EXHIBIT 10.11
CREDIT AGREEMENT
Dated as of February 9, 1998
Among
XXXXXX OIL CORPORATION
as Borrower,
BANK OF MONTREAL,
as Agent,
and
THE LENDERS SIGNATORY HERETO
$75,000,000 REVOLVING CREDIT FACILITY
CONVERTING TO TERM LOAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 TERMS DEFINED ABOVE. . . . . . . . . . . . . . . . . . .1
Section 1.02 CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . . . .1
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS. . . . . . . . . . 16
ARTICLE II
COMMITMENTS
Section 2.01 LOANS AND LETTERS OF CREDIT. . . . . . . . . . . . . . 16
Section 2.02 BORROWINGS, CONTINUATIONS AND CONVERSIONS,
LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . 17
Section 2.03 CHANGES OF COMMITMENTS . . . . . . . . . . . . . . . . 19
Section 2.04 FEES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.05 SEVERAL OBLIGATIONS. . . . . . . . . . . . . . . . . . 20
Section 2.06 NOTES. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.07 PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . 21
Section 2.08 BORROWING BASE . . . . . . . . . . . . . . . . . . . . 22
Section 2.09 ASSUMPTION OF RISKS. . . . . . . . . . . . . . . . . . 23
Section 2.10 OBLIGATION TO REIMBURSE AND TO PREPAY. . . . . . . . . 24
Section 2.11 LENDING OFFICES. . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 REPAYMENT OF LOANS . . . . . . . . . . . . . . . . . . 26
Section 3.02 INTEREST . . . . . . . . . . . . . . . . . . . . . . . 26
-i-
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.02 PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . 28
Section 4.03 COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . 28
Section 4.04 NON-RECEIPT OF FUNDS BY THE AGENT. . . . . . . . . . . 28
Section 4.05 SET-OFF, SHARING OF PAYMENTS, ETC. . . . . . . . . . . 29
Section 4.06 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.07 DISPOSITION OF PROCEEDS. . . . . . . . . . . . . . . . 33
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 ADDITIONAL COSTS. . . . . . . . . . . . . . . . . . . . 33
Section 5.02 LIMITATION ON EURODOLLAR LOANS . . . . . . . . . . . . 35
Section 5.03 ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.04 BASE RATE LOANS PURSUANT TO SECTIONS 5.01, 5.02 AND
5.03 . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.05 COMPENSATION . . . . . . . . . . . . . . . . . . . . . 36
Section 5.06 REPLACEMENT LENDERS. . . . . . . . . . . . . . . . . . 36
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 INITIAL FUNDING. . . . . . . . . . . . . . . . . . . . 38
Section 6.02 INITIAL AND SUBSEQUENT LOANS AND LETTERS OF CREDIT . . 39
Section 6.03 CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDERS. . . . 40
Section 6.04 NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . 40
Section 7.02 FINANCIAL CONDITION. . . . . . . . . . . . . . . . . . 40
Section 7.03 LITIGATION . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.04 NO BREACH. . . . . . . . . . . . . . . . . . . . . . . 41
-ii-
Section 7.05 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.06 APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.07 USE OF LOANS . . . . . . . . . . . . . . . . . . . . . 42
Section 7.08 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.09 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.10 TITLES, ETC. . . . . . . . . . . . . . . . . . . . . . 43
Section 7.11 NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . . 44
Section 7.12 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . 44
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . 44
Section 7.14 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 44
Section 7.15 LOCATION OF BUSINESS AND OFFICES . . . . . . . . . . . 44
Section 7.16 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.17 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . 45
Section 7.18 COMPLIANCE WITH THE LAW. . . . . . . . . . . . . . . . 46
Section 7.19 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.20 HEDGING AGREEMENTS . . . . . . . . . . . . . . . . . . 47
Section 7.21 RESTRICTION ON LIENS . . . . . . . . . . . . . . . . . 47
Section 7.22 MATERIAL AGREEMENTS. . . . . . . . . . . . . . . . . . 47
Section 7.23 GAS IMBALANCES . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
Affirmative Covenants
Section 8.01 REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . 48
Section 8.02 LITIGATION . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.03 MAINTENANCE, ETC.. . . . . . . . . . . . . . . . . . . 51
Section 8.04 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . 52
Section 8.05 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . 53
Section 8.06 PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . 53
Section 8.07 ENGINEERING REPORTS. . . . . . . . . . . . . . . . . . 53
Section 8.08 TITLE INFORMATION. . . . . . . . . . . . . . . . . . . 54
Section 8.09 ADDITIONAL COLLATERAL. . . . . . . . . . . . . . . . . 55
Section 8.10 MORTGAGE TITLE INFORMATION/OPINIONS. . . . . . . . . . 56
Section 8.11 ERISA INFORMATION AND COMPLIANCE . . . . . . . . . . . 56
Section 8.12 HEDGING ACTIVITIES . . . . . . . . . . . . . . . . . . 56
Section 8.13 PAYMENT OF TRADE PAYABLES. . . . . . . . . . . . . . . 57
Section 8.14 SUBSIDIARY SECURITY. . . . . . . . . . . . . . . . . . 57
-iii-
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.02 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.03 INVESTMENTS, LOANS AND ADVANCES. . . . . . . . . . . . 58
Section 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS . . . . . . . 59
Section 9.05 SALES AND LEASEBACKS . . . . . . . . . . . . . . . . . 59
Section 9.06 NATURE OF BUSINESS . . . . . . . . . . . . . . . . . . 59
Section 9.07 LIMITATION ON LEASES . . . . . . . . . . . . . . . . . 59
Section 9.08 MERGERS, ETC.. . . . . . . . . . . . . . . . . . . . . 60
Section 9.09 PROCEEDS OF NOTES AND LETTERS OF CREDIT. . . . . . . . 60
Section 9.10 ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . 60
Section 9.11 SALE OR DISCOUNT OF RECEIVABLES. . . . . . . . . . . . 61
Section 9.12 CURRENT RATIO. . . . . . . . . . . . . . . . . . . . . 62
Section 9.13 RATIO OF DEBT TO CAPITALIZATION. . . . . . . . . . . . 62
Section 9.14 TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . . 62
Section 9.15 DEBT TO EBITDA COVERAGE RATIO. . . . . . . . . . . . . 62
Section 9.16 SALE OF PROPERTIES. . . . . . . . . . . . . . . . . . 62
Section 9.17 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . 62
Section 9.18 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . 62
Section 9.19 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 62
Section 9.20 NEGATIVE PLEDGE AGREEMENTS . . . . . . . . . . . . . . 63
Section 9.21 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS . . . 63
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . 63
Section 10.02 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XI
THE AGENT
Section 11.01 APPOINTMENT, POWERS AND IMMUNITIES. . . . . . . . . . 66
Section 11.02 RELIANCE BY AGENT . . . . . . . . . . . . . . . . . . 66
Section 11.03 DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.04 RIGHTS AS A LENDER. . . . . . . . . . . . . . . . . . 67
-iv-
Section 11.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 67
Section 11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS . . . . . . . 68
Section 11.07 ACTION BY AGENT . . . . . . . . . . . . . . . . . . . 68
Section 11.08 RESIGNATION OR REMOVAL OF AGENT . . . . . . . . . . . 68
ARTICLE XII
MISCELLANEOUS
Section 12.01 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.02 NOTICES . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC . . . . . . . . 69
Section 12.04 AMENDMENTS, ETC.. . . . . . . . . . . . . . . . . . . 72
Section 12.05 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . 72
Section 12.06 ASSIGNMENTS AND PARTICIPATIONS. . . . . . . . . . . . 72
Section 12.07 INVALIDITY. . . . . . . . . . . . . . . . . . . . . . 74
Section 12.08 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . 74
Section 12.09 REFERENCES. . . . . . . . . . . . . . . . . . . . . . 74
Section 12.10 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.11 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.12 NO ORAL AGREEMENTS. . . . . . . . . . . . . . . . . . 75
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . 75
Section 12.14 INTEREST. . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.15 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . 77
Section 12.16 EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . 78
Section 12.17 EXCULPATION PROVISIONS. . . . . . . . . . . . . . . . 78
-v-
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Exhibit F - Form of Letter of Credit Application and Reimbursement
Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
-vi-
THIS CREDIT AGREEMENT dated as of February 9, 1998 is among:
XXXXXX OIL CORPORATION, a corporation formed under the laws of the State of
Michigan (the "BORROWER"); each of the lenders that is a signatory hereto
or which becomes a signatory hereto as provided in Section 12.06
(individually, together with its successors and assigns, a "LENDER" and,
collectively, the "LENDERS"); and BANK OF MONTREAL, a foreign bank formed
under the laws of Canada (in its individual capacity, "BMO"), as agent for
the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans
to and extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 TERMS DEFINED ABOVE. As used in this Agreement,
the terms "AGENT," "BORROWER," "LENDER," "LENDERS," and "BMO" shall have
the meanings indicated above.
Section 1.02 CERTAIN DEFINED TERMS. As used herein, the
following terms shall have the following meanings (all terms defined in
this Article I or in other provisions of this Agreement in the singular to
have equivalent meanings when used in the plural and VICE VERSA):
"ADDITIONAL COSTS" shall have the meaning assigned such term in
Section 5.01(a).
"AFFECTED LOANS" shall have the meaning assigned such term in
Section 5.04.
"AFFILIATE" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such
first Person, (ii) any director or officer of such first Person or of any
Person referred to in clause (i) above and (iii) if any Person in clause
(i) above is an individual, any member of the immediate family (including
parents, spouse and children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. For purposes of this definition, any Person which owns directly or
indirectly 10% or more of the securities having ordinary voting power for
the election of directors or other governing body of a corporation or 10%
or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") such corporation or other Person.
"AGREEMENT" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"AGGREGATE COMMITMENTS" at any time shall equal the amount calculated
in accordance with Section 2.03.
"AGGREGATE MAXIMUM CREDIT AMOUNTS" at any time shall equal the sum of
the Maximum Credit Amounts of the Lenders ($75,000,000), as the same may be
reduced pursuant to Section 2.03(b).
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other offices of such Lender (or of an Affiliate of such Lender) as
such Lender may from time to time specify to the Agent and the Borrower as
the office by which its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on
the Borrowing Base Utilization as in effect from time to time:
APPLICABLE MARGIN
-----------------
BORROWING BASE UTILIZATION EURODOLLAR LOANS BASE RATE LOANS
-------------------------- ---------------- ---------------
Less than or equal to 30% 0.750% 0.000%
Greater than 30%, but less 1.125% 0.000%
than or equal to 60%
Greater than 60% 1.620% 0.000%
Each change in the Applicable Margin resulting from a change in the
Borrowing Base Utilization shall take effect at the time of such change in
the Borrowing Base Utilization.
"ASSIGNMENT" shall have the meaning assigned such term in
Section 12.06(b).
-2-
"BASE RATE" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of
1% or (ii) the Prime Rate for such day. Each change in any interest rate
provided for herein based upon the Base Rate resulting from a change in the
Base Rate shall take effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BORROWING BASE" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"BORROWING BASE DEFICIENCY" shall occur and be continuing at any time
that, and relate to the amount by which, the sum of the aggregate
outstanding principal amount of the Loans, plus the LC Exposure, exceeds
the Borrowing Base.
"BORROWING BASE UTILIZATION" shall mean as of any date, the ratio of
(i) the aggregate principal amount of all Loans outstanding, plus LC
Exposure to (ii) the Borrowing Base on such date.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in Chicago, Illinois and, where
such term is used in the definition of "Quarterly Date" or if such day
relates to a borrowing or continuation of, a payment or prepayment of
principal of or interest on, or a conversion of or into, or the Interest
Period for, a Eurodollar Loan or a notice by the Borrower with respect to
any such borrowing or continuation, payment, prepayment, conversion or
Interest Period, any day which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"CHANGE OF CONTROL" shall mean either (i) a change resulting when any
Unrelated Person or any Unrelated Persons acting together which would
constitute a Group together with any Affiliates thereof (in each case also
constituting Unrelated Persons) shall at any time Beneficially Own more
than 70% of the aggregate voting power of all classes of Voting Stock of
the Parent. As used herein (a) "BENEFICIALLY OWN" means "beneficially own"
as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, or any successor provision thereto; PROVIDED, HOWEVER, that, for
purposes of this definition, (a) a Person shall not be deemed to
Beneficially Own securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange;
(b) "GROUP" means a "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended; (c) "UNRELATED PERSON" means at any time
any Person other than (A) X.X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
Xxxxxx X. Xxxxxx, Xxx Xxxxx Xxxx, (B) their respective spouses, lineal
descendants, and spouses of their lineal descendants, (C) the estates of the
-3-
Persons described in clauses (A) and (B), and (D) trusts established solely
for the benefit of any Person or Persons described in clauses (A) and (B);
and (d) "VOTING STOCK" of any Person shall mean capital stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times
or only so long as no senior class of securities has such voting power by
reason of any contingency or (ii) the Parent shall cease to own 100% of the
outstanding shares of capital stock of the Borrower on a fully-diluted
basis.
"CLOSING DATE" shall mean February 9, 1998.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean, for any Lender, its obligation to make Loans
and to participate in the Letters of Credit as provided in Section 2.01(b)
up to the lesser of (i) such Lender's Maximum Credit Amount and (ii) the
Lender's Percentage Share of the amount equal to the then effective
Borrowing Base.
"CONSOLIDATED NET INCOME" shall mean with respect to the Parent and
its Consolidated Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Parent and its Consolidated Subsidiaries after
allowances for taxes for such period, determined on a consolidated basis in
accordance with GAAP; PROVIDED that there shall be excluded from such net
income (to the extent otherwise included therein) the following: (i) the
net income of any Person in which the Parent or any Consolidated Subsidiary
has an interest (which interest does not cause the net income of such other
Person to be consolidated with the net income of the Parent and its
Consolidated Subsidiaries in accordance with GAAP), except to the extent of
the amount of dividends or distributions actually paid in such period by
such other Person to the Parent or to a Consolidated Subsidiary, as the
case may be; (ii) the net income (but not loss) of any Consolidated
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions or transfers or loans by that Consolidated Subsidiary
is not at the time permitted by operation of the terms of its charter or
any agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each
case determined in accordance with GAAP; (iii) the net income (or loss) of
any Person acquired in a pooling-of-interests transaction for any period
prior to the date of such transaction; (iv) any extraordinary gains or
losses, including gains or losses attributable to Property sales not in the
ordinary course of business; and (v) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or
write downs of assets.
-4-
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of any Person
(whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with GAAP.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments
(including principal, interest, fees and charges); (ii) all obligations
of such Person (whether contingent or otherwise) in respect of bankers'
acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred
purchase price of Property or services (other than for borrowed money);
(iv) all obligations under leases which shall have been, or should have
been, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination,
which are substantially equal to at least eighty percent (80%) of the
purchase price of the Property subject to such lease plus interest as an
imputed rate of interest; (vi) all Debt (as described in the other clauses
of this definition) and other obligations of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such
Person; (vii) all Debt (as described in the other clauses of this
definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor
or obligations of others; (viii) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or
covenants of others or to purchase the Debt or Property of others; (ix)
obligations to deliver goods or services including Hydrocarbons in
consideration of advance payments, except as permitted by Section 9.21 and
disclosed by Section 8.07(c); (x) obligations to pay for goods or services
whether or not such goods or services are actually received or utilized by
such Person; (xi) any capital stock of such Person in which such Person has
a mandatory obligation to redeem such stock; (xii) any Debt of a Special
Entity for which such Person is liable either by agreement or because of a
Governmental Requirement; (xiii) the undischarged balance of any production
payment created by such Person or for the creation of which such Person
directly or indirectly received payment; and (xiv) all obligations of such
Person under Hedging Agreements.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DEFICIENCY PAYMENT" shall mean, in respect of any Borrowing Base
Deficiency, any payments made by the Borrower during a Deficiency Period
for such Borrowing Base Deficiency equal to either (a) in the case of each
such payment the amount of the Borrowing Base Deficiency on the date the
-5-
Borrower notifies the Agent of its intent to initiate a Deficiency Period
divided by six (6) or (b) such other amount as the Majority Lenders may
approve, which when aggregated with the other such payments for such
Deficiency Period, are sufficient to satisfy the Borrowing Base Deficiency
on or before the final day of such Deficiency Period.
"DEFICIENCY PERIOD" shall mean any six (6) month period during which
the sum of the aggregate principal balance outstanding under the Notes,
plus the LC Exposure, exceeds the Borrowing Base.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net
Income of the Parent for such period plus the following expenses or charges
to the extent deducted from Consolidated Net Income of the Parent in such
period: interest, taxes, depreciation, depletion and amortization.
"EFFECTIVE DATE" shall have the meaning assigned such term in Section
12.16.
"ENGINEERING REPORTS" shall have the meaning assigned such term in
Section 2.08.
"ENVIRONMENTAL LAWS" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all
jurisdictions in which the Borrower or any Subsidiary is conducting or at
any time has conducted business, or where any Property of the Borrower or
any Subsidiary is located, including without limitation, the Oil Pollution
Act of 1990 ("OPA"), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have
the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the
terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; PROVIDED, HOWEVER, that (i) in the event either OPA,
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date
of such amendment and (ii) to the extent the laws of the state in which any
Property of the Borrower or any Subsidiary is located establish a meaning
for "oil," "hazardous substance," "release," "solid waste" or "disposal"
which is broader than that specified in either OPA, CERCLA or RCRA, such
broader meaning shall apply.
-6-
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be
deemed to be a "single employer" within the meaning of section 4001(b)(1)
of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of
the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section
4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by
the PBGC or (v) any other event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.
"EURODOLLAR LOANS" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of
"Eurodollar Rate".
"EURODOLLAR RATE" shall mean, with respect to any Eurodollar Loan, the
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
quoted by the Agent at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two (2) Business Days prior to the first day of
the Interest Period for such Loan for the offering by the Agent to leading
banks in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the Eurodollar Loan to be made by the Lenders for such
Interest Period.
"EVENT OF DEFAULT" shall have the meaning assigned such term in
Section 10.01.
"EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or
other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which adequate
reserves have been maintained; (ii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age
pension or public liability obligations not yet due or which are being
contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (iii) operators',
vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or other like Liens arising by operation of law
in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties or
-7-
statutory landlord's liens, each of which is in respect of obligations that
have not been outstanding more than 90 days or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have
been maintained in accordance with GAAP; (iv) any Liens reserved in leases
or farmout agreements for rent or royalties and for compliance with the
terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not
materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower, the Parent or any
Subsidiary or materially impair the value of such Property subject thereto;
(v) encumbrances (other than to secure the payment of borrowed money or the
deferred purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in
any rights of way or other Property of the Borrower, the Parent or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal
or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of
any rights of way or other Property which in the aggregate do not
materially impair the use of such rights of way or other Property for the
purposes of which such rights of way and other Property are held by the
Borrower, the Parent or any Subsidiary or materially impair the value of
such Property subject thereto; (vi) deposits of cash or securities to
secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business; and (vii) Liens permitted by the Security Instruments.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
a member of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the date for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such
day on such transactions as determined by the Agent.
"FEE LETTER" shall mean that certain letter agreement from BMO to the
Borrower dated of even date with this Agreement concerning certain fees in
connection with this Agreement and any agreements or instruments executed
in connection therewith, as the same may be amended or replaced from time
to time.
-8-
"FINAL MATURITY DATE" shall mean the earlier to occur of (i) the sixth
anniversary of the Closing Date, and (ii) the date that the Notes are
prepaid in full pursuant to Section 2.07.
"FINANCIAL STATEMENTS" shall mean the financial statement or
statements of the Borrower and its Consolidated Subsidiaries described or
referred to in Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such
Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including
monetary authorities which exercises valid jurisdiction over any such
Person or such Person's Property. Unless otherwise specified, all
references to Governmental Authority herein shall mean a Governmental
Authority having jurisdiction over, where applicable, the Borrower, its
Subsidiaries or any of their Property or the Agent, any Lender or any
Applicable Lending Office.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"GUARANTOR" shall mean the Parent and any Person who becomes, or
should have become, a party to a Guaranty Agreement pursuant to Section
8.14.
"GUARANTY AGREEMENT" shall mean an agreement now or hereafter executed
by the Parent and any Subsidiary in form and substance satisfactory to the
Agent guarantying, unconditionally, payment of the Indebtedness, as the
same may be amended, modified or supplemented from time to time.
"HEDGING AGREEMENTS" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Notes or on other Indebtedness under laws applicable to such Lender which
-9-
are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"HYDROCARBON INTERESTS" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas
and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral
fee interests, overriding royalty and royalty interests, net profit
interests and production payment interests, including any reserved or
residual interests of whatever nature.
"HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"INDEBTEDNESS" shall mean any and all amounts owing or to be owing by
the Borrower to the Agent, the Issuing Bank and/or the Lenders in
connection with the Loan Documents, the Letter of Credit Agreements, and
any Hedging Agreements now or hereafter arising between the Borrower and
any Lender or Affiliate of such Lender and permitted by the terms of this
Agreement and all renewals, extensions and/or rearrangements of any of the
foregoing.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
Section 12.03(a)(ii).
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (other than consequential
damages) or reasonable costs and expenses of any kind or nature whatsoever
incurred by such Person whether caused by the sole or concurrent negligence
of such Person seeking indemnification.
"INITIAL FUNDING" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit upon satisfaction of the
conditions set forth in Sections 6.01 and 6.02.
"INITIAL RESERVE REPORT" shall mean collectively the reports of Xxxxxx
and Xxxxx, Ltd., dated December 4, 1997 and X.X. Xxxxxxxx & Associates,
Inc. dated October 24, 1997, each with respect to the Oil and Gas
Properties of the Borrower as of September 30, 1997, a copy of which has
been delivered to the Agent.
"INTEREST PERIOD" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending
either (i) 14 days thereafter or (ii) on the numerically corresponding day
in the first, second, third or sixth calendar month thereafter, as the
-10-
Borrower may select as provided in Section 2.02 (or such longer period as
may be requested by the Borrower and agreed to by the Majority Lenders),
except that each Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after
the Final Maturity Date; (ii) no Interest Period for any Eurodollar Loan
may end after the due date of any installment, if any, provided for in
Section 3.01 to the extent that such Eurodollar Loan would need to be
prepaid prior to the end of such Interest Period in order for such
installment to be paid when due; (iii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day);
and (iv) except for 14 day Interest Periods, no Interest Period shall have
a duration of less than one month and, if the Interest Period for any
Eurodollar Loans would otherwise be for a shorter period, such Loans shall
not be available hereunder.
"ISSUING BANK" shall mean BMO or any other Lender agreed to among the
Borrowers and the Agent to issue Letters of Credit.
"LC COMMITMENT" at any time shall mean $5,000,000.
"LC EXPOSURE" at any time shall mean the difference between (i)
aggregate face amount of all undrawn and uncancelled Letters of Credit and
the aggregate of all amounts drawn under all Letters of Credit and not yet
reimbursed, minus (ii) the aggregate amount of all cash securing
outstanding Letters of Credit pursuant to Section 2.10(b).
"LETTER OF CREDIT AGREEMENTS" shall mean the written agreements with
the Issuing Bank, as issuing lender for any Letter of Credit, executed in
connection with the issuance by the Issuing Bank of the Letters of Credit,
such agreements to be on the Issuing Bank's customary form attached hereto
as EXHIBIT F or as otherwise agreed to by the Borrower and the Issuing
Bank.
"LETTERS OF CREDIT" shall mean the letters of credit issued pursuant
to Section 2.01(b) and all reimbursement obligations pertaining to any such
letters of credit, and "Letter of Credit" shall mean any one of the Letters
of Credit and the reimbursement obligations pertaining thereto.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether
such obligation or claim is fixed or contingent, and including but not
-11-
limited to (i) the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes or (ii)
production payments and the like payable out of Oil and Gas Properties.
The term "LIEN" shall include reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting Property. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a
financing.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes and the Security
Instruments.
"LOANS" shall mean the loans as provided for by Section 2.01(a).
"MAJORITY LENDERS" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent
(66-2/3%) of the Aggregate Commitments and, at any time while Loans are
outstanding, Lenders holding at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding aggregate principal amount of the Loans
(without regard to any sale by a Lender of a participation in any Loan
under Section 12.06(c)).
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations
or affairs of the Borrower, the Parent and its Subsidiaries taken as a
whole different from those reflected in the Financial Statements or from
the facts represented or warranted in any Loan Document, or (ii) the
ability of the Borrower, the Parent and its Subsidiaries taken as a whole
to carry out their business as at the Closing Date or as proposed as of the
Closing Date to be conducted or meet their obligations under the Loan
Documents on a timely basis.
"MAXIMUM CREDIT AMOUNT" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on ANNEX I under the caption "Maximum
Credit Amounts" (as the same may be reduced pursuant to Section 2.03(b) pro
rata to each Lender based on its Percentage Share), as modified from time
to time to reflect any assignments permitted by Section 12.06(b).
"MORTGAGE" shall mean those certain Mortgages, Deeds of Trusts,
Assignments of Production, Security Agreements and Financing Statements
dated as of even date herewith executed by the Borrower and covering
Borrower's interest in Oil and Gas Properties in the States of Michigan,
Mississippi and Texas, together with any other mortgages, deeds of trust,
-12-
assignments of production, security agreements and financing statements
executed at any time by any Person to secure the Indebtedness (directly or
indirectly), all as the same may from time to time be amended,
supplemented, restated or otherwise modified.
"MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and
which is subject to the Liens existing and to exist under the terms of any
Mortgage.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in
Section 3(37) or 4001(a)(3) of ERISA.
"NOTES" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof.
"OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including
without limitation all units created under orders, regulations and rules
of any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; all operating agreements, contracts and other
agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, the lands covered thereby and all
rents, issues, profits, proceeds, products, revenues and other incomes from
or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed
or incidental to the Hydrocarbon Interests; and all Properties, rights,
titles, interests and estates described or referred to above, including any
and all Property, real or personal, now owned or hereinafter acquired and
situated upon, used, held for use or useful in connection with the
operating, working or development of any of such Hydrocarbon Interests or
Property (excluding drilling rigs, automotive equipment or other personal
property which may be on such premises for the purpose of drilling a well
or for other similar temporary uses) and including any and all oil xxxxx,
gas xxxxx, injection xxxxx or other xxxxx, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping
units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, surface leases, rights-of-way, easements and servitudes
together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing.
-13-
"OTHER TAXES" shall have the meaning assigned such term in Section
4.06(b).
"PARENT" shall mean Xxxxxx Exploration Company, a Delaware
corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"PERCENTAGE SHARE" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
ANNEX I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government or any agency, instrumentality or political subdivision
thereof, or any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored,
maintained or contributed to by the Borrower, any Subsidiary or an ERISA
Affiliate or (ii) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by the Borrower, any Subsidiary or
an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or
any other Loan Document, a rate per annum during the period commencing on
the date of occurrence of an Event of Default until such amount is paid in
full or all Events of Default are cured or waived equal to 2% per annum
above the Base Rate as in effect from time to time plus the Applicable
Margin (if any), but in no event to exceed the Highest Lawful Rate;
provided however, for a Eurodollar Loan, the "POST-DEFAULT RATE" for such
principal shall be, for the period commencing on the date of occurrence of
an Event of Default and ending on the earlier to occur of the last day of
the Interest Period therefor or the date all Events of Default are cured or
waived, 2% per annum above the interest rate for such Loan as provided in
Section 3.02(a)(ii), but in no event to exceed the Highest Lawful Rate.
"PRIME RATE" shall mean the rate of interest from time to time
announced publicly by the Agent at the Principal Office as its prime
commercial lending rate. Such rate is set by the Agent as a general
reference rate of interest, taking into account such factors as the Agent
may deem appropriate, it being understood that many of the Agent's
commercial or other loans are priced in relation to such rate, that it is
not necessarily the lowest or best rate actually charged to any customer
and that the Agent may make various commercial or other loans at rates of
interest having no relationship to such rate.
-14-
"PRINCIPAL OFFICE" shall mean the principal office of the Agent,
presently located at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December, in each year, the first of which shall be March 31,
1998; PROVIDED, HOWEVER, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"REDETERMINATION DATE" shall have the meaning assigned such term in
Section 2.08(a).
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be amended
or supplemented from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including such Lender or its Applicable Lending Office) of or under any
Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration
thereof.
"REQUIRED PAYMENT" shall have the meaning assigned such term in
Section 4.04.
"RESERVE REPORT" shall mean a report, in form and substance
satisfactory to the Agent, setting forth (as of each January 1, with
respect to the report due each March 1, and as of each July 1, with respect
to the report due each September 1) pursuant to Section 8.07(a) (or such
other date in the event of an unscheduled redetermination) (i) the oil and
gas reserves attributable to the Borrower's Oil and Gas Properties together
with a projection of the rate of production and future net income, taxes,
operating expenses and capital expenditures with respect thereto as of such
date, based upon the pricing assumptions consistent with SEC reporting
requirements at the time and (ii) such other information as the Agent may
reasonably request.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and,
with respect to financial matters, the term "Responsible Officer" shall
include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.
-15-
"REVOLVING CREDIT PERIOD" shall mean the period from the Closing Date
to and ending on the Revolving Credit Termination Date.
"REVOLVING CREDIT TERMINATION DATE" shall mean the earlier to occur of
(i) the third anniversary of the Closing Date and (ii) the date that the
Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02.
"SCHEDULED REDETERMINATION DATE" shall have the meaning assigned such
term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECURITY INSTRUMENTS" shall mean the Mortgages, the Guaranty
Agreements, the Letters of Credit, the Letter of Credit Agreements, the Fee
Letter, the agreements or instruments described or referred to in EXHIBIT
D, and any and all other agreements or instruments now or hereafter
executed and delivered by the Borrower or any other Person (other than
participation or similar agreements between any Lender and any other lender
or creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Notes, this Agreement, or reimbursement obligations under the Letters of
Credit, as such agreements may be amended, supplemented or restated from
time to time.
"SPECIAL ENTITY" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which the Borrower or
one or more of its other Subsidiaries is a member, owner, partner or joint
venturer and owns, directly or indirectly, at least a majority of the
equity of such entity or controls such entity, but excluding any tax
partnerships that are not classified as partnerships under state law. For
purposes of this definition, any Person which owns directly or indirectly
an equity investment in another Person which allows the first Person to
manage or elect managers who manage the normal activities of such second
Person will be deemed to "control" such second Person (E.G. a sole general
partner controls a limited partnership).
"SUBSIDIARY" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Parent or one or more of its
Subsidiaries or by the Parent and one or more of its Subsidiaries and (ii)
any Special Entity. Unless otherwise indicated herein, each reference to
the term "Subsidiary" shall mean a Subsidiary of the Parent.
-16-
"TANGIBLE NET WORTH" shall mean, as at any date, the sum of the
following for the Parent and its Consolidated Subsidiaries determined
(without duplication) in accordance with GAAP (but without regard to any
write up or write down resulting from any changes in GAAP subsequent to
September 30, 1997):
(i) the amount of preferred stock and common stock at par or stated
value plus the amount of paid in capital in excess of par or stated value
of the Parent, PLUS
(ii) the retained earnings (or, in the case of retained earnings
deficit, MINUS the amount of such deficit), MINUS
(iii) the sum of the following: cost of treasury shares and the
book value of all assets of the Parent and its Consolidated Subsidiaries
which should be classified as intangibles (without duplication of
deductions in respect of items already deducted in arriving at surplus and
retained earnings) but in any event including as such intangibles the
following: goodwill, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt discount and
expense, all reserves and any writeup in the book value of assets resulting
from a revaluation thereof.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TERM LOAN PERIOD" shall mean the period commencing on the next
succeeding day after the Revolving Credit Termination Date and ending on
the Final Maturity Date.
"TRANSFER" shall mean any sale, assignment, farmout, conveyance or
other transfer of any Property or any interest in any Property, except for
(i) the sale of Hydrocarbons in the ordinary course of business; (ii)
farmouts of, or participation or joint venture agreements with respect to,
undeveloped acreage for which no value has been given in the most recent
Reserve Report and assignments in connection with such farmouts or
participation or joint venture agreements; (iii) the sale or transfer of
equipment that is no longer necessary for the business of the Borrower or
any Subsidiary or is replaced by equipment of at least comparable value and
use and (iv) sales in the ordinary course of business of Oil and Gas
Properties the fair market value consideration received for which shall not
exceed $2,000,000 in the aggregate for each period between Scheduled
Redetermination Dates.
"TYPE" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
-17-
interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all financial statements and certificates and
reports as to financial matters required to be furnished to the Agent or
the Lenders hereunder shall be prepared, in accordance with GAAP, applied
on a basis consistent with the audited financial statements of the Borrower
referred to in Section 7.02 (except for changes concurred with by the
Borrower's independent public accountants).
ARTICLE II
COMMITMENTS
Section 2.01 LOANS AND LETTERS OF CREDIT.
(a) LOANS. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to the Borrower during the
period from and including (i) the Closing Date or (ii) such later date
that such Lender becomes a party to this Agreement as provided in
Section 12.06(b), to and up to, but excluding, the Revolving Credit
Termination Date in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the amount of such Lender's
Commitment as then in effect; PROVIDED, HOWEVER, that the aggregate
principal amount of all such Loans by all Lenders hereunder at any one
time outstanding together with the LC Exposure shall not exceed the
Aggregate Commitments. Subject to the terms of this Agreement, during
the period from the Closing Date to and up to, but excluding, the
Revolving Credit Termination Date, the Borrower may borrow, repay and
reborrow the amount described in this Section 2.01(a).
(b) LETTERS OF CREDIT. During the period from and including the
Closing Date to, but excluding, the Revolving Credit Termination Date,
the Issuing Bank, as issuing bank for the Lenders, agrees to extend
credit for the account of the Borrower at any time and from time to
time by issuing, renewing, extending or reissuing Letters of Credit;
provided however, the LC Exposure at any one time outstanding shall
not exceed the lesser of (i) the LC Commitment or (ii) the Aggregate
Commitments, as then in effect, minus the aggregate principal amount
of all Loans then outstanding. The Lenders shall participate in such
Letters of Credit according to their respective Percentage Shares.
Each of the Letters of Credit shall (i) be issued by the Issuing Bank,
(ii) contain such terms and provisions as are reasonably required by
the Issuing Bank, (iii) be for the account of the Borrower and (iv)
expire not later than the earlier of (A) one (1) year from the date of
issuance or (B) two (2) days before the Revolving Credit Termination
Date.
(c) LIMITATION ON TYPES OF LOANS. Subject to the other terms
and provisions of this Agreement, at the option of the Borrower, the
-18-
Loans may be Base Rate Loans or Eurodollar Loans; provided that,
without the prior written consent of the Majority Lenders, no more
than four (4) Eurodollar Loans may be outstanding at any time.
Section 2.02 BORROWINGS, CONTINUATIONS AND CONVERSIONS, LETTERS
OF CREDIT.
(a) BORROWINGS. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of
each borrowing hereunder, which shall specify (i) the aggregate amount
of such borrowing, (ii) the Type and (iii) the date (which shall be a
Business Day) of the Loans to be borrowed, and (iv) (in the case of
Eurodollar Loans) the duration of the Interest Period therefor.
(b) MINIMUM AMOUNTS. All Base Rate Loan borrowings shall be in
amounts of at least $500,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $100,000 in excess
thereof, and all Eurodollar Loans shall be in amounts of at least
$500,000 or any whole multiple of $100,000 in excess thereof.
(c) NOTICES. All borrowings, continuations and conversions
shall require advance written notice to the Agent (which shall
promptly notify the Lenders) in the form of EXHIBIT B (or telephonic
notice promptly confirmed by such a written notice), which in each
case shall be irrevocable, from the Borrower to be received by the
Agent not later than 11:00 a.m. Houston, Texas time at least one
Business Day prior to the date of each Base Rate Loan borrowing and
three Business Days prior to the date of each Eurodollar Loan
borrowing, continuation or conversion; PROVIDED, HOWEVER, for Base
Rate Loans, the Borrower may request a same day advance of up to
$5,000,000 if the request is received by the Agent not later than
11:00 a.m. Houston, Texas time. Without in any way limiting the
Borrower's obligation to confirm in writing any telephonic notice, the
Agent may act without liability upon the basis of telephonic notice
believed by the Agent in good faith to be from the Borrower prior to
receipt of written confirmation. In each such case, the Borrower
hereby waives the right to dispute the Agent's record of the terms of
such telephonic notice except in the case of gross negligence or
willful misconduct by the Agent.
(d) CONTINUATION OPTIONS. Subject to the provisions made in
this Section 2.02(d), the Borrower may elect to continue all or any
part of any Eurodollar Loan beyond the expiration of the then current
Interest Period relating thereto by giving advance notice as provided
in Section 2.02(c) to the Agent (which shall promptly notify the
Lenders) of such election, specifying the amount of such Loan to be
continued and the Interest Period therefor. In the absence of such a
timely and proper election, the Borrower shall be deemed to have
-19-
elected to convert such Eurodollar Loan to a Base Rate Loan pursuant
to Section 2.02(e). All or any part of any Eurodollar Loan may be
continued as provided herein, provided that (i) any continuation of
any such Loan shall be (as to each Loan as continued for an applicable
Interest Period) in amounts of at least $500,000 or any whole multiple
of $100,000 in excess thereof and (ii) no Default shall have occurred
and be continuing. If a Default shall have occurred and be
continuing, each Eurodollar Loan shall be converted to a Base Rate
Loan on the last day of the Interest Period applicable thereto.
(e) CONVERSION OPTIONS. The Borrower may elect to convert all
or any part of any Eurodollar Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), the
Borrower may elect to convert all or any part of any Base Rate Loan at
any time and from time to time to a Eurodollar Loan by giving advance
notice as provided in Section 2.02(c) to the Agent (which shall
promptly notify the Lenders) of such election. All or any part of any
outstanding Loan may be converted as provided herein, provided that
(i) any conversion of any Base Rate Loan into a Eurodollar Loan shall
be (as to each such Loan into which there is a conversion for an
applicable Interest Period) in amounts of at least $500,000 or any
whole multiple of $100,000 in excess thereof and (ii) no Default shall
have occurred and be continuing. If a Default shall have occurred and
be continuing, no Base Rate Loan may be converted into a Eurodollar
Loan.
(f) ADVANCES. Not later than 11:00 a.m. Houston, Texas time on
the date specified for each borrowing hereunder (or 1:00 p.m. Houston,
Texas time for same day advance Base Rate Loans), each Lender shall
make available the amount of the Loan to be made by it on such date to
the Agent, to an account which the Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so
received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by depositing the
same, in immediately available funds, in an account of the Borrower,
designated by the Borrower and maintained at the Principal Office.
(g) LETTERS OF CREDIT. The Borrower shall give the Issuing Bank
(which shall promptly notify the Lenders of such request and their
Percentage Share of such Letter of Credit) advance notice to be
received by the Issuing Bank not later than 11:00 a.m. Houston, Texas
time not less than three (3) Business Days prior thereto of each
request for the issuance, and at least thirty (30) Business Days prior
to the date of the renewal or extension, of a Letter of Credit
hereunder which request shall specify (i) the amount of such Letter of
Credit, (ii) the date (which shall be a Business Day) such Letter of
-20-
Credit is to be issued, renewed or extended, (iii) the duration
thereof, (iv) the name and address of the beneficiary thereof, (v) the
form of the Letter of Credit and (vi) such other information as the
Agent may reasonably request, all of which shall be reasonably
satisfactory to the Agent. Subject to the terms and conditions of
this Agreement, on the date specified for the issuance, renewal or
extension of a Letter of Credit, the Agent shall issue, renew or
extend such Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower shall execute a Letter of Credit Agreement. In the event of
any conflict between any provision of a Letter of Credit Agreement and
this Agreement, the Borrower, the Issuing Bank, the Agent and the
Lenders hereby agree that the provisions of this Agreement shall
govern.
The Issuing Bank will send to the Borrower and each Lender,
immediately upon issuance of any Letter of Credit, or an amendment
thereto, a true and complete copy of such Letter of Credit, or such
amendment thereto.
Section 2.03 CHANGES OF COMMITMENTS.
(a) The Aggregate Commitments shall at all times be equal to the
lesser of (i) the Aggregate Maximum Credit Amounts after adjustments
resulting from reductions pursuant to Section 2.03(b) or (ii) the
Borrowing Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to reduce
the amount of the Aggregate Maximum Credit Amounts at any time, or
from time to time, upon not less than three (3) Business Days' prior
notice to the Agent (which shall promptly notify the Lenders) of each
such termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction (which
shall not be less than $5,000,000 or any whole multiple of $500,000 in
excess thereof) and shall be irrevocable and effective only upon
receipt by the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 FEES.
(a) COMMITMENT FEE. The Borrower shall pay to the Agent for the
account of each Lender a commitment fee on the daily average unused
amount of the Aggregate Commitments for the period from and including
the Closing Date up to, but excluding, the earlier of the date the
Aggregate Commitments are terminated or the Revolving Credit
-21-
Termination Date at a rate per annum equal to 3/8 of 1%. Accrued
commitment fees shall be payable quarterly in arrears on each
Quarterly Date and on the earlier of the date the Aggregate
Commitments are terminated or the Revolving Credit Termination Date.
(b) LETTER OF CREDIT FEES.
(i) The Borrower agrees to pay the Agent, for the account of
each Lender, commissions for issuing the Letters of Credit on the
daily average outstanding of the maximum liability of the Issuing Bank
existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at the rate per annum equal
to the Applicable Margin then in effect for Eurodollar Loans, provided
that each Letter of Credit shall bear a minimum commission of $500.
Each Letter of Credit shall be deemed to be outstanding up to the full
face amount of the Letter of Credit until the Issuing Bank has
received the canceled Letter of Credit or a written cancellation of
the Letter of Credit from the beneficiary of such Letter of Credit in
form and substance acceptable to the Issuing Bank, or for any
reductions in the amount of the Letter of Credit (other than from a
drawing), written notification from the beneficiary of such Letter of
Credit. Such commissions are payable quarterly in arrears on each
Quarterly Date and upon cancellation or expiration of each such Letter
of Credit.
(ii) The Borrower agrees to pay the Issuing Bank, for its own
account, an issuing fee for issuing Letters of Credit on the daily
average outstanding balance of the maximum liability of the Issuing
bank existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at the rate of 0.10% per annum,
payable quarterly in arrears on each Quarterly Date and upon
cancellation or expiration of each such Letter of Credit.
(c) The Borrower shall pay to the Agent for its account such
other fees as are set forth in the Fee Letter on the dates specified
therein to the extent not paid prior to the Closing Date.
Section 2.05 SEVERAL OBLIGATIONS. The failure of any Lender to
make any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan or provide
funds on such date, but no Lender shall be responsible for the failure of
any other Lender to make a Loan to be made by such other Lender or to
provide funds to be provided by such other Lender.
Section 2.06 NOTES. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the
form of EXHIBIT A, dated (i) the Closing Date or (ii) the effective date of
-22-
an Assignment pursuant to Section 12.06(b), payable to the order of such
Lender in a principal amount equal to its Maximum Credit Amount as
originally in effect and otherwise duly completed and such substitute Notes
as required by Section 12.06(b). The date, amount, Type, interest rate and
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its
books for its Note, and, prior to any transfer may be endorsed by such
Lender on the schedule attached to such Note or any continuation thereof or
on any separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender's or the
Borrower's rights or obligations in respect of such Loans or affect the
validity of such transfer by any Lender of its Note.
Section 2.07 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. The Borrower may prepay the Base
Rate Loans upon not less than one (1) Business Day's prior notice to
the Agent (which shall promptly notify the Lenders), which notice
shall specify the prepayment date (which shall be a Business Day) and
the amount of the prepayment (which shall be at least $1,000,000 or
the remaining aggregate principal balance outstanding on the Notes)
and shall be irrevocable and effective only upon receipt by the Agent,
provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Borrower
may prepay Eurodollar Loans on the same conditions as for Base Rate
Loans (except that prior notice to the Agent shall be not less than
three (3) Business Days for Eurodollar Loans) and in addition such
prepayments of Eurodollar Loans shall be subject to the terms of
Section 5.05 and shall be in an amount equal to all of the Eurodollar
Loans for the Interest Period prepaid.
(b) MANDATORY PREPAYMENTS.
(i) If, after giving effect to any termination or reduction
of the Aggregate Maximum Credit Amounts pursuant to Section 2.03(b),
the outstanding aggregate principal amount of the Loans plus the LC
Exposure exceeds the Aggregate Maximum Credit Amounts, the Borrower
shall (i) prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess,
together with interest on the principal amount paid accrued to the
date of such prepayment and (ii) if any excess remains after prepaying
all of the Loans because of LC Exposure, pay to the Agent on behalf of
the Lenders an amount equal to the excess to be held as cash
collateral as provided in Section 2.10(b) hereof.
(ii) Upon any redetermination of the amount of the Borrowing
Base in accordance with Section 2.08, if the redetermined Borrowing
Base results in a Borrowing Base Deficiency, then the Borrower shall
-23-
within thirty (30) days of receipt of written notice thereof either:
(A) prepay the Loans in an aggregate principal amount equal to the
Borrowing Base Deficiency, together with interest on the principal
amount paid accrued to the date of such prepayment and if a Borrowing
Base Deficiency remains after prepaying all of the Loans because of LC
Exposure, the Borrower shall pay to the Agent on behalf of the Lenders
an amount equal to such remaining Borrowing Base Deficiency to be held
as cash collateral as provided in Section 2.10(b); or (B) the Borrower
shall notify the Agent (which will promptly notify the Lenders) in
writing of the Borrower's election to initiate a Deficiency Period
during which it will eliminate such Borrowing Base Deficiency by
making six (6) consecutive monthly Deficiency Payments, the first of
such payments being due and payable with the delivery to the Agent of
such notice and each of the remaining payments due and payable on the
same day of each month thereafter during the Deficiency Period;
provided however, in the event of an acceleration of the maturity of
the Notes pursuant to Section 10.02 hereof, such acceleration shall
also accelerate the maturity of all outstanding and unpaid Deficiency
Payments.
(iii) If a reduction in the Borrowing Base pursuant to
Section 2.08(d) because of a Transfer of any Oil and Gas Properties
will result in a Borrowing Base Deficiency, then the Borrower shall
immediately upon such Transfer prepay the Loans in an aggregate
principal amount equal to such Borrowing Base Deficiency, and if a
Borrowing Base Deficiency remains thereafter because of LC Exposure,
pay to the Agent on behalf of the Lenders an amount equal to such
remaining Borrowing Base Deficiency to be held as cash collateral as
provided in Section 2.10(b).
(c) GENERALLY. Prepayments permitted or required under this
Section 2.07 shall be without premium or penalty, except as required
under Section 5.05 for prepayment of Eurodollar Loans. Any prepayment
made during the Revolving Credit Period may be reborrowed subject to
the then effective Aggregate Commitments. Any prepayments made during
the Term Loan Period may not be reborrowed and shall be applied to
installments of the Notes in the inverse order of maturity.
Section 2.08 BORROWING BASE.
(a) The Borrowing Base shall be determined in accordance with
Section 2.08(b) by the Agent with the concurrence of the Lenders and
is subject to redetermination in accordance with Section 2.08(d).
Upon any redetermination of the Borrowing Base, such redetermination
shall remain in effect until the next successive Redetermination Date.
"REDETERMINATION DATE" shall mean the date that the redetermined
Borrowing Base becomes effective subject to the notice requirements
specified in Section 2.08(e) both for scheduled redeterminations and
-24-
unscheduled redeterminations. So long as any of the Commitments are
in effect or any LC Exposure or Loans are outstanding hereunder, this
facility shall be governed by the then effective Borrowing Base.
During the period from and after the Closing Date until the first
redetermination pursuant to Section 2.08(d) or adjusted pursuant to
Section 8.08(c), the amount of the Borrowing Base shall be
$23,000,000.
(b) Upon receipt of the reports required by Section 8.07 and
such other reports, data and supplemental information as may from time
to time be reasonably requested by the Agent (the "ENGINEERING
REPORTS"), the Agent will redetermine the Borrowing Base. Such
redetermination will be in accordance with its normal and customary
procedures for evaluating oil and gas reserves and other related
assets as such exist at that particular time. The Agent, in its sole
discretion, may make adjustments to the rates, volumes and prices and
other assumptions set forth therein in accordance with its normal and
customary procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time. The Agent shall
propose to the Lenders a new Borrowing Base within 30 days following
receipt by the Agent and the Lenders of the Engineering Reports in a
timely and complete manner. After having received notice of such
proposal by the Agent, the Lenders shall have ten (10) Business Days
to agree or disagree with such proposal. If at the end of the ten
(10) Business Days, any Lender has not communicated its approval or
disapproval, such silence shall be deemed to be an approval. If the
Lenders have not approved the Borrowing Base within ten (10) Business
Days, the Lenders shall, within a reasonable period of time, agree on
a new Borrowing Base. The Agent and all of the Lenders must approve
any increase in the Borrowing Base. The Majority Lenders (one of
which must be the Agent) shall be required to approve a continuation
or decrease in any Borrowing Base.
(c) The Agent may exclude any Oil and Gas Property or portion of
production therefrom or any income from any other Property from the
Borrowing Base, at any time, because title information is not
reasonably satisfactory, such Property is not Mortgaged Property or
such Property is not assignable.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, on or around the first
Business Day of each May and November, commencing November, 1998 (each
being a "SCHEDULED REDETERMINATION DATE"), the Lenders shall
redetermine the amount of the Borrowing Base in accordance with
Section 2.08(b). In addition, the Majority Lenders and the Borrower
may each initiate a redetermination of the Borrowing Base at any other
time as it so elects by specifying in writing to the other date on
which the Borrower is to furnish a Reserve Report in accordance with
-25-
Section 8.07(b) and the date on which such redetermination is to
occur; PROVIDED, HOWEVER, that the Majority Lenders and the Borrower
may each initiate, only one such unscheduled redetermination during
any consecutive twelve (12) month period. Notwithstanding the
preceding sentence, if the Borrower or any Guarantor Transfers any Oil
and Gas Properties, then the Majority Lenders may, at their sole
election, reduce the Borrowing Base by the value given to such Oil and
Gas Properties in the immediately preceding Borrowing Base
redetermination.
(e) The Agent shall promptly notify in writing the Borrower and
the Lenders of the new Borrowing Base. Any redetermination of the
Borrowing Base shall not be in effect until written notice is received
by the Borrower.
Section 2.09 ASSUMPTION OF RISKS. The Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit
or any transferee thereof with respect to its use of such Letter of Credit.
Neither the Issuing Bank (except in the case of gross negligence or willful
misconduct on the part of the Issuing Bank or any of its employees), its
correspondents nor any Lender shall be responsible for the validity,
sufficiency or genuineness of certificates or other documents or any
endorsements thereon, even if such certificates or other documents should
in fact prove to be invalid, insufficient, fraudulent or forged; for
errors, omissions, interruptions or delays in transmissions or delivery of
any messages by mail, telex, or otherwise, whether or not they be in code;
for errors in translation or for errors in interpretation of technical
terms; the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; the failure of
any beneficiary or any transferee of any Letter of Credit to comply fully
with conditions required in order to draw upon any Letter of Credit; or for
any other consequences arising from causes beyond the Issuing Bank's
control or the control of the Issuing Bank's correspondents. In addition,
neither the Issuing Bank, the Agent nor any Lender shall be responsible for
any error, neglect, or default of any of the Issuing Bank's correspondents;
and none of the above shall affect, impair or prevent the vesting of any of
the Issuing Bank's, the Agent's or any Lender's rights or powers hereunder
or under the Letter of Credit Agreements, all of which rights shall be
cumulative. The Issuing Bank and its correspondents may accept
certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained
therein regardless of any notice or information to the contrary. In
furtherance and not in limitation of the foregoing provisions, the Borrower
agrees that any action, inaction or omission taken or not taken by the
Issuing Bank or by any correspondent for the Issuing Bank in good faith in
connection with any Letter of Credit, or any related drafts, certificates,
-26-
documents or instruments, shall be binding on the Borrower and shall not
put the Issuing Bank or its correspondents under any resulting liability to
the Borrower.
Section 2.10 OBLIGATION TO REIMBURSE AND TO PREPAY.
(a) If a disbursement by the Issuing Bank is made under any
Letter of Credit, the Borrower shall pay to the Agent within two (2)
Business Days after notice of any such disbursement is received by the
Borrower, the amount of each such disbursement made by the Issuing
Bank under the Letter of Credit (if such payment is not sooner
effected as may be required under this Section 2.10 or under other
provisions of the Letter of Credit), together with interest on the
amount disbursed from and including the date of disbursement until
payment in full of such disbursed amount at a varying rate per annum
equal to (i) the then applicable interest rate for Base Rate Loans
through the second Business Day after notice of such disbursement is
received by the Borrower and (ii) thereafter, the Post-Default Rate
for Base Rate Loans (but in no event to exceed the Highest Lawful
Rate) for the period from and including the third Business Day
following the date of such disbursement to and including the date of
repayment in full of such disbursed amount. The obligations of the
Borrower under this Agreement with respect to each Letter of Credit
shall be absolute, unconditional and irrevocable and shall be paid or
performed strictly in accordance with the terms of this Agreement
under all circumstances whatsoever, including, without limitation, but
only to the fullest extent permitted by applicable law, the following
circumstances: (i) any lack of validity or enforceability of this
Agreement, any Letter of Credit or any of the Security Instruments;
(ii) any amendment or waiver of (including any default), or any
consent to departure from this Agreement (except to the extent
permitted by any amendment or waiver), any Letter of Credit or any of
the Security Instruments; (iii) the existence of any claim, set-off,
defense or other rights which the Borrower may have at any time
against the beneficiary of any Letter of Credit or any transferee of
any Letter of Credit (or any Persons for whom any such beneficiary or
any such transferee may be acting), the Issuing Bank, the Agent, any
Lender or any other Person, whether in connection with this Agreement,
any Letter of Credit, the Security Instruments, the transactions
contemplated hereby or any unrelated transaction; (iv) any statement,
certificate, draft, notice or any other document presented under any
Letter of Credit proves to have been forged, fraudulent, insufficient
or invalid in any respect or any statement therein proves to have been
untrue or inaccurate in any respect whatsoever; (v) payment by the
Issuing Bank under any Letter of Credit against presentation of a
draft or certificate which appears on its face to comply, but does not
comply, with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of
the foregoing.
-27-
Notwithstanding anything in this Agreement to the contrary, the
Borrower will not be liable for payment or performance that results
from the gross negligence or willful misconduct of the Issuing Bank,
except (i) where the Borrower or any Subsidiary actually recovers the
proceeds for itself or the Issuing Bank of any payment made by the
Issuing Bank in connection with such gross negligence or willful
misconduct or (ii) in cases where the Agent makes payment to the named
beneficiary of a Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a
payment or prepayment pursuant to Section 2.07(b) or the maturity of
the Notes, whether by acceleration or otherwise, an amount equal to
the LC Exposure (or the excess in the case of Section 2.07(b) shall be
deemed to be forthwith due and owing by the Borrower to the Issuing
Bank, the Agent and the Lenders as of the date of any such occurrence;
and the Borrower's obligation to pay such amount shall be absolute and
unconditional, without regard to whether any beneficiary of any such
Letter of Credit has attempted to draw down all or a portion of such
amount under the terms of a Letter of Credit, and, to the fullest
extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or
recoupment which the Borrower may now or hereafter have against any
such beneficiary, the Issuing Bank, the Agent, the Lenders or any
other Person for any reason whatsoever. Such payments shall be held
by the Issuing Bank on behalf of the Lenders as cash collateral
securing the LC Exposure in an account or accounts at the Principal
Office; and the Borrower hereby grants to and by its deposit with the
Agent grants to the Agent a security interest in such cash collateral.
In the event of any such payment by the Borrower of amounts
contingently owing under outstanding Letters of Credit and in the
event that thereafter drafts or other demands for payment complying
with the terms of such Letters of Credit are not made prior to the
respective expiration dates thereof, the Agent agrees, if no Event of
Default has occurred and is continuing or if no other amounts are
outstanding under this Agreement, the Notes or the Security
Instruments, to remit to the Borrower amounts for which the contingent
obligations evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it
shall promptly reimburse the Issuing Bank an amount equal to such
Lender's Percentage Share of any disbursement made by the Issuing Bank
under any Letter of Credit that is not reimbursed according to this
Section 2.10.
(d) Notwithstanding anything to the contrary contained herein,
if no Event of Default has occurred and is continuing and subject to
availability under the Aggregate Commitments (after reduction for LC
Exposure), to the extent the Borrower has not reimbursed the Issuing Bank
-28-
for any drawn upon Letter of Credit within one (1) Business Days after
notice of such disbursement has been received by the Borrower, the amount
of such Letter of Credit reimbursement obligation shall automatically be
funded by the Lenders as a Revolving Credit Loan hereunder and used by the
Lenders to pay such Letter of Credit reimbursement obligation. If an Event
of Default has occurred and is continuing, or if the funding of such Letter
of Credit reimbursement obligation as a Loan would cause the aggregate
amount of all Loans outstanding to exceed the Aggregate Commitments (after
reduction for LC Exposure), such Letter of Credit reimbursement obligation
shall not be funded as a Loan, but instead shall accrue interest as
provided in Section 2.10(a).
Section 2.11 LENDING OFFICES. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending
Office for Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 REPAYMENT OF LOANS.
(a) REVOLVING CREDIT LOANS. Commencing on the Quarterly Date
immediately following the Revolving Credit Termination Date, the aggregate
principal amount of the Notes outstanding on the Revolving Credit
Termination Date shall be payable in twelve (12) equal consecutive
quarterly installments sufficient to amortize the outstanding principal
amount equally over the Term Loan Period with final payment of the
remaining principal balance on the Notes, if any, due on the Final Maturity
Date.
(b) GENERALLY. The Borrower will pay to the Agent, for the account
of each Lender, the principal payments required by this Section 3.01.
Section 3.02 INTEREST.
(a) INTEREST RATES. The Borrower will pay to the Agent, for the
account of each Lender, interest on the unpaid principal amount of
each Loan made by such Lender for the period commencing on the date
such Loan is made to, but excluding, the date such Loan shall be paid
in full, at the following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate
(as in effect from time to time) plus the Applicable Margin, but
in no event to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such
-29-
Loan plus the Applicable Margin (as in effect from time to time),
but in no event to exceed the Highest Lawful Rate.
(b) POST-DEFAULT RATE. Notwithstanding the foregoing, the
Borrower will pay to the Agent, for the account of each Lender
interest at the applicable Post-Default Rate on any principal of any
Loan made by such Lender, and (to the fullest extent permitted by law)
on any other amount payable by the Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of
such Lender, for the period commencing on the date of an Event of
Default until the same is paid in full or all Events of Default are
cured or waived.
(c) DUE DATES. Accrued interest on Base Rate Loans shall be
payable on each Quarterly Date commencing on March 31, 1998, and
accrued interest on each Eurodollar Loan shall be payable on the last
day of the Interest Period therefor and, if such Interest Period is
longer than three months at three-month intervals following the first
day of such Interest Period, except that interest payable at the Post-
Default Rate shall be payable from time to time on demand and interest
on any Eurodollar Loan that is converted into a Base Rate Loan
(pursuant to Section 5.04) shall be payable on the date of conversion
(but only to the extent so converted).
(d) DETERMINATION OF RATES. Promptly after the determination of
any interest rate provided for herein or any change therein, the Agent
shall notify the Lenders to which such interest is payable and the
Borrower thereof. Each determination by the Agent of an interest rate
or fee hereunder shall, except in cases of manifest error, be final,
conclusive and binding on the parties.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by
the Borrower under this Agreement and, the Notes and the Letter of Credit
Agreements shall be made in Dollars, in immediately available funds, to the
Agent at such account as the Agent shall specify by notice to the Borrower
from time to time, not later than 11:00 a.m. Houston, Texas time on the
date on which such payments shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the
fullest extent permitted by applicable law) defense, set-off or
counterclaim. Each payment received by the Agent under this Agreement or
any Note for account of a Lender shall be paid promptly to such Lender in
-30-
immediately available funds. Except as otherwise provided in the
definition of "Interest Period", if the due date of any payment under this
Agreement or any Note would otherwise fall on a day which is not a Business
Day such date shall be extended to the next succeeding Business Day and
interest shall be payable for any principal so extended for the period of
such extension. At the time of each payment to the Agent of any principal
of or interest on any borrowing, the Borrower shall notify the Agent of the
Loans to which such payment shall apply. In the absence of such notice the
Agent may specify the Loans to which such payment shall apply, but to the
extent possible such payment or prepayment will be applied first to the
Loans comprised of Base Rate Loans.
Section 4.02 PRO RATA TREATMENT. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the
Lenders under Section 2.01 and each continuation and conversion under
Section 2.02 shall be made from the Lenders pro rata in accordance with
their Percentage Share, each payment of fees under Section 2.04 shall be
made for account of the Lenders pro rata in accordance with their
Percentage Share, and each termination or reduction of the amount of the
Aggregate Maximum Credit Amounts under Section 2.03(b) shall be applied to
the Commitment of each Lender, pro rata according to the amounts of its
respective Commitment; (ii) each payment of principal of Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance
with the respective unpaid principal amount of the Loans held by the
Lenders; and (iii) each payment of interest on Loans by the Borrower shall
be made for account of the Lenders pro rata in accordance with the amounts
of interest due and payable to the respective Lenders; and (iv) each
reimbursement by the Borrower of disbursements under Letters of Credit
shall be made for account of the Issuing Bank or, if funded by the Lenders,
pro rata for the account of the Lenders, in accordance with the amounts of
reimbursement obligations due and payable to each respective Lender.
Section 4.03 COMPUTATIONS. Interest on Eurodollar Loans and
fees shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in
the period for which such interest is payable, unless such calculation
would exceed the Highest Lawful Rate, in which case interest shall be
calculated on the per annum basis of a year of 365 or 366 days, as the case
may be. Interest on Base Rate Loans shall be computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Section 4.04 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the
Agent shall have been notified by a Lender or the Borrower prior to the
date on which such notifying party is scheduled to make payment to the
Agent (in the case of a Lender) of the proceeds of a Loan or a payment
under a Letter of Credit to be made by it hereunder or (in the case of the
-31-
Borrower) a payment to the Agent for account of one or more of the Lenders
hereunder (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that it does not intend to make the
Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall
not be required to), make the amount thereof available to the intended
recipient(s) on such date and, if such Lender or the Borrower (as the case
may be) has not in fact made the Required Payment to the Agent, the
recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made
available by the Agent until, but excluding, the date the Agent recovers
such amount at a rate per annum which, for any Lender as recipient, will be
equal to the Federal Funds Rate, and for the Borrower as recipient, will be
equal to the Base Rate plus the Applicable Margin.
Section 4.05 SET-OFF, SHARING OF PAYMENTS, ETC.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled (after consultation with the Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
Borrower at any of its offices, in Dollars or in any other currency,
against any principal of or interest on any of such Lender's Loans, or
any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower and the
Agent thereof, provided that such Lender's failure to give such notice
shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement
(or reimbursement as to any Letter of Credit) through the exercise of
any right of set-off, banker's lien or counterclaim or similar right
or otherwise, and, as a result of such payment, such Lender shall have
received a greater percentage of the principal or interest (or
reimbursement) then due hereunder by the Borrower to such Lender than
the percentage received by any other Lenders, it shall promptly (i)
notify the Agent and each other Lender thereof and (ii) purchase from
such other Lenders participations in (or, if and to the extent
specified by such Lender, direct interests in) the Loans (or
participations in Letters of Credit) made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make
such other adjustments from time to time as shall be equitable, to the
end that all the Lenders shall share the benefit of such excess
payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance
-32-
with the unpaid principal and/or interest on the Loans held by each of
the Lenders (or reimbursements of Letters of Credit). To such end all
the Lenders shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Borrower agrees that any
Lender so purchasing a participation (or direct interest) in the Loans
made by other Lenders (or in interest due thereon, as the case may be)
may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such
Lender were a direct holder of Loans (or Letters of Credit) in the
amount of such participation. Nothing contained herein shall require
any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a set-off
to which this Section 4.05 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this
Section 4.05 to share the benefits of any recovery on such secured
claim.
Section 4.06 TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4.01,
free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, EXCLUDING, in the case of
each Lender, the Issuing Bank and the Agent, taxes imposed on its
income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which the Agent,
the Issuing Bank or such Lender, as the case may be, is a citizen or
resident or in which such Lender has an Applicable Lending Office,
(ii) the jurisdiction (or any political subdivision thereof) in which
the Agent, the Issuing Bank or such Lender is organized, or (iii) any
jurisdiction (or political subdivision thereof) in which such Lender,
the Issuing Bank or the Agent is presently doing business which taxes
are imposed solely as a result of doing business in such jurisdiction
(all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"TAXES"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lenders,
the Issuing Bank or the Agent (i) the sum payable shall be increased
by the amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 4.06) such Lender, the Issuing Bank or the Agent (as the case
may be) shall receive an amount equal to the sum it would have
-33-
received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) OTHER TAXES. In addition, to the fullest extent permitted
by applicable law, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made hereunder
or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Assignment or any Security Instrument
(hereinafter referred to as "OTHER TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE
ISSUING BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER
TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED
BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION
4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR THE AGENT (ON THEIR
BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY
LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER
TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH
TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT
OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION
SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER, THE
ISSUING BANK OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND
THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, ISSUING
BANK OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL
PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER
RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE
BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT
HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED),
PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE
ISSUING BANK OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT
(PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE
AGENT IN THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH
REFUND OR CREDIT.
(d) LENDER REPRESENTATIONS.
(i) Each Lender represents that it is either (1) a banking
association or corporation organized under the laws of the United
States of America or any state thereof or (2) it is entitled to
-34-
complete exemption from United States withholding tax imposed on
or with respect to any payments, including fees, to be made to it
pursuant to this Agreement (A) under an applicable provision of a
tax convention to which the United States of America is a party
or (B) because it is acting through a branch, agency or office in
the United States of America and any payment to be received by it
hereunder is effectively connected with a trade or business in
the United States of America. Each Lender that is not a banking
association or corporation organized under the laws of the United
States of America or any state thereof agrees to provide to the
Borrower and the Agent on the Closing Date, or on the date of its
delivery of the Assignment pursuant to which it becomes a Lender,
and at such other times as required by United States law or as
the Borrower or the Agent shall reasonably request, two accurate
and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying that all
payments to be made to it hereunder will be effectively connected
to a United States trade or business (the "FORM 4224
CERTIFICATION") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit of
a provision of a tax convention to which the United States of
America is a party which completely exempts from United States
withholding tax all payments to be made to it hereunder (the
"FORM 1001 CERTIFICATION"). In addition, each Lender agrees that
if it previously filed a Form 4224 Certification, it will deliver
to the Borrower and the Agent a new Form 4224 Certification prior
to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form 1001
Certification, it will deliver to the Borrower and the Agent a
new certification prior to the first payment date falling in the
third year following the previous filing of such certification.
Each Lender also agrees to deliver to the Borrower and the Agent
such other or supplemental forms as may at any time be required
as a result of changes in applicable law or regulation in order
to confirm or maintain in effect its entitlement to exemption
from United States withholding tax on any payments hereunder,
PROVIDED that the circumstances of such Lender at the relevant
time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a
Governmental Requirement or (ii) its circumstances, that it is
unable to submit any form or certificate that it is obligated to
submit pursuant to this Section 4.06, or that it is required to
withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify the Borrower and the Agent of
such fact. If a Lender is organized under the laws of a
jurisdiction outside the United States of America, unless the
Borrower and the Agent have received a Form 1001 Certification or
Form 4224 Certification satisfactory to them indicating that all
-35-
payments to be made to such Lender hereunder are not subject to
United States withholding tax, the Borrower shall withhold taxes
from such payments at the applicable statutory rate. Each Lender
agrees to indemnify and hold harmless the Borrower or Agent, as
applicable, from any United States taxes, penalties, interest and
other expenses, costs and losses incurred or payable by (i) the
Agent as a result of such Lender's failure to submit any form or
certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Borrower or the Agent as a result of
their reliance on any such form or certificate which such Lender
has provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has
failed to provide the Borrower with the form required pursuant to
this Section 4.06, if any, (other than if such failure is due to
a change in a Governmental Requirement occurring subsequent to
the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under
Section 4.06 with respect to taxes imposed by the United States
which taxes would not have been imposed but for such failure to
provide such forms; PROVIDED, HOWEVER, that if a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding
tax, becomes subject to taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as
such Lender shall reasonably request to assist such Lender to
recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any
certificate or document requested by the Borrower or the Agent or
to change the jurisdiction of its Applicable Lending Office or to
contest any tax imposed if the making of such a filing or change
or contesting such tax would avoid the need for or reduce the
amount of any such additional amounts that may thereafter accrue
and would not, in the sole determination of such Lender, be
otherwise disadvantageous to such Lender.
Section 4.07 DISPOSITION OF PROCEEDS. The Mortgage contains an
assignment by the Borrower unto and in favor of the Agent for the benefit
of the Lenders of all production and all proceeds attributable thereto
which may be produced from or allocated to the Mortgaged Property, and the
Mortgage further provides in general for the application of such proceeds
to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in
the Mortgage, until the occurrence of an Event of Default, the Lenders
agree that they will neither notify the purchaser or purchasers of such
production nor take any other action to cause such proceeds to be remitted
-36-
to the Lenders, but the Lenders will instead permit such proceeds to be
paid to the Borrower.
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 ADDITIONAL COSTS.
(a) EURODOLLAR REGULATIONS, ETC. The Borrower shall pay
directly to each Lender from time to time such amounts as such Lender
may determine to be necessary to compensate such Lender for any costs
which it determines are attributable to its making or maintaining of
any Eurodollar Loans or issuing or participating in Letters of Credit
hereunder or its obligation to make any Eurodollar Loans or issue or
participate in any Letters of Credit hereunder, or any reduction in
any amount receivable by such Lender hereunder in respect of any of
such Eurodollar Loans, Letters of Credit or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "ADDITIONAL COSTS"), resulting from any Regulatory Change
which: (i) changes the basis of taxation of any amounts payable to
such Lender under this Agreement or any Note in respect of any of such
Eurodollar Loans or Letters of Credit (other than taxes imposed on the
overall net income of such Lender or of its Applicable Lending Office
for any of such Eurodollar Loans by the jurisdiction in which such
Lender has its principal office or Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of such Lender, or the Commitment or Loans of such Lender
or the Eurodollar interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such
extensions of credit or liabilities) or such Lender's Commitment or
Loans. Each Lender will notify the Agent and the Borrower of any
event occurring after the Closing Date which will entitle such Lender
to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have
no obligation to so designate an Applicable Lending Office located in
the United States. If any Lender requests compensation from the
Borrower under this Section 5.01(a), the Borrower may, by notice to
such Lender, suspend the obligation of such Lender to make additional
Loans of the Type with respect to which such compensation is requested
until the Regulatory Change giving rise to such request ceases to be
-37-
in effect (in which case the provisions of Section 5.04 shall be
applicable).
(b) REGULATORY CHANGE. Without limiting the effect of the
provisions of Section 5.01(a), in the event that at any time (by
reason of any Regulatory Change or any other circumstances arising
after the Closing Date affecting (A) any Lender, (B) the Eurodollar
interbank market or (C) such Lender's position in such market), the
Eurodollar Rate, as determined in good faith by such Lender, will not
adequately and fairly reflect the cost to such Lender of funding its
Eurodollar Loans, then, if such Lender so elects, by notice to the
Borrower and the Agent, the obligation of such Lender to make
additional Eurodollar Loans shall be suspended until such Regulatory
Change or other circumstances ceases to be in effect (in which case
the provisions of Section 5.04 shall be applicable).
(c) CAPITAL ADEQUACY. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without duplication),
the Borrower shall pay directly to any Lender from time to time on
request such amounts as such Lender may reasonably determine to be
necessary to compensate such Lender or its parent or holding company
for any costs which it determines are attributable to the maintenance
by such Lender or its parent or holding company (or any Applicable
Lending Office), pursuant to any Governmental Requirement following
any Regulatory Change, of capital in respect of its Commitment, its
Note, its Loans or any interest held by it in any Letter of Credit,
such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of such Lender
or its parent or holding company (or any Applicable Lending Office) to
a level below that which such Lender or its parent or holding company
(or any Applicable Lending Office) could have achieved but for such
Governmental Requirement. Such Lender will notify the Borrower that
it is entitled to compensation pursuant to this Section 5.01(c) as
promptly as practicable after it determines to request such
compensation.
(d) COMPENSATION PROCEDURE. Any Lender notifying the Borrower
of the incurrence of additional costs under this Section 5.01 shall in
such notice to the Borrower and the Agent set forth in reasonable
detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to
Section 5.01(a) or (b), or of the effect of capital maintained
pursuant to Section 5.01(c), on its costs or rate of return of
maintaining Loans or its obligation to make Loans or issue Letters of
Credit, or on amounts receivable by it in respect of Loans or Letters
of Credit, and of the amounts required to compensate such Lender under
this Section 5.01, shall be conclusive and binding for all purposes,
-38-
provided that such determinations and allocations are made on a
reasonable basis. Any request for additional compensation under this
Section 5.01 shall be paid by the Borrower within thirty (30) days of
the receipt by the Borrower of the notice described in this Section
5.01(d).
Section 5.02 LIMITATION ON EURODOLLAR LOANS. Anything herein to
the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(i) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Rate" in Section 1.02 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided
herein; or
(ii) the Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of
interest referred to in the definition of "Eurodollar Rate" in
Section 1.02 upon the basis of which the rate of interest for
Eurodollar Loans for such Interest Period is to be determined are
not sufficient to adequately cover the cost to the Lenders of
making or maintaining Eurodollar Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long
as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans.
Section 5.03 ILLEGALITY. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder, then such Lender shall promptly notify the
Borrower thereof and such Lender's obligation to make Eurodollar Loans
shall be suspended until such time as such Lender may again make and
maintain Eurodollar Loans (in which case the provisions of Section 5.04
shall be applicable).
Section 5.04 BASE RATE LOANS PURSUANT TO SECTIONS 5.01, 5.02 AND
5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("AFFECTED LOANS"), all
Affected Loans which would otherwise be made by such Lender shall be made
instead as Base Rate Loans (and, if an event referred to in Section 5.01(b)
or Section 5.03 has occurred and such Lender so requests by notice to the
Borrower, all Affected Loans of such Lender then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made
-39-
as (or converted into) Base Rate Loans, all payments of principal which
would otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans.
Section 5.05 COMPENSATION. The Borrower shall pay to each
Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for
requesting such amounts and which shall be conclusive and binding for all
purposes provided that such determinations are made on a reasonable basis),
such amount or amounts as shall compensate it for any loss, cost, expense
or liability which such Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar
Loan properly made by such Lender or the Borrower for any reason
(including, without limitation, the acceleration of the Loans
pursuant to Section 10.01) on a date other than the last day of
the Interest Period for such Loan; or
(ii) any failure by the Borrower for any reason (including
but not limited to, the failure of any of the conditions
precedent specified in Article VI to be satisfied) to borrow,
continue or convert a Eurodollar Loan from such Lender on the
date for such borrowing, continuation or conversion specified in
the relevant notice given pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount so paid, prepaid
or converted or not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date
specified for such borrowing) at the applicable rate of interest for such
Loan provided for herein over (ii) the interest component of the amount
such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount
and with maturities comparable to such period (as reasonably determined by
such Lender).
Section 5.06 REPLACEMENT LENDERS.
(a) If any Lender has notified the Borrower and the Agent of its
incurring additional costs under Section 5.01 or has required the
Borrower to make payments for Taxes under Section 4.06, then the
Borrower may, unless such Lender has notified the Borrower and the
Agent that the circumstances giving rise to such notice no longer
apply, terminate, in whole but not in part, the Commitment of any
Lender (other than the Agent) (the "TERMINATED LENDER") at any time
-40-
upon five (5) Business Days' prior written notice to the Terminated
Lender and the Agent (such notice referred to herein as a "NOTICE OF
TERMINATION").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with
one or more Lenders to increase their Commitment or Commitments and/or
(ii) request any one or more other banking institutions to become
parties to this Agreement in place and instead of such Terminated
Lender and agree to accept a Commitment or Commitments; PROVIDED,
HOWEVER, that such one or more other banking institutions are
reasonably acceptable to the Agent and become parties by executing an
Assignment (the Lenders or other banking institutions that agree to
accept in whole or in part the Commitment of the Terminated Lender
being referred to herein as the "REPLACEMENT LENDERS"), such that the
aggregate increased and/or accepted Commitments of the Replacement
Lenders under clauses (i) and (ii) above equal the Commitment of the
Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "LENDER
TERMINATION DATE"), and the Replacement Lender or Replacement Lenders
to which the Terminated Lender will assign its Commitment and, if
there will be more than one Replacement Lender, the portion of the
Terminated Lender's Commitment to be assigned to each Replacement
Lender.
(d) On the Lender Termination Date, (i) the Terminated Lender
shall by execution and delivery of an Assignment assign its Commitment
to the Replacement Lender or Replacement Lenders (pro rata, if there
is more than one Replacement Lender, in proportion to the portion of
the Terminated Lender's Commitment to be assigned to each Replacement
Lender) indicated in the Notice of Termination and shall assign to the
Replacement Lender or Replacement Lenders each of its Loans (if any)
then outstanding and participation interests in Letters of Credit (if
any) then outstanding pro rata as aforesaid), (ii) the Terminated
Lender shall endorse its Note, payable without recourse,
representation or warranty to the order of the Replacement Lender or
Replacement Lenders (pro rata as aforesaid), (iii) the Replacement
Lender or Replacement Lenders shall purchase the Note held by the
Terminated Lender (pro rata as aforesaid) at a price equal to the
unpaid principal amount thereof plus interest and facility and other
fees accrued and unpaid to the Lender Termination Date, and (iv) the
Replacement Lender or Replacement Lenders will thereupon (pro rata as
aforesaid) succeed to and be substituted in all respects for the
Terminated Lender with like effect as if becoming a Lender pursuant to
the terms of Section 12.06(b), and the Terminated Lender will have the
rights and benefits of an assignor under Section 12.06(b). To the
-41-
extent not in conflict, the terms of Section 12.06(b) shall supplement
the provisions of this Section 5.06(d). For each assignment made
under this Section 5.06, the Replacement Lender shall pay to the Agent
the processing fee provided for in Section 12.06(b). The Borrower
will be responsible for the payment of any breakage costs associated
with termination and Replacement Lenders, as set forth in Section
5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 INITIAL FUNDING.
The obligation of the Lenders to make the Initial Funding is
subject to the receipt by the Agent and the Lenders of all fees payable
pursuant to Section 2.04 on or before the Closing Date and the receipt by
the Agent of the following documents and satisfaction of the other
conditions provided in this Section 6.01, each of which shall be
satisfactory to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary of
each of the Borrower and the Parent setting forth (i) resolutions of
its board of directors with respect to the authorization of the
Borrower or the Parent, as applicable to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower or
the Parent, as applicable (y) who are authorized to sign the Loan
Documents to which Borrower or the Parent, as applicable is a party
and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized
officers, and (iv) the articles or certificate of incorporation and
bylaws of the Borrower or the Parent, as applicable, certified as
being true and complete. The Agent and the Lenders may conclusively
rely on such certificate until the Agent receives notice in writing
from the Borrower or the Parent, as applicable to the contrary.
(b) Certificates of the appropriate state agencies with respect
to the existence, qualification and good standing of the Borrower and
the Parent.
(c) A compliance certificate which shall be substantially in the
form of EXHIBIT C, duly and properly executed by a Responsible Officer
and dated as of the date of the Initial Funding.
-42-
(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on
EXHIBIT D, duly completed and executed in sufficient number of
counterparts for recording, if necessary.
(f) Opinions of Xxxxxx Xxxxxxxx & Xxxx L.L.P., counsel to the
Borrower and the Parent, and Xxxxxx Xxxxxx, L.L.P., special
Mississippi counsel to the Agent, each in form and substance
satisfactory to the Agent, as to such matters incident to the
transactions herein contemplated as the Agent may reasonably request.
(g) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19.
(h) The Agent shall have been furnished with appropriate UCC
search certificates reflecting no prior Liens.
(i) The Agent shall be satisfied with the terms and conditions
of, and values relating to the Properties acquired from Amerada Xxxx
Corporation pursuant to, the Agreement for Purchase and Sale dated
November 25, 1997, between the Borrower and Amerada Xxxx Corporation
as amended, supplemented or otherwise modified (the "AMERADA XXXX
PURCHASE AND SALE AGREEMENT").
(j) The Parent shall have consummated an initial public offering
for the sale of common stock generating proceeds from the underwriter
that are contributed to the Borrower of at least $40,000,000.
(k) The Borrower shall have acquired the interests in the Oil
and Gas Properties contemplated by the Amerada Xxxx Purchase and Sale
Agreement.
(l) The Parent shall have executed and delivered to the Borrower
assignments from the Parent to the Borrower, in form and substance
satisfactory to the Agent, of all of the Parent's rights, titles, and
interest in and to all of its Oil and Gas Properties.
(m) Borrower shall have repaid all Debt for borrowed money and
terminated and/or released all credit agreements related thereto and
Liens securing such Debt.
(n) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Section 6.02 INITIAL AND SUBSEQUENT LOANS AND LETTERS OF CREDIT.
The obligation of the Lenders to make Loans to the Borrower upon the
-43-
occasion of each borrowing hereunder and to issue, renew, extend or reissue
Letters of Credit for the account of the Borrower (including the Initial
Funding) is subject to the further conditions precedent that, as of the
date of such Loans and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred; and
(c) the representations and warranties made by the Borrower and the
Parent in Article VII and in the Security Instruments shall be true on and
as of the date of the making of such Loans or issuance, renewal, extension
or reissuance of a Letter of Credit with the same force and effect as if
made on and as of such date and following such new borrowing, except to the
extent such representations and warranties are expressly limited to an
earlier date or the Majority Lenders may expressly consent in writing to
the contrary.
Each request for a borrowing or issuance, renewal, extension or
reissuance of a Letter of Credit by the Borrower hereunder shall constitute
a certification by the Borrower to the effect set forth in Section 6.02(c)
(both as of the date of such notice and, unless the Borrower otherwise
notifies the Agent prior to the date of and immediately following such
borrowing or issuance, renewal, extension or reissuance of a Letter of
Credit as of the date thereof).
Section 6.03 CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDERS.
All conditions precedent to the obligations of the Lenders to make any Loan
are imposed hereby solely for the benefit of the Lenders, and no other
Person may require satisfaction of any such condition precedent or be
entitled to assume that the Lenders will refuse to make any Loan in the
absence of strict compliance with such conditions precedent.
Section 6.04 NO WAIVER. No waiver of any condition precedent
shall preclude the Agent or the Lenders from requiring such condition to be
met prior to making any subsequent Loan or preclude the Lenders from
thereafter declaring that the failure of the Borrower to satisfy such
condition precedent constitutes a Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower and the Parent each represents and warrants to the Agent
and the Lenders that (each representation and warranty herein is given as
of the Closing Date and shall be deemed repeated and reaffirmed on the
dates of each borrowing and issuance, renewal, extension or reissuance of a
Letter of Credit as provided in Section 6.02):
-44-
Section 7.01 CORPORATE EXISTENCE. Each of the Borrower, the
Parent and each Subsidiary: (i) is a corporation duly organized, legally
existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to
own its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse
Effect.
Section 7.02 FINANCIAL CONDITION. The audited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at
December 31, 1996 and the related consolidated statement of income,
stockholders' equity and cash flow of the Borrower and its Consolidated
Subsidiaries for the fiscal year ended on said date, with the opinion
thereon of Xxxxxx Xxxxxxxx L.L.P. heretofore furnished to each of the
Lenders and the unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at September 30, 1997 and their related
consolidated statements of income, stockholders' equity and cash flow of
the Borrower and its Consolidated Subsidiaries for the nine month period
ended on such date heretofore furnished to the Agent, are complete and
correct and fairly present the consolidated financial condition of the
Borrower and its Consolidated Subsidiaries as at said dates and the results
of its operations for the fiscal year and the nine month period on said
dates, all in accordance with GAAP, as applied on a consistent basis
(subject, in the case of the interim financial statements, to normal year-
end adjustments). Neither the Borrower nor any Subsidiary has on the
Closing Date any material Debt, contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to
or reflected or provided for in the Financial Statements or in SCHEDULE
7.02. Since December 31, 1996, there has been no change or event having a
Material Adverse Effect. Since the date of the Financial Statements,
neither the business nor the Properties of the Borrower or any Subsidiary
have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental
Authority, riot, activities of armed forces or acts of God or of any public
enemy.
Section 7.03 LITIGATION. Except as disclosed to the Lenders in
SCHEDULE 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower or the Parent
threatened against or affecting the Borrower, the Parent or any Subsidiary
-45-
which involves the possibility of any judgment or liability against the
Borrower, the Parent or any Subsidiary not fully covered by insurance
(except for normal deductibles).
Section 7.04 NO BREACH. Neither the execution and delivery of
the Loan Documents, nor compliance with the terms and provisions hereof
will conflict with or result in a breach of, or require any consent which
has not been obtained as of the Closing Date under, the respective charter
or by-laws of the Borrower, the Parent or any Subsidiary, or any
Governmental Requirement or any agreement or instrument to which the
Borrower, the Parent or any Subsidiary is a party or by which it is bound
or to which it or its Properties are subject, or constitute a default under
any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Borrower, the Parent
or any Subsidiary pursuant to the terms of any such agreement or instrument
other than the Liens created by the Loan Documents.
Section 7.05 AUTHORITY. The Borrower, the Parent and each
Subsidiary have all necessary corporate power and authority to execute,
deliver and perform its obligations under the Loan Documents to which it is
a party; and the execution, delivery and performance by the Borrower, the
Parent and each Subsidiary of the Loan Documents to which it is a party,
have been duly authorized by all necessary corporate action on its part;
and the Loan Documents constitute the legal, valid and binding obligations
of the Borrower, the Parent and each Subsidiary, enforceable in accordance
with their terms.
Section 7.06 APPROVALS. No authorizations, approvals or
consents of, and no filings or registrations with, any Governmental
Authority are necessary for the execution, delivery or performance by the
Borrower, the Parent or any Subsidiary of the Loan Documents to which it is
a party or for the validity or enforceability thereof, except for the
recording and filing of the Security Instruments as required by this
Agreement.
Section 7.07 USE OF LOANS. The proceeds of the Loans shall be
used by the Borrower only to repay in full Debt existing on the date of
Initial Funding, including without limitation, Debt payable to First of
America Bank - Michigan, N.A. and the X.X. Xxxxxx Trust, for general
corporate purposes, and to finance in whole or in part acquisitions of Oil
and Gas Properties; PROVIDED, HOWEVER, such proceeds shall not be used for
any hostile corporate acquisitions or takeovers. The Borrower is not
engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan hereunder will be used to
buy or carry any margin stock.
-46-
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable,
the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could
result in imposition on the Borrower, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since
September 2, 1974. No liability to the PBGC (other than for the
payment of current premiums which are not past due) by the Borrower,
any Subsidiary or any ERISA Affiliate has been or is expected by the
Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to
such Plan, and no accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under
each Plan which is subject to Title IV of ERISA does not, as of the
end of the Borrower's most recently ended fiscal year, exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of
ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit
plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the
Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion
at any time without any material liability.
-47-
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the
preceding six calendar years, sponsored, maintained or contributed to,
any Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate
is required to provide security under section 401(a)(29) of the Code
due to a Plan amendment that results in an increase in current
liability for the Plan.
Section 7.09 TAXES. Except as set out in SCHEDULE 7.09, each of
the Borrower, the Parent and its Subsidiaries has filed all United States
Federal income tax returns and all other tax returns which are required to
be filed by them and have paid all material taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower, the Parent
or any Subsidiary. The charges, accruals and reserves on the books of the
Borrower, the Parent and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Borrower and the Parent,
adequate. No tax lien has been filed and, to the knowledge of the Borrower
or the Parent, no claim is being asserted with respect to any such tax, fee
or other charge.
Section 7.10 TITLES, ETC.
(a) Except as set out in SCHEDULE 7.10, each of the Borrower and
its Subsidiaries has good and defensible title to its material
(individually or in the aggregate) Properties, free and clear of all
Liens, except Liens permitted by Section 9.02. Except as set forth in
SCHEDULE 7.10, after giving full effect to the Excepted Liens, the
Borrower owns the net interests in production attributable to the
Hydrocarbon Interests reflected in the most recently delivered Reserve
Report and the ownership of such Properties shall not in any material
respect obligate the Borrower to bear the costs and expenses relating
to the maintenance, development and operations of each such Property
in an amount in excess of the working interest of each Property set
forth in the most recently delivered Reserve Report. All information
contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof.
(b) All leases and agreements necessary for the conduct of the
business of the Borrower and its Subsidiaries are valid and
subsisting, in full force and effect and there exists no default or
event or circumstance which with the giving of notice or the passage
of time or both would give rise to a default under any such lease or
leases, which would affect in any material respect the conduct of the
business of the Borrower and its Subsidiaries.
-48-
(c) The rights, Properties and other assets presently owned,
leased or licensed by the Borrower and its Subsidiaries including,
without limitation, all easements and rights of way, include all
rights, Properties and other assets necessary to permit the Borrower
and its Subsidiaries to conduct their business in all material
respects in the same manner as its business has been conducted prior
to the Closing Date.
(d) All of the assets and Properties of the Borrower and its
Subsidiaries which are reasonably necessary for the operation of its
business are in good working condition and are maintained in
accordance with prudent business standards.
Section 7.11 NO MATERIAL MISSTATEMENTS. No written information,
statement, exhibit, certificate, document or report furnished to the Agent
and the Lenders (or any of them) by the Borrower, the Parent or any
Subsidiary in connection with the negotiation of this Agreement contained
any material misstatement of fact or omitted to state a material fact or
any fact necessary to make the statement contained therein not materially
misleading in the light of the circumstances in which made and with respect
to the Borrower, the Parent and its Subsidiaries taken as a whole. There
is no fact peculiar to the Borrower, the Parent or any Subsidiary which has
a Material Adverse Effect or in the future is reasonably likely to have (so
far as the Borrower or the Parent can now foresee) a Material Adverse
Effect and which has not been set forth in this Agreement or the other
documents, certificates and statements furnished to the Agent by or on
behalf of the Borrower, the Parent or any Subsidiary prior to, or on, the
Closing Date in connection with the transactions contemplated hereby.
Section 7.12 INVESTMENT COMPANY ACT. Neither the Borrower nor
any Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 7.14 SUBSIDIARIES. Except for the Borrower, the Parent
has no Subsidiaries, and the Borrower has no Subsidiaries.
Section 7.15 LOCATION OF BUSINESS AND OFFICES. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal
place of business and chief executive office of each Subsidiary are located
at the addresses stated on SCHEDULE 7.14.
-49-
Section 7.16 DEFAULTS. None of the Borrower, the Parent or any
Subsidiary is in default nor has any event or circumstance occurred which,
but for the expiration of any applicable grace period or the giving of
notice, or both, would constitute a default under any material agreement or
instrument to which the Borrower, the Parent or any Subsidiary is a party
or by which the Borrower, the Parent or any Subsidiary is bound which
default would have a Material Adverse Effect. No Default hereunder has
occurred and is continuing.
Section 7.17 ENVIRONMENTAL MATTERS. Except (i) as provided in
SCHEDULE 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions
would not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any Subsidiary nor
the operations conducted thereon violate any order or requirement of
any court or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower or any Subsidiary nor the operations currently conducted
thereon or, to the best knowledge of the Borrower, by any prior owner
or operator of such Property or operation, are in violation of or
subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under
Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation
or use of any and all Property of the Borrower and each Subsidiary,
including without limitation past or present treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed, and the Borrower and
each Subsidiary are in compliance with the terms and conditions of all
such notices, permits, licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property of the Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and, to the best
knowledge of the Borrower, all such transport carriers and treatment
and disposal facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are
not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws;
-50-
(e) The Borrower has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any Property of the
Borrower or any Subsidiary except in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment;
(f) To the extent applicable, all Property of the Borrower and
each Subsidiary currently satisfies all design, operation, and
equipment requirements imposed by the OPA or scheduled as of the
Closing Date to be imposed by OPA during the term of this Agreement,
and the Borrower does not have any reason to believe that such
Property, to the extent subject to OPA, will not be able to maintain
compliance with the OPA requirements during the term of this
Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
Section 7.18 COMPLIANCE WITH THE LAW. None of the Borrower, the
Parent or any Subsidiary has violated any Governmental Requirement or
failed to obtain any license, permit, franchise or other governmental
authorization necessary for the ownership of any of its Properties or the
conduct of its business, which violation or failure would have (in the
event such violation or failure were asserted by any Person through
appropriate action) a Material Adverse Effect. Except for such acts or
failures to act as would not have a Material Adverse Effect, the Oil and
Gas Properties (and properties unitized therewith) have been maintained,
operated and developed in a good and workmanlike manner and in conformity
with all applicable laws and all rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of
the Hydrocarbon Interests and other contracts and agreements forming a part
of the Oil and Gas Properties; specifically in this connection, (i) after
the Closing Date, no Oil and Gas Property is subject to having allowable
production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or
not the same was permissible at the time) prior to the Closing Date and
(ii) none of the xxxxx comprising a part of the Oil and Gas Properties (or
properties unitized therewith) are deviated from the vertical more than the
maximum permitted by applicable laws, regulations, rules and orders, and
such xxxxx are, in fact, bottomed under and are producing from, and the
well bores are wholly within, the Oil and Gas Properties (or in the case of
xxxxx located on properties unitized therewith, such unitized properties).
-51-
Section 7.19 INSURANCE. SCHEDULE 7.19 attached hereto contains
an accurate and complete description of all material policies of fire,
liability, workmen's compensation and other forms of insurance owned or
held by the Borrower, the Parent and each Subsidiary. All such policies
are in full force and effect, all premiums with respect thereto covering
all periods up to and including the date of the closing have been paid, and
no notice of cancellation or termination has been received with respect to
any such policy. Such policies are sufficient for compliance with all
requirements of law and of all agreements to which the Borrower, the Parent
or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability)
as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of
the Borrower, the Parent and each Subsidiary; will remain in full force and
effect through the respective dates set forth in SCHEDULE 7.19 without the
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. SCHEDULE 7.19 identifies all material risks, if any, which the
Borrower, the Parent and its Subsidiaries and their respective Board of
Directors or officers have designated as being self-insured. None of the
Borrower, the Parent or any Subsidiary has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited
below usual and customary policy limits, by an insurance carrier to which
it has applied for any such insurance or with which it has carried
insurance during the last three years.
Section 7.20 HEDGING AGREEMENTS. SCHEDULE 7.20 sets forth, as
of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts
of sale which provide for prepayment for deferred shipment or delivery of
oil, gas or other commodities) of the Borrower and each Subsidiary, the
material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net xxxx to market
value thereof, all credit support agreements relating thereto (including
any margin required or supplied), and the counter party to each such
agreement.
Section 7.21 RESTRICTION ON LIENS. None of the Borrower, the
Parent or any of its Subsidiaries is a party to any agreement or
arrangement (other than this Agreement and the Security Instruments), or
subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to other Persons on or in
respect of their respective assets or Properties.
Section 7.22 MATERIAL AGREEMENTS. Set forth on SCHEDULE 7.22
hereto is a complete and correct list of all material agreements, leases,
indentures, purchase agreements, obligations in respect of letters of
-52-
credit, guarantees, joint venture agreements, and other instruments in
effect or to be in effect as of the Closing Date (other than Hedging
Agreements) providing for, evidencing, securing or otherwise relating to
any Debt of the Borrower or any of its Subsidiaries, and all obligations of
the Borrower or any of its Subsidiaries to issuers of surety or appeal
bonds issued for account of the Borrower or any such Subsidiary, and such
list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt or lease obligations outstanding or to be
outstanding and the Property subject to any Lien securing such Debt or
lease obligation. Also set forth on SCHEDULE 7.22 hereto is a complete and
correct list of all material agreements and other instruments of the
Borrower and its Subsidiaries relating to the purchase, transportation by
pipeline, gas processing, marketing, sale and supply of natural gas and
other Hydrocarbons, but in any event, any such agreement or other
instrument that will account for more than 5% of the sales of the Borrower
and its Subsidiaries during the Borrower's current fiscal year.
Section 7.23 GAS IMBALANCES. As of the Closing Date, except as
set forth on SCHEDULE 7.23 or on the most recent certificate delivered
pursuant to Section 8.07(c), on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to the Borrower's Oil and Gas
Properties which would require the Borrower to deliver five percent (5%) or
more of the monthly production from its Hydrocarbons produced on a monthly
basis from its Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower and the Parent each covenants and agrees that, so long as
any of the Commitments are in effect and until payment in full of all Loans
hereunder, all interest thereon and all other amounts payable by the
Borrower hereunder:
Section 8.01 REPORTING REQUIREMENTS. The Borrower or the Parent
shall deliver, or shall cause to be delivered, to the Agent with sufficient
copies of each for the Lenders:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within 90 days after the end of each fiscal year of the
Parent, the complete audited, consolidated and consolidating financial
statements (including income statements, balance sheets, statements of
changes in equity and statements of cash flows) of the Parent and its
Consolidated Subsidiaries, including the consolidated and
consolidating financial statements as of the end of such year, the
consolidated and consolidating statements of profit and loss and
-53-
surplus as of the end of such year, and the consolidated and
consolidating statements of profit and loss and surplus for the fiscal
year then ended, and setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year, and
accompanied by the related opinion of independent public accountants
of recognized national standing acceptable to the Agent which opinion
shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of
operations of the Parent and its Consolidated Subsidiaries as at the
end of, and for, such fiscal year and that such financial statements
have been prepared in accordance with GAAP, except for such changes in
such principles with which the independent public accountants shall
have concurred and such opinion shall not contain a "going concern" or
like qualification or exception, and a certificate of such accountants
stating that, in making the examination necessary for their opinion,
they obtained no knowledge, except as specifically stated, of any
Default.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in
any event within 60 days after the end of each of the first three
fiscal quarterly periods of each fiscal year of the Parent, management
prepared consolidated and consolidating financial statements
(including income statements, balance sheets, statements of changes in
equity and statements of cash flows) of the Parent and its
Consolidated Subsidiaries as of the end of such quarter, and the
consolidated and consolidating statements of profit and loss and
surplus of the Parent and its Consolidated Subsidiaries from the
beginning of their fiscal year to the end of such quarter, and setting
forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall
state that said financial statements fairly present the consolidated
and consolidating financial condition and results of operations of the
Parent and its Consolidated Subsidiaries in accordance with GAAP, as
at the end of, and for, such period (subject to normal year-end audit
adjustments).
(c) NOTICE OF DEFAULT, ETC. Promptly after the Borrower knows
that any Default or any Material Adverse Effect has occurred, a notice
of such Default or Material Adverse Effect, describing the same in
reasonable detail and the action the Borrower proposes to take with
respect thereto.
(d) OTHER ACCOUNTING REPORTS. Promptly upon receipt thereof, a
copy of each other report or letter submitted to the Borrower or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower and
its Subsidiaries, and a copy of any response by the Borrower or any
-54-
Subsidiary of the Borrower, or the Board of Directors of the Borrower
or any Subsidiary of the Borrower, to such letter or report.
(e) SEC FILINGS, ETC. Promptly after the sending or filing
thereof, copies of all reports, proxy statements and financial
statements which the Parent files with its shareholders or any
securities exchange, the SEC or any successor agency including,
without limitation, all reports of Form 10-K, 10-Q, and 8-K. Such
reports need not include exhibits. Borrower agrees to promptly
provide Agent with exhibits specifically requested by Agent.
(f) NOTICES UNDER OTHER LOAN AGREEMENTS. Promptly after the
furnishing thereof, copies of any statement, report or notice
furnished to any Person pursuant to the terms of any indenture, loan
or credit or other similar agreement, other than this Agreement and
not otherwise required to be furnished to the Lenders pursuant to any
other provision of this Section 8.01.
(g) HEDGING AGREEMENTS. As soon as available and in any event
within ten (10) Business Days after the last day of each calendar
quarter, a report, in form and substance satisfactory to the Agent,
setting forth as of the last Business Day of such calendar quarter a
true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Borrower and each Subsidiary, the
material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net xxxx to
market value therefor, any new credit support agreements relating
thereto not listed on SCHEDULE 7.23, any margin required or supplied
under any credit support document, and the counter party to each such
agreement.
(h) ANNUAL BUDGET. Concurrent with delivery of each January 1
Reserve Report, a one year financial projection for the Parent and its
Subsidiaries of revenues, expenses and capital expenditures, in form
and substance satisfactory to the Agent.
(i) PRODUCTION REPORTS, ETC. As soon as available and in any
event within 30 days after the end of each month, production reports,
which shall include quantities or volumes of production, and within 60
days after the end of each month, general and administrative cost
summaries by lease for its Oil and Gas Properties, which summaries
shall include revenue, realized product prices, operating expenses,
taxes, capital expenditures and lease operating costs which have
accrued to the Borrower's accounts in such period, and such other
information with respect thereto as the Agent may require.
-55-
(j) DRILLING REPORTS, ETC. As soon as possible after the end
of each calendar quarter, but in any event not later than concurrent
with the delivery of the financial statements required by Sections
8.01(a) and (b), a report setting forth for the immediately preceding
calendar quarter (i) the number of xxxxx drilled in which the
Borrower, the Parent, or any Subsidiary owns a beneficial or record
interest, (ii) the classification of such xxxxx as developmental or
exploratory, (iii) whether each such well is a dry hole or completed
or expected to be completed as a commercially productive well, and
(iv) capital expenditures associated with such xxxxx.
(k) OTHER MATTERS. From time to time such other information
regarding the business, affairs or financial condition of the Borrower
or any Subsidiary (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as any Lender or the Agent may reasonably request.
The Borrower and the Parent will furnish to the Agent, at the time each set
of financial statements is furnished pursuant to paragraph (a) or (b)
above, a certificate substantially in the form of EXHIBIT C executed by a
Responsible Officer (i) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default
has occurred and is continuing, describing the same in reasonable detail),
and (ii) setting forth in reasonable detail the computations necessary to
determine whether the Borrower is in compliance with Sections 9.12, 9.13,
9.14 and 9.15 as of the end of the respective fiscal quarter or fiscal
year.
Section 8.02 LITIGATION. The Borrower shall promptly give to
the Agent notice of: (i) all legal or arbitral proceedings, and of all
proceedings before any Governmental Authority affecting the Borrower, the
Parent or any Subsidiary, except proceedings which, if adversely
determined, would not have a Material Adverse Effect, and (ii) of any
litigation or proceeding against or adversely affecting Borrower, the
Parent or any Subsidiary in which the amount involved is not covered in
full by insurance (subject to normal and customary deductibles and for
which the insurer has not assumed the defense), or in which injunctive or
similar relief is sought. The Borrower will, and will cause the Parent and
each of its Subsidiaries to, promptly notify the Agent and each of the
Lenders of any claim, judgment, Lien or other encumbrance affecting any
Property of the Borrower, the Parent or any Subsidiary if the value of the
claim, judgment, Lien, or other encumbrance affecting such Property shall
exceed $2,000,000.
Section 8.03 MAINTENANCE, ETC.
(a) GENERALLY. The Borrower and the Parent shall and shall
cause each Subsidiary to: preserve and maintain its corporate
-56-
existence and all of its material rights, privileges and franchises;
keep books of record and account in which full, true and correct
entries will be made of all dealings or transactions in relation to
its business and activities; comply with all Governmental Requirements
if failure to comply with such requirements will have a Material
Adverse Effect; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or
profits or on any of its Property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
upon reasonable notice, permit representatives of the Agent or any
Lender, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Agent (as the case may be);
and keep, or cause to be kept, insured by financially sound and
reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry such other insurance as is
usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available.
(b) PROOF OF INSURANCE. Contemporaneously with the delivery of
the financial statements required by Section 8.01(a) to be delivered
for each year, the Borrower will furnish or cause to be furnished to
the Agent and the Lenders a certificate of insurance coverage from the
insurer in form and substance satisfactory to the Agent and, if
requested, will furnish the Agent and the Lenders copies of the
applicable policies.
(c) OIL AND GAS PROPERTIES. The Borrower will and will cause
each Subsidiary to, at its own expense, do or cause to be done all
things reasonably necessary to preserve and keep in good repair,
working order and efficiency all of its Oil and Gas Properties and
other material Properties including, without limitation, all
equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so
that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and
maintained, except to the extent a portion of such Properties is no
longer capable of producing Hydrocarbons in economically reasonable
amounts. The Borrower will and will cause each Subsidiary to
promptly: (i) pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the leases or
other agreements affecting or pertaining to its Oil and Gas
-57-
Properties, (ii) perform or make reasonable and customary efforts to
cause to be performed, in accordance with industry standards, the
obligations required by each and all of the assignments, deeds,
leases, sub-leases, contracts and agreements affecting its interests
in its Oil and Gas Properties and other material Properties, (iii)
will and will cause each Subsidiary to do all other things necessary
to keep unimpaired, except for Liens described in Section 9.02, its
rights with respect to its Oil and Gas Properties and other material
Properties and prevent any forfeiture thereof or a default thereunder,
except to the extent a portion of such Properties is no longer capable
of producing Hydrocarbons in economically reasonable amounts. The
Borrower will and will cause each Subsidiary to operate its Oil and
Gas Properties and other material Properties or cause or make
reasonable and customary efforts to cause such Oil and Gas Properties
and other material Properties to be operated in a careful and
efficient manner in accordance with the practices of the industry and
in compliance with all applicable contracts and agreements and in
compliance in all material respects with all Governmental
Requirements.
Section 8.04 ENVIRONMENTAL MATTERS.
(a) ESTABLISHMENT OF PROCEDURES. The Borrower will and will
cause each Subsidiary to establish and implement such procedures as
may be reasonably necessary to continuously determine and assure that
any failure of the following does not have a Material Adverse Effect:
(i) all Property of the Borrower and its Subsidiaries and the
operations conducted thereon and other activities of the Borrower and
its Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or
to any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on
or to any such Property in a quantity equal to or exceeding that
quantity which requires reporting pursuant to Section 103 of CERCLA,
and (iv) no oil, oil and gas exploration and production wastes or
hazardous substance is released on or to any such Property so as to
pose an imminent and substantial endangerment to public health or
welfare or the environment.
(b) NOTICE OF ACTION. The Borrower will promptly notify the
Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which the
Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) FUTURE ACQUISITIONS. The Borrower will and will cause each
Subsidiary to provide environmental audits and tests in accordance
-58-
with American Society for Testing and Materials standards as
reasonably requested by the Agent and the Lenders (or as otherwise
required to be obtained by the Agent or the Lenders by any
Governmental Authority) in connection with any future acquisitions of
Oil and Gas Properties or other material Properties.
Section 8.05 FURTHER ASSURANCES. The Borrower and the Parent
will and will cause each Subsidiary to cure promptly any defects in the
creation and issuance of the Notes and the execution and delivery of the
Security Instruments and this Agreement. The Borrower and the Parent at
their expense will and will cause each Subsidiary to promptly execute and
deliver to the Agent upon request all such other documents, agreements and
instruments to comply with or accomplish the covenants and agreements of
the Borrower, the Parent or any Subsidiary, as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more
fully describe the collateral intended as security for the Notes, or to
correct any omissions in the Security Instruments, or to state more fully
the security obligations set out herein or in any of the Security
Instruments, or to perfect, protect or preserve any Liens created pursuant
to any of the Security Instruments, or to make any recordings, to file any
notices or obtain any consents, all as may be necessary or appropriate in
connection therewith.
Section 8.06 PERFORMANCE OF OBLIGATIONS. The Borrower will pay
the Notes according to the reading, tenor and effect thereof; and the
Borrower and the Parent will, and will cause each Subsidiary to, do and
perform every act and discharge all of the obligations to be performed and
discharged by them under the Security Instruments and this Agreement, at
the time or times and in the manner specified.
Section 8.07 ENGINEERING REPORTS.
(a) On or before each March 1 and September 1, commencing with
September 1, 1998, the Borrower shall furnish to the Agent a Reserve
Report. The January 1 Reserve Report (due on or before each March 1)
of each year shall be prepared by certified independent petroleum
engineers or other independent petroleum consultant(s) acceptable to
the Agent and the July 1 Reserve Report (due on or before each
September 1) of each year shall be prepared by or under the
supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared
in accordance with the procedures used in the immediately proceeding
January 1 Reserve Report. Notwithstanding the first sentence of this
Section 8.07(a), the Agent, in its sole determination, may require
that a Reserve Report dated as of December 31, 1997, prepared by an
independent petroleum engineer or other consultant acceptable to the
Agent, be delivered on or before April 1, 1998 in connection with the
Scheduled Redetermination Date for May, 1998.
-59-
(b) In the event of an unscheduled redetermination, the Borrower
shall furnish to the Agent a Reserve Report prepared by or under the
supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared
in accordance with the procedures used in the immediately preceding
Reserve Report. For any unscheduled redetermination requested
pursuant to Section 2.08(d)), the Borrower shall provide such Reserve
Report with an "as of" date as required by the Agent as soon as
possible, but in any event no later than 45 days following the receipt
of the request by the Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Agent, a certificate from a Responsible Officer
certifying that, to the best of his knowledge and in all material
respects: (i) the information contained in the Reserve Report and any
other information delivered in connection therewith is true and
correct, (ii) the Borrower owns good and defensible title to the Oil
and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section
9.02, (iii) except as set forth on an exhibit to the certificate, on a
net basis there are no gas imbalances, take or pay or other
prepayments with respect to its Oil and Gas Properties evaluated in
such Reserve Report which would require the Borrower to deliver
Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv)
none of its Oil and Gas Properties have been sold since the date of
the last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its
Oil and Gas Properties sold and in such detail as reasonably required
by the Agent, (v) attached to the certificate is a list of its Oil and
Gas Properties added to and deleted from the immediately prior Reserve
Report and a list showing any change in working interest or net
revenue interest in its Oil and Gas Properties occurring and the
reason for such change, (vi) attached to the certificate is a list of
all Persons disbursing proceeds to the Borrower from its Oil and Gas
Properties and (vii) except as set forth on a schedule attached to the
certificate all of the Oil and Gas Properties evaluated by such
Reserve Report are Mortgaged Property.
Section 8.08 TITLE INFORMATION.
(a) DELIVERY. On or before the delivery to the Agent of each
Reserve Report required by Section 8.07(a), the Borrower will deliver
title information in form and substance acceptable to the Agent
covering enough of the Oil and Gas Properties evaluated by such
Reserve Report that were not included in the immediately preceding
Reserve Report, so that the Agent shall have received together with
title information previously delivered to the Agent, satisfactory
-60-
title information on at least eighty percent (80%) of the value of the
Oil and Gas Properties evaluated by such Reserve Report.
(b) CURE OF TITLE DEFECTS. The Borrower shall cure any title
defects or exceptions which are not Excepted Liens raised by such
information, or substitute acceptable Mortgaged Properties with no
title defects or exceptions except for Excepted Liens covering
Mortgaged Properties of an equivalent value, within 45 days after a
request by the Agent or the Lenders to cure such defects or
exceptions.
(c) FAILURE TO CURE TITLE DEFECTS. If the Borrower is unable to
cure any title defect requested by the Agent or the Lenders to be
cured within the 45 day period or the Borrower does not comply with
the requirements to provide acceptable title information covering
eighty percent (80%) of the value of the Oil and Gas Properties
evaluated in the most recent Reserve Report, such default shall not be
a Default or an Event of Default, but instead the Agent and the
Lenders shall have the right to exercise the following remedy in their
sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the
remedy by the Agent or the Lenders. To the extent that the Agent or
the Lenders are not satisfied with title to any Mortgaged Property
after the time period in Section 8.08(b) has elapsed, such
unacceptable Mortgaged Property shall not count towards the eighty
percent (80%) requirement, and the Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base
shall be reduced by an amount as determined by all of the Lenders to
cause the Borrower to be in compliance with the requirement to provide
acceptable title information on eighty percent (80%) of the value of
the Oil and Gas Properties. This new Borrowing Base shall become
effective immediately after receipt of such notice.
Section 8.09 ADDITIONAL COLLATERAL.
(a) LIEN IN ACQUIRED OIL AND GAS PROPERTIES. Should the
Borrower, the Parent or any Subsidiary acquire any additional Oil and
Gas Properties, the Borrower and the Parent will, and will cause such
Subsidiary to, as applicable, grant to the Agent as security for the
Indebtedness a first-priority Lien interest (subject only to Excepted
Liens) on its interest in any Oil and Gas Properties not already
subject to a Lien of the Security Instruments, which Lien will be
created and perfected by and in accordance with the provisions of
mortgages, deeds of trust, security agreements and financing
statements, or other Security Instruments, all in form and substance
satisfactory to the Agent in its sole discretion and in sufficient
executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
-61-
(b) TITLE INFORMATION. Concurrently with the granting of the
Lien or other action referred to in Section 8.07(a) above, the
Borrower will provide to the Agent title information in form and
substance satisfactory to the Agent in its sole discretion with
respect to the Borrower's, the Parent's or such Subsidiary's interests
in such Oil and Gas Properties.
(c) LEGAL OPINIONS. Also, promptly after the filing of any new
Security Instrument in any state, upon the reasonable request of the
Agent, the Borrower will provide to the Agent an opinion addressed to
the Agent for the benefit of the Lenders in form and substance
satisfactory to the Agent in its sole discretion from counsel
acceptable to Agent, stating that the Security Instrument is valid,
binding and enforceable in accordance with its terms and in legally
sufficient form for such jurisdiction.
(d) PARTICIPATION AGREEMENTS. Within 60 days after the Closing
Date, the Borrower shall have received and duly recorded conveyances
or assignments of all interests in Oil and Gas Properties that have
been earned by the Borrower prior to the Closing Date pursuant to the
terms of any and all participation agreements, joint venture
agreements, farmout agreements, exploration agreements, or any other
agreements ("PARTICIPATION AGREEMENTS") to which it is a party and
under which events have occurred that entitle the Borrower to receive
a record title interest in any Oil and Gas Property. With respect to
any right to an assignment earned pursuant to any Participation
Agreement after the Closing Date, the Borrower or the Parent shall,
and shall cause any Guarantor to, within 90 days after earning such
right cause an assignment of the earned interest to the Borrower, the
Parent or such Guarantor to be executed and duly recorded. The
Borrower or the Parent, as applicable, shall and shall cause any
Subsidiary to, promptly upon recording of such an assignment, grant to
the Agent as security for the Indebtedness a first priority Lien in
its interests in the Oil and Gas Properties so assigned pursuant to a
Mortgage, supplement or amendment to an existing Mortgage, or other
Security Instrument in form and substance satisfactory to the Agent in
its sole discretion and in sufficient executed and acknowledged
counterparts for recording purposes.
Section 8.10 MORTGAGE TITLE INFORMATION/OPINIONS. Within 45
days following the Initial Funding, the Borrower shall cause to be
delivered to the Agent title information (which in the sole discretion of
the Agent may be, to the extent necessary, in the form of title opinions)
satisfactory to the Agent so that the Agent shall have received
satisfactory title information on at least eighty percent (80%) of the
value of the Oil and Gas Properties evaluated by the Initial Reserve Report
and showing the Lien of the Mortgages covering the Mortgaged Property to be
first and prior and subject to no exceptions.
-62-
Section 8.11 ERISA INFORMATION AND COMPLIANCE. The Borrower will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies to the Lenders (i)
promptly after the filing thereof with the United States Secretary of
Labor, the Internal Revenue Service or the PBGC, copies of each annual and
other report with respect to each Plan or any trust created thereunder,
(ii) immediately upon becoming aware of the occurrence of any ERISA Event
or of any "prohibited transaction," as described in section 406 of ERISA or
in section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written notice signed by a Responsible Officer
specifying the nature thereof, what action the Borrower, the Subsidiary or
the ERISA Affiliate is taking or proposes to take with respect thereto,
and, when known, any action taken or proposed by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto, and
(iii) immediately upon receipt thereof, copies of any notice of the PBGC's
intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the
Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (i)
satisfy in full and in a timely manner, without incurring any late payment
or underpayment charge or penalty and without giving rise to any lien, all
of the contribution and funding requirements of section 412 of the Code
(determined without regard to subsections (d), (e), (f) and (k) thereof)
and of section 302 of ERISA (determined without regard to sections 303, 304
and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a
timely manner, without incurring any late payment or underpayment charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.12 HEDGING ACTIVITIES. The Borrower will, and will cause
each Subsidiary to, develop and maintain policies, controls and strategies
for their oil and gas hedging activities that are acceptable in all
material respects to the Agent and shall not enter into any Hedging Agreements
not in compliance with such policies, controls, and strategies.
Section 8.13 PAYMENT OF TRADE PAYABLES. The Borrower and the Parent
will pay and cause all Subsidiaries to pay all of their customary trade
payables incurred in the ordinary course of business within 60 days of the
invoice or billing date, unless being contested in good faith by
appropriate proceedings and if reserves adequate under GAAP shall have been
established therefor.
Section 8.14 SUBSIDIARY SECURITY. Should the Parent or the Borrower
create or acquire any Subsidiary to the extent permitted by the terms of
this Agreement, it will promptly grant to the Agent for the benefit of the
Lenders a security interest and pledge of all the capital stock of such
Subsidiary, in form and substance satisfactory to the Agent, and the
Borrower and Parent will cause such Subsidiary to enter into a guaranty of
the Indebtedness in form and substance satisfactory to the Agent. The
delivery of such security and guaranty shall be accompanied by such back up
-63-
corporate authority and opinions of counsel as the Agent may reasonably
request.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower and the Parent each covenants and agrees that, so long as
any of the Commitments are in effect and until payment in full of Loans
hereunder, all interest thereon and all other amounts payable by the
Borrower hereunder, without the prior written consent of the Majority
Lenders:
Section 9.01 DEBT. None of the Borrower, the Parent or any
Subsidiary will incur, create, assume or permit to exist any Debt, except:
(a) the Notes or other Indebtedness or any guaranty of or
suretyship arrangement for the Notes or other Indebtedness;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in SCHEDULE
9.01, and any renewals or extensions (but not increases) thereof;
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary
course of business which, if greater than 60 days past the invoice or
billing date, are being contested in good faith by appropriate
proceedings if reserves adequate under GAAP shall have been
established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of the Borrower pursuant to GAAP) not to exceed
$2,000,000;
(e) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil
and Gas Properties;
(f) Debt of the Parent created by loans permitted by Section
9.03(g); and
(g) Debt of the Borrower under Hedging Agreements with a Lender
or an Affiliate of any Lender or another investment grade counterparty
the notional amounts on which do not exceed 75% of the Borrower's
anticipated oil and/or gas production to be produced during the term
of such Hedging Agreements entered into as a part of its normal
business operations as a risk management strategy and/or hedge against
-64-
changes resulting from market conditions related to the Borrower's and
its Subsidiaries' operations.
Section 9.02 LIENS. None of the Borrower, the Parent, or any
Subsidiary will create, incur, assume or permit to exist any Lien on any of
its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d), but
only on the Property under lease;
(d) Liens disclosed on SCHEDULE 9.02; and
(e) Liens on cash or securities of the Borrower securing the
Debt described in Section 9.01(e).
Section 9.03 INVESTMENTS, LOANS AND ADVANCES. None of the
Borrower, the Parent or any Subsidiary will make or permit to remain
outstanding any loans or advances to or investments in any Person, except
that the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in SCHEDULE 9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of
creation thereof;
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender
or any office located in the United States of any other bank or trust
company which is organized under the laws of the United States or any
state thereof, has capital, surplus and undivided profits aggregating
at least $100,000,000.00 (as of the date of such Lender's or bank or
trust company's most recent financial reports) and has a short term
deposit rating of no lower than A2 or P2, as such rating is set forth
from time to time, by Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., respectively;
-65-
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) loans made by the Borrower to the Parent to pay federal or
state taxes, payroll and payroll related taxes and other reasonable
general and administrative expenses not to exceed at any one time
outstanding $2,000,000 in the aggregate; and
(h) investments by the Borrower in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related
thereto.
Section 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. Neither
the Parent nor the Borrower will declare or pay any dividend, purchase,
redeem or otherwise acquire for value any of its stock now or hereafter
outstanding, return any capital to its stockholders or make any
distribution of its assets to its stockholders.
Section 9.05 SALES AND LEASEBACKS. None of the Borrower, the
Parent or any Subsidiary will enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower, the Parent or any
Subsidiary shall sell or transfer any of its Property, whether now owned or
hereafter acquired, and whereby the Borrower, the Parent or any Subsidiary
shall then or thereafter rent or lease as lessee such Property or any part
thereof or other Property which the Borrower, the Parent or any Subsidiary
intends to use for substantially the same purpose or purposes as the
Property sold or transferred.
Section 9.06 NATURE OF BUSINESS. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of
its business as an independent oil and gas exploration and production
company.
Section 9.07 LIMITATION ON LEASES. None of the Borrower, the
Parent or any Subsidiary will create, incur, assume or permit to exist any
obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal including capital leases, but excluding leases
of Hydrocarbon Interests), under leases or lease agreements which would
cause the aggregate amount of all payments made by the Borrower, the Parent
and its Subsidiaries pursuant to all such leases or lease agreements to
exceed $1,000,000 in any period of twelve consecutive calendar months
during the life of such leases.
Section 9.08 MERGERS, ETC. None of the Borrower, the Parent or
any Subsidiary will merge into or with or consolidate with any other
Person, or sell, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its Property or
assets to any other Person, except that any Subsidiary may merge into or
-66-
consolidate with the Parent and the Parent may merge or consolidate with
another Person; provided that (i) the Parent is the surviving corporation
of any merger or consolidation, (ii) upon completion of the merger or
consolidation, the Tangible Net Worth of the corporation that results from
the merger or consolidation is not less than the Tangible Net Worth of the
Parent before that merger or consolidation, (iii) no Default or Event of
Default has occurred and is continuing or will result from such merger or
consolidation, and (iv) the Loan Documents will be amended if deemed
necessary by the Majority Lenders to reflect such merger in form
satisfactory to the Majority Lenders.
Section 9.09 PROCEEDS OF NOTES AND LETTERS OF CREDIT. The
Borrower will not permit the proceeds of the Notes or Letters of Credit to
be used for any purpose other than those permitted by Section 7.07.
Neither the Borrower nor any Person acting on behalf of the Borrower has
taken or will take any action which might cause any of the Loan Documents
to violate Regulation G, T, U or X or any other regulation of the Board of
Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA COMPLIANCE. The Borrower will not at any
time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to
engage in, any transaction in connection with which the Borrower, any
Subsidiary or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect
to any Plan, which could result in any liability to the Borrower, any
Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to
fail to make, full payment when due of all amounts which, under the
provisions of any Plan, agreement relating thereto or applicable law,
the Borrower, a Subsidiary or any ERISA Affiliate is required to pay
as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate
to permit to exist, any accumulated funding deficiency within the
meaning of Section 302 of ERISA or section 412 of the Code, whether or
not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under
any Plan maintained by the Borrower, any Subsidiary or any ERISA
-67-
Affiliate which is regulated under Title IV of ERISA to exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of
ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to
acquire, an interest in any Person that causes such Person to become
an ERISA Affiliate with respect to the Borrower, any Subsidiary or any
ERISA Affiliate if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has
sponsored, maintained, or contributed to, (1) any Multiemployer Plan,
or (2) any other Plan that is subject to Title IV of ERISA under which
the actuarial present value of the benefit liabilities under such Plan
exceeds the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur,
a liability to or on account of a Plan under sections 515, 4062, 4063,
4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any
such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend,
a Plan resulting in an increase in current liability such that the
Borrower, any Subsidiary or any ERISA Affiliate is required to provide
security to such Plan under section 401(a)(29) of the Code.
Section 9.11 SALE OR DISCOUNT OF RECEIVABLES. None of the
Borrower, the Parent or any Subsidiary will discount or sell (with or
without recourse) any of its notes receivable or accounts receivable.
Section 9.12 CURRENT RATIO. The Parent will not permit its
ratio of (i) consolidated current assets (including an amount, if any, by
which the then effective Borrowing Base exceeds the sum of the aggregate
outstanding principal amount of the Loans, plus the LC Exposure) to (ii)
-68-
consolidated current liabilities (excluding current maturities of the
Notes) to be less than 1.0 to 1.0 at any time.
Section 9.13 RATIO OF DEBT TO CAPITALIZATION. The Parent will
not permit its ratio of (i) Debt to (ii) Capitalization to be greater than
0.40 to 1.0 at any time. As used in this Section 9.13, "CAPITALIZATION"
shall mean Debt plus Tangible Net Worth.
Section 9.14 TANGIBLE NET WORTH. The Parent will not permit its
Tangible Net Worth as of the end of any fiscal quarter of the Parent
(calculated quarterly at the end of each fiscal quarter) to be less than
$38,000,000, PLUS 75% of the proceeds received from any equity offerings
occurring after February 9, 1998, plus 75% of Consolidated Net Income
aggregated for each calendar quarter from and after the Closing Date in
which Consolidated Net Income is positive.
Section 9.15 DEBT TO EBITDA COVERAGE RATIO. The Parent will not
permit its Debt to EBITDA Coverage Ratio as of the end of any fiscal
quarter of the Parent to be less than 1.00 to 1.00. For the purpose of
this Section 9.15, "DEBT TO EBITDA COVERAGE RATIO" shall mean the ratio of
(i) Debt as of the end of such fiscal quarter of the Borrower and its
Consolidated Subsidiaries to (ii) EBITDA for the immediately preceding four
fiscal quarters ending on such date.
Section 9.16 SALE OF PROPERTIES. Without the prior written
consent of the Lenders (which consent will not be unreasonably withheld),
neither the Parent nor the Borrower will, and will not permit any
Subsidiary to, Transfer any Property or any interest in any Property to any
Person.
Section 9.17 ENVIRONMENTAL MATTERS. None of the Borrower, the
Parent or any Subsidiary will cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will
subject any such Property to any remedial obligations under any
Environmental Laws, assuming disclosure to the applicable Governmental
Authority of all relevant facts, conditions and circumstances, if any,
pertaining to such Property where such violations or remedial obligations
would have a Material Adverse Effect.
Section 9.18 TRANSACTIONS WITH AFFILIATES. None of the Borrower
any Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate unless such transactions are
otherwise permitted under this Agreement, are in the ordinary course of its
business and are upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm's length transaction with a Person
not an Affiliate.
-69-
Section 9.19 SUBSIDIARIES. The Parent shall not, and shall not
permit any Subsidiary to, (i) create any additional Subsidiaries, (ii) sell
or issue any stock or ownership interest of a Subsidiary, except to the
Parent and except in compliance with Section 9.03, or (iii) enter into any
agreement that would restrict any Subsidiaries ability to make
distributions to the Borrower.
Section 9.20 NEGATIVE PLEDGE AGREEMENTS. None of the Borrower,
the Parent or any Subsidiary will create, incur, assume or permit to
exist any contract, agreement or understanding (other than this Agreement
and the Security Instruments) which in any way prohibits or restricts the
granting, conveying, creation or imposition of any Lien on any of its
Property or restricts any Subsidiary from paying dividends to the Borrower,
or which requires the consent of or notice to other Persons in connection
therewith.
Section 9.21 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS.
None of the Borrower, the Parent or any Subsidiary will allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and
Gas Properties of the Borrower, the Parent or any Subsidiary which would
require the Borrower, the Parent or such Subsidiary to deliver in the
aggregate five percent (5%) or more of their Hydrocarbons produced on a
monthly basis from such Oil and Gas Properties at some future time without
then or thereafter receiving full payment therefor.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT. One or more of the following
events shall constitute an "EVENT OF DEFAULT":
(a) the Borrower shall default in the payment or prepayment when
due of any principal of or interest on any Loan, or any reimbursement
obligation for a disbursement made under any Letter of Credit, or any
fees or other amount payable by it hereunder or under any Security
Instrument and such default, other than a default of a payment or
prepayment of principal (which shall have no cure period), shall
continue unremedied for a period of three Business Days; or
(b) the Borrower, the Parent or any Subsidiary shall default in
the payment when due of any principal of or interest on any of its
other Debt aggregating $2,000,000 or more, or any event specified in
any note, agreement, indenture or other document evidencing or
relating to any such Debt shall occur if the effect of such event is
to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Debt (or a trustee or
-70-
agent on behalf of such holder or holders) to cause, such Debt to
become due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed
made herein or in any Security Instrument by the Borrower, the Parent
or any Subsidiary, or any certificate furnished to any Lender or the
Agent pursuant to the provisions hereof or any Security Instrument,
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) the Borrower or the Parent shall default in the performance
of any of its obligations under Article IX or any other Article of
this Agreement other than under Article VIII; or the Borrower or the
Parent shall default in the performance of any of its obligations
under Article VIII or any Security Instrument (other than the payment
of amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days
after the earlier to occur of (i) notice thereof to the Borrower or
the Parent by the Agent or any Lender (through the Agent), or (ii) the
Borrower or the Parent otherwise becoming aware of such default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of
the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of the Borrower of all or any substantial part of its assets,
or (iii) similar relief in respect of the Borrower under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or
-71-
ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 days; or (iv) an order for relief
against the Borrower shall be entered in an involuntary case under the
Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate shall be rendered by a court against
the Borrower or any Subsidiary and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within thirty (30) days from
the date of entry thereof and the Borrower or such Subsidiary shall
not, within said period of 30 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) the Security Instruments after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease
to be in full force and effect and valid, binding and enforceable in
accordance with their terms, or cease to create a valid and perfected
Lien of the priority required thereby on any of the collateral
purported to be covered thereby, except to the extent permitted by the
terms of this Agreement, or the Borrower shall so state in writing; or
(j) an event having a Material Adverse Effect shall occur; or
(k) a Change of Control shall occur; or
(l) the Borrower fails to pay any Deficiency Payment or to pay
in full any Borrowing Base Deficiency on or before the last day of the
related Deficiency Period; or
(m) the Parent or any other Guarantor takes, suffers or permits
to exist any of the events or conditions referred to in paragraphs
(e), (f), (g) or (h).
Section 10.02 REMEDIES.
(a) In the case of an Event of Default other than one referred
to in clauses (e), (f) or (g) of Section 10.01 or in clause (m) to the
extent it relates to clauses (e), (f) or (g), the Agent, upon request
of the Majority Lenders, shall, by notice to the Borrower, cancel the
Commitments and/or declare the principal amount then outstanding of,
and the accrued interest on, the Loans and all other amounts payable
by the Borrower hereunder and under the Notes (including without
limitation the payment of cash collateral to secure the LC Exposure as
provided in Section 2.10(b)) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
-72-
presentment, demand, protest, notice of intent to accelerate, notice
of acceleration or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(m) to the extent it relates to clauses (e), (f) or (g), the
Commitments shall be automatically canceled and the principal amount
then outstanding of, and the accrued interest on, the Loans and all
other amounts payable by the Borrower hereunder and under the Notes
(including without limitation the payment of cash collateral to secure
the LC Exposure as provided in Section 2.10(b)) shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether
by acceleration or otherwise shall be applied first to reimbursement
of expenses and indemnities provided for in this Agreement and the
Security Instruments; second to accrued interest on the Notes; third
to fees; fourth pro rata to principal outstanding on the Notes and
other Indebtedness; fifth to serve as cash collateral to be held by
the Agent to secure the LC Exposure; and any excess shall be paid to
the Borrower or as otherwise required by any Governmental Requirement.
ARTICLE XI
THE AGENT
Section 11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the Security Instruments with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the
Security Instruments, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
Section 11.05 and the first sentence of Section 11.06 shall include
reference to its Affiliates and its and its Affiliates' officers,
directors, employees, attorneys, accountants, experts and agents): (i)
shall have no duties or responsibilities except those expressly set forth
in the Loan Documents, and shall not by reason of the Loan Documents be a
trustee or fiduciary for any Lender; (ii) makes no representation or
warranty to any Lender and shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this
Agreement, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
-73-
enforceability or sufficiency of this Agreement, any Note or any other
document referred to or provided for herein or for any failure by the
Borrower or any other Person (other than the Agent) to perform any of its
obligations hereunder or thereunder or for the existence, value, perfection
or priority of any collateral security or the financial or other condition
of the Borrower, its Subsidiaries or any other obligor or guarantor; (iii)
except pursuant to Section 11.07 shall not be required to initiate or
conduct any litigation or collection proceedings hereunder; and (iv) shall
not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided
for herein or in connection herewith including its own ordinary negligence,
except for its own gross negligence or willful misconduct. The Agent may
employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents,
accountants, attorneys or experts selected by it in good faith or any
action taken or omitted to be taken in good faith by it in accordance with
the advice of such agents, accountants, attorneys or experts. The Agent
may deem and treat the payee of any Note as the holder thereof for all
purposes hereof unless and until a written notice of the assignment or
transfer thereof permitted hereunder shall have been filed with the Agent.
The Agent is authorized to release any collateral that is permitted to be
sold or released pursuant to the terms of the Loan Documents.
Section 11.02 RELIANCE BY AGENT. The Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Agent.
Section 11.03 DEFAULTS. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for
Letter of Credit drawings) unless the Agent has received notice from a
Lender or the Borrower specifying such Default and stating that such notice
is a "Notice of Default." In the event that the Agent receives such a
notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Lenders. In the event of a payment Default, the Agent shall
give each Lender prompt notice of each such payment Default.
Section 11.04 RIGHTS AS A LENDER. With respect to its
Commitments and the Loans made by it and its participation in the issuance
of Letters of Credit, BMO (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were
not acting as the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual
capacity. BMO (and any successor acting as Agent) and its Affiliates may
-74-
(without having to account therefor to any Lender) accept deposits from,
lend money to and generally engage in any kind of banking, trust or other
business with the Borrower (and any of its Affiliates) as if it were not
acting as the Agent, and BMO and its Affiliates may accept fees and other
consideration from the Borrower for services in connection with this
Agreement or otherwise without having to account for the same to the
Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY
THE AGENT AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE
SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE
EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03,
BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION
12.03 AND FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF
ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST THE AGENT OR THE ISSUING BANK IN ANY WAY RELATING TO OR
ARISING OUT OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS
CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE
PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY
OF THE TERMS OF THIS AGREEMENT, ANY SECURITY INSTRUMENT OR OF ANY SUCH
OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS
SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT OR
THE ISSUING BANK, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT.
Section 11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each
Lender acknowledges and agrees that it has, independently and without
reliance on the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
the Borrower and its decision to enter into this Agreement, and that it
will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrower of this Agreement, the Notes, the Security Instruments or any
other document referred to or provided for herein or to inspect the
properties or books of the Borrower. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders
by the Agent hereunder, the Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
affairs, financial condition or business of the Borrower (or any of its
Affiliates) which may come into the possession of the Agent or any of its
Affiliates. In this regard, each Lender acknowledges that Xxxxxx & Xxxxxx
-75-
L.L.P. is acting in this transaction as special counsel to the Agent only,
except to the extent otherwise expressly stated in any legal opinion or any
Loan Document. Each Lender will consult with its own legal counsel to the
extent that it deems necessary in connection with the Loan Documents and
the matters contemplated therein.
Section 11.07 ACTION BY AGENT. Except for action or other
matters expressly required of the Agent hereunder, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder unless it
shall (i) receive written instructions from the Majority Lenders (or all of
the Lenders as expressly required by Section 12.04) specifying the action
to be taken, and (ii) be indemnified to its satisfaction by the Lenders
against any and all liability and expenses which may be incurred by it by
reason of taking or continuing to take any such action. The instructions
of the Majority Lenders (or all of the Lenders as expressly required by
Section 12.04) and any action taken or failure to act pursuant thereto by
the Agent shall be binding on all of the Lenders. If a Default has
occurred and is continuing, the Agent shall take such action with respect
to such Default as shall be directed by the Majority Lenders (or all of the
Lenders as required by Section 12.04) in the written instructions (with
indemnities) described in this Section 11.07, provided that, unless and
until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable in the best
interests of the Lenders. In no event, however, shall the Agent be
required to take any action which exposes the Agent to personal liability
or which is contrary to this Agreement and the Security Instruments or
applicable law.
Section 11.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Lenders and
the Borrower, and the Agent may be removed at any time with or without
cause by the Majority Lenders. Upon any such resignation or removal, the
Majority Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of
the Lenders, appoint a successor Agent. Upon the acceptance of such
appointment hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions
of this Article XI and Section 12.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while
it was acting as the Agent.
-76-
ARTICLE XII
MISCELLANEOUS
Section 12.01 WAIVER. No failure on the part of the Agent or
any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
Section 12.02 NOTICES. All notices and other communications
provided for herein and in the other Loan Documents (including, without
limitation, any modifications of, or waivers or consents under, this
Agreement or the other Loan Documents) shall be given or made by telex,
telecopy, courier or U.S. Mail or in writing and telexed, telecopied,
mailed or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or in the Loan
Documents or, as to any party, at such other address as shall be designated
by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the
next succeeding Business Day) by telex or telecopier and evidence or
confirmation of receipt is obtained, or personally delivered or, in the
case of a mailed notice, three (3) Business Days after the date deposited
in the mails, postage prepaid, in each case given or addressed as
aforesaid.
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC.
(a) The Borrower agrees:
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the Agent
and the Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of,
the Loan Documents and any amendment, waiver or consent relating
thereto (including, without limitation, travel, photocopy, mailing,
courier, telephone and other similar expenses of the Agent, the cost
of environmental audits, surveys and appraisals at reasonable
intervals, the reasonable fees and disbursements of counsel and other
-77-
outside consultants for the Agent and, in the case of enforcement, the
reasonable fees and disbursements of counsel for the Agent and any of
the Lenders); and promptly reimburse the Agent for all amounts
expended, advanced or incurred by the Agent or the Lenders to satisfy
any obligation of the Borrower under this Agreement or any Security
Instrument, including without limitation, all costs and expenses of
foreclosure;
(ii) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS
("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A
RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS OR
LETTERS OF CREDIT, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER
AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF
ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR
ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE
TO PAY UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING
UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-
DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED
DRAFT(S) AND CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS
WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH
INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR
CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL
INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE
LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST
THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY
OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR
-78-
DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A
RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY
SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY
SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME,
COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR
(V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION
WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE
AFFORDED UNDER THIS SECTION 12.03(A)(III) IN RESPECT OF ANY PROPERTY
FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR
ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS
OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY
FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION
OR OTHERWISE).
(b) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified
Party proposes, if the indemnitor does not have the financial ability
to pay all its obligations outstanding and asserted against the
indemnitor at that time, including the maximum potential claims
against the Indemnified Party to be indemnified pursuant to this
Section 12.03.
(c) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such
claim or demand being made against the Indemnified Party and the
Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower
provides a defense, the Indemnified Party shall bear its own cost of
defense unless there is a conflict between the Borrower and such
Indemnified Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY
KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN
AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF
TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED
PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE
COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS
CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL
ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE
-79-
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(e) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes
and shall continue thereafter in full force and effect.
(f) The Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Borrower of notice
of the amount due.
Section 12.04 AMENDMENTS, ETC. Any provision of this Agreement
or any Security Instrument may be amended, modified or waived with the
Borrower's and the Majority Lenders' prior written consent; provided that
(i) no amendment, modification or waiver which extends the final maturity
of the Loans, increases the Aggregate Maximum Credit Amounts, forgives the
principal amount of any Indebtedness outstanding under this Agreement,
releases any guarantor of the Indebtedness or releases all or substantially
all of the collateral, reduces the interest rate applicable to the Loans or
the fees payable to the Lenders generally, affects Section 2.03(a), this
Section 12.04 or Section 12.06(a) or modifies the definition of "Majority
Lenders" shall be effective without consent of all Lenders; (ii) no
amendment, modification or waiver which increases the Maximum Credit Amount
of any Lender shall be effective without the consent of such Lender; and
(iii) no amendment, modification or waiver which modifies the rights,
duties or obligations of the Agent shall be effective without the consent
of the Agent.
Section 12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the
prior consent of all of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent and,
if no Event of Default has occurred and is continuing, the Borrower
(which consent will not be unreasonably withheld), assign to one or
more assignees all or a portion of its rights and obligations under
this Agreement pursuant to an Assignment Agreement substantially in
the form of EXHIBIT E (an "ASSIGNMENT"); PROVIDED, HOWEVER, that
(i) any such assignment shall be in the amount of at least $10,000,000
or such lesser amount to which the Borrower has consented and (ii) the
assignee or assignor shall pay to the Agent a processing and
recordation fee of $2,500 for each assignment. Any such assignment
-80-
will become effective upon the execution and delivery to the Agent of
the Assignment and the consent of the Agent. Promptly after receipt
of an executed Assignment, the Agent shall send to the Borrower a copy
of such executed Assignment. Upon receipt of such executed
Assignment, the Borrower, will, at its own expense, execute and
deliver new Notes to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 12.06(b), the
assignee will become a "Lender," if not already a "Lender," for all
purposes of this Agreement and the Security Instruments. The assignor
shall be relieved of its obligations hereunder to the extent of such
assignment (and if the assigning Lender no longer holds any rights or
obligations under this Agreement, such assigning Lender shall cease to
be a "Lender" hereunder except that its rights under Sections 4.06,
5.01, 5.05 and 12.03 shall not be affected). The Agent will prepare
on the last Business Day of each month during which an assignment has
become effective pursuant to this Section 12.06(b), a new ANNEX I
giving effect to all such assignments effected during such month, and
will promptly provide the same to the Borrower and each of the
Lenders.
(c) Each Lender may transfer, grant or assign participations in
all or any part of such Lender's interests hereunder pursuant to this
Section 12.06(c) to any Person, PROVIDED that: (i) such Lender shall
remain a "Lender" for all purposes of this Agreement and the
transferee of such participation shall not constitute a "Lender"
hereunder; and (ii) no participant under any such participation shall
have rights to approve any amendment to or waiver of any of the Loan
Documents except to the extent such amendment or waiver would
(x) forgive any principal owing on any Indebtedness or extend the
final maturity of the Loans, (y) reduce the interest rate (other than
as a result of waiving the applicability of any post-default increases
in interest rates) or fees applicable to any of the Commitments or
Loans or Letters of Credit in which such participant is participating,
or postpone the payment of any thereof, or (z) release any guarantor
of the Indebtedness or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any
of the Commitments or Loans or Letters of Credit in which such
participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any
of the Security Instruments (the participant's rights against the
granting Lender in respect of such participation to be those set forth
in the agreement with such Lender creating such participation), and
all amounts payable by the Borrower hereunder shall be determined as
if such Lender had not sold such participation, PROVIDED that such
participant shall be entitled to receive additional amounts under
Article V on the same basis as if it were a Lender and be indemnified
under Section 12.03 as if it were a Lender. In addition, each
-81-
agreement creating any participation must include an agreement by the
participant to be bound by the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the
Borrower in the possession of the Lenders from time to time to
assignees and participants (including prospective assignees and
participants); provided that, such Persons agree to be bound by the
provisions of Section 12.15.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating
circular issued by such Federal Reserve System and/or such Federal
Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06,
no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require the Borrower to file
a registration statement with the SEC or to qualify the Loans under
the "Blue Sky" laws of any state.
Section 12.07 INVALIDITY. In the event that any one or more of
the provisions contained in any of the Loan Documents or the Letters of
Credit, the Letter of Credit Agreements shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of the
Notes, this Agreement or any Security Instrument.
Section 12.08 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute
one and the same instrument and any of the parties hereto may execute this
Agreement by signing any such counterpart.
Section 12.09 REFERENCES. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement
refer to this Agreement as a whole, and not to any particular article,
section or subsection. Any reference herein to a Section shall be deemed
to refer to the applicable Section of this Agreement unless otherwise
stated herein. Any reference herein to an exhibit or schedule shall be
deemed to refer to the applicable exhibit or schedule attached hereto
unless otherwise stated herein.
Section 12.10 SURVIVAL. The obligations of the parties under
Section 4.06, Article V, and Sections 11.05 and 12.03 shall survive the
repayment of the Loans and the termination of the Commitments. To the
-82-
extent that any payments on the Indebtedness or proceeds of any collateral
are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, debtor in possession,
receiver or other Person under any bankruptcy law, common law or equitable
cause, then to such extent, the Indebtedness so satisfied shall be revived
and continue as if such payment or proceeds had not been received and the
Agent's and the Lenders' Liens, security interests, rights, powers and
remedies under this Agreement and each Security Instrument shall continue
in full force and effect. In such event, each Security Instrument shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Agent and the Lenders to effect such
reinstatement.
Section 12.11 CAPTIONS. Captions and section headings appearing
herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO
THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE
INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED. TEX. REV. CIV. STAT. XXX. ART. 0000, XX. 15 (WHICH
REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-
PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
-83-
(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
LOCATED AT 000 X. XX. XXXX XXXXXX, XXXXXX, XXXXX 00000, AS THE
DESIGNEE, APPOINTEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON
BEHALF OF THE BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE
LOAN DOCUMENTS. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED
ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO THE
BORROWER AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW, BUT THE
FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY
WAY THE SERVICE OF SUCH PROCESS. THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS
SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER
SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY
LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
(e) THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II)
IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 INTEREST. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to
it. Accordingly, if the transactions contemplated hereby would be usurious
as to any Lender under laws applicable to it (including the laws of the
United States of America and the State of Texas or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding the
other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any of the Loan Documents or any agreement
entered into in connection with or as security for the Notes, it is agreed
as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
-84-
reserved, charged or received by such Lender under any of the Loan
Documents or agreements or otherwise in connection with the Notes shall
under no circumstances exceed the maximum amount allowed by such applicable
law, and any excess shall be canceled automatically and if theretofore paid
shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by
such Lender to the Borrower); and (ii) in the event that the maturity of
the Notes is accelerated by reason of an election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender
may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in this Agreement or
otherwise shall be canceled automatically by such Lender as of the date of
such acceleration or prepayment and, if theretofore paid, shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or
would thereby be paid in full, refunded by such Lender to the Borrower).
All sums paid or agreed to be paid to any Lender for the use, forbearance
or detention of sums due hereunder shall, to the extent permitted by law
applicable to such Lender, be amortized, prorated, allocated and spread
throughout the full term of the Loans evidenced by the Notes until payment
in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable
law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful
Rate applicable to such Lender pursuant to this Section 12.14 and (ii) in
respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate
applicable to such Lender, then the amount of interest payable to such
Lender in respect of such subsequent interest computation period shall
continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall
equal the total amount of interest which would have been payable to such
Lender if the total amount of interest had been computed without giving
effect to this Section 12.14. To the extent that Article 5069-1.04 of the
Texas Revised Civil Statutes is relevant for the purpose of determining the
Highest Lawful Rate, such Lender elects to determine the applicable rate
ceiling under such Article by the indicated weekly rate ceiling from time
to time in effect.
Section 12.15 CONFIDENTIALITY. In the event that the Borrower
provides to the Agent or the Lenders written confidential information
belonging to the Borrower, if the Borrower shall denominate such
information in writing as "confidential", the Agent and the Lenders shall
thereafter maintain such information in confidence in accordance with the
-85-
standards of care and diligence that each utilizes in maintaining its own
confidential information. This obligation of confidence shall not apply to
such portions of the information which (i) are in the public domain, (ii)
hereafter become part of the public domain without the Agent or the Lenders
breaching their obligation of confidence to the Borrower, (iii) are
previously known by the Agent or the Lenders from some source other than
the Borrower, (iv) are hereafter developed by the Agent or the Lenders
without using the Borrower's information, (v) are hereafter obtained by or
available to the Agent or the Lenders from a third party who owes no
obligation of confidence to the Borrower with respect to such information
or through any other means other than through disclosure by the Borrower,
(vi) are disclosed with the Borrower's consent, (vii) must be disclosed
either pursuant to any Governmental Requirement or to Persons regulating
the activities of the Agent or the Lenders, or (viii) as may be required by
law or regulation or order of any Governmental Authority in any judicial,
arbitration or governmental proceeding. Further, the Agent or a Lender may
disclose any such information to any other Lender, any independent
petroleum engineers or consultants, any independent certified public
accountants, any legal counsel employed by such Person in connection with
this Agreement or any Security Instrument, including without limitation,
the enforcement or exercise of all rights and remedies thereunder, or any
assignee or participant (including prospective assignees and participants)
in the Loans; PROVIDED, HOWEVER, that the Agent or the Lenders shall
receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same
obligation to maintain the confidentiality of such information as is
imposed upon the Agent or the Lenders hereunder. Notwithstanding anything
to the contrary provided herein, this obligation of confidence shall cease
three (3) years from the date the information was furnished, unless the
Borrower requests in writing at least thirty (30) days prior to the
expiration of such three year period, to maintain the confidentiality of
such information for an additional three year period. The Borrower waives
any and all other rights it may have to confidentiality as against the
Agent and the Lenders arising by contract, agreement, statute or law except
as expressly stated in this Section 12.15.
Section 12.16 EFFECTIVENESS. This Agreement shall not be
effective until the date (the "EFFECTIVE DATE") that it is delivered to the
Agent in the State of Texas, accepted by the Lenders in such State, and
executed by the Agent in such State.
Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES
HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND
THE SECURITY INSTRUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; THAT
IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL
NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS
AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS
-86-
CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS
AGREEMENT AND THE SECURITY INSTRUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE SECURITY INSTRUMENTS; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE
SECURITY INSTRUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN
SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS
THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY
PROVISION OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT
THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
[SIGNATURES BEGIN NEXT PAGE]
-87-
The parties hereto have caused this Agreement to be duly executed
as of the day and year first above written.
BORROWER: XXXXXX OIL CORPORATION
By:__________________________________________
Name: Xxxxx X. Xxxxxx
Title: President
Address for Notices:
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Telecopier No.: 616/941-8312
Telephone No.: 616/000-0000
Attention: Xxxxx X. Xxxxxx
PARENT: XXXXXX EXPLORATION COMPANY
By:__________________________________________
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive Officer
Address for Notices:
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Telecopier No.: 616/941-8312
Telephone No.: 616/000-0000
Attention: Xxxxx X. Xxxxxx
X-0
LENDER AND AGENT: BANK OF MONTREAL
By:__________________________________________
Name: Xxxxxx X. Xxxxxxxxxx
Title: Director
Lending Office for Base Rate Loans and
LIBOR Loans:
000 Xxxxx XxXxxxx
Xxxxxxx, Xxxxxxxx 00000
Address for Notices:
000 Xxxxx XxXxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No.: 312/750-6061
Telephone No.: 312/000-0000
Attention: Xxxxx Xxx
With copy to:
Bank of Montreal
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: 713/546-9754
Telephone No.: 713/000-0000
S-2
ANNEX I
LIST OF PERCENTAGE SHARES AND MAXIMUM CREDIT AMOUNTS
NAME OF LENDER PERCENTAGE MAXIMUM CREDIT AMOUNT
-------------- ---------- ---------------------
SHARE
-----
Bank of Montreal 100% $75,000,000
Annex I-1
EXHIBIT A
FORM OF NOTE
$_____________________________ ___________________, 1998
FOR VALUE RECEIVED, XXXXXX OIL CORPORATION, a Michigan corporation
(the "BORROWER") hereby promises to pay to the order of _________________
_____________ (the "LENDER"), at the Principal Office of Bank of Montreal
(the "AGENT"), at 000 Xxxxx XxXxxxx, Xxxxxxx, Xxxxxxxx 00000, the principal
sum of _____________ Dollars ($____________) (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Loans made by the
Lender to the Borrower under the Credit Agreement, as hereinafter defined),
in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of
each such Loan, at such office, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid in full,
at the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of
each Loan made by the Lender to the Borrower, and each payment made on
account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on
the schedules attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Credit Agreement
dated as of February 9, 1998 among the Borrower, the Lenders which are or
become parties thereto (including the Lender) and the Agent (as the same
may be amended or supplemented from time to time, the "CREDIT AGREEMENT"),
and evidences Loans made by the Lender thereunder. Capitalized terms used
in this Note have the respective meanings assigned to them in the Credit
Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled
to the benefits provided for in the Credit Agreement and the Security
Instruments. The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events, for
prepayments of Loans upon the terms and conditions specified therein and
other provisions relevant to this Note.
A-1
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
XXXXXX OIL CORPORATION
By:__________________________________________
Name:
Title:
A-2
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, 199__
Xxxxxx Oil Corporation, a Michigan corporation (the "BORROWER"),
pursuant to the Credit Agreement dated as of February 9, 1998 among the
Borrower, Bank of Montreal, as Agent for the lenders (the "LENDERS") which
are or become parties thereto, and such Lenders (together with all
amendments or supplements thereto, the "CREDIT AGREEMENT"), hereby makes
the requests indicated below (unless otherwise defined herein, capitalized
terms are defined in the Credit Agreement):
[ ] 1. Loans:
(a) Aggregate amount of new Loans to be $______________________;
(b) Requested funding date is _________________, 199__;
(c) $_____________________ of such borrowings are to be Eurodollar
Loans;
$_____________________ of such borrowings are to be Base Rate
Loans; and
(d) Length of Interest Period for Eurodollar Loans is:
_________________________.
[ ] 2. Eurodollar Loan Continuation for Eurodollar Loans maturing on
_____________________:
(a) Aggregate amount to be continued as Eurodollar Loans is
$____________________;
(b) Aggregate amount to be converted to Base Rate Loans is
$____________________;
(c) Length of Interest Period for continued Eurodollar Loans is
________________________.
[ ] 3. Conversion of Outstanding Base Rate Loans to Eurodollar Loans:
Convert $__________________ of the outstanding Base Rate Loans to
Eurodollar Loans on ____________________ with an Interest Period
of ______________________.
B-1
[ ] 4. Conversion of outstanding Eurodollar Loans to Base Rate Loans:
Convert $__________________ of the outstanding Eurodollar Loans
with Interest Period maturing on ______________________, 199_,
to Base Rate Loans.
The undersigned certifies that he is the _____________________ of the
Borrower, and that as such he is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive
the requested borrowing, continuation or conversion under the terms and
conditions of the Credit Agreement.
XXXXXX OIL CORPORATION
By:_________________________________
Name:
Title:
B-2
EXHIBIT C
COMPLIANCE CERTIFICATE
The undersigned hereby certify that they are the _______________ of
Xxxxxx Oil Corporation, a Michigan corporation (the "BORROWER") and the
_______________ of Xxxxxx Exploration Company, a Delaware corporation (the
"PARENT"), respectively, and that as such they are authorized to execute
this certificate on behalf of the Borrower and the Parent, respectively.
With reference to the Credit Agreement dated as of February 9, 1998 among
the Borrower, the Parent, Bank of Montreal, as Agent for the lenders (the
"LENDERS") which are or become a party thereto, and such Lenders (together
with all amendments or supplements thereto being the "CREDIT AGREEMENT"),
the undersigned represent and warrant as follows (each capitalized term
used herein having the same meaning given to it in the Credit Agreement
unless otherwise specified):
(a) The representations and warranties of the Borrower and
the Parent contained in Article VII of the Credit Agreement and
in the Security Instruments and otherwise made in writing by or
on behalf of the Borrower and the Parent pursuant to the Credit
Agreement and the Security Instruments were true and correct when
made, and are repeated at and as of the time of delivery hereof
and are true and correct at and as of the time of delivery
hereof, except as such representations and warranties are
modified to give effect to the transactions expressly permitted
by the Credit Agreement.
(b) The Borrower and the Parent have each performed and
complied with all agreements and conditions contained in the
Credit Agreement and in the Security Instruments required to be
performed or complied with by it prior to or at the time of
delivery hereof.
(c) None of the Borrower, the Parent, or any Subsidiary has
incurred any material liabilities, direct or contingent, since
December 31, 1996, except those set forth in SCHEDULE 9.01 to the
Credit Agreement and except those allowed by the terms of the
Credit Agreement or consented to by the Lenders in writing.
(d) Since December 31, 1996, no change has occurred, either
in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower, the Parent, or any Subsidiary which
would have a Material Adverse Effect.
(e) There exists, and, after giving effect to the loan or
loans with respect to which this certificate is being delivered,
C-1
will exist, no Default under the Credit Agreement or any event or
circumstance which constitutes, or with notice or lapse of time
(or both) would constitute, an event of default under any loan or
credit agreement, indenture, deed of trust, security agreement or
other agreement or instrument evidencing or pertaining to any
Debt of the Borrower, the Parent, or any Subsidiary, or under any
material agreement or instrument to which the Borrower, the
Parent, or any Subsidiary is a party or by which the Borrower,
the Parent, or any Subsidiary is bound.
(f) The financial statements furnished to the Agent with
this certificate fairly present the consolidated financial
condition and results of operations of the Borrower and its
Consolidated Subsidiaries as at the end of, and for, the fiscal
[quarter][year] ending ___________________ and such financial
statements have been approved in accordance with the accounting
procedures specified in the Credit Agreement.
(g) Attached hereto are the detailed computations necessary
to determine whether the Borrower and its Consolidated
Subsidiaries are in compliance with Sections 9.12, 9.13, 9.14 and
9.15 of the Credit Agreement as of the end of the fiscal
[quarter][year] ending __________________.
EXECUTED AND DELIVERED this 9th day of February 1998.
BORROWER: XXXXXX OIL CORPORATION
By:_____________________________________
Name:
Title:
PARENT: XXXXXX EXPLORATION COMPANY
By:_____________________________________
Name:
Title:
C-2
EXHIBIT D
SECURITY INSTRUMENTS
1. Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement executed by Borrower, with respect to
properties located in:
(a) Mississippi
(b) Michigan
(c) Texas
2. Financing Statements relating to the immediately preceding
documents to be filed with:
3. Guaranty Agreement to be executed by Parent
4. Fee Letter
D-1
EXHIBIT E
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of ________________,
199___ between: _________________________________ (the "ASSIGNOR") and
__________________________ (the "ASSIGNEE").
RECITALS
A. The Assignor is a party to the Credit Agreement dated as of
February 9, 1998 (as amended and supplemented and in effect from time to
time, the "CREDIT AGREEMENT") among Xxxxxx Oil Corporation, a Michigan
corporation (the "BORROWER"), each of the lenders that is or becomes a
party thereto as provided in Section 12.06 of the Credit Agreement
(individually, together with its successors and assigns, a "LENDER", and
collectively, together with their successors and assigns, the "LENDERS"),
and Bank of Montreal, in its individual capacity, ("BMO") and as agent for
the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").
B. The Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the
Assignor, [all][a portion] of the Assignor's Maximum Credit Amount,
outstanding Loans and its Percentage Share of the outstanding LC Exposure,
all on the terms and conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS.
Section 1.01 DEFINITIONS. All capitalized terms used but not
defined herein have the respective meanings given to such terms in the
Credit Agreement.
Section 1.02 OTHER DEFINITIONS. As used herein, the following terms
have the following respective meanings:
"ASSIGNED INTEREST" shall mean all of Assignor's (in its capacity
as a "Lender") rights and obligations (i) under the Credit Agreement
and the other Security Instruments in respect of the Maximum Credit
Amount of the Assignor in the principal amount equal to
E-1
$____________________, including, without limitation, any obligation
to participate pro rata in any LC Exposure, and (ii) to make Loans
under the Maximum Credit Amount and any right to receive payments for
the Loans outstanding under the Maximum Credit Amount assigned hereby
of $_______________ (the "LOAN BALANCE"), plus the interest and fees
which will accrue from and after the Assignment Date.
"ASSIGNMENT DATE" shall mean _____________________, 199___.
ARTICLE II
SALE AND ASSIGNMENT.
Section 2.01 SALE AND ASSIGNMENT. On the terms and conditions set
forth herein, effective on and as of the Assignment Date, the Assignor
hereby sells, assigns and transfers to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, all of the right, title and
interest of the Assignor in and to, and all of the obligations of the
Assignor in respect of, the Assigned Interest. Such sale, assignment and
transfer is without recourse and, except as expressly provided in this
Agreement, without representation or warranty.
Section 2.02 ASSUMPTION OF OBLIGATIONS. The Assignee agrees with
the Assignor (for the express benefit of the Assignor and the Borrower)
that the Assignee will, from and after the Assignment Date, perform all of
the obligations of the Assignor in respect of the Assigned Interest. From
and after the Assignment Date: (a) the Assignor shall be released from the
Assignor's obligations in respect of the Assigned Interest, and (b) the
Assignee shall be entitled to all of the Assignor's rights, powers and
privileges under the Credit Agreement and the other Security Instruments in
respect of the Assigned Interest.
Section 2.03 CONSENT BY AGENT. By executing this Agreement as
provided below, in accordance with Section 12.06(b) of the Credit
Agreement, the Agent hereby acknowledges notice of the transactions
contemplated by this Agreement and consents to such transactions.
ARTICLE III
PAYMENTS.
Section 3.01 PAYMENTS. As consideration for the sale, assignment and
transfer contemplated by Section 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if
any. An amount equal to all accrued and unpaid interest and fees shall be
E-2
paid to the Assignor as provided in Section 3.02 (iii) below. Except as
otherwise provided in this Agreement, all payments hereunder shall be made
in Dollars and in immediately available funds, without setoff, deduction or
counterclaim.
Section 3.02 ALLOCATION OF PAYMENTS. The Assignor and the Assignee
agree that (i) the Assignor shall be entitled to any payments of principal
with respect to the Assigned Interest made prior to the Assignment Date,
together with any interest and fees with respect to the Assigned Interest
accrued prior to the Assignment Date, (ii) the Assignee shall be entitled
to any payments of principal with respect to the Assigned Interest made
from and after the Assignment Date, together with any and all interest and
fees with respect to the Assigned Interest accruing from and after the
Assignment Date, and (iii) the Agent is authorized and instructed to
allocate payments received by it for account of the Assignor and the
Assignee as provided in the foregoing clauses. Each party hereto agrees
that it will hold any interest, fees or other amounts that it may receive
to which the other party hereto shall be entitled pursuant to the preceding
sentence for account of such other party and pay, in like money and funds,
any such amounts that it may receive to such other party promptly upon
receipt.
Section 3.03 DELIVERY OF NOTES. Promptly following the receipt by
the Assignor of the consideration required to be paid under Section 3.01
hereof, the Assignor shall, in the manner contemplated by Section 12.06(b)
of the Credit Agreement, (i) deliver to the Agent (or its counsel) the Note
held by the Assignor and (ii) notify the Agent to request that the Borrower
execute and deliver new Notes to the Assignor, if Assignor continues to be
a Lender, and the Assignee, dated the date of this Agreement in respective
principal amounts equal to the respective Maximum Credit Amounts of the
Assignor (if appropriate) and the Assignee after giving effect to the sale,
assignment and transfer contemplated hereby.
Section 3.04 FURTHER ASSURANCES. The Assignor and the Assignee
hereby agree to execute and deliver such other instruments, and take such
other actions, as either party may reasonably request in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT.
Section 4.01 CONDITIONS PRECEDENT. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction
of each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the Assignor
and the Assignee;
E-3
(b) the receipt by the Assignor of the payment required to be
made by the Assignee under Section 3.01 hereof; and
(c) the acknowledgment and consent by the Agent contemplated by
Section 2.03 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES.
Section 5.01 REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR. The
Assignor represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill
its obligations under, and consummate the transactions contemplated
by, this Agreement;
(b) the execution, delivery and compliance with the terms hereof
by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity
or enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course
of the banking business of the Assignor.
Section 5.02 DISCLAIMER. Except as expressly provided in Section
5.01 hereof, the Assignor does not make any representation or warranty, nor
shall it have any responsibility to the Assignee, with respect to the
accuracy of any recitals, statements, representations or warranties
contained in the Credit Agreement or in any certificate or other document
referred to or provided for in, or received by any Lender under, the Credit
E-4
Agreement, or for the value, validity, effectiveness, genuineness,
execution, legality, enforceability or sufficiency of the Credit
Agreement, the Notes or any other document referred to or provided
for therein or for any failure by the Borrower or any other Person (other
than Assignor) to perform any of its obligations thereunder prior or for
the existence, value, perfection or priority of any collateral security or
the financial or other condition of the Borrower or the Subsidiaries [or
any other obligor or guarantor], or any other matter relating to the Credit
Agreement or any other Security Instrument or any extension of credit
thereunder.
Section 5.03 REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE. The
Assignee represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill
its obligations under, and consummate the transactions contemplated
by, this Agreement;
(b) the execution, delivery and compliance with the terms hereof
by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and
all actions by any Governmental Authority necessary for the validity
or enforceability of its obligations under this Agreement have been
obtained;
(e) the Assignee has fully reviewed the terms of the Credit
Agreement and the other Security Instruments and has independently and
without reliance upon the Assignor, and based on such information as
the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement;
(f) the Assignee hereby affirms that the representations
contained in Section 4.06(d)[(i)][ii)] of the Credit Agreement are
true and accurate as to it [IF (ii) IS SELECTED ADD: and, the Assignee
has contemporaneously herewith delivered to the Agent and the Borrower
such certifications as are required thereby to avoid the withholding
taxes referred to in Section 4.06]; and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course
of the banking business of the Assignee.
E-5
ARTICLE VI
MISCELLANEOUS.
Section 6.01 NOTICES. All notices and other communications provided
for herein (including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made
in writing (including, without limitation, by telex or telecopy) to the
intended recipient at its "Address for Notices" specified below its name on
the signature pages hereof or, as to either party, at such other address as
shall be designated by such party in a notice to the other party.
Section 6.02 AMENDMENT, MODIFICATION OR WAIVER. No provision of
this Agreement may be amended, modified or waived except by an instrument
in writing signed by the Assignor and the Assignee, and consented to by the
Agent.
Section 6.03 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The representations and
warranties made herein by the Assignee are also made for the benefit of the
Agent and the Borrower, and the Assignee agrees that the Agent and the
Borrower are entitled to rely upon such representations and warranties.
Section 6.04 ASSIGNMENTS. Neither party hereto may assign any of
its rights or obligations hereunder except in accordance with the terms of
the Credit Agreement.
Section 6.05 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 6.06 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be identical and all of which,
taken together, shall constitute one and the same instrument, and each of
the parties hereto may execute this Agreement by signing any such
counterpart.
Section 6.07 GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the law of the State of ________________.
Section 6.08 EXPENSES. To the extent not paid by the Borrower
pursuant to the terms of the Credit Agreement, each party hereto shall bear
its own expenses in connection with the execution, delivery and performance
of this Agreement.
E-6
Section 6.09 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR:
________________________________________
By:_____________________________________
Name:
Title:
Address for Notices:
________________________________________
________________________________________
________________________________________
Telecopier No.: ________________________
Telephone No.: ________________________
Attention: ________________________
E-7
ASSIGNEE:
________________________________________
By:_____________________________________
Name:
Title:
Address for Notices:
________________________________________
________________________________________
________________________________________
Telecopier No.:_________________________
Telephone No.:__________________________
Attention:______________________________
ACKNOWLEDGED AND CONSENTED TO:
BANK OF MONTREAL, AS AGENT
By:___________________________
Name:
Title:
E-8
EXHIBIT F
APPLICATION AND REIMBURSEMENT AGREEMENT
FOR IRREVOCABLE STANDBY LETTER OF CREDIT
BANK OF MONTREAL Date: ___________________
Letter of Credit Processing Center SLDC 3896/ _____________
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
We request you to open and transmit by cable/airmail/courier your
Irrevocable Letter of Credit in favor of:
available by their drafts, drawn at sight on: Bank of Montreal, ________
_________________ or not exceeding a total of: ___________________________
accompanied by the following document(s):
Drafts drawn under this Letter of Credit must be drawn and presented
together with accompanying documentation at your principal office in
Chicago, Illinois not later than:
In consideration of your issuing at our request your Irrevocable Letter of
Credit (hereinafter called "Credit") on the terms mentioned above:
1. We hereby agree to pay you in immediately available and freely
transferable funds the amount of each draft or acceptance drawn under the
Credit, such payment to be made at the maturity of each respective draft or
acceptance or, if so demanded by you, on demand in advance of any drawing
or maturity.
2. Payment shall be made by us at your office in Chicago, Illinois in
lawful money of the United States, provided that, if a draft or other
request for payment under the Credit is drawn in a currency other than
United States currency, we shall pay the equivalent in United States
currency, at the rate of exchange then current in Chicago for cable
transfers to the place of payment in the currency in which such drawing was
made, as determined by you and notified to us, or, if you so request of us
F-1
at your option, we shall pay you the amount of such drawing in the currency
in which the drawing was made in a place, form and manner acceptable to
you.
3. We also agree to pay you the commissions, indemnifications, and other
amounts required under the Credit Agreement referred to below.
4. Any amounts not paid when due hereunder shall bear interest as
provided in the Credit Agreement. You are hereby authorized to charge any
depository or other account of ours or any of us maintained with you for
the full amount of any drawing paid by you under the Credit and for payment
of any other amount payable by us hereunder not paid to you on demand. If
by charging such account you create an overdraft in one of our accounts, we
shall pay interest to you on such overdrawn amount at the rate specified in
our agreement with you establishing such account or, if no such rate is
specified, at the Post-Default Rate provided for in the Credit Agreement.
5. We agree that in the event of any extension of the maturity or time
for presentation of drafts, acceptances or documents, or any other
modification of the terms of the Credit, at the request of any of us, with
or without notification to the others, or in the event of any increase in
the amount of the Credit at our request, this agreement shall be binding
upon us with regard to the credit extended, increased or otherwise
modified, to drafts, documents and property covered thereby, and to any
action taken by you or any of your correspondents, in accordance with such
extension, increase or other modification.
6. The users of the Credit shall be deemed our agents and we assume all
risks of their acts, omissions, or misrepresentations. Neither you nor your
correspondents shall be responsible for the validity, truthfulness, or
genuineness of any documents even if such documents should in fact prove to
be in any or all respects invalid, fraudulent or forged; for failure of any
draft to bear any reference or adequate reference to the Credit, or failure
of any person to note the amount of any draft on the reverse of the Credit,
or to surrender or to take up the Credit as required by the terms of the
Credit, each of which provisions, if contained in the Credit itself, it is
agreed may be waived by you, or for errors, omissions, interruptions or
delays in transmission or delivery of any message, by mail, cable,
telegraph, wireless, or otherwise, whether or not they be in cipher; nor
shall you be responsible for any error, neglect or default of any of your
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of your rights or powers hereunder.
7. The Credit is issued under the Credit Agreement dated as of February
9, 1998 among us, other lenders signatory thereto and the Bank of Montreal,
as Agent (the "CREDIT AGREEMENT"). To the extent of any conflict between
this Agreement and the Credit Agreement, the Credit Agreement shall govern.
F-2
8. You shall not be deemed to have waived any of your rights hereunder,
unless you or your authorized agent shall have signed such waiver in
writing. No such waiver, unless expressly as stated therein, shall be
effective as to any transaction which occurs subsequent to the date of such
waiver, or as to any continuance of a breach after such waiver.
9. The word "property", as used in this agreement, includes goods,
merchandise, securities, funds, chooses in action, and any and all other
forms of property, whether real, personal or mixed, and any right or
interest therein.
10. Without limiting the foregoing and in addition to the provisions of
paragraph numbered 6 hereof, you are hereby expressly authorized and
directed to honor any request for payment which is made under and in
compliance with the terms of said Credit without regard to, and without any
duty on your part to inquire into, the existence of any disputes or
controversies between any of the undersigned, the beneficiary of the Credit
or any other person, firm or corporation, or the respective rights, duties
or liabilities of any of them or whether any facts or occurrences
represented in any of the documents presented under the Credit are true or
correct. Furthermore, we fully understand and agree that your sole
obligation to us shall be limited to honoring requests for payment made
under and in compliance with the terms of the Credit and this application
and your obligation remains so limited even if you may have assisted us in
the preparation of the wording of the Credit or any documents required to
be presented thereunder or you may otherwise be aware of the underlying
transaction giving rise to the Credit and this application. In addition,
and without limiting any of the other provisions hereof, you and your
correspondents may (a) act in reliance upon any oral, telephonic,
telegraphic, electronic or written request or notice believed by you or
your relevant correspondent in good faith to have been authorized by us or
any one of us, whether or not given or signed by an authorized person, and
(b) receive, accept or pay as complying with the terms of the Credit any
drafts or other document, otherwise in order, that may be signed by, or
issued to, the administrator or executor of, or the trustee in bankruptcy
of, or the receiver for any of the property of, or any other person or
entity acting as the representative of, in the place of or as the successor
in interest to, the party in whose name the Credit provides that any drafts
or other documents should be drawn or issued.
11. If this agreement is signed by one party, the terms "we," "our," "us,"
shall be read throughout as "I," "my," "me," as the case may be. If this
agreement is signed by two or more parties, it shall constitute the joint
and several agreement of such parties. This agreement shall be deemed to be
made under and shall in all respects be governed by the law of the State of
Illinois. The Credit and, to the extent not inconsistent with the laws of
the State of Illinois, this agreement will be subject to the Uniform
Customs and Practice for Documentary Credits as most recently published by
F-3
the International Chamber of Commerce (the "UCP"), except that Article 41
and 43 of the UCP (1993 Revision) published by the International Chamber of
Commerce as Publication No. 500 shall not apply nor shall any equivalent
provision in any future version of the UCP.
Very truly yours,
_______________________________________________________
(FIRM'S name, IF APPLICABLE)
For Bank Use Only BY __________________________________
[ ] __________ _____TITLE _________________________________
Approved by DATE BY ___________________________________
TITLE_________________________________________
C60092 N7/94
F-4
