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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 Date of Report (Date
of earliest event reported): May 2, 1996
PATINA OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-14344 75-2629477
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1625 Broadway
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 592-4600
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<PAGE>
Item 2. Acquisition or Disposition of Assets.
As announced on May 2, 1996, the merger (the "Merger") of Gerrity Oil &
Gas Corporation ("Gerrity") into a wholly-owned subsidiary of Patina Oil & Gas
Corporation ("Patina") occurred on May 2, 1996 following approval of the Merger
by Gerrity's common shareholders. As a result of the Merger, Gerrity became a
wholly-owned subsidiary of Patina. Simultaneously with the Merger, Snyder Oil
Corporation ("SOCO") contributed all its assets and operations, subject to
certain limitations, in the Wattenberg Field of Colorado ("Wattenberg") to
Patina (the "Contribution"). In connection with the Contribution, Patina assumed
$75 million of bank debt from SOCO.
With the closing of the transaction, Patina holds interests in over
3,600 Wattenberg wells. As of December 31, 1995, Patina has net proved reserves
of 82 million barrels of oil equivalent ("BOE"), over two-thirds of which were
natural gas. Patina's production currently exceeds 20,000 BOE per day.
SOCO owns an aggregate of 14,000,000 shares of common stock of Patina,
of which 12,000,000 are common stock, par value $.01 per share ("Patina Common
Stock"), and 2,000,000 are Series A Common Stock. The Series A Common Stock is a
special series of common stock of Patina having three votes per share, and will
convert automatically into ordinary Patina Common Stock (i.e., shares with one
vote per share) upon transfer of those shares by SOCO to a non-affiliate or if
Patina ceases to be included in the consolidated financial statements of SOCO.
Thus, SOCO owns 70% of the outstanding shares of the common stock of Patina and
holds 75% of the voting power of Patina's common stock.
Pursuant to the terms of the Merger, the shares of common stock of
Gerrity issued and outstanding immediately prior to the effective time of the
Merger were converted into an aggregate of 6,000,000 shares of Patina Common
Stock and 3,000,000 five-year warrants initially to purchase one share of Patina
Common Stock at an exercise price of $12.50 per share (the "Patina Warrants").
In addition, pursuant to an exchange offer, approximately 75.3% of the
depositary shares representing Gerrity's $12 convertible preferred stock were
accepted by Patina for exchange into approximately 1.2 million shares of
Patina's 7 1/8% convertible preferred stock (the "Patina Preferred Stock"). The
Patina Preferred Stock has a liquidation preference of $25.00 per share, pays
quarterly dividends at the rate of 7 1/8% per year and is convertible into
Patina Common Stock at a conversion price of $12.30, which conversion price is
subject to downward adjustment after the Merger to equal 123% of the average
closing price of the Patina Common stock for the ten trading days immediately
following the 60th day after the Merger, subject to a minimum conversion price
of $8.61.
Patina also issued a five-year warrant for 500,000 shares of Patina
Common Stock, at a price equal to the average closing price during the 10-day
period following the Merger, to Robert W. Gerrity, who resigned as an officer
and director of Gerrity in connection with the transaction.
Patina's long-term debt, after all transaction costs, is expected to
approximate $215 initially. Patina has entered into a $240 million credit
facility with Texas Commerce Bank National Association, which serves as
Administrative Agent, NationsBank of Texas, N.A., Documentation
<PAGE>
Agent, and CIBC, Inc., Credit Lyonnais New York Branch and Wells Fargo Bank,
N.A., as co- agents. The facility will be used to refinance debt to be assumed
in the transaction, including approximately $100 million of bank debt assumed
from SOCO and Gerrity and up to $100 million of Gerrity's senior subordinated
notes if the holders exercise their right to put the notes to Gerrity. $87
million of the facility may be used only to repurchase Gerrity's senior
subordinated notes. The balance of the facility will be available for working
capital.
The Amended and Restated Agreement and Plan of Merger dated as of
January 16, 1996 as amended and restated as of March 20, 1996 (the "Merger
Agreement"), which was negotiated between representatives of SOCO and Gerrity,
provides that any contracts or transactions (other than transactions
contemplated by the Merger Agreement) involving Patina or any of its
subsidiaries in which SOCO or any of its subsidiaries has any interest (other
than an interest solely as a stockholder of Patina) shall be approved by either
(a) a majority of the disinterested directors of Patina or (b) a majority of any
committee established by the Patina Board of Directors that consists solely of
directors that are disinterested. In addition, in accordance with the Merger
Agreement, SOCO and Patina have entered into certain agreements, including a
Business Opportunity Agreement, Corporate Services Agreement,
Cross-Indemnification Agreement and Registration Rights Agreement, that will
govern the relationship between SOCO and Patina following the Merger.
The descriptions of the Merger Agreement, Business Opportunity
Agreement, Corporate Services Agreement, Cross-Indemnification Agreement and
Registration Rights Agreement included in this Report are summaries and are
qualified in their entirety by the respective terms of such agreements, which
are filed as exhibits to this Report and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The following financial statements of Gerrity Oil & Gas Corporation are
hereby incorporated by reference from the Amendment No. 2 to the Registration
Statement on Form S-4 of Patina (Registration No. 333-572):
(i) Report of Independent Public Accountants
(ii) Report of Independent Accountants
(iii) Consolidated Balance Sheets as of December 31, 1994 and 1995
(iv) Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995
(v) Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1993, 1994 and 1995
(vi) Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995
<PAGE>
(vii) Notes to Consolidated Financial Statements
The following financial statements of Gerrity Oil & Gas Corporation are
hereby incorporated by reference from the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996 of Gerrity Oil & Gas Corporation
(Commission file number 0-18667):
(i) Consolidated Balance Sheet as of March 31, 1996
(ii) Consolidated Statements of Operations for the Three Months Ended
March 31, 1995 and 1996
(iii Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1995 and 1996
(iv) Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial
statements of Patina are hereby incorporated by reference from Exhibit 99.1
filed herewith:
(i) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996
(ii) Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year ended December 31, 1995
(iii) Unaudited Pro Form Condensed Consolidated Statement of
Operations for the three months ended March 31, 1996
(iv) Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits.
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2.1 Amended and Restated Agreement and Plan of Merger dated as of January
16, 1996 as amended and restated as of March 20, 1996 -- incorporated
by reference to Exhibit 2.1 to Amendment No. 1 to the Registration
Statement on Form S-4 of Patina Oil & Gas Corporation (Registration No.
333-572)
2.2 Business Opportunity Agreement
<PAGE>
2.3 Corporate Services Agreement -- incorporated by reference to Exhibit
2.3 to the Registration Statement on Form S-4 of Patina Oil & Gas
Corporation (Registration No. 333-572)
2.4 Registration Rights Agreement
2.5 Cross Indemnification Agreement
10.l Credit Agreement dated as of May 2, 1996 among Patina Oil & Gas
Corporation, SOCO Wattenberg Corporation and Gerrity Oil and Gas
Corporation, as borrowers, certain financial institutions, as banks,
Texas Commerce Bank National Association, as Administrative Agent,
NationsBank of Texas, N.A., as Documentary Agent, and CIBC, Inc. Credit
Lyonnais New York Branch and Wells Fargo Bank, N.A., as Co-Agents
10.2 Subordinate Loan Agreement dated as of May 2, 1996 among SOCO
Wattenberg Corporation and Patina Oil & Gas Corporation, as lenders,
and Gerrity Oil & Gas Corporation, as borrower
99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements of
Patina
99.2 Audited Consolidated Financial Statements of Gerrity Oil & Gas
Corporation as of December 31, 1994 and 1995 and for the years ended
December 31, 1993, 1994 and 1995 -- incorporated by reference to
Amendment No. 2 to the Registration Statement on Form S-4 of Patina Oil
& Gas Corporation (Registration No. 333-572)
99.3 Unaudited Consolidated Financial Statements of Gerrity Oil & Gas
Corporation as of March 31, 1996 and for the three months ended March
31, 1995 and 1996 -- incorporated by reference to the Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1996 of Gerrity
Oil & Gas Corporation (Commission File No. 0-18667)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PATINA OIL & GAS CORPORATION
By: /s/David J. Kornder
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David J. Kornder
Vice President
May 17, 1996
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EXHIBIT 2.2
BUSINESS OPPORTUNITY AGREEMENT
This Business Opportunity Agreement (this "Agreement"), dated as of May 2,
1996, is made by and among Snyder Oil Corporation, a Delaware corporation
("Snyder"), and Patina Oil & Gas Corporation, a Delaware corporation ("Patina").
RECITALS:
WHEREAS, Snyder, Patina, Patina Merger Corporation, a Delaware corporation,
and Gerrity Oil & Gas Corporation, a Delaware corporation ("Gerrity"), have
entered into that certain Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement") dated as of January 16, 1996 and as amended and restated as
of March 20, 1996;
WHEREAS, as a result of the transactions contemplated under the Merger
Agreement, Gerrity is a wholly-owned subsidiary of Patina and Patina is majority
owned by Snyder with minority ownership initially in the former stockholders of
Gerrity;
WHEREAS, Snyder and Patina now desire to delineate rights as between the
two companies and certain of their affiliates with respect to certain business
opportunities arising after the consummation of the transactions contemplated by
the Merger Agreement;
NOW THEREFORE, in consideration of premises and mutual covenants set forth
herein and in the Merger Agreement, as well as other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Certain Definitions. When used herein the following terms shall
have the meanings indicated:
"Business Opportunity" shall mean any actual or potential opportunity to
enter into an Energy Business Transaction.
"Control" and its correlative terms shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies (whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a Person. For the purposes of
the preceding sentence, control shall include the possession, directly or
indirectly, through one or more intermediaries, of (A) in the case of a
corporation, 50% or more of the outstanding voting securities thereof; (B) in
the case of a limited liability company, partnership, limited partnership or
venture, the right to 50% or more of the distributions therefrom (including
liquidating distributions); and (C) in the case of any other Person, 50% or more
of the economic or beneficial interest therein.
"Energy Business Transaction" shall mean any transaction pursuant to which
any Person would acquire (whether by purchase, lease, or other transaction),
own, invest in, finance, lend funds
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to, contribute capital to, manage, operate or otherwise participate in any
Person, assets, or transaction involving any energy-related business, including
all phases of energy exploration, production and transportation.
"Patina Entity" shall mean Patina and any Person Controlled by Patina
(together, the "Patina Entities").
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, or other organization, whether or not a legal entity.
"Significant Steps" means the commitment of human or financial resources in
pursuit of a Business Opportunity including, without limitation, the commitment
of engineering, financial, legal, accounting or other resources (including
in-house resources) to the process of evaluating the Business Opportunity, the
signing of a confidentiality or lockup agreement, letter of intent or memorandum
of understanding, or the exchange of proposals or negotiations with management
of a Person that is the subject of the Business Opportunity or that owns the
property that is the subject of the Business Opportunity.
"Snyder Entity" shall mean Snyder and any Person Controlled by Snyder other
than Patina and the Patina Entities (together, the "Snyder Entities").
"Wattenberg Field" means the area from Townships 2 South to 7 North, Ranges
62 to 69 West, Adams, Weld, Larimer and Boulder Counties, Colorado.
Section 2. Business Opportunities Outside the Areas of Interest. With
respect to any Business Opportunity relating primarily to operations,
properties, assets, rights, liabilities, and obligations outside either the
Patina Area of Interest or the Snyder Area of Interest (each, as hereinafter
defined, and together, the "Areas of Interest"), then such Business Opportunity
may be pursued by the Initial Recipient (as hereinafter defined) without
offering such Business Opportunity to the other party. For purposes hereof, the
term "Initial Recipient" shall mean the Snyder Entities or Patina Entities, as
the case may be, that first was initially contacted by a third party in
connection with such Business Opportunity; provided, however, that if the
individual that was initially contacted in connection with such Business
Opportunity is an officer or director of one or more Snyder Entities and one or
more Patina Entities, then the characterization of the Business Opportunity for
purposes of this Agreement shall depend solely upon which capacity such
individual was serving in connection with receiving such third party contact;
provided further that if the capacity is not specified, then the Business
Opportunity may be pursued by the Snyder Entities without any participation by
Patina.
Section 3. Patina Business Opportunities. (a) Snyder hereby grants to
Patina a right of first refusal (the "Patina Option") on all Business
Opportunities primarily involving operations, properties, assets, rights,
liabilities and/or obligations in or centered on the Wattenberg Field, except
from the surface to the base of the Lyons formation in Sections 2, 3, 4, 9, 10
and 11 of Township 7 North, Range 67 West and Sections 33, 34 and 35 of Township
8 North, Range 67 West (the "Patina Area of Interest") (each Business
Opportunity subject to a Patina Option hereinafter referred to as a "Patina
Business Opportunity"). Notwithstanding the foregoing, the term "Patina Business
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Opportunity" shall not include those Business Opportunities primarily involving
the current operations, properties, assets, rights, liabilities, obligations,
claims and contracts listed (or required to be listed) in Section 1.3 of the
Snyder Disclosure Schedule to the Merger Agreement.
(b) Snyder shall notify Patina of any Patina Business Opportunity a Snyder
Entity desires to pursue, and in connection with such notice Snyder shall
furnish to Patina all information in its possession regarding such opportunity
that is material to Patina's decision regarding whether or not to exercise the
Patina Option. Within 10 days of receipt of such notice and information (twenty
days in the event Snyder notifies Patina of more than one such opportunity)
Patina shall notify Snyder as to whether Patina will exercise the Patina Option
with regard to such opportunity, unless such opportunity reasonably requires a
shorter response time, in which case Snyder shall describe the circumstances
giving rise to the need for a shorter response time in its notice to Patina and
Patina shall be required to respond within such shorter time period.
(c) If Patina notifies Snyder of its intent to exercise a Patina Option
pursuant to subsection (b) above then, subject to the provisions of subsection
(d) below, a Patina Entity may pursue the relevant Patina Business Opportunity
to the exclusion of the Snyder Entities or may otherwise pursue the relevant
Patina Business Opportunity. The Snyder Entities shall refrain from pursuing
such opportunity, unless and until Patina informs Snyder that the Patina
Entities have ceased their efforts to pursue such opportunity. Upon exercise of
the Patina Option, a Patina Entity that pursues a Patina Business Opportunity is
not required to do so on terms identical to those under which Snyder intended to
pursue such opportunity.
(d) If Patina has given Snyder notice of the intent of a Patina Entity to
pursue a Patina Business Opportunity under subsection (c) above and the Patina
Entities fail to take Significant Steps under the circumstances to pursue such
opportunity within a reasonable time of delivering such notice under the
circumstances, or if the Patina Entities cease to continue with Significant
Steps to pursue such opportunity for an unreasonable period under the
circumstances, then notwithstanding any other provision of this Section 3, the
Snyder Entities may pursue the relevant Patina Business Opportunity if (i)
Snyder provides notice to Patina of its intent to do so and (ii) within 20 days
of such notice the Patina Entities have not begun or continued to take
Significant Steps to pursue such opportunity.
Section 4. Snyder Business Opportunities. (a) Patina hereby grants to
Snyder the right of first refusal (the "Snyder Option") on all Business
Opportunities primarily involving operations, properties, assets, rights,
liabilities and/or obligations in or centered in the areas described on Appendix
I attached hereto (the "Snyder Area of Interest") (each Business Opportunity
subject to a Snyder Option hereinafter referred to as a "Snyder Business
Opportunity").
(b) Patina shall notify Snyder of any Snyder Business Opportunity a Patina
Entity desires to pursue, and in connection with such notice Patina shall
furnish to Snyder all information in its possession regarding such opportunity
that is material to Snyder's decision regarding whether or not to exercise the
Snyder Option. Within 10 days of receipt of such notice and information (twenty
days in the event Patina notifies Snyder of more than one such Business
Opportunity) Snyder shall notify Patina as to whether Snyder will exercise the
Snyder Option with regard to such opportunity, unless such opportunity
reasonably requires a shorter response time, in which case Patina shall describe
the
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circumstances giving rise to the need for a shorter response time in its notice
to Snyder and Snyder shall be required to respond within such shorter time
period.
(c) If Snyder notifies Patina of its intent to exercise a Snyder Option
pursuant to subsection (b) above then, subject to the provisions of subsection
(d) below, a Snyder Entity may pursue the relevant Snyder Business Opportunity
to the exclusion of the Patina Entities or may otherwise pursue the relevant
Snyder Business Opportunity. The Patina Entities shall refrain from pursuing
such opportunity unless and until Snyder informs Patina that the Snyder Entities
have ceased their efforts to pursue such opportunity. Upon exercise of the
Snyder Option, a Snyder Entity that pursues a Snyder Business Opportunity is not
required to do so on terms identical to those under which Patina intended to
pursue such opportunity.
(d) If Snyder has given Patina notice of its intent to pursue a Snyder
Business Opportunity under subsection (c) above and the Snyder Entities fail to
take Significant Steps under the circumstances to pursue such opportunity within
a reasonable time of delivering such notice under the circumstances, or if the
Snyder Entities cease to continue with Significant Steps to pursue such
opportunity for an unreasonable period under the circumstances, then
notwithstanding any other provision of this Section 4, Patina may pursue the
relevant Snyder Business Opportunity if (i) Patina provides notice to Snyder of
its intent to do so and (ii) within 20 days of such notice the Snyder Entities
have not begun or continued to take Significant Steps to pursue such
opportunity.
Section 5. Other Rights to Purchase by Patina. If any Snyder Entity
acquires any corporation, trust, partnership, limited liability company,
division, or other group of assets that do not primarily involve the Patina Area
of Interest, but which involve operations, properties, assets or rights located
in the Patina Area of Interest (together with any associated liabilities and
obligations, the "Patina Area of Interest Assets"), then Patina shall have the
right, exercisable in the manner set forth herein, to acquire all, but not less
than all, of such Patina Area of Interest Assets. Snyder shall notify Patina of
any Patina Area of Interest Assets, and such notice Snyder shall furnish to
Patina all information in its possession regarding such Patina Area of Interest
Assets that is material to Patina's decision regarding whether or not to
exercise the option set forth in this Section 5. Within 10 days of receipt of
such notice and information (twenty days in the event Snyder notifies Patina of
more than one such opportunity) Patina shall notify Snyder as to whether Patina
will exercise such option with regard to such opportunity, unless such
opportunity reasonably requires a shorter response time, in which case Snyder
shall describe the circumstances giving rise to the need for a shorter response
time in its notice to Patina and Patina shall be required to respond within such
shorter time period. If Patina notifies Snyder of its intent to exercise such
option pursuant to this Section 5, then the closing of such exercise shall occur
on a mutually agreeable date not more than 20 business days after the receipt of
the appraisal described below. The purchase price, which shall be payable in
immediately available funds, shall be equal to the fair market value of the
Patina Area of Interest Assets. Such fair market value shall be determined by an
appraisal performed by an investment banking firm or other valuation firm
experienced in valuing oil and gas properties (the "Appraiser"). The Appraiser
shall be appointed by Snyder, and must be reasonably acceptable to Patina. The
fees and expenses of the Appraiser shall be paid one-half by Snyder and one-half
by Patina, subject to the provisions of the final sentence of this Section 5.
The parties shall furnish such information to the Appraiser as shall be needed
to perform the appraisal contemplated hereby. Such appraisal shall be completed
within 30 days after the appointment of the Appraiser. Patina may revoke its
election to
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purchase the Patina Area of Interest Assets within five days after the receipt
of the appraisal, provided that if Patina so elects to revoke, it shall pay 100%
of the fees and expenses of the Appraiser.
Section 6. Other Rights to Purchase by Snyder. If any Patina Entity
acquires any corporation, trust, partnership, limited liability company,
division, or other group of assets that do not primarily involve the Snyder Area
of Interest, but which involve operations, properties, assets or rights located
in the Snyder Area of Interest (together any associated liabilities and
obligations, the "Snyder Area of Interest Assets"), then Snyder shall have
right, exercisable in the manner set forth herein, to acquire all, but not less
than all, of such Snyder Area of Interest Assets. Patina shall notify Snyder of
any Snyder Area of Interest Assets, and such notice Patina shall furnish to
Snyder all information in its possession regarding such Snyder Area of Interest
Assets that is material to Snyder's decision regarding whether or not to
exercise the option set forth in this Section 6. Within 10 days of receipt of
such notice and information (twenty days in the event Patina notifies Snyder of
more than one such opportunity) Snyder shall notify Patina as to whether Snyder
will exercise such option with regard to such opportunity, unless such
opportunity reasonably requires a shorter response time, in which case Patina
shall describe the circumstances giving rise to the need for a shorter response
time in its notice to Snyder and Snyder shall be required to respond within such
shorter time period. If Snyder notifies Patina of its intent to exercise such
option pursuant to this Section 6, then the closing of such exercise shall occur
on a mutually agreeable date not more than 20 business days after the receipt of
the appraisal described below. The purchase price, which shall be payable in
immediately available funds, shall be equal to the fair market value of the
Snyder Area of Interest Assets. Such fair market value shall be determined by an
appraisal performed by an Appraiser. The Appraiser shall be appointed by Patina,
and must be reasonably acceptable to Snyder. The fees and expenses of the
Appraiser shall be paid one-half by Patina and one-half by Snyder, subject to
the provisions of the final sentence of this Section 5. The parties shall
furnish such information to the Appraiser as shall be needed to perform the
appraisal contemplated hereby. Such appraisal shall be completed within 30 days
after the appointment of the Appraiser. Snyder may revoke its election to
purchase the Snyder Area of Interest Assets within five days after the receipt
of the appraisal, provided that if Snyder so elects to revoke, it shall pay 100%
of the fees and expenses of the Appraiser.
Section 7. Arbitration.
(a) Agreement to Arbitrate. Any and all claims, demands, causes of action,
disputes, controversies and other matters in question arising out of or relating
to any provision of this Agreement or the alleged breach thereof ("Claims"),
including claims that are allegedly extra-contractual in nature, whether such
Claims are based in contract, tort or otherwise, at law or in equity, under
state or federal law, whether provided by statute or the common law, for damages
or any other relief, shall be resolved and decided exclusively by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect and the provisions of this section.
(b) Procedural Matters. The arbitration proceeding shall be conducted in
Denver, Colorado. The arbitration shall be before a panel of three arbitrators.
Each party to such dispute shall select one arbitrator and the two arbitrators
selected by the parties shall select the third arbitrator (together the
"Arbitrators"). The Arbitrators are authorized to issue subpoenas for
depositions and
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other discovery mechanisms, as well as trial subpoenas, in accordance with the
Federal Rules of Civil Procedure. Any party may initiate a proceeding in the
appropriate United States District Court to enforce the provisions of the prior
sentence. This agreement to arbitrate shall be enforceable in either federal or
state court. Judgment upon any award rendered in any arbitration hereunder may
be entered by any federal or state court having jurisdiction. The enforcement of
this agreement to arbitrate and all procedural aspects of an arbitration
hereunder, including without limitation the construction and interpretation of
this agreement to arbitrate, the scope of the arbitrable issues, allegations of
waiver, delay or defenses to arbitrability, and the rules governing the conduct
of the arbitration, shall be governed by and construed pursuant to the Federal
Arbitration Act.
(c) Remedies; Amounts Awarded. The Arbitrators may grant such relief
(including, without limitation, injunctive relief and specific performance) as
may be consistent with the provisions of this Agreement and which the
Arbitrators deem appropriate except that, while the Arbitrators may award actual
damages to a party, they shall have no authority under any circumstances to
award punitive (including, without limitation, any exemplary damages, treble
damages or any other sort of penalty or punitive type damages), consequential,
incidental or indirect damages (in tort, contract or otherwise).
(d) Costs. The Arbitrators shall be entitled to award costs of the
arbitration and reasonable fees and expenses of attorneys as the Arbitrators
deem appropriate.
Section 8. Miscellaneous.
(a) Contracts and Agreements. Neither party shall from the date hereof
enter into any contracts or agreements that will prevent it from performing its
duties and obligations under this Agreement or prevent the other party hereto
from realizing the benefits of this Agreement.
(b) Third Party Beneficiaries. This Agreement is also intended for the
benefit of each Patina Entity, each Snyder Entity, and members of the Board of
Directors of Patina, each Patina Entity, Snyder and each Snyder Entity, each of
which shall be considered a third party beneficiary of this Agreement.
(c) Confidentiality. The provisions of this Agreement, all information
regarding Business Opportunities and all other information exchanged by the
parties under this Agreement (collectively, the "Information") shall not be
disclosed by any party to this Agreement unless otherwise publicly disclosed and
except as otherwise required by law. Each of Patina and Snyder may disclose the
Information on a need to know basis to its employees and agents but shall take
steps to ensure that such employees and agents, and the Patina Entities and
Snyder Entities, abide by the confidentiality provisions of this Section 8(c).
(d) Amendment; Waivers; Termination. This Agreement may only be altered,
supplemented, amended or waived by the written consent of each party hereto.
This Agreement shall terminate upon the mutual agreement by the parties hereto;
provided, however, that the provisions of Sections 3, 4, 5 and 6 shall terminate
on the third anniversary of the Effective Time. Any action taken by Patina
pursuant to this Agreement (including without limitation any action taken by
Patina
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in connection with any alteration, supplement, amendment, waiver or termination)
shall be approved in the manner set forth in Section 7.22 of the Merger
Agreement.
(e) Assignment. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their permitted
successors and assigns; provided, however, that no party hereto shall have the
right to assign this Agreement without the consent of the other party hereto.
(f) Notices. Any and all notices, designations, consents, offers,
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by personal delivery, overnight courier, certified mail, or
telecopy addressed, or sent, to the following addresses or telecopy numbers,
except as either party hereto may otherwise specify in writing in accordance
with this Section 8(f):
If to Patina to:
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attention: Rodney L. Waller
Telecopy No.: (303) 592-8600
If to Snyder to:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Attention: General Counsel
Telecopy No.: (817) 882-5982
Any Notice hereunder shall be deemed effective, delivered and received (a) if
given by personal delivery, when such Notice is personally delivered at the
address specified above; (b) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified above and receipt thereof is
confirmed; (c) if given by overnight courier, on the business day immediately
following the day on which such Notice is delivered to a reputable overnight
courier service; or (d) if given by certified mail, when such Notice is
delivered at the address specified above.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
(h) Choice of Law. This Agreement shall be governed by the internal laws of
the State of Delaware without giving effect to the principles of conflict of
laws thereof.
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(i) Entire Agreement. This Agreement contains the entire understanding of
the parties hereto respecting the subject matter hereof and supersedes all prior
agreements, discussions and understandings with respect thereto.
(j) No Partnership. No term or provision of this Agreement shall be
construed to establish any relationship of partnership, agency or joint venture
among the parties hereto.
(k) Severability. In the event that any one or more of the provisions
contained in this Agreement is, for any reason, held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first listed above.
PATINA OIL & GAS CORPORATION.
By: \s\ Rodney Waller
Rodney Waller
Vice President
SNYDER OIL CORPORATION
By: \s\ Thomas J. Edelman
Thomas J. Edelman
President
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EXHIBIT 2.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of May 2,
1996, is between PATINA OIL & GAS CORPORATION, a Delaware corporation (the
"Company"), and the undersigned stockholder (the "Holder").
W I T N E S S E T H:
WHEREAS, the Company, the Holder, Patina Merger Corporation, a Delaware
corporation, and Gerrity Oil & Gas Corporation, a Delaware corporation, have
entered into that certain Amended and Restated Agreement and Plan of Merger
dated as of January 16, 1996 and amended and restated as of March 20, 1996 (the
"Merger Agreement").
WHEREAS, pursuant to the Merger Agreement, after the Effective Time (as
that term is defined in the Merger Agreement) the Holder will own a substantial
number of shares of common stock, par value $.01 per share (the "Common Stock"),
of the Company, as well as a substantial number of shares of Series A Common
Stock, par value $.01 per share (the "Series A Common Stock"), which is
convertible under certain circumstances into Common Stock; and
WHEREAS, the Common Stock will be registered under Section 12 of the
Securities and Exchange Act of 1934 (the "Exchange Act"); and
WHEREAS, under the provisions of the Securities Act of 1933 (the
"Securities Act") and the General Rules and Regulations promulgated by the
Securities and Exchange Commission (the "SEC") thereunder, the Holder is or may
be limited in the manner of selling the shares of Common Stock owned by the
Holder, absent registration under the Securities Act of the sale of such shares
or the availability of another exemption from the registration requirements of
the Securities Act; and
WHEREAS, the Company desires to establish certain other restrictions on the
sale of the shares of Common Stock owned by the Holder, and the Company and the
Holder desire to set forth certain registration rights as to such shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto hereby agree as follows:
1. Agreement Not to Sell or Transfer Restricted Stock For A Period of Time.
The Holder agrees that it will not offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any security convertible into or
exchangeable for Common Stock for a period of 180 days after the Effective Time;
provided, however, that the foregoing shall not restrict any offers, sales,
contracts to sell or other dispositions to any affilate of the Holder.
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2. Demand Registration.
(A) Request for Registration. As used in this Agreement, "Restricted
Stock" shall mean all shares of Common Stock owned by the Holder at the
Effective Time, together with any securities issued or issuable with
respect to any such Common Stock by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, or upon conversion of Series A
Common Stock owned by the Holder at the Effective Time, or otherwise. As to
any particular shares of Restricted Stock, such securities shall cease to
be Restricted Stock when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (b) such securities shall have been distributed to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act (provided that if all Restricted Stock is then eligible for
sale pursuant to Rule 144, then all such Restricted Stock shall cease to be
Restricted Stock), (c) such securities shall have been otherwise
transferred, new certificates representing such securities not bearing a
legend restricting transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar
state law then in force, (d) such securities shall have ceased to be
outstanding, or (e) the Holder or Holders thereof shall agree in writing
that such Restricted Stock shall no longer be Restricted Stock (the Holder
and any permitted assignee of the Holder's rights and duties hereunder are
referred to herein as the "Holders" or individually as a "Holder"). Subject
to the conditions and limitations set forth in Section 5 of this Agreement,
at any time after the limitation period referred to in Section 1, the
Holder or Holders of Restricted Stock holding in the aggregate 5% in number
of shares of the Restricted Stock then outstanding may make a written
request for registration under the Securities Act of all or part of its or
their Restricted Stock pursuant to this Section 2 (a "Demand
Registration"), provided that the number of shares of Restricted Stock
proposed to be sold shall be at least 5% of the aggregate number of shares
of Restricted Stock then outstanding, but in no event less than 500,000
shares of Restricted Stock (subject to appropriate adjustment for any stock
dividend, stock split, combination, recapitalization, merger,
consolidation, reorganization or similar occurrence). Such request will
specify the aggregate number of shares of Restricted Stock proposed to be
sold and will also specify the intended method of disposition thereof.
Within ten days after receipt of such request, the Company will give
written notice of such registration request to all other Holders of
Restricted Stock and include in such registration all Restricted Stock with
regard to which the Company has received written requests for inclusion
therein within fifteen business days after the receipt by the applicable
Holders of the Company's notice. Each such request will also specify the
aggregate number of shares of Restricted Stock to be registered and the
intended method of disposition thereof. No other party, including the
Company (but excluding other Holders of Restricted Stock), shall be
permitted to offer securities under any such Demand Registration unless the
Holder or Holders requesting the Demand Registration shall consent in
writing.
(B) Priority on Demand Registrations. If the Holders of a majority in
number of shares of the Restricted Stock to be registered in a Demand
Registration so elect, the offering of such Restricted Stock pursuant to
such Demand Registration shall be in the form of an
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underwritten offering. In such event, if the managing underwriter or
underwriters of such offering advise the Company and the Holders in writing
that in their opinion the aggregate amount of Restricted Stock requested to
be included in such offering is so large that it will materially and
adversely affect the success of such offering, the Company will include in
such registration the aggregate number of shares of Restricted Stock that
in the opinion of such managing underwriter or underwriters can be sold
without any such material adverse effect, and such number of shares shall
be allocated pro rata among the Holders of Restricted Stock on the basis of
the number of shares of Restricted Stock requested to be included in such
registration by the Holders. To the extent shares of Restricted Stock so
requested to be registered are excluded from such offering, then a Holder
of such Restricted Stock shall have the right to one additional Demand
Registration under this Section with respect to such Restricted Stock,
provided that the failure of such Restricted Stock to be registered is
through no fault of such Holder.
(c) Selection of Underwriters and Counsel. If any Demand Registration
is in the form of an underwritten offering, the Holders of a majority in
number of the shares of Restricted Stock to be registered will select and
obtain the services of the investment banker or investment bankers and
manager or managers that will administer the offering and the counsel to
such investment bankers and managers; provided that such investment
bankers, managers and counsel must be approved by the Company, which
approval shall not be unreasonably withheld.
3. Piggyback Registration. If the Company proposes to file a registration
statement under the Securities Act with respect to an offering for its own
account of any class of its equity securities (other than a registration
statement on Form S-8 (or any successor form) or any other registration
statement relating solely to director and/or employee benefit plans or filed in
connection with an exchange offer, a transaction to which Rule 145 (or any
successor rule) under the Securities Act applies or an offering of securities
solely to the Company's existing stockholders) (each, an "Excluded Registration
Statement"), then the Company shall in each case give written notice of such
proposed filing to the Holders of Restricted Stock as soon as practicable (but
no later than five business days) before the anticipated filing date, and such
notice shall offer such Holders the opportunity to register such number of
shares of Restricted Stock as each such Holder may request. Each Holder of
Restricted Stock desiring to have such holder's Restricted Stock included in
such registration statement shall so advise the Company in writing within five
business days after the date of the Company's notice, setting forth the amount
of such Holder's Restricted Stock for which registration is requested. If the
Company's offering is to be an underwritten offering, the Company shall, subject
to the further provisions of this Agreement, use its reasonable efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Holders of the Restricted Stock requested to be included in the
registration for such offering to include such securities in such offering on
the same terms and conditions as any similar securities of the Company included
therein. Moreover, if the registration of which the Company gives notice
involves an underwriting, the right of each Holder to registration pursuant to
this Section 3 shall, unless the Company otherwise agrees, be conditioned upon
such Holder's participation as a seller in such underwriting and its execution
of an underwriting agreement with the managing underwriter or underwriters
selected by the Company. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering deliver a written opinion to the
Holders of Restricted Stock that
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either because of (A) the kind of securities that the Holders, the Company and
any other person or entities intend to include in such offering or (B) the size
of the offering that the Holders, the Company and other persons intend to make,
the success of the offering would be materially and adversely affected by
inclusion of the Restricted Stock requested to be included, then (i) in the
event that the size of the offering is the basis of such managing underwriter's
opinion, the number of shares to be offered for the accounts of Holders of
Restricted Stock shall be reduced pro rata to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number or kind of securities intended to be offered by Holders of Restricted
Stock than the fraction of similar reductions imposed on such other persons or
entities over the amount of securities of such kind they intended to offer; and
(ii) in the event that the combination of securities to be offered is the basis
of such managing underwriter's opinion, (x) the Restricted Stock to be included
in such offering shall be reduced as described in clause (i) above (subject to
the proviso in clause (i) ) or, (y) if the actions described in clause (x)
would, in the judgment of the managing underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the Restricted
Stock requested to be included would have on such offering, such Restricted
Stock will be excluded from such offering. Any Restricted Stock excluded from an
underwriting shall be withdrawn from registration and shall not, without the
consent of the Company and the manager of the underwriting, be transferred in a
public distribution prior to the earlier of 90 days (or such other shorter
period of time as the manager of the underwriting may require) after the
effective date of the registration statement or 120 days after the date the
Holders of such Restricted Stock are notified of such exclusion.
4. Registration Procedures. Whenever, pursuant to Section 2 or 3, any of
the Holders of Restricted Stock has requested that any Restricted Stock be
registered, the Company will, subject to the provisions of Section 5, use
reasonable best efforts to effect the registration and the sale of such
Restricted Stock in accordance with the intended method of disposition thereof
as promptly as practicable, and in connection with any such request, the Company
will:
(A) in connection with a request pursuant to Section 2, prepare and
file with the SEC, not later than 60 days after receipt of a request to
file a registration statement with respect to Restricted Stock, a
registration statement on any form for which the Company then qualifies and
which counsel for the Company shall deem appropriate and which form shall
be available for the sale of such Restricted Stock in accordance with the
intended method of distribution thereof, and use its reasonable best
efforts to cause such registration statement to become effective; provided
that if the Company shall furnish to the Holders making such a request a
certificate signed by either the chief financial officer or the chief
accounting officer of the Company stating that in such officer's good faith
judgment it would be significantly disadvantageous to the Company for such
a registration statement to be filed on or before the date filing would be
required (including without limitation the required disclosure of material
non-public information prior to the time that it would otherwise be
required by applicable law or securities exchange regulation to be
disclosed), the Company shall have an additional period of not more than 90
days within which to file such registration statement and provided further
(i) that, before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to one counsel
selected by the Holders of a
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majority in number of shares of the Restricted Stock covered by such
registration statement copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel, and (ii)
that after the filing of the registration statement, the Company will
promptly notify each of the selling Holders of Restricted Stock of any stop
order issued or, to the knowledge of the Company, threatened by the SEC and
take all reasonable actions to prevent the entry of such stop order or to
remove it if entered;
(B) in connection with a registration pursuant to Section 2, prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not
less than 180 days or such shorter period as shall terminate when all
shares of Restricted Stock covered by such registration statement have been
sold (but not before the expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable),
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
selling Holders thereof set forth in such registration statement;
(C) as soon as reasonably practicable, furnish to each of the selling
Holders, prior to filing a registration statement, copies of such
registration statement as proposed to be filed, and thereafter furnish to
such selling Holders such number of copies of such registration statement,
each amendment and supplement thereto (in each case, if specified by such
Holder, including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as a selling Holder may reasonably request in order to
facilitate the disposition of the Restricted Stock owned by such selling
Holder;
(D) with reasonable promptness, use its reasonable best efforts to
register or qualify (or cause to be registered or qualified) such
Restricted Stock under such other securities or blue sky laws of such
jurisdictions within the United States as any selling Holder (or managing
underwriter in the case of an underwritten offering) reasonably (in light
of such selling Holder's or managing underwriter's intended plan of
distribution) requests and do any and all other acts and things that may be
reasonably necessary or advisable to enable such selling Holder to
consummate the disposition in such jurisdictions of the Restricted Stock
owned by such selling Holder; provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this subsection (D),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction;
(E) with reasonable promptness, use its reasonable best efforts to
cause the Restricted Stock covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the selling Holder or Holders thereof to consummate
the disposition of such Restricted Stock;
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(F) promptly notify each selling Holder of such Restricted Stock, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the occurrence of any event known to the
Company requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Restricted Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
promptly make available to each selling Holder any such supplement or
amendment;
(G) in connection with a request pursuant to Section 2, enter into an
underwriting agreement in customary form, the form and substance of such
underwriting agreement being subject to the reasonable satisfaction of the
Company;
(H) with reasonable promptness make available for inspection by any
selling Holder, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by any such selling Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as
well as access at reasonable times to the Company's executive officers, key
employees, independent accountants and independent reserve engineers as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested for such purpose by any such
Inspector in connection with such registration statement; provided,
however, that the selection of any Inspector other than a selling Holder
shall be subject to the consent of the Company, which shall not be
unreasonably withheld. Each Inspector that actually reviews Records
supplied by the Company that include information that the Company
determines, in good faith, to be confidential ("Confidential Information")
shall be required, prior to any such review, to execute an agreement with
the Company providing that such Inspector shall not disclose any
Confidential Information unless such disclosure is required by applicable
law or legal process. Each selling Holder of Restricted Stock agrees that
Confidential Information obtained by it as a result of such inspections
shall not be used by it as the basis for any transactions in securities of
the Company unless and until such information is made generally available
to the public. Each selling Holder of Restricted Stock further agrees that
it will, upon learning that disclosure of Confidential Information is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of the Confidential Information. Each selling Holder
also agrees that the due diligence investigation made by the Inspectors
shall be conducted in a manner that will not unreasonably disrupt the
operations of the Company or the work performed by the Company's officers
and employees;
(I) in the event such sale is pursuant to an underwritten offering,
use its reasonable best efforts to obtain a comfort letter or letters from
the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by comfort letters as the
managing underwriter reasonably requests;
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(J) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months, beginning within two months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(K) with reasonable promptness, use its reasonable best efforts to
cause all such Restricted Stock to be listed on each securities exchange on
which the Common Stock of the Company is then listed, provided that the
applicable listing requirements are satisfied.
Each selling Holder of Restricted Stock agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
subsection (F) hereof, such selling Holder will forthwith discontinue
disposition of Restricted Stock pursuant to the registration statement covering
such Restricted Stock until such selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subsection (F) hereof, and,
if so directed by the Company, such selling Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
such selling Holder's possession, of the prospectus covering such Restricted
Stock current at the time of receipt of such notice. In the event the Company
shall give any such notice, the Company shall extend the period during which
such registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in subsection (B)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to subsection (F) hereof to and including the date when each selling
Holder of Restricted Stock covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (F) hereof. Each selling Holder also agrees to notify the Company if
any event relating to such selling Holder occurs that would require the
preparation of a supplement or amendment to the prospectus so that such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
5. Conditions and Limitations.
(A) The Company's obligations under Section 2 shall be subject to the
following limitations:
(i) the Company need not file a registration statement either (x)
during the period starting with the date 60 days prior to the
Company's estimated date of filing of, and ending 90 days after the
effective date of, any registration statement pertaining to securities
of the Company (other than an Excluded Registration Statement),
provided that if such Company registration statement is not filed
within 90 days after the first date on which the Company notifies a
Holder of Restricted Stock that it will delay a Demand Registration
pursuant to this clause (x), the Company may not further postpone such
Demand Registration pursuant to this clause; or (y) during the period
specified in the first proviso of subsection (A) of Section 4;
(ii) the Company shall not be required to furnish any audited
financial statements other than those audited statements customarily
prepared at the end of its
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fiscal year, or to furnish any unaudited financial information with
respect to any period other than its regularly reported interim
quarterly periods unless in the absence of such other unaudited
financial information the registration statement would contain an
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(iii) except as provided in Section 2(B), the Company shall not
be required to file more than two Demand Registrations. A registration
statement will not count as a Demand Registration until it has become
effective; and
(iv) the Company shall have received the information and
documents specified in Section 6 and each selling Holder shall have
observed or performed its other covenants and conditions contained in
such section.
(B) The Company's obligation under Section 3 shall be subject to the
limitations and conditions specified in such section and in clauses (i),
(ii) and (iv) of subsection (A) of this Section 5, and to the condition
that the Company may at any time terminate its proposal to register its
shares and discontinue its efforts to cause a registration statement to
become or remain effective.
6. Information from and Certain Covenants of Holders of Restricted Stock.
The Holders for whom Restricted Stock are to be registered pursuant to this
Agreement shall provide to the Company such information regarding the Restricted
Stock to be so registered, the Holder and the intended method of disposition of
such Restricted Stock as shall reasonably be required in connection with the
action to be taken. Any Holder whose Restricted Stock is included in a
registration statement pursuant to this Agreement shall execute all consents,
powers of attorney, registration statements and other documents reasonably
required to be signed by it in order to cause such registration statement to
become effective. Each selling Holder covenants that, in disposing of such
Holder's shares, such Holder will comply with Rules l0b-2, l0b-6 and l0b-7 of
the SEC adopted pursuant to the Exchange Act.
7. Registration Expenses. All Registration Expenses (as defined herein)
will be borne by the Company. Underwriting discounts and commissions applicable
to the sale of Restricted Stock shall be borne by each selling Holder of the
Restricted Stock to which such discount or commission relates, and each selling
Holder shall be responsible for the fees and expenses of any legal counsel,
accountants or other agents retained by such selling Holder and all other
out-of-pocket expenses incurred by such selling Holder in connection with any
registration under this Agreement.
As used herein, the term Registration Expenses means all expenses incident
to the Company's performance of or compliance with this Agreement (whether or
not the registration in connection with which such expenses are incurred
ultimately becomes effective), including without limitation all registration and
filing fees, fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Restricted Stock), rating agency fees, printing
expenses, messenger and delivery expenses incurred by the Company, internal
expenses incurred by the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the fees and
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expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed, and fees and disbursements of counsel for the Company
and its independent certified public accountants (including the expenses of any
comfort letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company and
the fees and expenses of other persons retained by the Company in connection
with such registration.
8. Indemnification; Contribution.
(A) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each selling Holder of Restricted Stock, its officers,
directors and agents and each person, if any, who controls such selling
Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
or prospectus relating to the Restricted Stock or in any amendment or
supplement thereto or in any preliminary prospectus relating to the
Restricted Stock, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such selling
Holder or on such selling Holder's behalf expressly for use therein and
provided further, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus,
the indemnity agreement contained in this subsection shall not apply to the
extent that any such loss, claim, damage, liability or expense results from
the fact that a copy of the final prospectus was not sent or given to the
person asserting any such losses, claims, damages, liabilities or expenses
at or prior to the written confirmation of the sale of the Restricted Stock
concerned to such person if a final prospectus is made available by the
Company on a timely basis. The Company also agrees to include in any
underwriting agreement with any underwriters of the Restricted Stock
provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who controls
such underwriters on substantially the same basis as the provisions of this
Section 8 indemnifying and providing for contribution to the selling
Holders.
(B) Indemnification by Holders of Restricted Stock. Each selling
Holder agrees to indemnify and hold harmless the Company, its officers,
directors and agents and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Restricted Stock or in any amendment or
supplement thereto or in any preliminary prospectus relating to the
Restricted Stock, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not
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misleading, provided (i) that such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, any such untrue statement or
omission or allegation thereof based upon information furnished in writing
to the Company by such selling Holder or on such selling Holder's behalf
expressly for use therein, (ii) that with respect to any untrue statement
or omission or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this subsection shall not
apply to the extent that any such loss, claim, damage, liability or expense
results from the fact that a copy of the final prospectus was not sent or
given to the person asserting any such losses, claims, damages, liabilities
or expenses at or prior to the written confirmation of the sale of the
Restricted Stock concerned to such person, and (iii) that no selling Holder
shall be liable for any indemnification under this Section 8 in an
aggregate amount that exceeds the total net proceeds (before deducting
expenses other than underwriting discounts or commissions) received by such
selling Holder from the offering. Each selling Holder also agrees to
include in any underwriting agreement with underwriters of the Restricted
Stock provisions indemnifying and providing for contribution to such
underwriters, their officers and directors, and each person who controls
such underwriters, on substantially the same basis as the provisions of
this Section 8 indemnifying and providing for contribution to the Company.
(C) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any indemnified party hereunder in respect of which
indemnity may be sought from an indemnifying party, the indemnifying party
shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such indemnified party, and shall assume the
payment of all expenses. Such indemnified party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party has
agreed to pay such fees and expenses or (ii) the indemnifying party shall
have failed to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to such indemnified party, or (iii) the
named parties to any such action or proceeding (including any impleaded
parties) include both such indemnified party and such indemnifying party,
and such indemnified party shall have been advised by counsel in writing
that there may be one or more legal defenses available to such indemnified
party that are different from or additional to those available to the
indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel
reasonably acceptable to the indemnifying party at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action or proceeding on behalf of such
indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party, which firm shall be designated in writing
by such indemnified party). The indemnifying party shall not be liable for
any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there is a
final judgment for the plaintiff in any such action or proceeding, the
indemnifying party agrees to
10
<PAGE>
indemnify and hold harmless such indemnified party from and against any
loss or liability (to the extent stated above) by reason of such settlement
or judgment.
(D) Contribution. If the indemnification provided for in this Section
8 is unavailable to the Company or the selling Holders in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each such indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments, in such proportion as is appropriate to reflect the relative
fault of each such party in connection with such statements or omissions,
as well as any other relevant equitable considerations. The relative fault
of each such party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8(D) were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. Notwithstanding the
provisions of this Section 8(D), no selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at
which the Restricted Stock of such selling Holder were offered to the
public exceeds the amount of any damages which such selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
9. Amendments. This Agreement may be amended or modified upon the written
consent thereto of the Company and the Holders of a majority of the Restricted
Stock.
10. Assignments. This Agreement shall be binding on and inure to the
benefit of the respective successors and assigns of the parties hereto.
11. Entire Agreement; Governing Law. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof and all prior or
contemporaneous written or oral agreements are merged herein. This Agreement
shall be governed by the laws of the State of Delaware.
11
<PAGE>
12. Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice") shall be in writing and delivered personally or mailed, postage
prepaid, or by telegram or telecopier, as follows:
If to the Holder:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Attention: General Counsel
Telecopy No.: (817) 882-5982
If to the Company:
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attention: Rodney L. Waller
Telecopy No.: (303) 592-8600
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party or Holder may change any
address to which Notice is to be given to it by giving Notice as provided above
of such change of address.
IN WITNESS WHEREOF, the Company and the Holder have caused this Agreement
to be signed by their respective officers thereunto duly authorized.
PATINA OIL & GAS CORPORATION
By: /s/ Rodney Waller
Rodney Waller
Vice President
SNYDER OIL CORPORATION
By: /s/ Thomas J. Edelman
Thomas J. Edelman
President
12
EXHIBIT 2.5
CROSS-INDEMNIFICATION AGREEMENT
This Cross-Indemnification Agreement (this "Agreement") is entered into as
of this 2nd day of May, 1996, by and between Snyder Oil Corporation, a Delaware
corporation ("Snyder"), and Patina Oil & Gas Corporation, a Delaware corporation
("Patina").
R E C I T A L S:
WHEREAS, Snyder, Patina, Patina Merger Corporation, a Delaware corporation,
and Gerrity Oil & Gas Corporation, a Delaware corporation ("Gerrity"), have
entered into that certain Amended and Restated Agreement and Plan of Merger
dated as of January 16, 1996 and amended and restated as of March 20, 1996 (the
"Merger Agreement");
WHEREAS, as a result of the transactions contemplated by the Merger
Agreement, Patina and/or its subsidiaries own the Business (as defined in the
Merger Agreement) and Gerrity has become a wholly owned subsidiary of Patina
(the Business and all of the activity of Patina and its subsidiaries after the
Effective Time (as defined below) are collectively referred to hereinafter as
the "Operations");
WHEREAS, in accord with the Merger Agreement, in connection with the
Contribution (as defined in the Merger Agreement), Snyder and Patina desire to
set forth the respective indemnification rights and obligations of each party
with respect to certain liabilities.
NOW THEREFORE, in consideration of the Contribution, of the premises and
mutual covenants hereinafter set forth, and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Definitions.
(a) An "Affiliate" of a party shall mean any individual, corporation,
limited liability company, partnership, trust or other legally recognized
entity controlling, controlled by or under common control with such party.
(b) "Business" shall have the meaning assigned that term in the Merger
Agreement.
(c) "Contribution" shall have the meaning assigned that term in the
Merger Agreement.
(d) "Effective Time" shall have the meaning assigned that term in the
Merger Agreement.
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<PAGE>
(e) "Field Sub" shall have the meaning assigned that term in the
Merger Agreement.
(f) "Liabilities" shall mean all losses, liabilities, claims, taxes,
damages, costs (including costs of investigation) and expenses (including
reasonable legal fees and expenses).
(g) "Merger Agreement" shall have the meaning assigned that term in
the Recitals above.
(h) "Patina Indemnified Parties" shall mean Patina and its
Subsidiaries and any officer, director, employee, agent or other
representative thereof (individually, a "Patina Indemnified Party").
(i) "Patina Liabilities" shall mean all Liabilities, known or
unknown, absolute, accrued contingent or otherwise, to the extent (A)
directly related to the assets or operations comprising the Business
that are purported to be owned by Patina or its subsidiaries pursuant
to the Contribution, (B) directly or indirectly related to Gerrity or
its subsidiaries or their assets, operations or businesses or (C)
otherwise reflected or reserved in the Patina Balance Sheet (as
defined in the Merger Agreement), in each case regardless of whether
such Liabilities exist or arise before, at or after the Effective
Time; provided, however, that any Liabilities disclosed or required by
GAAP to be disclosed on a balance sheet for Patina as of the Effective
Time (or in the notes thereto) that are not disclosed in the Patina
Balance Sheet shall not constitute Patina Liabilities; provided
further, that (M) Liabilities for income taxes of Patina or the
Business relating to periods prior to the Effective Time (other than
Liabilities for income taxes attributable to Excess Production, as
defined in the Merger Agreement), (N) Liabilities on Section 1.4 of
the SOCO Disclosure Schedule (as defined in the Merger
Agreement)(except to the extent otherwise provided in such Section)
and (O) Liabilities expressly assumed or retained by Snyder on Section
5.11 of the SOCO Disclosure Schedule, shall not constitute Patina
Liabilities; provided further, that, notwithstanding any provision to
the contrary herein, any Liability (X) included in the calculation of
working capital pursuant to Section 7.23 of the Merger Agreement or
(Y) constituting an Expense (within the meaning of the Merger
Agreement) or obligation for which Patina is liable under the terms of
the Merger Agreement shall constitute a Patina Liability.
(j) "Snyder Indemnified Parties" shall mean Snyder and its Affiliates,
other than Patina and its subsidiaries, and any officer, director, employee,
agent or other representative thereof (individually, a "Snyder Indemnified
Party").
(k) "Snyder Liabilities" shall mean all Liabilities known or unknown,
absolute, accrued, contingent or otherwise, arising out of or associated with
the affairs or operations of Snyder and any of its subsidiaries and which are
not Patina Liabilities.
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<PAGE>
2. Indemnification.
(a) Patina shall defend, indemnify and hold harmless the Snyder
Indemnified Parties against any and all Patina Liabilities, whether or not
the result of the sole or partial negligence or otherwise culpable conduct
or fault of one or more of the Snyder Indemnified Parties.
(b) Snyder shall defend, indemnify and hold harmless the Patina
Indemnified Parties against any and all Snyder Liabilities, whether or not
the result of the sole or partial negligence or otherwise culpable conduct
or fault of one or more of the Patina Indemnified Parties.
3. Indemnification Procedure. Each person to be indemnified pursuant to
this Agreement (an "Indemnified Party") agrees to give prompt notice to the
indemnifying party of the assertion of any claim, or the commencement of any
suit, action or proceeding, brought against or sought to be collected from such
Indemnified Party (each a "Third Party Claim"), in respect of which indemnity
may be sought by such Indemnified Party under this Agreement; provided that the
omission so to promptly notify the indemnifying party with respect to a Third
Party Claim brought against or sought to be collected from such Indemnified
Party will not relieve the indemnifying party from any Liability that it may
have to such Indemnified Party under this Agreement except to the extent that
such failure has materially prejudiced such indemnifying party with respect to
the defense of such Third Party Claim. If any Indemnified Party shall seek
indemnity under this Agreement with respect to a Third Party Claim brought
against or sought to be collected from such Indemnified Party, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, to assume and direct the defense and settlement thereof with counsel
satisfactory to such Indemnified Party. After notice from the indemnifying party
to an Indemnified Party of its election to assume and direct the defense and
settlement of a Third Party Claim brought against or sought to be collected from
such Indemnified Party that such indemnifying party is entitled to assume and
direct under the terms hereof, the indemnifying party shall not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the Indemnifying
Party and the Indemnified Party are both named parties to any such action, claim
or demand and representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest between them.
Notwithstanding the foregoing provisions of this Section 3, the indemnifying
party shall not (A) without the prior written consent of an Indemnified Party,
effect any settlement of any pending or threatened proceeding in respect of
which such Indemnified Party is, or with reasonable foreseeability, could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party for a Third Party Claim brought against or sought to be collected from
such Indemnified Party, unless such settlement includes an unconditional
release, in form and substance satisfactory to the Indemnified Party, of such
Indemnified Party from all Liability arising out of such proceeding (provided
that, whether or not such a release is required to be obtained, the indemnifying
party shall remain liable to such Indemnified Party in accordance with this
Agreement in the event that a Third Party Claim is subsequently brought against
or sought to be collected from such Indemnified Party) or (B) be liable for any
settlement of any Third Party Claim brought against or sought to be
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<PAGE>
collected from an Indemnified Party effected without such indemnifying party's
written consent (which shall not be unreasonably withheld), but if settled with
such indemnifying party's written con sent, or if there is a final judgment for
the plaintiff in any such Third Party Claim, such indemnifying party agrees (to
the extent stated above) to indemnify the Indemnified Party from and against any
loss, liability, claim, damage or expense by reason or such settlement or
judgment. The indemnification required by this Agreement shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or loss, liability, claim, damage or
expense is incurred.
4. Insurance.
(a) Notwithstanding any provision to the contrary herein, an indemnifying
party hereunder shall have no obligation for a liability or any part thereof
sought to be indemnified by an Indemnified Party pursuant to this Agreement to
the extent that the Indemnified Party has received payment from an insurer on
account of such liability, which payment has not been offset through a matching
deductible or premium adjustments made on account of such payment.
(b) To the extent that an Indemnified Party may have insurance for a
liability or any part thereof sought to be indemnified under this Agreement,
until an insurer makes payment on account thereof, the parties shall proceed
with indemnification under this Agreement as if the Indemnified Party is not
covered by such insurance. An indemnifying party which has paid all or any part
of an indemnification claim shall then be reimbursed by the Indemnified Party
from insurance payment later received, if any, which payment has not been offset
through a matching deductible or premium adjustments made on account of such
payment.
5. Assignment.
Except by operation of law or in connection with the sale of all or
substantially all the assets of a party hereto, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the written consent of the other party; and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void; provided, however, that the provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
6. Further Assurances.
Subject to the provisions hereof, the parties hereto shall make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as may be reasonably required in order to effectuate the purposes
of this Agreement and to consummate the transactions contemplated hereby.
Subject to the provisions hereof, each of the parties shall, in connection with
entering into this Agreement, performing its obligations hereunder and taking
any and all actions relating hereto, comply with all applicable laws,
regulations, orders and decrees, obtain all required
-4-
<PAGE>
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other parties with all such information as
they may reasonably request in order to be able to comply with the provisions of
this sentence.
7. Parties in Interest.
Except as herein otherwise specifically provided, nothing in this Agreement
expressed or implied is intended to confer any right or benefit upon any person,
firm or corporation other than the parties, the Snyder Indemnified Parties, the
Patina Indemnified Parties and their respective successors and permitted
assigns.
8. Waivers, Etc.
No failure or delay on the part of the parties in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure by the parties therefrom shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
9. Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any thereof which may be hereafter declared
invalid, void or unenforceable. In the event that any such term, provision,
covenant or restriction is held to be invalid, void or unenforceable, the
parties hereto shall use their reasonable efforts to find and employ an
alternate means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
10. Change of Law.
If, due to any change in applicable law or regulations or the
interpretation thereof by a court of law or other governing body having
jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement or any transaction contemplated hereby shall become
impracticable or impossible, the parties hereto shall use their reasonable
efforts to find and employ
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<PAGE>
an alternative means to achieve the same or substantially the same result as the
contemplated by such provision.
11. Notice.
Any notices to be given hereunder shall be in writing and shall be deemed
to be sufficiently given when delivered personally or sent certified or
registered mail, postage prepaid and return receipt requested, or by telecopy,
and if intended for Patina addressed to:
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attention: Rodney L. Waller
Telecopy No.: (303) 592-8600
or if intended for Snyder addressed to:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Attention: General Counsel
Telecopy No.: (817) 882-5982
Either party may change the address for receiving notice upon notice to the
other party given in the manner set forth in this Section 11.
12. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.
13. Amendment.
This Agreement may be amended or otherwise modified only by a writing duly
executed by each of the parties hereto.
14. Waiver.
No waiver of any of the provisions of this Agreement shall (a) be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), or (b) constitute a continuing waiver, unless otherwise expressly
provided in such waiver.
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<PAGE>
15. Headings.
The section headings used in this Agreement are for convenience only and
shall not be considered a part of, or affect the construction or interpretation
of, any provisions of this Agreement.
16. Execution of Counterparts.
This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such counterparts together
for all purposes shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
SNYDER OIL CORPORATION
By: \s\ Thomas J. Edelman
Thomas J. Edelman
President
PATINA OIL & GAS CORPORATION
By: \s\ Rodney Waller
Rodney Waller
Vice President
-7-
EXHIBIT 10.1
CREDIT AGREEMENT
dated as of
May 2, 1996
among
PATINA OIL & GAS CORPORATION,
SOCO WATTENBERG CORPORATION, and
GERRITY OIL & GAS CORPORATION,
as Borrowers
The Financial Institutions Listed on Schedule 1 hereto,
as Banks
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent,
NATIONSBANK OF TEXAS, N.A.,
as Documentary Agent,
and
WELLS FARGO BANK, N.A., CIBC, INC. and
CREDIT LYONNAIS NEW YORK BRANCH
as Co-Agents
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I TERMS DEFINED..................................................... 1
SECTION 1.1. Definitions............................................ 1
SECTION 1.2. Accounting Terms and Determinations................... 25
ARTICLE II THE CREDIT FACILITIES............................................. 26
SECTION 2.1. Patina Term Commitment................................ 26
SECTION 2.2. Patina Revolving Commitment............................26
SECTION 2.3. Gerrity Revolving Commitment...........................28
SECTION 2.4. Method of Borrowing....................................29
SECTION 2.5. Method of Requesting Letters of Credit.................30
SECTION 2.6. Notes..................................................31
SECTION 2.7. Interest Rates; Payments...............................31
SECTION 2.8. Mandatory Prepayments of Patina Term Loan..............33
SECTION 2.9. Mandatory Termination of Commitments; Termination Date
and Maturity.......................................... 33
SECTION 2.10. Mandatory Reduction of Patina Term Commitments........33
SECTION 2.11. Voluntary Reduction of Patina Commitments.............33
SECTION 2.12. Voluntary Reduction of Gerrity Commitments............33
SECTION 2.13. Voluntary Prepayments of Patina Term Loan.............34
SECTION 2.14. Application of Payments...............................34
SECTION 2.15. Commitment Fees Applicable to Revolvers...............34
SECTION 2.16. Commitment Fee Applicable to Patina Term Commitments..34
SECTION 2.17. Additional Fees Due on Patina Term Commitment
Termination Date.......................... 34
SECTION 2.18. Closing Fee...........................................34
SECTION 2.19. Patina Term Loan Funding Fee..........................34
SECTION 2.20. Agency and Other Fees.................................35
ARTICLE III GENERAL PROVISIONS................................................35
SECTION 3.1. Delivery and Endorsement of Notes......................35
SECTION 3.2. General Provisions as to Payments......................35
SECTION 3.3. Funding Losses.........................................36
SECTION 3.4. Foreign Lenders, Participants, and Assignees...........37
ARTICLE IV BORROWING BASE.....................................................37
SECTION 4.1. Reserve and Related Asset Report; Proposed Borrowing
Base..............................37
SECTION 4.2. Determination of Patina Borrowing Base................ 37
SECTION 4.3. Special Determination of Patina Borrowing Base.........38
SECTION 4.4. Patina Borrowing Base Deficiency.......................38
SECTION 4.5. Initial Patina Borrowing Base..........................39
SECTION 4.6. Determination of Gerrity Borrowing Base................39
SECTION 4.7. Special Determination of Gerrity Borrowing Base and
Gerrity Borrowing Base Ceiling.......................40
SECTION 4.8. Readjustment of Gerrity Borrowing Base.................40
SECTION 4.9. Gerrity Borrowing Base Deficiency......................41
SECTION 4.10. Initial Gerrity Borrowing Base.........................41
SECTION 4.11. Certain Agreements Regarding November 1, 1996 Periodic
Determination.................... 41
ARTICLE V COLLATERAL..........................................................41
<PAGE>
SECTION 5.1. Security...............................................41
SECTION 5.2. Guarantees.............................................43
ARTICLE VI CONDITIONS TO BORROWINGS ........................................ 43
SECTION 6.1. Conditions to Initial Extension of Credit .......... 43
SECTION 6.2. Conditions to each Borrowing and each Letter
of Credit ....... 46
SECTION 6.3. Additional Conditions to the initial Borrowing under
the Patina Term Commitments ................... 47
ARTICLE VII REPRESENTATIONS AND WARRANTIES ................................. 47
SECTION 7.1. Corporate Existence and Power ....................... 47
SECTION 7.2. Existence and Power (Other Companies)................. 47
SECTION 7.3. Corporate, Limited Liability Company,Partnership
and Governmental Authorization; Contravention...... 48
SECTION 7.4. Binding Effect........................................ 48
SECTION 7.5. Financial Information................................. 48
SECTION 7.6. Litigation............................................. 49
SECTION 7.7. ERISA................................................. 49
SECTION 7.8. Taxes and Filing of Tax Returns....................... 49
SECTION 7.9. Title to Properties; Liens............................ 49
SECTION 7.10. Business; Compliance.................................. 50
SECTION 7.11. Licenses, Permits, Etc................................ 50
SECTION 7.12. Compliance with Law................................... 50
SECTION 7.13. Ownership Interests................................... 50
SECTION 7.14. Full Disclosure....................................... 50
SECTION 7.15. Subsidiaries.......................................... 51
SECTION 7.16. Obligations of Unrestricted Subsidiaries............. 51
SECTION 7.17. Environmental Matters................................ 51
SECTION 7.18. Closing Documents.................................... 51
SECTION 7.19. Burdensome Obligations............................... 52
SECTION 7.20. Government Regulations............................... 52
ARTICLE VIII AFFIRMATIVE COVENANTS........................................... 52
SECTION 8.1. Information........................................... 52
SECTION 8.2. Business of Borrowers................................. 55
SECTION 8.3. Maintenance of Existence.............................. 55
SECTION 8.4. Title Data............................................ 55
SECTION 8.5. Right of Inspection................................... 55
SECTION 8.6. Maintenance of Insurance.............................. 55
SECTION 8.7. Payment of Taxes and Claims........................... 56
SECTION 8.8. Compliance with Laws and Documents.................... 56
SECTION 8.9. Operation of Properties and Equipment................. 56
SECTION 8.10. Further Assurances.................................... 57
SECTION 8.11. Environmental Law Compliance and Indemnity............ 57
SECTION 8.12. Change of Control Offer............................... 58
ARTICLE IX NEGATIVE COVENANTS................................................ 58
SECTION 9.1. Debt of Borrowers and their Restricted Subsidiaries... 58
SECTION 9.2. Restricted Payments................................... 59
SECTION 9.3. Negative Pledge....................................... 59
SECTION 9.4. Consolidations and Mergers............................ 59
SECTION 9.5. Asset Dispositions.................................... 59
SECTION 9.6. Amendments to Material Documents.......................60
<PAGE>
SECTION 9.7. Use of Proceeds........................................60
SECTION 9.8. Investments............................................60
SECTION 9.9. Transactions with Affiliates...........................60
SECTION 9.10. Plans..................................................60
SECTION 9.11. Oil and Gas Hedge Transactions.........................60
SECTION 9.12. Obligations of Unrestricted Subsidiaries...............61
SECTION 9.13. Acquisitions...........................................61
SECTION 9.14. Operating Leases.......................................61
SECTION 9.15. Speculative Hedge Transactions.........................61
ARTICLE X FINANCIAL COVENANTS................................................ 61
SECTION 10.1. Financial Covenants applicable to Patina on a
Consolidated Basis........................ 61
SECTION 10.2. Financial Covenants applicable to Patina on a
Consolidated Basis excluding Gerrity...... 62
SECTION 10.3. Financial Covenants Applicable to Gerrity on a
Consolidated Basis....................... 62
ARTICLE XI DEFAULTS.......................................................... 62
SECTION 11.1. Events of Default.................................... 62
ARTICLE XII AGENTS........................................................... 65
SECTION 12.1. Appointment and Authorization........................ 65
SECTION 12.2. Agents and Affiliates................................ 65
SECTION 12.3. Action by Agents..................................... 65
SECTION 12.4. Consultation with Experts............................ 65
SECTION 12.5. Liability of Agents...................................66
SECTION 12.6. Delegation of Duties..................................66
SECTION 12.7. Indemnification.......................................66
SECTION 12.8. Credit Decision.......................................66
SECTION 12.9. Successor Agent.......................................66
ARTICLE XIII PROTECTION OF YIELD; CHANGE IN LAWS..............................67
SECTION 13.1. Basis for Determining Interest Rate Applicable to
Eurodollar Tranches Inadequate............... 67
SECTION 13.2. Illegality of Eurodollar Loans....................... 67
SECTION 13.3. Increased Cost of Eurodollar Tranche................. 68
SECTION 13.4. Adjusted Base Rate Tranche Substituted for
Affected Eurodollar Tranche................... 69
SECTION 13.5. Capital Adequacy..................................... 69
<PAGE>
SECTION 13.6. Taxes................................................ 70
SECTION 13.7. Discretion of Banks as to Manner of Funding.......... 70
ARTICLE XIV MISCELLANEOUS.................................................... 70
SECTION 14.1. Notices.............................................. 70
SECTION 14.2. No Waivers........................................... 71
SECTION 14.3. Expenses; Documentary Taxes; Indemnification........ 71
SECTION 14.4. Right and Sharing of Set-Offs........................ 71
SECTION 14.5. Amendments and Waivers............................... 72
SECTION 14.6. Survival............................................. 72
SECTION 14.7. Limitation on Interest............................... 72
SECTION 14.8. Invalid Provisions................................... 73
SECTION 14.9. Waiver of Consumer Credit Laws....................... 73
SECTION 14.10. Successors and Assigns............................... 73
SECTION 14.11. TEXAS LAW............................................ 74
SECTION 14.12. Consent to Jurisdiction; Waiver of Immunities........ 74
SECTION 14.13. Counterparts; Effectiveness.......................... 75
SECTION 14.14. No Third Party Beneficiaries......................... 75
SECTION 14.15. COMPLETE AGREEMENT................................... 75
SECTION 14.16. WAIVER OF JURY TRIAL................................. 75
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of the 2nd day
of May, 1996, among Patina Oil & Gas Corporation, a Delaware corporation
("Patina"), SOCO Wattenberg Corporation, a Delaware corporation ("SWAT"),
Gerrity Oil and Gas Corporation, a Delaware corporation ("Gerrity") (Patina,
SWAT and Gerrity are each individually referred to herein as "Borrower" and
collectively as "Borrowers"), Texas Commerce Bank National Association, as
Administrative Agent ("Administrative Agent"), NationsBank of Texas, N.A., as
Documentary Agent ("Documentary Agent"), Wells Fargo Bank, N.A., CIBC, Inc. and
Credit Lyonnais New York Branch, as Co-Agents ("Co-Agents") and the financial
institutions listed on Schedule 1 hereto as Banks (individually a "Bank" and
collectively "Banks")
W I T N E S S E T H
WHEREAS, Patina and SWAT have requested that Banks provide Patina and SWAT
jointly with a term credit facility and a revolving credit facility, and Gerrity
has requested that Banks provide Gerrity with a revolving credit facility, and
Banks are willing to provide such credit facilities upon the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrowers, Administrative Agent, Documentary Agent, Co-Agents
and Banks agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted Base Rate" means, on any day, the greater of (a) the Base Rate in
effect on such day, or (b) the sum of (i) the Federal Funds Rate in effect on
such day, plus (ii) one half of one percent (.5%). Each change in the Adjusted
Base Rate shall become effective automatically and without notice to any
Borrower or any Bank upon the effective date of each change in the Federal Funds
Rate or the Base Rate, as the case may be.
"Adjusted Base Rate Tranche" means the portion of the principal of any Loan
bearing interest with reference to the Adjusted Base Rate.
"Adjusted Consolidated EBITDA" means, with respect to any Person for any
period, Consolidated EBITDA of such Person for such period, adjusted to reflect
all revenues and expenses (including lease operating expense, severance Taxes,
additional overhead and other expenses) attributable to material oil and gas
properties purchased by such Person or any of its Subsidiaries after the first
day of such period as if such properties had been owned by such Person or such
Subsidiaries on the first day of such period. As used in this definition,
"material oil and gas properties" means oil and gas properties purchased for a
purchase price of not less than $25,000,000.
"Adjusted Eurodollar Rate" applicable to any Interest Period, means a rate
per annum equal to the quotient obtained (rounded upwards, if necessary, to the
next higher 1/16 of 1%) by dividing (a) the applicable Eurodollar Rate by (b)
1.00 minus the Eurodollar Reserve Percentage.
1
<PAGE>
"Administrative Agent" means Texas Commerce Bank National Association in
its capacity as Administrative Agent for Banks hereunder or any successor
thereto.
"Affiliate" means, as to any Person, any Subsidiary of such Person, or any
other Person which, directly or indirectly, controls, is controlled by, or is
under common control with, such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or partnership interests, or by contract or
otherwise.
"Agent" means any of the Administrative Agent, the Documentary Agent or any
Co-Agent, and "Agents" means the Administrative Agent, the Documentary Agent and
the Co-Agents collectively.
"Agreement" means this Credit Agreement, including the Schedules and
Exhibits hereto, as the same may be amended or supplemented from time to time.
"Annualized" means, with respect to Adjusted Consolidated EBITDA of any
Person for a period of less than four (4) complete Fiscal Quarters, the Adjusted
Consolidated EBITDA of such Person for the number of complete Fiscal Quarters in
such period multiplied times a fraction, the numerator of which is four (4) and
the denominator of which is the number of complete Fiscal Quarters in such
period.
"Applicable Environmental Law" means any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority or any board of
fire underwriters (or other body exercising similar functions), affecting any
real or personal property owned, operated or leased by any Company or any other
operation of any Company in any way pertaining to health, safety or the
environment, including, without limitation, all applicable zoning ordinances and
building codes, flood disaster laws and health, safety and environmental laws
and regulations, and further including without limitation, (a) the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, herein referred to as "CERCLA"), (b) the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Recovery Act of 1976, as amended by the Solid Waste Disposal Act of
1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended from time
to time, herein referred to as "RCRA"), (c) the Safe Drinking Water Act, as
amended, (d) the Toxic Substances Control Act, as amended, (e) the Clean Air
Act, as amended, (f) the Occupational Safety and Health Act of 1970, as amended
(g) the laws, rules and regulations of any state having jurisdiction over any
real or personal property owned, operated or leased by any Company or any other
operation of any Company which relate to health, safety or the environment, as
each may be amended from time to time, and (h) any federal, state or municipal
laws, ordinances or regulations which may now or hereafter require removal of
asbestos or other hazardous wastes or impose any liability related to asbestos
or other hazardous wastes. The terms "hazardous substance", "petroleum",
"release" and "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, in the event either 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 with
respect to all provisions of this Agreement; and provided further that, to the
extent the laws of the state in which any real or personal property owned,
operated or leased by any Company is located establish a meaning for "hazardous
substance", "petroleum", "release", "solid waste" or "disposal" which is broader
than that specified in either CERCLA or RCRA, such broader meaning shall apply
in so far as such broader meaning is applicable to the real or personal property
owned, operated or leased by such Company and located in such state.
2
<PAGE>
"Applicable Margin" means, for purposes of determining the interest rate
applicable to outstanding Loans during any Fiscal Quarter of any Borrower (the
"Subject Quarter") (a) through and including the Fiscal Quarter in which the
Total Patina Term Commitment is cancelled and the Patina Term Loan is paid in
full, the amount set forth in Table A below (based on the type of Loan and Type
of Tranche), and (b) commencing with the first Fiscal Quarter after the Fiscal
Quarter in which the Total Patina Term Commitment is cancelled and the Patina
Term Loan is paid in full, for both the Gerrity Loan and the Patina Revolving
Loan, the amount set forth in Table B below under the applicable Type of Tranche
and opposite the applicable Ratio of Consolidated Funded Debt to Adjusted
Consolidated EBITDA. The Applicable Margin in effect pursuant to Table B below
during a Subject Quarter shall be calculated at the commencement of such Subject
Quarter based on the Ratio of Consolidated Funded Debt to Adjusted Consolidated
EBITDA as of the last day of the Fiscal Quarter then most recently ended for
which Patina and Gerrity have provided to Banks the financial statements
required by Sections 8.1(b), (d) and (f) hereof (in the case of the first three
(3) Fiscal Quarters of each Fiscal Year) or Sections 8.1(a), (c) and (e) hereof
(in the case of the fourth Fiscal Quarter of each Fiscal Year). Notwithstanding
the foregoing, in the event the Total Patina Term Commitment is cancelled and
the Patina Term Loan is paid in full prior to September 30, 1996, the Applicable
Margin applicable to Adjusted Base Rate Tranches and Eurodollar Tranches during
the Fiscal Quarters commencing with the first Fiscal Quarter after the Fiscal
Quarter in which the Total Patina Term Commitment is cancelled and the Patina
Term Loan is paid in full through and including the Fiscal Quarter ending
December 31, 1996 shall be one fourth of one percent (.25%) and one and one
fourth percent (1.25%) respectively.
<TABLE>
<CAPTION>
==========================================================================================================================
TABLE A
- --------------------------------------------------------------------------------------------------------------------------
Loan Adjusted BaseRate Tranches Eurodollar Tranches
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gerrity Loan .25% 1.25%
- --------------------------------------------------------------------------------------------------------------------------
Patina Revolving Loan .25% 1.25%
- --------------------------------------------------------------------------------------------------------------------------
Patina Term Loan .75%* 1.50%*
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* provided, that the Applicable Margin otherwise in effect pursuant to this
Table A for each Adjusted Base Rate Tranche and Eurodollar Tranche comprising a
part of the Patina Term Loan shall increase by one percent (1%) on the Patina
Term Commitment Termination Date and by one-half of one percent (.5%) every six
(6) months thereafter.
<TABLE>
<CAPTION>
==========================================================================================================================
TABLE B
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Patina Ratio of Consolidated Funded Debt to Adjusted Base Rate Eurodollar
Adjusted Consolidated EBITDA Tranches Tranches
- --------------------------------------------------------------------------------------------------------------------------
Less than or equal to 1.5 to 1 0 .75%
- --------------------------------------------------------------------------------------------------------------------------
Greater than 1.5 to 1 Less than or equal to 2.5 to 1 0 .875%
- --------------------------------------------------------------------------------------------------------------------------
Greater than 2.5 to 1 Less than or equal to 3.0 to 1 0 1.000%
- --------------------------------------------------------------------------------------------------------------------------
Greater than 3.0 to 1 .25% 1.250%
==========================================================================================================================
</TABLE>
3
<PAGE>
"Approved Petroleum Engineer" means any one or more of Netherland, Sewell &
Associates, Inc., Ryder Scott Company, Williamson Petroleum Consultants, Inc.,
Barnes and Click, Inc., or such other reputable firm(s) of independent petroleum
engineers as shall be approved by Required Banks and, as to oil and gas
properties aggregating not more than twenty percent (20%) of the total value of
a Borrower's and its Restricted Subsidiaries' oil and gas properties (based on
the Recognized Value), Patina's in-house staff shall be deemed an Approved
Petroleum Engineer.
"Assignee" has the meaning given such term in Section 14.10(c).
"Assignment and Amendment to Mortgages" means an Assignment of Notes and
Liens and Amendment to Mortgage to be entered into among Gerrity, Administrative
Agent and Bank of Montreal as agent for the banks parties to the Existing
Gerrity Credit Agreement, substantially in the form of Exhibit A hereto,
pursuant to which the Existing Gerrity Mortgages shall be assigned to
Administrative Agent for the ratable benefit of each Bank to secure the Gerrity
Obligations.
"Assignment and Assumption Agreement" has the meaning given such term in
Section 14.10(c).
"Authorized Officer" means, as to any Person, its Chairman, Vice-Chairman,
President, Executive Vice President(s), Senior Vice President(s) or Vice
President duly authorized to act on behalf of such Person.
"Bank" means any financial institution listed on Schedule 1 hereto as
having a Commitment, and its successors and assigns, and "Banks" shall mean all
Banks.
"Base Rate" means the floating rate of interest established from time to
time by Administrative Agent as its "prime rate" of interest, which rate is not
the lowest rate of interest which Administrative Agent charges, each change in
the Base Rate to become effective without notice to any Borrower on the
effective date of each such change.
"Borrower" means any of Patina, SWAT or Gerrity, and "Borrowers" means
Patina, SWAT and Gerrity collectively.
"Borrowing" means any disbursement to any Borrower under, or to satisfy the
obligations of any Company under, any of the Loan Papers. Any Borrowing which
will constitute an Adjusted Base Rate Tranche is referred to herein as a "Base
Rate Borrowing," and any Borrowing which will constitute a Eurodollar Tranche is
referred to herein as a "Eurodollar Borrowing."
"Borrowing Base Deficiency" means any Patina Borrowing Base Deficiency or
Gerrity Borrowing Base Deficiency.
"Borrowing Date" means the Eurodollar Business Day or the Domestic Business
Day, as the case may be, upon which the proceeds of any Borrowing are made
available to any Borrower or to satisfy the obligation of any Company.
"Capital Lease" means, for any Person as of any date, any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared as of such date in accordance with generally accepted accounting
principles.
"Closing Date" means the date of the initial Borrowing under this
Agreement. The Closing Date shall in no event be later than May 31, 1996.
4
<PAGE>
"Closing Documents" means the Merger Agreement, the Business Opportunity
Agreement, the Corporate Services Agreement, the Cross-Indemnification
Agreement, the Preferred Stock Designation, the Registration Statement, the
Exchange Agent Agreement, the Transfer Documents and all other material
documents, instruments and agreements executed or delivered by any Company
pursuant to the Merger Agreement or the Closing Transactions.
"Closing Transactions" means the transactions to occur on the Closing Date
pursuant to the Closing Documents and this Agreement, including, without
limitation, (a) the Merger, (b) the exchange of the issued and outstanding
capital stock of Gerrity for the Exchange Securities (other than shares of
Gerrity Preferred Stock which is not exchanged pursuant to the Exchange Offer
contemplated by Section 7.26 of the Merger Agreement), (c) the contribution of
SOCO Wattenberg to Patina, (d) the assumption and repayment by Patina of
$75,000,000 of Debt of SOCO assumed by Patina pursuant to the Merger Agreement,
and (e) the termination of the Existing Gerrity Credit Agreement, including,
without limitation, (i) the refinancing of all Debt of Gerrity outstanding under
such Existing Gerrity Credit Agreement with proceeds of the Gerrity Loan, (ii)
the cancellation of all letters of credit outstanding thereunder, and (iii) the
assignment of all Liens securing the obligations of Gerrity under the Existing
Gerrity Credit Agreement to Administrative Agent to secure the Gerrity
Obligations.
"Co-Agents" means Wells Fargo Bank, N.A., CIBC, Inc. and Credit Lyonnais
New York Branch in their capacities as Co-Agents hereunder or any successor
thereto, and "Co-Agent" means any one of the foregoing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Assignment of Intercompany Loan" means a Collateral Assignment
of Intercompany Loan of even date herewith substantially in the form of Exhibit
B attached hereto, to be executed by Patina and SWAT in favor of Administrative
Agent pursuant to which Patina and SWAT shall assign to Administrative Agent and
grant to Administrative Agent a first and prior Lien in and to all rights, title
and interest in and to the Intercompany Loan and the Intercompany Loan Documents
to secure the Obligations.
"Commitment" means, with respect to any Bank, the sum of such Bank's Patina
Term Commitment, Patina Revolving Commitment and Gerrity Commitment.
"Commitment Fee Percentage" means for any Fiscal Quarter of any Borrower
(the "Subject Quarter") (a) through and including the Fiscal Quarter in which
the Total Patina Term Commitment is cancelled and the Patina Term Loan is paid
in full, the amount set forth in Table A below based on the type of Commitment,
and (b) commencing with the first Fiscal Quarter after the Fiscal Quarter in
which the Total Patina Term Commitment is cancelled and the Patina Term Loan is
paid in full, for each type of Commitment, the amount set forth in Table B below
opposite the applicable Ratio of Consolidated Funded Debt to Adjusted
Consolidated Cash Flow. The Commitment Fee Percentage in effect pursuant to
Table B below during a Subject Quarter shall be calculated at the commencement
of such Subject Quarter based on the Ratio of Consolidated Funded Debt to
Adjusted Consolidated EBITDA as of the last day of the Fiscal Quarter then most
recently ended for which Patina and Gerrity have provided to Banks the financial
statements required by Sections 8.1(b), (d) and (f) hereof (in the case of the
first three (3) Fiscal Quarters of each Fiscal Year) or Sections 8.1(a) (c) and
(e) hereof (in the case of the fourth Fiscal Quarter of each Fiscal Year).
Notwithstanding the foregoing, if the Total Patina Term Commitment is cancelled
and the Patina Term Loan is paid in full prior to September 30, 1996, the
Commitment Fee Percentage during the Fiscal Quarters commencing with the first
Fiscal Quarter after the Fiscal Quarter in which the Total Patina Term
Commitment is cancelled and the Patina Term Loan is paid in full through
5
<PAGE>
and including the Fiscal Quarter ending December 31, 1996 shall be three eighths
of one percent (.375%).
<TABLE>
<CAPTION>
================================================================================
TABLE A
- --------------------------------------------------------------------------------
Commitment Commitment Fee Percentage
<S> <C>
- --------------------------------------------------------------------------------
Gerrity Commitment .375%
- --------------------------------------------------------------------------------
Patina Revolving Commitment .375%
- --------------------------------------------------------------------------------
Patina Term Commitment .50%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================
TABLE B
- ---------------------------------------------------------------------------------------
Patina's Ratio of Consolidated Funded Debt to Commitment Fee
Adjusted Consolidated EBITDA Percentage
<S> <C>
- ---------------------------------------------------------------------------------------
Less than or equal to 1.5 to 1 .25%
- ---------------------------------------------------------------------------------------
Greater than 1.5 to 1 Less than or equal to 2.5 to 1 .25%
- ---------------------------------------------------------------------------------------
Greater than 2.5 to 1 Less than or equal to 3.0 to 1 .30%
- ---------------------------------------------------------------------------------------
Greater than 3 to 1 .375%
=======================================================================================
</TABLE>
"Commitment Percentage" means, with respect to any Bank at any time, the
Commitment Percentage for such Bank set forth on Schedule 1 hereto.
"Common Stock" means Patina's Common Stock, par value $.01 per share.
"Companies" means each Borrower and all direct and indirect Subsidiaries of
each Borrower whether existing on the date hereof or hereafter acquired or
created, and "Company" means any one of the foregoing.
"Consolidated Current Assets" means, for any Person at any time, the sum of
(a) consolidated current assets of such Person and its Consolidated Subsidiaries
including accounts or notes receivable (if properly reserved in accordance with
generally accepted accounting principles), but excluding (i) prepaid expenses,
and (ii) assets held for resale, plus (b) in the case of (i) Patina, the Patina
Revolving Availability, and (ii) Gerrity, the Gerrity Availability.
"Consolidated Current Liabilities" means, for any Person at any time, the
current liabilities of such Person and its Consolidated Subsidiaries at such
time, but excluding, in the case of (i) Patina and SWAT, the current portion of
the principal outstanding under the Patina Term Loan and the Patina Revolving
Loan, and (ii) Gerrity, the current portion of the principal outstanding under
the Gerrity Loan.
"Consolidated EBITDA" means, for any Person for any period, the
Consolidated Net Income of such Person for such period, plus each of the
following determined for such Person and its Consolidated Subsidiaries on a
consolidated basis for such period: (a) any provision for (or less any benefit
from) income or franchise Taxes included in determining Consolidated Net Income;
(b) Consolidated Net Interest Expense deducted in determining Consolidated Net
Income; (c) depreciation, depletion and amortization expense deducted in
determining Consolidated Net Income; and (d) other noncash charges deducted in
6
<PAGE>
determining Consolidated Net Income and not already deducted in accordance with
clauses (b) and (c) of this definition.
"Consolidated Funded Debt" means, for any Borrower at any time, all Debt of
such Borrower and its Consolidated Subsidiaries at such time.
"Consolidated Net Income" means, for any person as of any period, the net
income (or loss) of such Person and its Consolidated Subsidiaries for such
period determined in accordance with generally accepted accounting principles,
but excluding: (a) the income of any other Person (other than its Consolidated
Subsidiaries) in which such Person or any of its Subsidiaries has an ownership
interest, unless received by such Person or its Consolidated Subsidiaries in a
cash distribution; (b) any after-tax gains attributable to asset dispositions;
(c) to the extent not included in clauses (a) and (b) above, any after-tax (i)
extraordinary gains, (ii) non-cash gains or (iii) nonrecurring gains; and (d)
non-cash or nonrecurring charges due to changes in accounting principles
required by generally accepted accounting principles.
"Consolidated Net Interest Expense" means, for any Person for any period,
the remainder of the following for such Person and its Consolidated Subsidiaries
for such period: (a) interest expense, minus (b) interest income.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, at any time, any Subsidiary or other entity the accounts of which would
be consolidated with those of such Person in its consolidated financial
statements as of such time.
"Consolidated Total Capital" means, for any Person as of any date, the sum
of (a) the Consolidated Funded Debt of such Person and its Consolidated
Subsidiaries as of such date, and (b) the shareholders equity of such Person
which would be reflected on a consolidated balance sheet of such Person and its
Consolidated Subsidiaries prepared as of such date in accordance with generally
accepted accounting principles.
"Conversion Date" has the meaning set forth in Section 2.7(c).
"Corporate Opportunity Agreement" means the Corporate Opportunity Agreement
to be entered into between SOCO and Patina pursuant to the Merger Agreement.
"Corporate Services Agreement" means the Corporate Services Agreement dated
January 16, 1996 between SOCO and Patina.
"Credit Period" means the period commencing on the date hereof and ending
on the Termination Date.
"Cross Indemnification Agreement" means the Cross-Indemnification Agreement
to be entered into between SOCO and Patina pursuant to the Merger Agreement.
"Current Gerrity Reserve Report" means that certain Estimate of Reserves
and Future Revenue dated January 19, 1996, prepared as of January 1, 1996 by
Netherland, Sewell & Associates, Inc. setting forth Netherland, Sewell &
Associates, Inc.'s analysis of certain oil and gas properties owned by Gerrity
and its Restricted Subsidiaries as of December 31, 1995.
"Current Patina Reserve Report" means that certain Estimate of Reserves and
Future Revenue
7
<PAGE>
dated March 11, 1996, prepared as of December 31, 1995 by Netherland,
Sewell & Associates, Inc. setting forth Netherland, Sewell & Associates, Inc.'s
analysis of certain oil and gas properties owned by SWAT (after giving effect to
the Closing Transactions) as of December 31, 1995.
"Current Reserve Reports" means, collectively, the Current Patina Reserve
Report and the Current Gerrity Reserve Report.
"Debt" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all other
indebtedness (including obligations under Capital Leases, other than Capital
Leases which are usual and customary oil and gas leases) of such Person on which
interest charges are customarily paid or accrued, (d) all Guarantees by such
Person, (e) the unfunded or unreimbursed portion of all letters of credit issued
for the account of such Person, and (f) all liability of such Person as a
general partner of a partnership for obligations of such partnership of the
nature described in (a) through (e) preceding.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Determination" means any Periodic Determination or Special Determination.
"Determination Date" means (a) each May 1 and November 1, and (b) with
respect to any Special Determination, the first day of the first month which is
not less than twenty (20) Domestic Business Days following the date of a request
for a Special Determination. The Closing Date shall also constitute a
Determination Date for purposes of this Agreement.
"Distribution" by any Person, means (a) with respect to any stock issued by
such Person or any partnership interest of such Person, the retirement,
redemption, purchase, or other acquisition for value of any such stock or
partnership interest, (b) the declaration or payment of any dividend or other
distribution on or with respect to any stock or any partnership interest of any
Person, and (c) any other payment by such Person with respect to such stock or
partnership interest.
"Documentary Agent" means NationsBank of Texas, N.A. in its capacity as
Documentary Agent for Banks hereunder or any successor thereto.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which national banks in Houston, Texas, are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office identified on
Schedule 1 hereto as its Domestic Lending Office or such other office as such
Bank may hereafter designate as its Domestic Lending Office by notice to
Borrowers and Administrative Agent.
"Environmental Liability" means any liability, loss, fine, penalty, charge,
lien, damage, cost, or expense of any kind that results directly or indirectly,
in whole or in part (a) from the violation of any Applicable Environmental Law,
(b) from the release or threatened release of any hazardous substance, (c) from
removal, remediation, or other actions in response to the release or threatened
release of any hazardous substance, (d) from actual or threatened damages to
natural resources, (e) from the imposition of injunctive relief or other orders,
(f) from personal injury, death, or property damage which occurs as a result of
any Company's use, storage, handling, or the release or threatened release of a
hazardous substance, or (g) from any environmental investigation performed at,
on, or for any real property owned
8
<PAGE>
by any Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in the applicable Eurodollar interbank market.
"Eurodollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address identified on Schedule 1 hereto as its
Eurodollar Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Eurodollar Lending Office by notice to
Borrowers and Administrative Agent.
"Eurodollar Rate" applicable to any Interest Period means the rate per
annum determined by Administrative Agent (rounded upward, if necessary, to the
next higher 1/16 of 1%) at which deposits in dollars are offered to
Administrative Agent by first class banks in the eurodollar interbank market
which has been selected by Administrative Agent at approximately 10:00 a.m.
(Houston, Texas time) two (2) Eurodollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Eurodollar Tranche to which such Interest Period is to apply and for a
period of time comparable to such Interest Period. Administrative Agent shall
determine the Eurodollar Rate and shall notify Borrowers and Banks as soon as
practicable.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in Houston, Texas in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Tranches is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
"Eurodollar Tranche" means, with respect to any Interest Period, any
portion of the principal amount outstanding under a Loan which bears interest at
a rate computed by reference to the Adjusted Eurodollar Rate for such Interest
Period.
"Event of Default" has the meaning set forth in Section 11.1 hereof.
"Exchange Agent Agreement" means that certain Exchange Agent Agreement
dated April 29, 1996, by and between Society National Bank and Patina.
"Exchange Securities" means (a) (i) 6,000,000 shares of Common Stock, and
(ii) 3,000,000 warrants to purchase Common Stock, which Common Stock and
warrants are to be issued pursuant to the Merger Agreement in exchange for all
of the issued and outstanding common stock, par value $.01 per share, of
Gerrity; and (b) up to 1,600,000 shares of Preferred Stock to be issued pursuant
to the Merger Agreement in exchange for the issued and outstanding Gerrity
Preferred Stock.
"Exempt Transfer" means any transfer of oil and gas properties or Related
Assets (a) by Patina to any of its Restricted Subsidiaries, or (b) by any of the
Restricted Subsidiaries of a Borrower to such Borrower or to any other
Restricted Subsidiary of such Borrower.
9
<PAGE>
"Exhibit" refers to an exhibit attached to this Agreement and incorporated
herein by reference, unless specifically provided otherwise.
"Existing Gerrity Credit Agreement" means that certain Amended and Restated
Credit Agreement dated December 21, 1994, by and among Gerrity, Bank of
Montreal, Den Norske Bank, Societe Generale, Credit Lyonnais, Christiana Bank
and Banque Paribas.
"Existing Gerrity Mortgages" means the mortgages, deeds of trust, security
agreements, assignments, pledges and other documents, instruments and agreements
described on Schedule 3 hereto which establish Liens on oil and gas properties
owned by Gerrity and its Restricted Subsidiaries and on Gerrity Related Assets
to secure Gerrity's obligations under the Existing Gerrity Credit Agreement.
"Fairness Opinion" means a written opinion of a nationally recognized
investment banking firm stating that the transaction contemplated by the
Intercompany Loan Documents is fair to Gerrity from a financial point of view.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (a) if the day for which such rate is to be
determined is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business Day, and (b) if
such rate is not so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for any day shall be the average rate charged to
Administrative Agent on such day on such transactions as determined by
Administrative Agent.
"Financial Statements" means, collectively, the Pro Forma Financial
Statements, the Pro Forma Segregated Financial Statements, the Patina Historical
Financial Statements and the Gerrity Historical Financial Statements.
"Fiscal Quarter" means the three (3) month periods ending March 31, June
30, September 30 or December 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending December 31.
"Gerrity" means Gerrity Oil & Gas Corporation, a Delaware corporation,
which, after the Merger, will be a wholly owned Subsidiary of Patina.
"Gerrity Availability" means, at any time, (a) the Gerrity Borrowing Base
in effect at such time, minus (b) the Gerrity Outstanding Credit at such time.
"Gerrity Borrowing Base" has the meaning set forth in Section 4.6 hereof.
"Gerrity Borrowing Base Ceiling" means (a) during the period commencing on
the Closing Date and continuing until the earlier of the first (i) Gerrity
Periodic Determination, or (ii) Gerrity Special Determination after the Closing
Date, $138,000,000, and (b) during each period between Determinations,
commencing with the first Gerrity Periodic Determination or Gerrity Special
Determination after the Closing Date, whichever first occurs, an amount
determined by Administrative Agent and approved by Required Banks in connection
with such Gerrity Periodic Determination or Gerrity Special Determination;
10
<PAGE>
provided, however, if a Gerrity Periodic Determination or a Gerrity Special
Determination following the Closing Date has not previously occurred, the
Gerrity Borrowing Base Ceiling shall automatically adjust on the Subordinate
Note Redemption Date and on any date thereafter on which Subordinate Notes are
redeemed or repurchased by Gerrity, to an amount equal to the remainder of (y)
$138,000,000, minus (z) a percentage of the principal balance of Subordinate
Notes outstanding after giving effect to such redemption or repurchase
determined by reference to the following table:
<TABLE>
<CAPTION>
========================================================================================================================
<S> <C>
Principal Balance of Remaining Applicable Percentage of Principal
Subordinate Notes Balance of Outstanding Subordinate Notes
- ------------------------------------------------------------------------------------------------------------------------
Less than $40,000,000 40%
- ------------------------------------------------------------------------------------------------------------------------
Greater than or equal to $40,000,000 Less than or equal to $60,000,000 45%
- ------------------------------------------------------------------------------------------------------------------------
Greater than $60,000,000 50%
========================================================================================================================
</TABLE>
"Gerrity Borrowing Base Deficiency" means, as of any date, the amount, if
any, by which (a) the Gerrity Outstanding Credit on such date, exceeds (b) the
Gerrity Borrowing Base in effect on such date; provided, that, for purposes of
computing the existence and amount of any Gerrity Borrowing Base Deficiency,
Gerrity Letter of Credit Exposure will not constitute Gerrity Outstanding Credit
to the extent funds have been deposited with Administrative Agent to secure such
Gerrity Letter of Credit Exposure pursuant to Section 2.3(b).
"Gerrity Commitment" means, with respect to any Bank, the commitment of
such Bank to lend its Commitment Percentage of the Total Gerrity Commitment. The
amount of each Bank's Gerrity Commitment is the amount of such commitment set
forth opposite such Bank's name on Schedule 1 hereto, as such amount may be
terminated or reduced from time to time in accordance with the provisions
hereof.
"Gerrity Debt Restriction Certificate" means a certificate of an Authorized
Officer of Gerrity, delivered simultaneously with the delivery of the financial
statements required to be delivered pursuant to Sections 8.1(c) and (d) (and
more frequently if Gerrity shall so elect, but in no event more frequently than
once per calendar month), setting forth a calculation in detail satisfactory to
Administrative Agent, certified by Gerrity's auditors, of the aggregate amount
Gerrity may borrow at that time under the Total Gerrity Commitment in accordance
with the first paragraph of Section 4.03(a) of the Indenture; provided however,
that such certificate is not required to be certified by Gerrity's auditors for
the financial statements required to be delivered pursuant to Section 8.1(c) and
(d) to the extent such certificate would not result in an increase of the
Gerrity Borrowing Base pursuant to Section 4.8.
"Gerrity Historical Financial Statements" means the consolidated balance
sheet of Gerrity as of December 31, 1995, and the related consolidated
statements of operations and cash flow for the Fiscal Year then ended, reported
on by Arthur Andersen LLP, all as set forth in Gerrity's annual report on Form
10-K for the Fiscal Year ended December 31, 1995.
"Gerrity Letter of Credit Exposure" of any Bank means such Bank's aggregate
participation in the unfunded portion of Gerrity Letters of Credit outstanding
at any time.
"Gerrity Letter of Credit Issuer" has the meaning set forth in Section
2.3(b).
"Gerrity Letters of Credit" means letters of credit issued for the account
of Gerrity pursuant to
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<PAGE>
Section 2.3(b).
"Gerrity Loan" means a revolving loan in an aggregate amount up to
$138,000,000 to be made to Gerrity pursuant to the Gerrity Commitments in
accordance with Section 2.3 hereof.
"Gerrity Note" means a promissory note of Gerrity payable to the order of a
Bank, in substantially the form of Exhibit C-1 hereto, in the amount of such
Bank's Gerrity Commitment, evidencing the obligation of Gerrity to repay to such
Bank its Commitment Percentage of the Gerrity Loan, together with all
modifications, extensions, renewals and rearrangements thereof, and "Gerrity
Notes" means all of such Gerrity Notes collectively.
"Gerrity Obligations" means, collectively, all present and future
indebtedness, obligations and liabilities and all renewals and extensions
thereof, or any part thereof, of Gerrity or any of its Subsidiaries to any Bank
or to any Affiliate of any Bank (a) arising pursuant to the Loan Papers, and all
interest accrued thereon and costs, expenses and attorneys' fees incurred in the
enforcement or collection thereof, (b) arising under or in connection with any
Oil and Gas Hedge Transaction entered into between Gerrity or any of its
Subsidiaries and any Bank or any Affiliate of any Bank, (c) arising under or in
connection with any interest rate swap, cap, collar, hedge or other interest
rate protection device entered into between Gerrity or any of its Subsidiaries
and any Bank or any Affiliate of any Bank, and (d) arising under or in
connection with any other financial "derivative" product provided by any Bank or
any Affiliate of any Bank, to Gerrity or any of its Subsidiaries, regardless of
whether such indebtedness, obligations and liabilities are direct, indirect,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several; provided, however, it is the intention of Borrowers, Agents and Banks
that Gerrity will not be liable for, and the Gerrity Obligations will not
include any of the obligations of Patina and its Restricted Subsidiaries under
any of the Loan Papers other than those obligations for which Gerrity is
otherwise the primary obligor under the Loan Papers and which have been
guaranteed by Patina or any of its Restricted Subsidiaries pursuant to the Loan
Papers.
"Gerrity Outstanding Credit" means, at any time, the sum of (i) the
aggregate Gerrity Letter of Credit Exposure at such time, plus (ii) the
outstanding principal balance of the Gerrity Loan at such time.
"Gerrity Periodic Determination" means a determination of the Gerrity
Borrowing Base pursuant to Section 4.6.
"Gerrity Pledge Agreement" means a Pledge Agreement in the form of Exhibit
D-1 attached hereto to be executed by Gerrity pursuant to which Gerrity pledges
the issued and outstanding capital stock of each Restricted Subsidiary of
Gerrity to Administrative Agent to secure the Gerrity Obligations.
"Gerrity Preferred Stock" means Gerrity's $12.00 Convertible Preferred
Stock, par value $.01 per share.
"Gerrity Readjustment Date" means the effective date of any automatic
readjustment of the Gerrity Borrowing Base pursuant to the delivery of a Gerrity
Debt Restriction Certificate in accordance with Section 4.8 hereof.
"Gerrity Refinancing Reserve" means a reserve established with respect to
the Gerrity Borrowing Base and the Total Gerrity Commitment (and ratably from
the Gerrity Commitments of each Bank) on the Closing Date and maintained until
the Patina Term Commitment is terminated and the Patina Term Loan is paid in
full. The Gerrity Refinancing Reserve shall be in the amount of (a) $14,000,000,
plus (b) the amount of any increase in the Gerrity Borrowing Base pursuant to
Section 4.8. Borrowings may
12
<PAGE>
be obtained by Gerrity in respect of the Gerrity Refinancing Reserve solely (a)
to repurchase Subordinate Notes tendered to Gerrity on the Subordinate Note
Redemption Date as a result of the Merger pursuant to Section 4.08 of the
Indenture, (b) to repurchase Subordinate Notes subsequent to the Subordinate
Note Redemption Date, and (c) to make payments and prepayments of the
Intercompany Loan.
"Gerrity Related Assets" means all pipelines, gathering systems, gas
processing plants and similar assets owned by Gerrity and its Restricted
Subsidiaries, including, related personal property and other fixed assets and
all easements, servitudes and similar real property interests owned by Gerrity
and its Restricted Subsidiaries on which such systems are located.
"Gerrity Related Assets Reports" means reports to be delivered by Gerrity
to Banks simultaneously with each delivery by Gerrity of a Gerrity Reserve
Report pursuant to Sections 4.1 and 4.7 which shall (a) be in form and substance
acceptable to Required Banks, (b) be prepared by the Approved Petroleum Engineer
(with the exception of the Gerrity Related Asset Report required to be delivered
on or before September 15 of each year or pursuant to any Gerrity Special
Determination which may be prepared by Patina's in-house staff) in accordance
with customary and prudent practices of the petroleum engineering industry, and
(c) which shall set forth the discounted present value of the Gerrity Related
Assets (which valuation shall be determined as of the same date as the
discounted present value of the oil and gas properties which are the subject of
the Gerrity Reserve Report delivered simultaneously therewith pursuant to
Sections 4.1 and 4.7 as applicable) as determined by the Approved Petroleum
Engineer or Patina's in-house staff (as applicable). Each Gerrity Related Asset
Report shall also designate the owner (either Gerrity, or one of its Restricted
Subsidiaries) of each Gerrity Related Asset which is the subject of such report.
"Gerrity Reserve Report" means an engineering analysis of the oil and gas
properties owned by Gerrity and its Restricted Subsidiaries in form and
substance acceptable to Required Banks prepared by the Approved Petroleum
Engineer or reviewed and approved by the Approved Petroleum Engineer (with the
exception of the Gerrity Reserve Reports required to be delivered on or before
September 15 of each year pursuant to Section 4.1 or pursuant to any Gerrity
Special Determination pursuant to Section 4.7 which may be prepared by Patina's
in-house staff) in accordance with customary and prudent practices in the
petroleum engineering industry and Financial Accounting Standards Board
Statement 69. Until superseded by delivery of a subsequent Gerrity Reserve
Report pursuant to Section 4.1 or Section 4.7, each reference to Gerrity Reserve
Report shall constitute a reference to the Current Gerrity Reserve Report.
"Gerrity Restricted Payment Limit" means (a) as of any date during the
period from the Closing Date through the date of delivery to the Banks of
Gerrity's consolidated financial statements required by Section 8.1(f) for the
Fiscal Quarter ending June 30, 1997, an amount equal to Gerrity's Allocated
Share of the Initial Restricted Payment Limit, and (b) as of any date (the
"measurement date") on and after the date of delivery to the Banks of Gerrity's
consolidated financial statements required by Section 8.1(f) for the Fiscal
Quarter ending June 30, 1997, the sum of (i) Gerrity's Allocated Share of the
Initial Restricted Payment Limit, plus (ii) an amount equal to five percent (5%)
of Gerrity's Consolidated EBITDA for the period commencing July 1, 1996 and
ending on the last day of the Fiscal Quarter most recently ended as of the
measurement date for which Gerrity's consolidated financial statements required
by Section 8.1(f) (in the case of the first three quarters of each Fiscal Year,
and Section 8.1(e) in the case of the fourth Fiscal Quarter of each Fiscal Year)
have been delivered to the Banks.
"Gerrity Special Determination" means any determination of the Gerrity
Borrowing Base pursuant to Section 4.7.
13
<PAGE>
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions, by "comfort letter"
or other similar undertaking of support or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Indenture" means that certain Indenture dated as of June 30, 1994, by and
between Gerrity and Chemical Bank as Trustee, which Indenture sets forth certain
terms applicable to the Subordinate Notes.
"Initial Gerrity Borrowing Base" means a Gerrity Borrowing Base in the
amount of $51,000,000, which shall be in effect during the period commencing on
the Closing Date and continuing until the earlier of (a) the first Gerrity
Readjustment Date after the Closing Date or (b) the first Gerrity Special
Determination or Gerrity Periodic Determination after the Closing Date.
"Initial Patina Borrowing Base" means a Patina Borrowing Base in the amount
of $102,000,000, which shall be in effect during the period commencing on the
Closing Date and continuing until the first Patina Special Determination or
Patina Periodic Determination after the Closing Date.
"Initial Restricted Payment Limit" means $12,000,000; provided that such
amount shall be allocated by Borrowers between Patina and Gerrity on or before
August 15, 1996, and Borrowers shall notify Banks in writing of such allocation
together with the delivery to the Banks of the financial statements for the
Fiscal Quarter ended June 30, 1996 required by Sections 8.1(b), (d) and (e);
provided, further, that not more than $6,000,000 of the Initial Restricted
Payment Limit shall be allocated to Patina. "Allocated Share of Initial
Restricted Payment Limit" means, with respect to Patina or Gerrity, that portion
of the Initial Restricted Payment Limit allocated to Patina or Gerrity (as
applicable) pursuant to this definition.
"Intercompany Loan" means a subordinate term loan made by Patina and SWAT
to Gerrity in an amount up to $87,000,000, pursuant to the Intercompany Loan
Agreement.
"Intercompany Loan Agreement" means a Subordinate Loan Agreement of even
date herewith to be entered into by and among Patina and SWAT as Lenders and
Gerrity as Borrower substantially in the form of Exhibit E hereto, setting forth
certain terms and conditions applicable to the Intercompany Loan.
"Intercompany Loan Documents" means the Intercompany Loan Agreement, the
promissory note evidencing the Intercompany Loan and all other documents,
instruments and agreements which evidence, secure or otherwise pertain to the
Intercompany Loan.
"Intercompany Loan Effectiveness Certificate" means the "Effectiveness
Certificate" as defined in the Intercompany Loan Agreement.
"Interest Option" has the meaning given such term in Section 2.7(c).
"Interest Period" means, with respect to each Eurodollar Tranche, the
period commencing on the Borrowing or Conversion Date applicable to such Tranche
and ending one (1), two (2), three (3) or six
14
<PAGE>
(6) months thereafter, as any Borrower may elect in the applicable Request for
Borrowing; provided that: (a) any Interest Period which would otherwise end on a
day which is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Eurodollar Business Day; (b) any Interest Period which begins on the
last Eurodollar Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last Eurodollar
Business Day of a calendar month; (c) if any Interest Period includes a date on
which any payment of principal of the Loan subject to such Eurodollar Tranche is
required to be made hereunder, but does not end on such date, then (i) the
principal amount of each Eurodollar Tranche required to be repaid on such date
shall have an Interest Period ending on such date, and (ii) the remainder of
each such Eurodollar Tranche shall have an Interest Period determined as set
forth above; and (d) no Interest Period shall extend past the expiration of the
Credit Period.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase of the
stock securities of, or interests in, any other Person; provided, that
"Investment" shall not include current customer and trade accounts which are
payable in accordance with customary trade terms.
"Lending Office" means, as to any Bank, its Domestic Lending Office or its
Eurodollar Lending Office, as the context may require.
"Letter of Credit Exposure" of any Bank means, collectively, such Bank's
aggregate participation in the unfunded portion of Letters of Credit outstanding
at any time.
"Letter of Credit Issuer" means a Gerrity Letter of Credit Issuer or a
Patina Letter of Credit Issuer, as applicable.
"Letters of Credit" means, collectively, Patina Letters of Credit and
Gerrity Letters of Credit.
"Lien" means with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For
purposes of this Agreement, Borrowers and their Subsidiaries shall be deemed to
own subject to a Lien any asset which is acquired or held subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan Papers" means this Agreement, the Notes, the Patina Guarantees, the
Collateral Assignment of Intercompany Loan, the Tax Credit Transaction
Agreement, the Patina Pledge Agreement, the Gerrity Pledge Agreement, all
Mortgages now or at any time hereafter delivered pursuant to Section 5.1, and
all other certificates, documents or instruments delivered in connection with
this Agreement, as the foregoing may be amended from time to time.
"Loans" means the Patina Term Loan, the Patina Revolving Loan and the
Gerrity Loan, collectively, and "Loan" means any of such Loans.
"Margin Regulations" mean Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
15
<PAGE>
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by which
such Person is directly or indirectly bound, or to which any assets of such
Person may be subject, which is not cancelable by such Person upon notice of
ninety (90) days or less without liability for further payment other than
nominal penalty.
"Material Debt" means Debt of any Borrower or any of its Subsidiaries
issued under one or more related or unrelated agreements or instruments in an
aggregate principal amount exceeding $2,500,000.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if the
context so permits or requires, an amount calculated at such rate) of interest
which, at the time in question would not cause the interest charged on the
portion of the Loans owed to such Bank at such time to exceed the maximum amount
which such Bank would be allowed to contract for, charge, take, reserve, or
receive under applicable law after taking into account, to the extent required
by applicable law, any and all relevant payments or charges under the Loan
Papers. To the extent the laws of the State of Texas are applicable for purposes
of determining the "Maximum Lawful Rate," such term shall mean the "indicated
rate ceiling" from time to time in effect under Article 1.04, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, or, if permitted by applicable law
and effective upon the giving of the notices required by such Article 1.04 (or
effective upon any other date otherwise specified by applicable law), the
"quarterly ceiling" or "annualized ceiling" from time to time in effect under
such Article 1.04, whichever Administrative Agent (with the approval of Required
Banks) shall elect to substitute for the "indicated rate ceiling," and vice
versa, each such substitution to have the effect provided in such Article 1.04,
and Administrative Agent (with the approval of Required Banks) shall be entitled
to make such election from time to time and one or more times and, without
notice to any Borrower, to leave any such substitute rate in effect for
subsequent periods in accordance with subsection (h)(1) of such Article 1.04.
"Merger" means the merger of Merger Sub with and into Gerrity pursuant to
the Merger Agreement, with Gerrity being the surviving corporation and pursuant
to which Gerrity will become a Subsidiary of Patina.
"Merger Agreement" means that certain Amended and Restated Agreement and
Plan of Merger dated as of January 16, 1996 as amended and restated as of March
20, 1996, by and among SOCO, Patina, Gerrity and Merger Sub.
"Merger Sub" means Patina Merger Corporation, a Delaware corporation, which
(a) prior to the Merger is a wholly owned Subsidiary of Patina, and (b) will be
merged into Gerrity pursuant to the Merger, with Gerrity being the surviving
corporation.
"Mortgages" means all mortgages, deeds of trust, security agreements,
pledge agreements and similar documents, instruments and agreements creating,
evidencing, perfecting or otherwise establishing the Liens required by Article V
hereof as may have been heretofore or may hereafter be granted or assigned to
Administrative Agent to secure repayment of the Obligations or any part thereof.
"Nonrecourse Debt" means Debt (a) secured solely by the assets acquired
with the proceeds of such Debt, (b) with respect to which none of the Borrowers
nor any of their Subsidiaries have any liability for repayment beyond the assets
pledged, and (c) with respect to which Borrowers have delivered to Banks an
opinion in a form satisfactory to Required Banks of counsel acceptable to
Administrative Agent stating that such indebtedness meets the criteria set forth
in (a) and (b) preceding.
"Notes" means, collectively, the Patina Term Notes, the Patina Revolving
Notes and the Gerrity Notes, and "Note" means any of such Notes.
16
<PAGE>
"Obligations" means, collectively, the Patina Obligations and the Gerrity
Obligations.
"Oil and Gas Hedge Transactions" means transactions pursuant to which any
Borrower or any of its Subsidiaries hedge the price to be received by them for
future production of hydrocarbons, including price swap agreements under which
any Borrower or any of its Subsidiaries agree to pay a price for a specified
amount of hydrocarbons determined by reference to a recognized market on a
specified future date and the contracting party agrees to pay such Borrower or
its Subsidiaries a fixed price for the same or similar amount of hydrocarbons.
"Operating Lease" means any lease, sublease, license or similar arrangement
(other than a Capital Lease and other than leases with a primary term of one
year or less or which can be terminated by the lessee upon notice of one year or
less without incurring a penalty) pursuant to which a Person leases, subleases
or otherwise is granted the right to occupy, take possession of, or use property
whether real, personal or mixed; provided, that "Operating Lease" shall not
include oil, gas or mineral leases entered into or assigned to any Company in
the ordinary course of such Companies' business.
"Participant" has the meaning given such term in Section 14.10(b).
"Patina" means Patina Oil & Gas Corporation, a Delaware corporation.
"Patina Borrowing Base" has the meaning set forth in Section 4.2 hereof.
"Patina Borrowing Base Deficiency" means, as of any date, the amount, if
any, by which (a) the Patina Outstanding Credit on such date, exceeds (b) the
Patina Borrowing Base in effect on such date; provided, that, for purposes of
computing the existence and amount of any Patina Borrowing Base Deficiency,
Patina Letter of Credit Exposure will not constitute Patina Outstanding Credit
to the extent funds have been deposited with Administrative Agent to secure such
Patina Letter of Credit Exposure pursuant to Section 2.2(b).
"Patina Determination" means any Patina Periodic Determination or Patina
Special Determination.
"Patina Guaranty" means, collectively, Guarantees in the form of Exhibit
F-1 and Exhibit F-2 attached hereto to be executed by Patina and SWAT,
respectively, pursuant to which Patina and SWAT shall each jointly and severally
guarantee payment and performance of the Gerrity Obligations.
"Patina Historical Financial Statements" means the consolidated balance
sheet of Patina as of December 31, 1995, and the related consolidated statements
of operations and cash flow for the Fiscal Year then ended (each prepared after
giving effect to the contribution of SOCO Wattenberg to Patina as contemplated
by the Merger Agreement, but prior to giving effect to the Merger) reported on
by Arthur Andersen LLP, copies of which have been provided to Banks.
"Patina Letter of Credit Exposure" of any Bank means such Bank's aggregate
participation in the unfunded portion of Patina Letters of Credit outstanding at
any time.
"Patina Letter of Credit Issuer" has the meaning set forth in Section
2.2(b).
"Patina Letters of Credit" means, collectively, letters of credit issued
for the account of Patina and its Restricted Subsidiaries pursuant to Section
2.2(b).
"Patina Loans" means the Patina Term Loan and the Patina Revolving Loan,
and "Patina Loan"
17
<PAGE>
means any of such Patina Loans.
"Patina Obligations" means, collectively, all present and future
indebtedness, obligations and liabilities, and all renewals and extensions
thereof, or any part thereof, of Patina and its Restricted Subsidiaries
(including obligations under the Patina Guarantees) to any Bank or to any
Affiliate of any Bank (a) arising pursuant to the Loan Papers, and all interest
accrued thereon and costs, expenses and attorneys' fees incurred in the
enforcement or collection thereof, (b) arising under or in connection with any
Oil and Gas Hedge Transaction entered into between Patina or any of its
Restricted Subsidiaries and any Bank or any Affiliate of any Bank, (c) arising
under or in connection with any interest rate swap, cap, collar, hedge or other
interest rate protection device entered into between Patina or any of its
Restricted Subsidiaries and any Bank or any Affiliate of any Bank, and (d)
arising under or in connection with any other financial "derivative" product
provided by any Bank or any Affiliate of any Bank to any Company, regardless of
whether such indebtedness, obligations and liabilities are direct, indirect,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several. It is the intention of Borrowers, Agent and Banks that Patina and its
Restricted Subsidiaries shall be jointly and severally liable for all
obligations of each other and for all obligations of Gerrity and its Restricted
Subsidiaries under the Loan Papers.
"Patina Outstanding Credit" means, at any time, the sum of (i) the
aggregate Patina Letter of Credit Exposure at such time plus (ii) the aggregate
principal balance of all Patina Revolving Loans.
"Patina Periodic Determination" means any determination of the Patina
Borrowing Base pursuant to Section 4.2.
"Patina Pledge Agreement" means a Pledge Agreement in the form of Exhibit
D-2 attached hereto to be executed by Patina pursuant to which Patina pledges
the issued and outstanding capital stock of SWAT and Gerrity of every class
(other than the shares of Gerrity Preferred Stock which are not exchanged for
Preferred Stock pursuant to the Exchange Offer made pursuant to Section 7.26 of
the Merger Agreement) to Administrative Agent to secure the Patina Obligations.
"Patina Related Assets" means all pipelines, gathering systems, gas
processing plants and similar assets owned by Patina and its Restricted
Subsidiaries, including, related personal property or other fixed assets and all
easements, servitudes and similar real property interests owned by Patina and
its Restricted Subsidiaries on which such systems are located.
"Patina Related Assets Reports" means reports to be delivered by Patina to
Banks simultaneously with each delivery by Patina of a Patina Reserve Report
pursuant to Sections 4.1 and 4.3 which shall (a) be in form and substance
acceptable to Required Banks, (b) be prepared by the Approved Petroleum Engineer
(with the exception of the Patina Related Asset Report required to be delivered
on or before September 15 of each year or pursuant to any Patina Special
Determination which may be prepared by Patina's in-house staff) in accordance
with customary and prudent practices of the petroleum engineering industry, and
(c) which shall set forth the discounted present value of the Patina Related
Assets owned by Patina (which valuation shall be determined as of the same date
as the discounted present value of the oil and gas properties which are the
subject of the Patina Reserve Report delivered simultaneously therewith pursuant
to Sections 4.1 and 4.3 as applicable) as determined by the Approved Petroleum
Engineer or Patina's in-house staff (as applicable). Each Patina Related Asset
Report shall also designate the owner (either Patina, or one of its Restricted
Subsidiaries) of each Patina Related Asset which is the subject of such report.
"Patina Reserve Report" means an engineering analysis of the oil and gas
properties owned by Patina and its Restricted Subsidiaries in form and substance
acceptable to Required Banks prepared by the
18
<PAGE>
Approved Petroleum Engineer or reviewed and approved by the Approved Petroleum
Engineer (with the exception of the Patina Reserve Reports required to be
delivered on or before September 15 of each year pursuant to Section 4.1 or
pursuant to any Patina Special Determination pursuant to Section 4.3 which may
be prepared by Borrower's in-house staff) in accordance with customary and
prudent practices in the petroleum engineering industry and Financial Accounting
Standards Board Statement 69. Until superseded by delivery of a subsequent
Patina Reserve Report pursuant to Section 4.1 or Section 4.3, each reference to
Patina Reserve Report shall constitute a reference to the Current Patina Reserve
Report.
"Patina Restricted Payment Limit" means (a) as of any date during the
period from the Closing Date through the date of delivery to the Banks of
Patina's consolidated financial statements required by Section 8.1(d) for the
Fiscal Quarter ending June 30, 1997, an amount equal to Patina's Allocated Share
of the Initial Restricted Payment Limit, and (b) as of any date (the
"measurement date") on and after the date of delivery to the Banks of Patina's
consolidated financial statements required by Section 8.1(d) for the Fiscal
Quarter ending June 30, 1997, the sum of (i) Patina's Allocated Share of the
Initial Restricted Payment Limit, plus (ii) an amount equal to five percent (5%)
of Patina's Consolidated EBITDA excluding Gerrity and its Subsidiaries for the
period commencing July 1, 1996 and ending on the last day of the Fiscal Quarter
most recently ended as of the measurement date for which Patina's consolidated
financial statements required by Section 8.1(d) (in the case of the first three
quarters of each Fiscal Year, and Section 8.1(c) in the case of the fourth
Fiscal Quarter of each Fiscal Year) have been delivered to the Banks.
"Patina Revolving Availability" means, at any time, (a) the Patina
Borrowing Base in effect at such time, minus (b) the Patina Outstanding Credit
at such time.
"Patina Revolving Commitment" means, with respect to any Bank, the
commitment of such Bank to lend its Commitment Percentage of the Total Patina
Revolving Commitment. The amount of each Bank's Patina Revolving Commitment is
the amount of such commitment set forth opposite such Bank's name on Schedule 1
hereto, as such amount may be terminated or reduced from time to time in
accordance with the provisions hereof.
"Patina Revolving Loan" means a revolving loan in an aggregate amount up to
$102,000,000 to be made to Patina and SWAT pursuant to the Patina Revolving
Commitments in accordance with Section 2.2 hereof.
"Patina Revolving Note" means a promissory note of Patina and SWAT, payable
to the order of a Bank, in substantially the form of Exhibit C-2 hereto,
evidencing the obligation of Patina and SWAT, jointly and severally, to repay to
such Bank its Commitment Percentage of the Patina Revolving Loan, together with
all modifications, extensions, renewals and rearrangements thereof, and "Patina
Revolving Notes" means all of such Patina Revolving Notes.
"Patina Special Determination" means any determination of the Patina
Borrowing Base pursuant to Section 4.3.
"Patina Term Availability" means, at any time, (a) the Total Patina Term
Commitment in effect at such time, minus (b) the principal balance of the Patina
Term Loan at such time.
"Patina Term Commitment" means, with respect to any Bank, the commitment of
such Bank to lend its Commitment Percentage of the Total Patina Term Commitment.
The amount of each Bank's Patina Term Commitment is the amount of such
commitment set forth opposite such Bank's name on Schedule 1 hereto, as such
amount may be terminated or reduced from time to time in accordance with
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the provisions hereof.
"Patina Term Commitment Termination Date" means May 2, 1997.
"Patina Term Loan" means a term loan in an amount up to $87,000,000 to be
made to Patina and SWAT pursuant to the Patina Term Commitments in accordance
with Section 2.1 hereof.
"Patina Term Note" means a promissory note of Patina and SWAT, payable to
the order of a Bank, in substantially the form of Exhibit C-3 hereto, evidencing
the obligation of Patina and SWAT, jointly and severally, to repay to such Bank
its Commitment Percentage of the Patina Term Loan, together with all
modifications, extensions, renewals and rearrangements thereof, and "Patina Term
Notes" means all of such Patina Term Notes collectively.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Periodic Determination" means any Patina Periodic Determination or Gerrity
Periodic Determination.
"Permitted Encumbrances" means with respect to any asset:
(a) Liens in favor of the Banks or their Affiliates under the Loan Papers;
(b) Minor defects in title which do not secure the payment of money and
otherwise have no material adverse effect on the value or operation of oil and
gas properties, and for the purposes of this Agreement, a minor defect in title
shall include (i) those instances where record title to an oil and gas lease is
in a predecessor in title to any Borrower or any of its Subsidiaries, but where
such Borrower or any of its Subsidiaries, by reason of a farmout or other
instrument is presently entitled to receive an assignment of its interest or
other evidence of title and the appropriate Person is proceeding diligently to
obtain such assignment, and (ii) easements, rights-of-way, servitudes, permits,
surface leases and other similar rights in respect of surface operations, and
easements for pipelines, streets, alleys, highways, telephone lines, power
lines, railways and other easements and rights-of-way, on, over or in respect of
any of the properties of Borrowers (or their Subsidiaries, as applicable) that
are customarily granted in the oil and gas industry; so long as, with respect to
any of such minor defects in title, the same are minor defects which are
customary and usual in the oil and gas industry and which are customarily
accepted by a reasonably prudent operator dealing with its properties;
(c) Inchoate statutory or operators' liens securing obligations for labor,
services, materials and supplies furnished to oil and gas properties which are
not delinquent (except to the extent permitted by Section 8.7);
(d) Mechanic's, materialmen's, warehouseman's, journeyman's and carrier's
liens and other similar liens arising by operation of law or statute in the
ordinary course of business which are not delinquent (except to the extent
permitted by Section 8.7);
(e) Production sales contracts, gas balancing agreements and joint
operating agreements; provided, that the amount of all gas imbalances known to
any Authorized Officer of any Borrower and the amount of all production which
has been paid for but not delivered shall have been disclosed or otherwise taken
into account in the Reserve Reports delivered to Banks hereunder;
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(f) Liens for Taxes or assessments not yet due or not yet delinquent, or,
if delinquent, that are being contested in good faith in the normal course of
business by appropriate action, as permitted by Section 8.7;
(g) All rights to consent by, required notices to, filings with, or other
actions by, governmental entities in connection with the sale or conveyance of
oil and gas leases or interests therein if any Borrower (or its Subsidiaries, as
applicable) is entitled to such consent, the same are customarily obtained
subsequent to such sale or conveyance and the appropriate Person is proceeding
diligently to obtain such consent, notice or filing;
(h) The terms and provisions of any of the oil and gas leases pursuant to
which any Borrower (or its Subsidiaries, as applicable) derives its interests;
(i) Lease burdens payable to third parties which are deducted in the
calculation of discounted present value in the Reserve Reports including,
without limitation, any royalty, overriding royalty, net profits interest,
production payment, carried interest or reversionary working interest and
which have been disclosed to the Administrative Agent in writing; provided,
however, that no Borrower shall be required to disclose such lease burdens
unless the same are lease burdens which are not customarily and usually
found in the oil and gas industry or unless the same are lease burdens
which obligate such Borrower and/or its Subsidiaries, as applicable, in a
fashion not customarily and usually found in the oil and gas industry;
(j) All applicable laws, rules and orders of governmental authorities
having jurisdiction over the affairs of any Borrower;
(k) Liens securing Debt incurred to finance the acquisition of the assets
which are the subject of such Liens (to the extent permitted by Section 9.1
hereof); and
(l) Liens securing the obligations due and owing under the Existing Credit
Agreement; provided that such Liens are assigned to Administrative Agent for the
ratable benefit of the Banks after the Closing Date.
"Permitted Investment" means, with respect to any Borrower or any
Restricted Subsidiary, (a) readily marketable direct obligations of the United
States of America, (b) fully insured time deposits and certificates of deposit
with maturities of one (1) year or less of any commercial bank operating in the
United States having capital and surplus in excess of $50,000,000.00, (c)
commercial paper of a domestic issuer if at the time of purchase such paper is
rated in one of the two highest ratings categories of Standard and Poor's
Corporation or Moody's Investors Service, (d) any reverse repurchase agreement
entered into with a commercial bank meeting the criteria described in clause (b)
preceding which is secured by a fully perfected security interest in a security
of the type described in clauses (a) through (c) preceding and which security
has a market value at the time such reverse repurchase agreement is entered into
of not less than 100% of the obligation of such commercial bank under such
reverse repurchase agreement, (e) Investments by Patina and its Restricted
Subsidiaries in Patina or Restricted Subsidiaries of Patina, (f) Investments by
Restricted Subsidiaries of Gerrity in Gerrity and in other Restricted
Subsidiaries of Gerrity, (g) Investments by Gerrity in Restricted Subsidiaries
of Gerrity consisting of loans which are evidenced by promissory notes payable
on demand and which do not exceed $1,000,000 in the aggregate at any time; (h)
Investments outstanding as of the date hereof described on Schedule 4 hereof,
(i) Investments by Patina in Gerrity Preferred Stock which are permitted
pursuant to Section 9.2, and (j) Investments by Patina which are made (i) after
the Patina Term Commitments have been terminated and the Patina Term Loan has
been paid in full, and (ii) which when made, together with all other
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Investments made pursuant to this clause (i) do not exceed an amount (measured
at cost) greater than five percent (5%) of the Patina Borrowing Base then in
effect.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is now or
was previously covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code.
"Preferred Stock" means Patina's Series A Convertible Preferred Stock
containing the rights and preferences set forth in, and issued pursuant to, the
Preferred Stock Designation.
"Preferred Stock Designation" means the Certificate of Designation of
Rights and Preferences of Series A Preferred Stock filed with the Secretary of
State of Delaware on or about May 1, 1996, setting forth the rights and
preferences of the Preferred Stock.
"Process Agent" has the meaning set forth in Section 14.12.
"Pro Forma Financial Statements" means (a) the unaudited Pro Forma
Condensed Consolidated Balance Sheet of Patina as of December 31, 1995, and (b)
the Unaudited Pro Forma Condensed Consolidated Statement of Operations for
Patina for the Fiscal Year ended December 31, 1995.
"Pro Forma Segregated Financial Statements" means (a) the Pro Forma
Unaudited Consolidated Balance Sheet of Gerrity as of December 31, 1995, and (b)
the Unaudited Consolidated Balance Sheet of Patina excluding Gerrity and its
Subsidiaries as of December 31, 1995, which are attached hereto as Schedule 5
and Schedule 6, respectively.
"Projection" means the projection of Patina's consolidated results of
operations for the Fiscal Year ended December 31, 1996, a true and correct copy
of which is attached hereto as Schedule 7.
"Ratio of Consolidated Funded Debt to Adjusted Consolidated EBITDA" means,
for any Person as of the last day of any Fiscal Quarter, such Person's ratio of
Consolidated Funded Debt on such day to its Adjusted Consolidated EBITDA for the
period of four (4) Fiscal Quarters ended on such day (or to its Annualized
Adjusted Consolidated EBITDA to the extent such ratio is being calculated as of
the last day of any of the first three (3) complete Fiscal Quarters after the
Closing Date).
"Recognized Value" means, with respect to oil and gas properties, the
pre-tax value of such properties determined in accordance with Financial
Accounting Standards Board Statement 69, generally known as the "standardized
measure of discounted cash flow".
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into between SOCO and Patina pursuant to the Merger Agreement.
"Registration Statement" means the Registration Statement on Form S-4 filed
by Patina with the Securities Exchange Commission on January 24, 1996 having
Registration No. 333-572 related to the issuance of the Exchange Securities and
certain shares of Common Stock issuable upon conversion of Preferred Stock, as
amended by (i) Amendment No. 1 to Form S-4 filed by Patina with the Securities
Exchange Commission on March 20, 1996, and (ii) Amendment No. 2 to Form S-4
filed by Patina with
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the Securities Exchange Commission on April 2, 1996.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Related Assets" means, collectively, the Gerrity Related Assets and the
Patina Related Assets.
"Related Assets Reports" means, collectively, the Gerrity Related Assets
Reports and the Patina Related Assets Reports, and "Related Assets Report" means
a Gerrity Related Assets Report or a Patina Related Assets Report.
"Rentals" means amounts payable by a lessee under an Operating Lease.
"Request for Borrowing" has the meaning set forth in Section 2.4.
"Request for Letter of Credit" has the meaning given such term in Section
2.5.
"Required Banks" means Banks holding greater than sixty-six and two-thirds
percent (66 2/3%) of the Total Commitment.
"Reserve Reports" means, collectively, a Patina Reserve Report and a
Gerrity Reserve Report and "Reserve Report" means a Patina Reserve Report or a
Gerrity Reserve Report individually.
"Restricted Payment" means (a) any Distribution by Gerrity or any of its
Restricted Subsidiaries to any Person other than Gerrity or Patina, (b) any
Distribution by Patina or any of its Restricted Subsidiaries other than
Distributions by such Restricted Subsidiaries to Patina, and (c) the retirement,
redemption or prepayment prior to the scheduled maturity by any Borrower or a
Restricted Subsidiary of any Borrower of Debt of any Borrower or any Restricted
Subsidiary of any Borrower (including without limitation, retirement, redemption
or prepayment prior to the scheduled maturity of any of the Subordinate Notes,
but expressly excluding the retirement, redemption or prepayment prior to
scheduled maturity of the Intercompany Loan).
"Restricted Subsidiary" means, with respect to each Borrower, the
Subsidiaries of such Borrower described as Restricted Subsidiaries on Schedule 9
attached hereto. "Restricted Subsidiary" shall also refer to any other
Subsidiary of any Borrower which Required Banks and such Borrower hereafter, in
their sole discretion, designate in writing a Restricted Subsidiary.
Notwithstanding anything to the contrary contained herein or contained in such
Schedule 9 Gerrity and its Subsidiaries shall not be a "Restricted Subsidiary"
of Patina for purposes of this Agreement.
"Rollover Notice" has the meaning given such term in Section 2.7(c).
"Schedule" means a "schedule" attached to this Agreement and incorporated
herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement unless
specifically indicated otherwise.
"SOCO" means Snyder Oil Corporation, a Delaware corporation, which (a)
prior to the Merger, is the legal and beneficial owner of one hundred percent
(100%) of the issued and outstanding capital stock of Patina of every class, and
(b) immediately after the Merger, will be the legal and beneficial owner
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of seventy percent (70%) of the issued and outstanding Common Stock (on a
non-diluted basis).
"SOCO Credit Agreement" means that certain Fifth Restated Credit Agreement
dated as of June 30, 1994, by and among SOCO, NationsBank of Texas, N.A., as
Agent and certain financial institutions parties thereto as Banks, as amended by
that certain Letter Agreement dated May 1, 1995, that certain Second Amendment
to Fifth Restated Credit Agreement dated June 30, 1995, that certain Third
Amendment to Fifth Restated Credit Agreement dated November 1, 1995, and that
certain Fourth Amendment to Fifth Restated Credit Agreement dated April 4, 1996.
"SOCO Wattenberg" means the assets and operations described and defined in
the Merger Agreement as the "Business", which assets and operations include,
without limitation, the assets, operations and capital stock of SWAT.
"Special Determination" means any Patina Special Determination or Gerrity
Special Determination.
"Subordinate Note Redemption Date" means the date specified as the "Change
of Control Payment Date" in the "Change of Control Offer" required to be
delivered by Gerrity as a result of the Merger pursuant to Section 4.18 of the
Indenture.
"Subordinate Note Redemption Period" means the period commencing on the
Closing Date and ending on the Subordinate Note Redemption Date.
"Subordinate Notes" means Gerrity's 11 3/4% Senior Subordinate Notes due
July 15, 2004.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Surplus Commitment" has the meaning set forth in Section 13.5.
"SWAT" means SOCO Wattenberg Corporation, a Delaware corporation, which,
(a) prior to the contribution by SOCO of SOCO Wattenberg to Patina pursuant to
the Merger Agreement, is a wholly owned Subsidiary of SOCO, and (b) thereafter,
will be a wholly owned Subsidiary of Patina.
"Tax Credit Transaction Agreement" means a Tax Credit Transaction Agreement
to be entered into among Borrowers, Agents and Banks substantially in the form
of Exhibit J attached hereto.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges, or
other charges of any nature whatsoever, from time to time or at any time imposed
by law or any federal, state or local governmental agency. "Tax" means any one
of the foregoing.
"Termination Date" means July 15, 1999.
"Total Commitment" means the aggregate of all Banks' Commitments.
"Total Gerrity Commitment" means the Gerrity Commitments of the Banks in an
initial aggregate amount of $138,000,000.
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"Total Patina Revolving Commitment" means the Patina Revolving Commitments
of the Banks in an initial aggregate amount of $102,000,000.
"Total Patina Term Commitment" means the Patina Term Commitments of the
Banks in an initial aggregate amount of $87,000,000.
"Tranche" means an Adjusted Base Rate Tranche or a Eurodollar Tranche and
"Tranches" means Adjusted Base Rate Tranches or Eurodollar Tranches or any
combination thereof.
"Transfer Agent" means the American Stock Transfer & Trust Company.
"Transfer Documents" means (a) the Assignment, Bill of Sale and Mineral
Deed dated May 2, 1996, between SOCO and Patina, and between Patina and SWAT;
(b) the Assignment and Bill of Sale dated May 2, 1996, between SOCO and Patina,
and between Patina and SWAT; (c) the Bill of Sale dated May 2, 1996, from SOCO
to Patina, and from Patina to SWAT; (d) the Deed dated May 2, 1996, from SOCO to
Patina, and from Patina to SWAT (relating to real property in Weld County,
Colorado); and (e) the Deed dated May 2, 1996, from SOCO to Patina, and from
Patina to SWAT (relating to real property in Morgan County, Colorado.
"Type" means with reference to a Tranche, the characterization of such
Tranche as an Adjusted Base Rate Tranche or a Eurodollar Tranche based on the
method by which the accrual of interest on such Tranche is calculated.
"Unrestricted Subsidiary" shall mean any Subsidiary of any Borrower which
is not a Restricted Subsidiary.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent with the most recent audited consolidated and
consolidating financial statements of the applicable Borrower and its
Consolidated Subsidiaries delivered to Banks except for changes concurred in by
Borrowers' independent certified public accountants and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to Banks pursuant to Sections 8.1(a), (b), (c) (d), (e) or (f);
provided that, unless Borrower and Required Banks shall otherwise agree in
writing, no such change shall modify or affect the manner in which compliance
with the covenants contained in Article X are computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods. As used herein, any reference herein to the
consolidated financial condition or results of operation of Patina as of a date
or for a period which is qualified by the phrase "excluding Gerrity and its
Subsidiaries" or by any similar phrase shall refer to the consolidated results
of operations or financial condition of Patina as of such date or for such
period excluding any amount attributable to the assets, liabilities, capital
stock, revenues, profits, losses or results of operations of Gerrity and its
Subsidiaries as of such date or for such period (including, without limitation,
any part of the Gerrity Obligations guaranteed by Patina pursuant to the Patina
Guarantees.)
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ARTICLE II
THE CREDIT FACILITIES
SECTION 2.1. Patina Term Commitment. Each Bank severally agrees, subject to
the terms and conditions set forth in this Agreement, to lend to Patina and
SWAT, collectively in (a) one Borrowing on the Subordinate Note Redemption Date
such Bank's Commitment Percentage of an amount equal to the remainder of (i)
101% of the principal amount of Subordinate Notes tendered for redemption on the
Subordinate Note Redemption Date as a result of the Merger pursuant to Section
4.18 of the Indenture, minus (ii) $14,000,000, and (b) one or more Borrowings
subsequent to the Subordinate Note Redemption Date, such Bank's Commitment
Percentage of amounts equal to the lesser of (i) the purchase price to be paid
by Gerrity for Subordinate Notes being repurchased by Gerrity subsequent to the
Subordinate Note Redemption Date, or (ii) the principal amount of Subordinate
Notes being repurchased by Gerrity subsequent to the Subordinate Note Redemption
Date. Borrowings under the Patina Term Commitments shall be used by Patina and
SWAT solely to make advances to Gerrity under the Intercompany Loan to be used
by Gerrity to repurchase or redeem Subordinate Notes tendered to Gerrity for
redemption or repurchase as a result of the Merger pursuant to Section 4.18 of
the Indenture or to otherwise repurchase Subordinate Notes subsequent to the
Subordinate Note Redemption Date. In no event shall Patina or SWAT be entitled
to a Borrowing under the Patina Term Commitments unless and until the Gerrity
Refinancing Reserve has been fully exhausted for the purposes of repurchasing or
redeeming Subordinates Notes or making principal payments or prepayments on the
Intercompany Loan. No Bank shall be obligated to loan under its Patina Term
Commitment (i) after the Patina Term Commitment Termination Date, (ii) which
would cause the aggregate amount of all Borrowings under the Total Patina Term
Commitment to exceed the amount of the Total Patina Term Commitment, or (iii)
which would cause the aggregate amount advanced by such Bank with respect to the
Patina Term Loan to exceed such Bank's Patina Term Commitment. Amounts repaid on
the Patina Term Loan may not be reborrowed.
SECTION 2.2. Patina Revolving Commitment. (a) Each Bank severally agrees,
subject to Section 2.2(c) and the other terms and conditions set forth in this
Agreement, to lend to Patina and SWAT from time to time during the Credit Period
amounts not to exceed in the aggregate at any one time outstanding, the amount
of such Bank's Patina Revolving Commitment reduced by an amount equal to such
Bank's Patina Letter of Credit Exposure. Each Borrowing shall (i) be in an
aggregate principal amount of $500,000 or any larger integral multiple of
$100,000 (except that any Adjusted Base Rate Borrowing may be in an amount equal
to the Patina Revolving Availability at such time), and (ii) be made from each
Bank ratably in accordance with its respective Commitment Percentage. Subject to
the foregoing limitations and the other provisions of this Agreement, Patina and
SWAT may borrow under this Section 2.2(a), repay amounts borrowed under this
Section 2.3(a) and request new Borrowings under this Section 2.3(a).
(b) Administrative Agent, or such Bank designated by Administrative Agent
which (without obligation to do so) consents to the same ("Patina Letter of
Credit Issuer"), will, from time to time during the Credit Period, upon request
by Patina and SWAT, issue Patina Letters of Credit for the account of Patina or
any Restricted Subsidiary designated by Patina and SWAT, so long as (i) the sum
of (A) the total Patina Letter of Credit Exposure then existing, and (B) the
amount of the requested Patina Letter of Credit does not exceed $10,000,000, and
(ii) Patina and SWAT would be entitled to a Borrowing under Sections 2.2(a) and
(c) in the amount of the requested Patina Letter of Credit. Not less than three
(3) Domestic Business Days prior to the requested date of issuance of any such
Patina Letter of Credit, Patina and SWAT (and any Restricted Subsidiary of
Patina for whose account such Patina Letter of Credit is being issued) shall
execute and deliver to Patina Letter of Credit Issuer, Patina Letter of Credit
Issuer's customary letter of credit application. Each Patina Letter of Credit
shall be in form and substance
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acceptable to Patina Letter of Credit Issuer. No Patina Letter of Credit shall
have an expiration date later than the earlier of (i) the Termination Date, or
(ii) one (1) year from the date of issuance. Upon the date of issuance of a
Patina Letter of Credit, Patina Letter of Credit Issuer shall be deemed to have
sold to each other Bank, and each other Bank shall be deemed to have
unconditionally and irrevocably purchased from Patina Letter of Credit Issuer, a
non-recourse participation in the related Patina Letter of Credit and Patina
Letter of Credit Exposure equal to such Bank's Commitment Percentage of such
Patina Letter of Credit and Letter of Credit Exposure. Upon request of any Bank,
but not less often than quarterly, Administrative Agent shall provide notice to
each Bank by telephone, teletransmission or telex setting forth each Patina
Letter of Credit issued and outstanding pursuant to the terms hereof and
specifying the Patina Letter of Credit Issuer, beneficiary and expiration date
of each such Patina Letter of Credit, each Bank's participation percentage of
each such Patina Letter of Credit and the actual dollar amount of each Bank's
participation held by the Patina Letter of Credit Issuer(s) thereof for such
Bank's account and risk. If any Patina Letter of Credit is presented for payment
by the beneficiary thereof, Administrative Agent shall cause an Adjusted Base
Rate Borrowing to be made from each Bank participating in such Patina Letter of
Credit and Patina Letter of Credit Exposure to reimburse Patina Letter of Credit
Issuer for the payment under the Patina Letter of Credit, whether or not Patina
and SWAT would then be entitled to a Borrowing pursuant to the terms hereof, and
each Bank which participated in such Patina Letter of Credit and Patina Letter
of Credit Exposure shall be obligated to lend its Commitment Percentage of such
Adjusted Base Rate Borrowing. At the time of issuance of each Patina Letter of
Credit, Patina and SWAT shall pay to Administrative Agent a fee equal to the sum
of (i) the greater of (A) $500, or (B) one- eighth of one percent (1/8%) per
annum (based on the face amount and term of such Patina Letter of Credit), plus
(ii) the greater of (A) $500, or (B) a per annum percentage equal to the
Applicable Margin in effect on the date of issuance of such Patina Letter of
Credit (based upon the amount and term of such Patina Letter of Credit).
Administrative Agent shall distribute the fee described in subclause (i) of the
preceding sentence paid on issuance of such Patina Letter of Credit to the
Patina Letter of Credit Issuer which issued such Patina Letter of Credit. The
remaining portion of such fee shall be paid to Banks participating in such
Patina Letter of Credit and Patina Letter of Credit Exposure based on the
relative amounts of their participation in such Patina Letter of Credit and
Patina Letter of Credit Exposure.
Upon the occurrence of an Event of Default, Patina and SWAT, jointly and
severally, shall, on the next succeeding Domestic Business Day, deposit with
Administrative Agent such funds as Administrative Agent may request, up to a
maximum amount equal to the aggregate existing Patina Letter of Credit Exposure
of all Banks. Any funds so deposited shall be held by Administrative Agent for
the ratable benefit of all Banks as security for the outstanding Patina Letter
of Credit Exposure and the other Patina Obligations, and Patina and SWAT will,
in connection therewith, execute and deliver such security agreements in form
and substance satisfactory to Administrative Agent which it may, in its
discretion, require. As drafts or demands for payment are presented under any
Patina Letter of Credit, Administrative Agent shall apply such funds to satisfy
such drafts or demands. When all Patina Letters of Credit have expired and the
Patina Obligations have been repaid in full (and the Commitments of all Banks
have terminated) or such Event of Default has been cured to the satisfaction of
Required Banks, Administrative Agent shall release to Patina and SWAT (as Patina
shall designate) any remaining funds deposited under this Section 2.2(b).
Whenever Patina and SWAT are required to make deposits under this Section 2.2(b)
and fail to do so on the day such deposit is due, Administrative Agent or any
Bank may, without notice to Patina or SWAT, make such deposit (whether by
application of proceeds of any collateral for the Patina Obligations, by
transfers from other accounts maintained with any Bank or otherwise) using any
funds then available to any Bank of Patina, and of its Restricted Subsidiaries,
any guarantor, or any other Person liable for all or any part of the Patina
Obligations.
(c) No Bank will be obligated to lend to Patina and SWAT under this Section
2.2 or incur Patina Letter of Credit Exposure, and Patina and SWAT shall not be
entitled to borrow hereunder
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or obtain Patina Letters of Credit hereunder (i) during the existence of any
Borrowing Base Deficiency, or (ii) in an amount which would cause a Borrowing
Base Deficiency. Nothing in this Section 2.2(c) shall be deemed to limit any
Bank's obligation to fund its ratable share of Adjusted Base Rate Borrowings
with respect to its participation in Patina Letters of Credit made as a result
of any drawing under any Patina Letter of Credit.
SECTION 2.3. Gerrity Revolving Commitment. (a) Each Bank severally agrees,
subject to Section 2.3(c) and (d) and 4.8 and the other terms and conditions set
forth in this Agreement, to lend to Gerrity from time to time during the Credit
Period amounts not to exceed in the aggregate at any one time outstanding, the
amount of such Bank's Gerrity Commitment reduced by an amount equal to such
Bank's Gerrity Letter of Credit Exposure. Each Borrowing shall be in an
aggregate principal amount of $500,000 or any larger integral multiple of
$100,000 (except that any Adjusted Base Rate Borrowing may be in an amount equal
to the Gerrity Availability at such time), and (ii) shall be made from each Bank
ratably in accordance with its respective Commitment Percentage. Subject to the
foregoing limitations and the other provisions of this Agreement, Gerrity may
borrow under this Section 2.3(a), repay amounts borrowed under this Section
2.3(a) and request new Borrowings under this Section 2.3(a).
(b) Administrative Agent, or such Bank designated by Administrative Agent
which (without obligation to do so) consents to the same ("Gerrity Letter of
Credit Issuer") will, from time to time during the Credit Period, upon request
by Gerrity, issue Gerrity Letters of Credit for the account of Gerrity or any
Restricted Subsidiary of Gerrity designated by Gerrity, so long as (i) the sum
of (A) the total Gerrity Letter of Credit Exposure then existing, and (B) the
amount of the requested Gerrity Letter of Credit does not exceed $10,000,000,
and (ii) Gerrity would be entitled to a Borrowing under Sections 2.3(a), (c) and
(d) in the amount of the requested Gerrity Letter of Credit. Not less than three
(3) Domestic Business Days prior to the requested date of issuance of any such
Gerrity Letter of Credit, Gerrity (and any Restricted Subsidiary of Gerrity for
whose account such Gerrity Letter of Credit is being issued) shall execute and
deliver to Gerrity Letter of Credit Issuer, Gerrity Letter of Credit Issuer's
customary letter of credit application. Each Gerrity Letter of Credit shall be
in form and substance acceptable to Gerrity Letter of Credit Issuer. No Gerrity
Letter of Credit shall have an expiration date later than the earlier of (i) the
Termination Date, or (ii) one (1) year from the date of issuance. Upon the date
of issuance of a Gerrity Letter of Credit, Gerrity Letter of Credit Issuer shall
be deemed to have sold to each other Bank, and each other Bank shall be deemed
to have unconditionally and irrevocably purchased from Gerrity Letter of Credit
Issuer, a non recourse participation in the related Gerrity Letter of Credit and
Gerrity Letter of Credit Exposure equal to the amount of such Bank's Commitment
Percentage of such Gerrity Letter of Credit and Letter of Credit Exposure. Upon
request of any Bank, but not less often than quarterly, Administrative Agent
shall provide notice to each Bank by telephone, teletransmission or telex
setting forth each Gerrity Letter of Credit issued and outstanding pursuant to
the terms hereof and specifying the Gerrity Letter of Credit Issuer, beneficiary
and expiration date of each such Gerrity Letter of Credit, each Bank's
percentage of each such Gerrity Letter of Credit and the actual dollar amount of
each Bank's participation held by the Gerrity Letter of Credit Issuer(s) thereof
for such Bank's account and risk. If any Gerrity Letter of Credit is presented
for payment by the beneficiary thereof, Administrative Agent shall cause an
Adjusted Base Rate Borrowing to be made from each Bank participating in such
Gerrity Letter of Credit and Gerrity Letter of Credit Exposure to reimburse
Gerrity Letter of Credit Issuer for the payment under the Gerrity Letter of
Credit, whether or not Gerrity would then be entitled to a Borrowing pursuant to
the terms hereof, and each Bank which participated in such Gerrity Letter of
Credit and Gerrity Letter of Credit Exposure shall be obligated to lend its
Commitment Percentage of such Adjusted Base Rate Borrowing. At the time of
issuance of each Gerrity Letter of Credit, Gerrity shall pay to Administrative
Agent a fee equal to the sum of (i) the greater of (A) $500, or (B) one-eighth
of one percent (1/8%) per annum (based on the face amount and term of such
Gerrity Letter of Credit), plus (ii) the greater of (A) $500, or (B) a per annum
percentage equal to the Applicable
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Margin in effect on the date of issuance of such Gerrity Letter of Credit (based
upon the amount and term of such Gerrity Letter of Credit). Administrative Agent
shall distribute the fee described in subclause (i) of the preceding sentence
paid on issuance of such Gerrity Letter of Credit to the Gerrity Letter of
Credit Issuer of such Gerrity Letter of Credit. The remaining portion of such
fee shall be paid to Banks participating in such Gerrity Letter of Credit and
Gerrity Letter of Credit Exposure based on the relative amounts of their
participation in such Gerrity Letter of Credit and Gerrity Letter of Credit
Exposure.
Upon the occurrence of an Event of Default, Gerrity shall, on the next
succeeding Domestic Business Day, deposit with Administrative Agent such funds
as Administrative Agent may request, up to a maximum amount equal to the
aggregate existing Gerrity Letter of Credit Exposure of all Banks. Any funds so
deposited shall be held by Administrative Agent for the ratable benefit of all
Banks as security for the outstanding Gerrity Letter of Credit Exposure and the
other Gerrity Obligations, and Gerrity will, in connection therewith, execute
and deliver such security agreements in form and substance satisfactory to
Administrative Agent which it may, in its discretion, require. As drafts or
demands for payment are presented under any Gerrity Letter of Credit,
Administrative Agent shall apply such funds to satisfy such drafts or demands.
When all Gerrity Letters of Credit have expired and the Gerrity Obligations have
been repaid in full (and the Gerrity Commitment of all Banks have terminated) or
such Event of Default has been cured to the satisfaction of Required Banks,
Administrative Agent shall release to Gerrity any remaining funds deposited
under this Section 2.3(b). Whenever Gerrity is required to make deposits under
this Section 2.3(b) and fails to do so on the day such deposit is due,
Administrative Agent or any Bank may, without notice to Gerrity, make such
deposit (whether by application of proceeds of any collateral for the Gerrity
Obligations, by transfers from other accounts maintained with any Bank or
otherwise) using any funds then available to any Bank of any Borrower or any of
their Restricted Subsidiaries, any guarantor, or any other Person liable for all
or any part of the Gerrity Obligations.
(c) No Bank will be obligated to lend to Gerrity hereunder or incur Gerrity
Letter of Credit Exposure, and Gerrity shall not be entitled to borrow hereunder
or obtain Gerrity Letters of Credit hereunder (i) during the existence of a
Borrowing Base Deficiency, or (ii) in an amount which would cause a Borrowing
Base Deficiency. Nothing in this Section 2.3(c) below shall be deemed to limit
any Bank's obligation to fund its Commitment Percentage of Adjusted Base Rate
Borrowings with respect to its participation in Gerrity Letters of Credit in
connection with any Adjusted Base Rate Borrowing made as a result of the drawing
under any Gerrity Letter of Credit.
(d) Gerrity shall not be permitted to obtain Borrowings hereunder in
respect of the Gerrity Refinancing Reserve for any purpose other than (i) to
redeem Subordinate Notes tendered to Gerrity as a result of the Merger pursuant
to Section 4.18 of the Indenture, (ii) to repurchase or redeem Subordinate Notes
after the Subordinate Note Redemption Date, and (iii) to make payments and
prepayments on the Intercompany Loan.
SECTION 2.4. Method of Borrowing. (a) In order to request any Borrowing
hereunder, the applicable Borrower(s) shall hand deliver, telex or telecopy to
Administrative Agent a duly completed Request for Borrowing (herein so called)
prior to 12:00 noon (Houston, Texas time), (i) at least one (1) Domestic
Business Day before the Borrowing Date specified for a proposed Adjusted Base
Rate Borrowing, and (ii) at least three (3) Eurodollar Business Days before the
Borrowing Date of a proposed Eurodollar Borrowing. Each such Request for
Borrowing shall be substantially in the form of Exhibit G hereto, and shall
specify:
(i) whether such Borrowing is being made under the
Patina Term Loan, the Patina Revolving Loan or the Gerrity
Loan;
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(ii) whether such Borrowing is to be an Adjusted Base
Rate Borrowing or a Eurodollar Borrowing;
(iii) the Borrowing Date of such Borrowing, which shall
be a Domestic Business Day in the case of an Adjusted Base
Rate Borrowing, or a Eurodollar Business Day in the case of
a Eurodollar Borrowing;
(iv) the aggregate amount of such Borrowing;
(v) in the case of a Eurodollar Borrowing, the duration
of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period; and
(vi) to the extent such Borrowing is to be used in
whole or in part to repurchase or redeem Subordinate Notes
(A) the principal amount of the Subordinate Notes to be
repurchased or redeemed, (B) the closing date for such
redemption or repurchase (which shall be the Borrowing Date
for the requested Borrowing), and (C) a description of the
material terms and conditions of such repurchase or
redemption (or a statement that such redemption is being
made as a result of the Merger pursuant to Section 4.18 of
the Indenture, if applicable).
(b) Upon receipt of a Request for Borrowings described in Section 2.4(a)
above, Administrative Agent shall promptly notify each Bank of the contents
thereof and the amount of the Borrowing to be loaned by such Bank pursuant
thereto, and such Request for Borrowings shall not thereafter be revocable by
the applicable Borrower(s).
(c) Not later than 12:00 noon (Houston, Texas time) on the date of each
Borrowing, each Bank shall make available its Commitment Percentage of such
Borrowing, in Federal or other funds immediately available in Houston, Texas to
Administrative Agent at its address set forth on Schedule 1 hereto.
Notwithstanding the foregoing, if the applicable Borrower(s) deliver to
Administrative Agent a Request for Borrowing prior to 10:00 a.m. (Houston, Texas
time) on a Domestic Business Day requesting an Adjusted Base Rate Borrowing on
such day, each Bank shall use its best efforts to make available to
Administrative Agent its Commitment Percentage of such Borrowing by 1:00 p.m.
(Houston, Texas time) on the same day. Unless Administrative Agent determines
that any applicable condition specified in Section 6.2 has not been satisfied,
Administrative Agent will make the funds so received from Banks available to the
applicable Borrower at Administrative Agent's aforesaid address.
SECTION 2.5. Method of Requesting Letters of Credit. (a) In order to
request any Letter of Credit hereunder, the applicable Borrower(s) shall hand
deliver, telex or telecopy to Administrative Agent a duly completed Request for
Letter of Credit (herein so called) prior to 12:00 noon (Houston, Texas time) at
least three Domestic Business Days before the date specified for issuance of
such Letter of Credit. Each Request for Letters of Credit shall be substantially
in the form of Exhibit H hereto, shall be accompanied by the applicable Letter
of Credit Issuer's duly completed and executed letter of credit application and
agreement and shall specify:
(i) whether such Letter of Credit is being requested
under the Gerrity Commitments or the Patina Revolving
Commitments;
(ii) the requested date for issuance of such Letter of
Credit;
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(iii) the terms of such requested Letter of Credit,
including the name and address of the beneficiary, the
stated amount, the expiration date and the conditions under
which drafts under such Letter of Credit are to be
available; and
(iv) the purpose of such Letter of Credit.
(b) Upon receipt of a Request for Letter of Credit
described in Section 2.5(a) above, Administrative Agent
shall promptly notify each Bank and the proposed Letter of
Credit Issuer of the contents thereof, including the amount
of the requested Letter of Credit, and such Request for
Letter of Credit shall not thereafter be revocable by the
applicable Borrower(s).
(c) No later than 12:00 noon (Houston, Texas time) on the date each Letter
of Credit is requested, unless Administrative Agent or the applicable Letter of
Credit Issuer determines that any applicable condition precedent set forth in
Section 6.2 hereof has not been satisfied, the applicable Letter of Credit
Issuer will issue and deliver such Letter of Credit pursuant to the instructions
of the applicable Borrower(s).
SECTION 2.6. Notes. Each Bank's Commitment Percentage of the Patina Term
Loan shall be evidenced by a single Patina Term Note payable to the order of
such Bank in an amount equal to such Bank's Patina Term Commitment. Each Bank's
Commitment Percentage of the Patina Revolving Loan shall be evidenced by a
single Patina Revolving Note payable to the order of such Bank in an amount
equal to such Bank's Patina Revolving Commitment. Each Bank's Commitment
Percentage of the Gerrity Loan shall be evidenced by a single Gerrity Note
payable to the order of such Bank in an amount equal to such Bank's Gerrity
Commitment.
SECTION 2.7. Interest Rates; Payments. (a) The principal amount of each
Loan outstanding from day to day which is the subject of an Adjusted Base Rate
Tranche shall bear interest at a rate per annum equal to the sum of the
Applicable Margin plus the Adjusted Base Rate in effect from day to day;
provided that in no event shall the rate charged hereunder or under the Notes
exceed the Maximum Lawful Rate. Interest on any portion of the principal of any
Loan subject to an Adjusted Base Rate Tranche shall be payable as it accrues on
the last day of each calendar month.
(b) The principal amount of each Loan outstanding from day to day which is
the subject of a Eurodollar Tranche shall bear interest for the Interest Period
applicable thereto at a rate per annum equal to the sum of the Applicable Margin
plus the applicable Adjusted Eurodollar Rate; provided that in no event shall
the rate charged hereunder or under the Notes exceed the Maximum Lawful Rate.
Interest on any portion of the principal of any Loan subject to a Eurodollar
Tranche having an Interest Period of one (1), two (2) or three (3) months shall
be payable on the last day of the Interest Period applicable thereto. Interest
on any portion of the principal of any Loan subject to a Eurodollar Tranche
having an Interest Period of six (6) months shall be payable on the last day of
the Interest Period applicable thereto and on the last day of each Fiscal
Quarter during such Interest Period.
(c) So long as no Default or Event of Default shall be continuing, subject
to the provisions of this Section 2.7, each Borrower shall have the option of
having all or any portion of the principal outstanding under each Loan borrowed
by it be the subject of an Adjusted Base Rate Tranche or one (1) or more
Eurodollar Tranches, which shall bear interest at rates based upon the Adjusted
Base Rate and the Adjusted Eurodollar Rate, respectively (each such option is
referred to herein as an "Interest Option"); provided, that each Eurodollar
Tranche shall be in a minimum amount of $500,000 and shall be in an amount which
is an integral multiple of $100,000. Each change in an Interest Option made
pursuant to this Section 2.7(c) shall be deemed both a payment in full of the
portion of the principal of
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the applicable Loan which was the subject of the Adjusted Base Rate Tranche or
Eurodollar Tranche from which such change was made and a Borrowing
(notwithstanding that the unpaid principal amount of the applicable Loan is not
changed thereby) of the portion of the principal of the applicable Loan which is
the subject of the Adjusted Base Rate Tranche or Eurodollar Tranche into which
such change was made. Prior to the termination of each Interest Period with
respect to each Eurodollar Tranche, the applicable Borrower shall give written
notice (a "Rollover Notice") in the form of Exhibit I attached hereto to
Administrative Agent of the Interest Option which shall be applicable to such
portion of the principal of the applicable Loan upon the expiration of such
Interest Period. Such Rollover Notice shall be given to Administrative Agent at
least one (1) Domestic Business Day, in the case of an Adjusted Base Rate
Tranche selection and three (3) Eurodollar Business Days, in the case of a
Eurodollar Tranche selection, prior to the termination of the Interest Period
then expiring. If the applicable Borrower shall specify a Eurodollar Tranche,
such Rollover Notice shall also specify the length of the succeeding Interest
Period (subject to the provisions of the definitions of such term), selected by
such Borrower. Each Rollover Notice shall be irrevocable and effective upon
notification thereof to Administrative Agent. If the required Rollover Notice
shall not have been timely received by Administrative Agent, the applicable
Borrower shall be deemed to have elected that the principal of the Loan subject
to the Interest Period then expiring be the subject of an Adjusted Base Rate
Tranche upon the expiration of such Interest Period and such Borrower will be
deemed to have given Administrative Agent notice of such election. Subject to
the limitations set forth in this Section 2.7(c) on the minimum amount of
Eurodollar Tranches, Borrower shall have the right to convert each Adjusted Base
Rate Tranche to a Eurodollar Tranche by giving Administrative Agent a Rollover
Notice of such election at least three (3) Eurodollar Business Days prior to the
date on which Borrower elects to make such conversion (a "Conversion Date"). The
Conversion Date selected by Borrower shall be a Eurodollar Business Day.
Notwithstanding anything in this Section 2.7 to the contrary, no portion of the
principal of a Loan which is the subject of an Adjusted Base Rate Tranche may be
converted to a Eurodollar Tranche and no Eurodollar Tranche may be continued as
such when any Default or Event of Default has occurred and is continuing, but
each such Tranche shall be automatically converted to an Adjusted Base Rate
Tranche on the last day of each applicable Interest Period. In no event shall
more than four (4) Interest Options be in effect with respect to any Loan at any
time.
(d) Notwithstanding anything to the contrary set forth in Section 2.7(a) or
(b) above, all overdue principal of and, to the extent permitted by law, overdue
interest on any Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the lesser of (a) the sum of (i) two percent
(2%), plus (ii) the Adjusted Base Rate in effect from day to day, and (b) the
Maximum Lawful Rate.
(e) Administrative Agent shall determine each interest rate applicable to
the Loans in accordance with the terms hereof. Administrative Agent shall
promptly notify Borrowers and Banks by telex, telecopy or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of interest
calculated with reference to the Adjusted Base Rate or the Eurodollar Rate
hereunder (the "contract rate") is limited to the Maximum Lawful Rate, any
subsequent reductions in the contract rate shall not reduce the rate of interest
on the affected Loan below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have accrued if the
contract rate had at all times been in effect. In the event that at maturity
(stated or by acceleration), or at final payment of any Note, the total amount
of interest paid or accrued on such Note is less than the amount of interest
which would have accrued if the contract rate had at all times been in effect
with respect thereto, then at such time, to the extent permitted by law, the
applicable Borrower shall pay to the holder of such Note an amount equal to the
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difference between (i) the lesser of the amount of interest which would have
accrued if the contract rate had at all times been in effect and the amount of
interest which would have accrued if the Maximum Lawful Rate had at all times
been in effect, and (ii) the amount of interest actually paid on such Note.
(g) Interest payable on the principal of any Loan subject to a Eurodollar
Tranche shall be computed based on the number of actual days elapsed assuming
that each calendar year consisted of 360 days. Interest payable on the principal
of any Loan subject to an Adjusted Base Rate Tranche shall be computed based on
the number of actual days elapsed and based on the actual number of days in the
calendar year for which accrued interest is being computed.
SECTION 2.8. Mandatory Prepayments of Patina Term Loan. A mandatory
prepayment of principal of the Patina Term Loan shall be due and payable on the
same day as the date of any prepayment of principal on the Intercompany Loan and
in an amount identical to the amount of such prepayment of principal of the
Intercompany Loan.
SECTION 2.9. Mandatory Termination of Commitments; Termination Date and
Maturity. The Patina Term Commitments shall terminate on the Patina Term
Commitment Termination Date. The Gerrity Commitments and the Patina Revolving
Commitments shall each terminate on the Termination Date. The outstanding
principal balance of all Loans, all accrued but unpaid interest thereon and all
other Gerrity Obligations and Patina Obligations shall be due and payable in
full on the Termination Date.
SECTION 2.10. Mandatory Reduction of Patina Term Commitments. In the event
the Gerrity Availability is increased pursuant to Section 4.8 and such
Availability is utilized to repurchase Subordinate Notes at any time that the
Patina Term Commitments are in effect, the Total Patina Term Commitment shall
reduce (and the Patina Term Commitments of each Bank shall reduce ratably) on
the date such Availability is so utilized by an amount equal to the amount so
utilized.
SECTION 2.11. Voluntary Reduction of Patina Commitments. (a) Patina and
SWAT may, by notice to Administrative Agent one (1) Domestic Business Day prior
to the effective date of any such reduction, permanently reduce the Total Patina
Term Commitment and/or the Total Patina Revolving Commitment (and thereby
permanently reduce the Patina Term Commitment and/or the Patina Revolving
Commitment of each Bank ratably in accordance with such Bank's Commitment
Percentage) in amounts not less than $1,000,000 or any larger multiple of
$100,000. On the effective date of any such reduction in the Total Patina
Revolving Commitment, Patina and SWAT shall, jointly and severally, to the
extent required as a result of such reduction, make a principal payment on the
Patina Revolving Loan in an amount sufficient to cause the Patina Outstanding
Credit to be equal to or less than the Total Patina Revolving Commitment as
thereby reduced. Notwithstanding the foregoing, Patina and SWAT shall not be
permitted to voluntarily reduce the Total Patina Revolving Commitment (a) if, as
a result of such reduction, Patina and SWAT would be required to prepay all or
any portion of the principal amount of any Eurodollar Tranche prior to the last
day of the Interest Period applicable thereto, or (b) to an amount less than the
aggregate Patina Letter of Credit Exposure of all Banks.
SECTION 2.12. Voluntary Reduction of Gerrity Commitments. (a) Gerrity may
by notice to Administrative Agent one (1) Domestic Business Day prior to the
effective date of any such reduction, permanently reduce the Total Gerrity
Commitment (and thereby permanently reduce the Gerrity Commitment of each Bank
ratably in accordance with such Bank's Commitment Percentage) in amounts not
less than $1,000,000 or any larger multiple of $100,000. On the effective date
of any such reduction, Gerrity shall, to the extent required as a result of such
reduction, make a principal payment on the Gerrity Loan in an amount sufficient
to cause the Gerrity Outstanding Credit to be equal to or less than the Total
Gerrity Commitment as thereby reduced. Notwithstanding the foregoing, Gerrity
shall not be permitted
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to voluntarily reduce the Total Gerrity Commitment (a) if, as a result of such
reduction, Gerrity would be required to prepay all or any portion of the
principal amount of any Eurodollar Tranche prior to the last day of the Interest
Period applicable thereto, or (b) to an amount less than the aggregate Gerrity
Letter of Credit Exposure of all Banks.
SECTION 2.13. Voluntary Prepayments of Patina Term Loan. Patina and SWAT
may, subject to Section 3.3 hereof, by notice to Administrative Agent not less
than one (1) Domestic Business Day prior to such prepayment, voluntarily prepay
the Patina Term Loan in whole or in part at any time without premium or penalty;
provided that any partial prepayment shall be in an amount not less than
$1,000,000 or a larger integral multiple of $100,000.
SECTION 2.14. Application of Payments. Each repayment pursuant to Sections
2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 4.4, 4.8 and 4.9 shall be made together with
accrued interest to the date of payment, and shall be applied to payment of the
Loans in accordance with Section 3.2 and the other provisions of this Agreement.
SECTION 2.15. Commitment Fees Applicable to Revolvers. On the Termination
Date and on the last day of each Fiscal Quarter until the Termination Date,
commencing on June 30, 1996, (a) Patina and SWAT shall, jointly and severally,
pay to Administrative Agent, for the ratable benefit of each Bank, a commitment
fee equal to the Commitment Fee Percentage (computed on the basis of actual days
elapsed and as if each calendar year consisted of 360 days) of the average daily
Patina Revolving Availability for the Fiscal Quarter (or portion thereof) ending
on such date, and (b) Gerrity shall pay to Administrative Agent, for the ratable
benefit of each Bank, a commitment fee equal to the Commitment Fee Percentage
(computed on the basis of actual days elapsed and as of each calendar year
consisted of 360 days) of the average daily Gerrity Availability for the Fiscal
Quarter (or portion thereof) ending on such date.
SECTION 2.16. Commitment Fee Applicable to Patina Term Commitments. On the
Patina Term Commitment Termination Date and on the last day of each Fiscal
Quarter prior thereto commencing June 30, 1996, Patina and SWAT shall jointly
and severally pay to Agent, for the ratable benefit of each Bank, a commitment
fee equal to the Commitment Fee Percentage (computed on the basis of actual days
elapsed and as if each calendar year consisted of 360 days) of the daily average
Patina Term Availability for the Fiscal Quarter (or portion thereof) ending on
such date.
SECTION 2.17. Additional Fees Due on Patina Term Commitment Termination
Date. In the event the Patina Term Loan is not repaid in full on or prior to the
Patina Term Commitment Termination Date, then on the Patina Term Commitment
Termination Date (a) Patina and SWAT shall, jointly and severally, pay to
Administrative Agent for the ratable benefit of each Bank, a fee in the amount
of (i) .375% of the Patina Revolving Commitments in effect on such day, and (ii)
.375% of the principal amount of the Patina Term Loan outstanding on such day,
and (b) Gerrity shall pay to Administrative Agent for the ratable benefit of all
Banks a fee in the amount of .375% of the Gerrity Borrowing Base in effect on
such day.
SECTION 2.18. Closing Fee. On the Closing Date, (a) Patina and SWAT shall
jointly and severally pay to Administrative Agent for the ratable benefit of
each Bank a closing fee in the amount of $236,250, and (b) Gerrity shall pay to
Administrative Agent for the ratable benefit of each Bank a closing fee in the
amount of $63,750.
SECTION 2.19. Patina Term Loan Funding Fee. On each day on which a
Borrowing is made under the Patina Term Loan, Patina and SWAT shall jointly and
severally pay to Administrative Agent for the ratable benefit of each Bank a
funding fee in an amount equal to .125% of the amount of such
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Borrowing.
SECTION 2.20. Agency and Other Fees. Each Borrower shall pay to each Agent
and its Affiliates such fees and other amounts as each Borrower shall be
required to pay to such Agent and its Affiliates from time to time pursuant to
any separate agreement between any Borrower and such Agent or any of its
Affiliates setting forth the compensation to be paid to such Agent and its
Affiliates in consideration for acting as Agent hereunder and for providing
other services in connection with the credit facilities provided pursuant
hereto. Such fees and other amounts shall be retained by the applicable Agent
and its Affiliates, and no Bank (other than the applicable Agents) shall have
any interest therein.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.1. Delivery and Endorsement of Notes. Simultaneously with the
execution of this Agreement, Administrative Agent shall deliver to each Bank the
Notes payable to such Bank. Each Bank may endorse (and prior to any transfer of
its Notes shall endorse) on the schedule attached to each of its Notes
appropriate notations to evidence the date and amount of each advance of funds
made by it in respect of any Borrowing, the Interest Period applicable thereto,
and the date and amount of each payment of principal received by such Bank with
respect to each Loan; provided that the failure by any Bank to so endorse its
Notes shall not affect the liability of any Borrower for the repayment of all
amounts outstanding under such Notes together with interest thereon. Each Bank
is hereby irrevocably authorized by each Borrower to endorse its Notes and to
attach to and make a part of any Note a continuation of any such schedule as
required.
SECTION 3.2. General Provisions as to Payments. (a) Each Borrower shall
make each payment of principal of, and interest on, the Loans payable by such
Borrower and all fees payable by such Borrower hereunder not later than 12:00
noon (Houston, Texas time) on the date when due, in Federal or other funds
immediately available in Houston, Texas, to Administrative Agent at its address
set forth on Schedule 1 hereto. Administrative Agent will promptly (and if such
payment is received by Administrative Agent by 10:00 a.m., and otherwise if
reasonably possible, on the same Domestic Business Day) distribute to each Bank
its Commitment Percentage of each such payment received by Administrative Agent
for the account of Banks. Whenever any payment of principal of, or interest on,
that portion of any Loan subject to an Adjusted Base Rate Tranche or of fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day (subject
to the definition of Interest Period). Whenever any payment of principal of, or
interest on, that portion of any Loan subject to a Eurodollar Tranche shall be
due on a day which is not a Eurodollar Business Day, the date for payment
thereof shall be extended to the next succeeding Eurodollar Business Day
(subject to the definition of Interest Period). If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time. Each Borrower hereby authorizes
Administrative Agent to charge from time to time against such Borrower's
accounts with Administrative Agent any amount then due by such Borrower.
(b) Prior to the occurrence of an Event of Default, all principal payments
received by Banks with respect to a Loan shall be applied first to Eurodollar
Tranches outstanding under such Loan with Interest Periods ending on the date of
such payment, then to the Adjusted Base Rate Tranches outstanding under such
Loan, and then to Eurodollar Tranches outstanding under such Loan next maturing
until such principal payment is fully applied.
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(c) After the occurrence of an Event of Default, all amounts collected or
received by Administrative Agent or any Bank from Patina and its Restricted
Subsidiaries or in respect of any of the Assets of Patina or any of its
Restricted Subsidiaries shall be applied first to the payment of all proper
costs incurred by Administrative Agent in connection with the collection thereof
(including reasonable expenses and disbursements of counsel to Administrative
Agent), second to the payment of all proper costs incurred by Banks in
connection with the collection thereof (including reasonable expenses and
disbursements of counsel to Banks), third to the reimbursement of any advances
made by Banks to effect performance of any unperformed covenants of the
Borrowers or any of their Restricted Subsidiaries under any of the Loan Papers,
fourth to the payment of any unpaid fees required pursuant to Section 2.20,
fifth to the payment of any unpaid fees required pursuant to Sections 2.2(b),
2.3(b), 2.15, 2.16, 2.17, 2.18 and 2.19, sixth, to each Bank for application to
its Commitment Percentage of the outstanding balance of the Loans then
outstanding (including accrued but unpaid interest thereon) in accordance with
their respective Commitment Percentages, and seventh to establish the deposits
required by Sections 2.2(b) and 2.3(b) if any. All payments received by a Bank
after the occurrence of an Event of Default for application to the principal of
any Loan pursuant to this Section 3.2(d) shall be applied by such Bank in the
manner provided in Section 3.2(b).
(d) After the occurrence of an Event of Default, all amounts collected or
received by Administrative Agent or any Bank of Gerrity or any of its Restricted
Subsidiaries or in respect of the assets of Gerrity or any of its Restricted
Subsidiaries shall be applied first to the payment of all proper costs incurred
by Administrative Agent in connection with the collection thereof (including
reasonable expenses and disbursements of Administrative Agent), second to the
payment of all proper costs incurred by Banks in connection with the collection
thereof (including reasonable expenses and disbursements of Banks), third to the
reimbursement of any advances made by Banks to effect performance of any
unperformed covenants of Gerrity or any of its Restricted Subsidiaries under any
of the Loan Papers, fourth to the payment of any unpaid fees with respect to
which Gerrity is liable pursuant to Section 2.20, fifth to the payment of any
unpaid fees required pursuant to Sections 2.3(b), 2.15(b), 2.17(b) and 2.18(b),
sixth, to each Bank for application to its Commitment Percentage of the balance
of the Gerrity Loan then outstanding (including accrued but unpaid interest
thereon), and seventh, to establish the deposits required by Section 2.3(b) if
any. All payments received by a Bank after the occurrence of an Event of Default
for application to the principal of the Gerrity Loan pursuant to this Section
2.3(e) shall be applied by such Bank in the manner provided in Section 3.2(b).
SECTION 3.3. Funding Losses. If any Borrower makes any payment of principal
subject to a Eurodollar Tranche (whether pursuant to Section 2.8, 2.9, 2.10,
2.11, 2.12, 2.13, 4.4, 4.8, 4.9, Article XI or XIII and whether as a voluntary
or mandatory prepayment or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or if any Borrower fails to borrow any
Eurodollar Borrowing, after notice has been given to any Bank in accordance with
Section 2.4, such Borrower shall reimburse each Bank on demand for any resulting
loss or expense incurred by it, including (without limitation) any loss incurred
in obtaining, liquidating or employing deposits from third parties, or any loss
arising from the reemployment of funds at rates lower than the cost to such Bank
of such funds and related costs, which in the case of the payment or prepayment
prior to the end of the Interest Period for any Eurodollar Tranche, shall
include the amount, if any, by which (a) the interest which such Bank would have
received, absent such payment or prepayment for the applicable Interest Period
exceeds (b) the interest which such Bank would receive if its Commitment
Percentage of the amount of such Eurodollar Borrowing, were deposited, loaned,
or placed by such Bank in the interbank eurodollar market on the date of such
payment or prepayment for the remainder of the applicable Interest Period. Such
Bank shall promptly deliver to such Borrower and Administrative Agent a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
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SECTION 3.4. Foreign Lenders, Participants, and Assignees. Each Bank,
Participant (by accepting a participation interest under this Agreement), and
Assignee (by executing an Assignment and Assumption Agreement) that is not
organized under the laws of the United States of America or one of its states
(a) represents to Administrative Agent and each Borrower that (i) no Taxes are
required to be withheld by Administrative Agent or any Borrower with respect to
any payments to be made to it in respect of the Obligations and (ii) it has
furnished to Administrative Agent and each Borrower two (2) duly completed
copies of either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8,
or other form acceptable to Administrative Agent that entitles it to exemption
from U.S. federal withholding Tax on all interest payments under the Loan
Papers, and (b) covenants to (i) provide Administrative Agent and each Borrower
a new Form 4224, Form 1001, Form W-8, or other form acceptable to Administrative
Agent upon the expiration or obsolescence of any previously delivered form
according to applicable laws and regulations, duly executed and completed by it,
and (ii) comply from time to time with all applicable laws and regulations with
regard to the withholding Tax exemption. If any of the foregoing is not true or
the applicable forms are not provided, then any Borrower and Administrative
Agent (but without duplication) may deduct and withhold from interest payments
under the Loan Papers any United States federal-income Tax at the maximum rate
under the Code.
ARTICLE IV
BORROWING BASE
SECTION 4.1. Reserve and Related Asset Report; Proposed Borrowing Base. As
soon as available and in any event by March 15 and September 15 of each year
commencing September 15, 1996, Borrowers shall deliver to each Bank a Patina
Reserve Report, Patina Related Asset Report, Gerrity Reserve Report and Gerrity
Related Asset Report prepared as of the immediately preceding December 31 and
June 30, respectively; provided, that Borrowers shall not be required to deliver
a Patina Related Asset Report or a Gerrity Related Asset Report unless Patina or
Gerrity intend to request Administrative Agent and Banks to take the value of
Patina Related Assets or Gerrity Related Assets into account for purposes of
establishing the Patina Borrowing Base or Gerrity Borrowing Base (as
applicable). On or before each April 10 and October 10 of each year, Patina and
SWAT shall notify each Bank of the Patina Borrowing Base Patina and SWAT request
for the period commencing on the next Determination Date, and Gerrity shall
notify each Bank of the Gerrity Borrowing Base and Gerrity Borrowing Base
Ceiling Gerrity requests for the period commencing on the next Determination
Date.
SECTION 4.2. Determination of Patina Borrowing Base. Based in part on the
Patina Reserve Reports and Patina Related Asset Reports delivered pursuant to
Section 4.1, Administrative Agent shall, not later than ten (10) days prior to
each Determination Date commencing with the Determination Date falling on
November 1, 1996, submit a proposed Patina Borrowing Base to become effective on
such Determination Date to Banks for their approval. In the event Required
Banks, or all Banks in the event of a proposed increase in the Patina Borrowing
Base, fail to promptly approve such proposed Patina Borrowing Base,
Administrative Agent shall propose one or more alternative Patina Borrowing
Bases to Banks and shall consult with Banks regarding the proposed Patina
Borrowing Base until such time as Required Banks, or all Banks in the event of a
proposed increase in the Patina Borrowing Base, approve a Patina Borrowing Base
proposed by Administrative Agent. Promptly upon the approval by Required Banks,
or all Banks in the event of a proposed increase in the Patina Borrowing Base,
of the Patina Borrowing Base to become effective on a Determination Date,
Administrative Agent shall provide written notice of the amount of such Patina
Borrowing Base to Patina and SWAT. In the event Administrative Agent and
Required Banks, or all Banks in the event of a proposed increase in the Patina
Borrowing Base, fail to approve a Patina Borrowing Base (and notify Patina and
SWAT of the amount thereof) on or prior
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to any applicable Determination Date, the Patina Borrowing Base in effect prior
to such Determination Date shall remain in effect thereafter until such time as
Administrative Agent and Required Banks, or all Banks in the event of a proposed
increase in the Patina Borrowing Base, approve such Patina Borrowing Base (which
shall become effective immediately upon notice to Patina and SWAT from
Administrative Agent setting forth the amount thereof). Any determination of a
proposed Patina Borrowing Base by Administrative Agent and any decision by Banks
regarding the approval or disapproval of any Patina Borrowing Base shall be made
by Administrative Agent and Banks in their sole discretion in accordance with
their respective standards for oil and gas loans, which may vary between
Administrative Agent and Banks and from Bank to Bank. Without limiting the right
of Administrative Agent to propose the amount of any Patina Borrowing Base or
the right of Banks to approve or disapprove such proposed Patina Borrowing Base
in their sole discretion, Patina and SWAT each acknowledge and agree that
subject to Administrative Agent's and Banks' consistent application of their
respective standards for similar loans, Administrative Agent and Banks (i) may
make such assumptions regarding appropriate existing and projected pricing for
hydrocarbons as they deem appropriate in their sole discretion, (ii) may make
such assumptions regarding projected rates and quantities of future production
of hydrocarbons from oil and gas properties and Patina Related Assets owned by
Patina and its Restricted Subsidiaries as they deem appropriate in their sole
discretion, (iii) may consider the projected cash requirements of Patina and its
Subsidiaries, including, without limitation, obligations under the Preferred
Stock and debt service and lease obligations of Patina and its Subsidiaries,
further including without limitation, the full amount Patina may be required to
pay in connection with any redemption or repurchase of the Subordinate Notes,
(iv) will not consider any asset other than oil and gas reserves and Patina
Related Assets, (v) will not consider any asset owned by an entity other than
Patina and its Restricted Subsidiaries, and (vi) may make such other
assumptions, considerations and exclusions as each Bank deems appropriate in the
exercise of its sole discretion.
SECTION 4.3. Special Determination of Patina Borrowing Base. In addition to
the redeterminations of the Patina Borrowing Base pursuant to Section 4.2,
Patina, Administrative Agent or Required Banks may each request Patina Special
Determinations of the Patina Borrowing Base from time to time; provided, that
Patina shall not request more than two (2) Patina Special Determinations in any
Fiscal Year. In the event Administrative Agent or Required Banks request such a
Patina Special Determination, Administrative Agent shall promptly deliver notice
of such request to Patina and Patina shall, within ten (10) days following the
date of such request, deliver to Banks a Patina Related Asset Report and a
Patina Reserve Report prepared as of the last day of the calendar month
preceding the date of such request. In the event Patina requests a Patina
Special Determination, Patina shall deliver written notice of such request to
Banks which shall include (i) a Patina Related Asset Report and a Patina Reserve
Report prepared as of a date not more than thirty (30) days prior to the date of
such request, and (ii) the amount of the Patina Borrowing Base requested by
Patina and to become effective on the Determination Date applicable to such
Patina Special Determination. Upon receipt of such Patina Reserve Report and
Patina Related Asset Report, Administrative Agent shall, subject to approval of
Required Banks, or all Banks in the event of a proposed increase in the Patina
Borrowing Base, redetermine the Patina Borrowing Base in accordance with the
procedure set forth in Section 4.2 which Borrowing Base shall become effective
on the Determination Date applicable to such Patina Special Determination (or as
soon thereafter as Administrative Agent and Required Banks, or all Banks in the
event of a proposed increase in the Patina Borrowing Base, approve such Patina
Borrowing Base and provide notice thereof to Patina).
SECTION 4.4. Patina Borrowing Base Deficiency. If a Patina Borrowing Base
Deficiency exists at any time, Patina and SWAT jointly and severally shall,
within ninety (90) days following the date such Patina Borrowing Base Deficiency
first occurs, at their option, either (a) make a prepayment of principal on the
Patina Revolving Loan in an amount sufficient to eliminate such Patina Borrowing
Base Deficiency, and if such Patina Borrowing Base Deficiency cannot be
eliminated by prepaying the Patina
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Revolving Loan in full (as a result of outstanding Patina Letter of Credit
Exposure), Patina and SWAT jointly and severally shall also deposit with
Administrative Agent sufficient funds to be held by Administrative Agent as
security for outstanding Patina Letter of Credit Exposure in the manner
contemplated by Section 2.2(b) as necessary to eliminate such Patina Borrowing
Base Deficiency, (b) submit additional oil and gas properties owned by Patina
and its Restricted Subsidiaries for consideration in connection with the
determination of the Patina Borrowing Base which Administrative Agent and
Required Banks deem sufficient in their sole discretion to eliminate such Patina
Borrowing Base Deficiency, or (c) take such other action as Administrative Agent
and Required Banks shall deem appropriate in their sole discretion to eliminate
such Patina Borrowing Base Deficiency.
SECTION 4.5. Initial Patina Borrowing Base. Notwithstanding anything
contained herein to the contrary, the Patina Borrowing Base in effect during the
period from the Closing Date until the date of the first Special or Periodic
Determination after the Closing Date shall be the Initial Patina Borrowing Base.
SECTION 4.6. Determination of Gerrity Borrowing Base and Gerrity Borrowing
Base Ceiling. Based in part on the Gerrity Reserve Reports and Gerrity Related
Asset Reports delivered pursuant to Section 4.1, Administrative Agent shall, not
later than ten (10) days prior to each Determination Date commencing with the
Determination Date falling on November 1, 1996, submit a proposed Gerrity
Borrowing Base and Gerrity Borrowing Base Ceiling to become effective on such
Determination Date to Banks for their approval. In the event Required Banks, or
all Banks in the event of a proposed increase in the Gerrity Borrowing Base or
Gerrity Borrowing Base Ceiling, fail to promptly approve such proposed Gerrity
Borrowing Base and Gerrity Borrowing Base Ceiling, Administrative Agent shall
propose one or more alternative Gerrity Borrowing Bases and Gerrity Borrowing
Base Ceilings to Banks and shall consult with Banks regarding the proposed
Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling until such time as
Required Banks, or all of Banks in the event of a proposed increase in the
Gerrity Borrowing Base or Gerrity Borrowing Base Ceiling, approve a Gerrity
Borrowing Base and Gerrity Borrowing Base Ceiling proposed by Administrative
Agent. Promptly upon the approval by Required Banks, or all Banks in the event
of a proposed increase in the Gerrity Borrowing Base or Gerrity Borrowing Base
Ceiling, of the Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling to
become effective on a Determination Date, Administrative Agent shall provide
written notice of the amount of such Gerrity Borrowing Base and Gerrity
Borrowing Base Ceiling to Gerrity. In the event Administrative Agent and
Required Banks, or all Banks in the event of a proposed increase in the Gerrity
Borrowing Base or Gerrity Borrowing Base Ceiling, fail to approve a Gerrity
Borrowing Base and Gerrity Borrowing Base Ceiling (and notify Gerrity of the
amount thereof) on or prior to any applicable Determination Date, the Gerrity
Borrowing Base or Gerrity Borrowing Base Ceiling (as applicable) in effect prior
to such Determination Date shall remain in effect thereafter until such time as
Administrative Agent and Required Banks, or all Banks in the event of a proposed
increase in the Gerrity Borrowing Base or Gerrity Borrowing Base Ceiling,
approve such Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling (which
shall become effective immediately upon notice to Gerrity from Administrative
Agent setting forth the amount thereof). Any determination of a proposed Gerrity
Borrowing Base or Gerrity Borrowing Base Ceiling by Administrative Agent and any
decision by Banks regarding the approval or disapproval of any Gerrity Borrowing
Base or Gerrity Borrowing Base Ceiling shall be made by Administrative Agent and
Banks in their sole discretion in accordance with their respective standards for
oil and gas loans, which may vary between Administrative Agent and Banks and
from Bank to Bank. Without limiting the right of Administrative Agent to propose
the amount of any Gerrity Borrowing Base or Gerrity Borrowing Base Ceiling or
the right of Banks to approve or disapprove such proposed Gerrity Borrowing Base
or Gerrity Borrowing Base Ceiling in their sole discretion, Gerrity acknowledges
and agrees that subject to Administrative Agent's and Banks' consistent
application of their respective standards for similar loans, Administrative
Agent and Banks (i) may make such assumptions regarding appropriate existing and
projected pricing for hydrocarbons as they
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deem appropriate in their sole discretion, (ii) may make such assumptions
regarding projected rates and quantities of future production of hydrocarbons
from oil and gas properties owned by Gerrity and Gerrity Related Assets as they
deem appropriate in their sole discretion, (iii) may consider the projected cash
requirements of Gerrity and its Subsidiaries including, without limitation,
obligations under the Subordinate Notes and other debt service and lease
obligations of Gerrity and its Subsidiaries, including, without limitation, the
full amount Gerrity may be required to pay in connection with any redemption of
the Subordinate Notes, (iv) will not consider any asset other than oil and gas
reserves owned by Gerrity and Gerrity Related Assets, (v) will not consider any
asset owned by an entity other than Gerrity, (vi) will not consider any oil and
gas reserves or Gerrity Related Assets which are not subject to a first and
prior Lien in favor of Administrative Agent for the ratable benefit of the Banks
to the extent required by Section 5.1, and (vii) may make such other
assumptions, considerations and exclusions as each Bank deems appropriate in the
exercise of its sole discretion.
SECTION 4.7. Special Determination of Gerrity Borrowing Base and Gerrity
Borrowing Base Ceiling. In addition to the redeterminations of the Gerrity
Borrowing Base and Gerrity Borrowing Base Ceiling pursuant to Section 4.6,
Gerrity, Administrative Agent or Required Banks may each request Gerrity Special
Determinations of the Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling
from time to time; provided, that Gerrity shall not request more than two (2)
Gerrity Special Determinations in any Fiscal Year. In the event Administrative
Agent or Required Banks request such a Gerrity Special Determination,
Administrative Agent shall promptly deliver notice of such request to Gerrity
and Gerrity shall, within ten (10) days following the date of such request,
deliver to Banks a Gerrity Related Asset Report and a Gerrity Reserve Report
prepared as of the last day of the calendar month preceding the date of such
request. In the event Gerrity requests a Gerrity Special Determination, Gerrity
shall deliver written notice of such request to Banks which shall include (i) a
Gerrity Related Asset Report and a Gerrity Reserve Report prepared as of a date
not more than thirty (30) days prior to the date of such request, and (ii) the
amount of the Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling
requested by Gerrity to become effective on the Determination Date applicable to
such Gerrity Special Determination. Upon receipt of such Gerrity Reserve Report
and Gerrity Related Asset Report, Administrative Agent shall, subject to
approval of Required Banks, or all Banks in the event of a proposed increase in
the Gerrity Borrowing Base, redetermine the Gerrity Borrowing Base and Gerrity
Borrowing Base Ceiling in accordance with the procedure set forth in Section 4.6
which Gerrity Borrowing Base and Gerrity Borrowing Base Ceiling shall become
effective on the Determination Date applicable to such Gerrity Special
Determination (or as soon thereafter as Administrative Agent and Required Banks,
or all Banks in the event of a proposed increase in the Gerrity Borrowing Base
and Gerrity Borrowing Base Ceiling, approve such Gerrity Borrowing Base and
Gerrity Borrowing Base Ceiling and provide notice thereof to Gerrity).
SECTION 4.8. Readjustment of Gerrity Borrowing Base. In addition to the
redeterminations of the Gerrity Borrowing Base pursuant to Sections 4.6 and 4.7
hereof, the Gerrity Borrowing Base shall automatically be adjusted upon the
delivery by Gerrity to Administrative Agent of a Gerrity Debt Restriction
Certificate certifying that, pursuant to Section 4.03(a) of the Indenture,
Gerrity is permitted to borrow under the Total Gerrity Commitment an amount in
excess of the Gerrity Borrowing Base then in effect (and certifying as to such
increased amount). Upon the delivery of such Gerrity Debt Restriction
Certificate certifying as to such increase, the Gerrity Borrowing Base shall be
automatically increased by an amount equal to the amount of the increase set
forth in such Gerrity Debt Restriction Certificate, but in no event to an amount
greater than the Gerrity Borrowing Base Ceiling then in effect. Upon any
increase in the Gerrity Borrowing Base pursuant to this Section 4.8, to the
extent such increase occurs prior to the termination of the Patina Term
Commitments and prior to payment in full of the Patina Term Loan, the
corresponding increase in the Gerrity Availability as a result thereof shall
become a part of the Gerrity Refinancing Reserve and shall be utilized by
Gerrity only for the purposes permitted in the
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definition of Gerrity Refinancing Reserve and Section 2.1 (so long as such
reserve is required to be maintained).
SECTION 4.9. Gerrity Borrowing Base Deficiency. If a Gerrity Borrowing Base
Deficiency exists at any time, Gerrity shall, within ninety (90) days following
the date such Gerrity Borrowing Base Deficiency first occurs, at its option,
either (a) make a prepayment of principal on the Gerrity Loan in an amount
sufficient to eliminate such Gerrity Borrowing Base Deficiency, and if such
Gerrity Borrowing Base Deficiency cannot be eliminated by prepaying the Gerrity
Loan in full (as a result of outstanding Gerrity Letter of Credit Exposure),
Gerrity shall also deposit with Administrative Agent sufficient funds to be held
by Administrative Agent as security for outstanding Gerrity Letter of Credit
Exposure in the manner contemplated by Section 2.3(b) as necessary to eliminate
such Gerrity Borrowing Base Deficiency, (b) submit additional oil and gas
properties owned by Gerrity and its Restricted Subsidiaries for consideration in
connection with the determination of the Gerrity Borrowing Base which
Administrative Agent and Required Banks deem sufficient in their sole discretion
to eliminate such Gerrity Borrowing Base Deficiency, or (c) take such other
action as Administrative Agent and Required Banks shall deem appropriate in
their sole discretion to eliminate such Gerrity Borrowing Base Deficiency.
SECTION 4.10. Initial Gerrity Borrowing Base. Notwithstanding anything
contained herein to the contrary, the Gerrity Borrowing Base in effect from and
after the Closing Date and continuing until the Gerrity Borrowing Base is
redetermined or readjusted pursuant to Sections 4.7 or 4.8 hereof shall be the
Initial Gerrity Borrowing Base.
SECTION 4.11. Certain Agreements Regarding November 1, 1996 Periodic
Determination. Subject to the right of Administrative Agent in its sole
discretion (with approval of Required Banks in their sole discretion) to
establish a higher or lower Patina Borrowing Base and a higher or lower Gerrity
Borrowing Base Ceiling at the time of the November 1, 1996 Periodic
Determination, it is anticipated that the Patina Borrowing Base and the Gerrity
Borrowing Base Ceiling established in connection with such Special Determination
will not exceed, on a combined basis, the remainder of (a) $215,000,000, minus
(b) a percentage of the principal balance of Subordinate Notes then outstanding
determined in accordance with the table set forth in the definition of "Gerrity
Borrowing Base Ceiling" herein contained.
ARTICLE V
COLLATERAL AND GUARANTEES
SECTION 5.1. Security. (a) The Obligations shall be secured by first and
prior Liens (subject only to Permitted Encumbrances) encumbering (i) one hundred
percent (100%) of the issued and outstanding capital stock of every class of
each Restricted Subsidiary of Patina, (ii) one hundred percent (100%) of the
issued and outstanding capital stock of Gerrity (excluding the shares of Gerrity
Preferred Stock outstanding after the Merger which are not exchanged for
Preferred Stock pursuant to the Exchange Offer contemplated by Section 7.26 of
the Merger Agreement), and (iii) the Intercompany Loan and the other
Intercompany Loan Documents. On or before the Closing Date Patina shall execute
and deliver to Administrative Agent the Patina Pledge Agreement, and Patina and
SWAT shall execute and deliver to Administrative Agent the Collateral Assignment
of Intercompany Loan.
(b) In the event the Patina Term Loan is not paid in full on or before the
Patina Term Commitment Termination Date, the Obligations shall be further
secured by first and prior Liens (subject only to Permitted Encumbrances)
encumbering proved oil and gas properties owned by Patina and its Restricted
Subsidiaries designated by Administrative Agent and Required Banks with a
Recognized Value
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at least equal to eighty percent (80%) of the aggregate Recognized Value of all
proved oil and gas properties owned by Patina and its Restricted Subsidiaries.
Not later than the fifth (5th) Domestic Business Day following the Patina Term
Commitment Termination Date and provided that the Patina Term Loan has not been
paid in full, Patina shall, and shall cause each of its Restricted Subsidiaries
to, execute and deliver to Administrative Agent for the ratable benefit of each
Bank, Mortgages in form and substance acceptable to Administrative Agent to
grant, evidence and perfect the Liens required by this Section 5.1(b).
(c) The Gerrity Obligations shall be secured by first and prior Liens
(subject only to Permitted Encumbrances) covering (i) all oil and gas properties
owned by Gerrity (other than certain oil and gas properties owned by Gerrity in
Uintah County and Duchesne County, Utah), including, without limitation, the
Gerrity Production Payment, as such term is defined in the Tax Credit
Transaction Agreement, (ii) all Gerrity Related Assets (to the extent Gerrity
has requested that the value of such Related Assets be taken into account by
Administrative Agent and Required Banks for purposes of establishing the Gerrity
Borrowing Base), and (iii) the issued and outstanding capital stock of every
class of each Restricted Subsidiary of Gerrity. On the Closing Date, Gerrity
shall deliver to Administrative Agent for the ratable benefit of each Bank the
Assignment and Amendment to Mortgages duly executed and delivered by Bank of
Montreal as the Agent under the Existing Gerrity Credit Agreement and such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-3 amendments and assignments (each duly authorized and
executed) as Administrative Agent shall deem necessary or appropriate to assign
and convey the Existing Gerrity Mortgages to Administrative Agent for the
benefit of each Bank and to confirm, evidence and perfect the Liens created by
the Existing Gerrity Mortgages in favor of Administrative Agent for the ratable
benefit of the Banks.
(d) On or before each Determination Date and at such other times as
Administrative Agent or Required Banks shall request, to the extent the Patina
Obligations are required to be secured at that time pursuant to Section 5.1(b)
Patina shall, and shall cause each of its Restricted Subsidiaries to, execute
and deliver to Administrative Agent for the ratable benefit of Banks, Mortgages
in form and substance acceptable to Administrative Agent to grant, evidence and
perfect the Liens required by Section 5.1(b) with respect to oil and gas
properties acquired by Patina and its Restricted Subsidiaries subsequent to the
last date on which Patina and its Restricted Subsidiaries were required to
execute and deliver Mortgages pursuant to this Section 5.1(d) or Section 5.1(b)
or which, for any other reason, were not the subject of valid, enforceable,
perfected first and prior Liens in favor of Administrative Agent for the ratable
benefit of Banks.
(e) On or before each Determination Date and at such other times as
Administrative Agent or Required Banks shall request, Gerrity shall execute and
deliver to Administrative Agent, for the ratable benefit of each Bank, Mortgages
in form and substance acceptable to Administrative Agent to grant, evidence and
perfect the Liens required by Section 5.1(c) preceding with respect to oil and
gas properties and Gerrity Related Assets acquired by Gerrity subsequent to the
last date on which Gerrity was required to execute and deliver Mortgages
pursuant to this Section 5.1(e) (or subsequent to the Closing Date in the case
of the first request pursuant to this Section 5.1(e)) or which, for any other
reason are not the subject of valid, enforceable, perfected first priority Liens
(subject only to Permitted Encumbrances) in favor of Administrative Agent for
the ratable benefit of Banks.
(f) At any time any Borrower or any of its Restricted Subsidiaries are
required to execute and deliver Mortgages to Administrative Agent pursuant to
this Section 5.1, such Borrower shall also deliver to Administrative Agent such
opinions of counsel (addressed to Administrative Agent) and other evidence of
title as Administrative Agent shall deem necessary or appropriate to verify (i)
such Borrower's or its Restricted Subsidiaries' title to the oil and gas
properties and Related Assets subject to such
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Mortgages, and (ii) the perfection and priority of the Liens created by such
Mortgages.
SECTION 5.2. Guarantees. Payment and performance of the Gerrity Obligations
shall be fully guaranteed by Patina and SWAT pursuant to two (2) separate Patina
Guarantees duly authorized and executed by Patina and SWAT.
ARTICLE VI
CONDITIONS TO BORROWINGS
SECTION 6.1. Conditions to Initial Extension of Credit. The obligation of
each Bank to loan its Commitment Percentage of the initial Borrowing made
hereunder, and the obligation of Administrative Agent to issue (or cause another
Bank to issue) the initial Letters of Credit issued hereunder is subject to the
satisfaction of each of the following conditions:
(a) Closing Deliveries. Administrative Agent shall have received each of
the following documents, instruments and agreements, each of which shall be in
form and substance and executed in such counterparts as shall be acceptable to
Administrative Agent and Required Banks and each of which shall, unless
otherwise indicated, be dated the Closing Date:
(i) a Patina Term Note, a Patina Revolving Note and a
Gerrity Note payable to the order of each Bank in the amount
of such Bank's Commitment, duly executed by each applicable
Borrower;
(ii) the Intercompany Loan Agreement, duly executed by
Gerrity, Patina and SWAT;
(iii) the Collateral Assignment of Intercompany Loan
duly executed and delivered by Patina and SWAT;
(iv) the Promissory Note evidencing the Intercompany
Loan duly executed by Gerrity and duly endorsed by Patina
and SWAT to Administrative Agent for the ratable benefit of
Banks;
(v) the Patina Guarantees duly executed by Patina and
SWAT, respectively;
(vi) [intentionally deleted];
(vii) the Patina Pledge Agreement duly executed by
Patina together with (A) certificates evidencing (1) one
hundred percent of the issued and outstanding capital stock
of SWAT of every class, and (2) the issued and outstanding
capital stock of Gerrity of every class (other than the
shares of Gerrity Preferred Stock which either (a) are
delivered to Society National Bank as Exchange Agent
pursuant to the Exchange Agent Agreement pursuant to the
Exchange Offer made pursuant to Section 7.26 of the Merger
Agreement, or (b) are not exchanged pursuant to such
Exchange Offer) (all certificates delivered pursuant to this
Section 6.1(a)(vii) shall be duly endorsed or accompanied by
duly executed blank stock powers), and (B) shall be
accompanied by such financing statements executed by Patina
as Administrative Agent shall request to perfect the Liens
granted pursuant to such Patina Pledge Agreement;
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(viii) a Federal Reserve Form U-1 Purpose Statement
duly executed by Patina;
(ix) the Gerrity Pledge Agreement duly executed by
Gerrity together with (A) the certificate(s) evidencing one
hundred percent of the issued and outstanding capital stock
of each Restricted Subsidiary of Gerrity of every class (all
certificates delivered pursuant to this Section 6.1(a)(ix)
shall be duly endorsed or accompanied by duly executed blank
stock powers), and (B) shall be accompanied by such
financing statements executed by Gerrity as Administrative
Agent shall request to evidence and perfect the Liens
granted pursuant to such Gerrity Pledge Agreement;
(x) the Assignment of and Amendment to Mortgages duly
executed and delivered by Gerrity, Bank of Montreal as agent
for the banks parties to the Existing Gerrity Credit
Agreement together with such other assignments, conveyances,
amendments, agreements and other writings, including,
without limitation, UCC-3 amendments and assignments, in
form and substance satisfactory to Administrative Agent, to
properly assign and convey to Administrative Agent the
Existing Gerrity Mortgages securing the Existing Gerrity
Credit Agreement;
(xi) a Certificate of Ownership Interests substantially
in the form of Exhibit J-1, duly executed and delivered by
an Authorized Officer of Patina;
(xii) a Certificate of Ownership Interests
substantially in the form of Exhibit J-2, duly executed and
delivered by an authorized officer of Gerrity;
(xiii) an opinion of Vinson & Elkins L.L.P., special
counsel for Patina and SWAT, favorably opining as to the
enforceability of each of the Loan Papers executed and
delivered by the Borrowers and to such other matters as
Administrative Agent or Required Banks may request;
(xiv) an opinion of Keith Crouch, Vice President and
Corporate Counsel for Gerrity, and an opinion of Peter E.
Lorenzen, Vice President, General Counsel and Secretary of
SOCO, each favorably opining as to such matters as
Administrative Agent or Required Banks may request;
(xv) opinion of Pendleton Friedberg Wilson Hennessey &
Meyer, P.C., special counsel to Gerrity, opining as to (i)
the validity and enforceability of the Assignment and
Amendment to Mortgages under the laws of such jurisdiction,
(ii) the validity, enforceability and perfection of the
Liens granted pursuant to each such Mortgage, and (iii) to
such other matters as Administrative Agent or Required Banks
may request;
(xvi) an opinion of Gardere & Wynne, L.L.P., special
counsel to Administrative Agent, in form and substance
satisfactory to Administrative Agent;
(xvii) Certificates executed by Authorized Officers of
each Borrower stating that (A) the representations and
warranties of each Borrower contained in this Agreement and
the other Loan Papers are true and correct in all respects,
(B) no Default or Event of Default has occurred which is
continuing, and (C) all conditions set forth in this Section
6.1 and Section 6.2 have been satisfied;
(xviii) such resolutions, certificates and other
documents relating to the existence of the
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Companies, the corporate authority for the execution,
delivery and performance of this Agreement, the Notes, the
other Loan Papers, the Closing Documents, and certain other
matters relevant hereto, in form and substance satisfactory
to Administrative Agent, which resolutions, certificates and
documents include resolutions of the directors of each of
the Companies authorizing the execution, delivery and
performance of the Loan Papers and certificates of
incumbency for each Company;
(xix) a Certificate executed by an Authorized Officer
of Patina and Gerrity, respectively, confirming that subject
only to the disbursement of the proceeds of the initial
Borrowing, the Closing Transactions have been consummated;
(xx) a copy of each Closing Document, together with a
certificate executed by an Authorized Officer of Patina and
Gerrity, respectively, certifying that such copies are
accurate and complete and represent the complete
understanding and agreement of the parties with respect to
the subject matter thereof;
(xxi) a report or reports in form, scope and detail
acceptable to Administrative Agent from environmental
engineering firms acceptable to Administrative Agent setting
forth the results of Phase I environmental review of the
Companies' properties and an environmental compliance audit
of the Companies' operations, which reports shall not
reflect the existence of facts or circumstances which would
constitute a material violation of any Applicable
Environmental Law or which is likely to result in a material
liability to any Company;
(xxii) Certificates from the Borrowers' insurance
broker setting forth the insurance maintained by the
Borrowers' and their Subsidiaries, stating that such
insurance is in full force and effect, that all premiums due
have been paid and stating that such insurance is adequate
and complies with the requirements of Section 8.6; and
(xxiii) a copy of a notice from Gerrity to the
Indenture Trustee delivered pursuant to the definition of
"Bank Credit Agreement" contained in the Indenture
specifying that this Agreement is the "Bank Credit
Agreement" as defined in the Indenture, together with
evidence that such notice has been delivered to the
Indenture Trustee.
(b) Closing Transactions. Subject only to disbursement and application of
the initial Borrowing, the Closing Transactions shall have occurred (or
Administrative Agent shall be satisfied that such transactions will occur
simultaneously therewith). Without limiting the foregoing, each of the following
shall have occurred (or Administrative Agent shall be satisfied that each of the
following shall occur simultaneously therewith):
(i) SOCO shall have contributed SOCO Wattenberg to
Patina;
(ii) Patina shall have assumed and paid in full
$75,000,000 of Debt of SOCO assumed by Patina pursuant to
the Merger Agreement;
(iii) the Existing Gerrity Credit Agreement shall have
been terminated, all obligations thereunder shall have been
refinanced with the proceeds of the initial Borrowing made
under the Gerrity Loan and all Liens securing payment and
performance of such obligations shall have been assigned to
Administrative Agent pursuant to the Assignment of and
Amendment to Mortgages; and
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(iv) the Merger shall have been completed pursuant to
the terms of the Merger Agreement, and pursuant thereto (A)
the certificate of merger contemplated by Section 1.2 of the
Merger Agreement shall have been duly filed with the
Secretary of State of Delaware, and (B) one hundred percent
(100%) of the issued and outstanding capital stock of
Gerrity of every class shall be owned beneficially and of
record by Patina other than shares of Gerrity Preferred
Stock which are not exchanged for Preferred Stock pursuant
to Section 7.26 of the Merger Agreement.
(c) Title Review. Administrative Agent or its counsel shall have completed
a review of title to the oil and gas properties owned by each Borrower and their
Restricted Subsidiaries as Administrative Agent or Required Banks shall require,
and such review shall not have revealed any condition or circumstance which
would reflect that the representations and warranties contained in Section 7.9
hereof are inaccurate in any respect.
(d) No Material Adverse Change. In the sole discretion of each Bank, no
material adverse change shall have occurred in the assets, liabilities,
financial condition or prospects of any of the Companies.
(e) No Legal Prohibition. The transactions contemplated by this Agreement
and the other Closing Transactions shall be permitted by applicable law and
regulation and shall not subject Agents, any Bank, SOCO Wattenberg, Borrowers or
any of their respective Subsidiaries to any material adverse change in their
assets, liabilities, financial condition or prospects.
(f) No Litigation. Except as disclosed in the Registration Statement, no
litigation, arbitration or similar proceeding shall be pending which calls into
question the validity or enforceability of this Agreement, the other Loan
Papers, the Closing Documents or the Closing Transactions.
(g) Other Matters. All matters related to this Agreement, the other Loan
Papers, the Closing Documents, SOCO Wattenberg, Borrowers and their respective
Subsidiaries and the Closing Transactions shall be acceptable to Administrative
Agent and each Bank in their sole discretion, and Borrowers shall have delivered
to Administrative Agent and each Bank such evidence as they shall request to
substantiate any matters related to this Agreement, the other Loan Papers, the
Closing Documents, SOCO Wattenberg, Borrowers their respective Subsidiaries and
the Closing Transactions as Administrative Agent or any Bank shall request.
(h) Closing Fees. Borrowers shall have paid to Administrative Agent for the
ratable benefit of each Bank the fees to be paid on the Closing Date pursuant to
Section 2.18 and to each Agent any fees payable to such Agent pursuant to
Section 2.20.
SECTION 6.2. Conditions to each Borrowing and each Letter of Credit. The
obligation of each Bank to loan its Commitment Percentage of each Borrowing and
the obligation of any Patina Letter of Credit Issuer or Gerrity Letter of Credit
Issuer to issue Letters of Credit on the date any Letter of Credit is to be
issued is subject to the further satisfaction of the following conditions:
(a) timely receipt by Administrative Agent of a Request for Borrowings
or Request for Letter(s) of Credit;
(b) immediately before and after giving effect to such Borrowing or
issuance of such Letter(s) of Credit, no Default or Event of Default shall
have occurred and be continuing and neither such Borrowing nor the issuance
of such Letter(s) of Credit shall cause a Default or Event of Default;
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(c) the representations and warranties of each Borrower contained in
this Agreement shall be true and correct on and as of the date of such
Borrowing or the issuance of such Letter of Credit;
(d) the funding of such Borrowing or the issuance of such Letter(s) of
Credit and all other Borrowings to be made and/or Letter(s) of Credit to be
issued on the same day under this Agreement, shall not cause a Patina
Borrowing Base Deficiency or a Gerrity Borrowing Base Deficiency;
(e) following the issuance of any Patina Letter of Credit, the
aggregate Patina Letter of Credit Exposure shall not exceed $10,000,000;
(f) following the issuance of any Gerrity Letter of Credit, the
aggregate Patina Letter of Credit Exposure shall not exceed $10,000,000;
and
(g) to the extent such Borrowing is to be made under the Patina Term
Commitments, Administrative Agent shall have received the funding fee
related to such Borrowing required by Section 2.9 hereof.
Each Borrowing and the issuance of each Letter of Credit hereunder
shall constitute a representation and warranty by each Borrower that on the
date of such Borrowing or issuance of such Letter of Credit the statements
contained in subclauses (b), (c), (d), (e) and (f) above are true.
SECTION 6.3. Additional Conditions to the initial Borrowing under the
Patina Term Commitments. The obligation of each Bank to loan its Commitment
Percentage of the initial Borrowing under the Total Patina Term Commitment is
subject to the further condition that Administrative Agent shall have received
(a) the Fairness Opinion, and (b) the Intercompany Loan Effectiveness
Certificate.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Each Borrower jointly and severally represents and warrants that each of
the following statements is true and correct on the date hereof, will be true
and correct on the Closing Date (before and immediately after giving effect to
the Closing Transactions) and will be true and correct on the occasion of each
Borrowing and the issuance of each Letter of Credit:
SECTION 7.1. Corporate Existence and Power. Each Borrower (a) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, (b) has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its businesses as now conducted and as proposed to be conducted, and (c) is
duly qualified to transact business as foreign corporation in each jurisdiction
where a failure to be so qualified could have a material adverse effect on its
financial condition or operations.
SECTION 7.2. Existence and Power (Other Companies). Each Company other than
each Borrower (a) is a corporation, limited liability company or partnership
duly incorporated or organized (as applicable), validly existing and in good
standing under the laws of its state of incorporation or organization (as
applicable), (b) has all corporate, limited liability company or partnership
power (as applicable) and all material governmental licenses, authorizations,
consents and approvals required to carry on its businesses as now conducted and
as proposed to be conducted, and (c) is duly qualified to transact business as
foreign corporations, foreign limited liability companies or foreign
partnerships (as applicable)
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in each jurisdiction where a failure to be so qualified could have a material
adverse effect on their respective financial condition or operations.
SECTION 7.3. Corporate, Limited Liability Company,Partnership and
Governmental Authorization; Contravention. The execution, delivery and
performance of this Agreement, the Notes and the other Loan Papers by each
Company purporting to execute the same are within such Company's corporate,
limited liability company or partnership powers (as applicable), when executed
will be duly authorized by all necessary corporate, limited liability company or
partnership action (as applicable), require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulations
(including, without limitation, the Margin Regulations) or of the partnership
agreement, articles of incorporation, certificate of incorporation, bylaws,
regulations or other organizational documents (as applicable) of such Companies
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon such Company or result in the creation or imposition of any Lien on
any asset of any such Company except Liens securing the Notes.
SECTION 7.4. Binding Effect. This Agreement constitutes a valid and binding
agreement of each Borrower; the Notes and the other Loan Papers when executed
and delivered in accordance with this Agreement, will the constitute valid and
binding obligations of each Company executing the same; and each Loan Paper is
enforceable against each Company executing the same in accordance with its terms
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors rights generally, and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 7.5. Financial Information. (a) The Gerrity Historical Financial
Statements fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of Gerrity as of the dates set
forth therein and its consolidated results of operations and cash flows for the
periods covered thereby.
(b) The Patina Historical Financial Statements fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of Patina (after giving effect to the contribution of SOCO
Wattenberg to Patina but prior to giving effect to the Merger) as of the dates
set forth therein and its consolidated results of operations and cash flows
(after giving effect to the contribution of SOCO Wattenberg to Patina but prior
to giving effect to the Merger) for the periods covered thereby.
(c) The Patina Pro Forma Financial Statements comprise a combination of the
Gerrity Historical Financial Statements and the Patina Historical Financial
Statements for corresponding periods and as of corresponding dates with
retroactive adjustments to give effect to the Merger and the other Closing
Transactions as of such dates.
(d) The Pro Forma Segregated Balance Sheets comprise (i) Patina's
consolidated balance sheet as of December 31, 1995 excluding Gerrity and its
Subsidiaries and otherwise adjusted to give effect to the Merger and the other
Closing Transactions as of such date, and (ii) Gerrity's audited consolidated
balance sheet as of December 31, 1995 adjusted to give effect to the Merger and
the other Closing Transactions as of such date.
(e) The Projection was prepared by management of Patina and Gerrity in good
faith based on the assumptions set forth therein which management of Patina and
Gerrity considered reasonable at the time such Projection was prepared and which
management of Patina considers to be reasonable on
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the date hereof.
(f) Prior to giving effect to the Closing Transactions, Patina and Merger
Sub (i) have no material assets, liabilities, obligations or commitments (fixed,
contingent, contractual or otherwise) other than rights, liabilities and
obligations arising under the Closing Documents and this Agreement, and (ii)
have not and do not engage in any operations or activities other than those
directly related to the consummation of the Closing Transactions.
(g) There has been no material adverse change in the business, financial
position, results of operations or prospects of any Company since (i) December
31, 1995 to the extent this representation and warranty is made or deemed to be
made as of any date prior to the receipt by Banks of the financial statements
for each Borrower and its Subsidiaries required to be delivered by each Borrower
to Banks pursuant to Sections 8.1(a), (b), (c), (d), (e) and (f) hereof,
prepared as of the end of the first complete Fiscal Quarter following the
Closing Date, or (ii) since the date of the most recent financial statements
delivered to Banks pursuant to Sections 8.1(a), (b), (c), (d), (e) and (f)
hereof to the extent this representation and warranty is made or deemed made as
of any date after receipt by Banks of the financial statements prepared as of
the end of the first complete Fiscal Quarter following the Closing Date required
to be delivered by each Borrower to Banks pursuant to Sections 8.1(a), (b), (c),
(d), (e) and (f) hereof.
SECTION 7.6. Litigation. Except for matters disclosed in the Registration
Statement or arising after the date of this Agreement which are promptly
disclosed in writing to Banks, there is no action, suit or proceeding pending
against, or to the knowledge of any Borrower, threatened against or affecting
any Company before any court or arbitrator, any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, consolidated financial position
or consolidated results of operations of any Company or which could in any
manner draw into question the validity of the Loan Papers.
SECTION 7.7. ERISA.No Company is a party to or bound by, or at any time
prior to the date hereof, has been a party to, or bound by, any Plan.
SECTION 7.8. Taxes and Filing of Tax Returns. Except as disclosed on
Schedule 8, each Company and its predecessors have filed all material tax
returns required to have been filed and has paid all Taxes shown to be due and
payable on such returns, including interest and penalties, and all other Taxes
which are payable by such party, to the extent the same have become due and
payable other than Taxes with respect to which a failure to pay would not have a
material adverse effect on any Company. Except as disclosed on Schedule 8,
Borrowers do not know of any proposed material Tax assessment against any
Company, and all Tax liabilities of each Company and its predecessors are
adequately provided for. Except as disclosed on Schedule 8 and except as
hereinafter disclosed in writing to Banks, no income tax liability of any
Company or any of their respective predecessors or Subsidiaries has been
asserted by the Internal Revenue Service for Taxes in excess of those already
paid.
SECTION 7.9. Title to Properties; Liens. After giving effect to the Closing
Transactions, each Borrower and each of its Subsidiaries has good and valid
title to all material assets purported to be owned by it subject only to
Permitted Encumbrances. Without limiting the foregoing, after giving effect to
the Closing Transactions, (a) each Borrower and its Restricted Subsidiaries have
good and valid title to all oil and gas properties and all Related Assets owned
by each such Borrower and its Restricted Subsidiaries which are included in the
most recent Reserve Reports and Related Asset Reports provided to Banks (except
for oil and gas properties disposed of in compliance with Section 9.5 to the
extent this representation and warranty is made or deemed made after the Closing
Date) and except for Permitted
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Encumbrances, and (b) the Companies have good and valid title to all material
assets reflected in the Financial Statements and any subsequent financial
statements delivered to Banks pursuant to Sections 8.1(a), (b), (c), (d) (e) or
(f) hereof.
SECTION 7.10. Business; Compliance. Each Company has performed and abided
by all obligations required to be performed under each license, permit, order,
authorization, grant, contract, agreement, or regulation to which any Company is
a party or by which any Company or any of the assets of any Company are bound to
the extent a failure to perform and abide by such obligations could have a
material adverse effect on the assets, liabilities, financial condition,
operations or prospects of such Company individually or the Companies taken as a
whole; provided that to the extent oil and gas properties owned by any Company
are operated by operators other than a Company or an Affiliate of a Company,
none of the Borrowers have knowledge that any such obligation remains
unperformed and the appropriate Person has diligently enforced all contractual
obligations of such operators to insure performance.
SECTION 7.11. Licenses, Permits, Etc. Each Company possesses such valid
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders of tribunals,
as are necessary to carry on its business as now being conducted except to the
extent a failure to obtain any such item would not have a material adverse
effect on such Company individually or on the Companies taken as a whole;
provided that to the extent oil and gas properties owned by any Company are
operated by operators other than a Company or an Affiliate of a Company, none of
the Borrowers have knowledge that possession of such items has not been
obtained, and the appropriate Person has diligently enforced all contractual
obligations of such operators to obtain such items.
SECTION 7.12. Compliance with Law. The business and operations of each
Company have been and are being conducted in accordance with all applicable
laws, rules and regulations of all tribunals, other than laws, rules and
regulations the violation of which could not (either individually or
collectively) have a material adverse effect on any Company's individual
financial condition or operations or on the financial condition or operations of
the Companies taken as a whole (both before and after giving effect to the
Closing Transactions); provided that to the extent oil and gas properties owned
by any Company are operated by operators other than a Company or an Affiliate of
a Company, none of the Borrowers have knowledge of non-compliance and the
appropriate Person has diligently enforced all contractual obligations of such
operators to insure compliance.
SECTION 7.13. Ownership Interests. The Reserve Reports and Related Asset
Reports most recently provided to Banks accurately reflect, and all Reserve
Reports and Related Asset Reports hereafter delivered pursuant to this Agreement
will reflect, in all material respects, the ownership interests in the oil and
gas properties and Related Assets referred to therein (including all before and
after payout calculations).
SECTION 7.14. Full Disclosure. All information heretofore furnished by any
Company (or any other party on any Company's behalf) to any Agent or any Bank
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by any
Company or on behalf of any Company to any Agent or any Bank will be, true,
complete and accurate in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. Borrowers have
disclosed to Banks in writing any and all facts (other than facts of general
public knowledge) which might reasonably be expected to materially and adversely
affect or might affect (to the extent any of the Borrowers can now reasonably
foresee), the business, operations, prospects or condition, financial or
otherwise, of any Company or the ability of any Borrower
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or any Company to perform its obligations under this Agreement and the other
Loan Papers.
SECTION 7.15.Subsidiaries. Schedule 9 hereto accurately reflects, before
and after giving effect to the Closing Transactions (i) the name and
jurisdiction of incorporation of each Subsidiary of each Borrower, (ii) each
jurisdiction in which each Subsidiary of each Borrower is qualified to transact
business as a foreign corporation, partnership or limited liability company,
(iii) the authorized, issued and outstanding capital stock of each such
Subsidiary, including, the record (and to each Borrower's knowledge, beneficial)
owner of such capital stock, and (iv) all outstanding warrants, options,
subscription rights, convertible securities or other rights to purchase capital
stock of each Subsidiary of each Borrower.
SECTION 7.16. Obligations of Unrestricted Subsidiaries. Except for
Obligations arising under the Loan Papers and except as set forth on Schedule 10
hereto, no Borrower nor any of its Restricted Subsidiaries has any obligation of
any nature to any Unrestricted Subsidiary of such Borrower.
SECTION 7.17. Environmental Matters. No real or personal property owned or
leased by any Company (including without limitation, oil and gas properties and
Related Assets) and no operations conducted thereon, and to each Borrower's
knowledge, no operations of any prior owner, lessee or operator of any such
properties, is or has been in violation of any Applicable Environmental Law
other than violations which individually and in the aggregate will not have a
material adverse effect on any Company individually or the Companies taken as a
whole, nor is any such property or operation the subject of any existing,
pending or, to each Borrower's knowledge, threatened action, suit,
investigation, inquiry or preceding with respect to Applicable Environmental
Laws which could, individually or in the aggregate, have a material adverse
effect on any Borrower and its Subsidiaries taken as a whole (both before and
after giving effect to the Closing Transactions). All notices, permits,
licenses, and similar authorizations, if any, required to be obtained or filed
in connection with the ownership or operation of any and all real and personal
property owned, leased or operated by any of the Companies, including, without
limitation, notices, licenses, permits and authorizations required in connection
with any past or present treatment, storage, disposal, or release of hazardous
substances, petroleums, or solid waste into the environment, have been duly
obtained or filed except to the extent the failure to obtain or file such
notices, licenses, permits and authorizations would not have a material adverse
effect on any Company individually or the Companies taken as a whole (both
before and after giving effect to the Closing Transactions). To each Borrower's
knowledge, all hazardous substances, if any, generated at any and all real and
personal property owned, leased or operated by the Companies have been
transported, treated, and disposed of only by carriers maintaining valid permits
under RCRA and any other Applicable Environmental Laws. Except as expressly
described in the Registration Statement, there has been no release or threatened
release of any quantity of any hazardous substances or petroleum on, to or from
any real or personal property owned, leased, or operated by the Companies which
was not in compliance with Applicable Environmental Laws other than releases
which would not, individually or in the aggregate, have a material adverse
effect on any Company individually or the Companies taken as a whole (both
before and after giving effect to the Closing Transactions). Except as expressly
described in the Registration Statement, no Company has any contingent liability
in connection with any release or threatened release of any hazardous substance,
petroleum, or solid waste into the environment which could have a material
adverse effect on any Company individually or the Companies taken as a whole.
SECTION 7.18. Closing Documents. Borrowers have provided Agent with a true
and correct copy of each Closing Document. No rights or obligations of any party
to any of the Closing Documents have been waived in any material respect, and no
party to any of the Closing Documents is in default of its obligations
thereunder. Each of the Closing Documents is a valid, binding and enforceable
obligation of the parties thereto in accordance with its terms and is in full
force and effect.
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SECTION 7.19. Burdensome Obligations. Except as disclosed in writing to
Banks prior to the date hereof, neither any Company nor the properties of any
Company is subject to any law or regulation or subject to any restriction under
the certificate or articles of incorporation, partnership agreement, regulations
or other organizational documents of any Company or under any agreement or
instrument to which any Company is a party or by which any of their respective
properties may be subject or bound, which is so unusual or burdensome as to be
likely in the foreseeable future to have a material adverse effect on the
assets, liabilities, financial condition, operations or prospects of any Company
individually or the Companies taken as a whole.
SECTION 7.20. Government Regulations. No Company is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940 (as any of the
preceding acts have been amended) or any other law or regulation which regulates
the incurring by it of Debt, including, but not limited to, laws relating to
common carriers or the sale of electricity, gas, steam, water or other public
utility services.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Each Borrower agrees that, so long as any Bank has any commitment to lend
or participate in Letter of Credit Exposure hereunder or any amount payable
under any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 8.1. Information. Borrowers will deliver, or cause to be delivered,
to each of the Banks:
(a) as soon as available and in any event within ninety (90) days after the
end of each Fiscal Year of Patina, consolidated and consolidating balance sheets
of Patina as of the end of such Fiscal Year and the related consolidated and
consolidating statements of income and cash flow for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous Fiscal Year,
all reported by Patina in accordance with generally accepted accounting
principles and audited by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing acceptable to Administrative
Agent;
(b) as soon as available and in any event within forty-five (45) days after
the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of
Patina, consolidated and consolidating balance sheets of Patina as of the end of
such quarter and the related consolidated and consolidating statements of income
and cash flow for such quarter and for the portion of Patina's Fiscal Year ended
at the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of Patina's
previous Fiscal Year; provided, however, that such balance sheets and statements
of income and cash flow for the Fiscal Quarter ending March 31, 1996, will be
delivered to each of the Banks by May 31, 1996. All financial statements
delivered pursuant to this Section 8.1(b) shall be certified as to fairness of
presentation, generally accepted accounting principles and consistency by the
chief financial officer or the chief accounting officer of Patina;
(c) as soon as available and in any event within ninety (90) days after the
end of each Fiscal Year of Patina, consolidated and consolidating balance sheets
of Patina (excluding Gerrity and its Subsidiaries) as of the end of such Fiscal
Year and the related consolidated and consolidating statements of income and
cash flow for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous Fiscal Year, all reported by Patina in accordance
with generally accepted accounting
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principles and audited by Arthur Andersen LLP or other independent public
accountants of nationally recognized standing acceptable to Administrative
Agent;
(d) as soon as available and in any event within forty-five (45) days after
the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of
Patina, consolidated and consolidating balance sheets of Patina (excluding
Gerrity and its Subsidiaries) as of the end of such quarter and the related
consolidated and consolidating statements of income and cash flow for such
quarter and for the portion of Patina's Fiscal Year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of Patina's previous Fiscal
Year; provided, however, that such balance sheets and statements of income and
cash flow for the Fiscal Quarter ending March 31, 1996, will be delivered to
each of the Banks by May 31, 1996. All financial statements delivered pursuant
to this Section 8.1(d) shall be certified as to fairness of presentation,
generally accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of Patina;
(e) as soon as available and in any event within ninety (90) days after the
end of each Fiscal Year of Gerrity, consolidated and consolidating balance
sheets of Gerrity as of the end of such Fiscal Year and the related consolidated
and consolidating statements of income and cash flow for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year, all reported by Gerrity in accordance with generally accepted
accounting principles and audited by Arthur Andersen LLP or other independent
public accountants of nationally recognized standing acceptable to
Administrative Agent;
(f) as soon as available and in any event within forty-five (45) days after
the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of
Gerrity, consolidated and consolidating balance sheets of Gerrity as of the end
of such quarter and the related consolidated and consolidating statements of
income and cash flow for such quarter and for the portion of Gerrity's Fiscal
Year ended at the end of such quarter, setting forth in each case in comparative
form the figures for the corresponding quarter and the corresponding portion of
Gerrity's previous Fiscal Year; provided, however, that such balance sheets and
statements of income and cash flow for the Fiscal Quarter ending March 31, 1996,
will be delivered to each of the Banks by May 31, 1996. All financial statements
delivered pursuant to this Section 8.1(f) shall be certified as to fairness of
presentation, generally accepted accounting principles and consistency by the
chief financial officer of the chief accounting officer of Gerrity;
(g) simultaneously with the delivery of each set of financial statements
referred to in Sections 8.1(e) and (f) (and more frequently if Gerrity shall so
elect, but in no event more frequently than once per calendar month), a Gerrity
Debt Restriction Certificate;
(h) simultaneously with the delivery of each set of financial statements
referred to in Sections 8.1(a), (b), (c), (d), (e) and (f), a certificate of an
Authorized Officer of Patina, (i) setting forth in reasonable detail the
calculations required to establish whether the Borrowers were in compliance with
the requirements of Article X on the date of such financial statements, (ii)
stating whether there exists on the date of such certificate any Default and, if
any Default then exists, setting forth the details thereof and the action which
the Borrowers are taking or propose to take with respect thereto and (iii)
stating whether or not such financial statements fairly reflect the business and
financial condition of the Borrowers as of the date of the delivery of such
financial statements;
(i) no later than March 15, and September 15 of each year, reports of
production volumes, revenue, expenses and product prices for all oil and gas
properties owned by the Borrowers and their Restricted Subsidiaries with a
Recognized Value of $100,000 or more (determined on a pretax bases
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in accordance with Financial Accounting Standards Board Statement 69)
(segregated between Gerrity and its Restricted Subsidiaries on the one hand and
Patina and its Restricted Subsidiaries on the other hand) for the periods of six
(6) months ending the preceding December 31, and June 30, respectively. Such
reports shall be prepared on a cash basis and shall be reported on a well by
well, lease by lease or field by field basis or on such other basis for which
such properties are normally reported in the ordinary course of Patina's
business;
(j) immediately upon any Authorized Officer of any Borrower becoming aware
of the occurrence of any Default, including, without limitation, a Default under
Article X, a certificate of an Authorized Officer of such Borrower setting forth
the details thereof and the action which such Borrower or Borrowers are taking
or propose to take with respect thereto;
(k) promptly upon the mailing thereof to the stockholders of any Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(l) promptly upon the filing thereof, copies of all final registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent), post effective amendments thereto and annual,
quarterly or special reports which any Borrower shall have filed with the
Securities and Exchange Commission;
(m) promptly notify Banks (i) of any material adverse change in the
financial condition of any Borrower or any of its Subsidiaries, or (ii) of the
occurrence of any acceleration of the maturity of any Debt owing by any Borrower
or any of its Subsidiaries or any default under any indenture, mortgage,
agreement, contract or other instrument to which any of them is a party or by
which any of them or any of their properties is bound, if such default or
acceleration might have a material adverse effect upon their financial
condition;
(n) immediately upon receipt of the same, a copy of any notice received by
any Borrower of the occurrence of any Event of Default under and as defined in
the Indenture or any event which with notice, lapse of time or both, would,
unless cured or waived, become an Event of Default;
(o) promptly upon receipt of same, any notice or other information received
by any Borrower or any Subsidiary of Borrower indicating any potential, actual
or alleged (i) non-compliance with or violation of the requirements of any
Applicable Environmental Law which could result in liability to any Borrower or
any Subsidiary for fines, clean up or any other remediation obligations or any
other liability in excess of $250,000 in the aggregate; (ii) release or
threatened release of any toxic or hazardous waste, substance, or constituent,
or other substance into the environment which release would impose on Borrower
or any Subsidiary a duty to report to a governmental authority or to pay cleanup
costs or to take remedial action under any Applicable Environmental Law which
could result in liability to any Borrower or any Subsidiary for fines, clean up
and other remediation obligations or any other liability in excess of $250,000
in the aggregate; or (iii) the existence of any Lien arising under any
Applicable Environmental Law securing any obligation to pay fines, clean up or
other remediation costs or any other liability in excess of $250,000 in the
aggregate. Without limiting the foregoing, Borrowers shall provide to Banks
promptly upon receipt of same copies of all environmental consultants or
engineers reports received by any Borrower or any Subsidiary of any Borrower
which would render the representation and warranty contained in Section 7.17
untrue or inaccurate in any respect;
(p) In the event any notification is provided by any Borrower to any Bank
or Administrative Agent pursuant to Section 8.1(o) hereof or Administrative
Agent or any Bank otherwise learns of any event or condition under which any
such notice would be required, then, upon request of
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Required Banks, such Borrower or Borrowers shall, within ninety (90) days of
such request, cause to be furnished to each Bank a report by an environmental
consulting firm acceptable to Administrative Agent and Required Banks, stating
that a review of such event, condition or circumstance has been undertaken (the
scope of which shall be acceptable to Administrative Agent and Required Banks)
and detailing the findings, conclusions, and recommendations of such consultant.
Such Borrower or Borrowers shall bear all expenses and costs associated with
such review and updates thereof, as well as all remediation or curative action
recommended by any such environmental consultant; and
(q) from time to time such additional information regarding the financial
position or business of any Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 8.2. Business of Borrowers. The primary business of each Borrower
and its Subsidiaries will be the acquisition, exploration for, development,
production, transportation, processing and marketing of liquid or gaseous
hydrocarbons and accompanying elements and related businesses.
SECTION 8.3. Maintenance of Existence. Each Borrower, shall, and shall
cause each Restricted Subsidiary to, at all times (a) maintain its corporate,
partnership or limited liability company existence in its state of incorporation
or organization except to the extent any Restricted Subsidiary ceases to be in
existence as a result of a merger or consolidation expressly permitted pursuant
to Section 9.4, and (b) maintain its good standing and qualification to transact
business in all jurisdictions where the failure to maintain good standing or
qualification to transact business could have a material adverse effect on the
financial condition or operations of any Borrower or any of its Restricted
Subsidiaries individually or each Borrower and its Restricted Subsidiaries taken
as a whole.
SECTION 8.4. Title Data. In addition to the title information required by
Section 5.1(f) hereof, each Borrower shall, upon the reasonable request of the
Required Banks, cause to be delivered to Administrative Agent such title
opinions and other information in its possession, control or direction regarding
title to the oil and gas properties owned by each Borrower and its Restricted
Subsidiaries as are appropriate to determine the status thereof.
SECTION 8.5. Right of Inspection. Each Borrower will permit and will cause
each of its Subsidiaries to permit any officer, employee or agent of
Administrative Agent or any of the Banks to visit and inspect any of the assets
of any Borrower and its Subsidiaries, examine any Borrower's and its
Subsidiaries' books of record and accounts, take copies and extracts therefrom,
and discuss the affairs, finances and accounts of any Borrower and its
Subsidiaries with any such Borrower's and its Subsidiaries' officers,
accountants and auditors, all at such reasonable times and as often as
Administrative Agent or any of the Banks may desire, all at the expense of the
applicable Borrower. Banks covenant and agree to preserve the confidentiality of
any information with respect to which any Borrower or any of its Subsidiaries
have an obligation of confidentiality to a third party (to the extent such
obligation has been disclosed to Banks), except to the extent Banks are required
to disclose such information pursuant to any applicable law, rule or regulation
of any governmental body or pursuant to the order of any court of competent
jurisdiction.
SECTION 8.6. Maintenance of Insurance. Each Borrower will, and will cause
each of its Subsidiaries to (and will use its best efforts to cause all
operators of oil and gas properties owned by Borrower and its Subsidiaries and
Related Assets to) at all times maintain or cause to be maintained insurance
covering such risks as are customarily carried by businesses similarly situated
including, without limitation, the following: (a) workmen's compensation
insurance; (b) employer's liability insurance; (c) comprehensive general public
liability and property damage insurance in respect of all activities in
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which any Borrower or any of its Subsidiaries might incur personal liability for
the death or injury of an employee or third person, or damage to or destruction
of another's property; (d) insurance against loss or damage by fire, lightning,
hail, tornado, explosion and other similar risk; (e) reservoir damage insurance;
and (f) comprehensive automobile liability insurance. All loss payable clauses
or provisions in all policies of insurance maintained by Borrowers pursuant to
this Section 8.6 shall be endorsed in favor of and made payable to
Administrative Agent for the ratable benefit of Banks, as their interests may
appear. Administrative Agent for the ratable benefit of Banks shall have the
right to collect, and each Borrower hereby assigns to Administrative Agent for
the ratable benefit of Banks, any and all monies that may become payable under
any such policies of insurance by reason of damage, loss or destruction of any
of property which stands as security for the Obligations or any part thereof,
and Administrative Agent may, at its election, either apply for the ratable
benefit of Banks all or any part of the sums so collected toward payment of the
Obligations (or the portion thereof with respect to which such property stands
as security), whether or not such Obligations are then due and payable, in such
manner as Administrative Agent may elect or release same to the applicable
Borrower.
SECTION 8.7. Payment of Taxes and Claims. Each Borrower will, and will
cause each of its Subsidiaries to, pay (a) all Taxes imposed upon it or any of
its assets or with respect to any of its franchises, business, income or profits
before any material penalty or interest accrues thereon and (b) all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
might become a Lien (other than a Permitted Encumbrance) on any of its assets;
provided, however, no payment of Taxes or claims shall be required if (i) the
amount, applicability or validity thereof is currently being contested in good
faith by appropriate action promptly initiated and diligently conducted in
accordance with good business practices and no material part of the property or
assets of any Borrower or any of its Subsidiaries are subject to levy or
execution, (ii) each Borrower as and to the extent required in accordance with
generally accepted accounting principles, shall have set aside on its books
reserves (segregated to the extent required by generally accepted accounting
practices) deemed by it to be adequate with respect thereto, and (iii) Borrowers
have notified Administrative Agent of such circumstances, in detail satisfactory
to Administrative Agent.
SECTION 8.8. Compliance with Laws and Documents. Each Borrower will and
will cause each of its Subsidiaries to comply with all laws, their respective
articles and certificates of incorporation, bylaws, partnership agreements,
regulations and similar organizational documents and all Material Agreements to
which any Borrower or any Subsidiary of any Borrower is a party, if a violation,
alone or when combined with all other such violations, could have a material
adverse effect on the financial condition or operations of any Borrower or any
of its Restricted Subsidiaries individually or any Borrower and its Restricted
Subsidiaries taken as a whole.
SECTION 8.9. Operation of Properties and Equipment. (a) Each Borrower will,
and will cause each of its Subsidiaries to, maintain, develop and operate their
respective oil and gas properties and Related Assets in a good and workmanlike
manner, and observe and comply with all of the terms and provisions, express or
implied, of all oil and gas leases relating to such properties so long as such
oil and gas leases are capable of producing hydrocarbons and accompanying
elements in paying quantities, to the extent that the failure to so observe and
comply could have a material adverse effect on the financial condition or
operations of any Borrower individually or any Borrower and its Subsidiaries
taken as a whole.
(b) Each Borrower will, and will cause each of its Subsidiaries to, comply
in all respects with all contracts and agreements applicable to or relating to
their respective oil and gas properties or the production and sale of
hydrocarbons and accompanying elements therefrom, except to the extent
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a failure to so comply could not have a material adverse effect on the financial
condition or operations of any Borrower individually or any Borrower and its
Subsidiaries taken as a whole.
(c) Each Borrower will, and will cause each of its Subsidiaries, at all
times, to maintain, preserve and keep all operating equipment used with respect
to the oil and gas properties of each Borrower in proper repair, working order
and condition, and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the efficiency of such
operating equipment shall at all times be properly preserved and maintained,
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if any applicable Borrower shall in good faith
determine that such action is not necessary or desirable for the continued
efficient and profitable operation of the business of such Borrower and its
Subsidiaries.
(d) With respect to the oil and gas properties of Borrowers and their
Subsidiaries which are operated by operators other than Borrowers or one of
their Subsidiaries, Borrowers and their Subsidiaries shall not be obligated to
directly perform any undertakings contemplated by the covenants and agreements
contained in this Section 8.9 which are performable only by such operators and
are beyond the control of Borrowers, but shall be obligated to seek to enforce
such operators' contractual obligations to maintain, develop and operate the oil
and gas properties subject to such operating agreements.
SECTION 8.10. Further Assurances.
(a) Each Borrower will execute and deliver or cause to be executed and
delivered such other and further instruments or documents and take such further
action as in the judgment of Administrative Agent may be required to carry out
the provisions and purposes of the Loan Papers including without limitation to
create, preserve, protect and perfect the Liens of the Administrative Agent for
the ratable benefit of the Banks as required by Section 5.1.
(b) Patina will cause the Exchange Agent under the Exchange Agent Agreement
to deliver the certificates evidencing the shares of Gerrity Preferred Stock
acquired by Patina pursuant to the Exchange Offer contemplated by Section 7.20
of the Merger Agreement to the Transfer Agent pursuant to Section 2.10 of the
Exchange Agent Agreement, and thereafter will cause the Transfer Agent to issue
a new certificate in the name of Patina evidencing such certificates and deliver
such certificate to Administrative Agent within thirty (30) days after the
Closing Date at the address set forth on the signature pages hereto.
SECTION 8.11. Environmental Law Compliance and Indemnity. Each Borrower
will, and will cause each of its Subsidiaries to, comply in all material
respects with all Applicable Environmental Laws, including, without limitation,
(a) all licensing, permitting, notification and similar requirements of
Applicable Environmental Laws, and (b) all provisions of Applicable
Environmental Law regarding storage, discharge, release, transportation,
treatment and disposal of hazardous substances, petroleum, solid waste or other
contaminants. Each Borrower will, and will cause each of its Subsidiaries to,
promptly pay and discharge when due all debts, claims, liabilities and
obligations with respect to any clean-up or remediation measures necessary to
comply with Applicable Environmental Laws. Each Borrower hereby jointly and
severally indemnifies and agrees to defend and hold Banks and their successors
and assigns harmless from and against any and all claims, demands, causes of
action, loss, damage, liabilities, costs and expenses (including reasonable
attorneys' fees and court costs) of any and every kind or character, known or
unknown, fixed or contingent, asserted against or incurred by any of the Banks
at any time and from time to time including, without limitation, those asserted
or arising subsequent to the payment or other satisfaction of the Loans, by
reason of or arising out of the ownership, construction, occupancy,
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operation, use and maintenance of any of the collateral for the Loans, including
matters arising out of the negligence of any of the Banks; provided, however,
this indemnity shall not apply with respect to matters caused by or arising out
of (i) the gross negligence or willful misconduct of Banks (IT BEING THE EXPRESS
INTENTION HEREBY THAT BANKS SHALL BE INDEMNIFIED FROM THE CONSEQUENCES OF THEIR
NEGLIGENCE); and (ii) the construction, occupancy, operation, use and
maintenance of the collateral for the Loans by any owner, lessee or party in
possession of the collateral for the Loans subsequent to the ownership of the
collateral for the Loans by any Borrower or any of their Subsidiaries (as
applicable), provided further, however, that this subclause (ii) shall not
exclude from the foregoing indemnity and agreement, liability, claims, demands,
causes of action, loss, damage, costs and expenses imposed by reason of the
ownership of the collateral for the Loans by Banks after purchase by Banks at
any foreclosure sale or transfer in lieu thereof from any Borrower or any
Restricted Subsidiary in partial or entire satisfaction of the Loans (unless the
same shall be solely attributable to the subsequent use of the collateral by
Banks during their ownership thereof). The foregoing indemnity and agreement
applies to the violation of any Applicable Environmental Law prior to the
payment or other satisfaction of the Loans and any act, omission, event or
circumstance existing or occurring on or about the collateral for the Loans
(including without limitation the presence on the collateral for the Loans or
release from the collateral for the Loans of asbestos or other hazardous
substances or solid waste disposed of or otherwise present in or released prior
to the payment or other satisfaction of the Loans). It shall not be a defense to
the covenant of Borrowers to indemnify that the act, omission, event or
circumstance did not constitute a violation of any Applicable Environmental Law
at the time of its existence or occurrence. The provisions of this Section 8.11
shall survive the repayment of the Loans and shall continue thereafter in full
force and effect. In the event of the transfer of the Loans or any portion
thereof, Banks or any prior holder of the Loans and any participants shall
continue to be benefitted by this indemnity and agreement with respect to the
period of such holding of the Loans.
SECTION 8.12. Change of Control Offer. Within 30 days after the Closing
Date Patina will deliver the Change of Control Offer to the Indenture Trustee
and each holder of Subordinated Notes as required pursuant to Section 4.18 of
the Indenture and will deliver a copy of such Change of Control Offer to the
Administrative Agent together with evidence that such Change of Control Offer
has been so delivered to the Indenture Trustee and each holder of Subordinated
Notes.
ARTICLE IX
NEGATIVE COVENANTS
The Borrowers agree that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 9.1. Debt of Borrowers and their Restricted Subsidiaries. Neither
any Borrower nor any Restricted Subsidiary of any Borrower will incur, become or
remain liable for any Debt other than (a) Debt secured by Permitted Encumbrances
described in subpart (k) of the definition of Permitted Encumbrances, (b)
Nonrecourse Debt, (c) the Loans, (d) the Subordinate Notes, (e) Debt outstanding
on the Closing Date described on Schedule 11 hereto, and (f) Guarantees by a
Borrower or a Restricted Subsidiary of such Borrower of Debt and other
liabilities of such Borrower or other Restricted Subsidiaries of such Borrower
provided that such Debt and other liabilities are permitted pursuant to this
Agreement; provided, that the Debt permitted pursuant to Section 9.1(a) and (b)
incurred by (i) Gerrity and its Restricted Subsidiaries shall not exceed
$1,000,000 in the aggregate and (ii) Patina and its Restricted Subsidiaries
shall not exceed $1,000,000 in the aggregate.
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SECTION 9.2. Restricted Payments. Neither any Borrower nor any Restricted
Subsidiary of any Borrower will declare or make any Restricted Payment;
provided, that, so long as no Default, Event of Default or Borrowing Base
Deficiency then exists, and provided that no Default or Event of Default would
result therefrom (a) Patina shall be permitted to declare and pay accrued
dividends on the Preferred Stock so long as, at any date, the sum of (i) the
aggregate amount of all such dividends declared and paid during the period
commencing on the Closing Date to and including such date, plus (ii) the
aggregate amount of all Investments made by Patina to purchase Gerrity Preferred
Stock from the Closing Date to and including the date of such declaration or
payment (excluding Investments in Gerrity Preferred Stock made in the form of
Preferred Stock or Common Stock) shall not exceed the Patina Restricted Payment
Limit in effect at such time, and (b) Gerrity shall be permitted to (i)
repurchase or redeem Subordinate Notes (A) tendered to Gerrity for redemption on
the Subordinate Note Redemption Date pursuant to Section 4.08 of the Indenture,
and (B) after the Subordinate Note Redemption Date, and (ii) declare and pay
accrued dividends on the Gerrity Preferred Stock, so long as, at any date, the
sum of (A) the aggregate amount of all dividends declared and paid on the
Gerrity Preferred Stock during the period commencing on the Closing Date to and
including such date (excluding any such dividends paid to Patina), plus (B) the
excess of the aggregate repurchase or redemption price paid by Gerrity for all
Subordinate Notes repurchased or redeemed by Gerrity subsequent to the Closing
Date over the sum of (1) 101% of the aggregate principal balance of all such
Subordinate Notes on the date of redemption or repurchase, plus (2) accrued but
unpaid interest on all such Subordinate Notes redeemed on the date of redemption
or repurchase, shall not exceed the Gerrity Restricted Payment Limit in effect
on such date. Nothing contained in this Section 9.2 shall limit or impair the
right and ability of Gerrity to make Distributions to Patina or the right and
ability of the Restricted Subsidiaries of each Borrower to make Distributions to
such Borrower or to other Restricted Subsidiaries of such Borrower.
SECTION 9.3. Negative Pledge. Neither any Borrower nor any Restricted
Subsidiary will create, assume or suffer to exist any Lien on any asset owned by
it (other than Permitted Encumbrances).
SECTION 9.4. Consolidations and Mergers. Neither any Borrower nor any
Subsidiary of any Borrower will consolidate or merge with or into any other
Person; provided, that so long as no Default or Event of Default exists or will
result (a) each Borrower may merge or consolidate with another Person so long as
such Borrower is the surviving corporation and, in the case of SWAT and Gerrity,
continues to be a wholly owned Subsidiary of Patina, (b) any Restricted
Subsidiary of a Borrower may merge or consolidate with or into another
Restricted Subsidiary of such Borrower, (c) any Unrestricted Subsidiary may
merge with or into another Unrestricted Subsidiary, (d) any Unrestricted
Subsidiary may merge with any other Person other than a Restricted Subsidiary so
long as such Unrestricted Subsidiary is the surviving corporation, and (e) any
Restricted Subsidiary may merge with any other Person so long as such Restricted
Subsidiary is the surviving corporation and is a wholly owned Subsidiary of
Patina after giving effect thereto.
SECTION 9.5. Asset Dispositions. Except as provided in this Section 9.5,
none of the Borrowers nor any Restricted Subsidiary shall sell, lease, abandon
or otherwise transfer any of its assets to any other Person other than pursuant
to an Exempt Transfer. Each Borrower and its Restricted Subsidiaries shall be
permitted to sell or otherwise dispose of any asset other than (a) oil and gas
properties, (b) Related Assets, (c) debt and equity securities issued by any
Restricted Subsidiary or by Gerrity, and (d) accounts (as such term is defined
in the Uniform Commercial Code). Patina and its Restricted Subsidiaries shall be
permitted to sell oil and gas properties and Related Assets; provided that the
aggregate value of all oil and gas properties and Related Assets sold by Patina
and its Restricted Subsidiaries during any period between Patina Periodic
Determinations shall not exceed the greater of (i) $5,000,000, or (ii) five
percent (5%) of the Patina Borrowing Base then in effect. Gerrity and its
Restricted Subsidiaries may sell oil and gas properties and Related Assets;
provided, that the aggregate value of all oil and gas properties and
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Related Assets sold by Gerrity and its Restricted Subsidiaries during any period
between Gerrity Periodic Determinations shall not exceed the greater of (i)
$5,000,000, or (ii) five percent (5%) of the Gerrity Borrowing Base then in
effect.
SECTION 9.6. Amendments to Material Documents. No Borrower will, nor will
any Borrower permit any of its Restricted Subsidiaries to, (a) enter into any
material modification or amendment of, grant any material consent under, or
waive any material right or obligation of any Person under (i) its certificate
or articles of incorporation, bylaws, partnership agreement, regulations or
other organizational documents, or (ii) any of the Closing Documents, or (b)
enter into any modification or amendment of, grant any consent under, or waive
any right or obligation of any Person under (i) the Intercompany Loan Documents,
(ii) the Indenture, or (iii) the Subordinate Notes.
SECTION 9.7. Use of Proceeds. The proceeds of Borrowings under (a) the
Patina Term Commitments will be used solely to make advances under the
Intercompany Loan Agreement, which advances will be used by Gerrity solely for
the purposes described in Section 2.1, (b) the Patina Revolving Commitments will
not be used for any purpose other than (i) working capital, (ii) to finance the
acquisition, exploration and development of oil and gas properties and Related
Assets and the transportation, processing and marketing of hydrocarbons by
Patina and its Restricted Subsidiaries, (iii) Restricted Payments permitted
pursuant to Section 9.2, (iv) Investments permitted pursuant to Section 9.8, and
(v) to finance the repayment of the Debt of SOCO assumed by Patina pursuant to
the Merger Agreement, and (c) the Gerrity Commitments will not be used for any
purpose other than (i) working capital, (ii) to finance the acquisition,
exploration and development of oil and gas properties and Related Assets and the
transportation, processing and marketing of hydrocarbons by Gerrity and its
Restricted Subsidiaries, (iii) Restricted Payments permitted pursuant to Section
9.2, (iv) to repay the obligations outstanding under the Existing Gerrity Credit
Agreement, and (v) to refinance the Intercompany Loan. None of the proceeds of
the Loans nor any Letter of Credit issued hereunder will be used, directly or
indirectly, (i) for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (ii) in violation of applicable law
or regulation (including, without limitation, the Margin Regulations).
SECTION 9.8. Investments. Neither any Borrower nor any Restricted
Subsidiary of any Borrower will, directly or indirectly, make any Investment
other than Permitted Investments.
SECTION 9.9. Transactions with Affiliates. No Borrower will, and no
Borrower will permit any of its Subsidiaries to, engage in any material
transaction with an affiliated Person (other than, in the case of Patina or
SWAT, with each other) unless such transaction is generally as favorable to any
such Borrower or such Subsidiary as could be obtained in an arm's length
transaction with an unaffiliated Person in accordance with prevailing industry
customs and practices; provided, that, nothing in this Section 9.9 shall
prohibit Restricted Subsidiaries of Gerrity from making Distributions to or
Investments in Gerrity otherwise permitted by this Agreement.
SECTION 9.10. Plans. No Borrower will, and no Borrower will permit any of
its Subsidiaries to, create, adopt or become bound by any Plan.
SECTION 9.11. Oil and Gas Hedge Transactions. No Borrower will, and no
Borrower will permit any of its Restricted Subsidiaries to, enter into Oil and
Gas Hedge Transactions which would cause the volume of hydrocarbons which are
the subject of Oil and Gas Hedge Transactions in existence at any time to exceed
seventy-five (75%) of any such Borrower's and its Restricted Subsidiaries'
anticipated production from proved, developed producing reserves during the term
of existing Oil and Gas Hedge Transactions.
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SECTION 9.12. Obligations of Unrestricted Subsidiaries. Except as expressly
permitted by Section 9.2, no Borrower will, nor will any Borrower permit any of
its Restricted Subsidiaries to, incur any liability or obligation to any
Unrestricted Subsidiary of such Borrower of any nature, or have any liability
(whether by operation of law or otherwise) for any liability, Debt or obligation
of any Unrestricted Subsidiary.
SECTION 9.13. Acquisitions. No Borrower will, nor will any Borrower permit
any of its Restricted Subsidiaries to, acquire, in a single transaction or a
series of related transactions, all or substantially all of the assets or
capital stock (or other outstanding equity interests of any Person) or all or
substantially all of the assets comprising a division of any Person; provided,
that nothing contained in this Section 9.13 shall prohibit any Borrower or any
Restricted Subsidiary of any Borrower from making any acquisition of assets
consisting of oil and gas properties or any other acquisition which is also a
Permitted Investment.
SECTION 9.14. Operating Leases. No Borrower will, nor will any Borrower
permit any of its Subsidiaries to, incur, become, or remain liable under any
Operating Lease which would cause the aggregate amount of all Rentals payable by
any such Borrower and its Restricted Subsidiaries in any Fiscal Year to be
greater than $1,500,000.
SECTION 9.15. Speculative Hedge Transactions. No Borrower will, nor will
any Borrower permit any of its Restricted Subsidiaries to, enter into any
commodity, interest rate, currency or other swap, option, collar or other
derivative transaction pursuant to which any such Borrower or such Restricted
Subsidiary speculates on the movement of commodity prices, securities prices,
interest rates, financial markets, currency markets or other items; provided,
that nothing contained in this Section 9.15 shall prohibit any Borrower from (a)
entering into interest rate swaps or other interest rate hedge transactions
pursuant to which any such Borrower hedges interest rate risk with respect to
the interest reasonably anticipated to be incurred pursuant to this Agreement,
(b) entering into Oil and Gas Hedge Transactions permitted by Section 9.11
hereof, or (c) making Permitted Investments.
ARTICLE X
FINANCIAL COVENANTS
Each Borrower agrees that, so long as any Bank has any commitment to lend
or participate in Letter of Credit Exposure hereunder or any amount payable
under any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 10.1. Financial Covenants applicable to Patina on a Consolidated
Basis.
(a) Patina will not permit its ratio of Consolidated Current Assets to its
Consolidated Current Liabilities as of the end of any Fiscal Quarter to be less
than 1 to 1.
(b) Patina will not permit its ratio of Consolidated Funded Debt to
Consolidated Total Capital as of (i) September 30, 1996 and December 31, 1996,
to exceed .60 to 1, (ii) as of the end of any Fiscal Quarter during the Fiscal
Year ending December 31, 1997, to exceed .55 to 1, and (iii) as of the end of
any Fiscal Quarter ending on or after March 31, 1998, to exceed .50 to 1.
(c) Patina will not permit its Ratio of Consolidated Funded Debt to
Adjusted Consolidated EBITDA as of the end of any Fiscal Quarter commencing with
the Fiscal Quarter ending September 30, 1996, to exceed 4.5 to 1.
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SECTION 10.2. Financial Covenants applicable to Patina on a Consolidated
Basis excluding Gerrity.
(a) Patina will not permit its ratio of Consolidated Current Assets to its
Consolidated Current Liabilities excluding Gerrity and its Subsidiaries as of
the end of any Fiscal Quarter to be less than 1 to 1.
(b) Patina will not permit its consolidated shareholder's equity excluding
Gerrity and its Subsidiaries as of the end of any Fiscal Quarter ending on or
after September 30, 1996, to be less than the remainder of (i) Patina's
consolidated shareholders equity excluding Gerrity and its Subsidiaries as of
June 30, 1996, minus (ii) $7,500,000.
(c) Patina will not permit its Consolidated Funded Debt (excluding Funded
Debt outstanding under the Patina Term Loan) to Adjusted Consolidated EBITDA
excluding Gerrity and its Subsidiaries as of the end of any Fiscal Quarter
ending on or after September 30, 1996, to exceed 4.5 to 1.
SECTION 10.3. Financial Covenants Applicable to Gerrity on a Consolidated
Basis.
(a) Gerrity will not permit its ratio of its Consolidated Current Assets to
its Consolidated Current Liabilities as of the end of any Fiscal Quarter to be
less than 1 to 1.
(b) Gerrity will not permit its ratio of Consolidated Funded Debt to
Consolidated Total Capital as of the end of any Fiscal Quarter ending on or
after September 30, 1996, to exceed .60 to 1.
(c) Gerrity will not permit its Ratio of Consolidated Funded Debt to
Adjusted Consolidated EBITDA as of the end of any Fiscal Quarter ending on or
after September 30, 1996, to exceed 4.5 to 1.
ARTICLE XI
DEFAULTS
SECTION 11.1. Events of Default. If one or more of the following events
(collectively "Events of Default" and individually an "Event of Default") shall
have occurred and be continuing:
(a) any Borrower shall fail to pay when due any principal of any Note or
any reimbursement obligation with respect to any Letters of Credit when due;
(b) any Borrower shall fail to pay any accrued interest due and owing on
any Note or any fees or any other amount payable hereunder when due and such
failure shall continue for a period of five (5) days;
(c) any Borrower shall fail to observe or perform any covenant or agreement
contained in Article IX or X;
(d) any Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant or agreement contained in this Agreement or the other Loan
Papers (other than those covered by Sections 11.1(a), (b) and (c)) for thirty
(30) days after written notice thereof has been given to any
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such Borrower by Administrative Agent at the request of any Bank, provided,
that, as to Defaults under Section 8.1(j) and (m), any defaulting Borrower shall
not be entitled to more than one (1) notice and period of cure during each
calendar year, and as to each other type of Default, such Borrower shall not be
entitled to more than two (2) notices and periods of cure during any calendar
year;
(e) Borrowers shall fail to cause the financial statements described in
Sections 8.1(a), (c) and (e) to be accompanied by the opinion without
qualification (except for qualifications required by changes in accounting
methods with which the applicable Borrower's auditors concur) of the accountants
preparing such opinion, that such financial statements were prepared in
accordance with generally accepted accounting principles and fairly present the
consolidated financial position and results of operations of the applicable
Borrower;
(f) any representation, warranty, certification or statement made or deemed
to have been made by any Company in this Agreement or by any Company or any
other Person on behalf of any Company in any other Loan Paper or any other
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when made;
(g) any Company shall fail to pay any Material Debt at maturity or any
event or condition (i) shall occur which results in the acceleration of the
maturity of any Material Debt of any Company, or (ii) shall occur and continue
for a period of thirty (30) days (or such shorter cure period as is provided
pursuant to the terms of such Material Debt) which entitles (or, with the giving
of notice or lapse of time or both, would unless cured or waived, entitle) the
holder of such Material Debt to accelerate the maturity thereof;
(h) any Company shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced against any
Company seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against any Company under the federal bankruptcy laws as now or
hereafter in effect;
(j) one (1) or more judgments or orders for the payment of money
aggregating in excess of $1,000,000 shall be rendered against any Company and
such judgment or order (i) shall continue unsatisfied and unstayed (unless
bonded with a supersedeas bond at least equal to such judgment or order) for a
period of thirty (30) days or (ii) is not fully paid and satisfied at least ten
(10) days prior to the date on which any of its assets may be lawfully sold to
satisfy such judgment or order;
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(k) one (1) or more judgments or orders for the payment of money
aggregating in excess of the sum of (i) ten percent (10%) of the Patina
Borrowing Base then in effect, plus (ii) (A) the amount of such judgment which
is covered by insurance to the satisfaction of Administrative Agent and its
counsel, and (B) any amounts which Patina or any of its Restricted Subsidiaries
has deposited with Administrative Agent to be held by Administrative Agent as
security for the payment of such judgment shall be rendered against Patina or
any of its Subsidiaries (excluding Gerrity or any of its Subsidiaries), whether
or not otherwise bonded or stayed;
(l) one (1) or more judgments or orders for the payment of money
aggregating in excess of the sum of (i) ten percent (10%) of the Gerrity
Borrowing Base then in effect, plus (ii) (A) the amount of such judgment which
is covered by insurance to the satisfaction of Administrative Agent and its
counsel, and (B) any amounts which Gerrity or any of its Restricted Subsidiaries
has deposited with Administrative Agent to be held by Administrative Agent as
security for the payment of such judgment shall be rendered against Gerrity or
any of its Subsidiaries, whether or not otherwise bonded or stayed;
(m) an Event of Default shall occur under and as defined in the Indenture;
(n) any Company shall incur Environmental Liabilities which, individually
or when considered in the aggregate for all Companies, exceeds $10,000,000;
(o) this Agreement or any other Loan Paper shall cease to be in full force
and effect or shall be declared null and void or the validity or enforceability
thereof shall be contested or challenged by any Borrower or any Restricted
Subsidiary of any Borrower, or any Borrower or any Restricted Subsidiary of any
Borrower shall deny that it has any further liability or obligation under any of
the Loan Papers, or any Lien created by the Loan Papers shall for any reason
(other than the release thereof in accordance with the Loan Papers) cease to be
a valid, first priority, perfected Lien upon any of the property purported to be
covered thereby;
(p) any Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) shall become the direct or indirect beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 of
more than 30% of the total voting power of all classes of capital stock then
outstanding of SOCO entitled (without regard to the occurrence of any
contingency) to vote in elections of directors of SOCO;
(q) at any date, more than fifty percent (50%) of the Person's comprising
SOCO's board of directors are Person who were not directors of SOCO one year
prior to such date; or
(r) SOCO shall cease, for any reason, to be the legal and beneficial owner
of more than fifty percent (50%) of the total voting power of all classes of
capital stock then outstanding of Patina entitled (without regard to the
occurrence of any contingency) to vote in elections of directors of Patina;
then, and in every such event, Administrative Agent shall without presentment,
notice or demand (unless expressly provided for herein) of any kind (including,
without limitation, notice of intention to accelerate and acceleration), all of
which are hereby waived, (a) if requested by Required Banks, terminate the
Commitments, or any of them, and they shall thereupon terminate, and (b) if
requested by Required Banks, take such other actions as may be permitted by the
Loan Papers including, declaring the Notes, or any of them, (together with
accrued interest thereon) to be, and the Notes, or any of them, shall thereupon
become, immediately due and payable; provided that (c) in the case of any of the
Events of Default specified in Section 11.1(h) or (i), without any notice to any
Borrower or any other act by Administrative Agent or Banks, the Commitments
shall thereupon terminate and the Notes (together with
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accrued interest thereon) shall become immediately due and payable.
ARTICLE XII
AGENTS
SECTION 12.1. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes each Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement, the Notes and the other Loan Papers
as are delegated to such Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto, provided that, as between and
among Banks and Agents, no Agent will prosecute, settle or compromise any claim
against any Borrower or release or institute enforcement proceedings, except
with the consent of Required Banks. Each Bank and each Borrower agree that none
of the Agents are a fiduciary for Banks or for Borrowers but each simply is
acting in the capacity described herein to alleviate administrative burdens for
both Borrowers and Banks and that no Agent has any duties or responsibilities to
Banks or Borrowers except those expressly set forth herein.
SECTION 12.2. Agents and Affiliates. Each Agent in its individual capacity
and not as Agent hereunder shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from exercising the same
as though it were not an Agent hereunder and each Agent in its individual
capacity and not as Agent hereunder may accept deposits from, lend money to, and
generally engage in any kind of business with any Borrower and their
Subsidiaries and Affiliates as if such parties were not Agents hereunder.
SECTION 12.3. Action by Agents. The obligations of Agents hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, no Agent shall be required to take any action with respect to any
Default or Event of Default, except as expressly provided in Article XI.
Notwithstanding the administrative authority delegated to Agents, no Agent shall
without the prior written approval of all Banks cause or permit any modification
of the Loan Papers which would (a) increase the Commitments of any Bank or
subject any Bank to any additional obligations, (b) forgive any of the principal
or reduce the rate of interest on any Loan or any fees hereunder (c) postpone
the date fixed for payment of principal of or interest on any Loan or any fees
hereunder including the Termination Date, (d) change the percentage of the Total
Commitment, or the number of Banks which shall be required for the Banks or any
of them to take any action under Section 14.5 or any other provision of this
Agreement, (e) permit Borrower to assign any of its rights hereunder, (f) amend
or waive any of the provisions of Article IV of the definitions contained in
Section 1.1 applicable thereto, or (g) provide for the release or substitution
of collateral for the Loans other than releases required pursuant to sales of
collateral which are expressly permitted under Section 9.5. Subject to the
foregoing, each Agent shall make such requests or take such actions in respect
of Borrower as the Required Banks shall direct. Further, subject to the
foregoing, the Agent shall grant such waivers, consents or approvals in favor of
Borrower as the Required Banks shall direct.
SECTION 12.4. Consultation with Experts. Each Agent may consult with legal
counsel (who may be counsel for any Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
SECTION 12.5. Liability of Agents. None of the Agents nor any of their
respective directors, officers, agents, or employees shall be liable for any
action taken or not taken by such Agent in
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connection herewith (a) with the consent or at the request of Required Banks or
(b) in the absence of its own gross negligence or willful misconduct, IT BEING
THE INTENTION OF BANKS THAT SUCH PARTIES SHALL NOT BE LIABLE FOR THE
CONSEQUENCES OF THEIR ORDINARY NEGLIGENCE. None of the Agents nor any of their
respective officers, directors, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with this Agreement or any borrowing
hereunder, (ii) the performance or observance of any of the covenants or
agreements of Borrowers, (iii) the satisfaction of any condition specified in
Article VI, except receipt of items required to be delivered to Administrative
Agent, or (iv) the validity, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in connection herewith. No
Agent shall incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties or upon any oral notice which Agent believes will be confirmed
in writing by the proper party or parties. If any Agent fails to take any action
required to be taken by it under the Loan Papers after the occurrence of an
Event of Default and within a reasonable time after being requested to do so by
any Bank (after such requesting Bank has obtained the approval of such other
Banks as required), such Agent shall not suffer or incur any liability as a
result thereof, but such requesting Bank may request such Agent to resign,
whereupon such Agent shall so resign pursuant to Section 12.9.
SECTION 12.6. Delegation of Duties. Each Agent may execute any of its
duties hereunder by or through officers, directors, employees, attorneys, or
agents.
SECTION 12.7. Indemnification. Each Bank shall, ratably in accordance with
its Commitment Percentage, indemnify each Agent (to the extent not reimbursed by
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
Agent's gross negligence or willful misconduct) that such Agent may suffer or
incur in connection with this Agreement or any action taken or omitted by such
Agent hereunder, including without limitation, matters arising out of such
Agent's own negligence. IT BEING THE INTENTION OF EACH BANK THAT EACH AGENT
SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS ORDINARY NEGLIGENCE.
SECTION 12.8. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 12.9. Successor Agent. Each Agent may resign at any time by giving
written notice thereof to Banks and Borrowers. In addition, Borrowers may, prior
to a Default, request the designation by Banks of a successor Agent. Upon any
such request by Borrowers or resignation by an Agent, Required Banks shall have
the right to appoint a successor Agent, which shall be one of Banks. If no
successor Agent shall have been so appointed by Required Banks and accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation or Borrowers' request for a successor Agent, then the retiring
Agent may, on behalf of Banks, appoint a successor Agent (as applicable), which
shall (a) be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000 and (b) unless the successor Agent is a Bank, be reasonably
acceptable to Borrowers. Upon the acceptance of its appointment as a successor
Agent hereunder, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be
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discharged from its duties and obligations hereunder. After any Agent's
resignation hereunder, the provisions of this Section 12.9 shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent hereunder. Borrowers shall be entitled to recommend a successor
Agent at the time of designation of any successor Agent pursuant to this Section
12.9. Banks shall give due consideration to the successor nominated by
Borrowers, but shall have no obligation to approve such nominee.
ARTICLE XIII
PROTECTION OF YIELD; CHANGE IN LAWS
SECTION 13.1. Basis for Determining Interest Rate Applicable to Eurodollar
Tranches Inadequate. If on or prior to the first day of any Interest Period with
respect to a Borrowing:
(a) Administrative Agent is advised by any Bank that deposits in dollars
(in the applicable amounts) are not being offered to such Bank(s) in the
relevant market for such Interest Period, or
(b) Banks having fifty percent (50%) or more of the aggregate amount of the
Total Commitment advise Administrative Agent that the Adjusted Eurodollar Rate
as determined by Administrative Agent will not adequately and fairly reflect the
cost to such Banks of funding their respective shares of the requested Borrowing
which will be subject to a Eurodollar Tranche for such Interest Period,
Administrative Agent shall give notice thereof to Borrowers and Banks, whereupon
the obligations of Banks to allow interest to be computed by reference to the
Adjusted Eurodollar Rate shall be suspended until Administrative Agent notifies
Borrowers that the circumstances giving rise to such suspension no longer exist.
Unless Borrowers notify Administrative Agent at least two (2) Domestic Business
Days before the date of any Borrowing for which a Request for Borrowing has
previously been given that it elects not to borrow on such date, such Borrowing
shall instead be made as an Adjusted Base Rate Borrowing.
SECTION 13.2. Illegality of Eurodollar Loans. (a) If, after the date of
this Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank (or its Eurodollar Lending Office)
to make, maintain or fund any portion of the Loans subject to a Eurodollar
Tranche and such Bank shall so notify Administrative Agent, Administrative Agent
shall forthwith give notice thereof to the other Banks and Borrowers. Until such
Bank notifies Borrowers and Administrative Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Bank to maintain
or fund any portion of the Loans subject to a Eurodollar Tranche shall be
suspended. Before giving any notice to Administrative Agent pursuant to this
Section 13.2, such Bank shall designate a different Eurodollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any
portion of an outstanding Loan subject to a Eurodollar Tranche to maturity and
shall so specify in such notice, Borrowers (as applicable) shall immediately
convert the principal amount of each such Loan which is subject to a Eurodollar
Tranche to an Adjusted Base Rate Tranche of an equal principal amount from such
Bank (on which interest and principal shall be payable contemporaneously with
the unaffected Eurodollar Tranches of the
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other Banks).
(b) No Bank shall be required to make any Loan hereunder if the making of
such Loan would be in violation of any law applicable to such Bank.
SECTION 13.3. Increased Cost of Eurodollar Tranche. If after the date
hereof, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(a) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to maintaining or funding any portion of its Loans
subject to a Eurodollar Tranche, its Notes or its obligation to allow interest
to be computed by reference to the Adjusted Eurodollar Rate shall change the
basis of taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on any Loan which is subject to any Eurodollar Tranche
or any other amounts due under this Agreement in respect of a Loan which is
subsequent to any Eurodollar Tranche or its obligation to allow interest to be
computed by reference to the Adjusted Eurodollar Rate (except for changes in the
rate of Tax on the overall net income of such Bank or its Lending Office imposed
by the jurisdiction in which such Bank's principal executive office or Lending
Office is located); or
(b) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, any such requirement imposed
by the Board of Governors of the Federal Reserve System, but excluding with
respect to any Eurodollar Tranche any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or for the
account of or credit extended by, any Bank's Lending Office or shall impose on
any Bank (or its Lending Office) or the applicable interbank Eurodollar market
or any other condition affecting Eurodollar Tranches, its Notes or its
obligation to allow interest to be computed by reference to the Adjusted
Eurodollar Rate;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of funding or maintaining any Loan subject to a Eurodollar
Tranche, or to reduce the amount of any sum received or receivable by such Bank
(or its Lending Office) under this Agreement or under its Notes with respect
thereto, by an amount deemed by such Bank to be material, then, within five (5)
days after demand by such Bank (with a copy to the Administrative Agent), the
Borrower(s) of the affected Loan shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction.
Each Bank will promptly notify the applicable Borrowers and Administrative Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section 13.3 and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section 13.3 and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 13.4. Adjusted Base Rate Tranche Substituted for Affected
Eurodollar Tranche. If (a) the obligation of any Bank to fund or maintain any
portion of any Loan subject to a Eurodollar Tranche has been suspended pursuant
to Section 13.2 or (b) any Bank has demanded compensation under Section 13.3 and
any Borrower shall, by at least five (5) Eurodollar Business Days prior notice
to such Bank through the Administrative Agent, have elected that the provisions
of this Section 13.4 shall apply
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to such Bank, then, unless and until such Bank notifies Borrowers that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) any Tranche which would otherwise be characterized by such Bank as
Eurodollar Tranche shall instead be deemed an Adjusted Base Rate Tranche (on
which interest and principal shall be payable contemporaneously with the
unaffected Eurodollar Tranches of the other Banks); and
(b) after all of its Eurodollar Tranches have been repaid, all payments of
principal which would otherwise be applied to repay Eurodollar Tranches shall be
applied to repay its Adjusted Base Rate Tranches instead.
SECTION 13.5. Capital Adequacy. If after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof, by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law), shall:
(a) impose, modify or deem applicable any reserve, special deposit,
compensatory loan, deposit insurance, capital adequacy, minimum capital,
capital ratio or similar requirement against all or any assets held by,
deposits or accounts with, credit extended by or to, or commitments to
extend credit or any other acquisition of funds by any Bank (or its Lending
Office), or impose on any Bank (or its Lending Office) any other condition,
with respect to the maintenance by such Bank of all or any part of its
Commitments; or
(b) subject any Bank (or its Lending Office) to, or cause the
termination or reduction of a previously granted exemption with respect to,
any Tax with respect to the maintenance by such Bank of all or any part of
its Commitments (other than Taxes assessed against such Bank's overall net
income); and the result of any of the foregoing is to increase the cost to
such Bank (or its Lending Office) of maintaining its Commitments or to
reduce the amount of any sums received or receivable by it (or its Lending
Office) under this Agreement or any other Loan Paper, or to reduce the rate
of return on such Bank's equity in connection with this Agreement, as the
case may be, by an amount which such Bank deems material then, in any such
case, within five (5) days of demand by such Bank (or its Lending Office)
(with a copy to Administrative Agent), the Borrower(s) which hold the
affected Commitments shall pay to such Bank (or its Lending Office) such
additional amount or amounts as will compensate such Bank for any
additional cost, reduced benefit, reduced amount received or reduced rate
of return. Each Bank will promptly notify the affected Borrower(s) and
Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation
pursuant to this Section 13.5. A certificate of any Bank claiming
compensation under this Section 13.5 and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
Without limiting the foregoing, in the event any event or condition
described in this Section 13.5 shall occur or arise which relates to the
maintenance by any Bank of that part of any Commitment which is in excess of its
Commitment Percentage of the Borrowing Base applicable to such Commitment and
then in effect, (such excess portion of such Commitment of any Bank is
hereinafter referred to as its "Surplus Commitment"), such Bank shall notify
Administrative Agent and the affected Borrower of the occurrence of such event
or the existence of such condition and of the amount of a fee (to be computed on
a per annum basis with respect to such Bank's Surplus Commitment) which such
Bank determines in good faith will compensate such Bank for such additional
cost, reduced benefit, reduced amount received
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or reduced rate of return. Within five (5) Domestic Business Days following
receipt of such notice, the affected Borrower or Borrowers shall notify such
Bank whether it accepts or rejects such fee (if such Borrower or Borrowers fails
to timely respond to such notice it will be deemed to have accepted such fee).
If such Borrower or Borrowers rejects such fee, the applicable Commitment of
each Bank will be automatically and permanently reduced to the Borrowing Base
applicable to such Commitment and then in effect. If such Borrower or Borrowers
accepts such fee, such fee shall accrue from and after the date of such Bank's
notice and shall be payable in arrears (based on the daily average balance of
such Bank's Surplus Commitment) on the last day of each Fiscal Quarter and on
the Termination Date. Such fee shall be in lieu of any amounts to which such
Bank would otherwise be entitled in respect of its Surplus Commitment pursuant
to the other provisions of this Section 13.5 for the period on and after the
date of such notice unless such Bank determines that such fee is not adequate to
fully compensate such Bank for any additional cost, reduced benefit, reduced
amount received or reduced rate of return such Bank may thereafter incur in
respect of such Bank's Surplus Commitment. In that event such Bank shall be
entitled to such additional compensation to which such Bank is otherwise
entitled pursuant to this Section 13.5.
SECTION 13.6. Taxes. All amounts payable by any Borrower under the Loan
Papers (whether principal, interest, fees, expenses, or otherwise) to or for the
account of each Bank shall be paid in full, free of any deductions or
withholdings for or on account of any Taxes. If any Borrower is prohibited by
law from paying any such amount free of any such deductions and withholdings,
then (at the same time and in the same manner that such original amount is
otherwise due under the Loan Papers) such Borrower shall pay to or for the
account of such Bank such additional amount as may be necessary in order that
the actual amount received by such Bank after deduction and/or withholding (and
after payment of any additional Taxes due as a consequence of the payment of
such additional amount, and so on) will equal the amount such Bank would have
received if such deduction or withholding were not made.
SECTION 13.7. Discretion of Banks as to Manner of Funding. Notwithstanding
any provisions of this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of its Commitments in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if such Bank had
actually funded and maintained each Loan subject to a Eurodollar Tranche during
the Interest Period for such Loan through the purchase of deposits having a
maturity corresponding to the last day of such Interest Period and bearing an
interest rate equal to the Adjusted Eurodollar Rate for such Interest Period.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopy or
similar writing) and shall be given (a) if to Agent or any Bank, to such party
at its address, telex or telecopy number set forth on Schedule 1 hereof, or (b)
if to any Borrower or any of its Subsidiaries, at the address, telex or telecopy
number for such Borrower set forth on the signature page hereto or such other
address, telex or telecopy number as such party may hereafter specify for the
purpose by notice to Administrative Agent and Borrowers, as the case may be.
Each such notice, request or other communication shall be effective (a) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
in this Section 14.1 and the appropriate answerback is received or receipt is
otherwise confirmed, (b) if given by mail, one (1) Domestic Business Day after
deposit in the mails with first class postage prepaid, addressed as aforesaid or
(c) if given by any other means, when delivered at the address specified in this
Section 14.1; provided that notices to Administrative Agent under Article II or
XIII shall not be effective until received.
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SECTION 14.2. No Waivers. No failure or delay by any Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note or other
Loan Paper shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law
or in any of the other Loan Papers.
SECTION 14.3. Expenses; Documentary Taxes; Indemnification. (a) Borrowers
shall pay (i) all out-of-pocket expenses of Administrative Agent, including
reasonable fees and disbursements of special counsel for Administrative Agent,
in connection with the preparation of this Agreement and the other Loan Papers
and, if appropriate, the recordation of the Loan Papers, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
each Agent and each Bank, including fees and disbursements of counsel in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom, fees of auditors and consultants incurred in
connection therewith and investigation expenses incurred by each Agent and each
Bank in connection therewith. Each Borrower shall indemnify each Bank against
any Taxes imposed by reason of the execution and delivery of this Agreement or
the Notes.
(b) Each Borrower agrees to indemnify each Agent and each Bank and hold
each Agent and each Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind (including, without limitation,
the reasonable fees and disbursements of counsel for each Agent and each Bank in
connection with any investigative, administrative or judicial proceeding,
whether or not such Bank shall be designated a party thereto) which may be
incurred by any Agent or any Bank relating to or arising out of this Agreement
or any actual or proposed use of proceeds of Loans hereunder; provided that no
Bank shall have the right to be indemnified hereunder for its own gross
negligence or willful misconduct, IT BEING THE INTENTION HEREBY THAT EACH BANK
AND EACH AGENT SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY
NEGLIGENCE.
SECTION 14.4. Right and Sharing of Set-Offs. (a) Upon the occurrence and
during the continuance of any Event of Default, each Bank is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and any Note held by such Bank, irrespective of whether or not such
Bank shall have made any demand under this Agreement or such Note and although
such obligations may be unmatured. Each Bank agrees promptly to notify any such
Borrower after any such setoff and application made by such Bank, provided that
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section 14.4(a) are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.
(b) Each Bank agrees that if it shall, by exercising any right of setoff or
counterclaim or otherwise, receive payment after the occurrence and during the
continuance of an Event of Default of a proportion of the aggregate amount of
principal and interest due with respect to any Loan which is greater than the
proportion received by any other Bank in respect of such Loan, the Bank
receiving such proportionately greater payment shall purchase such
participations in the interests in such Loan held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to each Loan held by Banks shall be shared
by Banks ratably in accordance with their respective Commitment Percentages;
provided that nothing in this Section 14.4 shall
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impair the right of any Bank to exercise any right of setoff or counterclaim it
may have and to apply the amount subject to such exercise to the payment of
indebtedness of any Borrower other than its indebtedness under the Loans. Each
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that Participants may exercise rights of setoff or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of each Borrower in the amount of such
participation.
SECTION 14.5. Amendments and Waivers. Any provision of this Agreement, the
Notes or the other Loan Papers may be amended or waived if, but only if such
amendment or waiver is in writing and is signed by Borrowers and Required Banks
(and, if the rights or duties of either Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall, unless signed by all
Banks, (a) increase the Commitments of any Bank or subject any Bank to any
additional obligation, (b) forgive any of the principal of or reduce the rate of
interest on any Loan or any fees hereunder, (c) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder including
the Termination Date, (d) change the percentages of the Total Commitment, or the
number of Banks which shall be required for the Banks or any of them to take any
action under this Section 14.5 or any other provision of this Agreement, (e)
permit any Borrower to assign any of its rights hereunder, (f) amend or waive
any of the provisions of Article IV or the definitions contained in Section 1.1
applicable thereto or (g) provide for release or substitution of collateral for
the Obligations or any part thereof other than releases required pursuant to
sales of collateral which are expressly permitted by Section 9.5 hereof.
Borrower, Agent and each Bank further acknowledge that any decision by Agent or
any Bank to enter into any amendment, waiver or consent pursuant hereto shall be
made by such Bank or Agent in its sole discretion, and in making any such
decision Agent and each such Bank shall be permitted to give due consideration
to any credit or other relationship Agent or any such Bank may have with any
Affiliate of Borrower, including, without limitation, any credit or other
relationship with Patina or any other Unrestricted Subsidiary of Borrower.
SECTION 14.6. Survival. All representations, warranties and covenants made
by each Borrower herein or in any certificate or other instrument delivered by
it or in its behalf under the Loan Papers shall be considered to have been
relied upon by Banks and shall survive the delivery to Banks of such Loan Papers
or the extension of the Loans (or any part thereof), regardless of any
investigation made by or on behalf of Banks.
SECTION 14.7. Limitation on Interest. Regardless of any provision contained
in the Loan Papers, Banks shall never be entitled to receive, collect, or apply,
as interest on the Loans, any amount in excess of the Maximum Lawful Rate, and
in the event Banks ever receive, collect or apply as interest any such excess,
such amount which would be deemed excessive interest shall be deemed a partial
prepayment of principal and treated hereunder as such; and if the Loans are paid
in full, any remaining excess shall promptly be paid to the applicable
Borrower(s). In determining whether or not the interest paid or payable under
any specific contingency exceeds the Maximum Lawful Rate, each Borrower and
Banks shall, to the extent permitted under applicable law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof and (c) amortize, prorate,
allocate and spread, in equal parts, the total amount of the interest throughout
the entire contemplated term of the applicable Notes, so that the interest rate
is the Maximum Lawful Rate throughout the entire term of the Notes; provided,
however, that if the unpaid principal balance thereof is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Lawful
Rate, Banks shall refund to the applicable Borrower(s) the amount of such excess
and, in such event, Banks shall not be subject to any penalties provided by any
laws for contracting for, charging, taking, reserving or receiving interest in
excess of the Maximum Lawful Rate.
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SECTION 14.8. Invalid Provisions. If any provision of the Loan Papers is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable, the
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of the Loan Papers a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 14.9. Waiver of Consumer Credit Laws. Pursuant to Article 15.10(b)
of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended,
each Borrower agrees that such Chapter 15 shall not govern or in any manner
apply to the Loans.
SECTION 14.10. Successors and Assigns. (a) Each Loan Paper binds and inures
to the parties to it, any intended beneficiary of it, and each of their
respective successors and permitted assigns. No Company may assign or transfer
any rights or obligations under any Loan Paper without first obtaining all
Banks' consent, and any purported assignment or transfer without all Banks'
consent is void. No Bank may transfer, pledge, assign, sell any participation
in, or otherwise encumber its portion of the Obligations except as permitted by
clauses (b) or (c) below.
(b) Any Bank may (subject to the provisions of this section, in accordance
with applicable law, in the ordinary course of its business, and at any time)
sell to one or more Persons (each a "Participant") participating interests in
its portion of the Obligations. The selling Bank remains a "Bank" under the Loan
Papers, the Participant does not become a "Bank" under the Loan Papers, and the
selling Bank's obligations under the Loan Papers remain unchanged. The selling
Bank remains solely responsible for the performance of its obligations and
remains the holder of its share of the outstanding Loans for all purposes under
the Loan Papers. Each Borrower and each Agent shall continue to deal solely and
directly with the selling Bank in connection with that Bank's rights and
obligations under the Loan Papers, and each Bank must retain the sole right and
responsibility to enforce due obligations of the Companies. Participants have no
rights under the Loan Papers except certain voting rights as provided below.
Subject to the following, each Bank may obtain (on behalf of its Participants)
the benefits of Article XIII with respect to all participations in its part of
the Obligations outstanding from time to time so long as no Borrower is
obligated to pay any amount in excess of the amount that would be due to that
Bank under Article XIII calculated as though no participations have been made.
No Bank may sell any participating interest under which the Participant has any
rights to approve any amendment, modification, or waiver of any Loan Paper
except as to matters in Sections 14.5(a) through 14.5(g).
(c) Each Bank may make assignments to the Federal Reserve Bank. Each Bank
may also assign to one or more assignees (each an "Assignee") all or any part of
its rights and obligations under the Loan Papers so long as (i) the assignor
Bank and Assignee execute and deliver to each Agent and each Borrower for their
consent and acceptance (that may not be unreasonably withheld) an assignment and
assumption agreement in substantially the form of Exhibit K (an "Assignment and
Assumption Agreement") and pay to Administrative Agent a processing fee of
$2,500, (ii) the Assignee acquires an identical percentage interest in each
Commitment of the assignor Bank and an identical percentage of the interests in
the outstanding Loans held by such assignor Bank, and (iii) the conditions
(including, without limitation, minimum amounts of the Total Commitment that may
be assigned or that must be retained) for that assignment set forth in the
applicable Assignment and Assumption Agreement are satisfied. The "Effective
Date" in each Assignment and Assumption Agreement must (unless a shorter period
is agreeable to each Borrower and Administrative Agent) be at least five (5)
Domestic Business Days after it is executed and delivered by the assignor Bank
and Assignee to Administrative Agent and
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each Borrower for acceptance. Once that Assignment and Assumption Agreement is
accepted by Administrative Agent and each Borrower, then, from and after the
Effective Date stated in it (i) Assignee automatically becomes a party to this
Agreement and, to the extent provided in that Assignment and Assumption
Agreement, has the rights and obligations of a Bank under the Loan Papers, (ii)
the assignor Bank, to the extent provided in that Assignment and Assumption
Agreement, is released from its obligations to fund Borrowings under this
Agreement and its reimbursement obligations under this Agreement and, in the
case of an Assignment and Assumption Agreement covering all of the remaining
portion of the assignor Bank's rights and obligations under the Loan Papers,
that Bank ceases to be a party to the Loan Papers, (iii) each Borrower shall
execute and deliver to the assignor Bank and Assignee the appropriate Notes in
accordance with this Agreement following the transfer, (iv) upon delivery of the
Notes under clause (iii) preceding, the assignor Bank shall return to each
Borrower all Notes previously delivered to that Bank under this Agreement, and
(v) Schedule 1 is automatically deemed to be amended to reflect the name,
address, telecopy number, and Commitment(s) of Assignee and the remaining
Commitment(s) (if any) of the assignor Bank, and Administrative Agent shall
prepare and circulate to each Borrower and Banks an amended Schedule 1
reflecting those changes.
SECTION 14.11. TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN
PAPERS HAVE BEEN EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE LAWS OF
ANY STATE IN WHICH ANY PROPERTY INTENDED AS SECURITY FOR THE OBLIGATIONS IS
LOCATED NECESSARILY GOVERN (A) THE PERFECTION AND PRIORITY OF THE LIENS IN FAVOR
OF AGENT AND BANKS WITH RESPECT TO SUCH PROPERTY, AND (B) THE EXERCISE OF ANY
REMEDIES (INCLUDING FORECLOSURE) WITH RESPECT TO SUCH PROPERTY.
SECTION 14.12. Consent to Jurisdiction; Waiver of Immunities. (a) Each
Borrower hereby irrevocably submits to the jurisdiction of any Texas State or
Federal court sitting in the Northern District of Texas over any action or
proceeding arising out of or relating to this Agreement or any other Loan
Papers, and each Borrower hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such Texas State or
Federal court. Each Borrower hereby irrevocably appoints The Corporation Company
(the "Process Agent"), with an office on the date hereof at 1675 Broadway,
Denver, Colorado 80202, as its agent to receive on behalf of each Borrower
proper service of copies of the summons and complaint and any other process
which may be made by mailing or delivering a copy of such process to each
Borrower (as applicable) in care of the Process Agent at the Process Agent's
above address, and each Borrower hereby irrevocably authorizes and directs the
Process Agent to accept such service on their behalf. As an alternative method
of service, each Borrower also irrevocably consents to the service of any and
all process in any such action or proceeding by the mailing of copies of such
process to each Borrower at its respective address specified in Section 14.1.
Each Borrower agree that a final judgment on any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Nothing in this Section 14.12 shall affect any right of Banks to serve
legal process in any other manner permitted by law or affect the right of any
Bank to bring any action or proceeding against any Borrower or any of their
Subsidiaries or their properties in the courts of any other jurisdictions.
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(c) To the extent that any Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the other Loan Papers.
SECTION 14.13. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when Administrative Agent shall have
received counterparts hereof signed by all of the parties hereto or, in the case
of any Bank as to which an executed counterpart shall not have been received,
Administrative Agent shall have received telegraphic or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank.
SECTION 14.14. No Third Party Beneficiaries. It is expressly intended that
there shall be no third party beneficiaries of the covenants, agreements,
representations or warranties herein contained other than Participants and
Assignees permitted pursuant to Section 14.10 and Affiliates of any Bank which
hold any part of the Obligations.
SECTION 14.15. COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS, AGENTS AND
BORROWERS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENTS AND BORROWERS. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN BANKS, AGENTS AND BORROWERS.
SECTION 14.16. WAIVER OF JURY TRIAL. EACH BORROWER, AGENT AND BANK HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND FOR
ANY COUNTERCLAIM THEREIN.
(Remainder of Page left intentionally blank)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers on the day and year first
above written.
BORROWERS:
PATINA OIL & GAS CORPORATION,
a Delaware corporation
By:/s/ David J. Kornder
- -----------------------
David J. Kornder,
Vice President
1625 Broadway
Denver, Colorado 80202
Attn: David J. Kornder
Telecopy No.: (303) 592-8600
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
SOCO WATTENBERG CORPORATION,
a Delaware corporation
By: /s/ David J. Kornder
- ------------------------
David J. Kornder,
Vice President
777 Main Street, Suite 2500
Fort Worth, Texas 76102
Attn: James H. Shonsey
Telecopy No.: 817-882-5895
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
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GERRITY OIL & GAS CORPORATION,
a Delaware corporation
By: /s/ David J. Kornder
- ------------------------
David J. Kornder,
Vice President
1625 Broadway
Denver, Colorado 80202
Attn: David Kornder
Telecopy No.: (303) 592-8600
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
BANKS:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ Timothy E. Perry
- ------------------------
Timothy E. Perry, Senior Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. Scott Fowler
- -----------------------
J. Scott Fowler, Vice President
CIBC, Inc.
By:
Its:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
- -----------------------
Pascal Poupelle, Senior Vice President
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WELLS FARGO BANK, N.A.
By: /s/ Charles D. Kirkham
- --------------------------
Charles D. Kirkham, Vice President
ADMINISTRATIVE AGENT:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ Timothy E. Perry
- ------------------------
Timothy E. Perry, Senior Vice President
DOCUMENTARY AGENT:
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. Scott Fowler
- -----------------------
J. Scott Fowler, Vice President
CO-AGENTS:
CIBC, INC.
By:
Its:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
- -----------------------
Pascal Poupelle, Senior Vice President
WELLS FARGO BANK, N.A.
By: /s/ Charles D. Kirkham
- --------------------------
Charles D. Kirkham, Vice President
78
EXHIBIT 10.2
SUBORDINATE LOAN AGREEMENT
dated as of
May 2, 1996
among
SOCO WATTENBERG CORPORATION
and PATINA OIL & GAS CORPORATION,
as Lenders,
and
GERRITY OIL & GAS CORPORATION,
as Borrower
<PAGE>
TABLE OF CONTENTS
ARTICLE I TERMS DEFINED ..................................................... 1
SECTION 1.1. Definitions.................................. 1
SECTION 1.2. Term Defined in the Indenture................ 6
ARTICLE II THE LOAN FACILITY.................................................. 7
SECTION 2.1. Commitments................................... 7
SECTION 2.2. Method for Requesting Advances............... 7
SECTION 2.3. Notes........................................ 7
SECTION 2.4. Interest Rate................................ 8
SECTION 2.6. Maturity Date................................ 8
SECTION 2.7. Voluntary Prepayments........................ 8
SECTION 2.8. Commitment Fee............................... 8
SECTION 2.9. Funding Fee.................................. 9
SECTION 2.10. General Provisions as to Payments........... 9
ARTICLE III OBLIGATIONS AND RIGHTS OF LENDERS ASSIGNED........................ 9
SECTION 3.1. Collateral Assignment to Senior Lenders..... 9
SECTION 3.2. Place of Payment............................ 9
SECTION 3.3. Certain Rights of Administrative Agent...... 9
ARTICLE IV CONDITIONS TO ADVANCES............................................ 10
SECTION 4.1. Conditions to Initial Advance................ 10
SECTION 4.2. Conditions to Each Advance................... 11
SECTION 4.3. Additional Condition to Initial Advance...... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES..................................... 11
SECTION 5.1. Corporate Authorization; Contravention....... 11
SECTION 5.2. Binding Effect............................... 11
SECTION 5.3. Margin Stock................................. 12
SECTION 5.4. Representations and Warranties Incorporated
by Reference........................ 12
ARTICLE VI COVENANTS......................................................... 12
SECTION 6.1. Covenants Incorporated by Reference.......... 12
SECTION 6.2 Use of Proceeds............................... 12
ARTICLE VII SUBORDINATION OF NOTE............................................ 12
SECTION 7.1. Note Subordinated to Senior Indebtedness..... 12
SECTION 7.2. No Payment on Notes in Certain Circumstances. 13
SECTION 7.3. Payment over of Proceeds upon Dissolution,
Etc.................................. 14
ARTICLE VIII DEFAULTS........................................................ 17
1
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SECTION 8.1. Events of Default............................ 17
ARTICLE IX MISCELLANEOUS..................................................... 19
SECTION 9.1. Notices...................................... 19
SECTION 9.2. No Waivers................................... 19
SECTION 9.3. Expenses; Indemnification; Documentary
Taxes.................................... 19
SECTION 9.4. Set-Offs..................................... 20
SECTION 9.5. Amendments and Waivers....................... 20
SECTION 9.6. Survival..................................... 20
SECTION 9.7. Limitation on Interest....................... 21
SECTION 9.8. Invalid Provisions........................... 21
SECTION 9.9. Waiver of Consumer Credit Laws............... 21
SECTION 9.10. Successors and Assigns....................... 21
SECTION 9.11. TEXAS LAW.................................... 21
SECTION 9.12. Consent to Jurisdiction; Waiver of
Immunities................................... 21
SECTION 9.13. Counterparts; Effectiveness................. 22
SECTION 9.14. COMPLETE AGREEMENT.......................... 22
SECTION 9.15. WAIVER OF JURY TRIAL......................... 22
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THIS SUBORDINATE LOAN AGREEMENT (this "Agreement") is dated as of the 2nd
day of May, 1996, among Patina Oil & Gas Corporation, a Delaware corporation
("Patina"), SOCO Wattenberg Corporation, a Delaware corporation ("SWAT") (Patina
and SWAT are collectively referred to herein as "Lenders" and individually as a
"Lender") and Gerrity Oil & Gas Corporation, a Delaware corporation
("Borrower"). Notwithstanding that this Agreement is executed on May 2, 1996,
this Agreement will not be deemed to be delivered and (subject only to the
obligations of Lenders and Borrower under this sentence and the remaining
provisions of this paragraph) will not constitute a binding obligation of
Lenders and Borrower unless and until the Fairness Opinion and the Certificate
of Effectiveness (each as herein defined) have been delivered by Borrower to
Lenders. Upon delivery of such Fairness Opinion and Certificate of
Effectiveness, this Agreement shall be deemed to be delivered as of May 2, 1996
and will constitute the valid and binding agreement of the parties hereto
effective as of May 2, 1996, enforceable against such parties hereto in
accordance with its terms. Borrower shall have no obligation to deliver the
Fairness Opinion or the Certificate of Effectiveness, and if the Fairness
Opinion and the Certificate of Effectiveness are not delivered on or before May
1, 1997, the obligations of Lenders under this paragraph shall terminate and
shall be of no further force or effect.
W I T N E S S E T H
WHEREAS, Borrower has requested that Lenders make a term loan to Borrower
on the terms and conditions set forth herein, and Lenders are willing to make
such term loan to Borrower on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower and Lenders agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Administrative Agent" means Texas Commerce Bank National Association as
Administrative Agent under the TCB Bank Credit Agreement and its successors and
assigns.
"Advance" has the meaning set forth in Section 2.1.
"Authorized Officer" means, as to any Person, its Chairman, Vice-Chairman,
President, Executive Vice President(s), Senior Vice President(s) or Vice
President duly authorized to act on behalf of such Person.
"Availability" means, at any time, (a) the Commitment in effect at such
time, minus (b) the principal balance of the Loan at such time.
"Bank Credit Agreement" means the TCB Bank Credit Agreement, together with
all other agreements, instruments and documents executed or delivered pursuant
thereto or in connection therewith, in each case as such TCB Bank Credit
Agreement or other agreements, instruments or documents may be amended,
supplemented, extended, renewed, replaced, substituted or otherwise modified
from time to time, including, without limitation, replacement or substitution in
its entirety with one or more agreements, agents or syndicates of financial
institutions; provided, that with respect to any agreement providing for the
refinancing of Indebtedness under the Bank Credit Agreement, such agreement
shall be the Bank Credit Agreement under this Agreement only if a notice to that
effect is delivered by Borrower to Lenders and there shall be at any time only
one instrument that is (together with the aforementioned related agreements,
instruments and documents) the Bank Credit Agreement under this Agreement.
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"Borrower" means Gerrity Oil & Gas Corporation, a Delaware corporation.
"Borrowing Date" means any Business Day upon which the proceeds of any
Advance are made available to Borrower.
"Business Day" means any day except a Saturday, Sunday or other day on
which national banks in Houston, Texas, are authorized by law to close.
"Closing Date" means May 2, 1996.
"Closing Transactions" means the transactions to occur on the Closing Date
pursuant to the Closing Documents (as defined in the TCB Bank Credit Agreement)
and the TCB Bank Credit Agreement, including, without limitation, (a) the
Merger, (b) the exchange of the issued and outstanding capital stock of Borrower
for the Exchange Securities (as defined in the TCB Bank Credit Agreement) (other
than shares of the Preferred Stock which is not exchangeable pursuant to the
Exchange Offer contemplated by Section 7.26 of the Merger Agreement), (c) the
contribution of SOCO Wattenberg (as defined in the TCB Bank Credit Agreement) to
Patina, (d) the assumption and repayment by Patina of $75,000,000 of Loans (as
defined in the SOCO Credit Agreement [as defined in the TCB Bank Credit
Agreement]) outstanding under the SOCO Credit Agreement, and (e) the termination
of the Existing Borrower Credit Agreement (as defined in the TCB Bank Credit
Agreement), including, without limitation, (i) the payment in full of all Debt
of Gerrity outstanding thereunder, (ii) the cancellation of all letters of
credit outstanding thereunder, and (iii) the termination and release of all
Liens securing the payment and performance of the obligations thereunder, or,
alternatively, the assignment of all such Liens to Administrative Agent to
secure the Indebtedness outstanding under the TCB Bank Credit Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Assignment of Intercompany Loan" means that certain Collateral
Assignment of Intercompany Loan of even date herewith by and among Lenders and
Administrative Agent.
"Commitment" means the commitment of Lenders to make Advances to Borrower
pursuant to Section 2.1 in an aggregate amount not to exceed $87,000,000 as such
amount may be reduced or terminated from time to time in accordance with the
provisions hereof.
"Commitment Fee Percentage" means for any Fiscal Quarter through and
including the Fiscal Quarter in which the Commitment is cancelled and the Loan
is paid in full, one half of one percent (.50%). Notwithstanding the foregoing,
if the Commitment is cancelled and the Loan is paid in full prior to September
30, 1996, the Commitment Fee Percentage during the Fiscal Quarters commencing
with the First Quarter after the Fiscal Quarter in which the Commitment is
cancelled and the Loan is paid in full through and including the Fiscal Quarter
ending December 31, 1996 shall be three eights of one percent (.375%).
"Commitment Termination Date" means the first anniversary of the Closing
Date.
"Debt" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all other
indebtedness (including obligations under Capital Leases, other than Capital
Leases which are usual and customary oil and gas leases) of such Person on which
interest charges are customarily paid or accrued, (d) all Guarantees by such
Person, (e) the unfunded or unreimbursed portion of all letters of credit issued
for the account of such Person, and (f) all liability of such Person as a
general partner of a partnership for obligations of such partnership of the
nature described in (a) through (e) preceding.
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"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Designated Senior Indebtedness" means (i) Indebtedness and all other
monetary obligations (including expenses, fees and other monetary obligations)
under the Bank Credit Agreement, and (ii) any other Indebtedness constituting
Senior Indebtedness that, at any date of determination, has an aggregate
principal amount of at least $10,000,000 and is specifically designated by
Borrower in the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Effectiveness Certificate" means a Certificate of Effectiveness in the
form of Annex C attached hereto to be executed by Borrower and delivered to
Lenders after receipt of the Fairness Opinion pursuant to which this Agreement
(a) will be deemed to be delivered by the parties hereto, and (b) will
constitute the valid and binding obligations of the Lenders and Borrower,
enforceable against Lenders and Borrower in accordance with its terms.
"Exhibit" refers to an exhibit attached to this Agreement and incorporated
herein by reference, unless specifically provided otherwise.
"Fairness Opinion" means a written opinion of a nationally recognized
investment banking firm stating that the transaction contemplated by the Loan
Papers is fair to Borrower from a financial point of view.
"Fiscal Quarters" means the three (3) month periods falling in each Fiscal
Year ending March 31, June 30, September 30 and December 31.
"Fiscal Year" means a twelve (12) month period ending December 31.
"Indenture" means that certain Indenture dated June 30, 1994, by and
between Borrower and Chemical Bank as Trustee, which Indenture sets forth
certain terms applicable to the Subordinate Notes.
"Indenture Trustee" means the Trustee under the Indenture, and its
successor and assign.
"Lenders" means Patina and SWAT collectively, and "Lender" means either
Patina or SWAT.
"Lien" means with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, Borrower and its Subsidiaries shall be deemed to own
subject to a Lien any asset which is acquired or held subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a senior subordinate loan in an amount up to $87,000,000 to be
made by Lenders to Borrower pursuant to this Agreement.
"Loan Papers" means this Agreement, the Note and all other certificates,
documents or instruments delivered in connection with this Agreement, as the
foregoing may be amended from time to time.
"Margin Regulations" mean Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by which
such Person is directly or indirectly bound, or to which any
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assets of such Person may be subject, which is not cancelable by such Person
upon notice of ninety (90) days or less without liability for further payment
other than nominal penalty.
"Material Debt" means Debt of Borrower or any of its Subsidiaries issued
under one or more related or unrelated agreements or instruments in an aggregate
principal amount exceeding $2,500,000.
"Maximum Lawful Rate" means the maximum rate (or, if the context so permits
or requires, an amount calculated at such rate) of interest which, at the time
in question would not cause the interest charged on the Loan at such time to
exceed the maximum amount which Lenders would be allowed to contract for,
charge, take, reserve, or receive under applicable law after taking into
account, to the extent required by applicable law, any and all relevant payments
or charges under the Loan Papers.
"Merger" means the merger of Merger Sub with and into Borrower pursuant to
the Merger Agreement, with Borrower being the surviving corporation and pursuant
to which Borrower will become a wholly owned Subsidiary of Patina.
"Merger Agreement" means that certain Amended and Restated Agreement and
Plan of Merger dated as of January 16, 1995 as amended and restated as of March
20, 1996, by and among SOCO, Borrower, Lenders and Merger Sub.
"Merger Sub" means Patina Merger Corporation, a Delaware corporation, which
(a) prior to the Merger is a wholly owned Subsidiary of Patina, and (b) will be
merged into Borrower pursuant to the Merger, with Borrower being the surviving
corporation.
"Note" means a Senior Subordinate Promissory Note of Borrower payable to
the order of Lenders, in substantially the form of Annex A hereto, evidencing
the aggregate indebtedness of Borrower to Lenders resulting from the Loan made
to Borrower pursuant hereto, together with all modifications, extensions,
renewals and rearrangements thereof.
"Obligations" means all present and future indebtedness, obligations and
liabilities, and all renewals and extensions thereof, or any part thereof, of
Borrower or any of its Subsidiaries to Lenders arising pursuant to the Loan
Papers, and all interest accrued thereon and costs, expenses, and attorneys'
fees incurred in the enforcement or collection thereof, regardless of whether
such indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means Borrower's $12.00 Convertible Preferred Stock
containing the rights and preferences set forth in, and issued pursuant to, the
Preferred Stock Designation.
"Preferred Stock Designation" means the Certificate of Designation of
Rights and Preferences of $12.00 Convertible Preferred Stock filed with the
Secretary of State of Delaware on May 4, 1993, setting forth the rights and
preferences of the Preferred Stock.
"Process Agent" has the meaning set forth in Section 9.12.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Request for Advance" has the meaning set forth in Section 2.2.
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"Schedule" means a "schedule" attached to this Agreement and incorporated
herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement unless
specifically indicated otherwise.
"Senior Indebtedness" means the following obligations of Borrower, whether
outstanding on the date of this Agreement or hereafter Incurred: (i) all
Indebtedness and all other monetary obligations (including expenses, fees and
other monetary obligations) of Borrower under the Bank Credit Agreement, any
Interest Rate Agreement, Currency Agreement or Hedging Arrangement and
Borrower's guarantee of any Indebtedness or monetary obligation of any of its
Subsidiaries under any Interest Rate Agreement, Currency Agreement or Hedging
Agreement and (ii) all other Indebtedness of Borrower (other than the Note),
including principal and interest on such Indebtedness, unless such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, is pari passu with, or subordinated in right of
payment to, the Note; provided that the term "Senior Indebtedness" shall not
include (a) any Indebtedness of Borrower that, when Incurred and without respect
to any election under Section 1111(b) of the United States Bankruptcy Code, was
without recourse to Borrower, (b) any Indebtedness of Borrower to any of its
Subsidiaries or to a joint venture in which Borrower has an interest, (c) any
Indebtedness of Borrower not permitted by Section 4.03 of the Indenture, (d) any
repurchase, redemption or other obligation in respect of Redeemable Stock, (e)
any Indebtedness of Borrower to any employee, officer or director of Borrower or
any of its Subsidiaries, (f) any liability for federal, state, local or other
taxes owned or owing by Borrower, (g) any Trade Payables of Borrower, or (h) the
Subordinate Notes or the Senior Subordinate Obligations (as that term is defined
in the Indenture); it being the agreement of Borrower and Lenders that the Note
and the Obligations shall rank pari passu in right of payment to the Subordinate
Notes and the Senior Subordinate Obligations. Senior Indebtedness will also
include interest accruing subsequent to events of bankruptcy of Borrower and its
Subsidiaries at the rate provided for in the document governing such Senior
Indebtedness, whether or not such interest in an allowed claim enforceable
against the debtor in a bankruptcy case under federal bankruptcy law or similar
laws relating to insolvency.
"SOCO" means Snyder Oil Corporation, a Delaware corporation, which (a)
prior to the Merger, is the legal and beneficial owner of one hundred percent of
the issued and outstanding capital stock of Patina of every class, and (b)
immediately after the Merger, will be the legal and beneficial owner of seventy
percent (70%) of the issued and outstanding Common Stock of Patina (on a
non-diluted basis).
"Subordinate Notes" means Borrower's 11 3/4% Senior Subordinate Notes due
July 15, 2004.
"Subordinate Note Redemption Date" means the date specified as the "Change
of Control Payment Date" in the "Change of Control Offer" required to be
delivered by Borrower as a result of the Merger pursuant to Section 4.18 of the
Indenture.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges, or
other charges of any nature whatsoever, from time to time or at any time imposed
by law or any federal, state or local governmental agency. "Tax" means any one
of the foregoing.
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"TCB Bank Credit Agreement" means the Credit Agreement dated May 2, 1996 by
and among Borrower, Lenders, Administrative Agent, NationsBank of Texas, N.A.,
as Documentary Agent, Wells Fargo Bank, N.A., CIBC, Inc. and Credit Lyonnais New
York Branch, as Co-Agents, and the Banks parties thereto described on Schedule 1
thereto, as the same may be modified, amended, renewed, extended or restated
from time to time.
"TCB Bank Credit Obligations" means the Obligations under and as defined in
the TCB Bank Credit Agreement.
SECTION 1.2. Term Defined in the Indenture. Each of the following terms,
as used herein or in any of the other Loan Papers, shall have the meaning given
such term in the Indenture: Trade Payables, Capitalized Leases, Guaranteed,
GAAP, Currency Agreements, Interest Rate Agreements, Hedge Agreements,
Indebtedness, Incurred, Restricted Subsidiaries and Redeemable Stock.
ARTICLE II
THE LOAN FACILITY
SECTION 2.1. Commitments. (a) Lenders agree, subject to the terms and
conditions set forth in this Agreement, to lend to Borrower (a) in a single
Advance on the Subordinate Note Redemption Date, an amount equal to the
remainder of (i) 101% of the principal amount of the Subordinate Notes tendered
for redemption on the Subordinate Note Redemption Date, minus $14,000,000, and
(b) in one or more Advances subsequent to the Subordinate Note Redemption Date,
an amount equal to the lesser of (i) the purchase price to be paid by Borrower
for Subordinate Notes purchased by Borrower subsequent to the Subordinate Note
Redemption Date, or (ii) the principal amount of Subordinate Notes purchased by
Borrower subsequent to the Subordinate Note Redemption Date. In no event shall
Borrower be entitled to Advances hereunder (x) unless and until the Gerrity
Refinancing Reserve (as defined in the TCB Bank Credit Agreement) has been fully
exhausted for the purposes permitted pursuant to the TCB Bank Credit Agreement,
(y) after the Commitment Termination Date, or (z) which would cause the
aggregate amount of all Advances made hereunder to exceed $87,000,000. Amounts
repaid with respect to the Loan may not be reborrowed.
SECTION 2.2. Method for Requesting Advances. In order to request an
Advance, Borrower shall hand deliver, telex or telecopy to each Lender and to
Administrative Agent (so long as the TCB Bank Credit Agreement is in effect or
any TCB Bank Credit Obligations remain unpaid or unperformed) a duly completed
Request for Advance prior to 12:00 noon (Houston, Texas time), at least one (1)
Business Day before the Borrowing Date specified for the proposed Advance. Each
Request for Advance shall be substantially in the form of Annex B hereto, and
shall specify:
(a) the aggregate principal amount of the Subordinate Notes to be redeemed
or repurchased by Borrower on the date such Advance is to be made;
(b) the redemption or repurchase price to be paid by Borrower for the
Subordinate Notes to be redeemed or repurchased with the proceeds of such
Advance;
(c) the Borrowing Date of such Advance, which shall be a Business Day and
shall also be the date of the closing of the redemption or repurchase of
Subordinate Notes to be redeemed or repurchased by Borrower with the proceeds of
such Advance; and
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(d) the aggregate amount of such Borrowing (which shall not exceed the
lesser of (i) the aggregate redemption or purchase price to be paid by Borrower
for the Subordinate Notes to be redeemed or repurchased by Borrower with the
proceeds of such Advance), or (ii) the principal balance of the Subordinate
Notes to be redeemed or repurchased by Borrower in whole or in part with the
proceeds of such Advance.
Not later than 12:00 noon (Houston, Texas time) on the date each Advance is
requested, Lenders shall, subject to the satisfaction of each condition
precedent set forth in Section 4.1 an 4.2 hereof, make available to Borrower the
proceeds of such Advance in Federal or other funds immediately available in
Houston, Texas.
SECTION 2.3. Notes. The Loan shall be evidenced by a single Note payable
to the order of the Lenders in the amount of $87,000,000.
SECTION 2.4. Interest Rate. (a) Subject to Section 2.4(b) hereof, interest
shall accrue on the outstanding principal balance of the Loan at a rate per
annum equal to eleven and three fourths percent (11.75%); provided that in no
event shall the rate charged hereunder or under the Note exceed the Maximum
Lawful Rate.
(b) In the event of default in payment of any of the Obligations when due
(and regardless of whether such Obligations become due as a result of the lapse
of time, the acceleration of maturity or otherwise) the entire outstanding
Obligations (including, to the extent permitted by applicable law, accrued but
unpaid interest) shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the lesser of (a) eighteen percent (18%), or (b)
the Maximum Lawful Rate.
(c) Notwithstanding the foregoing, if at any time the rate of interest
calculated pursuant to Section 2.4 (a) or (b) hereof (the "contract rate") is
limited to the Maximum Lawful Rate, any subsequent reductions in the contract
rate shall not reduce the rate of interest on the affected Loan below the
Maximum Lawful Rate until the total amount of interest accrued equals the amount
of interest which would have accrued if the contract rate had at all times been
in effect. In the event that at maturity (stated or by acceleration), or at
final payment of the Note, the total amount of interest paid or accrued on the
Note is less than the amount of interest which would have accrued if the
contract rate had at all times been in effect with respect thereto, then at such
time, to the extent permitted by law, Borrower shall pay to the holders of the
Note an amount equal to the difference between (i) the lesser of the amount of
interest which would have accrued if the contract rate had at all times been in
effect and the amount of interest which would have accrued if the Maximum Lawful
Rate had at all times been in effect, and (ii) the amount of interest actually
paid on the Note.
(d) Interest payable on the Loan shall be computed based on the number of
actual days elapsed assuming that each calendar year consisted of 360 days.
SECTION 2.5. Interest Payments. Interest shall be payable on the Note as it
accrues on the last day of each Fiscal Quarter commencing with the first such
day after the date of the initial Advance made hereunder.
SECTION 2.6. Maturity Date. The entire outstanding principal balance of
the Loan and all accrued but unpaid interest thereon and all other Obligations
shall be due and payable in full on July 15, 2004.
SECTION 2.7. Voluntary Prepayments. Borrower may, upon written notice to
Lenders one (1) Business Day prior to such payment date, prepay the Loan in
whole or in part at any time and from time to time without premium or penalty;
provided, that (a) any partial prepayment shall be in a minimum amount of
$500,000 and shall be in an amount which is an integral multiple of $100,000,
and (b) any prepayment of principal shall be paid together with accrued but
unpaid interest on the principal repaid through the date of repayment.
SECTION 2.8. Commitment Fee. On the Commitment Termination Date and on the
last day of each Fiscal Quarter prior thereto commencing June 30, 1996, Borrower
shall pay to Lenders a commitment fee
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(computed on the basis of actual days elapsed and as if each calendar year
consisted of 360 days) equal to the Commitment Fee Percentage of the daily
average Availability for the Fiscal Quarter (or portion thereof) ending on such
date.
SECTION 2.9. Funding Fee. On each day on which an Advance is made under
the Loan, Borrower shall pay to Lenders a funding fee in an amount equal to
.125% of the amount of such Advance.
SECTION 2.10. General Provisions as to Payments. (a) Prior to an Event of
Default (as defined in the TCB Bank Credit Agreement), Borrower shall make each
payment of principal of, and interest on, the Loan and all fees payable
hereunder to Lenders at their addresses set forth on the signature pages hereto.
(b) After the occurrence and during the continuance of an Event of Default
(as defined in the TCB Bank Credit Agreement), Borrower shall make each payment
of principal of, and interest on, the Loan and all fees payable hereunder not
later than 12:00 noon (Houston, Texas time) on the date when due, in Federal or
other funds immediately available in Houston, Texas, in the manner provided in
Section 3.2 hereof. Whenever any payment of principal of, or interest on, the
Loan or of fees shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding Business Day.
(c) After the occurrence of an Event of Default, all amounts collected or
received by either Lender in respect of the Loan shall be applied first to the
payment of all proper costs incurred by either Lender in connection with the
collection thereof (including reasonable expenses and disbursements of either
Lender), second to the reimbursement of any advances made by either Lender to
effect performance of any unperformed covenants of Borrower under any of the
Loan Papers, and third, to the payment of principal and accrued but unpaid
interest on the Loan in such manner as Lenders shall determine in their sole
discretion.
ARTICLE III
OBLIGATIONS AND RIGHTS OF LENDERS ASSIGNED
SECTION 3.1. Collateral Assignment to Senior Lenders. Borrower and Lenders
acknowledge and agree that to secure the TCB Bank Credit Obligations, Lenders
have entered into the Collateral Assignment of Intercompany Loan, pursuant to
which Lenders have transferred, assigned, set over and conveyed, and granted a
security interest in and to, this Agreement, the Note and the other Loan Papers
and all rights (but none of the obligations) of Lenders hereunder and thereunder
(including, without limitation, all rights of Lenders to receive payments of
principal, interest and other amounts due and owing hereunder) to the
Administrative Agent for the ratable benefit of Banks parties to the TCB Bank
Credit Agreement.
SECTION 3.2. Place of Payment. After the occurrence and during the
continuation of an Event of Default (as defined in the TCB Bank Credit
Agreement), all payments and prepayments made by Borrower of all or any part of
the Obligations hereunder shall be paid to Administrative Agent at its address
in Houston, Texas specified in Schedule 1 to the TCB Bank Credit Agreement for
application by Administrative Agent and the Banks parties to the TCB Bank Credit
Agreement in the manner specified therein.
SECTION 3.3. Certain Rights of Administrative Agent. Without limiting
anything contained in Section 3.1 hereof, Borrower acknowledges and agrees, for
the benefit of Administrative Agent and the Banks parties to the TCB Bank Credit
Agreement, that until such time as the TCB Bank Credit Obligations have been
paid and performed in full and the TCB Bank Credit Agreement has been
terminated, (a) Administrative Agent shall have the absolute and exclusive right
to enforce the provisions of this Agreement and the other Loan Papers and the
obligations of Borrower hereunder, (b) no amendment or modification of the terms
of this Agreement or any other Loan Paper, and no waiver of compliance of any
obligation of Borrower hereunder or thereunder, and no consent granted pursuant
hereto or thereto, shall be enforceable against or binding upon Administrative
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Agent or any Bank party to the TCB Bank Credit Agreement unless such amendment,
modification or waiver shall be in writing and executed by Administrative Agent,
(c) all obligations of Borrower hereunder or under any of the other Loan Papers
with respect to the payment of costs and expenses (including fees and expenses
of counsel to Lenders) in connection with the administration, collection and
enforcement of the Loans shall include the costs and expenses of Administrative
Agent and the Banks parties to the TCB Bank Credit Agreement, and (d) all
notices, reports, certificates and other information which would otherwise be
provided to Lenders hereunder shall instead (or in addition to) be provided to
Administrative Agent.
ARTICLE IV
CONDITIONS TO ADVANCES
SECTION 4.1. Conditions to Initial Advance. The obligation of Lenders to
make the initial Advance is subject to the satisfaction of each of the following
conditions:
(a) Closing Deliveries. Lenders shall have received each of the following
documents, instruments and agreements, each of which shall be in form and
substance and executed in such counterparts as shall be acceptable to Lenders
and each of which shall, unless otherwise indicated, be dated the Closing Date:
(i) the Note payable to the order of Lender in the amount of
$87,000,000, duly executed by Borrower;
(ii) a Certificate executed by an Authorized Officer of Borrower
stating that (a) the representations and warranties contained in this
Agreement are true and correct in all respects, and (b) no Default or
Event of Default has occurred which is continuing; and
(iii) such resolutions, certificates and other documents relating
to the existence of Borrower and its Subsidiaries, the corporate
authority for the execution, delivery and performance of this
Agreement, the Note, the other Loan Papers and certain other matters
relevant hereto, in form and substance satisfactory to the
Administrative Agent, and certificates of incumbency for Borrower.
(b) No Material Adverse Change. In the sole discretion of Lenders, no
material adverse change shall have occurred in the assets, liabilities,
financial condition or prospects of Borrower or any of its Subsidiaries.
(c) No Legal Prohibition. The transactions contemplated by this Agreement
and the Closing Transactions shall be permitted by applicable law and regulation
and shall not subject Lenders or Borrower or any of their respective
Subsidiaries to any onerous condition.
(d) No Litigation. Except for matters disclosed in the Registration
Statement, no litigation, arbitration or similar proceeding shall be pending
which calls into question the validity or enforceability of this Agreement, any
of the other Loan Papers, any of the Closing Transactions or any of the Closing
Documents (as defined in the TCB Bank Credit Agreement).
SECTION 4.2. Conditions to Each Advance. The obligation of Lenders to make
each Advance is subject to the further satisfaction of the following conditions:
(a) timely receipt by Lenders of a Request for Advance;
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(b) immediately before and after giving effect to such Advance, no Default
or Event of Default shall have occurred and be continuing and the making of such
Advance shall not cause a Default or Event of Default; and
(c) the representations and warranties of Borrower contained in this
Agreement and the other Loan Papers shall be true and correct on and as of the
date of such Advance.
The delivery of each Request for Advance hereunder shall constitute a
representation and warranty by Borrower that on the date of such Advance the
statements contained in subclauses (b) and (c) above are true.
SECTION 4.3. Additional Condition to Initial Advance. The obligation of
Lenders to make the initial Advance is subject to the further condition that
Administrative Agent shall have received (a) the Fairness Opinion, and (b) the
Effectiveness Certificate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that each of the following statements is
true and correct on the date hereof, will be true and correct on the Closing
Date (before and immediately after giving effect to the Closing Transactions)
and will be true and correct on the date of each Advance.
SECTION 5.1. Corporate Authorization; Contravention. The execution,
delivery and performance of this Agreement, the Note and the other Loan Papers
are within Borrower's corporate powers, when executed will be duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulations
(including, without limitation, the Margin Regulations) or of the certificate of
incorporation, bylaws or other organizational documents of Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
Borrower or any of its Subsidiaries or result in the creation or imposition of
any Lien on any asset of Borrower or any of its Subsidiaries.
SECTION 5.2. Binding Effect. This Agreement constitutes a valid and
binding agreement of Borrower; the Note and the other Loan Papers when executed
and delivered in accordance with this Agreement, will constitute the valid and
binding obligations of Borrower; and each Loan Paper is enforceable against
Borrower in accordance with its terms except as (a) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors
rights generally, and (b) the availability of equitable remedies may be limited
by equitable principles of general applicability.
SECTION 5.3. Margin Stock. None of the proceeds of the Loan will be used,
directly or indirectly, (i) for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (ii) in violation of
applicable law or regulation (including, without limitation, the Margin
Regulations).
SECTION 5.4. Representations and Warranties Incorporated by Reference. To
the extent the representations and warranties contained in Sections 7.1 and 7.2
and Section 7.5 through 7.20 (inclusive) of the TCB Bank Credit Agreement
constitute representations and warranties regarding Borrower or any Subsidiary
of Borrower, such representations and warranties are true and correct in all
respects.
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ARTICLE VI
COVENANTS
SECTION 6.1. Covenants Incorporated by Reference. Borrower agrees that, so
long as Lenders have any commitment to lend hereunder or any amount payable
under the Note remains unpaid, Borrower will, and will cause each of its
Subsidiaries to, observe, perform and comply with all covenants and agreements
applicable to Borrower or any of its Subsidiaries contained in the TCB Bank
Credit Agreement; provided, that, to the extent any of such covenants require
the delivery of any notice, report, request or other information to any Agent or
Bank pursuant the TCB Bank Credit Agreement, Borrower shall be obligated to
provide such notice, report, request or other information to Lenders hereunder.
SECTION 6.2 Use of Proceeds. The proceeds of Advances under the Loan will
be used by Borrower solely for the purposes described in Section 2.1 of the TCB
Bank Credit Agreement.
ARTICLE VII
SUBORDINATION OF NOTE
SECTION 7.1. Note Subordinated to Senior Indebtedness. Each Lender
covenants and agrees, and each subsequent holder of all or any part of the Note,
by its acceptance of any interest in the Note, likewise covenants and agrees
that the Note is issued subject to the provisions of this Article VII; and each
Person holding the Note or any interest therein, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that the
Obligations shall, to the extent and in the manner set forth in this
Article VII, be subordinated in right of payment to the prior payment in full,
in cash or cash equivalents, of all amounts payable under Senior Indebtedness,
including, without limitation, Borrower's obligations under the Bank Credit
Agreement (including any interest accruing subsequent to an event specified in
Sections 8.1(h) and 8.1(i), whether or not such interest is an allowed claim
enforceable against the debtor under the United States Bankruptcy Code).
SECTION 7.2. No Payment on Notes in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of Borrower of the
Obligations, whether pursuant to the terms of the Note or upon acceleration or
otherwise, shall be made if, at the time of such payment, there exists a default
in the payment of all or any portion of the obligations on any Senior
Indebtedness, and such default shall not have been cured or waived or the
benefits of this sentence waived by or on behalf of the holders of such Senior
Indebtedness.
(b) During the continuance of any other event of default with respect to
(i) the Bank Credit Agreement pursuant to which the maturity thereof may be
accelerated and (a) upon receipt by either Lender of written notice from the
Administrative Agent (or any other trustee or representative of the Lenders
parties to the Bank Credit Agreement) (the "Bank Agent") or (b) if such event of
default under the Bank Credit Agreement results from the acceleration of the
Note, from and after the date of such acceleration, no payment of the
Obligations may be made by or on behalf of Borrower upon or in respect of the
Note for a period (a "Payment Blockage Period") commencing on the earlier of the
date of receipt of such notice or the date of such acceleration and ending 179
days thereafter (unless such Payment Blockage Period shall be terminated by
written notice to either Lender from the Bank Agent or by repayment in full in
cash or cash equivalents of such Senior Indebtedness or such event of default
has been cured or waived) or (ii) any other Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated, upon receipt by
either Lender of written notice from the trustee or other representative for the
holders of such other Designated Senior Indebtedness (or the holders of at least
a majority in principal amount of such other Designated Senior
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Indebtedness then outstanding), no payment of the Obligations may be made by or
on behalf of Borrower upon or in respect of the Note for a Payment Blockage
Period commencing on the date of receipt of such notice and ending 119 days
thereafter (unless, in each case, such Payment Blockage Period shall be
terminated by written notice to either Lender from such trustee of, or other
representatives for, such holders or by repayment in full in cash or cash
equivalents of such Designated Senior Indebtedness or such event of default has
been cured or waived). Not more than one Payment Blockage Period pursuant to
this Section 7.2(b) may be commenced with respect to the Note during any period
of 360 consecutive days; provided that, subject to the limitations set forth in
the next sentence, the commencement of a Payment Blockage Period by the
representatives for, or the holders of, Designated Senior Indebtedness, other
than under the Bank Credit Agreement or under clause (i)(b) of this
Section 7.2(b), shall not bar the commencement of another Payment Blockage
Period by the Bank Agent within such period of 360 consecutive days.
Notwithstanding anything in this Agreement to the contrary, there must be 180
consecutive days in any 360-day period in which no Payment Blockage Period is in
effect. For all purposes of this Section 7.2(b), no event of default (other than
an event of default pursuant to the financial maintenance covenants under the
Bank Credit Agreement) that existed or was continuing (it being acknowledged
that any subsequent action that would give rise to an event of default pursuant
to any provision under which an event of default previously existed or was
continuing shall constitute a new event of default for this purpose) on the date
of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period shall be,
or shall be made, the basis for the commencement of a second Payment Blockage
Period by the representative for, or the holders of, such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such event of default shall have been cured or waived for a period of not less
than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any payment shall be
received by either Lender or any holder of the Note or any interest therein,
when such payment is prohibited by Section 7.2(a) or 7.2(b) of this Agreement,
the Lenders shall promptly notify the holders of Senior Indebtedness of such
prohibited payment and such payment shall be held in trust for the benefit of,
and shall be paid over or delivered to, the holders of Senior Indebtedness or
their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that,
upon notice from either Lender to the holders of Senior Indebtedness that such
prohibited payment has been made, the holders of the Senior Indebtedness (or
their representative or representatives or a trustee), within 30 days of receipt
of such notice from either Lender, notify either Lender of the amounts then due
and owing on the Senior Indebtedness, if any, and only the amounts specified in
such notice to such Lender shall be paid to the holders of Senior Indebtedness
and any excess above such amounts due and owing on Senior Indebtedness shall be
paid to Borrower.
SECTION 7.3. Payment over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities of Borrower of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
Borrower, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness (including any interest accruing subsequent to an event
specified in Sections 8.1(h) and 8.1(i) of this Agreement, whether or not such
interest is an allowed claim enforceable against the debtor under the United
States Bankruptcy Code) shall first be paid in full, in cash or cash
equivalents, before the holder of the Note shall be entitled to receive any
payment by Borrower on account of the Obligations, or any payment to acquire the
Note for cash, property or securities, or any distribution with respect to the
Note of any cash, property or securities. Before any payment may be made by, or
on behalf of, Borrower of any Obligations upon any such dissolution, winding up,
liquidation or reorganization, any payment or distribution of assets or
securities of Borrower of any kind or character, whether in cash, property or
securities, to which the holder of the Note would be entitled, but for the
provisions of this Article VII, shall be made by Borrower or by an receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person making
such payment or distribution, or by the holder of the Note if
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received by the holders of the Note, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives, or to any
trustee or trustees under any other indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or on
behalf of Borrower, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred. To the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision prohibiting
such payment or distribution, any payment or distribution of assets or
securities of Borrower of any kind or character, whether in cash, property or
securities, shall be received by the holder of the Note at any time when such
payment or distribution is prohibited by Section 7.3(a) of this Agreement and
before all obligations in respect of Senior Indebtedness are paid in full, in
cash or cash equivalents, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness (pro rata to such holders on the basis of the
respective amount of Senior Indebtedness held by such holders) or their
representatives, or to the trustee or trustees under any other indenture
pursuant to which any such Senior Indebtedness may have been issued, as their
respective interests appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full, in cash or cash equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness;
(d) For purposes of this Section 7.3, the words "cash, property or
securities" shall not be deemed to include, so long as the effect of this clause
is not to cause the Note to be treated in any case or proceeding or similar
event described in this Section 7.3 as part of the same class of claims as the
Senior Indebtedness or any class of claims pari passu with, or senior to, the
Senior Indebtedness for any payment or distribution, securities of Borrower or
any other corporation provide for by a plan of reorganization or readjustment
that are subordinated, at least to the extent that the Note is subordinated, to
the payment of all Senior Indebtedness then outstanding; provided, that (1) if a
new corporation results from such reorganization or readjustment, such
corporation assumes the Senior Indebtedness and (2) the rights of the holders of
the Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of Borrower with, or the
merger of Borrower with or into, another corporation or the liquidation of all
or substantially all of its property and assets to another corporation upon the
terms and conditions provided in Article Five of the Indenture shall not be
deemed a dissolution, winding up, liquidation or reorganization for the purposes
of this Section 7.3 if such other corporation shall, as a part of such
consolidation, merger, sale, conveyance, transfer, lease or other disposition,
pursuant to instruments and agreements acceptable to Lenders, agree to pay and
perform the Obligations in full.
SECTION 7.4. Subrogation. (a) Upon the payment in full of all Senior
Indebtedness in cash or cash equivalents, the holders of the Note shall be
subrogated to the rights of the holders of Senior Indebtedness to
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receive payments or distributions of cash, property or securities of Borrower
made on such Senior Indebtedness until the principal of, premium, if any, and
interest on the Note shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holder of the Note
would be entitled except for the provisions of this Article VII, and no payment
pursuant to the provisions of this Article VII to the holders of Senior
Indebtedness by the holder of the Note shall, as between Borrower, its creditors
other than holder of Senior Indebtedness, and the holder of the Note, be deemed
to be a payment by Borrower to or on account of the Senior Indebtedness. It is
understood that the provisions of this Article VII are intended solely for the
purpose of defining the relative rights of the holder of the Note, on the one
hand, and the holders of the Senior Indebtedness, on the other hand.
(b) If any payment or distribution to which the holder of the Note would
otherwise have been entitled but for the provisions of this Article VII shall
have been applied pursuant to the provisions of this Article VII, to the payment
of all amounts payable under Senior Indebtedness, then, and in such case, the
holder of the Note shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount required to make payment in full, in cash
or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 7.5. Obligations of Borrower Unconditional. (a) Nothing contained
in this Article VII or elsewhere in this Agreement or the Note is intended to or
shall impair, as between Borrower and the holder of the Note, the obligation of
Borrower which is absolute and unconditional, to pay to the holder of the Note
the principal of, premium, if any, and interest on the Note as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the holder of the Note and creditors of
Borrower other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the holder of the Note from exercising all remedies
otherwise permitted by applicable law upon the occurrence of an Event of
Default, subject to the rights, if any, under this Article VII of the holders of
the Senior Indebtedness.
(b) Without limiting the generality of the foregoing, nothing contained in
this Article VII will restrict the right of the holder of the Note to take any
action to declare the Note to be due and payable prior to stated maturity
pursuant to Section 8.1 or to pursue any rights or remedies hereunder; provided,
however, that all Senior Indebtedness then due and payable or thereafter
declared to be due and payable shall first be paid in full, in cash or cash
equivalents, before the holder of the Note is entitled to receive any direct or
indirect payment from Borrower of the Obligations.
SECTION 7.6. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets or securities referred to in
this Article VII, the holder of the Note shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution,
liquidating trustee, agent or other similar Person making such payment or
distribution, delivered to the holder of the Note for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other Indebtedness of Borrower, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article VII.
SECTION 7.7. Subordination Rights Not Impaired by Acts or Omissions of
Borrower or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as provided in this
Article VII will at any time in any way be prejudiced or impaired by any act or
failure to act on the part of Borrower or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by Borrower with the terms of
this Agreement, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with. The provisions of this Article VII are
intended to be for the benefit of, and shall be enforceable directly by, the
holders of Senior Indebtedness.
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SECTION 7.8. Not to Prevent Events of Default. The failure to make a
payment on account of principal of, premium, if any, or interest on the Note by
reason of any provisions of this Article VII will not be construed as preventing
the occurrence of an Event of Default.
SECTION 7.9. No Waiver of Subordination Provisions. Without in any way
limiting the generality of Section 7.7 of this Agreement, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of or
notice to or the holder of the Note, without incurring responsibility to the
holder of the Note and without impairing or releasing the subordination provided
in this Article VII or the obligations hereunder of the holder of the Note to
the holders of Senior Indebtedness, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness or any instrument evidencing the same or
any agreement under which Senior Indebtedness is outstanding or secured; (b)
sell, exchange, release or otherwise deal with any properly pledged, mortgaged
or otherwise securing Senior Indebtedness; (c) release any Person liable in any
manner for the collection of Senior Indebtedness; and (d) exercise or refrain
from exercising any rights against Borrower and any other Person.
SECTION 7.10. Payments May Be Paid Prior to Dissolution. Nothing contained
in this Article VII or elsewhere in this Indenture shall prevent Borrower,
except under the conditions described in Section 7.2 or 7.3 of this Agreement,
from making payments of principal of, premium, if any, and interest on the Note,
unless, at least two (2) Business Days prior to the date upon which such payment
becomes due and payable, or is otherwise paid, Lenders shall have received the
written notice provided for in Section 7.2(b) of this Agreement (or there shall
have been an acceleration of the Note prior to such application) or in Section
7.6 of this Agreement. Borrower shall give prompt written notice to the Lenders
of any dissolution, winding up, liquidation or reorganization of Borrower.
SECTION 7.11. Consent of Holders of Senior Indebtedness Under the Bank
Credit Agreement. The provisions of this Article VII (including the definitions
contained in this Article VII and references to this Article VII contained in
this Agreement) shall not be amended in a manner that would adversely affect the
rights of the holders of Senior Indebtedness under the Bank Credit Agreement,
and no such amendment shall become effective unless the holders of Senior
Indebtedness under the Bank Credit Agreement shall have consented (in accordance
with the provisions of the Bank Credit Agreement) to such amendment.
ARTICLE VIII
DEFAULTS
SECTION 8.1. Events of Default. If one or more of the following events
(collectively "Events of Default" and individually an "Event of Default") shall
have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal of the Note when due;
(b) Borrower shall fail to pay any accrued interest due and owing on the
Note or any fees or any other amount payable hereunder when due and such failure
shall continue for a period of five (5) days;
(c) Borrower shall fail to observe or perform any covenant or agreement
contained in Article IX or X of the TCB Bank Credit Agreement to the extent
incorporated herein;
(d) Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant or agreement contained in this Agreement, the TCB Bank Credit
Agreement to the extent incorporated herein or any other Loan Papers (other than
those covered by Sections 8.1(a), (b) and (c)) for thirty (30) days after
written notice thereof has been given to Borrower by either Lender (or the
Administrative Agent at the request
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of any Bank), provided, that, Borrower shall not be entitled to more than two
(2) notices and periods of cure during any calendar year;
(e) Borrower shall fail to cause the financial statements described in
Section 8.1(e) of the TCB Bank Credit Agreement to be accompanied by the opinion
without qualification (except for qualifications required by changes in
accounting methods with which Borrower's auditors concur) of the accountants
preparing such opinion, that such financial statements were prepared in
accordance with generally accepted accounting principles and fairly present the
consolidated financial position and results of operations of Borrower;
(f) any representation, warranty, certification or statement made or deemed
to have been made by Borrower or any Subsidiary of Borrower in this Agreement or
by Borrower, any Subsidiary of Borrower or any other Person on behalf of
Borrower in any other Loan Paper or any other certificate, financial statement
or other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made;
(g) Borrower or any of its Subsidiaries shall fail or pay any Material Debt
at maturity or any event or condition (i) shall occur which results in the
acceleration of the maturity of any Material Debt of Borrower or any of its
Subsidiaries, or (ii) shall occur and continue for a period of thirty (30) days
(or such shorter cure period as is provided pursuant to the terms of such
Material Debt) which entitles (or, with the giving of notice or lapse of time or
both, would unless cured or waived, entitle) the holder of such Material Debt to
accelerate the maturity thereof;
(h) Borrower or any of its Subsidiaries shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(i) an involuntary case or other proceeding shall be commenced against
Borrower or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against Borrower or any of its Subsidiaries of
any of them under the federal bankruptcy laws as now or hereafter in effect;
(j) one (1) or more judgments or orders for the payment of money
aggregating in excess of $1,000,000 shall be rendered against Borrower or any of
its Subsidiaries and such judgment or order (i) shall continue unsatisfied and
unstayed (unless bonded with a supersedeas bond at least equal to such judgment
or order) for a period of thirty (30) days or (ii) is not fully paid and
satisfied at least ten (10) days prior to the date on which any of its assets
may be lawfully sold to satisfy such judgment or order;
(k) one (1) or more judgments or orders for the payment of money
aggregating in excess of the sum of (i) ten percent (10%) of the Gerrity
Borrowing Base then in effect under, and as defined in, the TCB Bank Credit
Agreement, plus (ii) (A) the amount of such judgment which is covered by
insurance to the satisfaction of the Administrative Agent and its counsel, and
(B) any amounts which Borrower has deposited with the Administrative Agent to be
held by the Administrative Agent as security for the payment of such judgment
shall be rendered against Borrower or any of its Subsidiaries, whether or not
otherwise bonded or stayed;
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(l) an Event of Default shall occur under and as defined in the Indenture;
or
(m) Borrower or any Subsidiary of Borrower shall incur Environmental
Liabilities (as defined in the TCB Bank Credit Agreement) in an amount in excess
of $5,000,000 considered in the aggregate for Borrower and all Restricted
Subsidiaries;
then, and in every such event, the Lenders may, at their option, without
presentment, notice or demand (unless expressly provided for herein) of any kind
(including, without limitation, notice of intention to accelerate and
acceleration), all of which are hereby waived, terminate the Commitment and it
shall thereupon terminate, and (b) take such other actions as may be permitted
by the Loan Papers including, declaring the Note (together with accrued interest
thereon) to be, and the Note shall thereupon become, immediately due and
payable; provided that (c) in the case of any of the Events of Default specified
in Section 8.1(h) or (i), without any notice to Borrower or any other act by
either Lender, the Commitment shall thereupon terminate and the Note (together
with accrued interest thereon) shall become immediately due and payable.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telecopy or similar
writing) and shall be given to such party at its address, telex or telecopy
number set forth on the signature pages hereto or such other address, telex or
telecopy number as such party may hereafter specify for such purpose by notice
to the other parties hereto. Each such notice, request or other communication
shall be effective (a) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.1 and the appropriate
answerback is received or receipt is otherwise confirmed, (b) if given by mail,
one (1) Business Day after deposit in the mails with first class postage
prepaid, addressed as aforesaid or (c) if given by any other means, when
delivered at the address specified in this Section 9.1; provided that notices
under Article II shall not be effective until received.
SECTION 9.2. No Waivers. No failure or delay by either Lender in exercising
any right, power or privilege hereunder or under any Note or other Loan Paper
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law or in
any of the other Loan Papers.
SECTION 9.3. Expenses; Indemnification; Documentary Taxes. (a) Borrower
shall pay (i) all out-of-pocket expenses of Lenders, including reasonable fees
and disbursements of special counsel for Lenders, in connection with any Default
or alleged Default hereunder and collection and other enforcement proceedings
resulting therefrom, fees of auditors and consultants incurred in connection
therewith and investigation expenses incurred by either Lender in connection
therewith. Borrower shall indemnify each Lender against any Taxes imposed by
reason of the execution and delivery of this Agreement or the Note. (b) All
amounts payable by Borrower under the Loan Papers (whether principal, interest,
fees, expenses, or otherwise) to or for the account of each Lender shall be paid
in full, free of any deductions or withholdings for or on account of any Taxes.
If Borrower is prohibited by law from paying any such amount free of any such
deductions and withholdings, then (at the same time and in the same manner that
such original amount is otherwise due under the Loan Papers) Borrower shall pay
to or for the account of Lender such additional amount as may be necessary in
order that the actual amount received by such Lender after deduction and/or
withholding (and after payment of any additional Taxes due as a consequence of
the payment of such additional amount, and so on) will equal the amount such
Lender would have received if such deduction or withholding were not made.
17
<PAGE>
(c) Borrower agrees to indemnify each Lender and hold each Lender harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of counsel for each Lender in connection with any investigative, administrative
or judicial proceeding, whether or not such Lender shall be designated a party
thereto) which may be incurred by any Lender relating to or arising out of this
Agreement or any actual or proposed use of proceeds of the Loan hereunder;
provided that no Lender shall have the right to be indemnified hereunder for its
own gross negligence or willful misconduct, IT BEING THE INTENTION HEREBY THAT
EACH LENDER SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY
NEGLIGENCE.
SECTION 9.4. Set-Offs. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, but subject in all cases to
Article VII hereof, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of Borrower against any and all of the obligations of Borrower now or
hereafter existing under this Agreement and the Note irrespective of whether or
not such Lender shall have made any demand under this Agreement or the Note and
although such obligations may be unmatured. Each Lender agrees promptly to
notify Borrower after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Lender under this Section 9.4(a)
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which such Lender may have.
SECTION 9.5. Amendments and Waivers. Any provision of this Agreement, the
Note or the other Loan Papers may be amended or waived if, but only if such
amendment or waiver is in writing and is signed by Borrower and each Lender.
SECTION 9.6. Survival. All representations, warranties and covenants made
by Borrower herein or in any certificate or other instrument delivered by it or
in its behalf under the Loan Papers shall be considered to have been relied upon
by Lenders and shall survive the delivery to Lenders of such Loan Papers or the
extension of the Loan (or any part thereof), regardless of any investigation
made by or on behalf of either Lender.
SECTION 9.7. Limitation on Interest. Regardless of any provision contained
in the Loan Papers, Lenders shall never be entitled to receive, collect, or
apply, as interest on the Loan, any amount in excess of the Maximum Lawful Rate,
and in the event either Lender ever receives, collects or applies as interest
any such excess, such amount which would be deemed excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as such; and if
the Loan is paid in full, any remaining excess shall promptly be paid to
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the Maximum Lawful Rate, Borrower and Lenders
shall, to the extent permitted under applicable law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof and (c) amortize, prorate,
allocate and spread, in equal parts, the total amount of the interest throughout
the entire contemplated term of the Note, so that the interest rate is the
Maximum Lawful Rate throughout the entire term of the Note; provided, however,
that if the unpaid principal balance thereof is paid and performed in full prior
to the end of the full contemplated term thereof, and if the interest received
for the actual period of existence thereof exceeds the Maximum Lawful Rate, the
Lenders shall refund to Borrower the amount of such excess and, in such event,
the Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Lawful Rate.
SECTION 9.8. Invalid Provisions. If any provision of the Loan Papers is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable, the
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect
18
<PAGE>
and shall not be affected by the illegal, invalid, or unenforceable provision or
by its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of the Loan
Papers a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid and enforceable.
SECTION 9.9. Waiver of Consumer Credit Laws. Pursuant to Article 15.10(b)
of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended,
Borrower agrees that such Chapter 15 shall not govern or in any manner apply to
the Loan.
SECTION 9.10. Successors and Assigns. Each Loan Paper binds and inures to
the parties to it, any intended beneficiary of it, and each of their respective
successors and permitted assigns; provided, that Borrower may not assign or
transfer any rights or obligations under any Loan Paper without first obtaining
Lenders' consent, and any purported assignment or transfer without all Lenders'
consent is void.
SECTION 9.11. TEXAS LAW. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
PAPERS HAVE BEEN EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES OF AMERICA.
SECTION 9.12. Consent to Jurisdiction; Waiver of Immunities. (a) Borrower
and each Lender hereby irrevocably submits to the jurisdiction of any Texas
State or Federal court sitting in the Northern District of Texas over any action
or proceeding arising out of or relating to this Agreement or any other Loan
Papers, and Borrower and each Lender hereby irrevocably agree that all claims in
respect of such action or proceeding may be heard and determined in such Texas
State or Federal court. Borrower and each Lender hereby irrevocably appoints The
Corporation Company (the "Process Agent"), with an office on the date hereof at
1675 Broadway, Denver, Colorado 80202, as its agent to receive on behalf of such
party proper service of copies of the summons and complaint and any other
process which may be made by mailing or delivering a copy of such process to
Borrower or such Lender (as applicable) in care of the Process Agent at the
Process Agent's above address, and Borrower and each Lender hereby irrevocably
authorize and direct the Process Agent to accept such service on their behalf.
As an alternative method of service, Borrower and each Lender also irrevocably
consent to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to Borrower or such Lender at its
address specified in Section 9.1. Borrower agrees that a final judgment on any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 9.12 shall affect any right of either Lender or
Borrower to serve legal process in any other manner permitted by law or affect
the right of either Lender or Borrower to bring any action or proceeding against
Borrower or any Lender or their properties in the courts of any other
jurisdictions.
(c) To the extent that Borrower has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, Borrower and
such Lender hereby irrevocably waive such immunity in respect of their
obligations under this Agreement and the other Loan Papers.
SECTION 9.13. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.14. COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG THE BORROWER AND LENDERS
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
19
<PAGE>
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND LENDERS.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG BORROWER AND LENDERS.
SECTION 9.15. WAIVER OF JURY TRIAL. BORROWER AND EACH LENDER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND FOR
ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
BORROWER:
GERRITY OIL & GAS CORPORATION,
a Delaware corporation
By: /s/ David J. Kornder
- ------------------------
David J. Kornder,
Vice President
4100 East Mississippi Ave., Suite 1200
Denver, CO 80222
Attn: David J. Kornder
Telecopy No.: 303-757-1253
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
and with a copy to:
Texas Commerce Bank National Association
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: Timothy E. Perry
Telecopy No. 214-965-2389
20
<PAGE>
LENDERS:
SOCO WATTENBERG CORPORATION,
a Delaware corporation
By: /s/ Rodney L. Waller
- ------------------------
Rodney L. Waller,
Vice President
1625 Broadway
Denver, Colorado 80202
Attn: Rodney L. Waller
Telecopy No.: 303-592-8600
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
and with a copy to:
Texas Commerce Bank National Association
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: Timothy E. Perry
Telecopy No. 214-965-2389
PATINA OIL & GAS CORPORATION,
a Delaware corporation
By: /s/ Rodney L. Waller
- ------------------------
Rodney L. Waller,
Vice President
1625 Broadway
Denver, CO 80202
Attn: Rodney L. Waller
Telecopy No.: 303-629-2500
with a copy to:
Thomas J. Edelman
595 Madison Avenue
27th Floor
New York, New York 10022
Telecopy No.: 212-888-6877
21
<PAGE>
and with a copy to:
Texas Commerce Bank National Association
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: Timothy E. Perry
Telecopy No. 214-965-2389
22
<PAGE>
Annex A
SENIOR SUBORDINATE PROMISSORY NOTE
$87,000,000 _______________, 1996
FOR VALUE RECEIVED, the undersigned, Gerrity Oil & Gas Corporation, a
Delaware corporation ("Maker"), hereby promises to pay to the order of Patina
Oil & Gas Corporation and SOCO Wattenberg Corporation, each a Delaware
corporation (collectively "Payee"), at the offices of Patina Oil & Gas
Corporation, 1625 Broadway, Denver, Colorado 80222 (except with respect to
payments to be made to Administrative Agent pursuant to Section 3.2 of the
Agreement (as herein defined) which shall be paid to Administrative Agent at the
offices of Administrative Agent at its address in Houston, Texas specified in
Schedule 1 to the TCB Bank Credit Agreement, the principal sum of Eighty Seven
Million and No/100 Dollars ($87,000,000), or so much thereof as may be advanced
and outstanding, together with interest, as hereinafter described.
This Note has been executed and delivered pursuant to, and is subject to
and governed by, the terms of that certain Subordinate Loan Agreement dated as
of May 2, 1996 (as hereafter renewed, extended, amended, or supplemented, the
"Agreement") among Maker and Payee and is the "Note" referred to therein. Unless
otherwise defined herein or unless the context hereof otherwise requires, each
term used herein with its initial letter capitalized has the meaning given to
such term in the Agreement.
Maker also promises to pay interest on the unpaid principal amount hereof
in like money at the offices above referenced from the date hereof at the rates
applicable to the Loan provided in the Agreement.
Accrued but unpaid interest on this Note shall be due and payable as it
accrues at the times and in the amounts required by Section 2.4 of the
Agreement. The entire outstanding principal balance hereof and all accrued but
unpaid interest thereon shall be due and payable in full on July 15, 2004.
Upon and subject to the terms and conditions of the Agreement, Maker shall
be entitled to prepay the principal of or interest on this Note from time to
time and at any time, in whole or in part.
Upon the occurrence and continuance of an Event of Default, and upon the
conditions stated in the Agreement, the holder hereof may, at its option,
declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable (provided that, upon the occurrence of certain
Events of Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as otherwise required
by the Agreement), demand, or presentment, all of which are hereby waived, and
the holder hereof shall have the right to offset against this Note any sum or
sums owed by the holder hereof to Maker.
Notwithstanding the foregoing, if at any time, any rate of interest
calculated under Section 2.4 of the Agreement (the "Contract Rate") exceeds the
Maximum Lawful Rate, the rate of interest hereunder shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in the Contract Rate shall
not reduce the rate of interest on this Note below the Maximum Lawful Rate until
the total amount of interest accrued equals the amount of interest which would
have accrued (including the amount of interest which would have accrued prior to
the payment or prepayment of any portion of this Note) if the Contract Rate had
at all times been in effect. In the event that at maturity (stated or by
acceleration), or at final payment of this Note, the total amount of interest
paid or accrued on this Note is less than the amount of interest which would
have accrued if the Contract Rate had at all times been in effect with respect
thereto, then at such time the Maker shall pay to the holder of this Note an
amount equal to the difference between (a) the lesser of the amount of interest
which would have accrued if the Contract Rate had at all times been in effect
and the amount of interest which would
1
<PAGE>
have accrued if the Maximum Lawful Rate had at all times been in effect, and (b)
the amount of interest actually paid or accrued on this Note.
GERRITY OIL & GAS CORPORATION,
a Delaware corporation
By: /s/ David J. Kornder
------------------------
David J. Kornder,
Vice President
2
<PAGE>
<TABLE>
ADVANCES AND
PAYMENTS OF PRINCIPAL AND INTEREST
<CAPTION>
====================================================================================================================================
Advance Amount of Amount of Amount of Unpaid
Date Advance Principal Paid Interest Paid Principal Notation Made
Balance By
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Annex B
REQUEST FOR ADVANCE
Reference is made to that certain Subordinate Loan Agreement dated as of
May 2, 1996, (as from time to time amended, the "Agreement") by and among Patina
Oil & Gas Corporation, SOCO Wattenberg Corporation and Gerrity Oil & Gas
Corporation. Terms which are defined in the Agreement and which are used but not
defined herein are used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Borrower hereby requests pursuant to
Section 2.1 of the Agreement in the amount of $ to be advanced on , .
Borrower and the officer of Borrower signing this instrument hereby certify
that:
(a) Such officer is the duly elected, qualified and acting officer of
Borrower as indicated below such officer's signature hereto.
(b) The representations and warranties of Borrower set forth in the
Agreement and the Loan Papers delivered to Lenders are true and correct on and
as of the date hereof, with the same effect as though such representations and
warranties had been made on and as of the date hereof or, if such
representations and warranties are expressly limited to particular dates, as of
such particular dates. No material changes have occurred in the financial
condition of Borrower or any of its Subsidiaries since the date of the last
financial reports delivered to Banks pursuant to Section 8.1 of the TCB Bank
Credit Agreement.
(c) There does not exist on the date hereof, any condition or event which
constitutes a Default, nor will any such Default exist upon Borrower's receipt
and application of the proceeds requested hereby. Borrower will use the proceeds
hereby requested in compliance with the applicable provisions of the Agreement.
(d) Borrower has performed and complied with all agreements and conditions
in the Agreement required to be performed or complied with by Borrower on or
prior to the date hereof, and each of the conditions precedent to making of
Loans contained in the Agreement remain satisfied in all material respects.
IN WITNESS WHEREOF, this instrument is executed as of
______________________, 19 .
GERRITY OIL & GAS CORPORATION,
a Delaware corporation
By:
Its:
1
<PAGE>
Annex C
CERTIFICATE OF EFFECTIVENESS
Reference is made to that certain Subordinate Loan Agreement dated as of
May 2, 1996, (as from time to time amended, the "Agreement") by and among Patina
Oil & Gas Corporation, SOCO Wattenberg Corporation and Gerrity Oil & Gas
Corporation. Terms which are defined in the Agreement and which are used but not
defined herein are used herein with the meanings given them in the Agreement.
Borrower and the officer of Borrower signing this certificate hereby
certify that:
(a) Such officer is the duly elected, qualified and acting officer of
Borrower as indicated below such officer's signature thereto.
(b) Attached hereto as Exhibit 1 is a true, correct and complete copy of
the Fairness Opinion.
(c) The representations and warranties of Borrower set forth in the
Agreement and the Loan Papers are true and correct (i) on and as of the date
hereof and (ii) on and as of the effective date of the Agreement.
(d) Upon the delivery of this certificate, the Agreement shall be deemed to
be delivered as of May 2, 1996 and will constitute the valid and binding
agreement of the parties to the Agreement effective as of May 2, 1996, and
enforceable against such parties in accordance with the terms of such Agreement.
IN WITNESS WHEREOF, this certificate is executed as of ______________,
199__.
GERRITY OIL & GAS CORPORATION,
a Delaware corporation
By:
Its:
Acknowledged and Accepted:
Patina Oil & Gas Corporation
By:
Its:
SOCO Wattenberg Corporation
By:
Its:
2
Exhibit 99.1
PRO FORMA FINANCIAL INFORMATION OF
PATINA OIL & GAS CORPORATION
On May 2, 1996, the Company was merged (the "Merger") with Gerrity Oil &
Gas Corporation ("GOG"). Related to the Merger, the Company commenced an
Exchange Offer to exchange the Company's preferred stock for GOG's preferred
stock. The following tables summarize the unaudited pro forma effects on the
Company's financial statements assuming that the Merger and the Exchange Offer
had been consummated on March 31, 1996 (for balance sheet data) and January 1,
1995 and 1996 (for statement of operations data). These transactions will be
accounted for as a purchase of GOG. The pro forma effects of the Merger and the
Exchange Offer are based on assumptions set at the time of the filing of the
Company's registration statement declared effective by the Securities and
Exchange Commission. These assumptions have not been updated to reflect certain
aspects of the transactions which were not known until or subsequent to the
occurrence of the transactions. The pro forma condensed consolidated financial
statements should be read in conjunction with the related historical financial
statements included in the Company's registration statement and in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996.
Future results may differ substantially from pro forma results due to changes in
these assumptions, changes in oil and gas prices, production declines and other
factors. Therefore, pro forma statements cannot be considered indicative of
future operations.
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996
(In thousands)
<CAPTION>
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ------------ ---------
ASSETS
<S> <C> <C> <C> <C>
Current assets $ 9,498 $ 15,308 $ $ 24,806
Oil and gas properties and equipment, net 208,157 293,630 (83,754) (a) 418,033
Other noncurrent assets 728 6,480 (1,458) (a) 5,750
--------- --------- ---------
$ 218,383 $ 315,418 $ 448,589
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 9,498 $ 18,689 $ (5,104) (b) $ 20,583
(2,500) (c)
Deferred taxes and other 25,168 19,058 (34,225) (a) 10,001
Debt to parent 75,000 - (75,000) (b) -
Long-term debt - 117,500 15,884 (a) 215,988
80,104 (b)
2,500 (c)
Preferred stock of subsidiary - - 13,333 (a) 13,333
Stockholders' equity
Preferred stock, $.01 par - 4 7 (a) 11
Common stock, $.01 par 140 138 (78) (a) 200
Capital in excess of par value - 160,524 (80,628) (a) 188,473
108,577 (d)
Investment by parent 108,577 - (108,577) (d) -
Retained earnings (deficit) - (495) 495 (a) -
--------- --------- ---------
108,717 160,171 188,684
--------- --------- ---------
$ 218,383 $ 315,418 $ 448,589
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(In thousands, except per share data)
<CAPTION>
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Oil and gas sales $ 50,073 $ 51,513 $ $ 101,586
Other 29 2,347 2,376
--------- --------- ---------
50,102 53,860 103,962
--------- --------- ---------
Expenses
Direct operating 8,867 8,366 1,575 (e) 18,308
(500) (f)
Exploration 416 285 701
General and administrative 5,974 7,731 (4,705) (f) 7,425
(1,575) (e)
Interest and other 5,476 14,505 (1,049) (g) 18,932
Depletion, depreciation and amortization 32,591 30,333 (7,054) (h) 55,870
Restructuring expenses - 828 828
--------- --------- ---------
53,324 62,048 102,064
--------- --------- ---------
Income (loss) before taxes and dividends on
preferred stock of subsidiary (3,222) (8,188) 1,898
Provision for (benefit from) income taxes (1,128) (215) 2,007 (i) 664
Dividends on preferred stock of subsidiary - - 1,518 (j) 1,518
--------- --------- ---------
Net loss (2,094) (7,973) (284)
Dividends on preferred stock - 4,554 (2,654) (j) 1,900
--------- --------- ---------
Net loss applicable to common stock $ (2,094) $ (12,527) $ (2,184)
========= ========= =========
Net loss per share $ (.15) $ (.11)
========= =========
Weighted average shares outstanding 14,000 20,000
========= =========
</TABLE>
<PAGE>
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1996
(In thousands, except per share data)
<CAPTION>
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Oil and gas sales $ 10,634 $ 12,154 $ $ 22,788
Other 20 313 333
--------- --------- ---------
10,654 12,467 23,121
--------- --------- ---------
Expenses
Direct operating 1,955 2,030 394 (e) 4,254
(125) (f)
Exploration 68 59 127
General and administrative 1,543 1,678 (964) (f) 1,863
(394) (e)
Interest and other 1,247 3,408 (166) (g) 4,489
Depletion, depreciation and amortization 6,967 6,677 (1,123) (h) 12,521
--------- --------- ---------
11,780 13,852 23,254
--------- --------- ---------
Loss before taxes and dividends on
preferred stock of subsidiary (1,126) (1,385) (133)
Benefit from income taxes (394) (470) 817 (i) (47)
Dividends on preferred stock of subsidiary - - 380 (j) 380
--------- --------- ---------
Net loss (732) (915) (466)
Dividends on preferred stock - 1,139 (664) (j) 475
--------- --------- ---------
Net loss applicable to common stock $ (732) $ (2,054) $ (941)
========= ========= =========
Net loss per share $ (.05) $ (.05)
========= =========
Weighted average shares outstanding 14,000 20,000
========= =========
</TABLE>
The preceding unaudited pro forma condensed consolidated financial
statements reflect the adjustments described below:
Balance Sheet
(a) To reflect the acquisition of GOG, including the issuance of 6,000,000
shares of Common Stock, 3,000,000 Warrants, a warrant to be issued to the prior
chief executive of GOG exercisable for 500,000 shares of Common Stock (the
"Executive Warrant") and 1,066,667 shares of Preferred Stock (reflecting the
estimated exchange of two-thirds of the GOG Preferred Stock pursuant to the
Exchange Offer) at estimated fair value including transaction costs. The
estimated fair value of the common stock issued was based on an assumed trading
price of $8 per share of Common Stock. The trading price was estimated based on
various factors, including the trading price of GOG's Common Stock and trading
multiples of comparable public companies. The fair value of the Warrants and the
Executive Warrant were estimated to be $1.75 and $2.50 per warrant,
respectively, based primarily on a range calculated using the Black-Scholes
options model. The Preferred Stock was valued at $26,667,000 reflecting the
exchange of two-thirds of the GOG Preferred Stock at the liquidation preference
of the newly issued shares. The GOG Preferred Stock was valued at $13,333,000
which was estimated based on the trading price of GOG's Preferred Stock. For
each additional 10% of GOG Preferred Stock exchanged, pro forma preferred stock
of subsidiary would
<PAGE>
decrease $4,000,000, preferred stock, $.01 par would increase $1,600 and capital
in excess of par value would increase $3,998,400. No trading market or market
price existed for the Common Stock, Warrants, Executive Warrant, or Preferred
Stock prior to the Merger.
On a pro forma basis, the Company is expected to have the following equity
instruments outstanding upon consummation of the Merger and the Exchange Offer
(other than shares owned by the Company or GOG):
<TABLE>
<CAPTION>
Shares/Warrants
Outstanding
---------------
<S> <C>
Common Stock 20,000,000
Preferred Stock 1,066,667
Warrants 3,000,000
Executive Warrant 500,000
</TABLE>
In addition, GOG will have outstanding 1,012,000 Depository Shares
representing interests in GOG Preferred Stock.
(b) To reflect the repayment of the payable to parent through borrowings
under the Company's credit facility.
(c) To reflect the refinancing of GOG's current maturities of debt to
long-term debt through borrowings under the Company's credit facility.
(d) To reclassify the Company's investment by parent to capital in excess
of par value to reflect the Company's new capital structure.
Statement of Operations
(e) To conform the financial statement presentation by GOG of various
overhead charges and recoveries to a basis consistent with that of the Company.
(f) To reflect the reduction in direct operating and general and
administrative expenses that result from the elimination of redundant personnel,
lease space and other corporate services. Under the Merger Agreement, the
Company and SOCO have entered into a Corporate Services Agreement under which
SOCO will provide certain services to the Company so that it will not need to
have these tasks performed by the Company's employees. Administrative
efficiencies from combining headquarters and field operations and eliminating
duplicate executive, professional and administrative personnel are expected to
total approximately $4.7 million per year. Based upon a detailed analysis of the
expenses and personnel that will be required to provide such services following
the GOG Merger, management has estimated that future annual recurring general
and administrative expenses will approximate $5.0 million per year, net of
reimbursements.
(g) To adjust interest expense to reflect the refinancing or payment of (i)
$33.3 million (or 33.3%) of GOG's 11.75% Senior subordinated Notes, (ii) GOG's
bank borrowings under the terms of the Company's credit facility, (iii) the
payable to parent and (iv) transaction costs. The interest expense reflects the
Eurodollar Margin set forth in the credit facilities, which margin was applied
to the current Eurodollar Rate resulting in an average borrowing rate of
approximately 6.75%. Under the terms of GOG's Senior Subordinated Notes, GOG is
obligated to purchase any notes put to GOG at a price of 101% of the principal
amount thereof upon certain asset sales or dispositions. For each $10,000,000
change in the amount of Notes refinanced, pro forma interest expense, net income
and earnings per share would change by $475,000, $308,000 and $0.02 per share
for the year ended December 31, 1995 and $119,000, $77,000 and zero per share
for the three months ended March 31, 1996. The net decrease in interest expense
is attributable to the lower interest rate relating to the bank borrowings used
to refinance GOG's Senior Subordinated Notes, as described above, offset
somewhat by the increased debt level.
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(h) To adjust depletion, depreciation and amortization of oil and gas
properties based on the purchase price allocated to GOG oil and gas properties
and the use of a combined depletion, depreciation and amortization rate. The
combined rate utilized for 1995 was $5.73 per BOE reflecting a rate of $5.65 per
BOE for the first nine months (based on reserve quantities as of December 31,
1994) and $6.02 per BOE for the last three months (based on reserve quantities
as of December 31, 1995). The rate utilized for the three months ended March 31,
1996 was $6.32 per BOE based on reserve quantities as of December 31, 1995.
(i) To record the estimated provision for income taxes to reflect the
anticipated effective income tax rate of the combined entity after the Merger.
(j) To reduce dividends paid on GOG Preferred Stock (reflecting the
estimated exchange of two-thirds of the GOG Preferred Stock pursuant to the
Exchange Offer) and reclassify dividends paid on the remaining outstanding
shares of GOG Preferred Stock. For each additional 10% of GOG Preferred Stock
exchanged, pro forma dividends on preferred stock of subsidiary would decrease
and net income would increase $455,000 and $114,000, dividends on preferred
stock would increase $285,000 and $71,000 and net income per share would
increase $.01 and zero for the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively.
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