Execution Copy
CREDIT AGREEMENT
DEVON ENERGY CORPORATION (NEVADA),
as Borrower,
DEVON ENERGY CORPORATION and
DEVON ENERGY OPERATING CORPORATION,
as Guarantors,
NATIONSBANK OF TEXAS, N.A.
as Agent,
and
NATIONSBANK OF TEXAS, N.A., BANK ONE, TEXAS, N.A.,
BANK OF MONTREAL and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
as Lenders
$300,000,000 (U.S.)
August 30, 1996
CREDIT AGREEMENT
Table of Contents
Page
ARTICLE I -- Definitions and References . . . . . . . . . 1
Section 1.1. Defined Terms . . . . . . . . . . . . 1
Section 1.2. Exhibits and Schedules; Additional
Definitions . . . . . . . . . . . . . . . . . . 12
Section 1.3. Amendment of Defined Instruments . . . 12
Section 1.4. References and Titles . . . . . . . . 12
Section 1.5. Calculations and Determinations . . . 12
ARTICLE II -- The Loans . . . . . . . . . . . . . . . . . 12
Section 2.1. Loans . . . . . . . . . . . . . . . . 12
Section 2.2. Requests for Advances . . . . . . . . 13
Section 2.3. Proportionate and Disproportionate
Loans . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4. Cancellation of Old Agreement . . . . 15
Section 2.5. Use of Proceeds . . . . . . . . . . . 15
Section 2.6. Rate Elections . . . . . . . . . . . . 16
Section 2.7. Advances Constituting Offered Rate
Portions . . . . . . . . . . . . . . . . . . . 17
Section 2.8. Fees . . . . . . . . . . . . . . . . . 18
Section 2.9. Optional Prepayments . . . . . . . . . 18
Section 2.10. Mandatory Prepayments . . . . . . . . 18
Section 2.11. Payments to Lenders . . . . . . . . . 19
Section 2.12. Initial Borrowing Base . . . . . . . 19
Section 2.13. Subsequent Determinations of
Borrowing Base . . . . . . . . . . . . . . . . 20
Section 2.14. Borrower's Designation of Borrowing
Base Reduction . . . . . . . . . . . . . . . . 20
Section 2.15. Increased Cost of Fixed Rate Portions 20
Section 2.16. Change of Law . . . . . . . . . . . . 21
Section 2.17. Funding Losses . . . . . . . . . . . 21
Section 2.18. Reimbursable Taxes; Capital Adequacy 22
ARTICLE II-A -- Letters of Credit . . . . . . . . . . . . 23
Section 2A.1. Letters of Credit . . . . . . . . . . 23
Section 2A.2. Requesting Letters of Credit . . . . 24
Section 2A.3. Reimbursement and Participations . . 24
Section 2A.4. Letter of Credit Fees . . . . . . . . 26
Section 2A.5. No Duty to Inquire . . . . . . . . . 26
Section 2A.6. LC Collateral . . . . . . . . . . . . 27
ARTICLE III -- Conditions Precedent to Lending . . . . . 28
Section 3.1. Documents to be Delivered . . . . . . 28
Section 3.2. Additional Conditions Precedent . . . 29
ARTICLE IV -- Representations and Warranties . . . . . . 30
Section 4.1. Borrower's, Parent's and DEOC's
Representations and Warranties . . . . . . . . 30
Section 4.2. Representation by Lenders . . . . . . 33
ARTICLE V -- Covenants of Borrower, Parent . . . . . . . 34
Section 5.1. Affirmative Covenants . . . . . . . . 34
Section 5.2. Negative Covenants . . . . . . . . . . 39
Section 5.3. Investing Subsidiary . . . . . . . . . 49
ARTICLE VI -- Guaranties and Offset . . . . . . . . . . . 50
Section 6.1. Bank Accounts; Offset . . . . . . . . 50
Section 6.2. Guaranties of Subsidiaries . . . . . . 51
Section 6.3. Guarantors' Right of Setoff . . . . . 51
ARTICLE VII -- Events of Default and Remedies . . . . . . 51
Section 7.1. Events of Default . . . . . . . . . . 51
Section 7.2. Remedies . . . . . . . . . . . . . . . 54
ARTICLE VIII -- Agent . . . . . . . . . . . . . . . . . . 54
Section 8.1. Appointment and Authority . . . . . . 54
Section 8.2. Agent's Reliance, Etc. . . . . . . . . 55
Section 8.3. Lenders' Credit Decisions . . . . . . 55
Section 8.4. Indemnification . . . . . . . . . . . 56
Section 8.5. Rights as Lender . . . . . . . . . . . 56
Section 8.6. Sharing of Set-Offs and Other Payments 56
Section 8.7. Investments . . . . . . . . . . . . . 57
Section 8.8. Benefit of Article VIII . . . . . . . 57
Section 8.9. Resignation . . . . . . . . . . . . . 57
ARTICLE IX -- Miscellaneous . . . . . . . . . . . . . . . 58
Section 9.1. Waivers and Amendments;
Acknowledgements . . . . . . . . . . . . . . . 58
Section 9.2. Survival of Agreements; Cumulative
Nature . . . . . . . . . . . . . . . . . . . . 59
Section 9.3. Notices . . . . . . . . . . . . . . . 60
Section 9.4. Joint and Several Liability; Parties
in Interest; Purchases of Notes . . . . . . . . 60
SECTION 9.5. GOVERNING LAW; WAIVER OF JURY TRIAL;
ETC. . . . . . . . . . . . . . . . . . . . . . 60
Section 9.6. Limitation on Interest . . . . . . . . 61
Section 9.7. Optional Termination . . . . . . . . . 62
Section 9.8. Severability . . . . . . . . . . . . . 63
Section 9.9. Counterparts . . . . . . . . . . . . . 63
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 - Disclosure Schedule
Exhibit A -- Promissory Note
Exhibit B -- Request for Advances
Exhibit C -- Rate Election
Exhibit D -- Officer's Certificate Accompanying Financial Statements
Exhibit E -- Opinion of McAfee & Xxxx, A Professional Corporation
Counsel for Borrower, Parent, DEOC and Avon
Exhibit F-1 -- Guaranty of Parent
Exhibit F-2 -- Guaranty of DEOC
Exhibit G -- Notice of Final Agreement
Exhibit H -- Letter of Credit Application and Agreement
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of the 30th day of
August, 1996, by and among Devon Energy Corporation (Nevada),
a Nevada corporation, as Borrower ("Borrower"), Devon Energy
Corporation, an Oklahoma corporation ("Parent"), and Devon
Energy Operating Corporation, an Oklahoma corporation
("DEOC"), as Guarantors, NationsBank of Texas, N.A., a
national banking association, as Agent ("Agent"), and the
financial institutions named below, as Lenders ("Lenders").
In consideration of the mutual covenants and agreements
contained herein the parties hereto agree as follows:
ARTICLE I -- Definitions and References
Section 1.1. Defined Terms. As used in this Agreement,
each of the following terms has the meaning given it in this
Section 1.1 or in the sections and subsections referred to
below:
"Adjusted Eurodollar Rate" means, with respect to each
particular Eurodollar Portion of a Loan and the associated
Eurodollar Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the
next higher 0.01%) determined on a daily basis pursuant to the
following formula:
Adjusted Eurodollar Rate =
Eurodollar Rate + Euro Margin
100.0% - Reserve Percentage
Such Adjusted Eurodollar Rate shall change as the Euro Margin
and the associated Reserve Percentage change.
"Advance" means an advance under Section 2.1 or 2.7(a).
"Affiliate" means, as to any Person, each other Person
that directly or indirectly (through one or more
intermediaries or otherwise) controls, is controlled by, or is
under common control with, such Person.
"Agent" means NationsBank, as Agent hereunder and as
issuer of Letters of Credit hereunder, and its successors in
such capacity.
"Agreement" means this Credit Agreement.
"Approved Additional Debt" means unsecured Debt of
Borrower or Parent for money borrowed from banks, provided
that Majority Lenders have given prior approval at the time in
question to the terms of each such borrowing. For the
purposes of this paragraph, Lenders hereby consent to Borrower
and Parent entering into the letter agreement dated August __,
1996 between Borrower or Parent and Bank of Oklahoma, N.A and
to any replacement letter among the same parties on
substantially the same terms, provided that no more than
$10,000,000 of principalindebtedness may be outstanding at any
time under such original letter agreement or any such replacement letter
agreement.
"Authorized Officer" means, with respect to any act to be
performed or duty to be discharged by or on behalf of any
Person who is not an individual, any officer, agent or
representative thereof who is at the time in question
authorized to perform such act or discharge such duty on
behalf of such Person.
"Available Borrowing Base" means, at the particular time
in question, the remainder of (a) the Borrowing Base, minus
(b) the Borrowing Base Reduction.
"Avon" means Avon Energy Corporation, a Delaware
corporation.
"Base Rate" means the per annum rate of interest equal to
Agent's Prime Rate. As used in this paragraph, Agent's "Prime
Rate" means the rate of interest established by Agent from
time to time as its "prime rate". Such rate is set by Agent
as a general reference rate of interest, taking into account
such factors as it may deem appropriate, it being understood
that many of Agent's commercial or other loans are priced in
relation to such rate, that it is not necessarily the lowest
or the best rate actually charged to any customer, that it may
not correspond with further increases or decreases in interest
rates charged by other lenders or market rates in general and
that Agent may make various commercial or other loans at rates
of interest having no relationship to such rate. If Agent's
Prime Rate changes after the date hereof the Base Rate shall
be automatically increased or decreased, as the case may be,
without notice to Borrower from time to time as of the
effective time of each change in Agent's Prime Rate.
"Base Rate Portion" means that portion of the unpaid
principal balance of any Loan which is not made up of Fixed
Rate Portions.
"Borrower" means Devon Energy Corporation (Nevada), a
Nevada corporation.
"Borrowing Base" means, at the particular time in
question, either the amount provided for in Section 2.12 or
the amount determined by Agent in accordance with the
provisions of Section 2.13. At no time shall the Borrowing
Base exceed the sum of the Maximum Loan Amounts.
"Borrowing Base Deficiency" has the meaning given it in
Section 2.10.
"Borrowing Base Reduction" means, at the particular time
in question, either the amount provided for in Section 2.12 or
the amount designated by Borrower in accordance with the
provisions of Section 2.14.
"Business Day" means a day on which commercial banks are
open for business with the public in Dallas, Texas. Any
Business Day in any way relating to Eurodollar Portions (such
as the day on which a Eurodollar Interest Period begins or
ends) must also be a day on which, in the judgment of Agent, significant
transactions in dollars are carried out in the interbank
eurocurrency market.
"Commitment Period" means the period from and including
the date on which the Notes are delivered and accepted as
contemplated in Section 2.4 until and including August 31,
2002 (or any date on which the Notes otherwise become due and
payable in full as provided in the Loan Documents).
"Consolidated" refers to the consolidation of any Person,
in accordance with GAAP, with its properly consolidated
subsidiaries. References herein to a Person's Consolidated
financial statements, financial position, financial condition,
liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated
subsidiaries.
"Debt" means, as to any Person, all indebtedness,
liabilities and obligations of such Person, whether matured or
unmatured, liquidated or unliquidated, primary or secondary,
direct or indirect, absolute, fixed or contingent, and whether
or not required to be considered pursuant to GAAP.
"Default" means any Event of Default and any default,
event or condition which would, with the giving of any
requisite notices and the passage of any requisite periods of
time, constitute an Event of Default.
"DEOC" means Devon Energy Operating Corporation, an
Oklahoma corporation.
"Determination Date" has the meaning given it in Section
2.13.
"Devon Trust" means Devon Financing Trust, a statutory
business trust formed under the laws of the State of Delaware.
"Devon Trust Securities" means those certain Trust
Convertible Preferred Securities, issued by Devon Trust in an
amount of 2,990,000.
"Disclosure Schedule" means (a) Schedule 1 hereto and (b)
any documents listed on such schedule and expressly
incorporated therein by reference, so long as Borrower has
heretofore delivered true and correct copies of such documents
to Agent and each Lender. Insofar as any representations and
warranties made herein are incorporated by reference or
otherwise remade in Loan Documents delivered as of a date
after the date hereof, the term "Disclosure Schedule" shall in
such representations and warranties be deemed to refer as well
to (i) all documents which Borrower has at the time in
question delivered to Agent and each Lender under Sections
5.1(b), (c), or (d), and (ii) all other documents which
Borrower has at the time in question delivered to Agent and
each Lender and which expressly refer to the Disclosure
Schedule and state that they are given to supplement or amend
it.
"Drawing Amount" means, with respect to each Letter of
Credit at the time in question, the maximum amount which Agent
would be called upon to advance under such Letter of Credit if
such Letter of Credit were then drawn
upon in full. If any Letter of Credit provides that the
amount which may be drawn upon thereunder shall increase or
decrease according to a schedule set forth therein, the
Drawing Amount for such Letter of Credit shall increase or
decrease in accordance with such schedule.
"Engineering Report" means any of the Initial Engineering
Report, the final engineering reports delivered under Section
5.1(b)(iv), and the supplemental engineering reports delivered
under Section 5.1(b)(v).
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, together with all rules and regulations
promulgated with respect thereto.
"ERISA Plan" means any pension benefit plan subject to
Title IV of ERISA maintained by any Related Person or any
Affiliate thereof to which any Related Person has a fixed or
contingent liability.
"Euro Margin" means:
(a) one-half percent (0.5%) per annum whenever the Loan
Balance is equal to or greater than 75% of the
Borrowing Base in effect at the time in question; or
(b) one-quarter percent (0.25%) per annum whenever the
Loan Balance is less than 75% of the Borrowing Base
in effect at the time in question.
"Eurodollar Interest Period" means, with respect to each
particular Eurodollar Portion of a Loan, a period of 1, 2, or
3 months, as specified in the Rate Election applicable
thereto, beginning on and including the date specified in such
Rate Election (which must be a Business Day), and ending on
but not including the same day of the month as the day on
which it began (e.g., a period beginning on the third day of
one month shall end on but not include the third day of
another month), provided that each Eurodollar Interest Period
which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (unless such
next succeeding Business Day is the first Business Day of a
calendar month, in which case such Eurodollar Interest Period
shall end on the immediately preceding Business Day). No
Eurodollar Interest Period may be elected which would extend
past the date on which the associated Note is due and payable
in full.
"Eurodollar Portion" means any portion of the unpaid
principal balance of a Loan which Borrower designates as such
in a Rate Election.
"Eurodollar Rate" means, with respect to each particular
Eurodollar Portion within a Tranche and with respect to the
related Interest Period, the rate of interest per annum
determined by Agent in accordance with its customary general
practices to be representative of the rates at which deposits
of dollars are offered to Agent at approximately 9:00 a.m.
Dallas, Texas time two Business Days prior to the first day of
such Interest Period (by prime banks in the interbank
eurocurrency market which have been selected by Agent in accordance
with its customary general practices) for delivery on the first day
of such Interest Period in an amount equal or comparable to the amount
of Agent's Eurodollar Portion within such Tranche and for a
period of time equal or comparable to the length of such
Interest Period. The Eurodollar Rate determined by Agent with
respect to a particular Eurodollar Portion shall be fixed at
such rate for the duration of the associated Interest Period.
If Agent is unable so to determine the Eurodollar Rate for any
Eurodollar Portion, Borrower shall be deemed not to have
elected such Eurodollar Portion.
"Evaluating Lenders" means Agent and Lenders whose
aggregate Percentage Shares equal or exceed ninety percent
(90%).
"Event of Default" has the meaning given it in Section
7.1.
"Fiscal Quarter" means a three-month period ending on
March 31, June 30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on
December 31 of any year.
"Fixed Rate" means, with respect to any Fixed Rate
Portion, the related Adjusted Eurodollar Rate or Offered Rate.
"Fixed Rate Portion" means any Eurodollar Portion or
Offered Rate Portion.
"GAAP" means those generally accepted accounting
principles and practices which are recognized as such by the
Financial Accounting Standards Board (or any generally
recognized successor) and which, in the case of Parent and its
Consolidated subsidiaries, (i) are applied for all periods
after the date hereof in a manner consistent with the manner
in which such principles and practices were applied to the
audited Initial Financial Statements of Parent, and (ii) are
consistently applied for all periods after the date hereof so
as to properly reflect the financial condition, and the
results of operations and cash flows, of Parent and, on a
Consolidated basis, of Parent and its Consolidated
subsidiaries. If any change in any accounting principle or
practice is required by the Financial Accounting Standards
Board (or any such successor) in order for such principle or
practice to continue as a generally accepted accounting
principle or practice, all reports, financial statements and
calculations required hereunder may be prepared in accordance
with such change only after notice of such change is given to
Agent and after Borrower and Majority Lenders agree to such
change and to any appropriate corresponding changes to the
provisions hereof.
"Grace Period" has the meaning given it in Section 7.1.
"Guarantor" means any Person who has guaranteed some or
all of the Obligations and who has been recognized in writing
by Agent as a Guarantor. Parent, DEOC and Avon are each
hereby recognized as a Guarantor.
"Guaranties" means the Guaranties of even date herewith,
given by each of Parent and DEOC to Agent, substantially in
the forms of Exhibits F-1 and F-2 hereto, and the Guaranty of
Avon of even date herewith.
"Initial Engineering Report" means: the engineering
report concerning the oil and gas properties of Borrower
(including certain indirect interests) dated January 31, 1996,
prepared by XxXxxxx & Associates as of December 31, 1995, a
true and correct copy of which report has been furnished to
Agent and each Lender.
"Initial Financial Statements" means (a) the audited
annual Consolidated financial statements of Parent dated as of
December 31, 1995, and (b) the unaudited consolidating and
Consolidated financial statements of Parent dated as of June
30, 1996, copies of all of which financial statements have
heretofore been delivered to Agent and each Lender.
"Interest Period" means, with respect to any Fixed Rate
Portion, the related Eurodollar Interest Period or Offered
Rate Interest Period.
"Investing Subsidiary" means a single wholly owned
Subsidiary of Borrower, organized under the laws of one of the
United States, which did not conduct any business, or receive
any assets from any Related Person (other than cash not
exceeding $10,000) prior to December 10, 1990.
"Late Payment Rate" means at the time in question four
percent (4.0%) per annum plus the Base Rate then in effect;
provided that, with respect to any Fixed Rate Portion of a
Loan with an Interest Period extending beyond the date such
Fixed Rate Portion becomes due and payable, "Late Payment
Rate" shall mean four percent (4.0%) per annum plus the
related Fixed Rate.
"LC Application" means any application for a letter of
credit hereafter made by Borrower to Agent.
"LC Collateral" has the meaning given it in Section
2A.6(a).
"LC Obligations" means at the time in question, the sum
of the Matured LC Obligations plus the Maximum Drawing Amount.
A "Lender's LC Obligations" means at the time in question, the
sum of (i) the portion of the Maximum Drawing Amount for which
such Lender is liable to purchase participations under Section
2A.3(c), plus (ii) the Matured LC Obligations which have been
funded by such Lender under such section.
"Lenders" means NationsBank, Bank One, Texas, N.A., Bank
of Montreal, First Union National Bank of North Carolina and
their respective successors and assigns. "Lender" means any
of the Lenders.
"Letter of Credit Rate" means one-half percent (0.5%) per
annum.
"Letters of Credit" means any letter of credit issued
hereunder by Agent at the application of Borrower.Section 1.1
"Lien" means, with respect to any property or assets, any
right or interest therein of a creditor to secure Debt owed to
such creditor or any other arrangement with such creditor
which provides for the payment of such Debt out of such
property or assets or which allows him to have such Debt
satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage,
security interest, pledge, deposit, production payment, rights
of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien,
mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset
which arises in the ordinary course of business.
"Loan" has the meaning given it in Section 2.1.
"Loan Balance" means, at the time in question, the sum of
the outstanding principal balances of the Loans at such time
plus the LC Obligations at such time.
"Loan Documents" means this Agreement, the Notes, the LC
Applications, the Letters of Credit, the Guaranties, and all
other agreements, certificates, legal opinions and other
documents, instruments and writings heretofore or hereafter
delivered in connection herewith or therewith (exclusive of
commitment letters, term sheets, and similar documents used in
the negotiation hereof, except to the extent the same contain
information about Borrower, Parent, DEOC, or their Affiliates,
properties, businesses or prospects).
"Majority Lenders" means Agent and Lenders whose
aggregate Percentage Shares equal or exceed ninety percent
(90%), provided that whenever the Loan Balance is less than
seventy-five percent (75%) of the Borrowing Base in effect at
the time in question and Lenders have been requested to give a
waiver (as opposed to a permanent amendment) of one or more
provisions of Sections 5.2(d), (f), or (g), such waiver shall
be deemed to have been given by "Majority Lenders" when given
by Agent and Lenders whose aggregate Percentage Shares equal
or exceed sixty-six percent (66%).
"Matured LC Obligations" means all amounts paid by Agent
on drafts or demands for payment drawn or made under or
purported to be under any Letter of Credit (or under or in
connection with any LC Application) which have not been repaid
to Agent by or on behalf of Borrower (with the proceeds of an
Advance or otherwise, but excluding payments made by Lenders
on account of their participation interests hereunder).
"Maximum Drawing Amount" means at the time in question
the sum of all Drawing Amounts at such time for all Letters of
Credit then outstanding.
"Maximum Loan Amount" means, with respect to each Lender,
the amount set forth opposite its name on the signature pages
hereto, and "Maximum Loan Amounts" means the sum of all such
amounts; provided,
(a) on August 31, 1999, the Maximum Loan Amounts
shall be automatically ratably reduced to the Available
Borrowing Base which is in effect on such date; and
(b) on the last day of each November, February, May
and August, commencing November 30, 1999, the Maximum
Loan Amounts shall be further automatically ratably
reduced by the Quarterly Reduction Amount; and
(c) on August 31, 2002, the Maximum Loan Amounts
shall be automatically reduced to zero.
As used herein, "Quarterly Reduction Amount" shall mean an
amount equal to eight and one-third percent (8.33%) of the
Available Borrowing Base as of August 31, 1999.
"NationsBank" means NationsBank of Texas, N.A.
"Note" has the meaning given it in Section 2.1.
"Obligations" means all Debt from time to time owing by
any of the Related Persons to Agent or any Lender under or
pursuant to any of the Loan Documents, including all LC
Obligations. "Obligation" means any part of the Obligations.
"Offered Rate" has the meaning given it in Section 2.7.
"Offered Rate Portion" has the meaning given it in
Section 2.7.
"Old Agreement" has the meaning given it in Section 2.4.
"Parent" means Devon Energy Corporation, an Oklahoma
corporation.
"Parent's Cumulative Consolidated Net Income" means, on a
cumulative basis, the Consolidated net income (or net loss) of
Parent, determined on a cumulative basis for the period
beginning May 1, 1996 and ending on the last day of the most
recent Fiscal Quarter as of the time in question, calculated
in accordance with GAAP.
"Percentage Share" means, with respect to any Lender (a)
when used in Sections 2.1, 2.3, 2.8, Article II-A, or in any
Request for Advances (other than a Request for Advances
constituting an Offered Rate Portion) or when no Default
exists or when the Loan Balance equals zero, the percentage
obtained by dividing (i) such Lender's Maximum Loan Amount, by
(ii) $300,000,000, and (b) when used when a Default exists and
the Loan Balance at such time is greater than zero, the
percentage obtained by dividing (i) the sum of (A) the unpaid
principal balance of such Lender's Loans at the time in
question plus (B) such Lender's LC Obligations at such time,
by (ii) the Loan Balance at such time.
"Person" means an individual, corporation, partnership,
association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization
or joint venture, court or governmental unit or any agency or
subdivision thereof, or any other legally recognizable entity.
"Portfolio Company" means any corporation, limited
partnership, or partnership (other than Parent or any of its
present Affiliates) organized under the laws of one of the
United States, which is engaged primarily in the oil and gas
business.
"Prohibited Lien" means any Lien not expressly allowed
under Section 5.2(b).
"Proved Properties" means oil and gas processing plants,
oil and gas pipelines and gathering systems, and those
portions of oil and gas properties to which are properly
attributable proved developed producing reserves, proved
developed non-producing reserves, or proved undeveloped
reserves.
"Rate Election" has the meaning given it in Section 2.6.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System as from time to time
in effect.
"Related Person" means any of Borrower, Parent, DEOC,
Guarantors, and the Subsidiaries of Borrower or of Parent,
including Avon; provided, the following Subsidiaries of Parent
shall not be deemed to be Related Persons:
(a) BN Co. A Limited Partnership, a New Mexico limited
partnership;
(b) BN Coal, L.L.C., a New Mexico limited liability
company;
(c) BN Non-Coal, L.L.C., a New Mexico limited liability
company; and
(d) Devon-Xxxxxx Company, an Oklahoma general
partnership.
"Request for Advances" means a written or telephonic
request, or a written confirmation, made by Borrower which
meets the requirements of Section 2.2.
"Reserve Percentage" means, in relation to each
particular Eurodollar Portion in a Tranche, the maximum
reserve requirement, as determined by Agent (including without
limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to
the next higher 0.01%, which would apply to Agent under
Regulation D on the first day of the associated Interest
Period with respect to "Eurocurrency liabilities" (as such
term is defined in Regulation D) equal in amount to Agent's
Eurodollar Portion in such Tranche, were Agent to have any
such "Eurocurrency liabilities".
"Restricted Debt" means all Debt of any Person:
(a) for borrowed money,
(b) constituting an obligation to pay the deferred
purchase price of property,
(c) evidenced by bonds, debentures, notes or similar
instruments,
(d) upon which interest or finance charges are
customarily paid,
(e) arising under conditional sales or other title
retention agreements or under leases of any kind (including
operating leases and leases serving as a source of financing
or otherwise capitalized in accordance with GAAP but excluding
customary oil, gas or mineral leases),
(f) under direct or indirect guaranties of Debt of any
Person or constituting obligations to purchase or acquire or
to otherwise protect or insure a creditor against loss in
respect of Debt of any Person (such as obligations under
working capital maintenance agreements, agreements to
keep-well, or agreements to purchase Debt, assets, goods,
securities or services, but excluding endorsements in the
ordinary course of business of negotiable instruments in the
course of collection),
(g) with respect to letters of credit or applications or
reimbursement agreements therefor, or
(h) with respect to payments received in consideration of
oil, gas, or other minerals yet to be produced at the time of
payment (including without limitation obligations under
"take-or-pay" contracts to deliver gas in return for payments
already received and the undischarged balance of any
production payment created by such Person or for the creation
of which such Person directly or indirectly received payment)
or with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the term "Restricted Debt" shall not
include Debt which is thirty days or less past due that was
incurred on ordinary trade terms and is owed by the Person
incurring the same to vendors, suppliers, or other Persons
providing goods and services for use by such Person in the
ordinary course of its business. Any Restricted Debt owed by
a partnership shall be deemed Restricted Debt of any partner
in such partnership to the extent such partner has any
liability of any kind therefor.
"Restricted Person" means any Related Person which is not
an Unrestricted Person.
"SEC Case" has the meaning given it in Section
5.1(b)(iv).
"Subordinated Debt" has the meaning given it in Section
5.2(a)(v).
"Subordinated Parent Debentures" means those certain
Convertible Junior Subordinated Debentures issued by Parent to
Devon Trust pursuant to the Subordinated Parent Indenture and
subordinated to the Obligations, in the aggregate principal
amount of approximately $154,500,000.
"Subordinated Parent Guarantee" means that certain
Guarantee dated July 1, 1996, by Parent in favor of the
holders of the Devon Trust Securities pursuant to the
Subordinated Parent Indenture and subordinated to the
Obligations, guaranteeing certain payments to be made by Devon
Trust pursuant to the Devon Trust Securities.
"Subordinated Parent Indenture" means that certain Trust
Indenture dated July 1, 1996, between Parent and The Bank of
New York, as indenture trustee.
"Subordination Agreement" means that certain
Subordination Agreement of even date herewith among Borrower,
Parent, DEOC, Avon, other Guarantors from time to time a party
thereto, Agent and Lenders.
"Subsidiary" means, with respect to any Person, any
corporation, association, partnership, joint venture, or other
business or corporate entity, enterprise or organization which
is directly or indirectly (through one or more intermediaries)
controlled by or owned fifty percent or more by such Person,
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 federal 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, gas or mineral 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.
"Termination Event" means (a) the occurrence with respect
to any ERISA Plan of (i) a reportable event described in
Sections 4043(b)(5) or (6) of ERISA or (ii) any other
reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for
30-day notice to the Pension Benefit Guaranty Corporation
pursuant to a waiver by such corporation under Section 4043(a)
of ERISA, or (b) the withdrawal of any Related Person or of
any Affiliate of any Related Person from an ERISA Plan during
a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate any ERISA Plan or the treatment
of any ERISA Plan amendment as a termination under Section
4041 of ERISA, or (d) the institution of proceedings to
terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other
event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.
"Tranche" has the meaning given it in Section 2.6.
"Unrestricted Person" means any corporation or limited
partnership in which Parent does not presently own an interest
(directly or indirectly) which hereafter becomes a Subsidiary
of Parent and which, within 90 days thereafter, is designated
as an Unrestricted Person by Parent to Agent, provided that
Parent may not designate as an Unrestricted Person any
Subsidiary in which it has invested more than $1,000,000
(directly or indirectly) by any means other than newly issued
stock or treasury stock of Parent, which may be invested in
Unrestricted Persons without limit.
Section 1.2. Exhibits and Schedules; Additional
Definitions. All Exhibits and Schedules attached to this
Agreement are a part hereof for all purposes.
Section 1.3. Amendment of Defined Instruments. Unless
the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and
include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document,
provided that nothing contained in this section shall be
construed to authorize any such renewal, extension,
modification, amendment or restatement.
Section 1.4. References and Titles. All references in
this Agreement to Exhibits, Schedules, articles, sections,
subsections and other subdivisions refer to the Exhibits,
Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any
subdivisions are for convenience only and do not constitute
any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The
words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only
to the sections or subsections hereof in which such phrases
occur. The word "or" is not exclusive, and the word
"including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter
genders shall be construed to include any other gender, and
words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.
Section 1.5. Calculations and Determinations. All
calculations under the Loan Documents of interest chargeable
with respect to Fixed Rate Portions and of fees shall be on
the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other
calculations of interest made under the Loan Documents shall
be made on the basis of actual days elapsed (including the
first day but excluding the last) and a year of 365 or 366
days, as appropriate. Each determination by Agent or a Lender
of amounts to be paid under Sections 2.15 through 2.18 or any
other matters which are to be determined hereunder by Agent or
any Lender (such as any Adjusted Eurodollar Rate, Eurodollar
Rate, Business Day, Interest Period, or Reserve Percentage)
shall, in the absence of manifest error, be conclusive and
binding. Unless otherwise expressly provided herein or unless
Majority Lenders otherwise consent all financial statements
and financial reports furnished to Agent or any Lender
hereunder shall be prepared and all financial computations and
financial determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II -- The Loans
Section 2.1. Loans. Subject to the terms and conditions
hereof, each Lender agrees to make Advances to Borrower from
time to time during the Commitment Period so long as (i) the
aggregate outstanding amount of such Lender's Advances under
this Section 2.1, plus (ii) such Lender's LC Obligations, does
not exceed such Lender's Percentage Share of the Available
Borrowing Base in effect, all determined as of the date on which
the requested Advances under this Section 2.1 are to be made.
The aggregate amount of such Advances under this Section 2.1 requested
of all Lenders in any Request for Advances under this Section 2.1
must be an integral multiple of $100,000 which equals or
exceeds $200,000 or must equal the unadvanced portion of the
Available Borrowing Base. The obligation of Borrower to repay
to each Lender the aggregate amount of all Advances (whether
under this Section 2.1 or Section 2.7(a)) made by such Lender
(herein called such Lender's "Loan"), together with interest
accruing in connection therewith, shall be evidenced by a
single promissory note (herein called such Lender's "Note")
made by Borrower payable to the order of such Lender in the
form of Exhibit A with appropriate insertions. The amount of
principal owing on any Lender's Note at any given time shall
be the aggregate amount of all Advances (whether under this
Section 2.1 or Section 2.7(a)) theretofore made by such Lender
minus all payments of principal theretofore received by such
Lender on such Note. Interest on each Note shall accrue and
be due and payable as provided herein and therein. Subject to
the terms and conditions hereof, Borrower may borrow, repay,
and reborrow under the Notes.
Section 2.2. Requests for Advances. Prior to 11:00 a.m.
Dallas time, on the date requested by Borrower for the making
of any Advances, Borrower must give to Agent written notice,
or telephonic notice promptly confirmed in writing, of such
request, after which Agent shall give each Lender prompt
notice thereof. Each such written request or confirmation
must be made in the form and substance of the "Request for
Advances" attached hereto as Exhibit B, duly completed and
signed by an Authorized Officer of Borrower, Parent and DEOC.
Each such telephonic request shall be deemed a representation,
warranty, acknowledgement and agreement by Borrower, Parent
and DEOC as to the matters which are required to be set out in
such written confirmation. If all conditions precedent to
such Advances have been met, each Lender will promptly remit
to Agent in favor of Borrower the amount of such Lender's
Advance in immediately available funds, and upon receipt of
such funds, unless to its actual knowledge any conditions
precedent to such Advances have neither been met nor waived by
Lenders as provided herein, Agent shall promptly make the
Advances available to Borrower in immediately available funds
at Agent's office in Dallas, Texas. Each Request for Advances
shall be irrevocable and binding on Borrower. Unless Agent
shall have received prompt notice from a Lender that such
Lender will not make available to Agent such Lender's Advance,
Agent may in its discretion assume that such Lender has made
such Advance available to Agent in accordance with this
section and Agent may if it chooses, in reliance upon such
assumption, make such Advance available to Borrower. If and
to the extent such Lender shall not so make its Advance
available to Agent, such Lender and Borrower severally agree
to pay or repay to Agent within three days after demand the
amount of such Advance together with interest thereon, for
each day from the date such amount is made available to
Borrower until the date such amount is paid or repaid to
Agent, at the interest rate applicable at the time to the
other Advances made on such date. The failure of any Lender
to make any Advance to be made by it hereunder shall not
relieve any other Lender of its obligation hereunder, if any,
to make its Advance, but no Lender shall be responsible for
the failure of any other Lender to make any Advance to be made
by such other Lender.
Section 2.3. Proportionate and Disproportionate Loans.
(a) So long as no Offered Rate Portions or
disproportionate Advances made pursuant to Section 2.3(b)
below are outstanding, all Advances (other than Advances
constituting Offered Rate Portions under Section 2.7(a))
requested by Borrower shall be made pro rata by each Lender in
proportion to the Lenders' respective Percentage Shares.
(b) If any Offered Rate Portions or disproportionate
Advances previously made pursuant to this Section 2.3(b) are
outstanding, all Advances (other than Advances constituting
Offered Rate Portions under Section 2.7(a)) requested by
Borrower shall be made disproportionately by each Lender
according to such Lender's Adjusted Advance Amount.
Furthermore, any such Advance consisting of Fixed Rate
Portions shall be for an Interest Period ending on the latest
termination date of all outstanding Offered Rate Portions at
such time, such date to be designated a "Reconciliation Date",
provided, however, that in the event a Reconciliation Date has
been previously designated pursuant to this Section 2.3(b),
such Interest Period shall end on such previously designated
Reconciliation Date.
For purposes of this Section 2.3(b), the following terms shall
be defined as follows:
"Advance Amount" means, with respect to each Lender
at the time in question, the remainder (if positive or
negative) of:
(i) such Lender's Percentage Share times the Loan
Balance (including requested Advances) minus
(ii) the aggregate amount of such Lender's
outstanding Loan.
"Advancing Lender" means, with respect to any
requested Advance (other than an Advance constituting an
Offered Rate Portion under Section 2.7(a)), any Lender
whose Advance Amount is greater than zero.
"Non-Advancing Lender" means, with respect to any
requested Advance (other than an Advance constituting an
Offered Rate Portion under Section 2.7(a)), any Lender
whose Advance Amount is less than or equal to zero.
"Adjusted Advance Amount" means, with respect to
each Lender at the time in question:
(i) if each Lender is an Advancing Lender, such
Lender's Advance Amount; or
(ii) if any Lender is a Non-Advancing Lender:
(A) if such Lender is a Non-Advancing Lender,
zero, andSection 2.3(b)
(B) if such Lender is an Advancing Lender,
(I) such Lender's Percentage Share
divided by the sum of all Advancing
Lenders' Percentage Shares times
(II) the amount of the requested Advance.
(c) At the termination of any Offered Rate Interest
Period, the related Offered Rate Portion of such Lender's Loan
shall automatically terminate and become part of the Base Rate
Portion of such Lender's Loan, provided that Borrower may (i)
request Advances under Section 2.1 and/or Section 2.7(a), if
all conditions to Advances have been met, or (ii) prepay such
Lender's Loan in an amount equal to the terminating Offered
Rate Portion, or (iii) take such other action allowed
hereunder as may be necessary to cause the Loans to be held
pro rata by Lenders in accordance with their respective
Percentage Shares, after giving effect to any outstanding
Offered Rate Portions.
(d) Notwithstanding anything in this section to the
contrary, no Lender may make any Advance under any Note which
would cause the aggregate outstanding principal balance of
such Note to exceed the stated maximum principal balance of
such Note, nor may any Lender make any Advance which would
cause the sum of (A) the Loan Balance, plus (B) the aggregate
outstanding principal balance of the Approved Additional Debt
to exceed the sum of (C) the Available Borrowing Base then in
effect, plus (D) $10,000,000.
Section 2.4. Cancellation of Old Agreement. Borrower
has heretofore been indebted to Lenders under a Credit
Agreement dated as of October 7, 1994 (as heretofore amended,
herein called the "Old Agreement") originally entered into by
Borrower, Parent, DEOC, Agent and Lenders. As of the date
hereof, no "Loans" (as such term is defined in the Old
Agreement) are outstanding under the Old Agreement. Upon the
execution and delivery of this Agreement by each of the
parties hereto:
(a) Any letters of credit issued under the Old
Agreement and outstanding as of the date hereof shall be
deemed Letters of Credit issued hereunder as of the date
hereof and shall be subject to the terms and conditions
hereof, including without limitation Borrower's
reimbursement obligations under Section 2A.3(a) and
Lenders' participation obligations under Section 2A.3(c);
and
(b) Borrower shall be deemed to have terminated the
Old Agreement as provided in Section 9.7 thereof.
Section 2.5. Use of Proceeds. Borrower shall use all
funds from Advances (a) as provided in Sections 2.4, 5.2(f)
and 5.3(b), (b) to refinance its Matured LC Obligations, (c)
to finance the acquisition of oil and gas properties, (d) to
finance working capital and capital expenditures that are
standard in the oil and gas industry, and (e) for other
general corporate purposes. Borrower shall use all Letters of
Credit for its general corporate purposes. In no event,
except as provided in Section 5.3 hereof, shall the
funds from any Advance or any Letter of Credit be used
directly or indirectly for the purpose, whether immediate,
incidental or ultimate, of purchasing, acquiring or carrying
any "margin stock" or any "margin securities" (as such terms
are defined respectively in Regulation U and Regulation G
promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others directly or indirectly
for the purpose of purchasing or carrying any such margin
stock or margin securities. Borrower represents and warrants
to Lenders that Borrower is not engaged principally, or as one
of its important activities, in the business of extending
credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.
Section 2.6. Rate Elections. Borrower may from time to
time designate all or any portions of the Loans (including any
yet to be made Advances which are to be made prior to or at
the beginning of the designated Interest Period but excluding
any portions of the Loans which are required to be repaid
prior to the end of the designated Interest Period) as a
"Tranche", which term refers to a set of Eurodollar Portions
of the same type with identical Interest Periods. The amounts
of Lenders' Eurodollar Portions within a Tranche shall be in
proportion to their respective Percentage Shares, subject to
the provisions of Section 2.3. Borrower may make no such
election during the continuance of a Default, and Borrower may
make such an election with respect to already existing Fixed
Rate Portions only if such election will take effect at or
after the termination of the Interest Period applicable to
such already existing Fixed Rate Portions. Each election by
Borrower of a Tranche shall:
(a) Be made by written notice to Agent or by
telephonic notice to Agent promptly confirmed in writing,
in the form and substance of the "Rate Election" attached
hereto as Exhibit C, duly completed and signed by an
Authorized Officer of Borrower.
(b) Specify the aggregate amount of the Loans which
Borrower desires to designate as such Tranche, the first
day of the Interest Period which is to apply thereto, and
the length of such Interest Period; and
(c) Be received by Agent not later than 9:00 a.m.,
Dallas time, on the second Business Day preceding the
first day of the specified Interest Period.
Promptly after receiving any such election (herein called a
"Rate Election") which meets the requirements of this section,
Agent shall notify each Lender of the contents thereof. Each
Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying
with the definition of "Eurodollar Interest Period" in Section
1.1, and the aggregate amount of each Tranche elected in any
Rate Election must be $1,000,000 or a higher integral multiple
of $500,000. Upon the termination of each Interest Period the
portion of each Loan theretofore constituting the related
Fixed Rate Portion shall, unless the subject of a new Rate
Election then taking effect, automatically become a part of
the Base Rate Portion of such Loan and become subject to all
provisions of the Loan Documents governing such Base Rate
Portion. Borrower shall have no more than six Tranches or
Offered Rate Portions in effect at any time.
Section 2.7. Advances Constituting Offered Rate
Portions.
(a) Borrower may from time to time request each Lender
to quote an interest rate for a specified interest period
(identifying the days on which such interest period is to
begin and end) and a specified portion of the unpaid principal
balance of (or amounts available for borrowing under) such
Lender's Note; provided that no such request may be made with
respect to an already existing Fixed Rate Portion unless it is
to take effect at or after the termination of the Interest
Period applicable to such already existing Fixed Rate portion.
Any amounts so requested by Borrower must be $1,000,000 or a
multiple thereof. Each such request must be made to all
Lenders and may be made no later than 9:00 a.m. (Dallas time)
on the day such interest period is to begin. No Lender has
any obligation to make any such quotation and may do so or
decline to do so (and may make quotations for interest periods
and amounts different from those specified by Borrower) in its
sole and absolute discretion. Any Lender which makes such a
quotation, however, must do so by telecopy or telex (or by
telephone notice promptly confirmed by telecopy or telex) to
Borrower no later than 10:15 a.m. (Dallas time) on the day
such interest period is to begin, specifying an interest rate,
the amount to which such interest rate is to apply, and the
days on which the related interest period is to begin and end.
The rate (if any) quoted by such Lender is herein called an
"Offered Rate"; the amount of the Loan to which such Offered
Rate is to apply is herein called an "Offered Rate Portion" of
such Loan; and the period during which such rate is to apply
is herein called the related "Offered Rate Interest Period".
Borrower may choose to accept or reject any such quotation in
its sole and absolute discretion; to accept any such quotation
Borrower must, by 11:30 a.m. (Dallas time) on the same day,
give written notice (or telephonic notice promptly confirmed
by telecopy, telex or letter) to the Lender making such
quotation. After accepting any such quotation from a Lender,
Borrower may not revoke its acceptance without the consent of
such Lender, and such Lender shall in accordance with Section
2.7(d) make an Advance constituting such Offered Rate Portion.
After accepting or rejecting any such quotation from any
Lender, Borrower shall on the same day notify all Lenders of
the terms of the quotations, if any, made by each.
(b) Notwithstanding anything in this section to the
contrary, Borrower may not, without the consent of all
Lenders: (i) agree with any Lender on any Offered Rate
Interest Period which is longer than three months, (ii) agree
with any Lender for any Offered Rate Portion when any Default
is continuing, or (iii) have more than six Offered Rate
Portions outstanding at the same time.
(c) For the purposes of Section 2.17 hereof, any
agreement as to an Offered Rate Portion shall be deemed a
"Rate Election".
(d) Prior to or concurrently with any such Advance
constituting an Offered Rate Portion under Section 2.7(a),
Borrower shall deliver a Request for Advances, modified to
specify the Lender who is making such Advance, and otherwise
comply with the requirements of Section 2.2.
Section 2.8. Fees.
(a) Facility Fee. In consideration of each Lender's
commitment to make Advances, Borrower will pay to Agent for
the account of each Lender a facility fee, determined on a
daily basis, equal to one-quarter percent (0.25%) per annum on
the greater of (a) the Borrowing Base in effect on such day,
or (b) the Loan Balance on such day. The facility fee shall
be due and payable in arrears on the last day of each August,
November, February and May, beginning August 31, 1996, and at
the termination of the Commitment Period.
(b) Agency Fee. In addition to all other amounts due to
Agent under the Loan Documents, Borrower will pay to Agent an
annual agency fee pursuant to a letter agreement of even date
herewith between Agent and Borrower.
Section 2.9. Optional Prepayments. Borrower may, upon
concurrent notice to Agent (which shall give each Lender
prompt notice thereof), from time to time and without premium
or penalty prepay the Loans, in whole or in part, so long as
all partial prepayments of principal concurrently paid on the
Loans are in increments of $100,000 and in an aggregate amount
greater than or equal to $200,000 and so long as Borrower does
not prepay any Fixed Rate Portion. Each prepayment of
principal under this section shall be accompanied by all
interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section
shall be in addition to, and not in lieu of, all payments
otherwise required to be paid under the Loan Documents at the
time of such prepayment.
Section 2.10. Mandatory Prepayments. If the Loan
Balance ever exceeds the Available Borrowing Base (a
"Borrowing Base Deficiency"), Borrower shall, within thirty
Business Days after Agent gives written notice of such fact to
Borrower, either (a) make a single prepayment of the principal
of the Loans in an amount at least equal to such Borrowing
Base Deficiency, (b) provide additional assets to be included
in the Borrowing Base with a Borrowing Base value (as
determined by Agent and Lenders pursuant to Section 2.13) at
least equal to such Borrowing Base Deficiency, or (c) give
written notice to Agent electing to prepay the principal of
the Loans in six (or fewer) installments in an aggregate
amount at least equal to such Borrowing Base Deficiency;
provided, that if such Borrowing Base Deficiency is greater
than the aggregate principal balance of the Loans, Borrower
will also, after the Loans have been paid in full, continue to
make such payments as contemplated in Section 2A.6(a). Each
such installment shall equal or exceed one-sixth of such
Borrowing Base Deficiency; the first installment shall be paid
with the giving of such notice and the subsequent installments
shall be due and payable at one month intervals thereafter
until the Available Borrowing Base equals or exceeds the Loan
Balance. Each prepayment of principal under this section
shall be accompanied by all interest then accrued and unpaid
on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and
not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such
prepayment.
Section 2.11. Payments to Lenders. Borrower will make
each payment which it owes under the Loan Documents to Agent
for the account of the Lender to whom such payment is owed.
Each such payment must be received by Agent not later than
11:00 a.m. Dallas, Texas time, on the date such payment
becomes due and payable, in lawful money of the United States
of America and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been
made on the next following Business Day. Agent will promptly
remit each such payment to such Lender. Should any such
payment become due and payable on a day other than a Business
Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of
principal or past due interest, interest shall accrue and be
payable thereon for the period of such extension as provided
in the Loan Document under which such payment is due. Each
payment under a Loan Document shall be due and payable at the
place provided therein and, if no specific place of payment is
provided, shall be due and payable at Agent's office at
NationsBank Plaza, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxx Xxxxxx,
Xxxxx. When Agent collects or receives money on account of
the Obligations, Agent shall distribute all money so collected
or received, and Lenders shall apply all such money they
receive from Agent, as follows:
(a) first, to the payment of all Obligations which
are then due (and if such money is insufficient to pay
all such Obligations, first to any reimbursements due
Agent under Section 5.1(i) or (j) and then to the partial
payment of all other Obligations then due in proportion
to the amounts thereof, or as Lenders shall otherwise
agree);
(b) then to the prepayment of amounts owing under
the Loan Documents (other than principal on the Notes) if
so specified by Borrower;
(c) then to the prepayment of principal on the
Notes, together with accrued and unpaid interest on the
principal so prepaid; and
(d) last, to the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note
shall be applied first to any interest then due and payable,
then to principal then due and payable, and last to any
prepayment of principal and interest in compliance with
Sections 2.9 and 2.10. All distributions of amounts described
in any of subsections (b), (c), or (d) above shall be made by
Agent pro rata to Agent and each Lender then owed Obligations
described in such subsection in proportion to all amounts owed
to Agent and all Lenders which are described in such
subsection; provided that if any Lender then owes payments to
Agent for the purchase of a participation under Section
2A.3(c), any amounts otherwise distributable under this
section to such Lender shall be deemed to belong to Agent, to
the extent of such unpaid payments, and Agent shall apply such
amounts to make such unpaid payments rather than distribute
such amounts to such Lender.
Section 2.12. Initial Borrowing Base. During the period
from the date hereof to the first Determination Date, the
Borrowing Base shall be $250,000,000 and the Borrowing Base
Reduction shall be zero.
Section 2.13. Subsequent Determinations of Borrowing
Base. By February 1 of each year (and, at the option of
Borrower or Majority Lenders, a date specified by Borrower or
Majority Lenders as of which the Borrowing Base shall be
redetermined, provided, that Borrower shall not be entitled to
request any such optional redetermination more than once
during any calendar year and Majority Lenders shall not be
entitled to request any such optional redetermination more
than once during any calendar year), Borrower, Parent and DEOC
shall furnish to Agent and each Lender all information,
reports and data which Agent or any Lender has then requested
concerning the Related Persons' businesses and properties
(including their oil and gas properties and interests and the
reserves and production relating thereto), together with the
engineering report described in Section 5.1(b)(iv) which has
then become due. By the March 15 following each such February
1 (or by the 30th day following receipt by Agent of any final
Engineering Report delivered under Section 5.1(b)(iv) which
indicates materially lower values than the preliminary report
delivered under such section or pursuant to such
redetermination) (or by the forty-fifth day following an
optional redetermination date as specified by Borrower or
Majority Lenders as set forth above), Agent shall by notice to
Borrower, Parent and DEOC designate, with the concurrence of
Evaluating Lenders, the new Borrowing Base for the period
beginning on and including the date such written notice is
sent (herein called a "Determination Date") and continuing
until but not including the next date as of which the
Borrowing Base is redetermined. If Borrower, Parent and DEOC
do not furnish all such information, reports and data by the
dates specified in the first sentence of this section, Agent
may nonetheless designate the Borrowing Base at any amount
which Agent determines and may redesignate the Borrowing Base
from time to time thereafter until Agent receives all such
information, reports and data, whereupon Agent shall designate
a new Borrowing Base as described above. Agent and Lenders
shall determine the amount of the Borrowing Base based upon
such factors of any kind as they in their discretion deem
significant.
Section 2.14. Borrower's Designation of Borrowing Base
Reduction. Borrower may, during the two Business Days
following each Determination Date, designate any amount as the
Borrowing Base Reduction (provided that Borrower may not
thereby reduce the Available Borrowing Base below zero). To
exercise such option Borrower must send notice to Agent of the
amount of the Borrowing Base Reduction designated by Borrower.
If Borrower does not affirmatively exercise this option by
such second Business Day following any Determination Date, the
Borrowing Base Reduction shall be deemed to have been
designated as zero on such second Business Day. Any such
designation (or deemed designation) of a Borrowing Base
Reduction shall continue in effect until the next date as of
which the Borrowing Base Reduction is redesignated.
Section 2.15. Increased Cost of Fixed Rate Portions. If
any applicable domestic or foreign law, treaty, rule or
regulation (whether now in effect or hereinafter enacted or
promulgated, including Regulation D) or any interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or
not having the force of law):
(a) shall change the basis of taxation of payments
to Agent or any Lender of any principal, interest, or
other amounts attributable to any Fixed Rate
Portion or otherwise due under this Agreement in respect
of any Fixed Rate Portion or Letter of Credit (other than
taxes imposed on the overall net income of Agent or such
Lender or any lending office of Agent or such Lender by
any jurisdiction in which Agent or such Lender or any
such lending office is located); or
(b) shall change, impose, modify, apply or deem
applicable any insurance fees or premiums or any reserve,
special deposit or similar requirements in respect of any
Fixed Rate Portion or Letter of Credit (excluding those
for which there is full compensation pursuant to
adjustments made in the definition of Adjusted Eurodollar
Rate) or against assets of, deposits with or for the
account of, or credit extended by, Agent or any Lender;
or
(c) shall impose on Agent or any Lender or the
interbank eurocurrency deposit market any other condition
affecting any Fixed Rate Portion or Letter of Credit, the
result of which is to increase the cost to Agent or any
Lender of funding or maintaining any Fixed Rate Portion
or of issuing any Letter of Credit or to reduce the
amount of any sum receivable by Agent or any Lender in
respect of any Fixed Rate Portion or Letter of Credit by
an amount deemed by Agent or such Lender to be material,
then Agent or such Lender shall promptly notify Borrower in
writing (with a copy to Agent) of the happening of such event
and (1) Borrower shall upon demand pay to Agent for the
account of Agent or such Lender such additional amount or
amounts as will compensate Agent or such Lender for such event
and (2) Borrower may elect, by giving to Agent and such Lender
not less than three Business Days' notice, to convert all (but
not less than all) of any such Fixed Rate Portion into a part
of the Base Rate Portion.
Section 2.16. Change of Law. If any change in
applicable laws, treaties, rules or regulations or in the
interpretation or administration thereof or in any
jurisdiction whatsoever, domestic or foreign, shall make it
unlawful or impracticable for any Lender to fund or maintain
Fixed Rate Portions, or shall materially restrict the
authority of Agent or any Lender to purchase, sell or take
offshore deposits of dollars (i.e., "eurodollars") or to issue
or participate in Letters of Credit, then Borrower's right to
elect Fixed Rate Portions or to apply for Letters of Credit
shall be suspended to the extent and for the duration of such
illegality, impracticability or restriction and all Fixed Rate
Portions (or portions thereof) which are then outstanding or
are then the subject of any Rate Election and which cannot
lawfully or practicably be maintained or funded shall
immediately become or remain part of the Base Rate Portion of
the related Loan. Borrower agrees to indemnify Agent and any
such Lender and hold it harmless against all costs, expenses,
claims, penalties, liabilities and damages which actually
result from any such change in law, treaty, rule, regulation,
interpretation or administration.
Section 2.17. Funding Losses. Borrower will indemnify
Agent and each Lender against, and reimburse Agent and each
Lender on demand for, any loss or expense incurred or
sustained by Agent or such Lender (including without
limitation any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain Fixed Rate Portions or Advances
hereunder), as a result of (a) any payment or prepayment (whether
authorized or required hereunder or otherwise) of all or a portion of a
Fixed Rate Portion on a day other than the day on which the
applicable Interest Period ends, (b) any payment or
prepayment, whether required hereunder or otherwise, of a Loan
made after the delivery, but before the effective date, of a
Rate Election, if such payment or prepayment prevents such
Rate Election from becoming fully effective, (c) the failure
of any Advance to be made hereunder or of any Rate Election to
become effective due to any condition precedent to such
Advance not being satisfied or due to any other action or
inaction of any Related Person, or (d) any conversion (whether
authorized or required hereunder or otherwise) of all or any
portion of any Fixed Rate Portion into a Base Rate Portion or
into a different Fixed Rate Portion on a day other than the
day on which the applicable Interest Period ends.
Section 2.18. Reimbursable Taxes; Capital Adequacy.
Borrower covenants and agrees that, whether or not any Fixed
Rate Portion is ever elected:
(a) Borrower will reimburse Agent and each Lender
on demand, on an after-tax basis, for all present and
future income, stamp and other taxes, levies, costs and
charges whatsoever actually paid by Agent or such Lender
(or required to be withheld and paid on account of Agent
or such Lender) in respect of any Fixed Rate Portions or
Letters of Credit, excluding, however, any thereof
imposed on or measured by the overall net income of Agent
or any Lender or any lending office of Agent or any
Lender by any jurisdiction in which Agent or any Lender
or any such lending office is located (all such
non-excluded taxes, levies, costs and charges being
collectively called "Reimbursable Taxes" in this
section), and Borrower will pay directly to the
appropriate authority any Reimbursable Taxes which
Borrower is required to withhold and pay. Promptly after
the date on which payment of any such Reimbursable Tax to
be paid directly by Borrower is due or claimed to be due,
Borrower will, at the request of Agent or any Lender,
furnish to Agent and such Lender evidence in form and
substance satisfactory to Agent and such Lender that
Borrower has met its obligation under this section.
(b) Borrower will indemnify Agent and each Lender
against any loss, liability, claim or expense, including
interest, penalties and legal fees, that Agent or such
Lender may incur at any time arising out of or in
connection with the failure of Borrower to make any
reimbursement required under subsection (a) above or to
make any payment, when due or claimed to be due, of
Reimbursable Taxes to be withheld and paid directly by
Borrower.
(c) All payments on account of the principal of,
and interest on, the Loans and the Notes, and all other
amounts payable by Borrower to Agent or any Lender
hereunder shall be made free and clear of and without
reduction by reason of any Reimbursable Taxes, all of
which will be for the account of Borrower and reimbursed
or paid by Borrower.
(d) If Borrower is ever required to reimburse or
pay any Reimbursable Tax with respect to any Fixed Rate
Portion, Borrower may elect, by giving to Agent and each
Lender not less than three Business Days' notice, to
convert all (but not less than all) of any such Fixed
Rate Portion into a part of the Base Rate Portion of the
related Loan, but such election shall not diminish
Borrower's obligation to pay all Reimbursable Taxes.
(e) If at any time after the date hereof, and from
time to time, Agent or any Lender determines that the
adoption or modification of any applicable law, rule or
regulation regarding taxation, Agent's or such Lender's
required levels of reserves, deposits, insurance or
capital (including any allocation of capital requirements
or conditions), or similar requirements, or any
interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation, administration or
compliance of Agent or such Lender with any of such
requirements (including any interpretation at any time
made with respect to any Letter of Credit, whether on,
before or after the date hereof, that requires Agent or
any Lender to allocate capital, maintain reserves, or
take any other action or incur any cost based on an
amount higher than the Drawing Amount from time to time
in effect under such Letter of Credit), has or would have
the effect of (a) increasing Agent's or such Lender's
costs relating to the Obligations or the Letters of
Credit, or (b) reducing the yield or rate of return of
Agent or such Lender on the Obligations or the Letters of
Credit, to a level below that which Agent or such Lender
could have achieved but for such adoption, modification,
interpretation or application, then Borrower shall,
within 15 days after any request by Agent or such Lender,
pay to Agent or such Lender such additional amounts as
(in Agent's or such Lender's sole judgment, after
reasonable computation) will compensate Agent or such
Lender for such increase in costs or reduction in yield
or rate of return. No failure by Agent or any Lender to
immediately demand payment of any additional amounts
payable hereunder shall constitute a waiver of Agent's or
such Lender's right to demand payment of such amounts at
any subsequent time. Nothing herein contained shall be
construed or so operate as to require Borrower to pay any
interest, fees, costs or charges not permitted by Section
9.6.
ARTICLE II-A -- Letters of Credit
Section 2A.1. Letters of Credit. Subject to the terms
and conditions hereof, Borrower may during the Commitment
Period request Agent to issue one or more Letters of Credit,
provided that, after taking such Letter of Credit into
account:
(a) the sum of the aggregate amount of Advances
outstanding at such time plus the aggregate amount of LC
Obligations at such time does not exceed the Available
Borrowing Base at such time; and
(b) the aggregate amount of LC Obligations at such
time does not exceed $30,000,000; and
(c) the expiration date of such Letter of Credit is
prior to the end of the Commitment Period;
and further provided that:
(d) such Letter of Credit is to be used for general
corporate purposes of Borrower;
(e) such Letter of Credit is not directly or
indirectly used to assure payment of or otherwise support
any Person's Restricted Debt other than Restricted Debt
permitted under Section 5.2(a)(vii);
(f) the issuance of such Letter of Credit will be in
compliance with all applicable governmental restrictions,
policies, and guidelines and will not subject Agent to
any cost not anticipated on the date hereof;
(g) the form and terms of such Letter of Credit are
acceptable to Agent in its sole and absolute discretion;
and
(h) all other conditions in this Agreement to the
issuance of such Letter of Credit have been satisfied.
Agent will honor any such request if the foregoing conditions
(a) through (h) (in the following Section 2A.2 called the "LC
Conditions") have been met as of the date of issuance of such
Letter of Credit.
Section 2A.2. Requesting Letters of Credit. Borrower
must make written application for any Letter of Credit at
least three Business Days before the date on which Borrower
desires for Agent to issue such Letter of Credit. By making
any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions described in
Section 2A.1 will be met as of the date of issuance of such
Letter of Credit. Each such written application for a Standby
Letter of Credit must be made in writing in the form and
substance of Exhibit H, the terms and provisions of which are
hereby incorporated herein by reference (or in such other form
as may mutually be agreed upon by Agent and Borrower). Three
Business Days after the LC Conditions for a Letter of Credit
have been met as described in Section 2A.1 (or if Agent
otherwise desires to issue such Letter of Credit), Agent will
issue such Letter of Credit at Agent's office in Dallas,
Texas. If any provisions of any LC Application conflict with
any provisions of this Agreement, the provisions of this
Agreement shall govern and control.
Section 2A.3. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC
Obligation shall constitute a loan by Agent to Borrower.
Borrower hereby promises to pay to Agent, or to Agent's order,
on demand, the full amount of each Matured LC Obligation,
together with interest thereon at the Late Payment
Rate.
(b) Letter of Credit Advances. If the beneficiary of
any Letter of Credit presents a draft or other demand for
payment thereunder then Borrower may, during the interval
between the presentation thereof and the honoring thereof by
Agent, request Lenders to make Advances to Borrower in the
amount of such draft or demand, which Advances shall be made
concurrently with Agent's payment of such draft or demand and
shall be immediately used by Agent to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower
shall be made in compliance with all of the provisions hereof,
provided that for the purposes of the first sentence of
Section 2.1 the amount of such Advances shall be considered
but the amount of the Matured LC Obligation to be concurrently
paid by such Advances shall not be considered.
(c) Participation by Lenders. Agent irrevocably agrees
to grant and hereby grants to each Lender, and -- to induce
Agent to issue Letters of Credit hereunder -- each Lender
irrevocably agrees to accept and purchase and hereby accepts
and purchases from Agent, on the terms and conditions
hereinafter stated and for such Lender's own account and risk,
an undivided interest equal to such Lender's Percentage Share
of Agent's obligations and rights under each Letter of Credit
issued hereunder and the amount of each Matured LC Obligation
paid by Agent thereunder. Each Lender unconditionally and
irrevocably agrees with Agent that, if a Matured LC Obligation
is paid under any Letter of Credit for which Agent is not
reimbursed in full by Borrower in accordance with the terms of
this Agreement and the related LC Application (including any
reimbursement by means of concurrent Advances or by the
application of LC Collateral), such Lender shall (in all
circumstances and without set-off or counterclaim) pay to
Agent on demand, in immediately available funds at Agent's
address for notices hereunder, such Lender's Percentage Share
of such Matured LC Obligation (or any portion thereof which
has not been reimbursed by Borrower). Each Lender's
obligation to pay Agent pursuant to the terms of this
subsection is irrevocable and unconditional. If any amount
required to be paid by any Lender to Agent pursuant to this
subsection is paid by such Lender to Agent within three
Business Days after the date such payment is due, Agent shall
in addition to such amount be entitled to recover from such
Lender, on demand, interest thereon calculated from such due
date at the Base Rate. If any amount required to be paid by
any Lender to Agent pursuant to this subsection is not paid by
such Lender to Agent within three Business Days after the date
such payment is due, Agent shall in addition to such amount be
entitled to recover from such Lender, on demand, interest
thereon calculated from such due date at the Late Payment
Rate.
(d) Distributions to Participants. Whenever Agent has
in accordance with this section received from any Lender
payment of such Lender's Percentage Share of any Matured LC
Obligation, if Agent thereafter receives any payment of such
Matured LC Obligation or any payment of interest thereon
(whether directly from Borrower or by application of LC
Collateral or otherwise, and excluding only interest for any
period prior to Agent's demand that such Lender make such
payment of its Percentage Share), Agent will distribute to
such Lender its Percentage Share of the amounts so received by
Agent; provided, however, that if any such payment received by
Agent must thereafter be returned by Agent, such Lender shall
return to Agent the portion thereof which Agent has previously
distributed to it.
(e) Calculations. A written advice setting forth in
reasonable detail the amounts owing under this section,
submitted by Agent to Borrower or any Lender from time to
time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2A.4. Letter of Credit Fees. In consideration
of Agent's issuance of any Letter of Credit and each other
Lender's agreement to purchase a risk participation therein,
Borrower agrees to pay a letter of credit fee to Agent (for
the account of the Lenders) for each Letter of Credit in the
amount of the Letter of Credit Rate times the Drawing Amount
for such Letter of Credit. Each letter of credit fee will be
calculated on a daily basis (on the basis of a year of 360
days) based on the Drawing Amount of such Letter of Credit and
the applicable Letter of Credit Rate in effect on each day and
shall be payable quarterly in arrears and at the expiration or
termination of such Letter of Credit. Upon receipt of such
letter of credit fee for each Letter of Credit, Agent will pay
to each Lender such Lender's Percentage Share of such fee. In
addition, Borrower agrees to pay a fronting fee to Agent (for
its own account) for each Letter of Credit, in an amount to be
agreed on by Borrower and Agent for each separate Letter of
Credit. Each such fronting fee will be for the account of
Agent alone, and no other Lender shall have any right or
interest therein.
Section 2A.5. No Duty to Inquire.
(a) Drafts and Demands. Agent is authorized and
instructed to accept and pay drafts and demands for payment
under any Letter of Credit without requiring, and without
responsibility for, any determination as to the existence of
any event giving rise to said draft, either at the time of
acceptance of payment or thereafter. Agent and Lenders are
under no duty to determine the proper identity of anyone
presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or
agent of any beneficiary under any Letter of Credit, and
payment by Agent to any such beneficiary when requested by any
such purported officer, representative or agent is hereby
authorized and approved. Borrower agrees to hold Agent and
each Lender harmless and indemnified against any liability or
claim in connection with or arising out of the subject matter
of this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT
ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY AGENT OR ANY LENDER, provided only that neither
Agent nor any Lender shall be entitled to indemnification for
that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any
Letter of Credit is extended by its terms or by law or
governmental action, if any extension of the maturity or time
for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any
Related Person, or if the amount of any Letter of Credit is
increased at the request of any Related Person, the Loan
Documents shall be binding upon all Related Persons with
respect to such Letter of Credit as so extended, increased or
otherwise modified, with respect to drafts and property
covered thereby, and with respect to any action taken by Agent
or any of Agent's correspondents in accordance with such extension,
increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of
Credit provides that it is transferable, Agent shall have no
duty to determine the proper identity of anyone appearing as
transferee of such Letter of Credit, nor shall Agent be
charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive
transfers, and payment by Agent to any purported transferee or
transferees as determined by Agent is hereby authorized and
approved, and Borrower further agrees to hold Agent and each
Lender harmless and indemnified against any liability or claim
in connection with or arising out of the foregoing, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT OR
ANY LENDER, provided only that neither Agent nor any Lender
shall be entitled to indemnification for that portion, if any,
of any liability or claim which is proximately caused by its
own individual gross negligence or willful misconduct, as
determined in a final judgment.
Section 2A.6. LC Collateral.
(a) LC Obligations in Excess of Available Borrowing
Base. Section 2.10 requires Borrower to make certain
mandatory prepayments if a Borrowing Base Deficiency exists.
These payments shall be applied to the payment of the Loans
and any Matured LC Obligations before being held as LC
Collateral as provided below. If, however, such Borrowing
Base Deficiency is greater than the unpaid balance of the
Loans and any Matured LC Obligations and, after the Loans are
paid in full, the remaining outstanding LC Obligations will
exceed the Available Borrowing Base, then Borrower will
continue to make such payments and Agent will hold the same as
security for the remaining LC Obligations (all such amounts
held as security for LC Obligations being herein collectively
called "LC Collateral") until such LC Obligations become
Matured LC Obligations, at which time such LC Collateral may
be applied to such Matured LC Obligations. Neither this
subsection nor the following subsection shall, however, limit
or impair any rights which Agent may have under any other
document or agreement relating to any Letter of Credit or LC
Obligation, including any LC Application, or any rights which
Agent or Lenders may have to otherwise apply any payments by
Borrower and any LC Collateral under Section 2.11.
(b) Acceleration of LC Obligations. If the Obligations
or any part thereof become immediately due and payable
pursuant to Section 7.1 then, unless Majority Lenders
otherwise specifically elect to the contrary (which election
may thereafter be retracted by Majority Lenders at any time),
all LC Obligations shall become immediately due and payable
without regard to whether or not actual drawings or payments
on the Letters of Credit have occurred, and Borrower shall be
obligated to pay to Agent immediately an amount equal to the
aggregate LC Obligations which are then outstanding. All
amounts so paid shall first be applied to Matured LC
Obligations and then held by Agent as LC Collateral until the
remaining LC Obligations become MaturedSection 2A.6(b)
LC Obligations, at which time such LC Collateral shall be
applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application
thereof, all LC Collateral shall be invested by Agent in such
investments as Agent may choose in its sole discretion. All
interest on such investments shall be reinvested or applied to
Matured LC Obligations and other past due Obligations. When
all Obligations have been satisfied in full, including all LC
Obligations, all Letters of Credit have expired or been
terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, Agent shall
release any remaining LC Collateral. Borrower hereby assigns
and grants to Agent a continuing security interest in all LC
Collateral at any time held by Agent, all investments
purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under
this Agreement, the Note, and the other Loan Documents.
Borrower further agrees that Agent shall have all of the
rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of Texas with respect
to such security interest and that an Event of Default under
this Agreement shall constitute a default for purposes of such
security interest.
(d) Payment of LC Collateral. When Borrower is required
to provide LC Collateral for any reason and fails to do so on
the day required, Agent may without notice to Borrower or any
other Related Person provide such LC Collateral (whether by
application of proceeds of other Collateral, by transfers from
other accounts maintained with Agent, or otherwise) using any
available funds of Borrower or any other Person also liable to
make such payments. Any such amounts which are required to be
provided as LC Collateral and which are not provided on the
date required shall be considered past due Obligations owing
hereunder, and Agent and Lenders are hereby authorized to
exercise their respective rights to obtain such amounts.
ARTICLE III -- Conditions Precedent to Lending
Section 3.1. Documents to be Delivered. No Lender has
any obligation to make its first Advance unless Agent shall
have received all of the following, at Agent's office in
Dallas, Texas, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) Each Note, the Guaranties and the Subordination
Agreement.
(b) An "Omnibus Certificate" of the Secretary or
Assistant Secretary and of the Chairman of the Board,
President, Executive Vice President or Vice President-
Finance of each of Borrower, Parent and DEOC, which shall
contain the names and signatures of the officers of
Borrower, Parent and DEOC authorized to execute Loan
Documents and which shall certify to the truth,
correctness and completeness of the following exhibits
attached thereto: (i) copies of resolutions duly adopted
by the Boards of Directors of Borrower, Parent and DEOC
and in full force and effect at the time this Agreement
is entered into, authorizing the execution of this
Agreement and the other Loan Documents
delivered or to be delivered in connection herewith and
the consummation of the transactions contemplated herein
and therein, (ii) a copy of the charter of Borrower and
all amendments thereto, certified by the appropriate
official of the State of Nevada, a copy of the charter of
Parent and all amendments thereto, certified by the
appropriate official of the State of Oklahoma, a copy of
the charter of DEOC and all amendments thereto, certified
by the appropriate official of the State of Oklahoma, and
(iii) copies of the bylaws of Borrower, Parent and DEOC.
(c) A certificate (or certificates) of the due
organization, valid existence and good standing of
Borrower in the State of Nevada, issued by the
appropriate official of the State of Nevada, a similar
"long-form" certificate with respect to Parent in the
State of Oklahoma, and a similar certificate with respect
to DEOC in the State of Oklahoma.
(d) A "Compliance Certificate" of the Chairman of
the Board, President, or Executive Vice President and of
the Vice President-Finance of each of Borrower, Parent
and DEOC, of even date with such first Advance, in which
such officers certify to the satisfaction of the
conditions set out in subsections (a), (b) and (c) of
Section 3.2.
(e) A favorable opinion of McAfee & Xxxx, A
Professional Corporation, counsel for Borrower, Parent,
DEOC and Avon, substantially in the form set forth in
Exhibit E.
(f) Documents similar to those specified in
subsections (b) and (c) of this section with respect to
each Guarantor other than Parent and DEOC, including
Avon, and the execution by it of its guaranty of
Borrower's Obligations.
(g) Copies of any agreements, documents or
instruments delivered by any Related Person in connection
with any Subordinated Debt.
(h) Copies of the Subordinated Parent Indenture,
Subordinated Parent Guarantee and any agreements,
documents or instruments delivered by any Related Person
in connection therewith.
(i) A Notice of Final Agreement in the form of the
attached Exhibit G.
Section 3.2. Additional Conditions Precedent. No Lender
has any obligation to make any Advance (including its first)
and Agent has no obligation to issue any Letter of Credit
(whether or not otherwise agreed to by Agent) unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any
Related Person in any Loan Document shall be true on and
as of the date of such Advance or the date of issuance of
such Letter of Credit (except to the extent that the
facts upon which such representations are based have been
changed by the transactions herein contemplated) as if such
representations and warranties had been made as of the date
of such Advance or the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such
Advance or the date of issuance of such Letter of Credit.
(c) Each Related Person shall have performed and
complied with all agreements and conditions required in
the Loan Documents to be performed or complied with by it
on or prior to the date of such Advance or the date of
issuance of such Letter of Credit.
(d) The making of such Advance or the issuance of
such Letter of Credit shall not be prohibited by any law
or any regulation or order of any court or governmental
agency or authority and shall not subject Agent or any
Lender to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
(e) Agent shall have received all documents and
instruments which Agent has then reasonably requested, in
addition to those described in Section 3.1 (including
opinions of legal counsel for the Related Persons and
Agent; corporate documents and records; documents
evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of
public officials and of officers and representatives of
the Related Persons and other Persons), as to (i) the
accuracy and validity of or compliance with all
representations, warranties and covenants made by any of
the Related Persons in this Agreement and the other Loan
Documents, (ii) the satisfaction of all conditions
contained herein or therein, and (iii) all other matters
pertaining hereto and thereto. All such additional
documents and instruments shall be satisfactory to Agent
in form, substance and date.
(f) All legal matters relating to the Loan
Documents and the consummation of the transactions
contemplated thereby shall be satisfactory to Xxxxxxxx &
Knight, a Professional Corporation, counsel to Agent.
ARTICLE IV -- Representations and Warranties
Section 4.1. Borrower's, Parent's and DEOC's
Representations and Warranties. To induce Agent and Lenders
to enter into this Agreement and to make the Loans, each of
Borrower, Parent and DEOC represents and warrants to Agent and
each Lender that:
(a) No Default. Neither Borrower, Parent nor DEOC
is in default in the performance of any of the covenants
and agreements contained herein. No event has occurred
and is continuing which constitutes a Default.
(b) Organization and Good Standing. Each
Restricted Person which is a corporation, partnership or
business trust is duly organized, validly existing and in
good standing under the laws of its state of organization
or formation, having all corporate, partnership or business
trust powers required to carry on its business and enter into
and carry out the transactions contemplated hereby. Each
such Person is duly qualified, in good standing, and authorized
to do business in all other jurisdictions within the United
States wherein the character of the properties owned or
held by it or the nature of the business transacted by it
makes such qualification necessary. Each such Person has
taken all actions and procedures customarily taken in
order to enter, for the purpose of conducting business or
owning property, each jurisdiction outside the United
States wherein the character of the properties owned or
held by it or the nature of the business transacted by it
makes such actions and procedures desirable.
(c) Authorization. Each Restricted Person which is
a corporation or partnership has duly taken all corporate
or partnership action necessary to authorize the
execution and delivery by it of the Loan Documents to
which it is a party and to authorize the consummation of
the transactions contemplated thereby and the performance
of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and
delivery by the various Related Persons of the Loan
Documents to which each is a party, the performance by
each of its obligations under such Loan Documents, and
the consummation of the transactions contemplated by the
various Loan Documents, do not and will not (i) conflict
with any provision of (A) any domestic or foreign law,
statute, rule or regulation, (B) the articles or
certificate of incorporation, bylaws, charter, or
partnership agreement or certificate of any Related
Person, or (C) any agreement, judgment, license, order or
permit applicable to or binding upon any Related Person,
(ii) result in the acceleration of any Debt owed by any
Related Person, or (iii) result in or require the
creation of any Lien upon any assets or properties of any
Related Person except as expressly contemplated in the
Loan Documents. Except as expressly contemplated in the
Loan Documents no consent, approval, authorization or
order of, and no notice to or filing with, any court or
governmental authority or third party is required in
connection with the execution, delivery or performance by
any Related Person of any Loan Document or to consummate
any transactions contemplated by the Loan Documents.
(e) Enforceable Obligations. This Agreement is,
and the other Loan Documents when duly executed and
delivered will be, legal and binding obligations of each
Related Person which is a party hereto or thereto,
enforceable in accordance with their respective terms
except as limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance, or similar laws of general
application relating to the enforcement of creditors'
rights and as limited by general equitable principles.
(f) Initial Financial Statements. The Initial
Financial Statements fairly present the Consolidated
financial position at the respective dates thereof and
the Consolidated results of operations and the changes in
Consolidated financial position for the respective
periods thereof for each entity for which Initial
Financial Statements have been provided. Since the date
of such audited annual Initial Financial Statements no
material adverse change has occurred in the financial
condition or businesses or in Consolidated financial
condition or businesses of such entity, except as
reflected in the quarterly Initial Financial Statements
or in the Disclosure Schedule. All Initial Financial
Statements were prepared in accordance with GAAP.
(g) Other Obligations. No Related Person has any
outstanding Debt of any kind (including contingent
obligations, tax assessments, and unusual forward or
long-term commitments) which is, in the aggregate,
material with respect to Borrower's, Parent's or DEOC's
Consolidated financial condition and not shown in the
Initial Financial Statements or disclosed in the
Disclosure Schedule.
(h) Full Disclosure. No certificate, statement or
other information delivered herewith or heretofore by any
Related Person to Agent or any Lender in connection with
the negotiation of this Agreement or in connection with
any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any
material fact known to any Related Person (other than
industry risks normally associated with the types of
businesses conducted by the Related Persons) necessary to
make the statements contained herein or therein not
misleading as of the date made or deemed made. There is
no fact known to any Related Person (other than industry
risks normally associated with the types of businesses
conducted by the Related Persons) that has not been
disclosed to Agent and each Lender in writing which could
materially and adversely affect Borrower's, Parent's or
DEOC's Consolidated properties, business, prospects or
condition (financial or otherwise). There are no
statements or conclusions in any Engineering Report which
are based upon or include misleading information or fail
to take into account material information regarding the
matters reported therein, it being understood that each
Engineering Report is necessarily based upon professional
opinions, estimates and projections and that neither
Borrower, Parent nor DEOC warrant that such opinions,
estimates and projections will ultimately prove to have
been accurate. Borrower has heretofore delivered to
Agent and each Lender true, correct and complete copies
of any letters and documents listed in the Disclosure
Schedule.
(i) Litigation. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule: (i)
there are no actions, suits or legal, equitable,
arbitrative or administrative proceedings pending, or to
the knowledge of any Related Person threatened, against
any Related Person before any federal, state, municipal
or other court, department, commission, body, board,
bureau, agency, or instrumentality, domestic or foreign,
and there are no outstanding judgments, injunctions,
writs, rulings or orders by any such governmental entity
against any Related Person or any Related Person's
stockholders, partners, directors or officers, which do
or may materially and adversely affect Borrower
individually or, on a Consolidated basis, Borrower,
Parent or DEOC and their respective Consolidated
Subsidiaries, their ownership or use of any of their
assets or properties, their businesses or financial
condition or prospects, or the right or
ability of any Related Person to enter into the Loan
Documents to which it is a party or to consummate the
transactions contemplated thereby or to perform its
obligations thereunder.
(j) ERISA Liability. Except as disclosed in the
Initial Financial Statements or in the Disclosure
Schedule, no Termination Event has occurred with respect
to any ERISA Plan and the Related Persons are in
compliance with ERISA in all material respects. No
Related Person is required to contribute to, or has any
other absolute or contingent liability in respect of, any
"multiemployer plan" as defined in Section 4001 of ERISA.
(k) Names and Places of Business. Neither
Borrower, Parent nor DEOC has, during the preceding five
years, been known by or used any other corporate,
partnership or fictitious name, except as disclosed in
the Disclosure Schedule. Except as otherwise indicated
in the Disclosure Schedule, the chief executive office
and principal place of business of Borrower, Parent and
DEOC are located at the address of Borrower set out in
Section 9.3 hereof.
(l) Subsidiaries. Neither Borrower, Parent nor
DEOC (i) has any Subsidiary which has assets of
$1,000,000 or more, or (ii) owns any stock in any other
corporation or association which is not a Subsidiary,
except as listed in the Disclosure Schedule. No Related
Person is a member of any general or limited partnership,
joint venture or association of any type whatsoever
except those listed in the Disclosure Schedule and
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 federal 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, gas or
mineral properties and interests owned directly by the
parties in such associations, joint ventures or
relationships. As of the date hereof each of Parent,
Borrower and DEOC owns, directly or indirectly, the
equity interest in each of its Subsidiaries which is
indicated in the Disclosure Schedule.
(m) Title to Properties. Each Restricted Person
has defensible title to all of its properties and assets,
free and clear of all Prohibited Liens and of all
impediments to the use of such properties and assets in
such Restricted Person's business, except that no
representation or warranty is made with respect to any
oil, gas or mineral property or interest to which no
proved oil or gas reserves are properly attributed.
Section 4.2. Representation by Lenders. Each Lender
hereby represents that it will acquire its Note for its own
account in the ordinary course of its commercial lending
business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in
particular and without limitation, such Lender may sell or
otherwise transfer its Note, any participation interest or
other interest in its Note, or any of its other rights and
obligations under the Loan Documents.
ARTICLE V -- Covenants of Borrower, Parent and DEOC
Section 5.1. Affirmative Covenants. Each of Borrower,
Parent and DEOC warrants, covenants and agrees that until the
full and final payment of the Obligations and the termination
of this Agreement, unless Majority Lenders have previously
agreed otherwise in writing:
(a) Payment and Performance. Each of Borrower,
Parent and DEOC will pay all amounts owed by it under the
Loan Documents in accordance with the terms thereof and
will observe, perform and comply with every covenant,
term and condition expressed or implied in the Loan
Documents. Each of Borrower, Parent and DEOC will cause
the other Related Persons to observe, perform and comply
with every such term, covenant and condition.
(b) Books, Financial Statements and Reports. Each
Related Person will at all times maintain full and
accurate books of account and records. Borrower, Parent
and DEOC will maintain and will cause their respective
Subsidiaries to maintain a standard system of accounting
and will furnish the following statements and reports to
Agent and each Lender at Borrower's, Parent's or DEOC's
expense:
(i) As soon as available, and in any event
within 105 days after the end of each Fiscal Year,
complete Consolidated financial statements of
Parent, together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together
with an opinion, based on an audit using generally
accepted auditing standards, by KPMG Peat Marwick,
or other independent certified public accountants
selected by Parent and acceptable to Agent, stating
that such Consolidated financial statements have
been so prepared. These Consolidated financial
statements shall contain a Consolidated balance
sheet as of the end of such Fiscal Year and
Consolidated statements of earnings, of cash flows,
and of changes in stockholders' equity for such
Fiscal Year, each setting forth in comparative form
the corresponding figures for the preceding Fiscal
Year. In addition, within 105 days after the end of
each Fiscal Year Parent will furnish to Agent and
each Lender a certificate in the form of Exhibit D
signed by the President, Executive Vice President or
Vice President-Finance of Borrower, of Parent and of
DEOC, stating that such financial statements are
accurate and complete, stating that he has reviewed
the Loan Documents, containing all calculations
required to be made to show compliance or
non-compliance with the provisions of Sections
5.2(a)(iv), (j) and (k), and further stating that
there is no condition or event at the end of such
Fiscal Year or at the time of such certificate which
constitutes a Default or specifying the nature and
period of existence of any such condition or event.
(ii) As soon as available, and in any event
within 45 days after the end of each Fiscal
Quarter:
(A) a Consolidated and consolidating
balance sheet and income statement of Parent,
as at the end of such Fiscal Quarter and for
the period from the beginning of the then
current Fiscal Year to the end of such Fiscal
Quarter, all in reasonable detail and prepared
in accordance with GAAP, subject to changes
resulting from normal year-end adjustments;
(B) a Consolidated statement of cash flows
of Parent for the period from the beginning of
the then current Fiscal year to the end of such
Fiscal Quarter, in reasonable detail and
prepared in accordance with GAAP, subject to
changes resulting from normal year-end
adjustments; and
(C) a certificate in the form of Exhibit D
signed by the President, Executive Vice
President or Vice President-Finance of
Borrower, of Parent and of DEOC, stating that
such financial statements are accurate and
complete, stating that he has reviewed the Loan
Documents, containing all calculations required
to be made by Borrower or Parent to show
compliance or non-compliance with the
provisions of Sections 5.2(a)(iv), (j) and (k),
and further stating that there is no condition
or event at the end of such Fiscal Quarter or
at the time of such certificate which
constitutes a Default or specifying the nature
and period of existence of any such condition
or event.
(iii) Promptly upon their becoming
available, copies of all financial statements,
reports, notices and proxy statements sent by any
Restricted Person to its stockholders or partners
and all registration statements, periodic reports
and other statements and schedules filed by any
Restricted Person with any securities exchange, the
Securities and Exchange Commission or any similar
governmental authority, including any information or
estimates with respect to Parent's oil and gas
business (including its exploration, development and
production activities) which are required to be
furnished in Parent's annual report pursuant to
Sections 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (such required information and
estimates being called the "SEC Estimates" in the
immediately following subsection (iv)).
(iv) By February 1 of each year, a preliminary
version, and by March 14 of each year a final
version, of an engineering report prepared as of the
preceding December 31 by XxXxxxx & Associates, or
other independent petroleum engineers chosen by
Parent and acceptable to Majority Lenders,
concerning oil and gas properties and interests
owned by Borrower, Parent or DEOC constituting
approximately eighty percent (80%) of the total oil
and gas reserve value of all oil and gas properties
and interests owned by Borrower, Parent and the
other Guarantors which have attributable to them
proved oil or gas reserves, together with an
engineering report prepared by Borrower's, Parent's
and the other Guarantors' in-house engineering staff
concerning all other oil and gas properties and
interests owned by Borrower, Parent and the other
Guarantors not evaluated by such engineers which
have attributable to them proved oil or gas
reserves. Each such Engineering Report shall
distinguish among proved developed producing
reserves, proved developed non-producing reserves,
and proved undeveloped reserves, shall contain
sufficient information to enable Parent to meet the
reporting requirements concerning oil and gas
reserves contained in Regulations S-K and S-X
promulgated by the Securities and Exchange
Commission, shall be in form and substance
satisfactory to Agent, shall contain information and
analysis comparable in scope to that contained in
the Initial Engineering Report, and shall contain a
detailed analysis (herein called the "SEC Case")
from which can be derived the SEC Estimates referred
to in the immediately preceding subsection (iii).
(v) By August 15 of each year, a supplemental
engineering report prepared by Borrower's, Parent's
and DEOC's in-house engineering staff as of the
preceding July 1, using assumptions incorporated in
the most recent SEC Case furnished under the
immediately preceding subsection (iv), as to the
five oil and gas properties or interests (units,
fields and/or leases) owned by Borrower, Parent or
DEOC with the greatest oil and gas reserve value,
containing information and analysis comparable in
scope to that contained in the most-recent
Engineering Report delivered pursuant to the
immediately preceding subsection (iv).
(vi) As soon as available, and in any event
within 45 days after the end of each Fiscal Quarter,
a report describing the gross volume of production
and sales attributable to production during such
Fiscal Quarter from all properties described in the
final Engineering Report most recently furnished
under subsection (b)(iv) above or in any more recent
supplemental Engineering Report furnished under
subsection (b)(v) above, and describing the related
severance taxes, other taxes, and leasehold
operating expenses and capital costs attributable
thereto and incurred during such Fiscal Quarter. By
August 15 of each year Borrower, Parent and DEOC
shall provide a detailed report of all such items of
information, on a lease or unit basis for the oil
and gas properties or interests contained in the
most-recent supplemental Engineering Report
delivered pursuant to the immediately preceding
subsection (v), for the six month period ending on
the preceding June 30.
(vii) As soon as available, and in any
event within 45 days after the end of each Fiscal
Quarter, a report showing for the then current
Fiscal Year all transfers of Proved Properties.
(c) Other Information and Inspections. Each of
Borrower, Parent and DEOC will, and will cause each
Restricted Person to, furnish to Agent any
information which Agent may from time to time request
concerning any covenant, provision or condition of the
Loan Documents or any matter in connection with the
Restricted Persons' businesses and operations. Each
Restricted Person will permit representatives appointed
by Agent, including independent accountants, agents,
attorneys, appraisers and any other persons, to visit and
inspect any of such Restricted Person's property during
normal office hours, including its books of account,
other books and records, and any facilities or other
business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down
and record any information such representatives obtain,
and each Restricted Person shall permit Agent or its
representatives to investigate and verify the accuracy of
the information furnished to Agent in connection with the
Loan Documents and to discuss all such matters with its
officers, employees and representatives. Each of Agent
and Lenders agrees that it will take all reasonable steps
to keep confidential any information given to it by any
Restricted Person, provided, however, that this
restriction shall not apply to information which (i) has
at the time in question entered the public domain, (ii)
is required to be disclosed by law or by any order, rule
or regulation (whether valid or invalid) of any court or
governmental agency or authority, (iii) is disclosed to
Agent or any Lender or any of their respective examiners,
Affiliates, auditors, attorneys or agents (which
Affiliates, auditors, attorneys, and agents shall be
deemed bound by the restrictions of this sentence), (iv)
is furnished to prospective successor Agents or to
purchasers or prospective purchasers of participations or
interests in the Loans or the Notes (provided that any
such Persons who are not Affiliates of a Lender have
agreed to be bound by the restrictions of this sentence),
or (v) is disclosed in connection with enforcement of the
Loan Documents during the continuance of a Default.
(d) Notice of Material Events and Change of
Address. Each of Borrower, Parent and DEOC will promptly
notify Agent and each Lender (i) of any material adverse
change in Borrower's or DEOC's individual financial
condition or in Parent's Consolidated financial
condition, (ii) of the occurrence of any Default, (iii)
of the acceleration of the maturity of any Debt owed by
any Related Person or of any default by any Related
Person under any indenture, mortgage, agreement, contract
or other instrument to which any of them is a party or by
which any of them or any of their properties is bound, if
such acceleration or default might have a material
adverse effect upon Borrower's or DEOC's individual
financial condition or upon Parent's Consolidated
financial condition, (iv) of any material adverse claim
(or any claim of $1,000,000 or more) asserted against any
Related Person or with respect to any Related Person's
properties, (v) of the occurrence of any Termination
Event, and (vi) of the filing of any suit or proceeding
against any Related Person in which an adverse decision
could have a material adverse effect upon Borrower's or
DEOC's individual financial condition, business, or
operations or upon Parent's Consolidated financial
condition, business or operations. Upon the occurrence
of any of the foregoing the Restricted Persons will take
all necessary or appropriate steps to remedy promptly any
such material adverse change, Default or default, to
protect against any such adverse claim, to defend any
such suit or proceeding, and to resolve all
controversies on account of any of the foregoing.
Borrower, Parent and DEOC will also notify Agent in
writing at least twenty Business Days prior to the date
that any Related Person which is a party to any Loan
Document changes its name or the location of its chief
executive office.
(e) Maintenance of Properties. Each Restricted
Person will maintain, preserve, protect, and keep all
property used or useful in the conduct of its business in
good condition and in compliance with all applicable
laws, rules and regulations, and will from time to time
make all repairs, renewals and replacements needed to
enable the business and operations carried on in
connection therewith to be promptly and advantageously
conducted at all times.
(f) Maintenance of Existence and Qualifications.
Each Restricted Person which is a corporation,
partnership or business trust will maintain and preserve
its corporate, partnership or business trust existence
and its rights and franchises in full force and effect
and will qualify to do business as a foreign corporation,
partnership or business trust in all states or
jurisdictions where required by applicable law.
(g) Payment of Trade Debt, Taxes, etc. Each
Restricted Person will (i) timely file all required tax
returns; (ii) timely pay all taxes, assessments, and
other governmental charges or levies imposed upon it or
upon its income, profits or property; (iii) within thirty
days after the same becomes due pay all Debt owed by it
on ordinary trade terms to vendors, suppliers and other
Persons providing goods and services used by it in the
ordinary course of its business; (iv) pay and discharge
when due all other Debt now or hereafter owed by it; and
(v) maintain appropriate accruals and reserves for all of
the foregoing Debt in accordance with GAAP. Each
Restricted Person may, however, delay paying or
discharging any such Debt so long as it is in good faith
contesting the validity thereof by appropriate
proceedings and it has set aside on its books adequate
reserves therefor to the extent required by GAAP.
(h) Insurance. Each Restricted Person will keep or
cause to be kept adequately insured by financially sound
and reputable insurers, its surface equipment and other
property of a character usually insured by similar
Persons engaged in the same or similar businesses. Each
Restricted Person shall at all times maintain (1)
adequate insurance against fire, casualty and any other
hazards normally insured against, and (2) adequate
insurance against its liability for injury to persons or
property, which insurance shall be by financially sound
and reputable insurers.
(i) Payment of Expenses. Whether or not the
transactions contemplated by this Agreement are
consummated, Borrower will pay all reasonable costs and
expenses (including attorneys' fees but excluding normal
overhead) (i) of Agent in connection with the
preparation, execution and delivery of the Loan
Documents, and any and all consents, waivers or other
documents or instruments relating thereto, (ii) of any
Person in connection with the filing,
recording, refiling and re-recording of any Loan
Documents and any other documents or instruments or
further assurances required to be filed or recorded or
refiled or re-recorded by the terms of any Loan Document,
(iii) of Agent in connection with the borrowings
hereunder and other action reasonably required in the
course of administration hereof, and (iv) of Agent or any
Lender in connection with the defense at any time of the
Loan Documents and the Obligations, or, after the
occurrence of a Default, in connection with the
enforcement of the Loan Documents and the Obligations or
the defense of Agent's or such Lender's exercise of its
rights in respect thereof.
(j) Performance on Restricted Person's Behalf. If
any Restricted Person fails to pay any taxes, insurance
premiums, expenses, fees, or other amounts it is required
to pay under any Loan Document, Agent may pay the same,
and shall use its best efforts to notify Borrower prior
to making any such payment; provided, however, that any
failure by Agent to so notify Borrower shall not limit or
otherwise impair Agent's ability to make any such
payment. Borrower shall immediately reimburse Agent for
any such payments and each amount paid by Agent shall
constitute an Obligation owed hereunder and shall bear
interest at the Late Payment Rate from the date such
amount is paid by Agent until the date such amount is
repaid to Agent.
(k) Compliance with Agreements and Law. Each
Restricted Person will perform all material obligations
it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument
or obligation to which it is a party or by which it or
any of its properties is bound. Each Restricted Person
will conduct its business and affairs in compliance with
all laws, regulations, and orders applicable thereto
(including those relating to pollution and other
environmental matters).
(l) Evidence of Compliance. Each Restricted Person
will furnish to Agent and each Lender at such Restricted
Person's or Borrower's expense all evidence which Agent
or Majority Lenders from time to time reasonably request,
including the forms of evidence and assurance described
in Section 3.2(e), as to the accuracy and validity of or
compliance with all representations, warranties and
covenants made by any Related Person in the Loan
Documents, the satisfaction of all conditions contained
therein, and all other matters pertaining thereto.
Section 5.2. Negative Covenants. Each of Borrower,
Parent and DEOC warrants, covenants and agrees that until the
full and final payment of the Obligations and the termination
of this Agreement, unless Majority Lenders have previously
agreed otherwise in writing:
(a) Limitation on Debt. No Restricted Person will
in any manner owe or be liable for Restricted Debt
except:
(i) the Obligations;
(ii) operating lease or capital lease
obligations (excluding oil, gas or mineral leases)
entered into in the ordinary course of the
Restricted Persons' businesses in arm's length
transactions at competitive market rates under
competitive terms and conditions in all respects,
provided that the obligations required to be paid in
any Fiscal Year under any such operating and capital
leases do not in the aggregate exceed $4,000,000 for
all Restricted Persons;
(iii) Approved Additional Debt, provided,
however, that the sum of (A) the Loan Balance, plus
(B) the aggregate outstanding principal balance of
the Approved Additional Debt shall at no time exceed
the sum of (C) the Available Borrowing Base then in
effect, plus (D) $10,000,000;
(iv) obligations:
(1) under "take-or-pay" contracts to
deliver gas from specified properties in
consideration of advance payments therefor,
provided that, if the aggregate amount of such
obligations of the Restricted Persons is
$500,000 or more at the end of any Fiscal
Quarter, the amount of each such obligation
which is $100,000 or more, and the aggregate
amount of all such obligations which are less
than $100,000 (together with a list of the
properties which give rise to such
obligations), must be disclosed on each
quarterly officers' certificate delivered under
Section 5.1(b)(ii)(C); and
(2) resulting from an "over-produced"
status under gas balancing arrangements,
provided that, if the aggregate amount of the
Restricted Persons' net over-production (i.e.,
over-production less under-production) is
500,000 mcf or more at the end of any Fiscal
Quarter, the amount of each item of
over-production which is 100,000 mcf or more,
the aggregate amount of all such items which
are less than 100,000 mcf, and the aggregate
amount of all offsetting under-production
rights (together with a list of the properties
which give rise to such obligations and rights)
must be disclosed on each quarterly officers
certificate under Section 5.1(b)(ii)(C);
(v) Debt owed among Borrower, Parent and
Guarantors that is subordinated to the Obligations
pursuant to the Subordination Agreement (herein
called "Subordinated Debt");
(vi) guaranties by one Restricted Person of
Debt owed by another Restricted Person, if such Debt
either (1) is not Restricted Debt, or (2) is allowed
under subsections (i), (ii), (iv) or (v) of this
subsection 5.2(a);
(vii) Debt of the Restricted Persons for
plugging and abandonment bonds or for letters of
credit issued by any Lender in place thereof which
are required by regulatory authorities in the area
of operations, and Debt of the Restricted Persons for
other bonds or letters of credit issued by any
Lender which are required by such regulatory
authorities with respect to other normal oil and gas
operations;
(viii) obligations under the Subordinated
Parent Indenture, the Subordinated Parent Debentures
and the Subordinated Parent Guarantee;
(ix) non-recourse Restricted Debt as to which
neither Borrower nor Parent nor any Guarantor (A)
provides any guaranty or credit support of any kind
(including any undertaking, guarantee, indemnity,
agreement or instrument that would constitute
Restricted Debt) or (B) is directly or indirectly
liable (as a guarantor or otherwise); provided, that
after giving effect to such Restricted Debt
outstanding from time to time, Borrower is not in
violation of Sections 5.2(j) and (k);
(x) Debt arising under forward, future, swap
or hedging contracts permitted pursuant to Section
5.2(n);
(xi) miscellaneous items of Restricted Debt not
described in subsections (i) through (x) of this
subsection (a) which do not in the aggregate (taking
into account all such Restricted Debt of all
Restricted Persons) exceed $2,000,000 at any one
time outstanding; provided, that after giving effect
to such Restricted Debt outstanding from time to
time, Borrower is not in violation of Sections
5.2(j) and (k).
(b) Limitation on Liens. No Restricted Person will
create, assume or permit to exist any Lien upon any of
the properties or assets which it now owns or hereafter
acquires, except:
(i) operators' liens under customary operating
agreements, statutory Liens for taxes, statutory
mechanics' and materialmen's Liens, and other
similar statutory Liens, provided such Liens secure
only Debt which is not delinquent or which is being
contested as provided in Section 5.1(g);
(ii) Liens on any oil and gas properties which
neither have developed reserves (producing or
non-producing) properly attributable thereto nor are
otherwise held under lease by production of other
reserves;
(iii) Liens on the Restricted Persons'
office facilities;
(iv) Liens to secure the Obligations;
(v) Liens securing Subordinated Debt permitted
under Section 5.2(a)(v);
(vi) Liens on property securing Debt permitted
under Section 5.2(a)(ix) incurred to finance the
purchase price of such property
and not secured by other property (except for such
property and receivables, contract rights and
similar intangibles related thereto and the proceeds
thereof); and
(vii) Liens described in Section
5.2(n)(i)(B) to secure Debt arising under forward,
future, swap or hedging contracts permitted pursuant
to Section 5.2(n)(i).
No Restricted Person will allow the filing or continued
existence of any financing statement describing as
collateral any assets or property of such Restricted
Person, other than financing statements which describe
only collateral subject to a Lien permitted under this
section and which name as secured party or lessor only
the holder of such Lien.
(c) Limitation On Intercompany Transfers. No
Restricted Person will engage in any transaction with any
other Restricted Person or Unrestricted Person which
involves the transfer of assets by a Restricted Person in
any manner (whether by loan, purchase, dividend, capital
contribution, or otherwise) except (to the extent not
otherwise prohibited hereunder or under the other Loan
Documents) as follows:
(i) Borrower, Parent and the other Guarantors
may make loans among one another, Borrower and each
Guarantor other than Parent may pay dividends to
Borrower, Parent or any other Guarantor, and Parent,
Borrower and the other Guarantors may make capital
contributions to or purchase additional shares of
capital stock in Borrower and Guarantors, all
without limit, provided that no Default exists
immediately before or immediately after such
transaction;
(ii) Borrower, Parent and the other Guarantors
may make loans or capital contributions to, purchase
shares of common stock from, or otherwise provide
funds to Restricted Persons (other than Borrower,
Guarantors and Devon Trust) and Unrestricted
Persons, provided that (A) the aggregate amount of
all such loans (excluding any such loans which have
at the time in question been repaid) may at no time
in the aggregate exceed $1,000,000 with respect to
all such Restricted Persons and Unrestricted
Persons, (B) the aggregate amount of all such
capital contributions, purchases of shares, and
other provisions of funds (excluding loans and
excluding capital contributions consisting of newly
issued or treasury stock of Parent) shall be
included within and must not exceed the $1,000,000
annual limit on investments set out in Section
5.2(f)(ii), and (C) any Restricted Person or
Unrestricted Person who receives $1,000,000 or more
in any one or more such transactions (whether as a
loan, capital contribution, purchase, or otherwise)
from either or both of Borrower and Parent must
become a Guarantor to the extent provided in Section
6.2;Section 5.2(c)(iii)
(iii) Any Restricted Person other than
Parent may pay dividends to its shareholders so long
as the full amount of such dividends is received
(either directly or through a series of concurrent
transactions) by any or all of Borrower, Parent, or
the other Guarantors;
(iv) The Restricted Persons may sell (and pay
for) goods and services to each other, at fair
prices obtainable in arm's-length transactions with
third parties, in transactions which do not involve
the payment of cash or cash equivalents by Borrower
or Parent to any Person other than each other; and
(v) Parent may pay quarterly interest payments
on the Subordinated Parent Debentures to Devon
Trust, pursuant to the express terms thereof, and
Devon Trust may pay quarterly cash dividends to the
holders of the Devon Trust Securities pursuant to
the express terms thereof, provided that both
immediately before and immediately after any such
proposed interest payment and dividend payment,
Parent is in compliance with Section 5.2(k) and no
Default under Section 7.1(a), 7.1(f) or 7.1(h) is
continuing.
In addition to the foregoing, Borrower, Parent and the
other Guarantors may, without regard to the $1,000,000
limit referred to in subsection (ii)(B) of this section,
acquire interests from unaffiliated third parties in
corporations or limited partnerships who thereby become
(or already are) Subsidiaries of Parent, provided that
(1) no such corporation or limited partnership may be
designated as an Unrestricted Person, (2) Borrower or a
Guarantor must acquire directly more than 50% (by vote)
of the voting stock of any corporation so acquired, and
(3) Borrower or a Guarantor must acquire directly 100% of
the general partner interests in any limited partnership
so acquired.
(d) Limitation on Distributions and Repurchases;
Dividends and Redemptions. Except as permitted in
Section 5.2(c) or in the last sentence of this
subsection, no Restricted Person will otherwise declare
or pay any dividends on, or make any distribution or
other payment in respect of, any class of its capital
stock or any partnership or other interests in it, nor
will any Restricted Person directly or indirectly make,
cause or permit any capital contribution to or purchase,
redeem, acquire or retire any shares of the capital stock
of or partnership interests or other interests in any
Related Person (whether such interests are now or
hereafter issued, outstanding or created), or cause or
permit any reduction or retirement of the capital stock
of any Related Person, or agree to do any of the
foregoing. Each Restricted Person may declare and pay to
any Persons dividends payable only in its common or
preferred stock, so long as Parent's direct or indirect
interest in any of its Subsidiaries is not thereby
reduced. In addition to the foregoing, Parent may
declare and pay to any Persons quarterly cash dividends
on the common stock of Parent, provided that, immediately
prior to and immediately after the payment of such cash
dividends (i) Parent is in compliance with Section 5.2(k)
and (ii) no Borrowing Base Deficiency exists. In
addition to the foregoing, Parent may spend up to
$25,000,000 in the aggregate to purchase,
redeem, acquire or otherwise retire shares of the capital
stock of Parent, provided that both immediately before
and immediately after any such proposed repurchase (i) no
Default is continuing and (ii) no Borrowing Base
Deficiency exists.
(e) Limitation on Mergers, Issuances of Securities.
No Restricted Person will merge or consolidate with or
into any other Person, except that (i) any Related Person
which is a Subsidiary of Parent (other than Borrower) may
be consolidated with Borrower, Parent or any other
Guarantor so long as Borrower, Parent or a Guarantor is
the surviving entity and (ii) any Subsidiaries of Parent
(other than Borrower) may merge or consolidate with or
into each other so long as the surviving entity is a
Guarantor. No Restricted Person (other than Parent and
Devon Trust) will issue any additional shares of its
capital stock, additional partnership interests or other
securities or any options, warrants or other rights to
acquire such additional shares, partnership interests or
other securities except to a Restricted Person of which
such issuer is already directly or indirectly a
Subsidiary and only to the extent not otherwise forbidden
under the terms hereof. Devon Trust will not issue any
securities except common securities to Parent and the
Devon Trust Securities. Borrower and each Guarantor
other than Parent will at all times remain wholly-owned
direct or indirect Subsidiaries of Parent, Parent will at
all times own all of the outstanding common securities of
Devon Trust, and no Restricted Person will allow any
diminution of Borrower's or any Guarantor's interest
(direct or indirect) therein. Parent will not issue or
have outstanding any securities other than its common or
preferred stock and the Subordinated Parent Debentures.
(f) Limitation on Investments and New Businesses.
Other than as permitted in Section 5.2(c), no Restricted
Person will (i) make any expenditure or commitment or
incur any obligation or enter into or engage in any
transaction except in the ordinary course of its present
oil and gas businesses and operations, or (ii) make any
acquisitions of or capital contributions to or other
investments in any Persons in excess of $1,000,000 in the
aggregate in any Fiscal Year. Notwithstanding the
foregoing, so long as no Borrowing Base Deficiency
exists, the Restricted Persons may make:
(A) investments in direct obligations of, or
obligations guaranteed by the full faith and credit
of, the United States of America, maturing in twelve
months or less from the date of acquisition thereof
by such Restricted Person,
(B) demand deposits, and time deposits
(including certificates of deposit) maturing within
one year from the date of deposit thereof, with a
domestic office (1) of Agent or any Lender or the
Bank of Oklahoma, N.A., or (2) of any bank or trust
company organized under the laws of the United
States of America or any State therein, provided
that (a) the full amount of each such deposit in
such bank or trust company is insured by the Federal
Deposit Insurance Corporation or (b) such bank or
trust company has capital, surplus and undivided profits
aggregating at least $50,000,000,
(C) investments in (1) publicly traded debt
securities with an original term of 270 days or less
or (2) interest bearing securities issued to the
public by banks, associated entities or similar
institutions, which can be put to the issuer at the
investor's unconditional option within one month
after acquisition, so long as in each case such
securities have a credit rating of at least A-1 from
Standard & Poor's Corporation or P-1 from Xxxxx'x
Investors Service, Inc.
(g) Limitation on Credit Extensions. Except as
allowed under clauses (A), (B) or (C) of the immediately
preceding subsection (f), no Restricted Person will
extend credit, make advances or make loans other than (i)
normal and prudent extensions of credit by any Related
Person to its own customers buying goods and services in
the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar
businesses operated in a normal and prudent manner, (ii)
loans permitted under Section 5.2(c), and (iii) other
loans by Borrower or Guarantors to any Persons who are
not Related Persons, provided that aggregate principal
balance of all such loans does not exceed $250,000 at any
time outstanding.
(h) Limitation on Sales of Property. No Restricted
Person will sell, transfer, lease, exchange, alienate or
dispose of (in this section, "transfer") any of its
assets or properties or any interest therein except that
the following may be transferred in arms'-length
transactions:
(i) properties and assets which are not used
or useful in the exploration, production,
processing, transportation or refining of oil or
gas;
(ii) inventory (including oil and gas
production or seismic data) which is sold in the
ordinary course of business;
(iii) equipment which is not used or useful
in the operation or maintenance of Proved
Properties;
(iv) oil and gas properties (or portions
thereof) which are not Proved Properties, and Proved
Properties to which no proved developed producing
reserves or proved developed non-producing reserves
are attributed, provided that such Proved Properties
are farmed out to Persons other than Affiliates of
Borrower and not otherwise transferred; and
(v) Proved Properties, provided that (A) no
Default is continuing at the time of such proposed
transfer, (B) no Borrowing Base Deficiency exists,
and (C) the aggregate prices received from all
transfers of Proved Properties (including such
proposed transfer but excluding farmouts
under subsection (iv) immediately above) by all Restricted
Persons during any Fiscal Year does not exceed
$25,000,000.
Borrower will furnish to Agent and each Lender the report
regarding transfers made pursuant to the above subsection
5.2(h)(v) as set forth in subsection 5.1(b)(vii). No
Restricted Person will sell, transfer or otherwise
dispose of capital stock of any of Parent's Subsidiaries
except that any Subsidiary of Parent (other than
Borrower) may sell or issue its own capital stock to the
extent not otherwise prohibited hereunder. No Restricted
Person will discount, sell, pledge or assign any notes
payable to it, accounts receivable or future income
except to the extent expressly permitted under the Loan
Documents.
(i) Fiscal Year. No Related Person will change its
fiscal year.
(j) Working Capital and Current Ratio. The ratio
of Parent's Consolidated current assets to Parent's
Consolidated current liabilities (excluding deferred
taxes) will never be less than 1.00 to 1.00. For
purposes of this subsection: (a) up to $15,000,000 of an
aggregate amount of the unused portion of (I) the
Available Borrowing Base which is available for borrowing
at the time in question and (II) any long-term credit
facility at Bank of Oklahoma, N.A. which is available for
borrowing at the time in question without violation of
Section 5.2(a), will be considered a current asset, and
(b) Borrower's Consolidated current liabilities will be
calculated without including any payments of principal on
the Notes which are required to be repaid within one year
from the time of calculation. For purposes of the
foregoing, all accrued interest payments on the
Subordinated Parent Debentures and all dividend payments
on the Devon Trust Securities shall (without duplication)
be deemed to be and shall be included in Parent's
Consolidated current liabilities as defined by GAAP.
(k) Tangible Net Worth. Parent's Consolidated
Tangible Net Worth will never be less than:
(i) $310,000,000, plus
(ii) seventy-five percent (75%) of Parent's
Cumulative Consolidated Net Income (beginning May 1,
1996 as set forth in the definition thereof), to the
extent Parent's Cumulative Consolidated Net Income
is greater than zero, plus
(iii) one hundred percent (100%) of the
proceeds (net only of costs of sale) from any
issuance after April 30, 1996 of any shares of
Parent's common or preferred stock or any other
securities, other than the Subordinated Parent
Debentures (including any options, warrants or other
rights to acquire such stock) which Parent issues
after such date, provided that Parent shall comply
with the provisions of Section 5.2(e) hereof in
connection with any such issuance.
As used in this subsection:
"Parent's Consolidated Debt" means all Consolidated
liabilities and similar balance sheet items of Parent,
together with all other contingent and indirect
liabilities (including without limitation any guaranties)
of Parent or any of Parent's Subsidiaries which are of a
character required to be included in Parent's audited
Consolidated annual financial statements described in
Section 5.1(b)(i), other than deferred taxes.
Notwithstanding the foregoing, for the purposes of
determining "Parent's Consolidated Debt", the outstanding
principal amount of the Subordinated Parent Debentures
shall not be included.
"Parent's Consolidated Tangible Net Worth" means (A)
all Consolidated assets of Parent, other than intangible
assets (including without limitation as intangible assets
such assets as patents, copyrights, licenses, franchises,
goodwill, trade names, trade secrets and leases other
than oil, gas or mineral leases or leases required to be
capitalized under GAAP), plus (B) the amount spent by
Parent, if any, to purchase, redeem, acquire or otherwise
retire shares of the capital stock of Parent as provided
in Section 5.2(d), minus (C) Parent's Consolidated Debt
and deferred taxes. For the purposes of determining
"Parent's Consolidated Tangible Net Worth", no
adjustments shall be made to the book value of Parent's
Consolidated oil and gas assets which would otherwise be
required after March 31, 1992 pursuant to the limitation
on capitalized costs contained in Regulation Section
210.4-10(i)(4) of the Securities and Exchange Commission.
(l) Amendment of Contracts; ERISA Plans. No
Related Person will amend or permit any amendment of any
agreement, document or instrument delivered in connection
with the Subordinated Debt, the Subordinated Parent
Debentures or the Devon Trust Securities without the
written consent of Majority Lenders. No Related Person
will amend or permit any amendment to any contract which
releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits
of Agent or any Lender under or acquired pursuant to any
Loan Documents. No Related Person will incur any
obligation to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA.
(m) Devon Trust; Devon Trust Securities. Devon
Trust shall exist for the exclusive purposes of (A)
issuing the Devon Trust Securities, (B) investing the
gross proceeds of the Devon Trust Securities in the
Subordinated Parent Debentures and (C) engaging in only
those other activities necessary or incidental thereto.
Parent shall exercise its option to defer interest
payments on the Subordinated Parent Debentures rather
than default on such interest payments. Devon Trust
shall not be dissolved without prior written notice by
Parent to Majority Lenders. Devon Trust shall not redeem
the Devon Trust Securities prior to their stated
maturity, and Parent shall not prepay or redeem the
Subordinated Parent Debentures prior to their stated
maturity, unless both immediately before and immediately
after any such proposed prepayment or redemption, Parent
is in compliance with Section 5.2(k) and no Default under
Section 7.1(a), 7.1(f) or 7.1(h) is continuing.
(n) Hedging Contracts. No Restricted Person will
be a party to or in any manner be liable on any forward,
future, swap or hedging contract, unless such contracts
qualify under GAAP as a hedge of oil and gas production,
floating rate Debt or foreign currency needs (and not as
a speculative investment), such contracts are entered
into in the ordinary course of the Restricted Persons'
businesses, and
(i) if such contracts are entered into with
the purpose and effect of fixing prices on oil or
gas expected to be produced by the Restricted
Persons:
(A) such contracts for any single month
(determined, in the case of contracts that are
not settled on a monthly basis, by a monthly
proration acceptable to Agent) do not, in the
aggregate, cover amounts greater than seventy-
five percent (75%) of the Related Persons'
aggregate Projected Oil and Gas Production
anticipated to be sold in the ordinary course
of the Restricted Persons' businesses for such
month;
(B) such contracts do not require any Related
Person to provide any Lien to secure Borrower's
obligations thereunder, other than Liens on
cash or cash equivalents in an aggregate amount
not more than $10,000,000; and
(C) each such contract is with a counterparty
or has a guarantor of the obligation of the
counterparty who (unless such counterparty is
Agent, any Lender or any of their Affiliates)
at the time the contract is made has long-term
obligations rated AA or better by Standard &
Poor's Corporation or Aa2 or better by Xxxxx'x
Investors Service, Inc. or is an investment
grade-rated industry participant.
As used in this subsection (iii), the term
"Projected Oil and Gas Production" means the
projected production of oil or gas (measured by
volume unit or BTU equivalent, not sales price)
for the term of the contracts or a particular
month, as applicable, from properties and
interests owned by any Restricted Person which
have attributable to them proved oil or gas
reserves, as such production is projected in
the most recent Engineering Report delivered
pursuant to Section 5.1(b)(iv), after deducting
projected production from any properties or
interests sold or under contract for sale that
had been included in such Engineering Report
and after adding projected production from any
properties or interests that had not been
reflected in such Engineering Report but that
are reflected in a separate or supplemental
Engineering Report meeting the
requirements of such Section 5.1(b)(iv) above
and otherwise are satisfactory to Agent.
(ii) if such contracts are entered into with
the purpose and effect of fixing interest rates on a
principal amount of indebtedness of such Restricted
Person that is accruing interest at a variable rate,
the aggregate notional amount of such contracts
never exceeds the anticipated outstanding principal
balance of the indebtedness to be hedged by such
contracts or an average of such principal balances
calculated using a generally accepted method of
matching interest swap contracts to declining
principal balances, and the floating rate index of
each such contract generally matches the index used
to determine the floating rates of interest on the
corresponding indebtedness to be hedged by such
contract.
Section 5.3. Investing Subsidiary. Each of Borrower,
Parent and DEOC warrants, covenants and agrees that until the
full and final payment of the Obligations and the termination
of this Agreement, unless Majority Lenders have previously
agreed otherwise in writing:
(a) So long as it exists, Investing Subsidiary shall
be and at all times will remain a wholly-owned Subsidiary of
Borrower;
(b) Borrower shall make no equity investments in,
loans to, or other transfers of assets to Investing
Subsidiary, except that Borrower may make stock purchases or
capital contributions from time to time which are in cash
and which do not in the aggregate (including Borrower's
original investment in Investing Subsidiary and all
investments thereafter, but excluding previous investments
of capital which are returned to Borrower) exceed (i)
$15,000,000 or (ii) with the prior consent of Majority
Lenders, $25,000,000;
(c) Notwithstanding Section 5.2(a), Investing
Subsidiary shall not in any manner owe or be liable for
Restricted Debt of any type, whether to Related Persons or
otherwise, except for any guaranty of the Obligations which
may hereafter be requested by Agent;
(d) The sole business of Investing Subsidiary, if any,
shall be the purchase, holding, and sale of debt or equity
securities of one or more Portfolio Companies (provided that
Investing Subsidiary may temporarily invest cash not
required to be returned to Borrower under subsection (f)
below in investments permitted under the second sentence of
Section 5.2(f));
(e) No assets of Investing Subsidiary shall be counted
as current assets in any calculations under Section 5.2(j);
(f) Whenever Investing Subsidiary has assets with a
book value in excess of $5,000,000 (excluding unrealized
appreciation), and such assets consist in whole or in part
of cash received from anyone other than Borrower, such cash
(to the extent it does not exceed such excess) may not be reinvested
by Investing Subsidiary but must be promptly dividended or
otherwise distributed to Borrower;
(g) Investing Subsidiary shall be a Restricted Person
for all purposes under this Agreement, including without
limitation Sections 5.2(b) and 6.2, and Borrower will cause
Investing Subsidiary to give a guaranty of such part of the
Obligations as Agent may in its discretion at any time
request as contemplated in Section 6.2; and
Lenders hereby agree that, notwithstanding Sections 5.1(b),
5.1(c), 5.2(c), 5.2(f), 6.2 or any other provisions of this
Agreement: (1) Investing Subsidiary need not give a guaranty
as contemplated in Section 6.2 until requested to do so by
Agent, and (2) no Related Person shall be required to identify
Investing Subsidiary or any Portfolio Company to Lenders
except to the limited extent provided in the following
sentence. Borrower will identify Investing Subsidiary (but
not any Portfolio Company) in connection with any guaranty
hereafter given by Investing Subsidiary or any security
interest hereafter given by Borrower in Borrower's stock in
Investing Subsidiary, but Agent and Lenders shall take all
reasonable efforts to keep the knowledge of such identity to
the minimum number of Persons needed to effectuate such
guaranty or security interest. The investments permitted
under this section shall not count against the $1,000,000
limit on equity investments contained in Section 5.2(f)(ii),
nor may investments be made in Investing Subsidiary or in
Portfolio Companies under Sections 5.2(c) or 5.2(f) in
addition to those provided for in this section. As indicated
in Section 5.3(d) above, Investing Subsidiary may buy and sell
debt and equity securities of Portfolio Companies in its
discretion. Borrower and Lenders acknowledge and agree that
Lenders, in good faith, have not relied upon the debt or
equity securities of Portfolio Companies as collateral in
extending or maintaining this particular credit.
ARTICLE VI -- Guaranties and Offset
Section 6.1. Bank Accounts; Offset. To secure the
repayment of the Obligations, each of Borrower, Parent and the
other Guarantors hereby grants to Agent and each Lender a
security interest, a lien, and a right of offset, each of
which shall be upon and against all right, title, and interest
of any Restricted Person in (a) any and all moneys, securities
or other property (and the proceeds therefrom) of Borrower,
Parent and the other Guarantors now or hereafter held or
received by or in transit to Agent or such Lender from or for
the account of Borrower, Parent or any other Guarantor,
whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower,
Parent or any other Guarantor with Agent or such Lender, and
(c) any other credits and claims of Borrower, Parent or any
Guarantor at any time existing against Agent or such Lender,
including claims under certificates of deposit. Upon the
occurrence of any Default, each of Agent and Lenders is hereby
authorized to foreclose upon, offset, appropriate, and apply,
at any time and from time to time, without notice to Borrower,
Parent or any other Guarantor, any and all items hereinabove
referred to against the Obligations (whether or not such
Obligations are then due and payable). To the extent that
Borrower, Parent or any other Guarantor have accounts
designated as royalty or joint
interest owner accounts, the foregoing security interest, lien
and right of offset shall not extend to funds in such accounts
which belong to, or otherwise arise from payments to Borrower,
Parent or any other Guarantor for the account of, third party
royalty or joint interest owners.
Section 6.2. Guaranties of Subsidiaries. Each Related
Person (other than Borrower, Parent, the other Guarantors, or
Devon Trust) which is now existing or is created, acquired or
comes into existence after the date hereof and which after the
date hereof receives loans or capital contributions from or
has other debt or equity investments made in it by one or more
Restricted Persons in an aggregate amount of $1,000,000 or
more, shall, upon request by and at the discretion of Agent,
promptly execute and deliver to Agent for the benefit of Agent
and Lenders an absolute and unconditional guaranty of the
timely repayment of the Obligations and the due and punctual
performance of the obligations of Borrower hereunder, which
guaranty shall be satisfactory to Agent in form and substance.
Borrower, Parent and each other Guarantor will cause each such
Related Person to deliver to Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to
Agent and its counsel that such Related Person has taken all
corporate or partnership action necessary to duly approve and
authorize its execution, delivery and performance of such
guaranty and any other documents which it is required to
execute. Notwithstanding the foregoing, if any Related Person
not wholly owned (directly or indirectly) by Parent would
violate a duty to its minority interest owners by becoming a
Guarantor, such Related Person need not become a Guarantor and
Parent will instead, if requested by Agent, give (or cause to
be given) a first security interest (under documents in form
and substance acceptable to Agent) in its entire ownership
interest in such Related Person to Agent for the benefit of
Lenders.
Section 6.3. Guarantors' Right of Setoff. Insofar as any
Guarantor (other than Parent), Parent and Borrower are
concerned, any payment by any such Guarantor under its
guaranty of the Obligations shall be deemed to be a repayment
of, and shall be set off against (i) first, any intercompany
loans made by Parent to such Guarantor, and (ii) second, any
intercompany loans made by Borrower to such Guarantor.
ARTICLE VII -- Events of Default and Remedies
Section 7.1. Events of Default. Each of the following
events constitutes an Event of Default under this Agreement:
(a) Any Related Person fails to pay any Obligation
when due and payable, whether at a date for the payment of a
fixed installment or contingent or other payment to Agent or
a Lender or as a result of acceleration or otherwise;
(b) Any "default", "event of default", "Default" or
"Event of Default" occurs under any Loan Document (other
than this Agreement) which defines any such term, and the
same is not remedied within the applicable period of grace
(if any) provided in such Loan Document;Section 7.1(c)
(c) Any Related Person fails (other than as referred
to in subsections (a) and (b) above) to duly observe,
perform or comply with any covenant, agreement, condition or
provision of any Loan Document, and such failure is not
remedied within the applicable Grace Period;
(d) Any representation or warranty previously,
presently or hereafter made in or in writing by or on behalf
of any Related Person in connection with any Loan Document
shall prove to have been false or incorrect in any material
respect on any date on or as of which made, and the
represented or warranted facts do not become true and
correct within the applicable Grace Period;
(e) Any Restricted Person fails to duly observe,
perform or comply with any agreement with any Person or any
term or condition of any instrument, if such agreement or
instrument is materially significant (i) to Borrower, (ii)
to Parent, DEOC or any other Guarantor, or (iii) to Borrower
and its subsidiaries on a Consolidated basis, to Parent and
its subsidiaries on a Consolidated basis, or to DEOC and its
subsidiaries on a Consolidated basis, and such failure is
not remedied within the applicable period of grace (if any)
provided in such agreement or instrument;
(f) Any Related Person (i) fails to duly pay any Debt
constituting principal or interest owed by it with respect
to borrowed money or money otherwise owed under any note,
bond, or similar instrument, including without limitation
the Subordinated Parent Debentures, the Subordinated Parent
Indenture, the Subordinated Parent Guarantee and the Devon
Trust Securities, or (ii) fails to pay when the same becomes
due and payable any other Debt in excess of $100,000 (other
than trade payables outstanding in compliance with
Section 5.1(g)(iii)), or (iii) breaches or defaults in the
performance of any agreement or instrument by which any Debt
described in the preceding clauses (i) or (ii) is issued,
evidenced, governed, or secured, and any such failure,
breach or default continues beyond any applicable period of
grace provided therefor;
(g) Either (i) any "accumulated funding deficiency"
(as defined in Section 412(a) of the Internal Revenue Code
of 1986, as amended) in excess of $100,000 exists with
respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, provided,
pursuant to Section 412(c)(10) of the Internal Revenue Code
of 1986, as amended, any contribution for an ERISA Plan year
made during the period set forth in Section 412(c)(10) shall
be deemed to have been made on the last day of such ERISA
Plan year, or (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA
Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such
benefit liabilities by more than $100,000 (or in the case of
a Termination Event involving the withdrawal of a
substantial employer, the withdrawing employer's
proportionate share of such excess exceeds such
amount);
(h) Any Related Person:
(i) suffers the entry against it of a judgment,
decree or order for relief by a court of competent
jurisdiction in an involuntary case commenced under any
applicable bankruptcy, insolvency or other similar law
of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to
time amended, or has any such case commenced against it
which remains undismissed for a period of thirty days;
or
(ii) commences a voluntary case under any
applicable bankruptcy, insolvency or similar law now or
hereafter in effect, including the federal Bankruptcy
Code, as from time to time amended; or applies for or
consents to the entry of an order for relief in an
involuntary case under any such law; or makes a general
assignment for the benefit of creditors; or fails
generally to pay its debts as such debts become due; or
takes corporate or other action to authorize any of the
foregoing; or
(iii) suffers the appointment of or taking
possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of
all or any substantial part of its property in a
proceeding brought against or initiated by it, and such
appointment or taking possession is neither made
ineffective nor discharged within thirty days after the
making thereof, or such appointment or taking
possession is consented to, requested by, or acquiesced
to by it; or
(iv) suffers the entry against it of a final
judgment for the payment of money in excess of
$1,000,000, unless the same is discharged within thirty
days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken
within said period and a stay of execution pending such
appeal is obtained; or
(v) suffers a writ or warrant of attachment or
any similar process to be issued by any court against
all or any substantial part of its property, and such
writ or warrant of attachment or any similar process is
not stayed or released within thirty days after the
entry or levy thereof or after any stay is vacated or
set aside;
(i) Any material adverse change occurs in Borrower's
Consolidated financial condition or businesses or
operations, in Parent's Consolidated financial condition or
businesses or operations, or in DEOC's Consolidated
financial condition or businesses or operations, and such
adverse change is not remedied within the applicable Grace
Period;
(j) any Person (or syndicate or group of Persons which
is deemed a "person" for the purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) acquires
more than thirty percent (30%) of the outstanding
stock of Parent having ordinary voting power (disregarding
changes in voting power based on the occurrence of
contingencies) for the election of directors, or during any
period of twelve successive months a majority of the Persons
who were directors of Parent at the beginning of such period
cease to be directors of Parent; and
Upon the occurrence of an Event of Default described in
subsection (h)(i), (h)(ii) or (h)(iii) of this section with
respect to Borrower, Parent or DEOC, all of the Obligations
shall thereupon become immediately due and payable, without
presentment, demand, protest, notice of protest, declaration
or notice of acceleration or intention to accelerate, or other
notice or declaration of any kind, all of which are hereby
expressly waived by Borrower, Parent and DEOC and each
Restricted Person who at any time guaranties, ratifies or
approves this Agreement. During the continuance of any other
Event of Default, and with the consent of Majority Lenders,
Agent may at any time and from time to time (unless all
Defaults have theretofore been remedied) without notice to
Borrower or any Guarantor declare any or all of the
Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest,
declaration or notice of acceleration or intention to
accelerate, or other notice or declaration of any kind, all of
which are hereby expressly waived by Borrower, Parent and DEOC
and each Restricted Person who at any time guaranties,
ratifies or approves this Agreement. After any such
acceleration neither Agent nor any Lender shall have any
obligation to make any further Advances or Loans of any kind
under any agreement with any Restricted Person. The term
"Grace Period" as used herein with respect to an Event of
Default for which a Grace Period is specifically provided
shall mean the period beginning on the date of the related
Default and ending thirty days after written notice of such
Default is given by Agent to Borrower, provided that such
period shall be reduced to two days if Borrower has not
previously given written notice of such Default to Agent and
Lenders as required in Section 5.1(d).
Section 7.2. Remedies. If any Default shall occur and be
continuing, Agent and Lenders may protect and enforce their
rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and
Agent and Lenders may enforce the payment of any Obligations
due or enforce any other legal or equitable right. All
rights, remedies and powers conferred upon Agent or Lenders
under any Loan Document shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available
under the other Loan Documents or at law or in equity.
ARTICLE VIII -- Agent
Section 8.1. Appointment and Authority. Each Lender hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to
receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions
and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or
thereof, together with all other powers reasonably incidental
thereto. The relationship of Agent to Lenders is only that of
one commercial bank acting as administrative agent for others,
and nothing in the Loan Documents shall be
construed to constitute Agent a trustee or other fiduciary for
any holder of any of the Notes or of any participation therein
nor to impose on Agent duties and obligations other than those
expressly provided for in the Loan Documents. With respect to
any matters not expressly provided for in the Loan Documents
and any matters which the Loan Documents place within the
discretion of Agent, Agent shall not be required to exercise
any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in
which case it shall be required to act or to refrain from
acting (and shall be fully protected and free from liability
to all Lenders in so acting or refraining from acting) upon
the instructions of Majority Lenders (including itself),
provided, however, that Agent shall not be required to take
any action which exposes it to a risk of personal liability
that it considers unreasonable or which is contrary to the
Loan Documents or to applicable law. Upon receipt by Agent
from Borrower, Parent or DEOC of any communication calling for
action on the part of Lenders or upon notice from any Lender
to Agent of any Default or Event of Default, Agent shall
promptly notify each Lender thereof.
Section 8.2. Agent's Reliance, Etc. Neither Agent nor any
of its directors, officers, agents, attorneys, or employees
shall be liable for any action taken or omitted to be taken by
any of them under or in connection with the Loan Documents,
including their negligence of any kind, except that each shall
be liable for its own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (a)
may treat the payee of any Note as the holder thereof until
Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such
payee and in form satisfactory to Agent; (b) may consult with
legal counsel (including counsel for Borrower, Parent or
DEOC), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or
representations made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the
terms, covenants or conditions of the Loan Documents on the
part of any Related Person or to inspect the property
(including the books and records) of any Related Person; (e)
shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency
or value of any Loan Document or any instrument or document
furnished in connection therewith; (f) may rely upon the
representations and warranties of the Related Persons and the
Lenders in exercising its powers hereunder; and (g) shall
incur no liability under or in respect of the Loan Documents
by acting upon any notice, consent, certificate or other
instrument or writing (including any telecopy, telegram, cable
or telex) believed by it to be genuine and signed or sent by
the proper Person or Persons.
Section 8.3. Lenders' Credit Decisions. Each Lender
acknowledges that it has, independently and without reliance
upon Agent or any other Lender, made its own analysis of
Borrower, Parent and DEOC and the transactions contemplated
hereby and its own independent decision to enter into this
Agreement and the other Loan Documents. Each Lender also
acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the
Loan Documents.
Section 8.4. Indemnification. Each Lender agrees to
indemnify Agent (to the extent not reimbursed by Borrower
within ten (10) days after demand) from and against such
Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including
reasonable fees of attorneys, accountants, experts, and
advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by,
or asserted against Agent growing out of, resulting from or in
any other way associated with any of the Loan Documents and
the transactions and events (including the enforcement
thereof) at any time associated therewith or contemplated
therein. The foregoing indemnification shall apply whether or
not such liabilities and costs are in any way or to any extent
caused, in whole or in part, by any negligent act or omission
of any kind by Agent or any of its officers, agents,
attorneys, employees or representatives, provided only that no
Lender shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs
which is proximately caused by (and attributed under any
applicable principles of comparative fault to) Agent's own
individual gross negligence or willful misconduct, as
determined in a final judgment. Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon
demand for such Lender's Percentage Share of any out-of-pocket
expenses (including without limitation fees of attorneys,
accountants, and other experts and advisors) incurred by Agent
in connection with the preparation, execution, administration,
or enforcement of, or advice in respect of rights and
responsibilities under, the Loan Documents, all as reasonably
allocated by Agent, to the extent that Agent is not reimbursed
for such expenses by Borrower as provided in such section. As
used in this section the term "Agent" shall refer not only to
the Person designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative
and Affiliate of such Person.
Section 8.5. Rights as Lender. In its capacity as a
Lender, Agent shall have the same rights and obligations as
any Lender and may exercise such rights as though it were not
Agent. Agent may accept deposits from, lend money to, act as
Trustee under indentures of, and generally engage in any kind
of business with any of the Related Persons or their
Affiliates, all as if it were not Agent hereunder and without
any duty to account therefor to any other Lender.
Section 8.6. Sharing of Set-Offs and Other Payments. Each
of Agent and Lender agrees that if it shall, whether through
the exercise of rights of banker's lien, set off, or
counterclaim against Borrower, Parent or DEOC or otherwise,
obtain payment of a portion of the aggregate Obligations owed
to it which, taking into account all distributions made by
Agent under Section 2.11, causes Agent or such Lender to have
received more than it would have received had such payment
been received by Agent and distributed pursuant to Section
2.11, then (i) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the
Obligations as necessary to cause Agent and all Lenders to
share all payments as provided for in Section 2.11, and (ii)
such other adjustments shall be made from time to time as
shall be equitable to ensure that Agent and all Lenders share all
payments of Obligations as provided in Section 2.11; provided,
however, that nothing herein contained shall in any way affect
the right of Agent or any Lender to obtain payment (whether by
exercise of rights of banker's lien, set-off or counterclaim
or otherwise) of indebtedness other than the Obligations.
Each of Borrower, Parent and DEOC expressly consent to the
foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or
not acquired pursuant to the foregoing arrangements, may to
the fullest extent permitted by law exercise any and all
rights or banker's lien, set-off, or counterclaim as fully as
if such holder were a holder of the Obligations in the amount
of such interest or other participation. If all or any part
of any funds transferred pursuant to this section is
thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section
shall be deemed to have been rescinded to the extent of such
recovery together with interest, if any, if interest is
required pursuant to court order to be paid on account of the
possession of such funds prior to such recovery.
Notwithstanding anything herein to the contrary, no Lender
shall be obligated to take any action described in this
section which would cause such Lender to purchase a
participation in any Offered Rate Portion of a second Lender's
Loan or which would otherwise obligate such first Lender to
share in any loss or delay caused by an Offered Rate Portion
of a second Lender's Loan not being paid when due.
Section 8.7. Investments. Whenever Agent in good faith
determines that it is uncertain about how to distribute to
Lenders any funds which it has received, or whenever Agent in
good faith determines that there is any dispute among Lenders
about how such funds should be distributed, Agent may choose
to defer distribution of the funds which are the subject of
such uncertainty or dispute. If Agent in good faith believes
that the uncertainty or dispute will not be promptly resolved,
or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be
distributed upon the distribution of such investment and in
the same proportion and to the same Persons as such
investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate
capacity as a Lender) shall be held by Agent pending such
distribution solely as Agent for such Lenders, and Agent shall
have no equitable title to any portion thereof.
Section 8.8. Benefit of Article VIII. The provisions of
Sections 8.1 through 8.7 are intended solely for the benefit
of Agent and Lenders, and no Related Person shall be entitled
to rely on any such provision or assert any such provision in
a claim or defense against Agent or any Lender. Agent and
Lenders may amend such provisions as they desire without the
consent of Borrower, Parent or DEOC.
Section 8.9. Resignation. Agent may resign at any time by
giving written notice thereof to Lenders, Borrower, Parent and
DEOC. Each such notice shall set forth the date of such
resignation. Upon any such resignation Borrower may, with the
written concurrence of Lenders whose aggregate Percentage
Shares equal or exceed fifty percent (50%), designate a
successor Agent. If within fifteen days after the date of
such resignation Borrower makes no such designation or such
written concurrence is not given, Majority Lenders shall have
the right to appoint a successor Agent. A successor must
be appointed for any retiring Agent, and such Agent's resignation
shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the
retiring Agent's resignation, no successor Agent has been
appointed and has accepted such appointment, then the retiring
Agent may appoint a successor Agent, which shall be a
commercial bank organized or licensed to conduct a banking or
trust business under the laws of the United States of America
or of any state thereof. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, the
retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents.
After any retiring Agent's resignation hereunder the
provisions of this Article VIII shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Documents.
ARTICLE IX -- Miscellaneous
Section 9.1. Waivers and Amendments; Acknowledgements.
(a) Waivers and Amendments. No failure or delay by
Agent or any Lender in exercising any right, power or remedy
which Agent or such Lender may have under any of the Loan
Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial
exercise by Agent or such Lender of any such right, power or
remedy preclude any other or further exercise thereof or of
any other right, power or remedy. No waiver of any
provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and
then such waiver or consent shall be effective only in the
specific instances and for the purposes for which given and
to the extent specified in such writing. No notice to or
demand on any Related Person shall in any case of itself
entitle any Related Person to any other or further notice or
demand in similar or other circumstances. This Agreement
and the other Loan Documents set forth the entire
understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede
all prior discussions and understandings with respect to the
subject matter hereof and thereof, and no waiver, consent,
release, modification or amendment of or supplement to this
Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in
writing and signed: (i) if such party is Borrower, Parent or
DEOC, by such party, (ii) if such party is Agent, by Agent,
and (iii) if such party is a Lender, by such Lender or by
Agent on behalf of Lenders with the written consent of
Majority Lenders (or without further consent than that
already provided herein in the circumstances provided in
Section 9.7). Notwithstanding the foregoing or anything to
the contrary herein, Agent shall not, without the prior
consent of all Lenders, execute and deliver on behalf of
Lenders any waiver or amendment which would: (i) waive any
of the conditions specified in Article III (provided that
Agent may in its discretion withdraw any request it has made
under Section 3.2(e)), (ii) increase the Maximum Loan Amount
of any Lender or subject any Lender to any additional
obligations, (iii) reduce any fees hereunder, or the
principal of, or interest on, the Notes, (iv) postpone any
date fixed for any payment of any fees hereunder, or
principal of, or interest on, the Notes, (v)
amend the definitions herein of "Majority Lenders" or
"Evaluating Lenders" or otherwise change the aggregate
amount of Percentage Shares which is required for Agent,
Lenders or any of them to take any particular action under
the Loan Documents, or (vi) release Borrower from its
obligation to pay the Notes or Parent or DEOC from its
guaranty of such payment.
(b) Acknowledgements and Admissions. Each of
Borrower, Parent and DEOC hereby represents, warrants,
acknowledges and admits that (i) it has been advised by
counsel in the negotiation, execution and delivery of the
Loan Documents to which it is a party, (ii) it has made an
independent decision to enter into this Agreement and the
other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or
undertaking by Agent or any Lender, whether written, oral or
implicit, other than as expressly set out in this Agreement,
(iii) neither Agent nor any Lender has made any such
representation, covenant or undertaking to Borrower, Parent
or DEOC pursuant to any such Loan Document, (iv) there are
no representations, warranties, covenants, undertakings or
agreements by Agent or any Lender as to the Loan Documents
except as expressly set out herein or therein, (v) neither
Agent nor any Lender has any fiduciary obligation toward
Borrower with respect to any Loan Document or the
transactions contemplated thereby, (vi) the relationship
pursuant to the Loan Documents between Borrower, Parent and
DEOC, on one hand, and Agent and each Lender, on the other
hand, is and shall be solely that of debtor and creditor,
respectively, (vii) no partnership or joint venture exists
with respect to the Loan Documents between any of Borrower,
Parent, DEOC, Agent and Lenders, (viii) Agent is not
Borrower's, Parent's or DEOC's Agent, but Agent for Lenders,
(ix) should an Event of Default or Default occur or exist
Agent and each Lender will determine in its sole discretion
and for its own reasons what remedies and actions it will or
will not exercise or take at that time, (x) without limiting
any of the foregoing, Borrower, Parent and DEOC are not
relying upon any representation by Agent or any Lender, or
any representative thereof, and no such representation has
been made, that Agent or any Lender will, at the time of an
Event of Default or Default, or at any other time, waive,
negotiate, discuss, or take or refrain from taking any
action with respect to any such Event of Default or Default
or any other term of the Loan Documents, and (xi) Agent and
all Lenders have relied upon the truthfulness of the
foregoing acknowledgements in deciding to execute and
deliver this Agreement and to accept the Notes.
Section 9.2. Survival of Agreements; Cumulative Nature.
All of the Related Persons' various representations,
warranties, covenants and agreements in the Loan Documents
shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the
delivery of the Notes and the other Loan Documents, and shall
further survive until all of the Obligations are paid in full
to Lenders and all of Lenders' obligations to Borrower are
terminated. All statements and agreements contained in any
certificate or other instrument delivered by any Related
Person to Agent or Lenders under any Loan Document shall be
deemed representations and warranties by Borrower or
agreements and covenants of Borrower, Parent and DEOC
under this Agreement. The representations, warranties,
indemnities, and covenants made by the Related Persons in the
Loan Documents, and the rights, powers, and privileges granted
to Agent and Lenders in the Loan Documents, are cumulative,
and, except for express waivers and consents, no Loan Document
shall be construed in the context of another to diminish,
nullify, or otherwise reduce the benefit to Agent or any
Lender of any such representation, warranty, indemnity,
covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein
contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document,
and each such similar representation, warranty, indemnity, or
covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various
Loan Documents.
Section 9.3. Notices. All notices, requests, consents,
demands and other communications required or permitted under
any Loan Document shall be in writing, unless otherwise
specifically provided in such Loan Document (provided that
Agent may give telephonic notices to Lenders), and shall be
deemed sufficiently given or furnished if delivered by
personal delivery, by telecopy or telex, by expedited delivery
service with proof of delivery, or by registered or certified
mail, postage prepaid, to Borrower and the Related Persons at
the address of Borrower specified on the signature pages
hereto and to Agent and the other Lenders at their addresses
specified on the signature pages hereto (unless changed by
similar notice in writing given by the particular Person whose
address is to be changed). Any such notice or communication
shall be deemed to have been given (a) in the case of
expedited personal delivery or delivery service, as of the
date of first attempted delivery at the address provided
herein, (b) in the case of telecopy or telex, upon receipt, or
(c) in the case of registered or certified mail, three days
after deposit in the mail; provided, however, that no Request
for Advances or Rate Election shall become effective until
actually received by Agent.
Section 9.4. Joint and Several Liability; Parties in
Interest; Purchases of Notes. All Obligations which are
incurred by two or more Related Persons shall be their joint
and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall
bind and inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that no
Related Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan
Document without the prior written consent of Majority
Lenders. Neither Borrower nor any Affiliates of Borrower
shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender, nor will any Lender accept any
offer to do so, unless each Lender shall have received
substantially the same offer with respect to the same
Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate of Borrower at any time purchases some but
less than all of the Obligations owed to Agent and all
Lenders, such purchaser shall not be entitled to any rights of
Agent or a Lender under the Loan Documents unless and until
Borrower or its Affiliates have purchased all of the
Obligations.
SECTION 9.5. GOVERNING LAW; WAIVER OF JURY TRIAL; ETC. THE
LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND
INSTRUMENTSSection 9.5
MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAW
RULES) AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO
THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY
ELECTED IN A LOAN DOCUMENT. CHAPTER 15 OF TEXAS REVISED CIVIL
STATUTES ANNOTATED ARTICLE 5069 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR TO THE NOTES.
EACH OF BORROWER, PARENT AND DEOC HEREBY IRREVOCABLY SUBMITS
ITSELF AND EACH OTHER RESTRICTED PERSON TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT OR ANY OF THE RESTRICTED PERSONS IN ANY LEGAL
PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE OBLIGATIONS
IN ACCORDANCE WITH ANY APPLICABLE PROVISIONS OF TEXAS LAW
GOVERNING SERVICE OF PROCESS. EACH OF BORROWER, PARENT, DEOC,
AGENT AND LENDERS HEREBY (A) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION
WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B)
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES, PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT APPLY
TO ANY TRANSACTION SUBJECT TO THE TEXAS DECEPTIVE TRADE
PRACTICE ACT OR GOVERNED BY CHAPTER 6, 6A OR 7 OF THE TEXAS
CONSUMER CREDIT CODE; (C) CERTIFIES THAT NEITHER AGENT NOR ANY
LENDER NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY OF
THEM HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
AGENT AND LENDERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION.
Section 9.6. Limitation on Interest. Agent, Lenders, the
Related Persons and the other parties to the Loan Documents
intend to contract in strict compliance with applicable usury
law from time to time in effect. In furtherance thereof such
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Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use,
forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by
applicable law from time to time in effect. Neither any
Related Person nor any present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon
or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under
applicable law from time to time in effect, and the provisions
of this section shall control over all other provisions of the
Loan Documents which may be in conflict or apparent conflict
herewith. Agent and Lenders expressly disavow any intention
to charge or collect excessive unearned interest or finance
charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and
as a result any amounts held to constitute interest are
determined to be in excess of the legal maximum, or (c) Agent
or any Lender or any other holder of any or all of the
Obligations shall otherwise collect moneys which are
determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable
law then in effect, then all such sums determined to
constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at
Agent's or such Lender's or holder's option, promptly returned
to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest
paid or payable, under any specific circumstance, exceeds the
maximum amount permitted under applicable law, Agent, Lenders
and the Related Persons (and any other payors thereof) shall
to the greatest extent permitted under applicable law,
(i) characterize any non-principal payment as an expense, fee
or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable
law in order to lawfully charge the maximum amount of interest
permitted under applicable law. In the event applicable law
provides for an interest ceiling under Texas Revised Civil
Statutes Annotated article 5069-1.04, that ceiling shall be
the indicated rate ceiling. As used in this section the term
"applicable law" means the laws of the State of Texas or the
laws of the United States of America, whichever laws allow the
greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Section 9.7. Optional Termination. In its sole and
absolute discretion Borrower may -- at any time that no
Obligations are owing hereunder -- elect in a written notice
delivered to Agent to terminate this Agreement. Upon receipt
by Agent of such a notice, if such requirements are then
satisfied, this Agreement and all other Loan Documents shall
thereupon be terminated and the parties thereto released from
all prospective obligations thereunder, provided that any
waivers made in the Loan Documents, any Obligations under
Sections 2.15 through 2.18 and any obligations which any
Person may have to indemnify or compensate Agent or any Lender
shall survive such termination. At the request and expense of
Borrower, Agent and Lenders shall prepare and execute all
necessary instruments to reflect and effect such termination
of the Loan Documents. Agent is hereby authorized to execute
all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 9.8. Severability. If any term or provision of any
Loan Document shall be determined to be illegal or
unenforceable all other terms and provisions of the Loan
Documents shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable law.
Section 9.9. Counterparts. This Agreement may be
separately executed in any number of counterparts and by
different parties hereto in separate counterparts, each of
which when so executed shall be deemed to constitute one and
the same Agreement. IN WITNESS WHEREOF, this Agreement is
executed as of the date first written above.
DEVON ENERGY CORPORATION (NEVADA)
By:
X.X. Xxxxxxx, Xx., Executive Vice President
Address:
00 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Vice President-Finance
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Telex: 000-000-0000
DEVON ENERGY CORPORATION
By:
X.X. Xxxxxxx, Xx., Executive Vice President
DEVON ENERGY OPERATING CORPORATION
By:
X.X. Xxxxxxx, Xx., Executive Vice President
Maximum NATIONSBANK OF TEXAS, N.A.,
Loan Amount Agent and Lender
$120,000,000 By:
Xxxx X. Xxxxxx, Vice President
Address:
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Energy Finance Division
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
NationsBank Plaza
000 Xxxx Xx., 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Energy Finance Division
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Telex: 163542
Maximum BANK ONE, TEXAS, N.A., Lender
Loan Amount
$72,000,000 By:
Xxxxxxx X. Xxxxxxxx, Senior Vice President
Address:
400 Bank One Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Energy Group
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Telex: 163102
Maximum BANK OF MONTREAL, Lender
Loan Amount
$72,000,000 By:
Xxxxxxx X. Xxxxxxx, Director
Address:
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Maximum FIRST UNION NATIONAL BANK
Loan Amount OF NORTH CAROLINA, Lender
$36,000,000 By:
Xxxxxxx X. Xxxxxxxxxx, Vice President
Address:
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
