitted
by Section 5.20.
SECTION 4.15. RESERVE DATA AND PROJECTIONS. The statements and conclusions
as to the Borrowing Base Properties and forecast results included in the Initial
Reserve Reports are, and all such information included in any future Reserve
Report will be, based upon the best information available to the Borrower at the
time such statements were or are made and take or will take into consideration
all information which, in the reasonable judgment of the Borrower, was or is
believed to be material at the time (determined in a manner consistent with
standards customarily applicable to professionals in the oil and gas industry),
it being understood that such statements and conclusions are necessarily based
upon professional opinions, estimates and Projections, and the Borrower does not
warrant that such opinions, estimates and Projections will ultimately prove to
have been accurate.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Credit Exposure
hereunder or any interest or fees accrued hereunder remain unpaid:
SECTION 5.01. INFORMATION. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end of
each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all reported on in a manner acceptable to
the SEC by Deloitte & Touche LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such
49
Fiscal Quarter, the related consolidated statement of income, cash flows and
changes in stockholders' equity for such Fiscal Quarter and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, setting forth in the case of each such statement of income, cash flows
and changes in stockholders' equity in comparative form the figures for the
corresponding period in the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation and consistency with
GAAP by the Borrower's chief financial officer or chief accounting officer;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the Borrower's chief
financial officer or chief accounting officer (i) setting forth in reasonable
detail the calculations required to establish whether the Borrower was in
compliance with the requirements of Sections 5.10 to 5.16, on the date of such
financial statements and (ii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent public
accountants which reported on such statements (i) stating whether anything has
come to their attention to cause them to believe that any Default existed on the
date of such statements and (ii) confirming the calculations set forth in the
officer's certificate delivered simultaneously therewith pursuant to clause (c)
above;
(e) within five Domestic Business Days after any Responsible Officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing, a
certificate of a Responsible Officer of the Borrower setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(f) promptly after the mailing thereof to the Borrower's shareholders
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) filed by the Borrower with the SEC;
(h) promptly after any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
50
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC (unless, in each instance, the 30-day notice
requirement under Section 4043(a) of the Internal Revenue Code has been waived);
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the Borrower's
chief financial officer or chief accounting officer setting forth details as to
such occurrence and the action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(i) promptly, upon receipt of any complaint, order, citation, notice or
other written communication from any Person with respect to, or upon the
Borrower's obtaining knowledge of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or any Environmental Liability in
connection with any property now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries, (ii) any Release on such property or any
part thereof in a quantity that is reportable under any applicable Environmental
Law, and (iii) any pending or threatened proceeding for the termination,
suspension or non-renewal of any permit required under any applicable
Environmental Law, in each case, with respect to clauses (i), (ii) and (iii)
above, (x) which could result in liability or expenses in excess of $1,000,000
or (y) which individually or in the aggregate could have a Material Adverse
Effect, notice thereof; and
(j) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. RESERVE REPORTS. (a) Not later than September 1 of each
year, the Borrower will furnish to the Banks reports in form and substance
51
satisfactory to the Agent, each prepared by an Approved Petroleum Engineer,
which reports shall evaluate the Borrowing Base Properties of the Borrower and
the Subsidiaries as of the immediately preceding June 30 and which shall,
together with any other information reasonably requested by the Banks, set forth
the Proved Reserves attributable to such Property, together with a projection of
the rate of production and future net income with respect thereto as of such
date.
(b) From time to time, the Borrower (x) may, at its election, or, (y) will,
if so requested in writing by the Required Banks, (but not more frequently than
once each year, in the case of either (x) or (y)), furnish to the Banks within
45 days of such election or request reports in form and substance satisfactory
to the Agent, each of which shall be prepared by an Approved Petroleum Engineer,
which shall further evaluate the Borrowing Base Properties evaluated in the
immediately preceding Reserve Report, and which shall, together with any other
information reasonably requested by the Banks, set forth the Proved Reserves
attributable to such Property as of the date of such election or request,
together with a projection of the rate of production and net income with respect
thereto as of such date.
(c) Each of the reports to be furnished by the Borrower to the Banks
pursuant to this Section 5.02 shall be prepared on the basis of price and other
economic assumptions specified by the Agent to the Borrower in accordance with
the standards set forth in Section 2.15(c). Each such report shall separately
cover Proved Developed Reserves which are currently producing to market, other
Proved Developed Reserves and Proved Undeveloped Reserves, and shall identify
any material gas imbalances and any Liens on, and Production Payments and
Reserve Sales with respect to, any Oil and Gas Properties (including the amount
secured thereby).
SECTION 5.03. PAYMENT OF OBLIGATIONS. The Borrower will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before maturity, all
their respective material obligations and liabilities (including, without
limitation, tax liabilities and claims of materialmen, warehousemen and the like
which if unpaid might by law give rise to a Lien), except where the same are
contested in good faith by appropriate proceedings, and will maintain, and will
cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves
for the accrual thereof.
SECTION 5.04. MAINTENANCE OF PROPERTY INSURANCE. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all Property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
52
(b) The Borrower will maintain, and will cause each of its Subsidiaries to
maintain, insurance in responsible companies in such amounts and against such
risks as is usually carried by owners of similar businesses and properties in
the same general areas in which the Borrower and its Subsidiaries operate,
PROVIDED that in any event the Borrower will maintain, and will cause each of
its Subsidiaries to maintain, (i) property and casualty insurance on all real
and personal property on an all risks basis (including the perils of flood and
quake), covering the repair and replacement cost of all such property, for such
amounts not less than those, and with deductible amounts not greater than those,
set forth in Part I of Schedule 5.04, (ii) public liability insurance (including
products liability coverage) covering such risks, for such amounts not less than
those, and with deductible amounts not greater than those, set forth in Part II
of Schedule 5.04 and (iii) such other insurance coverage in such amounts and
with respect to such risks as the Required Banks may reasonably request. All
such insurance shall be provided by (A) insurers that are rated B+, Class X or
better by A.M. Best Company, Inc. (or accorded a similar rating by another
nationally or internationally recognized insurance rating agency of similar
standing, as determined in good faith by the Borrower), PROVIDED that, if the
Borrower or any of its Subsidiaries have insurance with any insurer that (1) is
not rated by A.M. Best Company, Inc. and (2) is a Lloyd's syndicate, such
insurer must have had, as of the last day of its most recently completed fiscal
year, capital and surplus of at least $250,000,000 and a ratio of liabilities
(including all potential claims under insurance policies written by them,
regardless of the amount of the reserves therefor) to capital and surplus of no
greater than 6:1, or (B) such other insurers as the Required Banks may approve
in writing. The Borrower will deliver to the Banks (i) upon request of any Bank
through the Agent from time to time full information as to the insurance
carried, (ii) within five days of receipt of notice from any insurer a copy of
any notice of cancellation, nonrenewal or material change in coverage from that
existing on the date of this Agreement and (iii) forthwith, notice of any
cancellation or nonrenewal of coverage by the Borrower or any Subsidiary.
SECTION 5.05. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower and its Subsidiaries will continue to engage in business of the
acquisition, exploration for, development, production, transportation,
gathering, storing, processing and marketing of Hydrocarbons and accompanying
elements, and will preserve, renew and keep in full force and effect their
respective corporate existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business, other than
those the failure of which to maintain would not reasonably be expected to have
a Material Adverse Effect; PROVIDED that nothing in this Section shall prohibit:
(i) mergers permitted under Section 5.08; or
53
(ii) the termination of the corporate existence of a Subsidiary if
the Borrower in good faith determines that such termination is in the best
interest of the Borrower and is not disadvantageous to the Banks.
SECTION 5.06. COMPLIANCE WITH LAWS. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or the failure
to so comply would not reasonably be expected to have a Material Adverse Effect.
SECTION 5.07. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries shall be made of all dealings and transactions
in relation to its business and activities; and will permit, and will cause each
Subsidiary to permit, representatives of any Bank at such Bank's expense to
visit and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times
during normal business hours and as often as may reasonably be requested.
SECTION 5.08. MERGERS AND SALES OF ASSETS. The Borrower will not, and will
not permit any Guarantor to, consolidate or merge with or into any other Person;
PROVIDED that (x) any Guarantor may merge with the Borrower, any other Guarantor
or with any other Person if the Guarantor is the corporation surviving such
merger with any other Person (other than the Borrower or another Guarantor), and
(y) the Borrower may merge with or into another Person if the Borrower is the
corporation surviving such merger, if after giving effect to any such merger, no
Default shall have occurred and be continuing. The Borrower and its Subsidiaries
will not sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as a
whole, to any other Person.
SECTION 5.09. USE OF PROCEEDS. The proceeds of the Loans will be used by
the Borrower (and Acquisition Corp. in the case of (i)) (i) to finance the
Acquisition, (ii) to refinance Debt of the Borrower under the Existing Credit
Facility and (iii) for general corporate purposes. The Letters of Credit will be
used by the Borrower for general corporate purposes. Neither any proceeds of the
Loans nor any Letter of Credit will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
54
SECTION 5.10. NEGATIVE PLEDGE. Neither the Borrower nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal or face amount not
exceeding $___________;
(b) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the purpose
of financing all or any part of the cost of acquiring such asset, PROVIDED that
such Lien attaches to such asset concurrently with or within 90 days after the
acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such Person is
merged or consolidated with or into the Borrower or a Subsidiary and not created
in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary and not created in contemplation of such acquisition;
(f) Liens arising in the ordinary course of its business which (i) do not
secure Debt or Derivatives Obligations and (ii) do not secure any single
obligation (or class of obligations having a common cause) in an amount
exceeding $[----------];
(g) Liens on cash and Temporary Cash Equivalents securing Derivatives
Obligations, PROVIDED that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $[ _______ ];
(h) any Lien arising under the Acquisition Documents with respect to
Property in the Escrow Account; and
[(i) Liens which (i) arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, transportation or exchange of oil and natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements,
overriding royalty agreements, marketing agreements, processing agreements, net
profits agreement, production payment agreements, royalty trust agreements,
development agreements, production sales contracts, gas balancing or deferred
production
55
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are customary in the oil and gas business, and (ii)
are for claims which are either not delinquent or are being contested in good
faith by appropriate proceedings and as to which the Borrower or its applicable
Subsidiaries shall have set aside on its books such reserves as may be required
pursuant to GAAP;] [Subject to discussion with MGT]
[(j) Liens reserved in oil and gas mineral leases, or created by statute, to
secure royalty, net profits interests, bonus payments, rental payments or other
payments out of or with respect to the production, transportation or processing
of Hydrocarbons, and compliance with the terms of such leases;] [Subject to
discussion with MGT.]
(k) Production Payments and Reserve Sales, and Liens on properties
subject thereto to secure performance obligations in connection therewith;
(l) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that any such Debt is not increased beyond the
amount thereof outstanding on the Closing Date (PLUS the reasonable costs of
renewals and extensions) and is not secured by any additional assets; and
(m) Liens not otherwise permitted by the foregoing clauses of this Section
securing Debt in an aggregate principal or face amount not at any time exceeding
[$---------].
SECTION 5.11. LIMITATION ON DEBT. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(i) Debt under the Financing Documents;
(ii) Debt outstanding on the date hereof identified on Schedule 5.12 and
refinancings thereof; PROVIDED that the principal amount thereof is not
increased beyond the amount outstanding thereunder on the date hereof (PLUS
reasonable costs and expenses associated with such refinancings);
(iii) Debt secured by Liens permitted by Section 5.10;
(iv) Permitted Subordinated Debt of the Borrower and its Subsidiaries;
56
(v) Debt owed by the Borrower to any of its Subsidiaries or by any
Subsidiary to the Borrower or any other Subsidiary;
(vi) Endorsements of negotiable instruments for collection in the ordinary
course of business;
(vii) [Debt consisting of the Borrower's obligations to purchase the
natural gas pursuant to the terms of that certain Gas Purchase Contract dated
February 7, 1979, as amended, between the Borrower, successor to Texas Gas
Transmission Corporation, as buyer, and West Monroe Gas Gathering Corporation,
et al., successor to Reliance Trust, et al., as sellers, covering the sale and
purchase of natural gas from the West Monroe Field, Union Parish, Louisiana, as
in effect on the Closing Date;] and [To discuss nature of transaction, amounts
and whether it is Debt or a forward purchase;] and
(viii) Additional Debt not permitted by clauses (i) through (vii) above,
PROVIDED, HOWEVER, that the aggregate amount of all Debt incurred by the
Borrower and its Subsidiaries pursuant to this clause (viii) shall not exceed
$_______ at any one time outstanding.
SECTION 5.12. DEBT OF SUBSIDIARIES. Total Debt of all Subsidiaries
(excluding Debt of a Subsidiary to the Borrower or to a Guarantor) will at no
time exceed [10.00]% of Consolidated Tangible Net Worth.
SECTION 5.13. CASH INTEREST COVERAGE RATIO. As of the last day of each
Fiscal Quarter, the Cash Interest Coverage Ratio will not be less than 3.0 to 1.
SECTION 5.14. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated
Tangible Net Worth will at no time during any Fiscal Quarter set forth below be
less than an amount equal to the sum of (i) $40,000,000 PLUS (ii) an amount
equal to 50% of Consolidated Net Income for each Fiscal Quarter ending after
December 31, 1996, in each case, for which Consolidated Net Income is positive
(but with no deduction on account of negative Consolidated Net Income for any
Fiscal Quarter) PLUS (iii) upon the consummation of any issuance of
Non-Redeemable Stock after September 30, 1996 (or, on the date hereof, in the
case of any issuance consummated prior to the date hereof), 100% of the first
$30,000,000, and 75% of all amounts in excess thereof, of the amount of Net Cash
Proceeds received by the Borrower from all such issuances.
SECTION 5.15. RESTRICTED PAYMENTS. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment other than Restricted Payments of
the type referred to in clauses (i) and (ii) of the definition thereof
57
unless (x) both before and after giving effect thereto, no Default shall have
occurred and be continuing and (y) the aggregate amount of all such Restricted
Payments declared or made in any Fiscal Quarter does not exceed the sum of (i)
$________ PLUS (ii) ___% of Consolidated Net Income (or MINUS 100% of
consolidated net loss) for the Fiscal Quarter most recently ended PLUS (iii) the
aggregate amount of any Net Cash Proceeds received by the Borrower in any
sale(s) by the Borrower of Non-Redeemable Stock during any such period.
SECTION 5.16. INVESTMENTS. Neither the Borrower nor any Subsidiary will
hold, make or acquire any Investment in any Person other than:
(a) Investments in any Guarantor or the Borrower;
(b) Temporary Cash Investments;
(c) Investments existing on the date hereof and disclosed on Schedule
5.17;
(d) Accounts receivable from customers in the ordinary course of business;
(e) Investments pursuant to farm-out, farm-in, joint operating, joint
venture or area of mutual interest agreements, gathering systems, pipelines or
other similar or customary arrangements, and the performance of the Borrower's
or any Subsidiary's obligations thereunder in accordance with prudent operating
standards and in the ordinary course of business;
(f) Investments in Borrower permitted by Section 5.11(vi);
(g) Investments in any Person which is a Subsidiary or which thereby
becomes a Subsidiary, PROVIDED that no Event of Default exists immediately after
such Investment is made and, PROVIDED FURTHER that the sum of all Investments in
Subsidiaries that are not Guarantors shall not exceed $1,000,000 (in each case,
the amount thereof determined at the time such Investment is made);
(h) Investments in stock, obligations or securities received in settlement
of debts owing to the Borrower or any Subsidiary as a result of bankruptcy or
insolvency proceedings or upon the foreclosure, perfection or enforcement of any
Lien in favor of the Borrower or any Subsidiary; and
(i) any Investment not otherwise permitted by the foregoing clauses of
this Section if, immediately after such Investment is made or acquired, the
58
aggregate net book value of all Investments permitted by this clause (i) does
not exceed $10,000,000.
SECTION 5.17. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any Investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary as could have been obtained from a third party
that was not an Affiliate; PROVIDED that the foregoing provisions of this
Section shall not prohibit any such Person from declaring or paying any lawful
dividend or other payment ratably in respect of all its capital stock of the
relevant class so long as, after giving effect thereto, no Default shall have
occurred and be continuing.
SECTION 5.18. ADDITIONAL GUARANTORS. At any time after the Closing Date,
if any Person becomes a Material Subsidiary of the Borrower that is not listed
on Part II of Schedule 4.09 hereto, then the Borrower will cause each such new
Material Subsidiary to become a party hereto as Guarantor by executing a
supplement hereto in form and substance satisfactory to the Agent, such
supplement to be executed within 20 Domestic Business Days of the creation of
such Material Subsidiary.
SECTION 5.19. PRICE HEDGE. On the Closing Date, pursuant to the Purchase
and Sale Agreement, the Borrower will place $9,011,853 into escrow to secure
payment of the portion of the consideration paid (or to be paid), pursuant to
the Purchase and Sale Agreement, by the Borrower to the Sellers for the Touch
Acquired Properties, the payment of which is based upon a fixed volume of gas
and a formula, as set forth in the Purchase and Sale Agreement..
SECTION 5.20. AMENDMENTS OF THE ACQUISITION DOCUMENTS. The Company will
not amend, modify or terminate (or consent to amend, modify or terminate), or
permit any of its Subsidiaries to amend, modify, or terminate (or consent to
amend, modify or terminate), any of the Acquisition Documents in any manner
which would have a Material Adverse Effect.
SECTION 5.21. EXTRAORDINARY BORROWING BASE REDETERMINATIONS. (a) TITLE
INFORMATION.
(i) If applicable, as soon as practicable after the provision of any
Reserve Report to the Banks pursuant to Section 5.02, the Borrower will
59
deliver acquisition summaries, title opinions and due diligence reports
(if any), in respect of any new Borrowing Base Properties being added to
the Borrowing Base for any period, prepared in connection with the
acquisition and the financing of the acquisition of such Property prepared
for the Borrower or the Person financing such acquisition and such
additional title information in form and substance reasonably acceptable
to the Agent as is requested so that the Agent shall have received,
together with the title information previously received by it,
satisfactory title information covering Oil and Gas Property representing
80% of the value of the new Borrowing Base Properties as set forth in such
Reserve Report, as such value is set forth therein.
(ii) The Borrower shall commence to cure any material title defects
or exceptions, which are not Liens permitted by Section 5.11, raised by
any title information, within 90 days after a reasonable request by the
Agent to cure such material defects or exceptions.
(iii) If the Borrower is unable to cure any material title defects
reasonably requested by the Agent to be cured within such 90-day period or
the Borrower does not comply with the requirements to provide acceptable
title information covering 80% of the value of such new Borrowing Base
Properties evaluated in the most recent Reserve Report, such default shall
not be a Default, but instead the Required Banks shall have the right to
exercise the following remedy in their sole discretion from time to time,
and any failure to so exercise this remedy at any time is not a waiver as
to future exercise of the remedy by the Banks. To the extent that the
Banks are not satisfied with a title to any Property after the time period
in Section 5.21(a)(ii) has elapsed, the Agent shall, if so requested by
the Required Banks, send a Borrowing Base Notice to the Company that the
then outstanding Borrowing Base shall be reduced by an amount equal to the
loan value attributed to such unacceptable Property by the Banks in the
latest Borrowing Base. This new Borrowing Base shall become effective upon
receipt of such notice.
(b) BORROWING BASE PROPERTY SALES. Whenever the Borrower or any of its
Subsidiaries, in one or more transactions after the Determination Date
immediately preceding the time in question (or, prior to the first Determination
Date, after the date hereof) sells, transfers or otherwise disposes of Borrowing
Base Properties of $5,000,000 or more in the aggregate, the Borrower will
promptly give notice of such event to the Agent and each Bank and, upon receipt
of such notice, the Agent may, with the consent of the Required Banks, either
(i) request a Reserve Report as contemplated in Section 5.02(b) and the Required
Banks may make the determinations, contemplated in Section 2.15(b), or (ii)
request any supplemental
60
information which the Required Banks reasonably desire from the Borrower without
requiring all such reports and other information, and then designate a new
Borrowing Base as the Required Banks deem appropriate in light of such event and
such supplemental information. The determination of any new Borrowing Base
pursuant to this Section 5.21(b) shall take effect as provided in Section
2.15(d).
(c) SUBORDINATED DEBT SALES; APPROVAL OF SUBORDINATED DEBT. Not less than
30 days prior to any proposed issuance and sale by the Borrower of any
subordinated debt securities, the Borrower will deliver to the Banks notice of
such proposed transaction containing (A) the type and amount of the subordinated
debt securities to be sold, (B) the principal amount of the subordinated debt
securities that the Borrower expects to issue and sell in such proposed
transaction and (C) the material terms and conditions of the proposed
subordinated debt securities. Within 15 days after the receipt of such notice,
the Agent will notify the Banks (1) whether it approves of the terms and
conditions of the proposed subordinated debt securities and (2) of a proposed
new Borrowing Base (such notice, the "SECTION 5.21(C) NOTICE"). Within 15 days
after the provision of the Section 5.21(c) Notice, if any Bank disapproves of
(i) the terms and conditions of the proposed subordinated debt securities,
and/or (ii) the proposed new Borrowing Base, such Bank shall submit to the Agent
in writing such disapproval, which disapproval shall, as applicable, state (A)
the reasons and basis for its disapproval of the terms and conditions of the
proposed subordinated debt securities and/or (B) the maximum Borrowing Base
acceptable to such Bank (taking into account the effect of the issuance of such
proposed subordinated debt securities). On the close of business on the
fifteenth day after the provisions of the Section 5.21(c) Notice (or the next
succeeding Domestic Business Day if such day is not a Domestic Business Day),
(i) the terms and conditions of the proposed subordinated debt securities shall
be deemed to have been approved by the Required Banks (and the Agent shall
notify the Borrower of such approval) unless, on or prior to such fifteenth day
(or such next succeeding Domestic Business Day, as applicable), Banks having
more than 331/3 of the Credit Exposure at such time shall have expressed their
disapproval of such terms and conditions in the manner set forth in the previous
sentence, in which case the Borrower will not issue any subordinated debt
securities until it repeats the foregoing procedures of this Section 5.21(c) and
(ii) such proposed Borrowing Base shall become the basis for determining the new
Borrowing Base, pursuant to the final sentence of this Section 5.21(c), unless
on or prior to such fifteenth day, (A) the Agent shall have received the written
consent of the Required Banks to such proposed Borrowing Base, or (B) Banks
having more than 331/3 of the Credit Exposure at such time shall have expressed
their disapproval to the Agent in the manner set forth in the previous sentence,
in which case the Agent shall notify the Borrower of the lowest determination
agreed to by the Required Banks. Upon the consummation of the sale of any
61
subordinated debt securities, (i) the Borrower shall notify the Agent of the
principal amount of the subordinated debt securities sold in such transaction
and (ii) the Borrowing Base will on and as of such date be redetermined in an
amount equal to (A) the maximum Borrowing Base agreed to by the Required Banks
PLUS (B) the difference of (1) the principal amount of the subordinated debt
securities sold in such transaction MINUS (2) the principal amount that the
Borrower had expected to issue in the proposed subordinated debt securities
sale, as specified in its notice to the Banks pursuant to the first sentence of
this Section 5.21(c).
ARTICLE 6
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) any principal of any Loan or any LC
Reimbursement Obligation payable by it hereunder when due or (ii) any interest,
fee or other amount payable by it hereunder within 3 days of the date due
hereunder;
(b) the Borrower shall fail to observe or perform any covenant contained in
the Financing Documents, other than Sections 5.01 through 5.07 hereof,
inclusive;
(c) any Obligor shall fail to observe or perform any covenant or agreement
(other than those covered by clause (a) or (b) above) contained in this
Agreement or any amendment hereof for 30 days after the Agent gives notice
thereof to the Borrower at the request of any Bank;
(d) any representation, warranty, certification or statement made by any
Obligor in this Agreement or any amendment hereof or in any certificate,
financial statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make one or more payments
in respect of Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice or
lapse
62
of time or both, would enable) the holder of such Debt or any Person acting on
such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Material Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer, any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000;
(j) judgments or orders for the payment of money exceeding $5,000,000 in
aggregate amount shall be rendered against the Borrower or any Subsidiary and
such judgments or orders shall continue unsatisfied and unstayed for a period of
10 days;
63
(k) the Borrower and/or any Subsidiary of the Borrower has incurred or
incurs Environmental Liabilities in excess of $5,000,000 in the aggregate, which
Environmental Liabilities would, under GAAP, be reflected in the financial
statements (or the footnotes thereto) of the Borrower;
(l) any person or group of persons (within the meaning of Section 13 or 14
of the Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the SEC under said Act) of 331/3% or more
of the outstanding shares of common stock of the Borrower; or, during any period
of [12] consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period shall cease to constitute a majority of
the Borrower's board of directors; or, any "Change of Control" (as defined in
the indenture with respect to subordinated debt included in a Long Term Junior
Financing) shall have occurred; or
(m) at any time, any Guarantee hereunder by any Guarantor shall fail to
constitute a valid and binding obligation of such Guarantor, enforceable in
accordance with its terms;
then, and in every such event, the Agent shall:
(i) if requested by Banks having more than 662/3% in aggregate
amount of the Commitments, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate;
(ii) if requested by Banks having more than 662/3% of the Aggregate
LC Exposure, by notice to each LC Issuing Bank instruct such LC Issuing
Bank not to extend the expiry date of any outstanding Letter of Credit,
whereupon such LC Issuing Bank shall deliver notice to that effect
promptly to the beneficiary of each such Letter of Credit and the
Borrower; and
(iii) if requested by Banks holding Notes evidencing more than
662/3% in aggregate outstanding principal amount of the Loans, by notice
to the Borrower declare the Loans (together with accrued interest thereon)
to be, and the Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower;
PROVIDED that, if any Event of Default specified in Section 6.01(h) or 6.01(i)
occurs with respect to the Borrower, then without any notice to the Borrower or
any
64
other act by the Agent or the Banks, the Commitments shall thereupon terminate
and the Loans (together with accrued interest thereon) shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. CASH COVER. The Borrower agrees that, if an Event of Default
shall have occurred and be continuing and Banks having more than 662/3% of the
Aggregate LC Exposure instruct the Agent to request cash collateral pursuant to
this Section, the Borrower will, promptly after it receives such request from
the Agent, pay to the Agent an amount in immediately available funds equal to
the then aggregate amount available for subsequent drawings under all
outstanding Letters of Credit, to be held by the Agent, under arrangements
satisfactory to it, to secure the payment of all LC Reimbursement Obligations
arising from subsequent drawings under such Letters of Credit (which collateral
shall be released by the Agent to the Borrower upon the cure of any such Event
of Default); PROVIDED that, if any Event of Default specified in Section 6.01(h)
or 6.01(i) occurs with respect to the Borrower, the Borrower shall pay such
amount to the Agent forthwith without any notice or demand or any other act by
the Agent or the Banks.
ARTICLE 7
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to the Agent by
the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.02. AGENTS AND AFFILIATES. Xxxxxx Guaranty Trust Company of New
York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Xxxxxx Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Borrower or any Subsidiary or affiliate of the Borrower as if it were
not the Agent.
65
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article 6.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal
counsel (who may be counsel for the Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. None of the Agent or any of its
affiliates or any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or such different
number of Banks as any provision hereof expressly requires for such consent or
request) or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement or other writing (which may be a bank wire, telex,
facsimile or similar writing) believed by it to be genuine or to be signed by
the proper party or parties. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.06. INDEMNIFICATION. The Banks shall, ratably in proportion to
their Credit Exposures, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any action taken or omitted
by such indemnitees hereunder.
66
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking any
action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving
notice thereof to the Banks and the Borrower. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent with the
consent of the Borrower (which shall not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $100,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent resigns as Agent hereunder,
the provisions of this Article 7 shall inure to its benefit as to actions taken
or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Borrower shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon by the
Borrower and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or before the first day of any Interest Period for any Euro-Dollar Loan:
(a) the Agent is advised by the Reference Banks that deposits in dollars
(in the applicable amounts) are not being offered to the Reference Banks in the
London interbank market for such Interest Period, or
67
(b) Banks holding 50% or more of the aggregate principal amount of the
affected Loans advise the Agent that the London Interbank Offered Rate as
determined by the Agent will not adequately and fairly reflect the cost to such
Banks of funding their Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make Euro-Dollar Loans or to continue or convert outstanding Loans as or into
Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any affected Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank notifies the Borrower
and the Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as
Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such notice is given, each Euro-Dollar Loan of such Bank then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Bank may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan
to such day or (b) immediately if such Bank shall determine that it may not
lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such
day.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change
68
in any applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Applicable Lending Office) or any LC Issuing Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency, shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement with respect to which such Bank is entitled to compensation
during the relevant Interest Period under Section 2.13), special deposit,
insurance assessment or similar requirement against assets of, deposits with or
for the account of, or credit (including letters of credit and participations
therein) extended by, any Bank (or its Applicable Lending Office) or any LC
Issuing Bank or shall impose on any Bank (or its Applicable Lending Office) or
any LC Issuing Bank or the London interbank market any other condition affecting
its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans or
its obligations hereunder in respect of Letters of Credit and the result of any
of the foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) or such LC Issuing Bank of making or maintaining any Euro-Dollar Loan or
issuing or participating in any Letter of Credit, or to reduce the amount of any
sum received or receivable by such Bank (or its Applicable Lending Office) or
such LC Issuing Bank under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank or LC Issuing Bank to be material,
then, within 15 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank or LC Issuing Bank such additional amount or
amounts as will compensate such Bank or LC Issuing Bank for such increased cost
or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
69
(c) Each Bank and LC Issuing Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank or LC Issuing Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank or LC Issuing Bank, be otherwise
disadvantageous to it. A certificate of any Bank or LC Issuing Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank or LC Issuing Bank may use
any reasonable averaging and attribution methods.
SECTION 8.04. TAXES. (a) For the purposes of this Section, the following
terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings of any nature with respect to any
payment by the Borrower or any Guarantor, as the case may be, pursuant to this
Agreement or under any Note, and all liabilities with respect thereto, EXCLUDING
(i) in the case of each Bank Party, taxes imposed on its net income, and
franchise or similar taxes imposed on it, by a jurisdiction under the laws of
which it is organized or in which its principal executive office is located or,
in the case of each Bank, in which its Applicable Lending Office is located and
(ii) in the case of each Bank, any United States withholding tax imposed on such
payment, but not excluding any portion of such tax that exceeds the United
States withholding tax which would have been imposed on such a payment to such
Bank under the laws and treaties in effect when such Bank first becomes a party
to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Note or from the
execution, delivery, registration or enforcement of, or otherwise with respect
to, this Agreement or any Note.
(b) All payments by the Borrower or any Guarantor to or for the account of
any Bank Party hereunder or under any Note shall be made without deduction for
any Taxes or Other Taxes; PROVIDED that, if the Borrower or any Guarantor shall
be required by law to deduct any Taxes or Other Taxes from any such payment, (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) such Bank Party receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower or any
Guarantor, as the case may be, shall make such deductions, (iii) the Borrower or
70
such Guarantor, as the case may be, shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and (iv) the Borrower shall promptly furnish to the Agent, at its address
specified in or pursuant to Section 10.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank Party for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section),
whether or not correctly or legally imposed, paid by such Bank Party and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Bank Party makes demand therefor.
(d) Each Bank Party organized under the laws of a jurisdiction outside the
United States, on or before it signs and delivers this Agreement in the case of
each Bank listed on the signature pages hereof and on or before it becomes a
Bank in the case of each other Bank, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Bank remains
lawfully able to do so), shall provide each of the Borrower and the Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the United States is a
party which exempts such Bank from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such Bank or
certifying that the income receivable by it pursuant to this Agreement is
effectively connected with the conduct of its trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide the
Borrower or the Agent with the appropriate form referred to in Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
after the date on which such form originally was required to be provided), such
Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c)
with respect to Taxes imposed by the United States; PROVIDED that if a Bank,
that is otherwise exempt from or subject to a reduced rate of withholding tax,
becomes subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(f) If the Borrower or any Guarantor is required to pay additional amounts
to or for the account of any Bank pursuant to this Section as a result of a
change in law or treaty occurring after such Bank first became a party to this
Agreement, then such Bank will, at the Borrower's request, change the
jurisdiction
71
of its Applicable Lending Office if, in the sole judgment of such Bank, such
change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR LOANS.
If (i) the obligation of any Bank to make, or to continue or convert outstanding
Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect
to its Euro-Dollar Loans, and in any such case the Borrower shall, by at least
five Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist, all Loans
which would otherwise be made by such Bank as (or continued as or converted to)
Euro-Dollar Loans shall instead be Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related CD Loans or
Euro-Dollar Loans of the other Banks). If such Bank notifies the Borrower that
the circumstances giving rise to such suspension or demand for compensation no
longer exist, the principal amount of each such Base Rate Loan shall be
converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
SECTION 8.06. SUBSTITUTION OF BANK. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04, the Borrower shall
have the right (a) with the assistance of the Agent, to seek a mutually
satisfactory substitute bank or banks (which may be one or more of the Banks) to
purchase the Note and assume the rights and obligations of such Bank hereunder,
or (b) to elect to terminate this Agreement as to such Bank, and in connection
therewith not to borrow or convert to any Base Rate Loan provided for in Section
8.02 or to prepay any Base Rate Loan made pursuant to Section 8.02 or 8.05,
PROVIDED that the Borrower (x) notifies such Bank through the Agent of such
election at least three Euro-Dollar Business Days before any date fixed for such
a borrowing, prepayment or conversion, as the case may be, and (y) prepays all
of such Bank's outstanding Loans at the end of the respective Interest Periods
applicable thereto or, if required by clause (b) of the last sentence of Section
8.02, immediately. Upon receipt by the Agent of such notice the Commitment of
such Lender, if outstanding, shall terminate.
72
ARTICLE 9
GUARANTY
SECTION 9.01. THE GUARANTY. Each Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment of
all other amounts payable by the Borrower under this Agreement. Upon failure by
the Borrower to pay punctually any such amount, each Guarantor shall forthwith
on demand pay the amount not so paid at the place and in the manner specified in
this Agreement.
SECTION 9.02. GUARANTY UNCONDITIONAL. The obligations of each Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or any other
Guarantor under this Agreement or any Note, by operation of law or
otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower or any
other Guarantor under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership
of the Borrower or any other Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
other Guarantor or their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other Guarantor
contained in this Agreement or any Note;
(v) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, any other Guarantor,
the Agent, any Bank or any other Person, whether in connection herewith or
any unrelated transactions, PROVIDED that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
73
(vi) any invalidity or unenforceability relating to or against the
Borrower or any other Guarantor for any reason of this Agreement or any
Note, or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower or any other Guarantor of the
principal of or interest on any Note or any other amount payable by the
Borrower or any other Guarantor under this Agreement; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor, the Agent, any Bank or any other Person or
any other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
Guarantor's obligations hereunder.
SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Each Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement shall have been paid in full. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by the Borrower under this Agreement is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
any other Guarantor or otherwise, each Guarantor's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
SECTION 9.04. WAIVER BY EACH GUARANTOR. Each Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the Borrower or any other Guarantor or any other Person.
SECTION 9.05. SUBROGATION AND CONTRIBUTION. Upon making any payment with
respect to any Borrower hereunder, the relevant Guarantor shall be subrogated to
the rights of the payee against the Borrower with respect to such payment;
PROVIDED that no Guarantor shall enforce any payment by way of subrogation or
contribution against any other Obligor until all amounts of principal of and
interest on the Notes and all other amounts payable by the Borrower under this
Agreement have been paid in full.
SECTION 9.06. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or any Note
is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by each Guarantor hereunder forthwith on demand by
74
the Agent made at the request of the requisite proportion of the Banks specified
in Article 6 of the Agreement.
SECTION 9.07. LIMIT OF LIABILITY. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
SECTION 9.08. RELEASE UPON SALE. Upon any sale by the Borrower of a
Subsidiary permitted by and in compliance with this Agreement, such Subsidiary
shall automatically and without further action by any Bank or the Agent be
released from its obligations, if any, as a Guarantor hereunder.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
or similar writing) and shall be given to such party (a) in the case of the
Borrower or the Agent, at its address, facsimile number or telex number set
forth on the signature pages hereof, (b) in the case of any Guarantor, in care
of the Borrower (c) in the case of any Bank, at its address, facsimile number or
telex number set forth in its Administrative Questionnaire or (d) in the case of
any party, at such other address, facsimile number or telex number as such party
may hereafter specify for the purpose by notice to the Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given
by telex, when transmitted to the telex number referred to in this Section and
the appropriate answerback is received, (ii) if given by facsimile, when
transmitted to the facsimile number referred to in this Section and confirmation
of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address referred to in this Section; PROVIDED that notices to the Agent or
any LC Issuing Bank under Article 2 or Article 8 shall not be effective until
received.
SECTION 10.02. NO WAIVERS. No failure or delay by any Bank Party
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or
75
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 10.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay (i)
all reasonable out-of-pocket expenses of the Agent, including reasonable fees
and disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses
incurred by each Bank Party, including (without duplication) the reasonable fees
and disbursements of outside counsel and the allocated cost of inside counsel,
in connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Bank Party, their respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of any Letter
of Credit or any proceeds of Loans hereunder; PROVIDED that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
(c) The Borrower hereby indemnifies each Bank from and against and agrees
to hold each of them harmless from any and all liabilities, losses, damages,
costs and expenses of any kind (including without limitation reasonable expenses
of investigation by engineers, environmental consultants and similar technical
personnel and reasonable fees and disbursements of counsel) of any Bank arising
out of, in respect of or in connection with any and all Environmental
Liabilities. Without limiting the generality of the foregoing, the Borrower
hereby waives all rights for contribution or any other rights of recovery with
respect to liabilities, losses, damages, costs and expenses arising under or
related to Environmental Laws that it might have by statute or otherwise against
any Bank.
SECTION 10.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest then due with
respect to the Loans and participations in LC Reimbursement Obligations held by
it which is greater than the proportion received by any other Bank in respect of
the
76
aggregate amount of principal and interest then due with respect to the Loans
and participations in LC Reimbursement Obligations held by such other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the Loans and participations in LC Reimbursement Obligations
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans and participations in LC Reimbursement Obligations held by the Banks shall
be shared by the Banks pro rata; PROVIDED that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim it
may have and to apply the amount subject to such exercise to the payment of
indebtedness of any Obligor other than its indebtedness in respect of the Loans
and LC Reimbursement Obligations. Each Obligor agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a participation
in a Loan or LC Reimbursement Obligation, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of such Obligor in the amount of such
participation.
SECTION 10.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent or any LC Issuing Bank are affected thereby, by
the Agent or such LC Issuing Banks, as the case may be); PROVIDED that no such
amendment or waiver shall, unless signed by all the Banks, (i) increase or
decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or the amount of any LC
Reimbursement Obligation or any interest thereon or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or interest on any Loan
or of any LC Reimbursement Obligation or any interest thereon or any fees
hereunder or for the termination of any Commitment or (except as expressly
provided in Section 2.14) extend the expiry date of any Letter of Credit, (iv)
change the aggregate amount by which or to which the Commitments are required to
be reduced on or prior to any Commitment Reduction Date, (v) release any
Guarantor from its obligations hereunder, or (vi) change the Commitments
Percentage or the percentage of the Aggregate LC Exposure or of the aggregate
unpaid principal amount of the Loans, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement.
SECTION 10.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
77
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the Bank Parties.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans and participations in Letters of Credit. If a Bank
grants any such participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the LC Issuing Banks
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower and the LC Issuing Banks hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; PROVIDED that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii), (iii) or
(iv) of Section 10.05 without the consent of the Participant. The Borrower
agrees that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Section 2.13 and Article 8 with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection.
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of its
rights and obligations under this Agreement and its Note, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit D hereto signed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower (which shall not be unreasonably withheld), the Agent
and the LC Issuing Banks; PROVIDED that if an Assignee is an affiliate of such
transferor Bank or was a Bank immediately before such assignment, or, if at the
time of such assignment, an Event of Default shall have occurred and be
continuing, no such consent of the Borrower shall be required. Each such
assignment shall be in such an amount that, after such assignment is made, each
of the assignor Bank and the Assignee will have an Outstanding Amount, together
with their respective unused Commitments, of at least $5,000,000. When such
instrument has been signed and delivered by the parties thereto and such
Assignee has paid to such transferor Bank the purchase price agreed between
them, such Assignee shall be a Bank party to this Agreement and shall have all
the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor
78
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection, the transferor Bank,
the Agent and the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States or a political subdivision
thereof, it shall deliver to the Borrower and the Agent certification as to its
exemption from deduction or withholding of, or its entitlement to a reduced
withholding rate for, United States federal income taxes in accordance with
Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 10.07. NO RELIANCE ON MARGIN STOCK. Each of the Banks represents
to the Agent and each of the other Banks that it in good faith is not relying
upon any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Obligor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Obligor irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 10.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be signed in any number of counterparts, each of which shall be an
79
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective when the Agent has received from
each of the parties hereto a counterpart hereof signed by such party or
facsimile or other written confirmation satisfactory to the Agent confirming
that such party has signed a counterpart hereof.
SECTION 10.10. WAIVER OF JURY TRIAL. THE BORROWER AND EACH BANK PARTY
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 10.11. APPOINTMENT OF AGENT FOR SERVICES OF PROCESS. (a) The
Borrower hereby irrevocably designates, appoints, authorizes and empowers as its
agent for service of process, CT Corporation System at its offices currently
located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 to accept and acknowledge for
and on behalf of the Borrower service of any and all process, notices or other
documents that may be served in any suit, action or proceeding relating hereto
in any New York State or Federal court sitting in The State of New York.
(b) In lieu of service upon its agent, the Borrower consents to process
being served in any suit, action or proceeding relating hereto by mailing a copy
thereof by registered or certified air mail, postage prepaid, return receipt
requested, to its address designated pursuant to Section 10.01. The Borrower
agrees that such service (1) shall be deemed in every respect effective service
of process upon it in any such suit, action or proceeding and (2) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to it.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
SECTION 10.12. JUDGMENT CURRENCY. If for the purposes of enforcing the
obligations of the Borrower any hereunder it is necessary to convert a sum due
from such Person in U.S. dollars ("DOLLARS") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
80
procedures the Agent and the Banks could purchase dollars with such currency at
or about 11:00 A.M. (New York City time) on the Domestic Business Day preceding
that on which final judgment is given. The obligations in respect of any sum due
to the Agent and the Banks hereunder shall, notwithstanding any adjudication
expressed in a currency other than dollars, be discharged only to the extent
that on the Domestic Business Day following receipt by the Agent and the Banks
of any sum adjudged to be so due in such other currency the Agent and the Banks
may in accordance with normal banking procedures purchase dollars with such
other currency; if the amount of dollars so purchased is less than the sum
originally due to the Agent and the Banks in dollars, the Borrower and each
Guarantor agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such adjudication, to indemnify the
Agent and the Banks against such loss, and if the amount of dollars so purchased
exceeds the sum originally due to the Agent and the Banks, it shall remit such
excess to the Borrower.
SECTION 10.13. MAXIMUM INTEREST RATE. (a) Nothing contained in this
Agreement or the Notes shall require the Borrower to pay interest at a rate
exceeding the maximum rate permitted by applicable law
(b) If the amount of interest payable for the account of any Bank on any
interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to Section 2.04, would exceed the maximum
amount permitted by applicable law to be charged by such Bank, the amount of
interest payable for its account on such interest payment date shall be
automatically reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of any Bank in
respect of any interest computation period is reduced pursuant to clause (b) of
this Section and the amount of interest payable for its account in respect of
any subsequent interest computation period, computed pursuant to Section 2.04,
would be less than the maximum amount permitted by applicable law to be charged
by such Bank, then the amount of interest payable for its account in respect of
such subsequent interest computation period shall be automatically increased to
such maximum permissible amount; PROVIDED that at no time shall the aggregate
amount by which interest paid for the account of any Bank has been increased
pursuant to this clause (c) exceed the aggregate amount by which interest paid
for its account has theretofore been reduced pursuant to clause (b) of this
Section.
81
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BELLWETHER EXPLORATION
COMPANY
By:
Name:
Title:
Address:
Facsimile:
` [SIGNATURE BLOCKS FOR EACH
MATERIAL SUBSIDIARY OF THE
BORROWER AS GUARANTORS]
By:
Name:
Title:
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By:
Name:
Title:
Address: 00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile:
82
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK, as Bank
By:
Name:
Title:
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK, as LC
Issuing Bank
By:
Name:
Title:
83
