<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 1997
OR
( ) Transition report pursuant to section 13 or 15[d] of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-7792
Pogo Producing Company
(Exact name of registrant as specified in its charter)
Delaware 74-1659398
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
(Address of principal executive offices) (Zip Code)
(713) 297-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days: Yes X No
Registrant's number of common shares outstanding
as of June 30, 1997: 33,380,326
<PAGE>
Part I. Financial Information
Pogo Producing Company and Subsidiaries
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- -------------------------------
1997 1996 1997 1996
------------- --------------- ----------- --------------
(Expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 75,281 $ 51,543 $ 136,595 $ 99,760
Gains (losses) on sales 1,459 -- 1,459 (165)
------------- --------------- ----------- --------------
Total 76,740 51,543 138,054 99,595
------------- --------------- ----------- --------------
Operating Costs and Expenses:
Lease operating 16,191 9,205 28,488 18,080
General and administrative 5,121 4,383 10,957 9,804
Exploration 4,053 3,966 5,953 7,876
Dry hole and impairment 4,086 2,568 5,007 5,118
Depreciation, depletion and amortization 28,457 15,793 46,877 31,506
------------- --------------- ----------- --------------
Total 57,908 35,915 97,282 72,384
------------- --------------- ----------- --------------
Operating Income 18,832 15,628 40,772 27,211
------------- --------------- ----------- --------------
Interest:
Charges (5,536) (3,172) (9,831) (6,184)
Income 73 124 129 139
Capitalized 760 1,004 2,630 1,830
------------- --------------- ----------- --------------
Income Before Income Taxes 14,129 13,584 33,700 22,996
Income Tax Expense (4,955) (4,647) (11,708) (7,794)
------------- --------------- ----------- --------------
Income Before Extraordinary Loss 9,174 8,937 21,992 15,202
Extraordinary Loss on
Early Extinguishment of Debt -- (821) -- (821)
------------- --------------- ----------- --------------
Net Income $ 9,174 $ 8,116 $ 21,992 $ 14,381
============= =============== =========== ==============
Primary Earnings Per Share:
Income before extraordinary loss $ 0.27 $ 0.26 $ 0.64 $ 0.44
Extraordinary loss -- (0.02) -- (0.02)
------------- --------------- ----------- --------------
Net Income $ 0.27 $ 0.24 $ 0.64 $ 0.42
============= =============== =========== ==============
Fully Diluted Earnings Per Share:
Income before extraordinary loss $ 0.26 $ 0.25 $ 0.62 $ 0.44
Extraordinary loss -- (0.02) -- (0.02)
------------- --------------- ----------- --------------
Net Income $ 0.26 $ 0.23 $ 0.62 $ 0.42
============= =============== =========== ==============
Dividends Per Common Share $ 0.03 $ 0.03 $ 0.06 $ 0.06
============= =============== =========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
- 1 -
<PAGE>
Pogo Producing Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- -------------
(Unaudited)
(Expressed in thousands,
except share amounts)
<S> <C> <C>
Assets
Current Assets:
Cash and cash investments $ 23,505 $ 3,054
Accounts receivable 35,980 30,031
Other receivables 40,811 35,027
Inventory - Product 5,688 --
Inventories - Tubulars 8,457 6,165
Other 1,101 641
------------- -------------
Total current assets 115,542 74,918
------------- -------------
Property and Equipment:
Oil and gas, on the basis of successful efforts accounting
Proved properties being amortized 1,224,391 1,079,523
Unevaluated properties and properties
under development, not being amortized 68,366 111,192
Other, at cost 11,290 8,773
-------------- -------------
1,304,047 1,199,488
Less--accumulated depreciation, depletion and
amortization, including $5,345 and $4,822,
respectively, applicable to other property 861,875 814,623
-------------- -------------
442,172 384,865
-------------- -------------
Other 27,308 19,459
-------------- -------------
$ 585,022 $ 479,242
============== =============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable - operating activities $ 11,872 $ 7,676
Accounts payable - investing activities 29,005 56,961
Accrued interest payable 2,850 1,957
Accrued payroll and related benefits 2,444 1,490
Other 165 163
-------------- -------------
Total current liabilities 46,336 68,247
Long-Term Debt 338,205 246,230
Deferred Federal Income Tax 60,174 46,321
Deferred Credits 11,694 11,162
-------------- -------------
Total liabilities 456,409 371,960
-------------- -------------
Shareholders' Equity:
Preferred stock, $1 par; 2,000,000 shares authorized -- --
Common stock, $1 par; 100,000,000 shares
authorized, 33,395,901 and
33,321,381 shares issued, respectively 33,396 33,321
Additional capital 140,806 139,337
Retained earnings (deficit) (45,085) (65,075)
Currency translation adjustment (180) 23
Treasury stock, at cost (324) (324)
-------------- -------------
Total shareholders' equity 128,613 107,282
-------------- -------------
$ 585,022 $ 479,242
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
- 2 -
<PAGE>
Pogo Producing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
1997 1996
-------------- --------------
(Expressed in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 124,958 $ 94,723
Operating, exploration, and general
and administrative expenses paid (41,202) (36,546)
Interest paid (8,938) (6,185)
Federal income taxes received (paid) 2,537 (6,000)
Other (3,548) (1,632)
-------------- --------------
Net cash provided by operating activities 73,807 44,360
-------------- --------------
Cash Flows from Investing Activities:
Capital expenditures (112,617) (64,089)
Purchase of proved reserves (28,617) --
Proceeds from the sales of properties 100 100
-------------- --------------
Net cash used in investing activities (141,134) (63,989)
-------------- --------------
Cash flows from Financing Activities:
Proceeds from issuance of new debt 100,000 115,000
Borrowings under senior debt agreements 345,000 78,000
Payments under senior debt agreements (353,000) (116,000)
Payments of cash dividends on common stock (2,002) (1,984)
Purchase of 8% debentures due 2005 -- (40,699)
Payment of debt issue expenses (2,975) (2,875)
Proceeds from exercise of stock options 958 2,518
-------------- --------------
Net cash provide by financing activities 87,981 33,960
-------------- --------------
Effect of Exchange Rate Changes (203) 23
-------------- --------------
Net Increase in Cash and Cash Investments 20,451 14,354
Cash and Cash Investments at the Beginning of the Year 3,054 4,481
-------------- --------------
Cash and Cash Investments at the End of the Period $ 23,505 $ 18,835
============== ==============
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net income $ 21,992 $ 14,381
Adjustments to reconcile net income to
net cash provided by operating activities -
Extraordinary loss on early extinguishment
of debt (net of tax) -- 821
(Gains) losses from the sales of properties (1,459) 165
Depreciation, depletion and amortization 46,877 31,506
Dry hole and impairment 5,007 5,118
Interest capitalized (2,630) (1,830)
Deferred federal income taxes 14,414 2,212
Change in operating assets and liabilities (10,394) (8,013)
-------------- --------------
Net Cash Provided by Operating Activities $ 73,807 $ 44,360
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
Pogo Producing Company and Subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
1997 1996
-------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- -------------
(Expressed in thousands, except share amounts)
<S> <C> <C> <C> <C>
Common Stock:
$1.00 par - 100,000,000 shares authorized
Balance at beginning of year 33,321,381 $ 33,321 33,006,972 $ 33,007
Conversion of 2004 Notes 1,126 1 -- --
Stock options exercised 73,394 74 206,430 207
---------- ------------ ---------- -------------
Issued at end of period 33,395,901 33,396 33,213,402 33,214
---------- ------------ ---------- -------------
Additional Capital:
Balance at beginning of year 139,337 132,881
Conversion of 2004 Notes 24 --
Stock options exercised 1,445 3,547
-------------- -------------
Balance at end of period 140,806 136,428
-------------- -------------
Retained Earnings (Deficit):
Balance at beginning of year (65,075) (93,856)
Net income 21,992 14,381
Dividends ($0.06 per common share) (2,002) (1,984)
------------ -------------
Balance at end of period (45,085) (81,459)
------------ -------------
Treasury Stock:
Balance at beginning of year (15,575) (324) (15,575) (324)
Activity during period -- -- -- --
---------- ------------ ---------- -------------
Balance at end of period (15,575) (324) (15,575) (324)
---------- ------------ ---------- -------------
Cumulative Foreign
Currency Translation
Balance at beginning of year 23 --
Activity during the period (203) 23
------------ -------------
Balance at end of period (180) 23
------------ -------------
Common Stock Outstanding,
at the End of the Period 33,380,326 33,197,827
========== ==========
Total Shareholders' Equity $ 128,613 $ 87,882
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(1) General Information -
The consolidated financial statements included herein have been
prepared by Pogo Producing Company (the "Company") without audit and
include all adjustments (of a normal and recurring nature) which are, in
the opinion of management, necessary for the fair presentation of interim
results which are not necessarily indicative of results for the entire
year. The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's latest annual report.
(2) Long-Term Debt -
Long-term debt and the amount due within one year at June 30,
1997 and December 31, 1996, consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- -------------
(Expressed in thousands)
<S> <C> <C>
Senior debt --
Bank revolving credit agreement
Prime rate based loans, borrowing at
interest rates of 8.5% and 8.25%, respectively $ 2,000 $ 13,000
LIBO Rate based loans, borrowings at average
interest rates of 6.75% and 6.59%, respectively 25,000 22,000
Uncommitted credit lines with banks, borrowings at
average interest rates of 6.59% and 7.0%, respectively 10,000 10,000
-------------- -------------
Total senior debt 37,000 45,000
-------------- -------------
Subordinated debt --
8 3/4% Senior subordinated notes due 2007 100,000 --
5 1/2% Convertible subordinated notes due 2004 86,205 86,230
5 1/2% Convertible subordinated notes due 2006 115,000 115,000
-------------- -------------
Total subordinated debt 301,205 201,230
-------------- -------------
Long-term debt $ 338,205 $ 246,230
============== =============
</TABLE>
Effective August 1, 1997, the Company entered into an amended and
restated credit agreement (the "Credit Agreement"). The Credit Agreement
provides for an unsecured $250,000,000 revolving/term credit facility which
will be fully revolving until July 1, 2000, after which the balance will
be due in eight quarterly term loan installments, commencing October 31, 2000.
The amount that may be borrowed under the Credit Agreement may not exceed
a borrowing base which is composed of both domestic and Thai properties less,
in certain circumstances, the present value of interest payments on a portion
of certain subordinated indebtedness, including the 2007 Notes.
The domestic borrowing base is determined semi-annually by the lenders
in accordance with the Credit Agreement, based primarily on the discounted
present value of future net revenues from the Company's domestic oil and gas
reserves. The portion of the borrowing base which is composed of properties
located in the Kingdom of Thailand is also determined semi-annually, but may,
at the lenders discretion, be redetermined once more during each semi-annual
period. The value of this portion of the borrowing base is determined by the
lenders applying their usual and customary criteria for
oil and gas evaluation. As of August 1, 1997, the Company's total borrowing
base, including both domestic and Thai properties, exceeded $250,000,000.
The Credit Agreement is governed by various financial and other covenants,
including requirements to maintain positive working capital (excluding
current maturities of debt) and a fixed charge coverage ratio, and
limitations on indebtedness, creation of liens, the prepayment of
- 5 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(2) Long-Term Debt (Continued)
subordinated debt, the payment of dividends, mergers and consolidations,
investments and asset dispositions. In addition, the Company is prohibited
from pledging borrowing base properties as security for other debt.
Borrowings under the Credit Agreement currently bear interest at a base
(prime) rate or LIBOR plus 5/8%, at the Company's option. A commitment fee
on the unborrowed amount under the Credit Agreement is also charged. The
commitment fee is currently 0.25% per annum on the unborrowed amount under
the Credit Agreement that is designated as "active" and 0.10% per annum
on the unborrowed amount under the Credit Agreement that is designated as
"inactive." Of the $250,000,000 that is currently available under the
Credit Agreement (subject to borrowing base limitations), $125,000,000
is designated as "active" and $125,000,000 is designated as "inactive."
On May 22, 1997, the Company issued $100,000,000 of 8 3/4%
Senior Subordinated Notes due 2007 (the "2007 Notes"). The proceeds from
the issuance of the 2007 Notes were used to repay amounts outstanding under
the Company's bank revolving credit agreement, and to purchase short-term
cash investments. The 2007 Notes bear interest at a rate of 8 3/4%,
payable semi-annually in arrears on May 15 and November 15 of each year,
commencing November 15, 1997. The 2007 Notes are general unsecured senior
subordinated obligations of the Company and are subordinated in
right of payment to the Company's senior indebtedness, which currently
includes its obligations under its bank revolving credit agreement and its
unsecured credit lines, but are senior in right of payment to the Company's
subordinated indebtedness, which currently includes the 2006 Notes
and the 2004 Notes. The Company, at its option, may redeem the 2007 Notes
in whole or in part, at any time on or after May 15, 2002, at a redemption
price of 104.375% of their principal value and decreasing percentages
thereafter. No sinking fund payments are required on the 2007 Notes. The
2007 Notes are redeemable at the option of any holder, upon the occurrence
of a change of control (as defined in the indenture governing the 2007 Notes),
at 101% of their principal amount. The indenture governing the 2007 Notes
also imposes certain covenants on the Company (as more fully described therein)
that are customary for senior subordinated indebtedness generally,
including covenants limiting: incurrence of indebtedness, including senior
indebtedness; restricted payments; the issuance and sales of restricted
subsidiary capital stock; transactions with affiliates; liens; disposition
of proceeds of asset sales; non-guarantor restricted subsidiaries; dividends
and other payment restrictions affecting restricted subsidiaries; and mergers,
consolidations and the sale of assets.
Refer to Note 3 of the Notes to Consolidated Financial
Statements included in the Company's latest annual report for a further
discussion of the bank revolving credit agreement, the 5 1/2%
Convertible Subordinated Notes due 2004 (the "2004 Notes") and the 5 1/2%
Convertible Subordinated Notes due 2006 (the "2006 Notes").
- 6 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(3) Earnings per Share -
Earnings per share (in thousands, except per share amounts) are based on
the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
------------------------------- ---------------------------
Income Shares Per Share Income Shares Per Share
---------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings and shares outstanding $ 9,174 33,369 $ 21,992 33,359
Effect of dilutive securities:
Options to at average price -- 784 -- 806
_________ _________ ________ _______
Primary earnings per share $ 9,174 34,153 $ 0.27 $ 21,992 34,165 $ 0.64
======= =======
Options at closing price -- 15 -- 7
2004 Notes 771 3,886 1,541 3,886
--------- --------- -------- -------
Fully diluted earnings per share $ 9,945 38,054 $ 0.26 $ 23,533 38,058 $ 0.62
========= ========= ======= ======== ======= =======
Antidilutive securities --
Options at average price -- 80 $ 41.84 -- 80 $ 41.84
2006 Notes 1,028 2,726 $ 0.38 2,056 2,726 $ 0.75
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
------------------------------- ---------------------------
Income(a) Shares Per Share Income(a) Shares Per Share
---------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings and shares outstanding $ 8,937 33,156 $ 15,202 33,110
Effect of dilutive securities:
Options at average price -- 820 -- 795
--------- --------- -------- ------
Primary earnings per share $ 8,937 33,976 $ 0.26 $ 15,202 33,905 $ 0.44
======= =======
Options at closing price -- 36 -- 29
2004 Notes 771 3,887 1,542 3,887
--------- --------- -------- -------
Fully diluted earnings per share $ 9,708 37,899 $ 0.25 $ 16,744 37,821 $ 0.44
========= ========= ======= ======== ======= =======
Antidilutive securities --
8% Debentures 546 1,063 $ 0.51 1,092 1,063 $ 1.03
2006 Notes 144 382 $ 0.38 144 191 $ 0.75
</TABLE>
- ----------------
(a) Income before extraordinary loss
The 8% Debentures (retired on June 28, 1996) were common stock
equivalents. The 2004 Notes and the 2006 Notes (issued on June 18, 1996)
are not common stock equivalents.
- 7 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128"). It is effective for periods ending after
December 15, 1997, and early adoption is not permitted. The following is the
pro forma effect (in thousands, except per share amounts) of applying the
provisions of SFAS 128 to the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
------------------------------- ---------------------------
(Pro Forma) (Pro Forma)
------------------------------- ---------------------------
Income Shares Per Share Income Shares Per Share
---------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share -- $ 9,174 33,369 $ 0.27 $ 21,992 33,359 $ 0.66
======= =======
Effect of dilutive securities:
Options at average price -- 784 -- 806
2004 Notes 771 3,886 1,541 3,886
--------- --------- -------- -------
Diluted earnings per share $ 9,945 38,039 $ 0.26 $ 23,533 38,051 $ 0.62
========= ========= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
------------------------------- ---------------------------
(Pro Forma) (Pro Forma)
------------------------------- ---------------------------
Income(a) Shares Per Share Income(a) Shares Per Share
---------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share -- $ 8,937 33,156 $ 0.27 $ 15,202 33,110 $ 0.46
======= =======
Effect of dilutive securities:
Options at average price -- 820 -- 795
2004 Notes 771 3,887 1,542 3,887
--------- --------- -------- -------
Diluted earnings per share $ 9,708 37,863 $ 0.26 $ 16,744 37,792 $ 0.44
========= ========= ======= ======== ======= =======
</TABLE>
- ----------------
(a) Income before extraordinary loss
- 8 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion should be read in conjunction
with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the
Company's annual report on Form 10-K for the year
ended December 31, 1996. Certain statements contained herein are "Forward
Looking Statements" and are thus prospective. As further discussed in the
Company's annual report on Form 10-K, such forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by
such forward-looking statements.
RESULTS OF OPERATIONS --
INCOME AND REVENUE DATA
NET INCOME
The Company reported net income for the
second quarter of 1997 of $9,174,000 or $0.27 per share
($0.26 on a fully diluted basis) compared to net income
for the second quarter of 1996 of $8,116,000 or $0.24
per share ($0.23 on a fully diluted basis). For the
first six months of 1997, the Company reported net
income of $21,992,000 or $0.64 per share ($0.62 on a fully diluted
basis) compared to net income for the first six months
of 1996 of $14,381,000 or $0.42 per share (on both a primary and a
fully diluted basis). The Company recorded an extraordinary loss
during the second quarter of 1996 of $821,000, or $0.02 per share
related to early retirement of the Company's 2005 Debentures with
the proceeds from the Company's issuance of its 2006 Notes on
June 18, 1996. Earnings per share are based on the
weighted average number of common and common
equivalent shares outstanding for the second quarter and
first six months of 1997 of 34,153,000 and
34,165,000, respectively, compared to 33,976,000 and
33,905,000, respectively, for the second quarter and
first six months of 1996. The increases in the
weighted average number of common and common equivalent
shares outstanding for the 1997 periods, compared to
the 1996 periods, resulted primarily from the issuance of
shares of common stock upon the exercise of stock options
pursuant to the Company's stock option plans. Earnings per share
computations on a fully diluted basis in the 1997 periods
primarily reflect additional shares of common stock issuable
upon the assumed conversion of the Company's 2004 Notes
(the only convertible securities of the Company that were
dilutive during any of the periods presented) and the
elimination of related interest requirements, as adjusted for
applicable federal income taxes. The weighted average
number of shares of common and common equivalent shares
outstanding on a fully diluted basis for the second
quarter and first six months of 1997 were 38,054,000 and
38,058,000, respectively, compared to 37,899,000 and
37,821,000 respectively, for the second quarter and
first six months of 1996. Earnings applicable to common stock,
assuming full dilution and, with respect to the 1996 periods,
after giving effect to an extraordinary loss of $821,000,
for the second quarter and first six months of
1997 were $9,945,000 and $23,533,000, respectively,
compared to $8,887,000 and $15,923,000, respectively, for
the second quarter and first six months of 1996.
- 9 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
REVENUES
TOTAL REVENUES
The Company's total revenues for the second
quarter of 1997 were $76,740,000, an increase of
approximately 49% compared to total revenues of
$51,543,000 for the second quarter of 1996. The
Company's total revenues for the first six
months of 1997 were $138,054,000, an increase of approximately 39%
compared to total revenues of $99,595,000 for the first six
months of 1996. The increase in the Company's total revenues for
the second quarter and first six months of 1997, compared to the
second quarter and first six months of 1996, resulted primarily
from increases in the the Company's natural gas and liquid hydrocarbon
(including crude oil, condensate and natural gas liquid ("NGL"))
production volumes, that were only partially offset by decreases in
the average price that the Company received for such production.
In addition, the total revenues for the second quarter and first six
months of 1997 were positively affected by a $1,600,000 non-recurring
gain recorded in connection with the sale of certain excess equipment,
while the Company's total revenues for the first six months of of 1996
were adversely affected by a $165,000 loss resulting from the sale of a
non-strategic property.
OIL AND GAS REVENUES.
The following table reflects an analysis
of differences in the Company's oil and gas revenues (expressed
in thousands of dollars) between the second quarter and
first six months of 1997 and the same periods in the
preceding year.
<TABLE>
<CAPTION>
2nd Qtr '97 6 mos. '97
Compared to Compared to
2nd Qtr '96 6 mos. '96
----------- ----------
<S> <C> <C>
Increase (decrease) in total revenues
resulting from differences in :
Natural gas --
Price . . . . . . . . . . . . . . . . $ (1,649) $ (535)
Production . . . . . . . . . . . . . . 21,467 27,074
--------- ---------
19,818 26,539
--------- ---------
Crude oil and condensate --
Price . . . . . . . . . . . . . . . . (4,848) (2,465)
Production . . . . . . . . . . . . . . 6,432 10,723
--------- ---------
1,584 8,258
--------- ---------
NGL and other, net . . . . . . . . . . . 2,336 2,038
--------- ---------
Increase in oil and gas revenues . . . . $ 23,738 $ 36,835
========= =========
</TABLE>
- 10 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
NATURAL GAS PRICES. Prices per thousand cubic feet ("Mcf") that
the Company received for its natural gas production during the second
quarter of 1997 averaged $2.14 per Mcf, a decrease of approximately
7% from an average price of $2.31 per Mcf that the Company received for its
production during the second quarter of 1996. Prices that the
Company received for its natural gas production during
the first six months of 1997 averaged $2.34 per Mcf, a decrease
of approximately 1% from an average price of $2.36 per Mcf that the
Company received for its domestic natural gas production during the
first six months of 1996.
DOMESTIC PRICES. prices that the Company received for its
domestic natural gas
production during the second quarter of 1997 averaged $2.15 per Mcf,
a decrease of approximately 7% from an average price of $2.31 per Mcf
that the Company received for its domestic natural gas production
during the second quarter of 1996. Prices that the
Company received for its domestic natural gas production during
the first six months of 1997 averaged $2.41 per Mcf, an increase
of approximately 2% from an average price of $2.36 per Mcf that the
Company received for its domestic natural gas production during the
first six months of 1996.
THAILAND PRICES. The Company's Tantawan Field located in the
Kingdom of Thailand commenced production of natural gas and liquid
hydrocarbons in February
1997. During the second quarter of 1997, the price that the Company
received under its long term gas sales contract for natural gas production
from the Tantawan Field averaged approximately 54 Thai Baht per Mcf.
At the then prevailing currency exchange rates of approximately 25.5 Baht
to the dollar, this equaled approximately $2.12 per Mcf. In early July
1997, the government of the Kingdom of Thailand announced that the value
of the Baht would be set against the dollar and other currencies
under a "managed float" arrangement. Since that time, the value of the Baht
has declined. As of July 31, 1997, the prevailing currency exchange rate
was approximately 32 Baht to the dollar. The Company cannot predict what
the Baht to dollar exchange rate may be in the future. Moreover, it is
anticipated that this exchange rate will remain volatile.
NATURAL GAS PRODUCTION. The Company's natural gas production
during the second quarter of 1997 averaged 216.8 million cubic feet
("MMcf") per day, an increase of approximately 103% from an average of
106.6 MMcf per day that the Company produced during the second
quarter of 1996. The Company's natural gas production
during the first six months of 1997 averaged 173.5 MMcf
per day, an increase of approximately 59% from an
average of 108.9 MMcf per day that the Company
produced during the first six months of 1996.
DOMESTIC PRODUCTION. The Company's domestic natural gas
production during the second quarter of 1997 averaged 177.8 MMcf per
day, an increase of approximately
67% from an average of 106.6 MMcf per day that the Company produced
during the second quarter of 1996. The Company's domestic natural gas
production during the first six months of 1997 averaged 145.1 MMcf
per day, an increase of approximately 33% from an average of 108.9 MMcf
per day that the Company produced during the first six months of 1996.
The increase in the Company's natural gas production during
the second quarter and first six months of 1997, compared to
the second quarter and first six months of 1996, was related in large
measure to production from the Company's East Cameron Block 334 "E" platform,
which commenced production in April 1997, and, to a lesser extent, the
results of successful drilling in the Company's Lopeno Field in South Texas
and its Eugene Island Block 261 field, that
- 11 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
was only partially offset by the anticipated decline from certain of the
Company's properties. As of August 1, 1997, the Company was not a party
to any future natural gas sales contracts.
THAILAND PRODUCTION. The Company commenced production from
its Tantawan Field early in
February 1997. Following a field startup phase which ended on
March 15, 1997, production from the Tantawan Field stabilized. During
the second quarter of 1997, the Company's share of natural gas
production from the Tantawan Field averaged approximately 39 MMcf per day.
The Company anticipates that production will remain at approximately this
level until October 1997, when, in accordance with the long term gas sales
contract with the Petroleum Authority of Thailand for the Tantawan Field,
natural gas production from the field is anticipated to increase to
approximately 45 MMcf per day (net to the Company's working interest).
CRUDE OIL AND CONDENSATE PRICES. Prices received by the Company for
its crude oil and condensate production during the second quarter of 1997
averaged $18.35 per barrel, a decrease of approximately 19% from
the average price of $22.58 per barrel that the Company
received during the second quarter of 1996. Prices that the
Company received for its crude oil and condensate production during
the first six months of 1997 averaged $20.14 per barrel, a decrease of
approximately 5% from an average price of $21.14 per barrel
that the Company received during the first six months of 1996.
DOMESTIC PRICES. Prices received by the Company for its domestic
crude oil and condensate production during the second quarter of 1997
averaged $18.54 per barrel, a decrease of approximately 18% from
the average price of $22.58 per barrel that the Company
received during the second quarter of 1996. Prices that the
Company received for its domestic crude oil and condensate production during
the first six months of 1997 averaged $20.40 per barrel, a decrease of
approximately 4% from an average price of $21.14 per barrel
that the Company received during the first six months of 1996.
THAILAND PRICES. Since the inception of production from the
Tantawan Field, crude
oil and condensate has been stored in a Floating Production, Storage and
Offloading System (the "FPSO") until an economic quantity was accumulated
for offloading and sale. The first such sale of crude oil and condensate
from the Tantawan Field occurred in July 1997. Prices that the Company
recorded for its crude oil and condensate production stored on the FPSO
for the second quarter and first six months of 1997, were $17.26 and
$18.15, respectively. Prices that the Company currently expects to receive
for such production (and in fact did receive for its July 1997 sale) are
based on world benchmark prices, which are denominated in dollars.
CRUDE OIL AND CONDENSATE PRODUCTION. The Company's crude oil and
condensate production during the second quarter of 1997 averaged 16,457
barrels per day, an increase of approximately 23% from an average of
12,605 barrels per day during the second quarter of 1996. The Company's
crude oil and condensate production during the first six months of 1997
averaged 15,273 barrels per day, an increase of approximately 25% from
an average of 12,247 barrels per day during the first six months of 1996.
- 12 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
DOMESTIC PRODUCTION. The Company's domestic crude oil and
condensate production during the second quarter of 1997 averaged 14,065
barrels per day, an increase of approximately 12% from an average of
12,605 barrels per day during the second quarter of 1996. The Company's
domestic crude oil and condensate production during the first six months
of 1997 averaged 13,531 barrels per day, an increase of approximately 25%
from an average of 12,247 barrels per day during the first six months
of 1996. The increase in the Company's domestic crude oil and condensate
production during the second quarter and first six months of 1997,
compared to the second quarter and first six months of 1996, resulted
primarily from the success of the Company's ongoing development drilling
and workover program in the offshore and onshore Gulf of Mexico regions.
THAILAND PRODUCTION. The Company commenced production from its
Tantawan Field early in February 1997. Following a field startup phase
which ended on March 15, 1997, production from the Tantawan Field
stabilized. During the second quarter of 1997, the Company's share of
crude oil and condensate production production from the Tantawan Field
averaged approximately 2,392 barrels per day.
NGL PRODUCTION AND "OTHER" NET REVENUE ITEMS. The Company's
oil and gas revenues, and total liquid hydrocarbon
production volumes reflect the production and sale of NGL by the Company.
In addition, the Company's oil and gas revenues for the second quarter
and first six months of 1997 and 1996 also reflect adjustments for
various miscellaneous items of a non-recurring nature.
Liquid products are often extracted from its natural gas streams
and sold separately as NGL. All of the Company's NGL production comes
from its domestic operations. The prices that the Company typically
receives for its NGL production is related to crude oil prices. However,
because NGL is extracted from liquid rich natural gas, the Company's NGL
production volumes correlate most closely with increases (or decreases)
from certain of the Company's natural gas fields. Natural gas production
from the Company's East Cameron Block 334 "E" platform is considered
to be relatively rich in NGL.
The Company's NGL and "other" net revenues for the second quarter
and first six months of 1997 increased $2,336,000 and $2,038,000,
from the second quarter and first six months of 1996, respectively.
The increase in the Company's NGL and "other" net revenues for the second
quarter and first six months of 1997, compared to the second quarter
and first six months of 1996, was primarily related to an increase in
the Company's NGL production from the Company's East Cameron 334 "E" platform,
that was only partially offset by a decrease in the average price that the
Company received for its NGL production.
TOTAL LIQUID HYDROCARBON PRODUCTION. The Company's average
liquid hydrocarbon (including crude oil, condensate and NGL) production
during the second quarter of 1997 was 20,997 barrels per day, an increase of
approximately 39% from an average liquid hydrocarbon production
of 15,077 barrels per day during the second quarter of 1996.
The Company's average liquid hydrocarbon production during the first six
months of 1997 was 18,122 barrels per day, an increase of approximately
25% from an average liquid hydrocarbon production
of 14,475 barrels per day during the first six months of 1996.
- 13 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OPERATING COSTS AND EXPENSES
LEASE OPERATING EXPENSES
Lease operating expenses for the second quarter of
1997 were $16,191,000, an increase of approximately 76% from lease
operating expenses of $9,205,000 for the second quarter of 1996.
Lease operating expenses for the first six months of 1997 were
$28,488,000, an increase of approximately 58% from lease operating
expenses of $18,080,000 for the first six months of 1996.
The increases in lease operating expenses for the second quarter
and first six months of 1997, compared to the second quarter
and first six months of 1996, resulted primarily from
expenses related to the leasing of equipment (principally the FPSO);
increased operating activity by the Company and its industry partners;
and increased costs to the Company (and the entire offshore oil
industry) due to a shortage of qualified offshore
service contractors and equipment, which has permitted such contractors
to increase the costs of their services.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the second
quarter of 1997 were $5,121,000, an increase of approximately 17% from
general and administrative expenses of $4,383,000 for the second
quarter of 1996. General and administrative expenses for
the first six months of 1997 were $10,957,000, an increase of approximately
12% from general and administrative expenses of $9,804,000 for the first
six months of 1996. The increases in general and administrative expenses
for the second quarter and first six months of 1997, compared with the
second quarter and first six months of 1996,
were related to, among other things, an increase in the size of the Company's
work force and leased office space in the United States and Bangkok,
Thailand and normal salary and concomitant benefit expense adjustments that
were partially offset by decreases in miscellaneous general and administrative
expense items.
EXPLORATION EXPENSES
Exploration expenses consist primarily of delay rentals and
geological and geophysical costs which are expensed as incurred.
Exploration expenses for the second quarter of 1997 were $4,053,000, an
increase of approximately 1% from exploration expenses of $3,996,000
for the second quarter of 1996. The increase in exploration expenses
for the second quarter of 1997, compared to the second quarter of 1996,
resulted primarily from increased geophysical activity by the Company in
the Gulf of Mexico and an increase in delay rentals, which was not entirely
offset by a decrease in geophysical activity in other areas in which the
Company is currently conducting geophysical operations. Exploration
expenses for the first six months of 1997 were $5,953,000, a decrease of
approximately 24% from exploration expenses of $7,876,000 for the first
six months of 1996. The decrease in exploration expenses for the first
six months of 1997, compared to the first six months of 1996, resulted
primarily from a decrease in expenses resulting from the completion of
a 3-D seismic survey by the Company on its leases in South Louisiana and
East Texas in the first six months of 1996, which was partially offset
by increased expenses resulting from geophysical activity by the Company
in the Gulf of Mexico; and also by increased delay rental payments.
- 14 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
DRY HOLE AND IMPAIRMENT EXPENSES
Dry hole and impairment expenses relate to costs of
unsuccessful wells drilled, along with impairments due to decreases in
expected reserves from producing wells. The Company's dry
hole and impairment expenses for the second quarter of 1997 were
$4,086,000, an increase of approximately 59% from dry hole and
impairment expenses of $2,568,000 for the second quarter of 1996. The
Company's dry hole and impairment expenses for the first six months of
1997 were $5,007,000, a decrease of approximately 2% from dry hole and
impairment expenses of $5,118,000 for the first six months of 1996.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES
The Company accounts for its oil and gas activities using the
successful efforts method of accounting. Under the successful
efforts method, lease acquisition costs and all development costs are
capitalized. Unproved properties are reviewed whenever events or
changes in circumstances indicate that the carrying amount of such asset
may not be recoverable. Unproved properties are reviewed quarterly, with
any such impairment charged to expense in the period. Exploratory drilling
costs are capitalized until the results are determined. If proved
reserves are not discovered, the exploratory drilling costs are
expensed. Other exploratory costs are expensed as incurred.
The provision for depreciation, depletion and amortization
("DD&A") is based on the capitalized costs, as determined in the preceding
paragraph, plus future costs to abandon offshore wells and platforms, and
is determined on a cost center by cost center (generally, a field by field)
basis using the units of production method. The Company's DD&A expense
for the second quarter of
1997 was $28,457,000, an increase of approximately 80% from DD&A
expense of $15,793,000 for the second quarter of 1996. The Company's
DD&A expense for the first six months of 1997 was $46,877,000, an
increase of approximately 49% from DD&A expense of $31,506,000 for the
first six months of 1996. The increases in DD&A expense for the second
quarter and first six months of 1997, compared to the second
quarter and first six months of 1996, resulted
primarily from increased production of oil and gas from the Company's
properties and, to a much lesser extent, a slight increase in the Company's
composite DD&A rate. The composite DD&A rate for all of the
Company's producing fields for the second quarter of 1997 was $0.90
per equivalent Mcf ($5.38 per equivalent barrel), an increase of
approximately 3% from a composite DD&A rate of $0.87 per equivalent
Mcf ($5.22 per equivalent barrel) for the second quarter of 1996.
The composite DD&A rate for all of the Company's producing fields for
the first six months of 1997 was $0.90 per equivalent Mcf ($5.41 per equivalent
barrel), an increase of approximately 3% from a composite DD&A rate of $0.87
per equivalent Mcf ($5.24 per equivalent barrel) for the first six
months of 1996. The increase in the composite DD&A rate for all of the
Company's producing fields for the second quarter and the first six months
of 1997, compared to the second quarter and
first six months of 1996, resulted primarily from an increased percentage
of the Company's production coming from certain of the Company's fields
that have DD&A rates that are higher than the Company's recent historical
composite rate and a corresponding decrease in the percentage of the
Company's production coming from fields that have DD&A rates that are
lower than the
- 15 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Company's recent historical composite DD&A rate. The
Company produced 31,197,000 equivalent Mcf (5,200,000 equivalent
barrels) during the second quarter of 1997, an increase of approximately
74% from the 17,932,000 equivalent Mcf (2,989,000 equivalent barrels)
produced by the Company during the second quarter of 1996.
The Company produced 51,178,000 equivalent Mcf (8,530,000
equivalent barrels) during the first six months of 1997, an increase of
approximately 44% from the 35,628,000 equivalent Mcf (5,938,000 equivalent
barrels) produced by the Company during the first six months of 1996.
INTEREST
INTEREST CHARGES
The Company incurred interest charges for the
second quarter of 1997 of $5,536,000, an increase of approximately 75%
from interest charges of $3,172,000 for the second quarter of 1996.
Interest charges incurred by the Company for the first six months
of 1997 were $9,831,000, an increase of approximately 59% from interest
charges of $6,184,000 for the first six months of 1996.
The increases in interest charges for the second quarter and first six
months of 1997, compared to the second quarter and first six months of 1996,
resulted primarily from an increase in the average amount of the Company's
outstanding debt and, to a lesser extent, increased amortization and debt
issuance expenses resulting from the issuance of the 2006 Notes, that were
partially offset by lower average interest rate levels on the debt
outstanding (resulting primarily from the retirement of the 8% Debentures
and the issuance of the 2006 Notes that bear interest at a 5-1/2% annual
interest rate).
CAPITALIZED INTEREST EXPENSE
Capitalized interest expense for
the second quarter of 1997 was $760,000, a decrease of approximately
24% from capitalized interest expense of $1,004,000 for the first quarter
of 1996. The decrease in capitalized interest expense for the second
quarter of 1997, compared to the second quarter of 1996, resulted
primarily the cessation of the requirement to capitalize interest expense
attributable to capital expenditures on properties once production
commences from such properties. A substantial percentage of the
Company's capitalized interest
expense during 1996 and most of the first quarter of 1997 resulted
from capitalization of interest related to capital expenditures for the
development of the Tantawan Field (which commenced production in early
February 1997) and the East Cameron Block 334 "E" platform field (which
commenced production in early April 1997). Capitalized interest expense
for the first six months of 1997 was $2,630,000, an increase of
approximately 44% from capitalized interest expense of $1,830,000 for the
first six months of 1996. For the reasons enumerated above, the increase
in capitalized interest
expense for the first six months of 1997, compared to the first six months
of 1996, resulted primarily from the requirement to capitalize interest
expense attributable to capital expenditures on non-producing properties,
principally capital expenditures related to the Company's development of
the Tantawan Field and the East Cameron Block 334 "E" platform during the
first quarter of 1997, which substantially exceeded the Company's capital
expenditures on non-producing properties (principally the Tantawan Field)
during the first six months of 1996.
- 16 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
As of August 1, 1997, the Company was a party to an interest rate
swap agreement. The swap agreement, which terminates on March 10, 1998,
effectively changes the interest rate that the Company would pay on
$5,000,000 of debt from a market based variable rate to a fixed rate of 7.2%.
INCOME TAX EXPENSE
Income tax expense for the second quarter of 1997 was
$4,955,000, an increase of approximately 7% from income tax expense
of $4,647,000 for the second quarter of 1996. Income tax expense
for the first six months of 1997 was $11,708,000, an increase of
approximately 50% from income tax expense of $7,794,000 for the
first six months of 1996. The increase in income tax expense for the
second quarter and first six months of 1997, compared to the second
quarter and first six months of 1996, resulted primarily
from increased pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES --
CASH FLOWS
The Company's Condensed Consolidated Statement of Cash Flows for
the six months ended June 30, 1997, reflects net cash provided by operating
activities of $73,807,000 (including an income tax refund of $7,037,000
which was partially offset by a payment of estimated income taxes of
$4,500,000). In addition to net cash provided by operating
activities, the Company received net proceeds of $97,270,000 from the
issuance of the 2007 Notes on May 22, 1997, $958,000 from the exercise
of stock options and $100,000 from the sale of certain non-strategic
properties.
During the first six months of 1997, the Company invested $112,617,000
of such cash flow in capital projects, repaid a net $8,000,000
under its revolving credit facility and paid $2,002,000 ($0.03 per share
for each of the first two quarters of 1997) in cash dividends to
holders of the Company's common stock. Of the $112,617,000
invested in capital projects, $56,961,000 was applicable to 1996 capital
projects and $55,656,000 was applicable to 1997
capital projects. As of June 30, 1997, the Company's cash and cash
investments were $23,505,000 and its long-term debt stood at $338,205,000.
FUTURE CAPITAL REQUIREMENTS
The Company's capital and exploration budget for 1997, which
does not include any amounts that may be expended for the purchase of
proved reserves or any interest which may be capitalized resulting from
projects in progress, was established by the Company's Board of Directors
at $210,000,000. In addition to anticipated
capital and exploration expenses, other material 1997 cash requirements
that the Company currently anticipates include ongoing operating, general
and administrative, income tax, interest expense and the payment of
dividends on its common stock,
including a $.03 per share dividend on its common stock to be paid on
August 22, 1997 to stockholders of record as of August 8, 1997.
The Company currently anticipates that its available cash and cash
investments, cash provided by operating
activities and funds available under
its revolving credit facility and
- 17 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
uncommitted lines of credit with banks will be sufficient to fund
the Company's ongoing expenses, its 1997 capital and exploration
budget, any currently anticipated costs associated with the Company's
Thailand projects during 1997 and anticipated future
dividend payments. The declaration of future dividends will depend upon,
among other things, the Company's future earnings and financial condition,
liquidity and capital requirements, the general economic and regulatory
climate and other factors deemed relevant by the Company's Board of
Directors.
NEW DEBT INSTRUMENTS
2007 NOTES
On May 22, 1997, the Company issued $100,000,000 of 8 3/4%
Senior Subordinated Notes due 2007 (the "2007 Notes"). The proceeds from
the issuance of the 2007 Notes were used to repay amounts outstanding under
the Company's bank revolving credit agreement, and to purchase short-term
cash investments. The 2007 Notes bear interest at a rate of 8 3/4%,
payable semi-annually in arrears on May 15 and November 15 of each year,
commencing November 15, 1997. The 2007 Notes are general unsecured senior
subordinated obligations of the Company and are subordinated in
right of payment to the Company's senior indebtedness, which currently
includes its obligations under its bank revolving credit agreement and its
unsecured credit lines, but are senior in right of payment to its
subordinated indebtedness, which currently includes the 2006 Notes
and the 2004 Notes. The Company, at its option, may redeem the 2007 Notes
in whole or in part, at any time on or after May 15, 2002, at a redemption
price of 104.375% of their principal value and decreasing percentages
thereafter. No sinking fund payments are required on the 2007 Notes. The
2007 Notes are redeemable at the option of any holder, upon the occurrence
of a change of control (as defined in the indenture governing the 2007 Notes),
at 101% of their principal amount. The indenture governing the 2007 Notes
also imposes certain covenants on the Company (as more fully described therein)
that are customary for senior subordinated indebtedness generally,
including covenants limiting: incurrence of indebtedness, including senior
indebtedness; restricted payments; the issuance and sales of restricted
subsidiary capital stock; transactions with affiliates; liens; disposition
of proceeds of asset sales; non-guarantor restricted subsidiaries; dividends
and other payment restrictions affecting restricted subsidiaries; and mergers,
consolidations and the sale of assets.
AMENDED AND RESTATED CREDIT AGREEMENT
Effective August 1, 1997, the Company entered into an amended and
restated credit agreement (the "Credit Agreement"). The Credit Agreement
provides for an unsecured $250,000,000 revolving/term credit facility which
will be fully revolving until July 1, 2000, after which the balance will
be due in eight quarterly term loan installments, commencing October 31, 2000.
The amount that may be borrowed under the Credit Agreement may not exceed
a borrowing base which is composed of both domestic and Thai properties less,
in certain circumstances, the present value of interest payments on a portion
of certain subordinated indebtedness, including the 2007 Notes.
The domestic borrowing base is determined semi-annually by the lenders
in accordance with the Credit Agreement, based primarily on the discounted
present value of future net revenues from the Company's domestic oil and gas
reserves. The portion of the borrowing base which is composed of properties
- 18 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
located in the Kingdom of Thailand is also determined semi-annually, but may,
at the lenders discretion, be redetermined once more during each semi-annual
period. The value of this portion of the borrowing base is determined by the
lenders applying their usual and customary criteria for
oil and gas evaluation. As of August 1, 1997, the Company's total borrowing
base, including both domestic and Thai properties, exceeded $250,000,000.
The Credit Agreement is governed by various financial and other covenants,
including requirements to maintain positive working capital (excluding
current maturities of debt) and a fixed charge coverage ratio, and
limitations on indebtedness, creation of liens, the prepayment of
subordinated debt, the payment of dividends, mergers and consolidations,
investments and asset dispositions. In addition, the Company is prohibited
from pledging borrowing base properties as security for other debt.
Borrowings under the Credit Agreement currently bear interest at a base
(prime) rate or LIBOR plus 5/8%, at the Company's option. A commitment fee
on the unborrowed amount under the Credit Agreement is also charged. The
commitment fee is currently 0.25% per annum on the unborrowed amount under
the Credit Agreement that is designated as "active" and 0.10% per annum
on the unborrowed amount under the Credit Agreement that is designated as
"inactive." Of the $250,000,000 that is currently available under the
Credit Agreement (subject to borrowing base limitations), $125,000,000
is designated as "active" and $125,000,000 is designated as "inactive."
- 19 -
<PAGE>
Pogo Producing Company and Subsidiaries
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security-Holders
The registrant held it annual meeting of stockholders in
Houston, Texas on April 22, 1997. The following sets forth
the items that were put to a vote of the stockholders and
the results thereof concerning:
(A) the election of four directors, each for a term of
three years. Proxies for the meeting were solicited
pursuant to Regulation 14A under the Securities Exchange
Act of 1934. There were no solicitations in opposition
to management's nominees as listed in the proxy statement
and all such nominees were elected;
(B) the appointment of Arthur Andersen LLP, independent
public accountants, to audit the financial statements
of the registrant for the year 1997, with 31,153,313
shares of stock cast for the appointment, 17,034 against
the appointment, and 13,873 abstentions and broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
4(a) -- Amended and Restated Credit Agreement dated as of
August 1, 1997, among Pogo Producing Company,
certain commercial lending institutions, Bank of
Montreal as the Agent and Banque Paribas as the
Co-Agent.
27 -- Financial Data Schedule
(B) Reports on Form 8-K
None
- 20 -
<PAGE>
Pogo Producing Company and Subsidiaries
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.
Pogo Producing Company
Registrant
/s/ THOMAS E. HART
Thomas E. Hart
Vice President and Controller
/s/ JOHN W. ELSENHANS
John W. Elsenhans
Vice President - Finance
and Treasurer
Date: August 8, 1997
- 21 -
U.S. $250,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of August 1, 1997
among
POGO PRODUCING COMPANY,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS, as the Lenders,
and
BANK OF MONTREAL,
acting through its Chicago, Illinois branch
as the Agent for the Lenders,
and
BANQUE PARIBAS,
acting through its Houston Agency
as the Co-Agent for the Lenders.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . 2
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . 25
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . 25
1.4. Accounting and Financial Determinations . . . . . . . . . . . 25
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES . . . . . . . . . . . . . 26
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.1.1. Revolving Loan Commitment . . . . . . . . . . . . . . . . . . 26
2.1.3. Lenders Not Permitted or Required To Make Loans in
Excess of Commitment . . . . . . . . . . . . . . . . . . . 26
2.2. Termination, Reduction, Redesignation and Extension
of the Commitment Amounts . . . . . . . . . . . . . . . . . 27
2.2.1. Optional . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.2.2. Mandatory . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2.3. Mandatory as to Term Loans . . . . . . . . . . . . . . . . . . 28
2.3. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . 28
2.4. Continuation and Conversion Elections . . . . . . . . . . . . 29
2.5. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.6. Determination of Borrowing Base . . . . . . . . . . . . . . . 29
2.7. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES . . . . . . . . . . . . . 31
3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . 31
3.1.1. Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1.2. Mandatory Prepayments on Revolving Loans . . . . . . . . . . . 32
3.1.3. Mandatory Prepayments on Term Loans . . . . . . . . . . . . . 33
3.1.4. Repayment Upon Acceleration . . . . . . . . . . . . . . . . . 35
3.2. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . 35
3.3. Interest Provisions . . . . . . . . . . . . . . . . . . . . . 35
3.3.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.3.2. Post-Maturity Rates . . . . . . . . . . . . . . . . . . . . . 36
3.3.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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3.3.4. Interest Rate Determination . . . . . . . . . . . . . . . . . 37
3.3.5. Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . 37
3.4. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4.1. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . 39
3.4.2. Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS . . . . . . . . . . . . . . . 40
4.1. Fixed Rate Lending Unlawful . . . . . . . . . . . . . . . . . 40
4.2. Rates Unavailable . . . . . . . . . . . . . . . . . . . . . . 40
4.3. Increased Fixed Rate Loan Costs, etc. . . . . . . . . . . . . 40
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 41
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . 41
4.6. Period of Liability . . . . . . . . . . . . . . . . . . . . . 42
4.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.8. Payments, Computations, etc. . . . . . . . . . . . . . . . . . 42
4.9. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . 43
4.10. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
CONDITIONS TO BORROWING . . . . . . . . . . . . . . . . . . . . . . 44
5.1. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . 44
5.1.1. Corporate or Partnership Existence . . . . . . . . . . . . . . 44
5.1.2. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . 44
5.1.3. Compliance with Representations and Warranties . . . . . . . . 45
5.1.4. Delivery of Notes . . . . . . . . . . . . . . . . . . . . . . 45
5.1.5. [Intentionally Omitted.]. . . . . . . . . . . . . . . . . . . 45
5.1.6. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 45
5.1.7. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . 46
5.2. Conditions Precedent to Revolving Loans . . . . . . . . . . . 46
5.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . 46
5.2.2. Borrowing Request . . . . . . . . . . . . . . . . . . . . . . 47
5.2.3. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 47
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . 48
6.3. Government Approval, Regulation, etc. . . . . . . . . . . . . 48
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . 48
6.5. Financial Information . . . . . . . . . . . . . . . . . . . . 48
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . 49
6.7. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . 49
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.9. Ownership of Properties . . . . . . . . . . . . . . . . . . . 50
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . 50
6.12. Environmental Warranties . . . . . . . . . . . . . . . . . . . 50
6.13. Regulations G, T, U and X . . . . . . . . . . . . . . . . . . 52
6.14. Rank of Indebtedness . . . . . . . . . . . . . . . . . . . . . 52
6.15. Absence of Defaults . . . . . . . . . . . . . . . . . . . . . 52
6.16. Accuracy of Information . . . . . . . . . . . . . . . . . . . 52
6.17. No Contractual Violation . . . . . . . . . . . . . . . . . . . 53
ARTICLE VII
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1. Performance of Affirmative Covenants . . . . . . . . . . . . . 53
7.2. Financial Information, Reports, Notices, etc. . . . . . . . . 53
7.3. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . 56
7.4. Maintenance of Properties . . . . . . . . . . . . . . . . . . 56
7.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.6. Books and Records . . . . . . . . . . . . . . . . . . . . . . 57
7.7. Environmental Covenant . . . . . . . . . . . . . . . . . . . . 57
7.8. Performance Under Material Operating Contracts . . . . . . . . 57
7.9. Payment of Indebtedness . . . . . . . . . . . . . . . . . . . 57
7.10. Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.1. Performance of Negative Covenants . . . . . . . . . . . . . . 58
8.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . 60
8.5. Investments . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.6. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . 63
</TABLE>
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8.7. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . 64
8.8. Asset Dispositions . . . . . . . . . . . . . . . . . . . . . . 65
8.9. Modification of Certain Agreements . . . . . . . . . . . . . . 65
8.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . 66
8.11. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . 66
8.12. Negative Pledges, etc. . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.1. Listing of Events of Default . . . . . . . . . . . . . . . . . 66
9.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . 66
9.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . 67
9.1.3. Non-Performance of Certain Covenants and Obligations . . . . . 67
9.1.4. Non-Performance of Other Covenants and Obligations . . . . . . 67
9.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . 67
9.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . 68
9.1.8. Control of the Borrower . . . . . . . . . . . . . . . . . . . 68
9.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . 68
9.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . 68
9.3. Action if Other Event of Default . . . . . . . . . . . . . . . 69
ARTICLE X
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . 69
10.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.5. Loans by the Agent and Banque Paribas . . . . . . . . . . . . 71
10.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . 71
10.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XI
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 71
11.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . 71
11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . 72
</TABLE>
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11.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . 73
11.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . 74
11.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.8. Execution in Counterparts, Effectiveness, etc. . . . . . . . 74
11.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . 75
11.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . 75
11.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes . . . . . . . . . . . . . . . . . . . 75
11.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . 75
11.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . 77
11.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 77
11.13. Other Transactions . . . . . . . . . . . . . . . . . . . . . 78
SCHEDULE I - Disclosure Schedule
EXHIBIT A - Form of Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Lender Assignment Agreement
EXHIBIT E-1 - Form of Opinion of Gerald A. Morton,
Vice President - Law and Corporate Secretary to
the Borrower
EXHIBIT E-2 - Form of Opinion of Baker & McKenzie, Counsel to
Thaipo Limited
EXHIBIT F - Form of Subsidiary Guaranty
</TABLE>
v
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 1, 1997,
among POGO PRODUCING COMPANY, a Delaware corporation (the "Borrower"), the
various financial institutions which are or may become parties hereto
(collectively, the "Lenders"), and BANK OF MONTREAL, acting through its
Chicago, Illinois branch ("the Bank"), as agent (the "Agent") for the Lenders
and BANQUE PARIBAS, acting through its Houston Agency, as co-agent (the "Co-
Agent") for the Lenders,
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent entered
into that certain Credit Agreement dated as of September 23, 1992, which Credit
Agreement was amended and modified from time to time, including an amendment
and restatement dated as of June 1, 1995 (as so amended and modified, the
"Original Credit Agreement"); and
WHEREAS, the Borrower desires to further amend the Original Credit
Agreement; and
WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent agree
that it is in the best interests of all parties to restate the Original Credit
Agreement in its entirety in connection with such further amendments sought by
Borrower;
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments and make such Loans to the Borrower; and
WHEREAS, there currently exist certain Loans outstanding under the
Original Credit Agreement and it is the intent of all parties that these
outstanding Loans shall become, as of the Effective Date of this Amended and
Restated Credit Agreement, outstanding Loans under this Amended and Restated
Credit Agreement; and
WHEREAS, the proceeds of Loans to be made after the date hereof will be
used for general corporate purposes of the Borrower and its Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Activation Amount" means, in each case, any portion of the Inactive
Revolving Loan Commitment Amount that is converted to Active Revolving Loan
Commitment Amount by the Borrower following notice to the Agent in connection
with any Borrowing pursuant to Section 2.3 or, if not in connection with a
Borrowing, in a notice to the Agent pursuant to Section 11.2. Each Activation
Amount shall be in an amount equal to an integral multiple of $12,500,000.
"Active Revolving Loan Commitment Amount" means, on any date,
$125,000,000, plus the net amount of all Activation Amounts, as such Active
Revolving Loan Commitment Amount may be changed from time to time pursuant to
Section 2.2.
"Additional Costs" is defined in Section 4.3.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" is defined in the preamble and includes each other Person as
shall have subsequently been appointed as the successor Agent pursuant to
Section 10.4.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Reserve Report" means, as the context requires, either the
Alternate Thailand Reserve Report or the Alternate U.S. Reserve Report and,
when used in the plural, shall mean both such reserve reports.
2
<PAGE>
"Alternate Thailand Reserve Report" means a report, in form and detail
satisfactory to the Agent and the Required Lenders, on reserves updated
internally by the Borrower making adjustments for any changes in production
volumes, expenses, Applicable Prices and for dispositions of properties in the
six-month period subsequent to the immediately preceding Reserve Report Date
and based upon the immediately preceding Thailand Reserve Report and , at the
Borrower's option, for any acquisitions of properties not included in the
immediately preceding Thailand Reserve Report or the restoration to the
Thailand Borrowing Base of properties previously removed from the Thailand
Borrowing Base by the Borrower.
"Alternate U.S. Reserve Report" means a report, in form and detail
satisfactory to the Agent and the Required Lenders, on reserves updated
internally by the Borrower making adjustments for any changes in production
volumes, expenses, Applicable Prices and for dispositions of properties in the
six-month period subsequent to the immediately preceding Reserve Report Date
and based upon the immediately preceding U.S. Reserve Report and, at the
Borrower's option, for any acquisitions of properties not included in the
immediately preceding U.S. Reserve Report or the restoration to the U.S.
Borrowing Base of properties previously removed from the U.S. Borrowing Base by
the Borrower. If any report which purports to be an Alternate U.S. Reserve
Report and which is delivered by the Borrower pursuant to the terms of this
Agreement is unsatisfactory in substance, form or detail to Lenders with an
aggregate Percentage of at least 75%, or if Lenders with an aggregate
Percentage of 75% or more disagree with the estimate of Proved Reserves insofar
as such estimate reflects internal work by the Borrower rather than estimates
by independent engineers in the preceding U.S. Reserve Report, the Borrower
shall as promptly as practicable but in any event within 90 days provide to the
Agent and the Lenders an Alternate Reserve Report Review. Such Alternate U.S.
Reserve Report so reviewed pursuant to the Alternate Reserve Report Review
shall qualify as an Alternate U.S. Reserve Report for purposes of this
Agreement.
"Alternate Reserve Report Review" means a review of any Alternate
Reserve Report by Ryder Scott Company Petroleum Engineers or other independent
petroleum engineers (provided that such other engineers are satisfactory to the
Borrower, the Agent and the Required Lenders), which engineer shall, as a part
of such review, certify that the estimates in the Alternate Reserve Report are
reasonable estimates using generally accepted petroleum engineering and
evaluation principles and that the methods and procedures used in preparing the
Alternate Reserve Report are reasonable. The principles to be utilized are
those set forth in the Standards Pertaining to the Estimating and Auditing of
Oil and Gas Reserve Information promulgated by the Society of Petroleum
Engineers.
"Applicable Gas Price" means the average (rounded to the nearest $.01)
of the natural gas prices being used (including prices for future periods) by
the Agent and the Co-Agent for evaluation of oil and gas reserve lending
transactions in accordance with the Agent's and the Co-Agent's customary
standards (which prices, other than those fixed by contract and subject to BTU
adjustment to reflect the liquids content of Borrower's natural gas, will be
consistent with those then being applied to other borrowers of the Agent or Co-
Agent generally) as of each January 1 or July 1, as applicable; provided,
however, that for purposes of determining the Borrowing Base, production
3
<PAGE>
volumes hedged under fixed price contracts or production volumes committed
under long-term sales contracts (in each case with counterparties acceptable to
the Agent and the Co-Agent) will be included in the Reserve Reports at the
contracted price and the Applicable Gas Price will be BTU-adjusted to reflect
the liquids content of Borrower's natural gas.
"Applicable Margin" means, at any time that the Borrower's Implied
Senior Debt Rating is equal to any rating set forth below, the percentage per
annum set forth opposite such Implied Senior Debt Rating in the column that is
applicable at that time, determined by reference to the percentage of the
Borrowing Base that the outstanding Loans represent at that time; provided,
that for purposes of determining the Applicable Margin if the Borrower's
Implied Senior Debt Rating shall change at any time for purposes of the grid
set forth below, such new Implied Senior Debt Rating shall become effective on
the immediately next Quarterly Payment Date:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
35% of the BB ( 50% of the BB ( 75% of the BB (
Implied Outstanding outstanding outstanding outstanding Outstanding
Senior Debt Loans ( 35% of Loans ( 50% of Loans ( 75% of Loans ( 90% of Loans ) 90% of
Rating the BB* the BB the BB the BB the BB
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B+ or lower 1.25% 1.25% 1.50% 1.70% 1.90%
- ------------------------------------------------------------------------------------------------------------
BB- .75% .875% 1.00% 1.125% 1.25%
- ------------------------------------------------------------------------------------------------------------
BB .625% .6875% .75% .85% .95%
- ------------------------------------------------------------------------------------------------------------
BB+ or higher .50% .5625% .625% .70% .80%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* For purposes of the column headings in the forgoing table only, "BB" shall
mean Borrowing Base.
"Applicable Oil Price" means the average (rounded to the nearest $.01)
of the crude oil prices being used (including prices for future periods) by the
Agent and the Co-Agent for evaluation of oil and gas reserve lending
transactions in accordance with the Agent's and Co-Agent's customary standards
(which prices, other than those fixed by contract and adjusted to reflect the
quality of Borrower's crude oil, will be consistent with those then being
applied to other borrowers of the Agent and Co-Agent generally) as of each
January 1 and July 1, as applicable, provided, however, that, for purposes of
determining the Borrowing Base, production volumes hedged under fixed price
contracts or production volumes committed under long-term sales contracts (in
each case with counterparties acceptable to the Agent and the Co-Agent) will be
included in the Reserve Reports at the contracted price and the Applicable Oil
Price will be adjusted to reflect the quality of Borrower's crude oil.
"Applicable Percentage" means (a) 65% for Proved Developed Producing
Reserves located in the United States, (b) 33% for Proved Developed Shut-In
Reserves located in the United States, (c) 33% for Proved Developed Behind Pipe
Reserves located in the United States and (d) 18% for Proved Undeveloped
Reserves located in the United States.
"Applicable Price" means the Applicable Gas Price, the Applicable Oil
Price and the Applicable Products Price, as the case may be.
"Applicable Products Price" means in respect of any year (a) for volumes
not hedged under fixed price contracts or committed under long-term sales
contracts the lesser of (i) (A) for the first
4
<PAGE>
two years included in any calculation, the Current Products Price and (B) for
all subsequent years included in any calculation, the Current Products Price
escalated at a rate of 4% per annum, such escalation commencing at the
beginning of the third year from the date such calculation is being made, and
(ii) $26 per barrel and (b) for volumes hedged under fixed price contracts or
committed under long-term sales contracts (in each case with counterparties
acceptable to the Agent and the Co-Agent), the contract price for such volumes.
"Assignee Lender" is defined in Section 11.11.1.
"Audited Reserve Report" means a report of an independent petroleum
engineer pertaining to, and audit of, any Reserve Report or Updated Reserve
Report previously furnished to the Lenders which shall certify that the
estimates of Proved Reserves and the estimates of production and production
costs employed in such Reserve Report, or Updated Reserve Report, as the case
may be, are reasonable and report only the Proved Reserves attributable to
Borrower's working interest percentage in or Borrower's pro rata share of, as
the case may be, any Proved Reserves located on Borrowing Base Properties,
using generally accepted petroleum engineering and evaluation principles, and
that the methods and procedures used in preparing the Reserve Report, or
Updated Reserve Report, as the case may be are reasonable, or, if such engineer
cannot so certify as to such estimates, providing revised estimates of Proved
Reserves, estimates of production and production costs, which revised estimates
shall be certified to have been prepared in accordance with generally accepted
petroleum engineering and evaluation principles. The principles to be used are
those set forth in the Standards Pertaining to the Estimating and Auditing of
Oil and Gas Reserve Information promulgated by the Society of Petroleum
Engineers. The date of an Audited Reserve Report shall be the Reserve Report
Date of the previously rejected Reserve Report or the date of the previously
rejected Updated Reserve Report, as the case may be.
"Authorized Person" means, relative to the Borrower, those of its
officers and employees whose signatures and incumbency shall have been
certified to the Agent and the Lenders pursuant to Section 5.1.2.
"B8/32 Partners" means that certain corporation organized under the laws
of the Kingdom of Thailand known as B8/32 Partners, Ltd., in which the Borrower
holds an equity interest equal to its subsidiary Thaipo Limited's working
interest in the Block B8/32 Concession located in the Gulf of Thailand.
"Bank" is defined in the preamble.
"Borrower" is defined in the preamble.
"Borrowing" means the Loans of the same Type made by all Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Base" means, at any time, the sum of the U.S. Borrowing Base
and the Thailand Borrowing Base; provided, however, for purposes of determining
or redetermining the Borrowing Base, if the ratio of the amount of outstanding
principal of the New Subordinated Debt to the amount
5
<PAGE>
equal to the sum of the U.S. Borrowing Base and the Thailand Borrowing Base is
greater than or equal to .50 to 1.00, then "Borrowing Base" shall mean the sum
of the U.S. Borrowing Base and the Thailand Borrowing Base, minus the present
value (discounted at 10%) of the interest payments payable by the Borrower on
account of the New Subordinated Debt from the date of determination or
redetermination through July 2, 2002.
"Borrowing Base Properties" means those oil and gas properties of the
Borrower or, to the extent provided below, of a Subsidiary or Affiliate of the
Borrower (including the Borrower's and such Subsidiary's and Affiliate's pro
rata share of Qualified Partnership Properties pro rated on the basis of the
lesser of (i) Borrower's or such Subsidiary or Affiliate's share of income from
the Qualified Partnership Properties and (ii) the Borrower's or such Subsidiary
or Affiliate's share of the Qualified Partnership Properties or proceeds
thereof upon a liquidation of the Person holding title to such Qualified
Partnership Properties) included in the most recent Reserve Report or Alternate
Reserve Report; provided, however, that Borrowing Base Properties shall not
include: (i) properties located outside the United States (other than
properties located in the Kingdom of Thailand), (ii) properties owned by the
Borrower's Subsidiaries or Affiliates (other than Qualified Partnership
Properties to the extent of the Borrower's, its Subsidiary's or Affiliate's pro
rata share thereof) except as permitted by the provisions of the sentence
immediately following, (iii) properties which secure Non-Recourse Indebtedness
and (iv) properties subject to Liens other than those permitted under clauses
(d), (e), (f), (g) and (i) of Section 8.3; provided that, unless the Discounted
Present Value of such properties, in the aggregate, is no more than $5,000,000,
no properties of the Borrower or any Subsidiary of Borrower (including the
Borrower's or such Subsidiary's pro rata share of Qualified Partnership
Properties) included in the most recently delivered Reserve Report or Alternate
Reserve Report, as the case may be, may be deleted from a subsequent Reserve
Report or Alternate Reserve Report, including the imposition of a Lien thereon
or the securing of Non-Recourse Indebtedness thereby, without the consent of
the Required Lenders, which consent shall not be unreasonably withheld and
shall not require the payment of a fee or other compensation by the Borrower.
Notwithstanding the immediately preceding sentence, the Borrower or a
Subsidiary or Affiliate of the Borrower may transfer Borrowing Base Properties
to one or more Majority-owned Subsidiaries of the Borrower provided that (i)
such transfer is permitted pursuant to Section 8.8(b) and (ii) (except with
respect to properties that may be transferred to Thaipo Limited by B8/32
Partners) the Subsidiary to which such properties are transferred by the
Borrower or any Subsidiary or Affiliate of the Borrower shall have executed and
delivered to the Agent a Subsidiary Guaranty. Nothing herein shall prevent a
Subsidiary or Affiliate from transferring Borrowing Base Properties to the
Borrower at any time.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Person of the Borrower, substantially in the form of Exhibit B
hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in
Chicago, Illinois or Houston, Texas.
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"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a capitalized lease,
and, for purposes of this Agreement and each other Loan Document, the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by
(i) a corporation (other than an Affiliate of the
Borrower) organized under the laws of any state of the United
States or of the District of Columbia and rated to be of
investment grade by Standard & Poor's Corporation or Moody's
Investors Service, Inc., or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or banker's acceptance,
maturing not more than one year after such time, which is issued by
either
(i) a commercial banking institution that is a member
of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $100,000,000, or
(ii) any Lender;
(d) any repurchase agreement entered into with any Lender (or
other commercial banking institution of the stature referred to in
clause (c)(i)) which
(i) is secured by a fully perfected security interest
in any obligation of the type described in any of clauses (a)
through (c); and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of such Lender (or other commercial banking
institution) thereunder; or
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(e) any loan participation in a loan which is to a Borrower
with a long-term debt rating of investment grade or higher from any
nationally recognized rating agency and is made by
(i) a commercial banking institution that is a member
of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $100,000,000, or
(ii) any Lender.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of fifty percent (50%) or more of the outstanding shares of voting
stock of the Borrower.
"Co-Agent" is defined in the preface and includes any successor or
assign of Banque Paribas in such capacity.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, relative to any Lender, such Lender's Revolving Loan
Commitment or Term Loan Commitment, as the case may be.
"Commitment Amount" means either the Revolving Loan Commitment Amount or
Term Loan Commitment Amount.
"Commitment Fees" is defined in Section 3.4.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses (a)
through (d) of Section 9.1.9; and
(b) any other Event of Default shall have occurred and be
continuing and either
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(i) the Loans are declared to be due and payable
pursuant to Section 9.3, or
(ii) in the absence of such declaration, the Agent,
acting at the direction of the Required Lenders, gives notice to
the Borrower that the Commitments have been terminated.
"Confidentiality Letter" means the letter agreements entered into by the
Borrower with the Agent, the Co-Agent and each of the other Lenders and to be
entered into with each Assignee Lender or Participant respecting non-disclosure
of the Borrower's confidential information.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Person of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Current Products Price" means at any time the weighted average price
per barrel calculated on a property by property basis received by the Borrower
during the preceding 12 month period for all sales of hydrocarbon products.
"Current Ratio" means the ratio of
(a) consolidated current assets of the Borrower, its
Subsidiaries and Affiliates
to
(b) consolidated current liabilities, less current maturities
of long-term debts (including Non-Recourse Indebtedness), of the
Borrower, its Subsidiaries and Affiliates.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Deficiency Period" means any period commencing upon any date that the
Agent determines that (i) the aggregate principal amount of all Senior Debt
exceeds the Borrowing Base then in effect or (ii) those ratios with respect to
the Term Loans set forth in Section 3.1.3 are not satisfied, and continuing
until the date that, pursuant to the redetermination of the Borrowing Base or
the determination of a Revised Borrowing Base, or by reason of mandatory
prepayments or scheduled repayments, (i) with respect to Revolving Loans, the
aggregate outstanding principal amount of Senior Debt no longer exceeds the
Borrowing Base or (ii) with respect to Term Loans outstanding,
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the ratios set forth in Section 3.1.3 are satisfied; provided that, pursuant to
Sections 3.1.2 and 3.1.3 (i) if a Reserve Report or Alternate Reserve Report
shall be found unsatisfactory in substance, form or detail, or unsatisfactory
by reason of the estimate of Proved Reserves, by Lenders having an aggregate
Percentage of at least 75% and (ii) upon the delivery by the Borrower of an
Audited Reserve Report or the results of any Alternate Reserve Report Review,
as the case may be, and the determination of the Borrowing Base pursuant
thereto, the Agent shall determine that as of the date of such Audited Reserve
Report or the Alternate Reserve Report so reviewed pursuant to an Alternate
Reserve Report Review, (A) the aggregate principal amount of all Senior Debt
exceeds the Borrowing Base in effect or (B) those ratios with respect to Term
Loans set forth in Section 3.1.3 are not satisfied, then the Deficiency Period
shall be deemed to have begun on (i) the April 30th following the date of an
Audited Reserve Report (or the first day thereafter on which the Senior Debt
shall have exceeded the Borrowing Base as determined pursuant to the Audited
Reserve Report) or (ii) the October 31st following the date of an Alternate
Reserve Report (or the first day thereafter on which the Senior Debt shall have
exceeded the Borrowing Base as determined after the Alternate Reserve Report
Review) pursuant to the provisions of Sections 3.1.2 and 3.1.3.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agent and the Required
Lenders.
"Discounted Present Value" means, at any time that a calculation thereof
is being made, the sum total of the Future Net Income for each year, or portion
thereof, commencing on or after the date six months from the date of such
calculation, as presented in the then most recent Reserve Report or Alternate
Reserve Report delivered pursuant to Section 7.2(e), discounted to present
value as of the date six months from the date of such calculation at such rate
and in such manner as provided by the requirements of the S.E.C. from time to
time in effect.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the
Lender Assignment Agreement or such other office of a Lender (or any successor
or assign of such Lender) within the United States as may be designated from
time to time by notice from such Lender, as the case may be, to each other
Person party hereto. A Lender may have separate Domestic Offices for purposes
of making, maintaining or continuing, as the case may be, Prime Rate Loans.
"EBITDA" means, for any period for which a determination thereof is to
be made, on a consolidated basis and without duplication, the sum of the
amounts for such period of (i) net income (or loss) after taxes, (ii) interest
expense, (iii) depreciation expense and depletion expense, (iv) amortization
expense, (v) federal, state and foreign taxes, (vi) other non-cash charges and
expenses and (vii) any losses arising outside of the ordinary course of
business which have been included in the determination of consolidated net
income; less any gains arising outside of the ordinary course of
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business which have been included in the determination of consolidated net
income, all as determined on a consolidated basis for the Borrower, its
Subsidiaries and Affiliates.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 11.8.
"Environmental Laws" means all applicable federal, state or local
statutes, laws (including common law causes of action), ordinances, codes,
rules, regulations and guidelines (including consent decrees and administrative
orders) relating to public health and safety and protection of the environment.
"Environmental Laws" shall not include the Occupational Safety and Health Act
of 1970 or similar state statutes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 9.1.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum (equal for each day during such period) to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Bank from three federal funds brokers of
recognized standing selected by it.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31st; references to a Fiscal Year with a number
corresponding to any calendar year (e.g. the "1995 Fiscal Year") refer to the
Fiscal Year ending on the December 31st occurring during such calendar year.
"Fixed Charges" means, for any period, without duplication, the sum of
(i) the total interest charges (including the interest component of capitalized
leases) which, in accordance with GAAP, would be included on the consolidated
statements of income for the Borrower, its
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Subsidiaries and Affiliates, for such period, net of interest income, plus (ii)
dividends paid by the Borrower on its preferred and preference stock during
such period plus (iii) the current portion of Specified Debt (including Non-
Recourse Indebtedness but excluding current maturities of any Loan outstanding
hereunder) and the current portion of production payments to be paid by the
Borrower, its Subsidiaries and Affiliates, as of the end of such period, plus
(iv) the amount of mandatory redemptions of preferred stock to be made by the
Borrower in cash during the succeeding twelve-month period (excluding
redemptions of shares of such preferred stock held by Subsidiaries or
Affiliates of the Borrower).
"Fixed Charge Coverage Ratio" at any date means the ratio of EBITDA to
Fixed Charges for the four fiscal quarters most recently ended on such date.
"Fixed Rate Loan" means any LIBO Rate Loan.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Future Net Income" means, for each year or portion thereof, the amount
for such year or portion thereof, as reflected in the then most recent Reserve
Report or Alternate Reserve Report, as the case may be, which would result from
the expected sale of recoverable hydrocarbons from or attributable to the
Borrower's interest in any Proved Reserves located on Borrowing Base
Properties. Future Net Income shall be calculated by taking the Gross Revenues
less all applicable royalties, net profits interests and similar burdens on
production, and costs and expenses (other than general and administrative costs
and expenses) which the Borrower can reasonably be expected to incur or, in the
case of Qualified Partnership Properties, the Borrower's interest can
reasonably be expected to bear in producing each product from such Proved
Reserves (including production, severance and ad valorem or like taxes,
transportation costs, operating expenses, capital expenses with respect to such
Proved Reserves, and the cost of drilling, completing and equipping additional
wells, including any dry holes, which are reasonably expected to be drilled for
the purpose of completing development of such Proved Reserves and obtaining
therefrom the volumes of such production included for the purposes hereof).
Commencing with the third year from the date such calculation is made, such
costs and expenses will be escalated at a rate of the average (rounded to the
nearest .01 of 1%) of the escalation being used by the Agent and the Co-Agent
for evaluation of oil and gas transactions in accordance with the Agent's and
the Co-Agent's customary standards (which escalations will be consistent with
those being applied to other borrowers of the Agent or Co-Agent generally) as
of each January 1 or July 1, as applicable.
"GAAP" is defined in Section 1.4.
"Gross Revenues" means the sum, for the several product classes of
hydrocarbon production, of annual production attributed to each product
multiplied by the Applicable Prices, as the case may be, per unit volume
applicable to each product.
"Guarantee" means any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the debt or other obligation to
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pay money of or, in respect of, any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person. The
amount of any Person's obligation under any Guarantee shall (subject to any
limitation set forth therein) be deemed to be the outstanding principal amount
(or maximum outstanding principal amount, if larger) of the debt, obligation or
other liability guaranteed thereby.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum, crude oil or any fraction thereof;
(d) any hazardous, dangerous or toxic chemical, material waste
or substance within the meaning of any Environmental Law;
(e) any radioactive material, including any naturally
occurring radioactive material, and any source, special or by-product
material as defined in 42 U.S.C. Section 2011 et. seq., and any
amendments or reauthorizations thereof;
(f) asbestos-containing materials in any form of condition; or
(g) polychlorinated biphenyls in any form or condition.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Highest Lawful Rate" is defined in Section 3.3.5.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification
(a) which is of a "going concern" nature;
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(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its
obligations under Section 8.4.
"Implied Senior Debt Rating" means that "implied senior debt rating", if
any, from time to time assigned to the Borrower by any of Standard & Poors,
Moody's or another nationally recognized debt rating agency, provided that
such other agency is acceptable to the Agent and Co-Agent. In the event that
an "implied senior debt rating" is assigned by more than one of Standard &
Poors, Moody's or any other debt rating agency acceptable to the Agent and Co-
Agent and such ratings are different (a "split rating "), the Implied Senior
Debt Rating shall be the highest of the ratings assigned by any of these debt
rating agencies.
"Inactive Revolving Loan Commitment Amount" means, on any date,
$125,000,000, less the net amount of all Activation Amounts, as such Inactive
Revolving Loan Commitment Amount may be changed from time to time pursuant to
Section 2.2.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit (except those which have as
collateral cash or Cash Equivalent Investments, whether or not drawn),
and banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities except to the extent such obligations are
offset by the contractual obligations of a third party to make payments
to such Person to reimburse such Person for a portion of such
Capitalized Lease Liabilities and such third party is current with
respect to such payments;
(d) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which
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Indebtedness is to be determined except that, in the case of the
Borrower, any preferred stock of the Borrower, now existing or hereafter
issued, which by its express terms is not required to be redeemed in
cash, property, notes or other debt instruments by either the Borrower
or the holder of such preferred stock prior to a date seven years after
the Effective Date, is excluded from Indebtedness;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, advance payment agreements on which performance is incomplete
and all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest
thereon) secured by a Lien on property owned or being purchased by such
Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have
been assumed by such Person or is limited in recourse; and
(g) all Guarantees of such Person in respect of any of the
foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the greater of that portion of the Indebtedness of any partnership or
joint venture for which such Person is (a) by operation of law, or (b)
contractually liable.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interest Period" means, relative to any Fixed Rate Loans comprising
part of the same Borrowing, the period beginning on (and including) the date on
which such Fixed Rate Loan is made or continued as, or converted into, a Fixed
Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day
which numerically corresponds to such date one, two, three or six months
thereafter (or, if such month has no numerically corresponding day, on the last
Business Day of such month), as the Borrower may select in its relevant notice
pursuant to Section 2.3 or 2.4; provided, however, that
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than five different dates;
(b) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless, if such Interest Period applies to LIBO
Rate Loans, such next following Business Day is the
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first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day); and
(d) no Interest Period for a Revolving Loan may end later than
180 days after the Revolving Loan Commitment Termination Date and no
Interest Period for a Term Loan may end later than the Stated Maturity
Date of such Term Loan.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Guarantee of such Person; and
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit D hereto.
"Lenders" is defined in the preamble.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest equal to the average (rounded upwards, if necessary, to
the nearest 1/100 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Reference Banks' respective LIBO
Office in the London interbank market as at or about 10:00 a.m. United States
Central time two Business Days prior to the beginning of such Interest Period
for delivery on the first day of such Interest Period, and in an amount
approximately equal to the amount of such Reference Bank's LIBO Rate Loan and
for a period approximately equal to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate.
"LIBO Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto (or designated in the Lender
Assignment Agreement) or such other office of a Lender as designated from time
to time by notice from such Lender to the Borrower and the
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Agent, whether or not outside the United States, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other) of any
kind or nature whatsoever (other than a Guarantee) with respect to any
property, real or personal.
"Loan" shall mean any Revolving Loan or Term Loan.
"Loan Document" means this Agreement, the Notes and any Subsidiary
Guaranty.
"Majority Borrowing Base Lenders" means the Agent and Lenders holding at
least 75% of the then aggregate outstanding principal amount of the Notes then
held by the Lenders, or, if no such principal amount is then outstanding, the
Agent and Lenders responsible for at least 75% of the then current Commitment
Amount.
"Majority-owned Subsidiary" means, with respect to any Person, any
partnership or joint venture in which such Person is a general partner and any
corporation of which more than 90% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person.
"New Subordinated Indebtedness" means the eight and three quarters
percent (8 3/4%) Senior Subordinated Notes due 2007 issued by the Borrower
pursuant to the Indenture dated as of May 15, 1997 between the Borrower and
State Street Bank and Trust Company, as Trustee.
"Non-Recourse Indebtedness" means any Indebtedness of the Borrower, its
Subsidiaries and B8/32 Partners with respect to which the holder thereof agrees
that (i) the Borrower, its Subsidiaries and B8/32 Partners are not personally
liable and (ii) such holder may require payment only to the extent specifically
identified properties of the Borrower, its Subsidiaries or B8/32 Partners, as
applicable, are available to provide therefor, such matters to be set forth in
an agreement or other instrument in form and substance reasonably satisfactory
to the Required Lenders.
"Non-Standard Determination" means a determination or redetermination of
the Thailand Borrowing Base that may be made at the discretion of the Majority
Borrowing Base Lenders no more than once during any six month period ending
either October 31st, or April 30th, as applicable, as provided in Section
2.6(c).
"Note" means a promissory note of the Borrower payable to any Lender, in
the form of Exhibit A hereto (as such promissory note may be amended, endorsed
or otherwise modified from time to time), evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from
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outstanding Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement, the Notes and each
other Loan Document.
"Organic Document" means, relative to any Person and as applicable, its
certificate of incorporation, by-laws, or other general rules of governance or
association other than, with respect to publicly held Persons, any non-public
shareholder agreements, voting trusts and similar arrangements applicable to
any of its authorized shares of capital stock.
"Participant" is defined in Section 11.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multi-employer plan as defined in section 4001(a)(3) of ERISA), and to which
the Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in the Lender Assignment Agreement,
as such percentage may be adjusted from time to time pursuant to Lender
Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to Section 11.11.
"Person" means any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Prime Rate" means, on any date and with respect to all Prime Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently announced by the Agent
at its Domestic Office as its Prime Rate; and
(b) the Federal Funds Rate most recently determined by the
Agent plus 1%.
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The Prime Rate is not necessarily intended to be the lowest rate of interest
charged by the Agent in connection with extensions of credit. Changes in the
rate of interest on that portion of any Loans maintained as Prime Rate Loans
will take effect simultaneously with each change in the Prime Rate. The Agent
will give notice promptly to the Borrower and the Lenders of changes in the
Prime Rate.
"Prime Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Prime Rate.
"Proved Developed Behind Pipe Reserves" means those Proved Reserves
which are recoverable from zones behind casing in existing wells, which will
require additional completion work or a future recompletion prior to the start
of production.
"Proved Developed Producing Reserves" means those Proved Reserves which
are recoverable from completion intervals in existing wells currently open and
producing to market. Improved recovery reserves are considered to be producing
only after an improved recovery project has been installed and is in operation.
"Proved Developed Shut-in Reserves" means Proved Reserves that are
recoverable from completion intervals open, but not producing.
"Proved Reserves" means those recoverable hydrocarbons which have been
proved to a high degree of certainty by reason of existing production, adequate
testing, or in certain cases by adequate core data and other engineering and
geologic information on zones which are present in existing wells or in known
reservoirs which are recoverable under existing economic and operating
conditions. Reserves that can be produced economically through the application
of established improved recovery techniques are included in the proved
classification when (a) successful testing by a pilot project or the operation
of any installed program in that reservoir or one in the immediate area with
similar rock and fluid properties provides support for the engineering analysis
on which the project or program was based, and (b) it is reasonably certain the
project will proceed. Reserves to be recovered by improved recovery techniques
that have yet to be established through repeated economically successful
applications are included in the proved category only after successful testing
by a pilot project or after the operation of an installed program in the
reservoir provides support for the engineering analysis on which the project or
program was based. Improved recovery includes all methods for supplementing
natural reservoir forces and energy, or otherwise increasing ultimate recovery
from a reservoir, including (1) pressure maintenance, (2) cycling, and (3)
secondary recovery in its original sense. Improved recovery also includes the
enhanced recovery methods of thermal, chemical flooding, and the use of
miscible and immiscible displacement fluids.
"Proved Undeveloped Reserves" means Proved Reserves that are recoverable
by new wells on undrilled acreage, from existing wells where a relatively large
expenditure is required for recompletion and from acreage where the application
of an improved recovery technique is planned and the costs required to place
the project in operation are relatively large. Proved Undeveloped Reserves on
undrilled acreage shall be limited to those drilling units offsetting
productive units that
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are reasonably certain of production when drilled. Proved Reserves for other
undrilled units are Proved Undeveloped Reserves only where it can be
demonstrated with certainty that there is continuity of production from the
existing productive formation.
"Qualified Partnership Properties" means (i) Proved Reserves owned by a
partnership or joint venture in which the Borrower or a Majority-owned
Subsidiary is a general partner or (ii) Proved Reserves attributable to the
Borrower's Affiliate B8/32 Partners; provided that no consent of any other
partner or shareholder, nor amendment of any Organic Document or any other
agreement is or will be necessary to the granting of a Lien on any such
property.
"Quarterly Payment Date" means the last day of each January, April, July
and October or, if any such day is not a Business Day, the next succeeding
Business Day.
"Reference Banks" means the Agent and the Co-Agent.
"Regulatory Change" means, with respect to any Lender, any change in or
adoption of United States federal, state or foreign law, rule or regulations or
the adoption of, making of, or any change in any interpretations or directives
applying to a class of banks including such Lender under any United States
federal, state or foreign law or regulations by any court, governmental or
monetary authority or central bank charged with the interpretation or
administration thereof.
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time, Lenders holding at least 60% of
the then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, Lenders having at
least 60% of the Commitments.
"Reserve Report" means, as the context requires, either the U.S. Reserve
Report or the Thailand Reserve Report and, when used in the plural, shall mean
both reserve reports.
"Reserve Report Date" means January 1, with respect to Reserve Reports,
and July 1, with respect to Alternate Reserve Reports, it being understood that
no date shall be deemed a Reserve Report Date until the applicable Reserve
Reports or Alternate Reserve Reports with respect thereto are available.
"Revised Borrowing Base" is defined in Section 3.1.2.
"Revolving Loan" is defined in Section 2.1.1 of this Agreement.
"Revolving Loan Commitment" means, relative to any Lender, such Lender's
obligation to make Revolving Loans pursuant to Section 2.1.1 of this Agreement.
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"Revolving Loan Commitment Amount" means, on any date, the sum total of
the Active Revolving Loan Commitment Amount on such date and the Inactive
Revolving Loan Commitment Amount on such date.
"Revolving Loan Commitment Termination Date" means the earliest of
(a) the Stated Maturity Date of the Revolving Loans;
(b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (b) or (c), the Revolving
Loan Commitment shall terminate automatically and without any further action.
"S.E.C." means the Securities and Exchange Commission or any successor
agency.
"Senior Debt" means all indebtedness for borrowed money (including Loans
outstanding under this Agreement) other than Subordinated Indebtedness, Non-
Recourse Indebtedness and intercompany loans from the Borrower.
"Specified Debt" means the principal of all obligations of the Borrower
for borrowed money, and all obligations of the Borrower evidenced by bonds,
debentures, notes or other similar instruments (but excluding Non-Recourse
Indebtedness).
"Stated Maturity Date" means
(a) with respect to Revolving Loans, July 1, 2000; and
(b) with respect to the Term Loans, July 2, 2002.
"Subordinated Indebtedness" means (i) the five and one half percent (5
1/2%) Convertible Subordinated Notes due 2004 issued by the Borrower pursuant
to the Indenture dated as of March 23, 1994 between the Borrower and State
Street Bank and Trust Company, as Trustee, (ii) the five and one half percent
(5 1/2%) Convertible Subordinated Notes due 2006 issued by the Borrower
pursuant to the Indenture dated as of June 15, 1996 between the Borrower and
State Street Bank and Trust Company, as Trustee, (iii) the New Subordinated
Indebtedness and (iv) new Indebtedness incurred, provided that all or a portion
of the proceeds of such new Indebtedness is used to repay in whole or in part
any issue of Subordinated Indebtedness of the Borrower (unless otherwise
approved by the Required Lenders), and provided further that:
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(a) such new Indebtedness has covenants regarding the
matters set forth in Section 8.4 not materially more restrictive
to the Borrower than the covenants contained in Section 8.4 of
this Agreement;
(b) such new Indebtedness has subordination terms not
materially less favorable to the holders of the Notes than the
Subordinated Indebtedness to be repaid or such terms are approved
by the Required Lenders;
(c) the aggregate principal payments for such new
Indebtedness scheduled to be paid (i) in any Fiscal Year ending
prior to the Stated Maturity Date for the Term Loans are no
greater than the aggregate principal payments under the existing
schedule of principal payments of the Subordinated Indebtedness
being repaid and (ii) prior to a period ending thirty-six (36)
months after the Stated Maturity Date for the Term Loans shall
not exceed the aggregate principal payments under the existing
schedule of principal payments of the Subordinated Indebtedness
being repaid; and
(d) the maturity dates thereof are no earlier than
thirty-six (36) months after the Stated Maturity Date of the Term
Loans.
"Subsidiary" means, with respect to any Person, any partnership or joint
venture in which such Person is a general partner and any corporation or
limited liability company of which more than 50% of the outstanding capital
stock or member interests having ordinary voting power to elect a majority of
the board of directors of such corporation or managers of such limited
liability company (irrespective of whether at the time capital stock or member
interest of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"Subsidiary Guaranty" means any Guaranty executed and delivered by a
Subsidiary of the Borrower pursuant to Section 7.10, substantially in the form
of Exhibit F, as the same may from time to time be amended, supplemented,
restated or otherwise modified.
"Taxes" is defined in Section 4.7.
"Term Loan" is defined in Section 2.1.2.
"Term Loan Commitment" means, relative to any Lender, such Lender's
obligation to make Term Loans pursuant to Section 2.1.2 of this Agreement.
"Term Loan Commitment Amount" means the least of (i) the aggregate
Revolving Loans outstanding to all Lenders as of the Revolving Loan Commitment
Termination Date, (ii) the Commitment Amount in effect with respect to
Revolving Loans as of the Revolving Loan Commitment Termination Date, or (iii)
the Borrowing Base in effect on the Revolving Loan
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Commitment Termination Date minus all Senior Debt other than the Revolving
Loans outstanding on such date.
"Term Loan Commitment Termination Date" means the earlier of
(a) the Business Day after the Stated Maturity Date of the
Revolving Loans; and
(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (b), the Term Loan
Commitment shall terminate automatically and without any further action.
"Thailand Borrowing Base" means, at any time, that amount, determined in
accordance with Section 2.6 and calculated using the Lenders usual and
customary criteria for oil and gas reserve evaluation. During the period from
August 1, 1997, to the date of the next determination of the Thailand Borrowing
Base pursuant to the provisions of Section 7.2, the amount of the Thailand
Borrowing Base shall be Eighty Million Dollars ($80,000,000).
"Thailand Reserve Report" means a report of Ryder Scott Company
Petroleum Engineers or other independent petroleum engineers satisfactory to
the Agent and the Required Lenders showing, in form and detail satisfactory to
the Agent and Required Lenders, such engineers' estimate of the Proved Reserves
on the Borrowing Base Properties located in the Kingdom of Thailand and the
future Gross Revenue and Future Net Income to be derived from such Proved
Reserves as of the Reserve Report Date for each year. The Reserve Report shall
estimate the Proved Reserves and income data for the Proved Developed Producing
Reserves, the Proved Developed Shut-In Reserves, the Proved Developed Behind
Pipe Reserves and the Proved Undeveloped Reserves, and shall, in each case,
report only the Proved Reserves and income data attributable to Borrower's
working interest percentage in or Borrower's pro rata share of, as the case may
be, any Proved Reserves located on the Borrowing Base Properties located in the
Kingdom of Thailand, less the Borrower's obligations or pro rata share of such
obligations, as the case may be, for advance payments for each such property.
All calculations including the calculation of Applicable Prices in the Reserve
Report shall be made on a property-by-property and an interest-by-interest
basis in order to reflect the varying royalties, costs and expenses, working
interests and advance payments applicable to the various Borrowing Base
Properties covered by the Reserve Report. Except as otherwise specifically
required herein, the Reserve Report shall be prepared and presented in
accordance with the requirements of the S.E.C. from time to time in effect.
"Trade Indebtedness" means all Indebtedness owed by any Person on
ordinary trade terms to vendors, suppliers, and other Persons providing goods
and services used by it in the ordinary course of its business.
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"Type" means, relative to any Borrowing or Loan, the portion thereof, if
any, being maintained as a Prime Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Updated Reserve Report" means a reserve report prepared internally by
the Borrower and which shall have been reviewed by Ryder Scott Company
Petroleum Engineers or another independent petroleum engineer satisfactory to
the Agent and the Required Lenders who shall have certified that the estimates
in the Updated Reserve Report are reasonable estimates using generally accepted
petroleum engineering and evaluation principles and that the methods and
procedures used in preparing the Updated Reserve Report are reasonable. The
principles to be utilized are those set forth in the Standards Pertaining to
the Estimating and Auditing of Oil and Gas Reserve Information promulgated by
the Society of Petroleum Engineers. If any report which purports to be an
Updated Reserve Report and which is delivered by the Borrower pursuant to the
terms of this Agreement is unsatisfactory in substance, form or detail to
Lenders with an aggregate Percentage of at least 75%, or if Lenders with an
aggregate Percentage of 75% or more disagree with the estimate of Proved
Reserves, the Borrower shall, as promptly as practicable but in any event
within 90 days deliver to the Agent and the Lenders an Audited Reserve Report
of independent petroleum engineers (other than the engineers which reviewed the
report previously deemed unsatisfactory by such Lenders) which engineers are
satisfactory to the Borrower and the Agent. The Updated Reserve Report so
certified or revised by the Audited Reserve Report shall qualify as an Updated
Reserve Report for the purposes of this Agreement.
"U.S. Borrowing Base" means, at any time, that amount, determined in
accordance with Section 2.6 and calculated using information in the then most
recent U.S. Reserve Report or Alternate U.S. Reserve Report, which equals the
lesser of (i) the sum total of (a) the Discounted Present Value of the Future
Net Income for each category of Proved Reserves located in the United States
multiplied by (b) the relevant Applicable Percentage for each category of such
Proved Reserves, and (ii) the product of 10/7 times sixty-five percent (65%) of
the Discounted Present Value of Future Net Income attributable to the Proved
Developed Producing Reserves located in the United States. During the period
from August 1, 1997, to the date of the next determination of the U.S.
Borrowing Base pursuant to the provisions of Section 7.2, the amount of the
U.S. Borrowing Base shall be One Hundred and Seventy-Four Million, Nine Hundred
Thousand Dollars ($174,900,000).
"U.S. Reserve Report" means a report of Ryder Scott Company Petroleum
Engineers or other independent petroleum engineers satisfactory to the Agent
and the Required Lenders showing, in form and detail satisfactory to the Agent
and Required Lenders, such engineers' estimate of the Proved Reserves on the
Borrowing Base Properties located in the United States and the future Gross
Revenue and Future Net Income to be derived from such Proved Reserves as of the
Reserve Report Date for each year. The Reserve Report shall estimate the
Proved Reserves and income data for the Proved Developed Producing Reserves,
the Proved Developed Shut-In Reserves, the Proved Developed Behind Pipe
Reserves and the Proved Undeveloped Reserves, and shall, in each case,
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report only the Proved Reserves and income data attributable to Borrower's
working interest percentage in or Borrower's pro rata share of, as the case may
be, any Proved Reserves located on the Borrowing Base Properties located in the
United States, less the Borrower's obligations or pro rata share of such
obligations, as the case may be, for advance payments for each such property.
All calculations including the calculation of Applicable Prices in the Reserve
Report shall be made on a property-by-property and an interest-by-interest
basis in order to reflect the varying royalties, costs and expenses, working
interests and advance payments applicable to the various Borrowing Base
Properties covered by the Reserve Report. Except as otherwise specifically
required herein, the Reserve Report shall be prepared and presented in
accordance with the requirements of the S.E.C. from time to time in effect. If
any report which purports to be a Reserve Report and which is delivered by the
Borrower pursuant to the terms of this Agreement is unsatisfactory in
substance, form or detail to Lenders with an aggregate Percentage of at least
75%, or if Lenders with an aggregate Percentage of 75% or more disagree with
the engineers' estimate of Proved Reserves, the Borrower shall, as promptly as
practicable but in any event within 90 days of notice to the Borrower by the
Agent that such report is not satisfactory, deliver to the Agent and the
Lenders an Audited Reserve Report of independent petroleum engineers (other
than the engineers which prepared the report previously deemed unsatisfactory
by such Lenders) which engineers are satisfactory to the Borrower and the
Agent. The Reserve Report so certified or revised by the Audited Reserve
Report shall qualify as a Reserve Report for the purposes of this Agreement.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document,
notice and other communication delivered from time to time in connection with
this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in
any Article, Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder (including under Section 8.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in Section
6.5.
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ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Article V), each Lender severally agrees to make
Loans pursuant to the Commitments described in this Section 2.1.
SECTION 2.1.1. Revolving Loan Commitment. From time to time on
any Business Day occurring prior to the Revolving Loan Commitment Termination
Date, each Lender will make revolving loans (relative to such Lender, its
"Revolving Loan") to the Borrower equal to such Lender's Percentage of the
aggregate amount of the Borrowing requested by the Borrower to be made on such
day. The Commitment of each Lender described in this Section 2.1.1 is herein
referred to as its "Revolving Loan Commitment". On the terms and subject to
the conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow Revolving Loans.
SECTION 2.1.2. Term Loan Commitment. On the Revolving Loan
Commitment Termination Date (unless such date shall occur as a result of clause
(c) of the definition thereof), each Lender will make one term loan (relative
to such Lender its "Term Loan") to the Borrower equal to the lesser of the then
outstanding principal amount of its Revolving Loan and the amount described in
Section 2.1.3(b). The Commitment of each Lender described in this Section
2.1.2 is herein referred to as its "Term Loan Commitment". No amounts paid or
prepaid with respect to the Term Loan may be reborrowed. Fixed Rate Loans for
which the Interest Period shall not have terminated as of the Revolving Loan
Commitment Termination Date shall be continued as Fixed Rate Loans for the
applicable Interest Period and Prime Rate Loans shall be continued as Prime
Rate Loans after the Revolving Loan Commitment Termination Date, unless the
Borrower shall have elected otherwise by delivery of a Continuation/Conversion
Notice pursuant to Section 2.4; provided that such Fixed Rate Loans which shall
have converted to Term Loans shall be in a minimum amount of $5,000,000 and an
integral multiple of $1,000,000. Any principal repayments received on the
Revolving Loan Commitment Termination Date for Revolving Loans not converted
into Term Loans shall be applied first to Prime Rate Loans and, after Prime
Rate Loans have been paid in full, to Fixed Rate Loans, unless the Borrower
shall have otherwise instructed the Agent in writing. Upon a Lender making
such Term Loan, its Term Loan Commitment shall terminate and it shall have no
further Commitment to make Loans.
SECTION 2.1.3. Lenders Not Permitted or Required To Make Loans in
Excess of Commitment. No Lender shall be permitted or required to make any
Loan if, after giving effect thereto,
(a) in the case of Revolving Loans, the aggregate outstanding
principal amount of all Revolving Loans outstanding would exceed the
lesser of (i) the Revolving Loan Commitment Amount and (ii) the
Borrowing Base then in effect minus all other Senior Debt outstanding;
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(b) in the case of Term Loans, the aggregate original
principal amount of all Term Loans would exceed the Term Loan Commitment
Amount;
(c) in the case of Revolving Loans, the aggregate outstanding
principal amount of all Revolving Loans of any such Lender would exceed
such Lender's Percentage of the Revolving Loan Commitment Amount; or
(d) in the case of Term Loans, the aggregate outstanding
principal amount of the Term Loan of any such Lender would exceed such
Lender's Percentage of the Term Loan Commitment Amount.
SECTION 2.2. Termination, Reduction, Redesignation and Extension of the
Commitment Amounts. Each of the Commitment Amounts is subject to reduction
from time to time pursuant to this Section 2.2.
SECTION 2.2.1.Optional. The Borrower may, from time to time on
any Business Day occurring after the time of the initial Borrowing hereunder,
voluntarily reduce the amount of any Commitment Amount; provided, however, that
all such reductions shall require at least three Business Days' prior notice to
the Agent and specifying whether such reduction is a permanent reduction or
whether it is in connection with a redesignation of a portion of the Active
Revolving Loan Commitment Amount or the Inactive Revolving Loan Commitment
Amount, whether, if permanent, the reduction relates to the Active Revolving
Loan Commitment Amount or the Inactive Revolving Loan Commitment Amount, and
the amount by which such Commitment Amount is being reduced or redesignated
which amount shall be limited as follows:
(a) with respect to any reduction or redesignation of the
Active Revolving Loan Commitment Amount, (i) if such reduction is a
permanent reduction, such reduction shall be in a minimum amount of
$5,000,000 and in increments of $1,000,000, and (ii) if such reduction
is a redesignation by the Borrower of a portion of the Active Revolving
Loan Commitment Amount as a part of the Inactive Revolving Loan
Commitment Amount, then (A) such reduction shall be in a minimum amount
of $12,500,000 and in increments of $12,500,000 and (B) such reduction
shall never result in the Active Revolving Loan Commitment Amount being
less than $100,000,000; and
(b) with respect to any reduction or redesignation of the
Inactive Revolving Loan Commitment Amount, (i) if such reduction is a
permanent reduction, such reduction shall be in a minimum amount of
$5,000,000 and in increments of $2,500,000 and (ii) if such reduction is
a redesignation by the Borrower of a portion of the Inactive Revolving
Loan Commitment Amount into a part of the Active Revolving Loan
Commitment Amount as part of a Activation Amount, then such reduction
shall be in a minimum amount of $12,500,000 and in increments of
$12,500,000.
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SECTION 2.2.2. Mandatory as to Revolving Loans. The
Revolving Loan Commitment Amount shall be reduced or terminated as
described below:
(a) Each Lender's Revolving Loan Commitment shall be
automatically terminated on the Revolving Loan Commitment Termination
Date.
(b) Each reduction in the Revolving Loan Commitment Amount
hereunder shall be made ratably among the Lenders in accordance with
their respective Percentages. The Borrower shall pay to the Agent for
the account of the Lenders, on the date of each termination or
reduction, the Commitment Fees accrued pursuant to Section 3.4.1 on the
amount of Commitments so terminated or reduced through the date of such
termination or reduction.
(c) Should the Commitment Amount exceed the Borrowing Base at
any time, the Commitment Amount shall be reduced to the Borrowing Base
that is then in effect. Such reduction in Commitments shall be
allocated first to the Inactive Revolving Credit Commitment Amount until
such Inactive Revolving Credit Commitment Amount is reduced to zero and
thereafter to the Active Revolving Credit Commitment Amount.
SECTION 2.2.3.Mandatory as to Term Loans. The Term Loan
Commitment Amount shall be reduced or terminated as described below:
(a) Each Lender's Term Loan Commitment shall be automatically
terminated on the Term Loan Commitment Termination Date.
(b) Each reduction in the Term Loan Commitment Amount
hereunder shall be made ratably among the Lenders in accordance with
their respective Percentages.
SECTION 2.3. Borrowing Procedure. The Borrower may from time to time
irrevocably request that a Borrowing be made in a minimum amount of (i)
$1,000,000 for Prime Rate Loans and (ii) $5,000,000 for LIBO Rate Loans, and in
an integral multiple of $1,000,000 or in the case of a Revolving Loan, in the
unused amount of the Revolving Loan Commitment Amount. Such request shall be
made by delivering a Borrowing Request to the Agent on or before 10:00 a.m.
United States Central time, (x) on the Business Day of such Borrowing in the
case of a Prime Rate Borrowing and (y) on a Business Day not less than three
Business Days in advance of a LIBO Rate Borrowing. On the terms and subject to
the conditions of this Agreement, each Borrowing shall be comprised of the Type
of Loans, and shall be made on the Business Day, specified in such Borrowing
Request. With respect to any Borrowing, the Agent shall have given each of the
Lenders notice of such Borrowing on or before 10:30 a.m. United States Central
time on the date of such Borrowing and on or before 11:00 a.m. United States
Central time on such Business Day each Lender shall deposit with the Agent same
day funds in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the Agent shall
specify from time to time by notice to the Lenders. To the extent funds are
received from the Lenders, the Agent shall make such funds
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available to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its Borrowing Request. No Lender's obligation to make any
Loan shall be affected by any other Lender's failure to make any Loan.
SECTION 2.4. Continuation and Conversion Elections. The Borrower may
from time to time irrevocably elect that all, or any portion in an aggregate
minimum amount of $5,000,000 and an integral multiple of $1,000,000, of any
Borrowing be, in the case of Prime Rate Loans, converted into Fixed Rate Loans
or, in the case of Fixed Rate Loans, be converted into Prime Rate Loans or
continued as Fixed Rate Loans of the same or different Type. Such request for
a continuation or conversion of a Borrowing shall be made by delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m., United
States Central time, on a Business Day, such Continuation/Conversion Notice to
be delivered at least three Business Days in advance for any Borrowing
continued as or converted into a LIBO Rate Loan. In the absence of delivery of
a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period
with respect thereto, such Fixed Rate Loan shall, on such last day,
automatically convert to a Prime Rate Loan. Notwithstanding the above, no
portion of the outstanding principal amount of any Loans may be continued as,
or be converted into, Fixed Rate Loans when any Default has occurred and is
continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert Fixed Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such Fixed Rate Loan; provided,
however, that such Fixed Rate Loan shall nonetheless be deemed to have been
made and to be held by such Lender, and the obligation of the Borrower to repay
such Fixed Rate Loan shall nevertheless be to such Lender for the account of
such foreign branch, Affiliate or international banking facility. In addition,
the Borrower hereby consents and agrees that, for purposes of any determination
to be made for purposes of Sections 4.1, 4.2, 4.3 or 4.4, it shall be
conclusively assumed that each Lender elected to fund all Fixed Rate Loans by
purchasing Dollar deposits in its LIBO Office's interbank Eurodollar market.
SECTION 2.6. Determination of Borrowing Base. Upon delivery of a
Reserve Report or Alternate Reserve Report pursuant to Section 7.2 hereof and
provided, that (i) such delivery shall be on or before the dates required
therein and (ii) such Reserve Report or Alternate Reserve Report shall not have
been found unsatisfactory in substance, form or detail, or unsatisfactory by
reason of the estimates of Proved Reserves contained therein, by Lenders with
an aggregate Percentage of at least 75%, then:
(a) With respect to the annual or semi-annual, as the case may
be, determination of the U.S. Borrowing Base, the Agent will notify the
Borrower of the new U.S. Borrowing Base on or before (i) the next April
30th, in the case of a U.S. Reserve Report and (ii) the next October
31st, in the case of an Alternate U.S. Reserve Report, which U.S.
Borrowing Base shall remain in effect until the next October 31st or
April 30th (subject to delivery of an Updated Reserve Report pursuant to
Sections 3.1.2 or 3.1.3 and the
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<PAGE>
determination of a Revised Borrowing Base); provided that, if pursuant
to Reserve Reports dated January 1st of any year the ratio of (x)
Borrowing Base to (y) Commitment Amount plus the amount of Senior Debt
(other than the Loans) that is outstanding on such date which is
permitted pursuant to Section 8.2(a)(ii) is at least 1.5 to 1.0, then
the Agent shall not redetermine the U.S. Borrowing Base pursuant to the
Alternate U.S. Reserve Report and shall not notify the Borrower of any
redetermination of the U.S. Borrowing Base pursuant to the Alternate
U.S. Reserve Report dated as of July 1st of such year. Notwithstanding
the foregoing, if any Reserve Report or Alternate Reserve Report
pursuant to which a Borrowing Base is to be determined shall have been
unsatisfactory in form, substance or detail, or unsatisfactory by reason
of the estimates of Proved Reserves therein, to Lenders with an
aggregate Percentage of at least 75%, then the Borrowing Base in effect
as of the Reserve Report Date of such Reserve Report or Alternate
Reserve Report shall remain in effect until (i) the Borrower shall have
delivered to the Agent and the Lenders an Audited Reserve Report or the
results of an Alternate Reserve Report Review, as the case may be, which
report shall be delivered within 90 days of notice from the Agent to the
Borrower that the Reserve Report or Alternate Reserve Report, as the
case may be, was not satisfactory, and (ii) the Agent shall have
notified the Borrower of the new Borrowing Base, which notification
shall be made within 5 Business Days of the delivery of such Audited
Reserve Report or the results of such Alternate Reserve Report Review.
(b) With respect to the semi-annual redetermination of the
Thailand Borrowing Base, the Agent will propose to the Lenders a
Thailand Borrowing Base for acceptance by the Majority Borrowing Base
Lenders. If such Thailand Borrowing Base, as proposed by the Agent is
accepted by the Majority Borrowing Base Lenders, then such agreed
Thailand Borrowing Base shall be communicated by the Agent to the
Borrower on or before (i) the next April 30th, in the case of a Thailand
Reserve Report and (ii) the next October 31st, in the case of an
Alternate Thailand Reserve Report, and shall remain in effect until the
next October 31st or April 30th; provided that if such proposed Thailand
Borrowing Base is not approved by the Majority Borrowing Base Lenders
prior to the applicable date then, within thirty (30) days following the
applicable date, the Majority Borrowing Base Lenders will establish and
agree to a Thailand Borrowing Base, and such amount will be promptly
communicated to the Borrower; provided that the then current Thailand
Borrowing Base shall remain in effect until the Borrower is notified of
the new Thailand Borrowing Base. The Thailand Borrowing Base, as
determined and established pursuant to this Section 2.6(b) shall be
subject, at all times, to the determination of a Revised Borrowing Base
as a result of (A) the delivery by the Borrower, and approval by the
Majority Borrowing Base Lenders, of an Updated Reserve Report pursuant
to Sections 3.1.2 or 3.1.3 or (B) a Non-Standard Determination.
(c) With respect to a redetermination of the Thailand
Borrowing Base resulting from a Non-Standard
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Determination, the Agent or the Required Lenders shall have the right,
but not the obligation on no more than one occasion during each six
month period ending on April 30th and October 31st, to notify the
Borrower of its intent to perform a Non-Standard Determination of the
Thailand Borrowing Base. As part of such Non-Standard Determination,
the Agent shall propose, and the Majority Borrowing Base Lenders shall
agree to and approve, a new Thailand Borrowing Base which shall become
effective upon receipt by the Borrower of notice of such new Thailand
Borrowing Base until such new Thailand Borrowing Base may be
redetermined as a result of (i) a semi-annual determination of the
Thailand Borrowing Base pursuant to Section 2.6(b) or (ii) the delivery
by the Borrower, and approval by the Majority Borrowing Base Lenders, of
an Updated Reserve Report pursuant to Sections 3.1.2 or 3.1.3.
SECTION 2.7. Notes. Each of the Lenders' Loans under a Commitment
shall be evidenced by a Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original applicable
Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to
make (or cause to be made) appropriate notations on the grid attached to such
Lender's Note (or on any continuation of such grid), which notations, if made,
shall evidence, inter alia, the date of, the outstanding principal of, and the
interest rate and Interest Period applicable to the Loans evidenced thereby.
Such notations shall be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to make any such
notations shall not limit or otherwise affect any Obligations of the Borrower.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall make
mandatory repayments and prepayments and may also make voluntary prepayments
from time to time pursuant to this Section 3.1. Each prepayment of any Loans
made pursuant to this Section shall be without premium or penalty, except as
may be required by Section 4.4.
SECTION 3.1.1.Repayments. To the extent that Term Loans are made
to the Borrower on the Revolving Loan Commitment Termination Date, such Term
Loans shall be deemed to be for repayment of the principal of Revolving Loans
outstanding as of the Revolving Loan Commitment Termination Date. The Borrower
shall repay in full the unpaid aggregate principal amount of each Loan upon the
Stated Maturity Date therefor. Prior thereto, the Borrower shall, on each
Quarterly Payment Date occurring after the Revolving Loan Commitment
Termination Date, make a scheduled repayment of the outstanding principal
amount of the Term Loans (i) on each of the first four Quarterly Payment Dates
following the Revolving Loan Commitment Termination Date (or if any such day is
not a Business Day, the next succeeding Business Day), each in an amount equal
to 15% of the original principal amount of the Term Loan and (ii) on each of
the next four Quarterly Payment Dates thereafter, in an amount equal to 10% of
the original principal amount of the Term Loan; provided that, in the event
that the first Quarterly Payment Date falls on a date that is less than eighty-
eight (88) days after conversion of a Revolving Loan to a Term Loan, the first
Quarterly Payment Date for such Term Loan shall be the next succeeding
Quarterly Payment Date and provided further
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that, the final scheduled repayment shall be in an amount necessary to repay in
full the unpaid principal of the Term Loan.
SECTION 3.1.2. Mandatory Prepayments on Revolving Loans. If at
any time prior to the Revolving Loan Commitment Termination Date, the aggregate
principal amount of all Senior Debt outstanding shall exceed the Borrowing Base
then in effect, the Borrower shall, at the Borrower's option, either (i)
forthwith repay the Revolving Loans in an aggregate amount equal to such excess
or (ii) prepay the Revolving Loans, in no more than five substantially equal
monthly installments, in an amount such that upon the conclusion of such
mandatory prepayments, the aggregate principal amount of all outstanding Senior
Debt will not exceed the Borrowing Base.
(a) If the Thailand Borrowing Base as redetermined pursuant to
a Non-Standard Determination decreases by an amount equal to or greater
than $25,000,000 and the aggregate principal amount of all Senior Debt
outstanding exceeds the Borrowing Base because of a redetermination of
the Thailand Borrowing Base pursuant to a Non-Standard Determination
thereby resulting in the commencement of a Deficiency Period, then the
first payment pursuant to Clause (ii) above shall be due within 90 days
after the date on which the Borrower is notified of the amount of the
new Thailand Borrow Base as determined pursuant to such Non-Standard
Determination, and the remaining payments shall be due on the
numerically corresponding day of each of the subsequent months. If a
subsequent month does not contain a numerically corresponding day, the
Borrower shall make such payment on the last Business Day of such month,
or if the numerically corresponding day is not a Business Day, such
payment will be due on the preceding Business Day.
(b) Except as provided in Section 3.1.2(c) below, if the
aggregate principal amount of all Senior Debt outstanding exceeds the
Borrowing Base at any time for any other reason other than as described
in Section 3.1.2(a) above, the first such payment pursuant to Clause
(ii) above shall be due within 30 days after the commencement date of a
Deficiency Period (or the date on which the Borrower is notified of a
new Thailand Borrowing Base pursuant to a Non-Standard Determination, if
such Non-Standard Determination results in the commencement of a
Deficiency Period), and the remaining payments shall be due on the
numerically corresponding day of each of the subsequent months. If a
subsequent month does not contain a numerically corresponding day, the
Borrower shall make such payment on the last Business Day of such month,
or if the numerically corresponding day is not a Business Day, such
payment will be due on the preceding Business Day.
(c) If any Reserve Report or Alternate Reserve Report, which
pursuant to Section 2.6, serves as the basis for the redetermination of
the Borrowing Base, shall be found unsatisfactory in substance, form or
detail, or unsatisfactory by reason of the estimate of Proved Reserves,
by Lenders having an aggregate Percentage of at least 75% and, upon the
delivery of an Audited
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Reserve Report or the results of an Alternate Reserve Report Review, as
the case may be, by the Borrower, the aggregate principal amount of all
Senior Debt outstanding exceeds the Borrowing Base then in effect
determined pursuant to such Audited Reserve Report or Alternate Reserve
Report Review, then the Deficiency Period shall be deemed to have begun
on (i)(A) the April 30th or (B) the May 30th (if the Borrowing Base
determination is delayed by the Lenders pursuant to Section 2.6(b))
following the date of an Audited Reserve Report relating to a Reserve
Report (or the first date thereafter on which Senior Debt outstanding
shall have exceeded the Borrowing Base as determined pursuant to the
Audited Reserve Report) or (ii) (A) the October 31st or (B) the November
30th (if the Borrowing Base determination is delayed by the Lenders
pursuant to Section 2.6(b)) following the date of an Alternate Reserve
Report so reviewed pursuant to the Alternate Reserve Report Review (or
the first date thereafter on which Senior Debt outstanding shall have
exceeded the Borrowing Base as determined pursuant to such Alternate
Reserve Report Review) and, upon notification by the Agent of the new
Borrowing Base, any and all mandatory prepayments of principal which,
pursuant to the immediately preceding paragraph, would have been due and
payable on or prior to the date of such notice from the Agent during the
Deficiency Period beginning on the date so deemed the beginning date for
such Deficiency Period, together with accrued interest thereon, shall be
immediately due and payable.
(d) During any Deficiency Period, the Borrower may deliver to
the Lenders an Updated Reserve Report. If the Updated Reserve Report (i)
reflects a revised U.S. Borrowing Base or results in the Majority
Borrowing Base Lenders approving an increase in the Thailand Borrowing
Base ( as so revised and increased, the "Revised Borrowing Base"), (ii)
is satisfactory in form, substance and detail and as to the estimates of
Proved Reserves located in the United States, to the Lenders and/or the
Agent as required by the definition of "Updated Reserve Report" and
(iii) such Updated Reserve Report evidences an increase in Proved
Reserves located in the United States over those shown in the Reserve
Reports or Alternate Reserve Reports, as applicable, most recently
previously delivered pursuant to Section 7.2 or, with respect to the
Thailand Borrowing Base, such Updated Reserve Report results in the
Majority Borrowing Base Lenders agreeing to increase the Thailand
Borrowing Base from the then current amount (such determination whether
to increase the Thailand Borrowing Base from its then current amount,
and if so determined, the amount by which such Thailand Borrowing Base
is to be increased, to be made by the Majority Borrowing Base Lenders
within thirty (30) days after receipt of an Updated Reserve Report
relating to Borrowing Base Properties located in the Kingdom of
Thailand) as previously determined by the Majority Borrowing Base
Lenders pursuant to Sections 2.6(b) or 2.6(c), the installment payments
otherwise required pursuant to this Section 3.1.2 shall be reduced or
eliminated, as the case may be, to the extent that the aggregate
principal amount of all Senior Debt does not exceed the Revised
Borrowing Base.
SECTION 3.1.3. Mandatory Prepayments on Term Loans. If at any
time after the making of the Term Loans, the ratio of (a) the Discounted
Present Value of Future Net Income attributable to Proved Reserves located in
the United States (provided that at least 7/10 times such Discounted Present
Value of Future Net Income is attributable to the Proved Developed Producing
Reserves) (based on the data in the Reserve Report or Alternate Reserve Report,
as the case may be), to (b) the difference of the outstanding principal amount
of the Senior Debt less the Thailand Borrowing Base
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<PAGE>
(as last determined by the Required Lenders pursuant to Sections 2.6(b) or
2.6(c)) shall at any time be less that 1.5 to 1.0, the Borrower shall, at the
Borrower's option, either (i) forthwith repay Term Loans in an aggregate amount
equal to such deficiency, or (ii) prepay the Term Loans, in no more than five
substantially equal monthly installments, in an amount such that, upon the
conclusion of such mandatory prepayments, such ratio would be at least 1.5 to
1.0. The first such payment pursuant to clause(ii) above shall be due within
30 days after the date on which it is first determined that such ratio is less
than 1.5 to 1.0, and the remaining payments shall be due on the numerically
corresponding day of each of the subsequent months. If a subsequent month does
not contain a numerically corresponding day, the Borrower shall make such
payment on the last Business Day of such month, or if the numerically
corresponding day is not a Business Day, such payment will be due on the
preceding Business Day.
(a) If any Reserve Report or Alternate Reserve Report which,
pursuant to Section 2.6, serves as the basis for the redetermination of
the Borrowing Base shall be found unsatisfactory in substance, form or
detail, or unsatisfactory by reason of the estimate of Proved Reserves,
by Lenders having an aggregate Percentage of at least 75% and, upon the
delivery of an Audited Reserve Report or the results of an Alternate
Reserve Report Review, as the case may be, by the Borrower, the ratios
set forth in Clauses (a) and (b) of the preceding paragraph are not
satisfied, then the Deficiency Period shall be deemed to have begun on
the April 30th or (B) May 30th (if the Borrowing Base determination is
delayed by the Lenders pursuant to Section 2.6(b)) following the date of
such Audited Reserve Report relating to a Reserve Report (or the first
date thereafter on which the ratios set forth in Clauses (a) and (b) of
the preceding paragraph are not satisfied) or (ii)(A) the October 31st
or (B) November 30th (if the Borrowing Base determination is delayed by
the Lenders pursuant to Section 2.6(b)) following the date of an
Alternate Reserve Report so reviewed by an Alternate Reserve Report
Review relating to an Alternate Reserve Report (or the first date
thereafter on which the ratios set forth in Clauses (a) and (b) of the
preceding paragraph are not satisfied) and, upon notification by the
Agent of the new Borrowing Base, any mandatory prepayments of principal
which, pursuant to the immediately preceding paragraph, would have been
due and payable on or prior to the date of such notice from the Agent
during the Deficiency Period beginning on the date so deemed the
beginning date for such Deficiency Period, together with accrued
interest thereon, shall be immediately due and payable.
(b) Mandatory prepayments pursuant to this Section 3.1.3 shall
be in addition to and not in lieu of payments required pursuant to
Section 3.1.1. Mandatory prepayments pursuant to this Section 3.1.3
shall be applied to the next scheduled repayment or repayments required
pursuant to Section 3.1.1 if, as of such repayment date, after giving
effect to such scheduled repayment, the ratios set forth in clauses (a)
and (b) of the first paragraph of this Section 3.1.3 are satisfied,
however, the repayments pursuant to Section 3.1.1 shall always be
required.
(c) During any Deficiency Period, the Borrower may deliver to
the Lenders an Updated Reserve Report. If the Updated Reserve Report (i)
reflects a Revised Borrowing
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<PAGE>
Base (ii) is satisfactory in form, substance and detail, and as to
estimates of Proved Reserves located in the United States, to the
Lenders and/or Agent as required by the definition of "Updated Reserve
Report" and (iii) such Updated Reserve Report evidences an increase in
Proved Reserves located in the United States over those shown in the
Reserve Reports or Alternate Reserve Reports, as applicable, most
recently previously delivered pursuant to Section 7.2, the installment
payments otherwise required pursuant to this Section 3.1.3 shall be
reduced or eliminated, as the case may be, provided that after such
reduction or elimination, the ratios set forth in this Section 3.1.3
shall be satisfied as of the next installment payment date.
SECTION 3.1.4. Repayment Upon Acceleration. The Borrower shall,
immediately upon any acceleration of the Stated Maturity Date of any Loans
pursuant to Section 9.2 or 9.3, repay all Loans.
SECTION 3.2. Voluntary Prepayments. The Borrower may, from time to
time on any Business Day prior to the Stated Maturity Date, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of all
Loans comprising the same Borrowing; provided, however, that
(i) any such prepayment shall be made pro rata among the
Lenders with respect to Loans of the same Type and, if applicable,
having the same Interest Period;
(ii) no such prepayment of any Fixed Rate Loan may be made on
any day other than the last day of the Interest Period for such Loan;
(iii) all such voluntary prepayments of Fixed Rate Loans shall
require at least one but no more than five Business Days' prior written
notice to the Agent and the Lenders and all such voluntary prepayments
of Prime Rate Loans shall require prior written notice to the Agent on
or before 10:00 a.m. United States Central Time on the Business Day of
such voluntary repayment; and
(iv) all such voluntary partial prepayments shall be in a
minimum amount equal to $1,000,000 for Prime Rate Loans and $5,000,000
for Fixed Rate Loans, and an integral multiple of $1,000,000.
No voluntary prepayment of principal of any Revolving Loan shall cause a
reduction in the Revolving Loan Commitment Amount. No voluntary prepayment of
principal of any Term Loan may be reborrowed. All voluntary prepayments of
Term Loans shall be applied to scheduled repayments as the Borrower may direct
by written notice to the Agent.
SECTION 3.3. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.3.
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<PAGE>
SECTION 3.3.1. Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect
that Loans comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Prime
Rate Loan, equal to the Prime Rate from time to time in effect; and
(b) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate for such Interest Period plus the Applicable Margin.
The LIBO Rate for any Interest Period for LIBO Rate Loans will be determined by
the Agent on the basis of the applicable rates furnished to and received by the
Agent from the Reference Banks, two Business Days before the first day of such
Interest Period. All Fixed Rate Loans shall bear interest from and including
the first day of the applicable Interest Period to (but not including) the last
day of such Interest Period at the interest rate determined as applicable to
such Fixed Rate Loan.
SECTION 3.3.2. Post-Maturity Rates. After the date any principal
amount of any Loan is due and payable (whether on the Stated Maturity Date,
upon acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay interest
(after as well as before judgment) on such amounts at a rate per annum equal to
the Prime Rate plus a margin of 2%.
SECTION 3.3.3. Payment Dates. Interest accrued on each Loan shall
be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan;
(c) with respect to Prime Rate Loans, on each Quarterly
Payment Date occurring after the date of the initial Borrowing
hereunder;
(d) with respect to Fixed Rate Loans, the last day of each
applicable Interest Period (and, if such Interest Period shall exceed 90
days, on the 90th day of such Interest Period);
(e) with respect to any Prime Rate Loans converted into Fixed
Rate Loans on a day when interest would not otherwise have been payable
pursuant to clause (c), on the date of such conversion; and
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<PAGE>
(f) on any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 9.2 or Section 9.3, immediately upon
such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand. Notwithstanding clauses (a) and (b) above,
except as otherwise provided in this Section 3.3.3, no accrued interest shall
be due and payable on the Revolving Loan Commitment Termination Date on those
Revolving Loans the principal of which is deemed to have been repaid by Term
Loans to the Borrower pursuant to Section 3.1.1.
SECTION 3.3.4. Interest Rate Determination. Each Reference Bank
agrees to furnish to the Agent timely information for the purpose of
determining the LIBO Rate. If either of the Reference Banks shall fail to
timely furnish such information to the Agent for such interest rate, the Agent
shall determine such interest rate on the basis of information furnished by the
remaining Reference Bank.
SECTION 3.3.5. Maximum Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws and, anything
herein to the contrary notwithstanding, the obligations of the Borrower to the
Lenders under this Agreement, the Loan Documents and any other document or
instrument executed in connection herewith or therewith, shall be subject to
the limitation that payments of interest or of other amounts constituting
interest under applicable law to a Lender shall not be required to the extent
that receipt thereof would be in excess of the Highest Lawful Rate, or
otherwise contrary to provisions of law applicable to such Lender limiting
rates of interest which may be charged or collected by such Lender.
Accordingly, if the transactions or the amount paid or otherwise agreed to be
paid for the use, forbearance or detention of money under this Agreement, the
Loan Documents and any other document or instrument executed in connection
herewith or therewith would exceed the Highest Lawful Rate or otherwise be
usurious under applicable law (including the federal and state laws of the
United States of America, or of any other jurisdiction whose laws may be
mandatorily applicable) with respect to any Lender then, in that event,
notwithstanding anything to the contrary in this Agreement or the Loan
Documents and any other document or instrument executed in connection herewith
or therewith, it is agreed as follows as to such Lender:
(a) in respect to such Lender, the provisions of this Section
3.3.5 shall govern and control over any other provision in this
Agreement, the Loan Documents and any other document or instrument
executed in connection herewith or therewith and each provision set
forth therein is hereby so limited;
(b) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, charged or
received under this Agreement, or under any of the other aforesaid
agreements or otherwise in connection with this Agreement by such Lender
shall under no circumstances exceed the maximum amount of interest
allowed by applicable law (such maximum lawful interest rate, if any,
with respect to such Lender herein
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<PAGE>
called the "Highest Lawful Rate"), and all amounts owed under this
Agreement, the Loan Documents and any other document or instrument
executed in connection herewith or therewith shall be held subject to
reduction and (i) the amount of interest which would otherwise be
payable to such Lender hereunder and under the Loan Documents and any
other document or instrument executed in connection herewith or
therewith, shall be automatically reduced to the amount allowed under
applicable law and (ii) any unearned interest paid by the Borrower in
excess of the Highest Lawful Rate shall be credited to the Borrower by
such Lender (or, if such consideration shall have been paid in full,
refunded to the Borrower);
(c) all sums paid, or agreed to be paid, to such Lender for
the use, forbearance and detention of the indebtedness of the Borrower
to such Lender hereunder shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full so that the actual rate
of interest is uniform throughout the full term thereof;
(d) if at any time the interest provided pursuant to Sections
3.3.1 or 3.3.2, as the case may be, together with any other fees payable
pursuant to or in connection with this Agreement and deemed interest
under applicable law, with respect to any Lender exceeds that amount
which would have accrued at the Highest Lawful Rate, the amount of
interest and any such fees to accrue to such Lender pursuant to this
Agreement shall be limited, notwithstanding anything to the contrary in
this Agreement to that amount which would have accrued at the Highest
Lawful Rate for such Lender, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue pursuant to this
Agreement below such Lender's Highest Lawful Rate until the total amount
of interest payable to such Lender (including all consideration which
constitutes interest) equals the amount of interest which would have
been payable to such Lender (including all consideration which
constitutes interest) assuming a varying rate per annum equal to the
interest provided pursuant to Sections 3.3.1 and 3.3.2 at all times in
effect, plus the amount of fees which would have been received but for
the effect of this Section 3.3.5.
For purposes of Article 5069-1.04, Vernon's Texas Civil Statutes, as amended,
to the extent, if any, applicable to any Lender, the Borrower agrees that the
Highest Lawful Rate for such Lender shall be the "indicated (weekly) rate
ceiling" as defined in said Article, provided that such Lender may also rely,
to the extent permitted by applicable laws, on alternative maximum rates of
interest under other laws applicable to such Lender if greater. To the extent
that Texas law shall be applicable to the determination of the Highest Lawful
Rate of any Lender, the provisions of Chapter 15 of Subtitle 3, Title 79 of the
Revised Civil Statutes of Texas, 1925, as amended, shall not apply to this
Agreement or the Notes.
SECTION 3.4. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.4. All such fees shall be non-refundable.
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SECTION 3.4.1. Commitment Fee. The Borrower agrees to pay to the
Agent for the account of each Lender, for the period (including any portion
thereof when any of Commitments are suspended by reason of the Borrower's
inability to satisfy any condition of Article V) commencing on the Effective
Date and continuing through the Revolving Loan Commitment Termination Date,
commitment fees (collectively, the "Commitment Fees") at a rate per annum for
each day of such period equal to a percentage determined by reference to the
following grid and the applicable Implied Senior Debt Rating of the Borrower
times such Lender's respective Percentage of the sum of the average daily
unused portion of (i) the Active Revolving Loan Commitment Amount and (ii) the
Inactive Revolving Loan Commitment Amount:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
IMPLIED SENIOR FEE ON THE ACTIVE REVOLVING LOAN FEE ON THE INACTIVE REVOLVING LOAN
DEBT RATING COMMITMENT AMOUNT COMMITMENT AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
B+ or lower .375% .15%
- ----------------------------------------------------------------------------------------------------------------
BB- .3125% .125%
- ----------------------------------------------------------------------------------------------------------------
BB .25% .10%
- ----------------------------------------------------------------------------------------------------------------
BB+ or higher .25% .10%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, on each occasion the Borrower elects to redesignate any portion of
the Inactive Revolving Loan Commitment Amount into an Active Revolving Loan
Commitment Amount, a fee on such Activation Amount equal to the product of (i)
1/4 of 1% of such Activation Amount, and (ii) the lesser of six (6) or the
number of calendar months (rounded to the next highest integer, not to exceed
six) that have elapsed since (A) the Effective Date or (B) the Inactive
Designation Date (as defined hereafter) (in either case, and as applicable, the
"Calculation Period"). For purposes of determining the Calculation Period, to
the extent that any Activation Amount is redesignated back into an Inactive
Revolving Loan Commitment Amount (the effective date of such redesignation
herein an "Inactive Designation Date") and then subsequently redesignated
herein an Activation Amount (such amount herein a "Reactivated Amount"), the
Calculation Period in respect of the portion of the Activation Amount which is
equal to each such Reactivated Amount shall be determined, with respect to such
Reactivated Amount, from the Inactive Designation Date or Inactive Designation
Dates, as the case may be, of each such Reactivated Amount. Fees payable
pursuant to this Section 3.4.1 shall be payable by the Borrower in arrears on
each Quarterly Payment Date, commencing with the first such day following the
Effective Date, and on the Revolving Loan Commitment Termination Date.
SECTION 3.4.2. Other Fees. The Borrower agrees to pay to the
Agent and the Co-Agent, the fees as described in the fee letter agreements
dated as August 1, 1997, between the Borrower and the Agent and Co-Agent.
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ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. Fixed Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower if made in good faith)
that the introduction of or any change in or in the interpretation of any law
or regulation makes it unlawful for such Lender to make, continue or maintain
any Loan as, or to convert any Loan into, a Fixed Rate Loan, the obligations of
such Lender to make, continue, maintain or convert any such Loans shall, upon
such determination, forthwith be suspended until such Lender shall notify the
Agent that the circumstances causing such suspension no longer exist, and Fixed
Rate Loans of such Lender shall automatically convert into Prime Rate Loans at
the end of the then current Interest Periods with respect thereto or sooner, if
required by such law or regulation.
SECTION 4.2. Rates Unavailable. If the Agent or the Required Lenders
shall have determined that by reason of circumstances affecting the Agent's or
the Required Lenders' relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to Fixed Rate Loans of such
Type, then, upon notice from the Agent (given at the direction of the Required
Lenders if such determination shall have been made by the Required Lenders) to
the Borrower and the Lenders, the obligations of all Lenders under Section 2.3
and Section 2.4 to make or continue any Loans as, or to convert any Loans into,
Fixed Rate Loans shall forthwith be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
SECTION 4.3. Increased Fixed Rate Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in, the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, Fixed Rate Loans (such increases in costs and reductions in amounts
receivable, after taking into account such Lender's estimate, which shall be
conclusive if given in good faith, of the net tax benefit, if any, realized by
such Lender from such additional costs and reductions, being herein called
"Additional Costs"), resulting from any Regulatory Change after the Effective
Date which: (i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement in respect of any of such Fixed Rate Loans (other
than taxes imposed on the overall net income of such Lender for any such Fixed
Rate Loans by the jurisdiction in which such Lender has its principal office)
or (ii) imposes or modifies (without duplication of any other amount required
to be paid hereunder) any reserve, special deposit, minimum capital, capital
ratio or similar requirements relating to the making by such Lender of any
Fixed Rate Loans (including any increase in cost to a Lender by reason of an
increase in any reserve requirement specified from time to time by the F.R.S.
Board and applicable to "Eurodollar Liabilities" as defined in Regulation D of
the F.R.S. Board or other similar reserve requirements affecting Eurodollar
deposits). Such Lender shall promptly notify the Agent and the Borrower in
writing of the occurrence of any such event, such notice to state, in
reasonable detail, the reasons therefor and the Additional Costs. Such
Additional Costs shall be payable by the
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Borrower directly to such Lender within thirty days of the Borrower's receipt
of such notice, and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or reasonable expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to make, continue or maintain any portion of the principal amount of any
Loan as, or to convert any portion of the principal amount of any Loan into, a
Fixed Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any Fixed Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as Fixed Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, Fixed
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to
the Agent), the Borrower shall, within thirty days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense, provided that, the
Borrower shall not be liable to a Lender hereunder for any such loss or expense
incurred by such Lender as a result of such Lender's gross negligence or wilful
misconduct, breach of this Agreement or failure to comply with a Borrowing
Request or Continuation/ Conversion Notice. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence of manifest
error, be conclusive and, if made in good faith, binding on the Borrower.
SECTION 4.5. Increased Capital Costs. Without duplication of any other
provision of this Article IV, if any Regulatory Change after the Effective Date
affects the amount of capital required to be maintained by any Lender or any
Person controlling such Lender, and such Lender determines (in its sole and
absolute discretion) that the rate of return on its or such controlling
Person's capital as a consequence of its Commitments or the Loans made by such
Lender is reduced as a result of such Regulatory Change to a level below that
which such Lender or such controlling Person could have achieved but for the
occurrence of such Regulatory Change, then, in any such case upon notice from
time to time by such Lender to the Borrower, the Borrower shall within thirty
days pay directly to such Lender additional amounts (after taking into account
such Lender's estimates, which shall be conclusive if made in good faith, of
the net tax benefit, if any, realized by such Lender resulting from such
Regulatory Change) sufficient to compensate such Lender or such controlling
Person for such reduction in rate of return. A statement of such Lender as to
any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be conclusive and,
if made in good faith, binding on the Borrower. In determining such amount,
such
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Lender may use any method of averaging and attribution that it (in its sole and
absolute discretion) shall deem applicable.
SECTION 4.6. Period of Liability. The Borrower shall not be liable to
any Lender pursuant to Section 4.3, 4.4, or 4.5 in respect of such compensation
for any period commencing more than one year before the delivery of any notice
pursuant to Sections 4.3, 4.4, or 4.5 except that the Borrower may be liable
for an earlier period if the Regulatory Change resulting in such notice shall
have been given retroactive effect affecting any period beginning more than 365
days prior to such notice.
SECTION 4.7. Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income, stamp
or other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, other than taxes imposed on or
measured by any Lender's net income or receipts and franchise taxes (such non-
excluded items being called "Taxes"). In the event that any withholding or
deduction from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
Upon the request of the Borrower, each Lender and each subsequent holder of any
Note that is organized under the laws of a jurisdiction other than the U.S.
shall, prior to the due date of any payments under the Notes, execute and
deliver to the Borrower, on or about the first scheduled payment date in each
Fiscal Year, a United States Internal Revenue Service Form 4224 or Form 1001,
as may be applicable (or any successor form), appropriately completed. Without
prejudice to the survival of any other agreement of the Borrower hereunder or
any other Loan Document, the agreements of the Borrower contained in this
Section shall survive the payment in full of all its Obligations.
SECTION 4.8. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Loan Document shall be made by the Borrower to the Agent for the pro
rata account of the Lenders entitled to receive such payment. The Borrower
shall make each payment required to be made to the Agent not later than 11:00
a.m., United States Central time, on the date due, in same day or immediately
available funds,
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to such account as the Agent shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been received
by the Agent on the next succeeding Business Day. The Agent shall promptly
remit in same day funds to each Lender its share, if any, of such payments
received by the Agent for the account of such Lender. All interest on Fixed
Rate Loans and all fees shall be computed on the basis of the actual number of
days (including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 360
days and in the case of interest on a Prime Rate Loan, 365 days or, if
appropriate, 366 days. Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.
SECTION 4.9. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan (other than pursuant to the terms
of Sections 4.3, 4.4 and 4.5 ) in excess of its pro rata share of payments then
or therewith obtained by all Lenders, such Lender shall purchase from the other
Lenders such participations in Loans made by them as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and each Lender which has sold a
participation to the purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together with an amount
equal to such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the purchasing
Lender to (b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.10) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.
SECTION 4.10. Setoff. Each Lender shall, upon the occurrence of any
Default described in clauses (a) through (d) of Section 9.1.9 with respect to
the Borrower or any Subsidiary or, upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with such Lender; provided, however,
that any such appropriation and application shall be subject to the provisions
of Section 4.9. Each Lender agrees promptly to notify the Borrower and the
Agent after any such setoff and application made by such Lender; provided,
however, 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
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are in addition to other rights and remedies (including other rights of setoff
under applicable law or otherwise) which such Lender may have.
SECTION 4.11. Use of Proceeds. The Borrower shall apply the proceeds of
each Borrowing in accordance with the sixth recital; without limiting the
foregoing, and except as permitted by Section 8.5(d), no proceeds of any Loan
will be used to acquire any equity security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 if such
acquisition would result in the Borrower's owning more than five percent (5%)
of the issuer's outstanding voting stock and no proceeds of any Loan will be
used to acquire such stock if such acquisition would result in any violation of
F.R.S. Board Regulation U by the Borrower or the Lender.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1. Initial Borrowing. The obligations of the Lenders to fund
the initial Borrowing after the date hereof shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
Section 5.1.
SECTION 5.1.1. Corporate or Partnership Existence. The Agent
shall have received from the Borrower and each of its Majority-owned
Subsidiaries that has executed a Subsidiary Guaranty or owns Borrowing Base
Properties, a copy of its certificate or articles of incorporation, including
all amendments thereto, certified (if a U.S. Subsidiary) as of a recent date by
the Secretary of State of the state of its organization, and a certificate as
to the good standing of the Borrower or such Majority-owned Subsidiary as of a
recent date, from such Secretary of State. The Agent shall have received from
each of the Borrower's Subsidiaries which is organized as a limited
partnership, a copy of the certificate of limited partnership, certified as of
a recent date by the Secretary of State of the state of its organization. The
Agent shall also receive from any Subsidiary organized as a partnership, its
partnership agreement, including all amendments thereto, and a certificate of
the Corporate Secretary of the Borrower dated the date of the Initial Borrowing
stating that the partnership agreement has not been amended since the date of
the last amendment thereto shown. The Agent shall also receive from the
Secretary of the Borrower and each Majority-owned Subsidiary that has executed
a Subsidiary Guaranty or owns Borrowing Base Properties, a certificate dated as
of the date hereof, stating that the certificate or articles of incorporation
of Borrower or such Majority-owned Subsidiary have not been amended since the
date of the last amendment thereto shown.
SECTION 5.1.2. Resolutions, etc. The Agent shall have received
from the Borrower and each of its Majority-owned Subsidiaries that has executed
a Subsidiary Guaranty, a certificate, dated the date of this Agreement, of its
respective Secretary as to
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(a) a copy of the by-laws of the Borrower or of such Majority-
owned Subsidiary attached thereto, as the case may be, that such
attached by-laws are a true and complete copy of the by-laws of the
Borrower or such Majority-owned Subsidiary, as the case may be, and that
such by-laws had been in effect since a date prior to the resolutions of
the Borrower's or such Subsidiary's Board of Directors referred to in
(b) below;
(b) resolutions of the Board of Directors of the Borrower or
of such Majority-owned Subsidiary, as the case may be, then in full
force and effect authorizing the execution, delivery and performance of
the Loan Documents to be executed by it; and
(c) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Borrower or such
Majority-owned Subsidiary canceling or amending such prior certificate.
SECTION 5.1.3. Compliance with Representations and Warranties.
The Agent shall have received a certificate from an Authorized Person
confirming compliance with Section 5.2.1 and stating that the Reserve Report of
January 1, 1997, previously delivered to the Lenders, includes as a basis for
Future Net Income only Proved Reserves which are either owned by the Borrower
or, to the extent permitted by the definition of Borrowing Base Properties, a
Subsidiary or Affiliate of the Borrower (including, to the extent permitted by
such definition, Qualified Partnership Properties).
SECTION 5.1.4. Delivery of Notes. The Agent shall have received,
for the account of each Lender, its Note duly executed and delivered by the
Borrower.
SECTION 5.1.5. [Intentionally Omitted.].
SECTION 5.1.6. Opinions of Counsel. The Agent shall have received
opinions, dated the date of the initial Borrowing and addressed to the Agent
and all Lenders, from
(a) Gerald A. Morton, Vice President - Law and Corporate
Secretary to the Borrower, substantially in the form of Exhibit E-1
hereto;
(b) Baker & McKenzie, special Thai counsel to Thaipo Limited,
substantially in the form of Exhibit E-2 hereto; and
(c) Mayer, Brown & Platt, special Illinois counsel to the
Agent in form and substance satisfactory to the Lenders.
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SECTION 5.1.7. Closing Fees, Expenses, etc. The Agent shall have
received for its own account, or for the account of each Lender, as the case
may be, all fees, costs, and expenses due and payable pursuant to Section 3.4
and Section 11.3, if then invoiced.
SECTION 5.2. Conditions Precedent to Revolving Loans. The obligation
of each Lender to fund any Revolving Loan (including the initial Borrowing)
shall be subject to the satisfaction of each of the conditions precedent set
forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any such Borrowing the following statements
shall be true and correct
(a) the representations and warranties set forth in Article VI
(excluding, however, those contained in Section 6.7) shall be true and
correct with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Agent and the
Lenders pursuant to Section 6.7;
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to
the knowledge of the Borrower, threatened against the Borrower or
any of its Subsidiaries which has a significant probability of
consequences that would materially adversely affect the
Borrower's business, operations, assets, revenues, properties or
prospects or which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan
Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section 6.7
which has a significant probability of consequences that would
materially adversely affect the businesses, operations, assets,
revenues, properties or prospects of the Borrower, or of the
Borrower and its Subsidiaries taken as a whole;
(c) no Default shall have then occurred and be continuing, and
neither the Borrower nor any of its Subsidiaries are in material
violation of any law or governmental regulation or court order or
decree; and
(d) the Active Commitment Amount plus all Senior Debt
outstanding other than the Loans does not exceed the Borrowing Base and
the Borrower is in compliance with the Current Ratio and Fixed Charge
Coverage Ratio as required by Sections 8.4(c) and 8.4(d), respectively,
and, immediately after giving effect to the proposed Borrowing, Senior
Debt shall not exceed the Borrowing Base then in effect and the
Indebtedness of the Borrower shall not exceed the amount permitted under
clause(a) of Section 8.4.
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SECTION 5.2.2. Borrowing Request. The Agent shall have received a
Borrowing Request for such Borrowing. Each of the delivery of a Borrowing
Request and the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct.
SECTION 5.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries shall be satisfactory in form and substance to the Agent and its
counsel; the Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent or its counsel may
reasonably request.
SECTION 5.3. Conditions Precedent to the Making of the Term Loans. The
obligation of each Lender to make its Term Loan is subject to (a) the condition
precedent that the principal of all Revolving Loans and accrued interest on all
Revolving Loans, except those Revolving Loans the principal of which shall be
deemed to have been repaid by Term Loans pursuant to Section 3.1.1 and for
which such interest is not otherwise due and payable, shall have been paid in
full prior to or concurrently with the making of such Term Loan, (b) the
conditions precedent set forth in Sections 5.2.1(c) and (d), and (c) the
condition precedent that the representations and warranties set forth in
Sections 6.1, 6.2, 6.3, and 6.4 are true and correct with the same effect as if
then made. The acceptance by the Borrower of the proceeds of the Term Loans
shall constitute a representation and warranty that on the Revolving Loan
Commitment Termination Date (both before and after giving effect to such Term
Loans and the application of the proceeds thereof) the statements made in
Section 5.2.1(c) and (d) are true and correct and the representations and
warranties set forth in Sections 6.1, 6.2, 6.3 and 6.4 are true and correct
with the same effect as if then made.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to make Loans hereunder, the Borrower represents and warrants
unto the Agent and each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its corporate
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the State, or country, of its incorporation, and is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its business requires such
qualification, except where failure to qualify would not have a material
adverse effect on the business or financial condition of the Borrower and its
Subsidiaries taken as a whole or the Borrower's ability to perform the Loan
Documents. Each of the Borrower's Subsidiaries which is organized as a
partnership or a limited liability company is validly organized and existing
and in good standing under the laws of the state of its formation, and is duly
qualified to do business and is in good standing as a foreign partnership
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or limited liability company where the nature of its business requires such
qualification, except where failure to qualify would not have a material
adverse effect on the business or financial condition of the Borrower, or the
Borrower and its Subsidiaries taken as a whole or the Borrower's ability to
perform under the Loan Documents. The Borrower and each of its Subsidiaries
has full corporate, partnership or limited liability company, as the case may
be, power and authority and holds all requisite governmental licenses, permits
and other approvals to enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document and to own and hold under
lease its property and to conduct its business substantially as currently
conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower or any Subsidiary of this Agreement,
the Notes and each other Loan Document executed or to be executed by it, are
within the Borrower's or the Subsidiary's corporate, partnership or limited
liability company powers, as the case may be, have been duly authorized by all
necessary corporate, partnership or limited liability company action, as the
case may be, and do not
(a) contravene the Borrower's or such Subsidiary's Organic
Documents, partnership agreement, or other similar governing agreements,
as the case may be;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or affecting
the Borrower or any Subsidiary; or
(c) result in, or require the creation or imposition of, any
Lien on any properties of the Borrower or its Subsidiaries.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery or
performance by the Borrower or any Subsidiary of this Agreement, the Notes or
any other Loan Document. Neither the Borrower nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower or any Subsidiary will,
on the due execution and delivery thereof, constitute, the legal, valid and
binding obligations of the Borrower or such Subsidiary, as the case may be,
enforceable in accordance with their respective terms except as such
enforceability is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar law relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
including concepts of materiality, reasonableness, good faith and fair dealing.
SECTION 6.5. Financial Information. The consolidated balance sheets of
the Borrower, its Subsidiaries and Affiliates, as at December 31, 1996 and
March 31, 1997 and the related consolidated statements of income and cash flow
of the Borrower, its Subsidiaries and Affiliates, for
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the periods then ended, copies of which have been furnished to the Agent and
the Co-Agent and each other Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition
of the corporations, partnerships and limited liability companies covered
thereby as at the dates thereof and the results of their operations for the
periods then ended subject, in the case of the consolidated balance sheets of
March 31, 1997 and the related consolidated statements of income and cash flow
as of such date, to the making of normal year-end audit adjustments and the
year-end addition of notes required pursuant to GAAP. Attached hereto as Item
8.5 ("Ongoing Investments") of the Disclosure Schedule is a complete and
correct schedule of loans, investments and advances by the Borrower, its
Subsidiaries and Affiliates as of March 31, 1997. Except as noted on said
schedule, since the date thereof there have been, as of the date of this
Agreement, no material increases in the respective outstanding amounts of or
changes in the terms or conditions of such loans, investments and advances.
SECTION 6.6. No Material Adverse Change. Since March 31, 1997, there
has been no material adverse change in the financial condition, operations,
assets, business, properties or prospects of the Borrower, or the Borrower and
its Subsidiaries taken as a whole other than those changes as may affect the
oil and gas industry generally.
SECTION 6.7. Litigation, etc. There is no pending or, to the knowledge
of the Borrower, threatened labor controversy, litigation, action, or
proceeding against, or to the knowledge of the Borrower, affecting the Borrower
or any of its Subsidiaries or Affiliates, or any of their respective
properties, assets or revenues, which has a significant probability of
consequences that would materially adversely affect the financial condition,
operations, assets, business, properties or prospects of the Borrower, or of
the Borrower and any Subsidiaries and Affiliates taken as a whole, except as
disclosed in the Borrower's most recent Form 10-K or 10-Q filed with the S.E.C.
or Item 6.7 ("Litigation") of the Disclosure Schedule, or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes or
any other Loan Document. Neither the Borrower nor any of its Subsidiaries is
in default with respect to any judgment, order, writ, injunction, decree, rule
or regulation of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which default could materially adversely affect the business
operations, properties, assets or condition, financial or other, of the
Borrower, or of the Borrower and its Subsidiaries taken as a whole.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries or
Affiliates, except those
(a) which are identified in Item 6.8 (a) ("Existing
Subsidiaries and Affiliates") of the Disclosure Schedule; or
(b) which are permitted to have been acquired or formed in
accordance with Section 8.5 or 8.7.
As of June 30, 1997, the Borrower is the record or beneficial owner of
the amount of issued and outstanding shares of capital stock of each
such corporate Subsidiary which is identified in Item 6.8(a) of the
Disclosure Schedule. Such shares are free and clear of any Liens,
including, without limitation, claims arising out of any preemptive
rights granted in connection
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with the issuance of any such shares. All such shares are duly issued,
fully paid and nonassessable and there are no outstanding options,
warrants or other rights entitling the holder thereof to purchase any
shares of capital stock of any such Subsidiary except as disclosed in
Item 6.8(a) of the Disclosure Schedule. The Borrower's partnership or
member interest, as the case may be, in any Subsidiary organized as a
partnership or limited liability company is free and clear of any
Liens.
SECTION 6.9. Ownership of Properties. The Borrower and each of its
Subsidiaries owns good and marketable title to all of its real properties and
good title to, or has the right to use, all of its personal property, tangible
and intangible, of any nature whatsoever (including concession agreements,
patents, trademarks, trade names, service marks and copyrights), and all
properties and assets and all revenues (present and future) of the Borrower and
its Subsidiaries are free and clear of all Liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except (i) as to any such charges or claims (other than Liens) are
disclosed in the Borrower's most recent Form 10-K filed with the S.E.C. or (ii)
as permitted pursuant to Section 8.3.
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-
month period prior to the date of the execution and delivery of this Agreement
and prior to the date of any Borrowing hereunder, no steps have been taken to
terminate any Pension Plan, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which might result in the incurrence by the
Borrower or any member of the Controlled Group of any material liability, fine
or penalty. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the
Disclosure Schedule, neither the Borrower nor any member of the Controlled
Group has any contingent liability with respect to any post-retirement benefit
under a Welfare Plan, other than liability for continuation coverage described
in Part 6 of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule:
(a) to the best knowledge of the Borrower, all facilities and
property (including underlying groundwater) owned, leased or operated by
the Borrower or any of its Subsidiaries have been, and continue to be,
owned, leased or operated by the Borrower and its Subsidiaries in
material compliance with all Environmental Laws;
(b) to the best knowledge of the Borrower, there have been no
past, and there are no pending or threatened
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(i) claims, complaints, or notices received by the
Borrower or any of its Subsidiaries with respect to any alleged
violation of any Environmental Law, or
(ii) claims, complaints, notices or inquiries to, or
requests for information received by, the Borrower or any of its
Subsidiaries regarding potential liability under any
Environmental Law relating to operations or the condition of any
facilities or property (including underlying groundwater) owned,
leased or operated by the Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or may reasonably be expected to
have, a material adverse effect on the properties or prospects of the
Borrower and its Subsidiaries taken as a whole;
(c) to the best knowledge of the Borrower, there have been no
Releases of Hazardous Materials at, on or under any property now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a material adverse effect on the financial
condition, operations, assets, business, properties or prospects of the
Borrower and its Subsidiaries taken as a whole;
(d) to the best knowledge of Borrower, the Borrower and its
Subsidiaries have been issued and are in material compliance with all
permits, certificates, approvals, licenses and other authorizations
relating to environmental matters that are necessary for their
businesses;
(e) no property now or previously owned, leased or operated by
the Borrower or any of its Subsidiaries is listed or proposed for
listing (with respect to owned property only) on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up where such listing or proposed
listing would have a material adverse effect on the financial condition,
operations, assets, business, properties or prospects of the Borrower
and its Subsidiaries taken as a whole;
(f) to the best knowledge of the Borrower, there are no
underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned, leased
or operated by the Borrower or any of its Subsidiaries that, singly or
in the aggregate, have, or may reasonably be expected to have, a
material adverse effect on the financial condition, operations, assets,
business, properties or prospects of the Borrower and its Subsidiaries
taken as a whole;
(g) to the best knowledge of the Borrower, neither the
Borrower nor any Subsidiary of the Borrower has directly transported or
directly arranged for the transportation of any Hazardous Material to
any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar
state list or a site which currently is the subject of federal, state or
local enforcement actions or other investigations which may lead to
claims against the Borrower or such Subsidiary thereof for
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any remedial work, damage to natural resources or personal injury,
including claims under CERCLA which claims would have a material adverse
effect on the financial condition, operations, assets, business
properties, or prospects of the Borrower and its Subsidiaries taken as a
whole;
(h) to the best knowledge of the Borrower, there are no
polychlorinated biphenyls or friable asbestos present at any property
now or previously owned, leased or operated by the Borrower or any
Subsidiary of the Borrower that, singly or in the aggregate, have, or
may reasonably be expected to have, a material adverse effect on the
financial condition, operations, assets, business, properties or
prospects of the Borrower and its Subsidiaries taken as a whole; and
(i) to the best knowledge of the Borrower, no conditions exist
at, on or under any property now or previously owned, leased or operated
by the Borrower which, with the passage of time, or the giving of notice
or both, would give rise to liability under any Environmental Law which
liability would have a material adverse effect on the financial
condition, operations, assets, business, properties or prospects of the
Borrower and its Subsidiaries taken as a whole.
SECTION 6.13. Regulations G, T, U and X. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Loans will be used for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation G, T, U or X.
Terms for which meanings are provided in F.R.S. Board Regulation G, T, U or X
or any regulations substituted therefor, as from time to time in effect, are
used in this Section with such meanings.
SECTION 6.14. Rank of Indebtedness. The obligations of the Borrower to
pay the principal of and interest on the Loans made hereunder and the Notes and
all other amounts payable by the Borrower hereunder constitute direct and
general obligations of the Borrower and rank in right of payment prior to or
pari passu with all unsecured indebtedness and liabilities for borrowed money,
or other obligations arising out of the extension of credit, of the Borrower.
As of March 31, 1997, the Borrower does not have outstanding any such liability
or obligation which is subordinated to any other such indebtedness, liability
or obligation but which is not subordinated to all indebtedness of the Borrower
for money borrowed hereunder and under the Notes. Except as disclosed in the
notes to the financial statements filed with the Borrower's Form 10-Q for the
quarter ended March 31, 1997, there is no Senior Debt outstanding as of March
31, 1997 other than obligations pursuant to this Agreement, the Notes, and the
other Loan Documents.
SECTION 6.15. Absence of Defaults. Neither the Borrower nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in this Agreement or any
other material agreement or instrument governing Indebtedness to which any of
them is a party.
SECTION 6.16. Accuracy of Information. As of March 31, 1997, the
Borrower has no Indebtedness except as disclosed in Item 6.16 ("Ongoing
Indebtedness") of the Disclosure Schedule,
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which Disclosure Schedule includes all Indebtedness reported in the Borrower's
most recent Form 10-K or 10-Q filed with the S.E.C. Since May 31, 1997, there
have been, as of the date of this Agreement, no material increases in the
respective outstanding amounts of or (except for Trade Indebtedness and other
permitted Senior Debt) changes in the terms or conditions of such Indebtedness.
All factual information heretofore or contemporaneously furnished by or on
behalf of the Borrower in writing to the Agent or any Lender for purposes of or
in connection with this Agreement or any transaction contemplated hereby is,
and all other such factual information hereafter furnished by or on behalf of
the Borrower to the Agent or any Lender for purposes of or in connection with
this Agreement will be, true and accurate in every material respect on the date
as of which such information is dated or certified, and such information does
not, or shall not, as the case may be, omit to state any material fact
necessary to make such information not misleading.
SECTION 6.17. No Contractual Violation. Borrower has no contract or
agreement to which it or any of its Subsidiaries is a party or by which it or
its properties are bound (excluding any agreements or contracts governing
Indebtedness that do not exceed $1,000,000 at any one time outstanding in the
aggregate which have been incurred to vendors to finance acquisition of assets
as to the assets financed with such Indebtedness) prohibiting or having the
effect of prohibiting the creation or assumption of any Lien upon any of its
assets, properties or revenues whether now owned or hereafter acquired, or
restricting the ability of the Borrower to amend or otherwise modify this
Agreement or any other Loan Document, except as provided in this Agreement and
the other Loan Documents.
ARTICLE VII
AFFIRMATIVE COVENANTS
SECTION 7.1. Performance of Affirmative Covenants. The Borrower agrees
with the Agent and each Lender that, until all Commitments have terminated and
all Obligations have been paid and performed in full, the Borrower will perform
the obligations set forth in this Article VII.
SECTION 7.2. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender and the
Agent copies of the following financial statements, reports, notices and
information:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower, consolidated balance sheets of the Borrower, its
Subsidiaries and Affiliates, as of the end of such Fiscal Quarter and
consolidated statements of income and cash flows of the Borrower, its
Subsidiaries and Affiliates, for such Fiscal Quarter and for the period
commencing at the end of the previous Fiscal Year and ending with the
end of such Fiscal Quarter, certified by the principal financial officer
of the Borrower, such certificate further showing in reasonable detail
and with appropriate calculations and computations in all respects
reasonably satisfactory to the Agent compliance with the financial
covenants set forth in Section 8.4;
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(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower, its Subsidiaries and
Affiliates, including therein consolidated balance sheets of the
Borrower, its Subsidiaries and Affiliates, as of the end of such Fiscal
Year and consolidated statements of income and cash flows of the
Borrower, its Subsidiaries and Affiliates, for such Fiscal Year, in each
case certified by Arthur Andersen LLP or other independent public
accountants reasonably acceptable to the Agent and the Required Lenders,
together with a certificate from such accountants containing a
computation of, and showing compliance with, each of the financial
ratios and restrictions contained in Section 8.4 and to the effect that,
in making the examination necessary for the signing of such annual
report by such accountants, they have not become aware of any Default or
Event of Default that has occurred and is continuing, or, if they have
become aware of such Default or Event of Default, describing such
Default or Event of Default and the steps, if any, being taken to cure
it; provided that, if such accountants' opinion contains an
Impermissible Qualification, the Borrower must satisfy the Agent and the
Required Lenders that the Impermissible Qualification does not reflect a
condition that materially impairs the timely collectibility by the
Lenders of any monetary Obligations then outstanding;
(c) as soon as available and in any event within the time
limits set for submission of the statements submitted under clauses (a)
and (b) above, a certificate signed by an Authorized Person of the
Borrower to the effect that: (i) a review of the activities of the
Borrower during the preceding Fiscal Year or Fiscal Quarter has been
made under his supervision with a view to determining whether the
Borrower has fulfilled all of its obligations under this Agreement and
the Notes and any other Loan Document to which it is a party and that to
the best of his knowledge (A) no Default has occurred, or if any such
Default has occurred, specifying the nature and extent thereof and the
nature of any corrective action taken or proposed to be taken to cure
such Default, (B) the Borrower has fulfilled all its obligations under
this Agreement and the Notes and (C) there have been no material adverse
changes in the financial condition, operations, assets, business,
properties or prospects of the Borrower and its Subsidiaries, taken as a
whole; and (ii) stating, to such Authorized Person's actual knowledge
based solely upon information in his or the Borrower's chief legal
officer's actual possession, that no such information would cause him to
believe that any Affiliate of the Borrower which owns an interest in
Borrowing Base Properties could not, as of the end of such Fiscal
Quarter, make any of representations or warranties made by a Subsidiary
of the Borrower which is set forth in Sections 6.1, 6.9, 6.10 and 6.12;
(d) as soon as possible and in any event within five Business
Days after the Borrower learns of the occurrence of any Default, a
statement of an Authorized Person of the Borrower setting forth details
of such Default and the action which the Borrower has taken and proposes
to take with respect thereto;
(e) (i) as soon as available, but in no event later than 90
days after the close of each Fiscal Year of the Borrower, commencing
with the Fiscal Year ended December 31,
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1997, Reserve Reports prepared by Ryder Scott Company Petroleum
Engineers or another independent engineering firm acceptable to the
Agent and the Required Lenders as of January 1 of the next succeeding
year, and (ii) as soon as available, but in no event later than 45 days
after each June 30, commencing June 30, 1998, Alternate Reserve Reports
dated as of July 1, provided that, if following the determination of the
U.S. Borrowing Base pursuant to a U.S. Reserve Report dated as of
January 1, the ratio of (x) the Borrowing Base to (y) the Commitment
Amount plus the amount of Senior Debt (other than the Loans) that is
outstanding on such date which is permitted pursuant to Section
8.2(a)(ii) is at least 1.5 to 1.0, then the Borrower shall deliver the
report referred to in clause (ii) but the U.S. Borrowing Base shall not
be redetermined pursuant thereto;
(f) as soon as possible and in any event within five Business
Days after (i) the occurrence of any material adverse development with
respect to any labor controversy, litigation, action or proceeding
described in Section 6.7 , (ii) the commencement of any labor
controversy, litigation, action or proceeding of the type described in
Section 6.7, notice thereof and copies of all documentation relating
thereto, (iii) the cancellation, suspension, or termination of any
material contract or agreement involving any Borrowing Base Property
located in the Kingdom of Thailand resulting from a default thereunder
or (iv) any material default by the Borrower, Thaipo Limited or B8/32
Partners under the concession agreement governing the Borrowing Base
Properties located in the Kingdom of Thailand;
(g) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security holders, and
all reports and registration statements which the Borrower or any of its
Subsidiaries files with the S.E.C. or any national securities exchange;
(h) with the reports submitted under clause (e) above, a
certificate signed by an Authorized Person of the Borrower setting
forth, as of the date of the last delivered Reserve Report or Alternate
Reserve Report, the name and location of each property to which Proved
Reserves included in the Reserve Report or Alternate Reserve Report, as
the case may be, submitted concurrently are attributable and certifying
that each such property is either owned by the Borrower, a Subsidiary or
an Affiliate and identifying whether such property constitutes a
Qualified Partnership Property;
(i) with the Reserve Reports submitted under clause (e), a
certificate signed by an Authorized Person of the Borrower setting forth
the Borrowing Base (calculated using data in such Reserve Reports) and
the calculations performed to determine the Borrowing Base;
(j) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension Plan,
or the failure to make a required contribution to any Pension Plan if
such failure is sufficient to give rise to a Lien under section 302(f)
of ERISA, or the taking of any action with respect to a Pension Plan
which could
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result in the requirement that the Borrower furnish a bond or other
security to the PBGC or such Pension Plan, or the occurrence of any
event with respect to any Pension Plan which could result in the
incurrence by the Borrower of any material liability, fine or penalty,
or any material increase in the contingent liability of the Borrower
with respect to any post-retirement Welfare Plan benefit, notice thereof
and copies of all documentation relating thereto;
(k) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender through the Agent may from time to time
reasonably request;
(l) as soon as available, and in any event within 90 days
after the end of each Fiscal Year, or at other times as the Agent may
reasonably request, a certificate from the Borrower's risk manager
setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries;
(m) as soon as reasonably possible and in any event within ten
(10) Business Days if the principal of the Senior Debt outstanding
(including the Loans) shall exceed the Borrowing Base then in effect,
notice of such excess.
SECTION 7.3. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate or
partnership existence and qualification as a foreign corporation or
partnership except as contemplated by Section 8.7 or except where the
failure to do so would not have a material adverse effect on the
business and operations of the Borrowers and its Subsidiaries taken as a
whole.
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its
property except to the extent being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books or except where the
failure to do so would not have a material adverse effect on the
business or operations of the Borrower and its Subsidiaries taken as a
whole.
SECTION 7.4. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties, whether owned in fee or leased, in good repair, working order and
condition, and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
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SECTION 7.5. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business (excluding
business interruption insurance) against such casualties and contingencies and
of such types and in such amounts as is customary in the case of similar
businesses.
SECTION 7.6. Books and Records. The Borrower will, and will cause each
of its Subsidiaries to, keep books and records which accurately reflect all of
its material business affairs and transactions and permit the Agent and each
Lender or any of their respective representatives, at reasonable times and
intervals, to visit all of its offices, to discuss its financial matters with
its officers and independent public accountant (and the Borrower hereby
authorizes such independent public accountant to discuss the Borrower's
financial matters with each Lender or its representatives whether or not any
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
or partnership records. The Borrower shall pay any fees of such independent
public accountant incurred in connection with the Agent's or any Lender's
exercise of its rights pursuant to this Section.
SECTION 7.7. Environmental Covenant. The Borrower will, and will cause
each of its Subsidiaries to,
(a) use, operate and maintain all facilities and properties
under its control in material compliance with all Environmental Laws,
keep all necessary material permits, approvals, certificates, licenses
and other authorizations relating to environmental matters in effect and
remain in material compliance therewith, and handle all Hazardous
Materials in material compliance with all applicable Environmental Laws;
and
(b) promptly notify the Agent and provide copies upon receipt
of all written claims, complaints, or notices of material violations
relating to the condition of its facilities and properties or compliance
with Environmental Laws, and shall promptly furnish to the Agent a
statement of its proposed actions and proceedings relating to its
compliance with Environmental Laws.
SECTION 7.8. Performance Under Material Operating Contracts. The
Borrower will, and will cause each of its Subsidiaries and, to the extent
within its reasonable control, its Affiliates to, perform their respective
obligations under all material operating contracts, licenses, permits and
concession agreements to which they are a party and which relate to Borrowing
Base Properties located in the Kingdom of Thailand, except where the failure to
so perform would not have a material adverse effect on the business and
properties of the Borrower and its Subsidiaries taken as a whole.
SECTION 7.9. Payment of Indebtedness. The Borrower shall pay all Trade
Indebtedness owed by it as such Trade Indebtedness shall become due and shall
pay and discharge when due all other Indebtedness now or hereafter owed by it,
except in each case to the extent being diligently contested in good faith by
appropriate proceedings.
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SECTION 7.10. Subsidiary Guaranties. Prior to, or contemporaneous with,
the transfer by Borrower, a Subsidiary or an Affiliate, of a Borrowing Base
Property to a Subsidiary of Borrower, Borrower shall cause such transferee
Subsidiary (other than Thaipo Limited, B8/32 Partners or Pogo Gulf Coast
Limited) to execute and deliver to the Lenders a Subsidiary Guaranty if such
transferee Subsidiary has not previously executed a similar Guaranty for the
benefit of the Lenders.
ARTICLE VIII
NEGATIVE COVENANTS
SECTION 8.1. Performance of Negative Covenants. The Borrower agrees
with the Agent and each Lender that, until all Commitments have terminated and
all Obligations have been paid and performed in full, the Borrower will perform
the obligations set forth in this Article VIII.
SECTION 8.2. Indebtedness. The Borrower hereby agrees that it shall
not, and shall not permit any of its Subsidiaries nor B8/32 Partners to:
(a) create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Senior Debt, other than, without
duplication, the following:
(i) Senior Debt in respect of the Loans and other
Obligations;
(ii) other Senior Debt not to exceed $20,000,000 in the
aggregate at any time outstanding; provided, that no more than
$2,000,000 in the aggregate at any time outstanding of such other
Senior Debt may be the obligation of Thaipo Limited; or;
(b) create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Non-Recourse Indebtedness secured
by a Lien on Borrowing Base Properties.
SECTION 8.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, including the capital stock of any
Subsidiary or Affiliate, whether now owned or hereafter acquired, except:
(a) Liens on pipeline or pipeline facilities which arise out
of operation of law; Liens arising under operating agreements, joint
venture agreements, partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, purchase,
transportation, processing or exchange of oil, gas or other
hydrocarbons, unitization and pooling declarations and agreements, area
of mutual interest agreements, development agreements, joint ownership
arrangements and other agreements which are customary in the
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oil and gas business; and Liens reserved in oil and gas mineral leases
for bonus or rental payments and form compliance with the terms of such
lease;
(b) Liens granted prior to the Effective Date to secure
payment of Indebtedness which is identified in Item 6.16 ("Ongoing
Indebtedness") of the Disclosure Schedule;
(c) rights of first refusal granted pursuant to joint
operating agreements, joint ownership agreements, stockholders
agreements, Organic Documents and other similar agreements and
documents;
(d) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business
(including lessee and operator obligations under statute, governmental
regulations or instruments related to the ownership, exploration and
production of oil, gas and minerals on state, federal or foreign lands
or waters) or to secure obligations on surety or appeal bonds;
(g) pre-judgement Liens and judgment Liens in existence less
than 15 days after the entry thereof or with respect to which execution
has been stayed or the payment of which is covered in full (subject to a
customary deductible) by insurance;
(h) Liens on cash or Cash Equivalent Investments which are
collateral for letters of credit;
(i) statutory Liens and easements or other servitudes arising
in the ordinary course of business and minor irregularities of title
which do not materially impair the ownership or use of the property
subject thereto for the purposes for which such property is owned and
held by the Borrower or any of its Subsidiaries;
(j) Liens which do not encumber Borrowing Base Properties and
which secure or relate to Non-Recourse Indebtedness;
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(k) Liens on oil and gas stored on board the Floating
Production, Storage and Offloading Facility named the "Tantawan
Explorer" granted to the Lessor and operator thereof;
(l) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness of the
Borrower or any of its Subsidiaries to the extent any such defeasance is
not prohibited by this Agreement; customary Liens for the fees, costs
and expenses of trustees and escrow agents pursuant to the indenture,
escrow agreement or other similar agreement establishing such trust or
escrow arrangement; and Liens pursuant to merger agreements, stock
purchase agreements, asset sale agreements and similar agreements (i)
limiting the transfer of properties and assets pending consummation of
the subject transaction and (ii) in respect of earnest money deposits,
good faith deposits, purchase price adjustment escrows and similar
deposits and escrow arrangements made or established thereunder; and
(m) rights reserved to or vested in any municipality or
governmental, statutory or public authority by the terms of any right,
power, franchise, grant, license or permit, or by any provision of law,
to terminate such right, power, franchise, grant, license or permit or
to purchase, condemn, expropriate or recapture or to designate a
purchaser of any of the property of such Person; rights reserved to or
vested in any municipality or governmental, statutory or public
authority to control or regulate any property of such Person, or to use
such property in a manner which does not materially impair the use of
such property for the purposes for which it is held by such Person; any
obligation or duties affecting the property of such Person to any
municipality or governmental, statutory or public authority with respect
to any franchise, grant, license or permit.
SECTION 8.4. Financial Condition. The Borrower will not permit:
(a) the Indebtedness of the Borrower and its Subsidiaries,
less current liabilities (except for current maturities of long-term
Indebtedness), Non-Recourse Indebtedness, deferred taxes, deferred
credits and, to the extent the same constitutes Indebtedness, Thaipo
Limited's Guarantee of Tantawan Services, LLC's obligations under the
bareboat charter and operating agreement relating to the FPSO "Tantawan
Explorer", to exceed $500,000,000 on a consolidated basis;
(b) [Intentionally Omitted];
(c) its Current Ratio to be equal to or less than 1.0:1.0 at
the end of any Fiscal Quarter; or
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(d) its Fixed Charge Coverage Ratio to be equal to or less
than 2.50:1.00 at the end of any Fiscal Quarter;
provided that, no breach of clause (c) or (d) shall be deemed to have occurred
unless and until financial statements for such Fiscal Quarter are available to
the Borrower that reflect such breach.
SECTION 8.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified
in Item 8.5 ("Ongoing Investments") of the Disclosure Schedule so long
as it is not increased, extended or renewed and so long as there are no
changes in the terms and conditions with respect thereto;
(b) Cash Equivalent Investments;
(c) in the ordinary course of business, Investments by the
Borrower in any of its Subsidiaries or Affiliates, or by any such
Subsidiary or Affiliate in any of its Subsidiaries or Affiliates whether
or not existing on the date hereof, by way of contributions to capital
or loans or advances;
(d) if such Investment shall not result in any violation of
F.R.S. Board Regulation U, other equity Investments of a class required
to be registered pursuant to Section 12 of the Securities Exchange Act
of 1934 provided that the Borrower's ownership interest will not exceed
5% of the issuer's outstanding shares entitled to vote, unless such
ownership interest is acquired solely in exchange for capital stock of
the Borrower or any of its Subsidiaries and such exchange complies with
Sections 8.7 and 8.8;
(e) loans and advances in the ordinary course of business
which are appropriate in connection therewith and stock, obligations or
securities received in settlement of debts so created and owing to the
Borrower or any Subsidiary of the Borrower;
(f) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by any agency of the United
States Government, which has a rating of A- or better from Standard &
Poor's Corporation or a rating of A3 or better from Moody's Investors
Service, Inc.;
(g) any interest bearing account at, or certificate of deposit
maturing not more than one year after such time issued by, a U. S.
savings and loan association which has a rating of A- or better from
Standard & Poor's Corporation or a rating of A3 or better from Moody's
Investors Service, Inc. on its long term unsecured debt and which has
combined capital and surplus and undivided profits of not less than
$100,000,000;
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(h) any interest bearing account at, or certificate of deposit
maturing not more than one year after such time, payable in U. S.
Dollars and issued by, (i) a foreign banking institution or foreign
branch of a U. S. banking institution, which banking institution has a
rating of A- or better from Standard & Poor's Corporation or a rating of
A3 or better from Moody's Investors Service, Inc. on its long-term
unsecured debt and combined capital and surplus and undivided profits of
not less than $100,000,000, or (ii) any foreign subsidiary of a U. S.
banking institution, which U. S. banking institution has a rating of A-
or better from Standard & Poor's Corporation or a rating of A3 or better
from Moody's Investors Service, Inc. and which subsidiary has combined
capital and surplus and undivided profits of not less than $100,000,000
or (iii) by any Lender;
(i) any evidence of Indebtedness, maturing not more than one
year after such time, issued by any State of the United States, by any
county or municipality organized or incorporated under the laws of any
State of the United States or by any agency or subdivision of any of the
foregoing, in each case rated A- or better by Standard & Poor's
Corporation or rated A3 or better by Moody's Investors Service, Inc.;
(j) auction rate preferred stock of a U. S. corporation or
mutual investment company rated A- or better by Standard & Poor's
Corporation or rated A3 or better by Moody's Investors Service, Inc.
provided that such Investment will not result in any violation of F.R.S.
Board Regulation U and further provided that the Borrower's ownership
interest will not exceed (and will not be convertible into shares which
exceed) 5% of the issuer's outstanding shares entitled to vote;
(k) mutual funds or similar investment vehicles investing
primarily in Investments of the types set forth in clauses (a) through
(d) of the definition of Cash Equivalent Investments or in the foregoing
clauses (f) through (k), provided that ratings requirements shall be
applicable to the mutual fund rather than the underlying Investments, as
follows: such mutual funds shall, in each case, have a rating of A- or
better from Standard & Poor's Corporation or a rating of A3 from Moody's
Investors' Service, Inc. or a rating satisfactory to the Agent from
another recognized rating agency satisfactory to the Agent, provided,
however, that it is agreed that (i) any Investment which when made
complies with the requirements of any of the foregoing clauses (f), (g)
or (h) may continue to be held notwithstanding that such Investment if
made thereafter would not comply with such requirements; and (ii) no
Investment otherwise permitted by clauses (i) or (j) shall be permitted
to be made directly or indirectly through a mutual fund if, immediately
before or after giving effect thereto, any Default shall have occurred
and be continuing; and
(l) Guarantees constituting Indebtedness permitted by Section
8.4 and Thaipo Limited's Guarantee of Tantawan Services, LLC's
obligations under the bareboat charter and operating agreement relating
to the FPSO "Tantawan Explorer";
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provided, however, that
(m) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements; and
(n) no Investment otherwise permitted by clause (c) or (d)
shall be permitted to be made if, immediately before or after giving
effect thereto, any Default shall have occurred and be continuing.
SECTION 8.6. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) the Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower or
on any warrants, options or other rights with respect to any shares of
any class of capital stock (now or hereafter outstanding) of the
Borrower (other than dividends or distributions payable in its common
stock or rights or warrants to purchase its capital stock or split-ups
or reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower, other than (i) payments
of dividends as required on preferred stock outstanding and (ii)
dividends on common stock and purchases and redemptions of capital
stock, provided further that the aggregate of all such dividends,
purchases, and redemptions paid after January 1, 1992 does not exceed
the sum of (x) thirty-three percent of cumulative income, net of
cumulative losses, after January 1, 1992 and (y) one hundred percent of
the cumulative proceeds from the issuance of any capital stock after
January 1, 1992; provided further that no dividends on common stock
shall be paid in cash, property, or obligations unless the net worth of
the Borrower, based on the Borrower's latest available balance sheet,
after subtracting therefrom intangible assets including goodwill,
franchises, licenses, patents, trademarks, tradenames, copyrights,
service marks, and brand names, is positive and provided further that
notwithstanding any restriction contained in this Section 8.6, the
Borrower may redeem any of its shares of capital stock in exchange for,
or out of the proceeds of the substantially concurrent sale of, shares
of capital stock, and any dividend otherwise permitted under the terms
of this Section 8.6 on the date of such dividend's declaration shall be
payable notwithstanding that on the date of payment, such dividend would
not be permitted under this section;
(b) the Borrower will not, and will not permit any of its
Subsidiaries to,
(i) except to the extent of any payment, prepayment,
redemption, purchase or defeasance paid from the proceeds of the
issuance or sale of Subordinated Indebtedness or capital stock,
make any payment or prepayment of principal of any
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Subordinated Indebtedness on any day prior to the stated,
scheduled date for such payment or prepayment set forth in the
documents and instruments memorializing such Subordinated
Indebtedness, or redeem, purchase or defease any Subordinated
Indebtedness if such payments, prepayments, redemptions,
purchases or defeasance shall be in an aggregate amount in excess
of $10,000,000 in any one year, or $20,000,000 in the aggregate
after the date hereof and prior to August 1, 2000; or
(ii) make any payment or prepayment of principal of any
Subordinated Indebtedness which would violate the subordination
provisions of such Subordinated Indebtedness; or
(iii) make any payment or prepayment of interest on any
Subordinated Indebtedness, other than payments or prepayments of
interest in connection with any payment, prepayment, redemption,
purchase or defeasance permitted under Section 8.6(b)(i), on any
day prior to the stated scheduled date for such payment or
prepayment set forth in the documents memorializing such
Subordinated Indebtedness, or which would violate the
subordination provisions of such Subordinated Indebtedness;
(c) the Borrower will not, and will not permit any Subsidiary
to, make any deposit for any of the foregoing prohibited purposes and no
payment, dividend, distribution, prepayment, redemption, purchase or
defeasance otherwise permitted by clause (a) or (b) shall be permitted
to be made if, immediately before or after giving effect thereto, any
Default shall have occurred and be continuing provided that, in
determining if any Default pursuant to Section 8.4 shall have occurred
or is continuing immediately before or after such payment, dividend,
distribution, prepayment, redemption, purchase or defeasance, the
Borrower may rely on financial information available to it since the
date of the financial statements most recently delivered by it pursuant
to Sections 7.2(a) and 7.2(b); and
(d) the Borrower will not permit any Subsidiary or Affiliate
owning Borrowing Base Properties to enter into any agreement which
restricts such Subsidiary or Affiliate from (i) dividending the
Borrower's, or its share owning Subsidiary's, share of net profits to
the Borrower or such share owning Subsidiary or (ii) making payments of
principal or interest on any loan from the Borrower, a Subsidiary or an
Affiliate unless (x) prior thereto, such Subsidiary or Affiliate
executes and delivers a valid and enforceable Subsidiary Guarantee to
the Lenders or (y) contemporaneously therewith, the Required Lenders
consent to such Subsidiary or Affiliate entering into such agreement;
provided that in connection with such consent, the Required Lenders may
require an immediate redetermination of the Borrowing Base in connection
therewith.
SECTION 8.7. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries or B8/32 Partners to, liquidate, wind
up or dissolve, consolidate with, or merge
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into or with, any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof)
except as set forth below and so long as the Borrower (if the Borrower is a
party thereto) is the surviving entity:
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may consolidate or merge with and into, the Borrower or any
other Subsidiary;
(b) B8/32 Partners may liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower, any Subsidiary or any other
Person; provided, that, either (i) the Borrower's equity interest in the
surviving Person (in the case of a dissolution into, or consolidation or
merger with and into a Person other than the Borrower or a Subsidiary)
is equal to its equity interest in B8/32 Partners immediately prior to
such dissolution, consolidation or merger or (ii) all of the Borrowing
Base Properties, or the proceeds upon liquidation thereof, become the
property of the Borrower or a Subsidiary; and
(c) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or substantially all of the assets of any
Person (other than the Borrower), or acquire such Person (other than the
Borrower) by merger.
SECTION 8.8. Asset Dispositions. The Borrowing Base may be
redetermined if, in either of the first half or second half of any Fiscal Year:
(a) the aggregate value of assets (including cash accounts,
accounts receivable, production payments, and capital stock of or
partnership interests in Subsidiaries, but excluding oil, gas, and other
liquid or gaseous hydrocarbons sold in the ordinary course of business)
sold, transferred, leased, contributed, or otherwise conveyed by the
Borrower and its Subsidiaries other than to the Borrower or its
Subsidiaries, or to which the Borrower and its Subsidiaries may grant
options, warrants, or other rights, shall exceed, in the aggregate,
$10,000,000. Notwithstanding the foregoing, the Borrower and its
Subsidiaries may grant, sell, or convey production payments as permitted
by this Agreement in connection with Non-Recourse Indebtedness. For
purposes of this Section 8.8(a), the value of any asset is the greater
of its book value or fair market value at the time of any disposition;
and
(b) the Discounted Present Value of Borrowing Base Properties
sold, transferred, leased, contributed or otherwise conveyed by the
Borrower to any Subsidiary shall exceed, in the aggregate, ten percent
(10%) of the Borrowing Base determined pursuant to the most recent
Reserve Reports or Alternate Reserve Reports without first obtaining the
consent of the Required Lenders, which consent shall not be unreasonably
withheld and shall not require the payment of a fee or other
compensation by the Borrower.
SECTION 8.9. Modification of Certain Agreements. The Borrower will not
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or
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applicable to any document or instrument evidencing or governing any existing
Subordinated Indebtedness, other than any amendment, supplement or other
modification which (a) does not accelerate the date of or increase the amount
of any repayment or redemption required pursuant to such agreements, prior to
July 2, 2002, (b) does not contain covenants regarding the matters set forth in
Section 8.4 materially more restrictive than the covenants contained in Section
8.4 of this Agreement, (c) does not increase the rate of interest payable or
fees and other compensation, except to the extent such fees and other
compensation are usual and customary for transactions of such type, and (d)
does not contain or result in subordination terms materially less favorable to
holders of the Notes than the original terms. After giving effect to any
amendment, supplement, or modification which conforms to clauses (a), (b), (c),
and (d) of this Section 8.9, the Indebtedness of the Borrower shall not exceed
the limits permitted pursuant to clause (a) of Section 8.4.
SECTION 8.10. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement, as of the date it was entered into, is fair and
equitable to the Borrower or such Subsidiary and is (as of such date) not of a
sort which would not be entered into by a prudent Person in the position of the
Borrower or such Subsidiary with, or which is on terms which are less favorable
than are obtainable from, any Person which is not one of its Affiliates.
SECTION 8.11. [Intentionally Omitted].
SECTION 8.12. Negative Pledges, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any agreement (excluding this
Agreement, any other Loan Document, any agreement related to Indebtedness
permitted under Sections 8.2(a)(ii) and 8.2(a)(iii), and any agreement
governing Indebtedness not to exceed $1,000,000 at any one time outstanding in
the aggregate which is incurred to vendors to finance acquisitions of assets as
to the assets financed with proceeds of such Indebtedness) prohibiting or
having the effect of prohibiting the creation or assumption of any Lien upon
any of its properties, revenues or assets, whether now owned or hereafter
acquired, or restricting the ability of the Borrower to amend or otherwise
modify this Agreement or any other Loan Document.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 9.1 shall constitute an "Event
of Default".
SECTION 9.1.1. Non-Payment of Obligations. The Borrower shall
default in the payment or prepayment, including any mandatory prepayment
pursuant to Section 3.1.2. or 3.1.3, when due of any principal of any Loan, or
the Borrower shall default (and such default shall continue
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unremedied for a period of five days) in the payment when due of interest on
any Loan, any Commitment Fee or other fee provided for in this Agreement or of
any other Obligation.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any Subsidiary made or deemed to be made hereunder or in any
other Loan Document or any other writing or certificate furnished by or on
behalf of the Borrower (including any certificate delivered pursuant to Article
VII) to the Agent or any Lender for the purposes of or in connection with this
Agreement or any such other Loan Document (including any certificates delivered
pursuant to Article V) is or shall be incorrect when made in any material
respect.
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Article VIII (excluding Section 8.4) and, with respect to
Section 8.3, 8.5 or 8.6, such default shall continue unremedied for a period of
five (5) Business Days after notice thereof shall have been given to the
Borrower by the Agent or any Lender.
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any Subsidiary shall default in the due performance and observance
of any other covenant or agreement contained herein, including Section 8.4, or
in any other Loan Document, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the Borrower by
the Agent or any Lender.
SECTION 9.1.5. Default on Other Indebtedness. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise of any Indebtedness (other than Indebtedness described
in Section 9.1.1 or Non-Recourse Indebtedness) in excess of $10,000,000 of the
Borrower or any of its Subsidiaries, or a default shall occur in the performance
or observance of any obligation or condition with respect to such Indebtedness
if the effect of such default is to accelerate the maturity of any such
Indebtedness or to permit the holder or holders thereof, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity.
SECTION 9.1.6. Judgments. Any judgments or orders for the payment of
money which are, in aggregate, in excess of $10,000,000 at any one time
outstanding shall be rendered against the Borrower or any of its Subsidiaries
and the same shall remain undischarged and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
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SECTION 9.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION 9.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries shall
(a) generally fail to pay, or admit in writing its inability
or unwillingness to pay, its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower or
any of its Subsidiaries or any property of any thereof, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of its
Subsidiaries or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall not be
discharged within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution, winding up
or liquidation proceeding (except the voluntary dissolution, not under
any bankruptcy or insolvency law, of a Subsidiary pursuant to Section
8.7), in respect of the Borrower or any of its Subsidiaries, and, if any
such case or proceeding is not commenced by the Borrower or such
Subsidiary, such case or proceeding shall be consented to or acquiesced
in by the Borrower or such Subsidiary or shall result in the entry of an
order for relief or shall remain for 60 days undismissed; or
(e) take any corporate, or in the case of a Subsidiary
organized as a partner, partnership action authorizing, or in
furtherance of, any of the foregoing.
SECTION 9.2. Action if Bankruptcy. If any Event of Default described
in clauses (a) through (d) of Section 9.1.9 shall occur, the outstanding
principal amount of all outstanding Loans
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and all other Obligations shall automatically be and become immediately due and
payable, without notice or demand.
SECTION 9.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of
Section 9.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Agent, upon the direction of the Required Lenders, shall
by notice to the Borrower declare the outstanding principal amount of the Loans
and other Obligations to be due and payable, whereupon the full unpaid amount
of such Loans and other Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment.
ARTICLE X
THE AGENT AND THE CO-AGENT
SECTION 10.1. Actions. Each Lender hereby appoints the Agent as its
agent under and for purposes of this Agreement, the Notes and each other Loan
Document. Each Lender authorizes the Agent to act on behalf of such Lender
under this Agreement, the Notes and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Agent (with respect to which the Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
each of the Agent and the Co-Agent, pro rata according to such Lender's
Percentage, from and against any and all liabilities, obligations, losses,
damages, claims, costs or expenses of any kind or nature whatsoever which may
at any time be imposed on, incurred by, or asserted against, the Agent and the
Co-Agent in any way relating to or arising out of this Agreement, the Notes and
any other Loan Document, including reasonable attorneys' fees, and as to which
the Agent or Co-Agent is not reimbursed by the Borrower; provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses which are
determined by a court of competent jurisdiction in a final proceeding to have
resulted solely from the Agent's or the Co-Agent's gross negligence or wilful
misconduct. Neither the Agent nor the Co-Agent shall be required to take any
action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction.
If any indemnity in favor of the Agent or the Co-Agent shall be or become, in
the Agent's or the Co-Agent's determination, inadequate, the Agent or the
Co-Agent may call for additional indemnification from the Lenders and cease to
do the acts indemnified against hereunder until such additional indemnity is
given.
SECTION 10.2. Funding Reliance, etc. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., United
States Central time on the day
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prior to a Borrowing in the case of Fixed Rate Loans, or by 11:00 a.m. U.S.
Central time on the day of any Borrowing in the case of Prime Rate Loans, that
such Lender will not make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor, the Agent may
assume that such Lender has made such amount available to the Agent and, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Borrower severally agree to repay
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Agent made such amount available to the
Borrower to the date such amount is repaid to the Agent, at the Federal Funds
Rate at that time.
SECTION 10.3. Exculpation. Neither the Agent, the Co-Agent nor any of
their directors, officers, employees or agents shall be liable to any Lender
for any action taken or omitted to be taken by it under this Agreement or any
other Loan Document, or in connection herewith or therewith, except for their
own wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor to
make any inquiry respecting the performance by the Borrower of its obligations
hereunder or under any other Loan Document. The Agent and the Co-Agent shall
each be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the Agent or
the Co-Agent believes to be genuine and to have been presented by a proper
Person.
SECTION 10.4. Successor. The Agent may resign as such at any time upon
at least 30 days' prior notice to the Borrower and all Lenders. If the Agent
at any time shall resign, the Required Lenders, with the consent of the
Borrower, may appoint another Lender or a commercial banking institution
organized under the laws of the U.S. (or any state thereof) or a U.S. branch or
agency of a commercial banking institution, and having a combined capital and
surplus of at least $500,000,000 as a successor Agent which shall thereupon
become the Agent hereunder. If no successor Agent shall have been so appointed
by the Required Lenders, and shall have accepted such appointment, within 30
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be
one of the Lenders or a commercial banking institution organized under the laws
of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial
banking institution, and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor
Agent may reasonably request, and shall thereupon succeed to and become vested
with all rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder as the Agent, the
provisions of
(a) this Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent under
this Agreement; and
(b) Section 11.3 shall continue to inure to its benefit.
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SECTION 10.5. Loans by the Agent and Banque Paribas. Each of the Agent
and Banque Paribas shall have the same rights and powers with respect to (x)
the Loans made by it or any of its Affiliates, and (y) the Notes held by it or
any of its Affiliates as any other Lender and may exercise the same as if it
were not the Agent or Co-Agent, as the case may be.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower and such other documents,
information and investigations as such Lender has deemed appropriate, made its
own credit decision to extend its Commitments. Each Lender also acknowledges
that it will, independently of the Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 10.7. Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution
to the Lenders by the Agent.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, change the definition of
"Required Lenders", increase any Commitment Amount or the Percentage of
any Lender, change the definition of "Prime Rate" or "LIBO Rate" to
reduce interest payable or the Applicable Margin by the Borrower, reduce
any fees described in Article III, or extend any Commitment Termination
Date shall be made without the consent of each Lender and each holder of
a Note;
(c) extend the Stated Maturity Date for, or reduce the amount
of, any scheduled repayment or any mandatory prepayment (whether
pursuant to Section 3.1.2 or
71
<PAGE>
3.1.3 or otherwise) or of any interest payment due to any Lender on any
Loan (or reduce the principal amount of or rate of interest on any Loan)
shall be made without the consent of the holder of that Note evidencing
such Loan; or
(d) affect adversely the interests, rights or obligations of
the Agent qua the Agent, or the Co-Agent qua Co-Agent, shall be made
without consent of the Agent or Co-Agent, as the case may be.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Agent, any Lender or the
holder of any Note under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by Telex or by facsimile and addressed, delivered or transmitted to
such party at its address, Telex or facsimile number set forth below its
signature hereto or set forth in the Lender Assignment Agreement or at such
other address, Telex or facsimile number as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by Telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of Telexes and transmission confirmed in the
case of facsimiles).
SECTION 11.3. Payment of Costs and Expenses. The Borrower agrees to
promptly pay all reasonable expenses of each of the Agent and Co-Agent
(including the reasonable fees and out-of-pocket expenses of counsel to the
Agent or Co-Agent and of local counsel, if any, who may, following reasonable
notice to the Borrower, be retained by counsel to the Agent or Co-Agent) in
connection with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
72
<PAGE>
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Agreement, the borrowings
hereunder, or the issuance of the Notes or any other Loan Documents. The
Borrower also agrees to reimburse the Agent and each Lender upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees, which attorneys'
fees may include those of an attorney who is an employee of a Lender, and legal
expenses) incurred by the Agent or such Lender in connection with the
enforcement of any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Co-Agent and each
Agent, Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action
for which indemnification hereunder is sought), including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities"), incurred
by the Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to fund
any Borrowing);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of any portion of the stock or assets of any Person,
whether or not the Agent or such Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of
its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the activities of the Indemnified
Party on the property of the Borrower conducted
73
<PAGE>
subsequent to a foreclosure on such property by the Lenders or by reason of the
relevant Indemnified Party's gross negligence or wilful misconduct or breach of
this Agreement, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower shall be
obligated to indemnify the Indemnified Parties for all Indemnified Liabilities
subject to and pursuant to the foregoing provisions, regardless of whether the
Borrower or any of its Subsidiaries had knowledge of the facts and
circumstances giving rise to such Indemnified Liability.
Promptly after the receipt by an Indemnified Party of notice of the
commencement of any action to which the Borrower is not a party, such
Indemnified Party will, if a claim for indemnity in respect thereof is to be
made against the Borrower, notify the Borrower of the commencement thereof. If
the Borrower will have acknowledged in writing that this Section 11.4 will
cover any Indemnified Liabilities in any such action, suit, proceeding or
investigation, and, in the sole determination of the Indemnified Party, the
Borrower has the financial ability to pay such Indemnified Liabilities, then
the Borrower will have the right, on behalf of such Indemnified Party, but at
the Borrower's expense, to defend such action, suit or proceeding, or
participate in such investigation, with counsel selected by it, and will have
sole discretion as to whether to litigate, appeal or settle.
SECTION 11.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.7, 11.3 and 11.4, and the obligations of the Lenders under
Section 10.1 and of the Agent and the Lenders under Section 11.12, shall in
each case survive any termination of this Agreement. The representations and
warranties made by the Borrower in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and each Lender (or
notice thereof satisfactory to the Agent) shall have been received by the Agent
and notice thereof shall have been given by the Agent to the Borrower and each
Lender.
74
<PAGE>
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent and
all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes. Each Lender may assign, or sell participations in, its
Loans and Commitments to one or more other Persons in accordance with this
Section 11.11.
SECTION 11.11.1. Assignments. Any Lender,
(a) with the written consents of the Borrower and the Agent
(which consents shall not be unreasonably delayed or withheld and which
consent, in the case of the Borrower, shall be deemed to have been given
in the absence of a written notice delivered by the Borrower to the
Agent, on or before the tenth Business Day after receipt by the Borrower
of such Lender's request for consent, stating, in reasonable detail, the
reasons why the Borrower proposes to withhold such consent) may at any
time assign and delegate to one or more commercial banks or other
financial institutions, each of which banks or institutions has capital
and surplus and undivided profits of not less than $500,000,000, and
(b) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any of
its Affiliates or to any other Lender
75
<PAGE>
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's
total Loans and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Lender's Loans and
Commitment) in a minimum aggregate amount for any Commitment equal to the
lesser of $5,000,000 or the Lender's entire Commitment; provided, however, that
any such Assignee Lender will comply with Section 11.12 and, if applicable,
with the provisions contained in the penultimate sentence of Section 4.7 and
further, provided, however, that, the Borrower and the Agent shall be entitled
to continue to deal solely and directly with such Lender in connection with the
interests so assigned and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Agent by such Lender and such Assignee Lender,
(d) such Assignee Lender shall have executed and delivered to
the Borrower and the Agent a Lender Assignment Agreement, accepted by
the Agent, and
(e) the processing fees described below shall have been paid.
From and after the date that the Agent accepts such Lender Assignment Agreement
in accordance with the foregoing, (x) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the extent that
rights and obligations hereunder have been assigned and delegated to such
Assignee Lender in connection with such Lender Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection with
such Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Loan Documents. Within five Business Days after
its receipt of notice that the Agent has received an executed Lender Assignment
Agreement, the Borrower shall execute and deliver to the Agent (for delivery to
the relevant Assignee Lender) new Notes evidencing such Assignee Lender's
assigned Loans and Commitment and, if the assignor Lender has retained any
Loans and Commitment hereunder, replacement Notes in the principal amount of
the Loans and Commitment obligations retained by the assignor Lender hereunder
(such Notes to be in exchange for, but not in payment of, those Notes then held
by such assignor Lender). Each such Note shall be dated the date of the
predecessor Notes. The assignor Lender shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest on that part of
the predecessor Notes evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Agreement. Accrued interest on that
part of the predecessor Notes evidenced by the replacement Notes shall be paid
to the assignor Lender. Accrued interest and accrued fees shall be paid at the
same time or times provided in the predecessor Notes and in this Agreement.
Such assignor Lender or such Assignee Lender must also pay a processing fee to
the Agent upon delivery of any Lender Assignment Agreement in the amount of
$2,000. Any attempted assignment and delegation not made in accordance with
this Section 11.11.1 shall be null and void.
76
<PAGE>
SECTION 11.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks
and other Persons being herein called a "Participant") participating interests
in any of the Loans, Commitments, or other interests of such Lender hereunder;
provided, however, that
(a) no participation contemplated in this Section 11.11 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document,
(b) such Lender shall remain solely responsible for the
performance of its Commitment and such other obligations,
(c) the Borrower and the Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and each of the other Loan
Documents,
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (b) or (c) of
Section 11.1, and
(e) no Participant shall be entitled to payment of any amount
under Section 4.6 that would not have been required to be paid to such
Lender had no participation occurred.
The Borrower acknowledges and agrees that each Participant, for purposes
of Sections 4.3, 4.4, 4.5, 4.9, 4.10, 11.3 and 11.4, shall be considered
a Lender.
SECTION 11.12. Confidentiality. The Lenders shall hold all
non-public information obtained pursuant to the requirements of this Agreement
in accordance with the Confidentiality Letters, and
(a) may not disclose or discuss such information with any
other persons except that any Lender may disclose such information (i)
to any bank regulatory authority at the request of such authority or in
connection with an examination of such Lender by any such authority,
(ii) pursuant to subpoena, other court process or as otherwise required
by law, (iii) at the express direction of any other agency of any State
of the United States, (iv) to such Lender's independent auditors,
counsel or independent petroleum engineers retained by such Lender or
(v) to any Assignee Lender or proposed Assignee Lender of all or any
portion of any Lender's interests, rights and obligations under the
Agreement and any participant or proposed participant in all or a
portion of a Lender's obligations under the Agreement, in each case,
only if such Assignee Lender or proposed Assignee Lender or participant
or proposed
77
<PAGE>
participant shall execute and deliver to the Borrower prior to any
disclosure of information or conclusions based on such information, a
Confidentiality Letter.
(b) The obligation of confidentiality shall not apply to such
portions of the information which the Lender establishes (i) are in the
public domain, (ii) hereafter become part of the public domain without
breach of this Section 11.12 or any Confidentiality Letter, (iii) are
previously known from some source other than the Borrower, (iv) are
developed without using the Borrower's information or (v) are hereafter
obtained from a third party who owes no obligation of confidence to the
Borrower with respect to such information.
(c) Unless prohibited by applicable law or court order, each
Lender and the Agent will promptly notify the Borrower (in advance, if
practicable) if it is required to disclose any such information or
conclusions pursuant to clause (a)(ii) above.
(d) Each Lender and the Agent agree that it will not use any
information obtained, inspected or reviewed by it in connection with the
Agreement for the purpose of bidding, or in any manner advising or
assisting in the bidding (including advising or assisting in advising in
the nomination of tracts to be leased), on future lease sales of tracts
in offset tracts or in drainage tracts to the Borrower's interests or
for the purpose of purchasing, selling, offering to purchase or offering
to sell, directly or indirectly, any equity securities of the Borrower
(or assisting or advising others in connection therewith).
(e) All obligations of any Lender pursuant to this Section
11.12 shall terminate on the second anniversary of the date on which all
Obligations of the Borrower to such Lender under the Agreement and the
Notes have been fulfilled.
(f) Each Lender and the Agent agree that it shall be
responsible for the compliance with this Agreement by all its officers
and employees to the same extent as if they were parties hereto.
SECTION 11.13. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
78
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
POGO PRODUCING COMPANY
By /s/ JOHN W. ELSENHANS
---------------------------------------
Name: John W. Elsenhans
Title: Vice President - Finance and
Treasurer
Address: 5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
Facsimile No.: (713) 297-4954
Attention: Mr. John W. Elsenhans
Vice President - Finance and
Treasurer
BANK OF MONTREAL,
acting through its U.S. branches
and agencies, including initially
its Chicago, Illinois branch, as Agent
By /s/ ROBERT L. ROBERTS
--------------------------------------
Name: Robert L. Roberts
Title: Director, U.S. Corporate Banking
Address: 115 South LaSalle Street
Chicago, Illinois 60603
with copy to:
Bank of Montreal
Houston Agency
700 Louisiana Street
4400 NationsBank Center
Houston, Texas 77002
Facsimile No.: (713) 223-4007
Attention: Ms. Christa Hash
<PAGE>
BANQUE PARIBAS
acting through its Houston Agency, as
Co-Agent
By /s/ BARTON D. SHCOUEST
--------------------------------------
Name: Barton D. Schouest
Title: Group Vice President
By /s/ DOUGLAS LIFTMAN
---------------------------------------
Name: Douglas Liftman
Title: Vice President
Domestic
Office: 1200 Smith, Suite 3100
Houston, Texas 77002
Facsimile No.: (713) 659-3832
Attention: Mr. Douglas Liftman
<PAGE>
PERCENTAGE LENDERS
24.000% BANK OF MONTREAL
By /s/ ROBERT L. ROBERTS
-------------------------------
Name: Robert L. Roberts
Title: Director, U.S. Corporate
Banking
Domestic
Office: 115 South LaSalle Street
Chicago, Illinois 60603
LIBOR
Office: 115 South LaSalle Street
Chicago, Illinois 60603
with copy to:
Bank of Montreal
Houston Agency
4400 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Facsimile No.: (713) 223-4007
Attention: Ms. Christa Hash
<PAGE>
20.000% BANQUE PARIBAS
By /s/ BARTON D. SCHOUEST
----------------------------
Name: Barton D. Schouest
Title:Group Vice President
By /s/ DOUGLAS LIFTMAN
--------------------------
Name:Douglas Liftman
Title:Vice President
Domestic
Office:1200 Smith, Suite 3100
Houston, Texas 77002
Facsimile No.: (713) 659-3832
Attention:Mr. Douglas Liftman
LIBOR
Office:1200 Smith, Suite 3100
Houston, Texas 77002
Facsimile No.: (713) 659-5305
Attention: Ms. Leah Hughes
13.200% BANKBOSTON, N.A.
By /s/ TERRENCE RONAN
-------------------------
Name:Terrence Ronan
Title:Vice President
Domestic
Office:100 Federal Street
01-08-04
Boston, Massachusetts 02110
Facsimile No.:(617) 434-3652
Attention:Terrence Ronan
Vice President
LIBOR
Office:100 Federal Street
01-08-02
Boston, Massachusetts 02110
Facsimile No.:(617) 434-9820
Attention:Ruth Sawyer
<PAGE>
11.400% NATIONSBANK OF TEXAS, N.A.
By: /s/ JOHN H. ROBERTS
--------------------------
Name:John H. Roberts
Title:Vice President
Domestic
Office: 700 Louisiana, 8th Floor
Houston, Texas 77002
Facsimile No.:(713) 247-6568
Attention:John H. Roberts
LIBOR
Office: 901 Main Street, 14th
Floor
Dallas, Texas 75202
Telephone No.: (214) 508-2141
Facsimile No.:(214) 508-2020
Attention: Terri Smith
11.400% THE CHASE MANHATTAN BANK
By: /s/ RUSSELL JOHNSON
-------------------------
Name:Russell Johnson
Title:Vice President
Domestic
Office: 707 Travis, 5NAD6
Houston, Texas 77002-8086
Facsimile No.:(713) 216-4117
Attention:Russell Johnson
LIBOR
Office:The Chase Manhattan Bank
1 Chase Manhattan Plaza, 8th
Floor
New York, New York 10081
Facsimile No.: (212) 552-5777
Attention: Lynette Lang
<PAGE>
10.000% SOCIETE GENERALE
By: /s/ RICHARD A. ERBERT
--------------------------
Name:Richard A. Erbert
Title: Vice President, Houston
Corporate
Domestic
Office:1111 Bagby Street,
Suite 2020
Houston, Texas 77002
Facsimile No.: (713) 650-0824
Attention: Richard A. Erbert
LIBOR
Office:Loan Operations
Trammell Crow Center
2001 Ross Ave., Suite 4800
Dallas, Texas 75201
Facsimile No.:(214) 754-0171
Attention:Loan Operations
<PAGE>
10.000% TORONTO DOMINION (TEXAS), INC.
By: /s/ NEVA NESBITT
------------------------------
Name: Neva Nesbitt
----------------------------
Title: Vice President
--------------------------
Domestic
Office:Toronto Dominion
(Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Telephone No.: (713) 653-8201
Facsimile No.:(713) 652-2647
Attention:Mark Green, Managing
Director
With a copy to:
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Telephone No.: (713) 653-8239
Facsimile No.:(713) 951-9921
Attention:Jimmy Simien,
Manager, Credit Administration
LIBOR
Office:Toronto Dominion
(Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Telephone No.: (713) 653-8239
Facsimile No.:(713) 951-9921
Attention:Jimmy Simien,
Manager, Credit Administration
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Consolidated Financial Statements (Unaudited) of Pogo Producing
Company, including the Consolidated Balance Sheets as of June 30, 1997
and the Consolidated Statements of Income for the three months
ended June 30, 1997, and is qualified in its entirety by reference
to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 23,505
<SECURITIES> 0
<RECEIVABLES> 76,791
<ALLOWANCES> 0<F1>
<INVENTORY> 14,145
<CURRENT-ASSETS> 115,542
<PP&E> 1,304,047
<DEPRECIATION> 861,875
<TOTAL-ASSETS> 585,022
<CURRENT-LIABILITIES> 46,336
<BONDS> 338,205
<COMMON> 33,396
0
0
<OTHER-SE> 95,217
<TOTAL-LIABILITY-AND-EQUITY> 585,022
<SALES> 136,595<F2>
<TOTAL-REVENUES> 138,054
<CGS> 28,488<F3>
<TOTAL-COSTS> 28,488<F3>
<OTHER-EXPENSES> 68,794<F4>
<LOSS-PROVISION> 0<F5>
<INTEREST-EXPENSE> 9,831
<INCOME-PRETAX> 33,700
<INCOME-TAX> 11,708
<INCOME-CONTINUING> 21,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,992
<EPS-PRIMARY> .64
<EPS-DILUTED> .62
<FN>
<F1>This amount is not disclosed on the face of the Consolidated
Financial Statements due to lack of materiality, but is included as
a contra-asset in Accounts Receivable.
<F2>Does not include Gains (or Losses) on Property Sales.
<F3>Includes Lease Operating Expense, but excludes General and
Administrative, Exploration, Dry Hole and Impairment and Depreciation,
Depletion and Amortization Expenses.
<F4>Includes General and Administrative, Exploration, Dry Hole and
Impairment and Depreciation, Depletion and Amortization Expenses.
<F5>This amount is not disclosed on the face of the Consolidated Financial
Statements due to lack of materiality, but is included in Oil and Gas
Revenues.
</FN>
</TABLE>
