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EXHIBIT 10.2
AMENDED AND RESTATED CREDIT AGREEMENT
among
EXCO RESOURCES, INC.,
as Borrower,
BANK OF AMERICA, N.A.,
as Administrative Agent,
BANK ONE, TEXAS, N.A.,
as Syndication Agent,
and
The Financial Institutions Listed on Schedule 1 Hereto,
as Banks
$150,000,000
dated
September 22, 2000
BANC OF AMERICA SECURITIES LLC,
As Sole Lead Arranger and Book Manager
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 AMENDMENT AND RESTATEMENT...............................................................................2
ARTICLE 2 TERMS DEFINED...........................................................................................2
SECTION 2.1 DEFINITIONS..................................................................................2
SECTION 2.2 ACCOUNTING TERMS AND DETERMINATIONS.........................................................20
SECTION 2.3 PETROLEUM TERMS.............................................................................20
SECTION 2.4 MONEY.......................................................................................20
ARTICLE 3 THE CREDIT.............................................................................................21
SECTION 3.1 COMMITMENTS.................................................................................21
SECTION 3.2 NOTES.......................................................................................25
SECTION 3.3 INTEREST RATES; PAYMENTS....................................................................25
SECTION 3.4 MANDATORY PREPAYMENTS DURING BORROWING BASE DEFICIENCY......................................27
SECTION 3.5 VOLUNTARY PREPAYMENTS.......................................................................27
SECTION 3.6 VOLUNTARY REDUCTION OF COMMITMENTS..........................................................28
SECTION 3.7 TERMINATION OF COMMITMENTS; FINAL MATURITY OF REVOLVING LOAN................................28
SECTION 3.8 UNUSED COMMITMENT FEE.......................................................................28
SECTION 3.9 BORROWING BASE INCREASE FEE.................................................................28
SECTION 3.10 AGENCY AND OTHER FEES.......................................................................28
SECTION 3.11 CLOSING FEE.................................................................................28
ARTICLE 4 GENERAL PROVISIONS.....................................................................................29
SECTION 4.1 DELIVERY AND ENDORSEMENT OF NOTES...........................................................29
SECTION 4.2 GENERAL PROVISIONS AS TO PAYMENTS...........................................................29
ARTICLE 5 CHANGE IN CIRCUMSTANCES................................................................................30
SECTION 5.1 INCREASED COST AND REDUCED RETURN...........................................................30
SECTION 5.2 LIMITATION ON TYPES OF LOANS................................................................31
SECTION 5.3 ILLEGALITY..................................................................................32
SECTION 5.4 TREATMENT OF AFFECTED LOANS.................................................................32
SECTION 5.5 COMPENSATION................................................................................33
SECTION 5.6 TAXES.......................................................................................33
SECTION 5.7 DISCRETION OF BANKS AS TO MANNER OF FUNDING.................................................34
ARTICLE 6 BORROWING BASE.........................................................................................35
SECTION 6.1 RESERVE REPORT; PROPOSED BORROWING BASE.....................................................35
SECTION 6.2 SCHEDULED REDETERMINATIONS OF THE BORROWING BASE; PROCEDURES AND STANDARDS..................35
SECTION 6.3 SPECIAL REDETERMINATION.....................................................................36
SECTION 6.4 BORROWING BASE DEFICIENCY...................................................................36
SECTION 6.5 INITIAL BORROWING BASE......................................................................36
ARTICLE 7 COLLATERAL AND GUARANTEES..............................................................................36
SECTION 7.1 SECURITY....................................................................................36
ARTICLE 8 CONDITIONS PRECEDENT...................................................................................37
SECTION 8.1 CONDITIONS TO INITIAL BORROWING AND PARTICIPATION IN LETTER OF CREDIT EXPOSURE..............37
SECTION 8.2 CONDITIONS TO EACH BORROWING AND EACH LETTER OF CREDIT......................................40
SECTION 8.3 POST CLOSING DELIVERIES.....................................................................41
SECTION 8.4 MATERIALITY OF CONDITIONS...................................................................41
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 9 REPRESENTATIONS AND WARRANTIES.........................................................................41
SECTION 9.1 EXISTENCE AND POWER.........................................................................41
SECTION 9.2 NECESSARY AUTHORIZATION; CONTRAVENTION......................................................41
SECTION 9.3 BINDING EFFECT..............................................................................42
SECTION 9.4 FINANCIAL INFORMATION.......................................................................42
SECTION 9.5 LITIGATION..................................................................................43
SECTION 9.6 ERISA.......................................................................................43
SECTION 9.7 TAXES AND FILING OF TAX RETURNS.............................................................44
SECTION 9.8 OWNERSHIP OF PROPERTIES GENERALLY...........................................................44
SECTION 9.9 MINERAL INTERESTS...........................................................................44
SECTION 9.10 LICENSES, PERMITS, ETC......................................................................44
SECTION 9.11 COMPLIANCE WITH LAW.........................................................................45
SECTION 9.12 FULL DISCLOSURE.............................................................................45
SECTION 9.13 ORGANIZATIONAL STRUCTURE; NATURE OF BUSINESS................................................45
SECTION 9.14 ENVIRONMENTAL MATTERS.......................................................................45
SECTION 9.15 BURDENSOME OBLIGATIONS......................................................................46
SECTION 9.16 FISCAL YEAR.................................................................................46
SECTION 9.17 NO DEFAULT..................................................................................46
SECTION 9.18 GOVERNMENT REGULATION.......................................................................46
SECTION 9.19 INSIDER.....................................................................................46
SECTION 9.20 GAS BALANCING AGREEMENTS AND ADVANCE PAYMENT CONTRACTS......................................47
SECTION 9.21 CENTRAL RESOURCES ACQUISITION DOCUMENTS.....................................................47
ARTICLE 10 AFFIRMATIVE COVENANTS.................................................................................47
SECTION 10.1 INFORMATION.................................................................................47
SECTION 10.2 BUSINESS OF BORROWER........................................................................49
SECTION 10.3 MAINTENANCE OF EXISTENCE....................................................................49
SECTION 10.4 TITLE DATA..................................................................................49
SECTION 10.5 RIGHT OF INSPECTION.........................................................................49
SECTION 10.6 MAINTENANCE OF INSURANCE....................................................................50
SECTION 10.7 PAYMENT OF TAXES AND CLAIMS.................................................................50
SECTION 10.8 COMPLIANCE WITH LAWS AND DOCUMENTS .........................................................50
SECTION 10.9 OPERATION OF PROPERTIES AND EQUIPMENT.......................................................51
SECTION 10.10 ENVIRONMENTAL LAW COMPLIANCE................................................................51
SECTION 10.11 ERISA REPORTING REQUIREMENTS................................................................51
SECTION 10.12 ADDITIONAL DOCUMENTS........................................................................52
SECTION 10.13 ENVIRONMENTAL REVIEW........................................................................53
SECTION 10.14 OIL AND GAS HEDGE TRANSACTIONS..............................................................53
ARTICLE 11 NEGATIVE COVENANTS....................................................................................53
SECTION 11.1 INCURRENCE OF DEBT..........................................................................53
SECTION 11.2 RESTRICTED PAYMENTS.........................................................................53
SECTION 11.3 NEGATIVE PLEDGE.............................................................................53
SECTION 11.4 CONSOLIDATIONS AND MERGERS..................................................................53
SECTION 11.5 ASSET DISPOSITIONS..........................................................................54
SECTION 11.6 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS; OTHER MATERIAL AGREEMENTS...........................54
SECTION 11.7 USE OF PROCEEDS.............................................................................54
SECTION 11.8 INVESTMENTS.................................................................................55
SECTION 11.9 TRANSACTIONS WITH AFFILIATES................................................................55
SECTION 11.10 ERISA.......................................................................................55
SECTION 11.11 HEDGE TRANSACTIONS..........................................................................55
SECTION 11.12 FISCAL YEAR.................................................................................56
SECTION 11.13 CHANGE IN BUSINESS..........................................................................56
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 12 FINANCIAL COVENANTS...................................................................................56
SECTION 12.1 CURRENT RATIO OF BORROWER...................................................................56
SECTION 12.2 MINIMUM CONSOLIDATED TANGIBLE NET WORTH.....................................................56
ARTICLE 13 DEFAULTS..............................................................................................56
SECTION 13.1 EVENTS OF DEFAULT...........................................................................56
ARTICLE 14 AGENTS................................................................................................58
SECTION 14.1 APPOINTMENT, POWERS, AND IMMUNITIES.........................................................58
SECTION 14.2 RELIANCE BY AGENTS..........................................................................59
SECTION 14.3 DEFAULTS....................................................................................59
SECTION 14.4 RIGHTS AS BANK..............................................................................59
SECTION 14.5 INDEMNIFICATION.............................................................................60
SECTION 14.6 NON-RELIANCE ON AGENT AND OTHER BANKS.......................................................60
SECTION 14.7 RESIGNATION OF AGENT........................................................................60
ARTICLE 15 MISCELLANEOUS.........................................................................................61
SECTION 15.1 NOTICES.....................................................................................61
SECTION 15.2 NO WAIVERS..................................................................................61
SECTION 15.3 EXPENSES; INDEMNIFICATION...................................................................61
SECTION 15.4 RIGHT OF SET-OFF; ADJUSTMENTS...............................................................62
SECTION 15.5 AMENDMENTS AND WAIVERS......................................................................63
SECTION 15.6 SURVIVAL....................................................................................63
SECTION 15.7 LIMITATION ON INTEREST......................................................................63
SECTION 15.8 INVALID PROVISIONS..........................................................................64
SECTION 15.9 WAIVER OF CONSUMER CREDIT LAWS..............................................................64
SECTION 15.10 ASSIGNMENTS AND PARTICIPATIONS..............................................................64
SECTION 15.11 TEXAS LAW...................................................................................66
SECTION 15.12 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES...............................................66
SECTION 15.13 COUNTERPARTS; EFFECTIVENESS.................................................................67
SECTION 15.14 NO THIRD PARTY BENEFICIARIES................................................................67
SECTION 15.15 COMPLETE AGREEMENT..........................................................................67
SECTION 15.16 WAIVER OF JURY TRIAL........................................................................67
</TABLE>
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EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF REQUEST FOR BORROWING
EXHIBIT C FORM OF REQUEST FOR LETTER OF CREDIT
EXHIBIT D FORM OF CONTINUATION AND CONVERSION NOTICE
EXHIBIT E FORM OF CERTIFICATE OF OWNERSHIP INTERESTS
EXHIBIT F FORM OF CERTIFICATE OF FINANCIAL OFFICER
EXHIBIT G FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULES
SCHEDULE 1 FINANCIAL INSTITUTIONS
SCHEDULE 2 EXISTING LETTERS OF CREDIT
SCHEDULE 3 LITIGATION
SCHEDULE 4 CAPITALIZATION
SCHEDULE 5 ENVIRONMENTAL DISCLOSURE AND COMPLIANCE SCHEDULE
SCHEDULE 6 CRUDE OIL HEDGE VOLUMES
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is entered
into as of the 22nd day of September, 2000, among EXCO RESOURCES, INC., a Texas
corporation ("Borrower"), BANK OF AMERICA, N.A., as Administrative Agent
("Administrative Agent"), and the financial institutions listed on Schedule 1
hereto as Banks (individually a "Bank" and collectively "Banks").
WITNESSETH:
WHEREAS, Borrower, Bank of America, N.A., successor by merger to
NationsBank, N.A., successor by merger to NationsBank of Texas, N.A., as
Administrative Agent, and Bank of America, N.A., successor by merger to
NationsBank, N.A., successor by merger to NationsBank of Texas, N.A., as the
sole Bank ("Bank of America"), are parties to that certain Credit Agreement
dated as of February 11, 1998, pursuant to which Bank of America provided
certain loans and other extensions of credit to Borrower (as amended by that
First Amendment to Credit Agreement dated September 21, 1998, that Second
Amendment to Credit Agreement dated February 11, 2000, and that letter agreement
dated February 29, 2000, the "Existing Credit Agreement"); and
WHEREAS, immediately prior to the execution of this Agreement, Bank of
America has entered into Assignment and Acceptance Agreements (collectively, the
"Assignments") with each of Bank One, Texas, N.A. ("Bank One") and Bank of
Texas, N.A. ("Bank of Texas," and together with Bank One collectively referred
to herein as the "New Banks"), pursuant to which Bank of America assigned to the
New Banks, and each of the New Banks (i) acquired from Bank of America a portion
of Bank of America's Commitment and a portion of the Revolving Loan and Letter
of Credit Exposure held by Bank of America under and as defined in the Existing
Credit Agreement and each of the other Loan Papers (as defined in the Existing
Credit Agreement), (ii) assumed and agreed to perform a portion of Bank of
America's obligations under the Existing Credit Agreement and the other Loan
Papers (as defined therein), and (iii) became a party to, and a "Bank" under,
the Existing Credit Agreement and the other Loan Papers (as defined therein);
and
WHEREAS, immediately after giving effect to the Assignments, the parties
hereto desire to amend and restate the Existing Credit Agreement in the form of
this Agreement, (a) to finance the Central Resources Acquisition (as hereinafter
defined), and (b) for other purposes permitted herein; and
WHEREAS, after giving effect to the Assignments and the amendment and
restatement of the Existing Credit Agreement pursuant to the terms hereof, the
Commitment Percentage of each Bank (including Bank of America and each of the
New Banks) hereunder will be as set forth on Schedule 1 hereto; and
WHEREAS, subject to and upon the terms and conditions herein contained,
Banks are willing to provide the credit facility described herein; and
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WHEREAS, pursuant to Article 14 of this Agreement, Bank of America, N.A.
has been appointed Administrative Agent for Banks hereunder; and
WHEREAS, pursuant to Article 14 of this Agreement, Bank One, Texas, N.A.
has been appointed Syndication Agent for Banks hereunder; and
WHEREAS, pursuant to certain separate agreements among Bank of America,
N.A., Banc of America Securities LLC ("BAS") and Borrower, BAS has been
appointed Sole Lead Arranger and Book Manager for the credit facility provided
herein.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, Administrative Agent and Banks agree as follows:
ARTICLE 1 AMENDMENT AND RESTATEMENT
Subject to the satisfaction of each condition precedent contained in
Section 8.1 hereof, the Existing Credit Agreement shall be amended and restated
as of the Closing Date in the form of this Agreement. It is understood and
agreed that the Obligations outstanding under the Existing Credit Agreement are
being modified, amended and extended pursuant hereto, but this Agreement shall
not effect a novation or satisfaction of such Obligations, all of which shall
remain outstanding as renewed, extended and modified hereby, and all of which
shall continue to be secured by all Liens securing the same, all of which are
hereby renewed, extended and affirmed.
ARTICLE 2 TERMS DEFINED
SECTION 2.1 Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by Administrative Agent to be equal to the
quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar Loan
for such Interest Period by (b) 1.00 minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.
"Administrative Agent" means Bank of America, N.A. in its capacity as
administrative agent for the Banks hereunder or any successor thereto.
"Advance Payment Contract" means any contract whereby Borrower or any
Subsidiary of Borrower either (a) receives or becomes entitled to receive
(either directly or indirectly) any payment (an "Advance Payment") to be applied
toward payment of the purchase price of Hydrocarbons produced or to be produced
from Mineral Interests owned by Borrower or any Subsidiary of Borrower and which
Advance Payment is paid or to be paid in advance of actual delivery of such
production to or for the account of the purchaser regardless of such production,
or (b) grants an
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option or right of refusal to the purchaser to take delivery of such production
in lieu of payment, and, in either of the foregoing instances, the Advance
Payment is, or is to be, applied as payment in full for such production when
sold and delivered or is, or is to be, applied as payment for a portion only of
the purchase price thereof or of a percentage or share of such production;
provided that inclusion of the standard "take or pay" provision in any gas sales
or purchase contract or any other similar contract shall not, in and of itself,
constitute such contract as an Advance Payment Contract for the purposes hereof.
"Affiliate" means, as to any Person, any Subsidiary of such Person, or any
other Person which, directly or indirectly, controls, is controlled by, or is
under common control with, such Person and, with respect to Borrower or any of
its Subsidiaries, means any director or executive officer of Borrower or any of
its Subsidiaries and any Person who holds five percent (5%) or more of the
voting stock of Borrower or any of its Subsidiaries. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, or
by contract or otherwise.
"Agent" means any of Administrative Agent, Syndication Agent, Sole Lead
Arranger or Book Manager, individually, and "Agents" means Administrative Agent,
Syndication Agent, Sole Lead Arranger and Book Manager, collectively.
"Agreement" means this Amended and Restated Agreement as the same may
hereafter be modified, amended or supplemented from time to time.
"Applicable Environmental Law" means any Law, statute, ordinance, rule,
regulation, order or determination of any Tribunal or any board of fire
underwriters (or other body exercising similar functions), affecting any real or
personal property owned, operated or leased by Borrower or any of its
Subsidiaries or any other operation of Borrower or any of its Subsidiaries in
any way pertaining to health, safety or the environment, including, without
limitation, all applicable zoning ordinances and building codes, flood disaster
Laws and health, safety and environmental Laws and regulations, and further
including, without limitation, (a) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (as amended from time to time, herein referred
to as "CERCLA"), (b) the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Recovery Act of
1976, as amended by the Solid Waste Disposal Act of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended from time to time, herein referred to
as "RCRA"), (c) the Safe Drinking Water Act, as amended, (d) the Toxic
Substances Control Act, as amended, (e) the Clean Air Act, as amended, (f) the
Occupational Safety and Health Act of 1970, as amended, (g) the Laws, rules and
regulations of any state having jurisdiction over any real or personal property
owned, operated or leased by Borrower or any of its Subsidiaries or any other
operation of Borrower or any of its Subsidiaries which relates to health, safety
or the environment, as each may be amended from time to time, and (h) any
federal, state or municipal Laws, ordinances or regulations which may now or
hereafter require removal of asbestos
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or other hazardous wastes or impose any liability related to asbestos or other
hazardous wastes. The terms "hazardous substance", "petroleum", "release" and
"threatened release" have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") have the meanings specified in RCRA;
provided, however, in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment with respect to all
provisions of this Agreement; and provided further that, to the extent the Laws
of the state in which any real or personal property owned, operated or leased by
Borrower or any of its Subsidiaries is located establish a meaning for
"hazardous substance", "petroleum", "release", "solid waste" or "disposal" which
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply in so far as such broader meaning is applicable to the real or
personal property owned, operated or leased by Borrower or any of its
Subsidiaries and located in such state.
"Applicable Lending Office" means, for each Bank and for each Type of Loan,
the Domestic Lending Office or Eurodollar Lending Office of such Bank (or of an
Affiliate of such Bank) designated for such Type of Loan set forth on Schedule 1
hereto or such other office of such Bank (or an Affiliate of such Bank) as such
Bank may from time to time specify to Administrative Agent and Borrower by
written notice in accordance with the terms hereof as the office by which its
Loans of such Type are to be made and maintained.
"Applicable Margin" means, on any date, with respect to each Eurodollar
Loan, an amount determined by reference to the ratio of Outstanding Credit to
the Borrowing Base on such date in accordance with the table below; provided,
that, the Applicable Margin shall not be less than 1.50% at any time that the
principal balance of the Revolving Loan is less than $5,000,000:
<TABLE>
<CAPTION>
Ratio of Outstanding Applicable Margin for
Credit to Borrowing Base Eurodollar Loans
------------------------ ---------------------
<S> <C>
< .50 to 1 1.00%
> .50 to 1 < .70 to 1 1.25%
= =
> .70 to 1 < .90 to 1 1.50%
=
> .90 to 1 1.75%
</TABLE>
"Approved Petroleum Engineer" means Lee Keeling and Associates, Inc. or any
other reputable firm of independent petroleum engineers as shall be selected by
Borrower and approved by Required Banks, such approval not to be unreasonably
withheld.
"Assignment and Acceptance Agreement" has the meaning given such term in
Section 15.10(a).
"Assignments" has the meaning assigned to such term in the recitals hereto.
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"Authorized Officer" means, as to any Person, its Chief Executive Officer,
its President, its Chief Financial Officer, any of its Vice Presidents, its
Treasurer or its corporate Secretary.
"Availability" means, as of any date, the remainder of (a) the Borrowing
Base in effect on such date, minus (b) the Outstanding Credit on such date.
"Bank" means any financial institution reflected on Schedule 1 hereto as
having a Commitment and its successors and permitted Eligible Assignees, and
"Banks" shall mean all Banks.
"Bank of America" means Bank of America, N.A., a national banking
association, in its capacity as a Bank.
"Bank of Texas" means Bank of Texas, N.A., a national banking association.
"Bank One" means Bank One, Texas, N.A., a national banking association.
"BAS" means Banc of America Securities LLC.
"Base Rate" means, the floating rate of interest established from time to
time by Administrative Agent as its "prime rate" of interest, which rate may not
be the lowest rate of interest charged by Administrative Agent, each change in
the Base Rate to become effective without notice to Borrower on the effective
date of each such change.
"Base Rate Loan" means the portion of the principal of the Revolving Loan
bearing interest with reference to the Base Rate.
"Book Manager" means BAS in its capacity as book manager for the credit
facility hereunder or any successor thereto.
"Borrower" means EXCO Resources, Inc., a Texas corporation.
"Borrowing" means any disbursement to Borrower under, or to satisfy the
obligations of Borrower or any of its Subsidiaries under, any of the Loan
Papers. Any Borrowing of the Base Rate Loan is referred to herein as a "Base
Rate Borrowing," and any Borrowing of Eurodollar Loans is referred to herein as
a "Eurodollar Borrowing."
"Borrowing Base" means the loan value attributable to certain of Borrower's
Mineral Interests as determined in accordance with Article 6 hereof.
"Borrowing Base Deficiency" means, as of any date, the amount, if any, by
which the Outstanding Credit on such date exceeds the Borrowing Base in effect
on such date; provided, that, for purposes of determining the existence and
amount of any Borrowing Base Deficiency, Letter of Credit Exposure will not be
deemed to be outstanding to the extent it is secured by cash in the manner
contemplated by Section 3.1(b).
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"Borrowing Base Properties" means all Mineral Interests evaluated by Banks
for purposes of establishing the Borrowing Base. The Borrowing Base Properties
on the date hereof constitute all of the Mineral Interests described in the
Existing Reserve Report and the Central Resources Reserve Report.
"Borrowing Date" means the Eurodollar Business Day or the Domestic Business
Day, as the case may be, upon which the proceeds of any Borrowing are made
available to Borrower or to satisfy any obligation of Borrower or any of its
Subsidiaries.
"Central Resources Acquisition" means the proposed purchase by Borrower of
the Central Resources Properties pursuant to the Central Resources Acquisition
Agreement.
"Central Resources Acquisition Agreement" means that certain Purchase and
Sale Agreement dated August 31, 2000, by and between Borrower, as Buyer, and
Central Resources, Inc., as Seller.
"Central Resources Acquisition Documents" means the Central Resources
Acquisition Agreement and all agreements, assignments, deeds, conveyances,
certificates and other documents and instruments now or hereafter executed and
delivered by or between Borrower and Central Resources, Inc., pursuant to the
Central Resources Acquisition Agreement or in connection with the Central
Resources Acquisition.
"Central Resources Properties" means the Mineral Interests and other
properties to be acquired by Borrower pursuant to the Central Resources
Acquisition Agreement which are defined therein as the "Properties".
"Central Resources Reserve Report" means, an engineering and economic
analysis of the Central Resources Properties prepared as of August 21, 2000 by
Borrower's in-house engineering staff.
"Closing Date" means September 22, 2000.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, with respect to any Bank, the commitment of such Bank
to lend its Commitment Percentage of the Total Commitment to Borrower pursuant
to Section 3.1 hereof. The amount of each Bank's Commitment is initially the
amount set forth opposite such Bank's name on Schedule 1 hereto, as such
Commitment may be terminated or reduced from time to time in accordance with the
provisions hereof; provided, that, after giving effect to any Assignment and
Acceptance Agreement, the Commitment of each Bank shall be the amount set forth
in the Register maintained by Administrative Agent pursuant to Section 15.10(b).
"Commitment Percentage" means, with respect to each Bank, initially, the
Commitment Percentage for such Bank set forth on Schedule 1 hereto; provided,
that, after giving effect to any
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Assignment and Acceptance Agreement, the Commitment Percentage of each Bank
shall be the amount set forth in the Register maintained by Administrative Agent
pursuant to Section 15.10(b).
"Consolidated Current Assets" means, for any Person at any time, the
current assets of such Person and its Consolidated Subsidiaries at such time.
"Consolidated Current Liabilities" means, for any Person at any time, the
current liabilities of such Person and its Consolidated Subsidiaries at such
time.
"Consolidated Net Income" means, for any Person for any period, the net
income (or loss) of such Person and its Consolidated Subsidiaries for such
period.
"Consolidated Tangible Net Worth" means, with respect to any Person at any
time, (a) the consolidated shareholder's equity of such Person at such time,
less (b) the consolidated Intangible Assets of such Person at such time. For
purposes of this definition, "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated shareholder's equity) of all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, organization
expenses and other intangible items.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements.
"Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant to Section 3.3(c) hereof of a Eurodollar Loan from one Interest Period
to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 3.3(c) hereof of one Type of Loan into another Type of Loan.
"Debt" means, for any Person at any time, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all other indebtedness (including capitalized lease obligations, other than
usual and customary oil and gas leases) of such Person on which interest charges
are customarily paid or accrued, (d) all Guarantees by such Person, (e) the
unfunded or unreimbursed portion of all letters of credit issued for the account
of such Person, (f) any amount owed by such Person representing the deferred
purchase price of property or services other than accounts payable incurred in
the ordinary course of business and in accordance with customary trade terms and
which have not been outstanding for more than ninety (90) days past the invoice
date, (g) all obligations of such Person secured by a Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person, and (h) all liability of such Person as a general partner
of a partnership for obligations of such partnership of the nature described in
(a) through (g) preceding.
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"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice, lapse of time or both would, unless
cured or waived, become an Event of Default.
"Distribution" by any Person, means (a) with respect to any stock issued by
such Person or any partnership, joint venture, limited liability company,
membership or other interest of such Person, the retirement, redemption,
purchase, or other acquisition for value of any such stock or partnership, joint
venture, limited liability company, membership or other interest, (b) the
declaration or payment of any dividend or other distribution on or with respect
to any stock, partnership, joint venture, limited liability company, membership
or other interest of any Person, and (c) any other payment by such Person with
respect to such stock, partnership, joint venture, limited liability company,
membership or other interest of such Person.
"Dollars" means the lawful currency of the United States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which national banks in Dallas, Texas, are authorized by Law to close.
"Domestic Lending Office" means, as to each Bank, its office located at its
address identified on Schedule 1 hereto as its Domestic Lending Office or such
other office as such Bank may hereafter designate as its Domestic Lending Office
by notice to Borrower and Administrative Agent.
"Eligible Assignee" means (i) a Bank, (ii) an Affiliate of a Bank, and
(iii) any other Person approved by Administrative Agent and, unless an Event of
Default has occurred and is continuing at the time any assignment is effected in
accordance with Section 15.10, such approval not to be unreasonably withheld or
delayed by Borrower and such approval to be deemed given by Borrower if no
objection is received by the assigning Bank and Administrative Agent from
Borrower within two (2) Domestic Business Days after notice of such proposed
assignment has been provided by the assigning Bank to Borrower; provided,
however, that neither Borrower nor an Affiliate of Borrower shall qualify as an
Eligible Assignee.
"Environmental Complaint" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other communication from any federal, state or municipal authority or any
other party against Borrower or any of its Subsidiaries involving (a) a
Hazardous Discharge from, onto or about any real property owned, leased or
operated at any time by Borrower or any of its Subsidiaries, (b) a Hazardous
Discharge caused, in whole or in part, by Borrower or any of its Subsidiaries or
by any Person acting on behalf of or at the instruction of Borrower or any of
its Subsidiaries, or (c) any violation of any Applicable Environmental Law by
Borrower or any of its Subsidiaries.
"Environmental Liability" means any liability, loss, fine, penalty, charge,
Lien, damage, cost, or expense of any kind that results directly or indirectly,
in whole or in part (a) from the violation of any Applicable Environmental Law,
(b) from the release or threatened release of any Hazardous Substance, (c) from
removal, remediation, or other actions in response to the release or threatened
release of any Hazardous Substance, (d) from actual or threatened damages to
natural resources,
8
<PAGE> 14
(e) from the imposition of injunctive relief or other orders, (f) from personal
injury, death, or property damage which occurs as a result of Borrower's or any
of its Subsidiaries' use, storage, handling, or the release or threatened
release of a Hazardous Substance, or (g) from any environmental investigation
performed at, on, or for any real property owned by Borrower or any of its
Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder as from time to time
in effect.
"ERISA Affiliate" means any Person that for purposes of Title IV of ERISA
is under common control with Borrower as determined under Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations
and rulings issued thereunder.
"ERISA Event" means, with respect to Borrower and any ERISA Affiliate, (a)
a "reportable event" as defined in Section 4043 of ERISA (other than a
reportable event not subject to the provision for thirty (30) days notice to the
PBGC under regulations issued under Section 4043 of ERISA), (b) the withdrawal
of Borrower or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan under Section 4041(c) of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC, (e) the
failure to make required contributions which could result in the imposition of a
Lien under Section 412 of the Internal Revenue Code of 1986, as amended or
Section 302 of ERISA, or (f) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or the
imposition of any liability under Title IV of ERISA other than PBGC premiums due
but not delinquent under Section 4007 of ERISA.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in the applicable eurodollar interbank market.
"Eurodollar Lending Office" means, as to each Bank, its office, branch or
Affiliate located at its address identified on Schedule 1 hereto as its
Eurodollar Lending Office or such other office, branch or Affiliate of such Bank
as it may hereafter designate as its Eurodollar Lending Office by notice to
Borrower and Administrative Agent.
"Eurodollar Loans" means Loans that bear interest at rates based upon the
Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two (2) Eurodollar Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period. If for any
reason such rate is not available, the term "Eurodollar Rate" shall mean, for
any Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
9
<PAGE> 15
on Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Events of Default" has the meaning set forth in Section 13.1.
"Exhibit" refers to an exhibit attached to this Agreement and incorporated
herein by reference, unless specifically provided otherwise.
"Existing Credit Agreement" has the meaning assigned to such term in the
recitals hereto.
"Existing Reserve Report" means the most recent engineering analysis of
Borrower's Mineral Interests owned on the date hereof (excluding the Central
Resources Properties) and delivered to each Bank pursuant to Section 5.1 of the
Existing Credit Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided, that, (a) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (b) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate charged to Administrative Agent (in its individual
capacity) on such day on such transactions as determined by Administrative
Agent.
"Financial Officer" of any Person means its Chief Financial Officer;
provided, that if no Person serves in such capacity, "Financial Officer" shall
mean the highest ranking executive officer of such Person with responsibility
for accounting, financial reporting, cash management and similar functions.
"Fiscal Quarter" means the three (3) month periods ending on March 31, June
30, September 30 and December 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending December 31.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by the Financial
Accounting Standards Board or through other appropriate boards or committees
thereof and which are consistently applied for all periods after the date hereof
so as to properly reflect the financial condition, and the results of operations
and changes in financial position, of a Person and its Consolidated
Subsidiaries, except that any accounting principle or practice required to be
changed by the said Accounting Principles Board or Financial
10
<PAGE> 16
Accounting Standards Board (or other appropriate board or committee of the said
Boards) in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Gas Balancing Agreement" means any agreement or arrangement whereby
Borrower or any of its Subsidiaries, or any other party having an interest in
any Hydrocarbons to be produced from Mineral Interests in which Borrower or any
of its Subsidiaries owns an interest, has a right to take more than its
proportionate share of production therefrom.
"Governmental Authority" means any court or governmental department,
commission, board, bureau, agency, or instrumentality of any nation or of any
province, state, commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted or existing.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions, by "comfort letter"
or other similar undertaking of support or otherwise), or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of any Hazardous Substance from or onto any real property
owned, leased or operated at any time by Borrower or any of its Subsidiaries or
any real property owned, leased or operated by any other party.
"Hazardous Substance" means any pollutant, toxic substance, hazardous
waste, compound, element or chemical that is defined as hazardous, toxic,
noxious, dangerous or infectious pursuant to any Applicable Environmental Law or
which is otherwise regulated by any Applicable Environmental Law or is required
to be investigated and/or remediated by or pursuant to any Applicable
Environmental Law.
"Hedge Transaction" means any commodity, interest rate, currency or other
swap, option, collar, futures contract or other contract pursuant to which a
Person hedges risks related to commodity prices, interest rates, currency
exchange rates, securities prices or financial market conditions. Hedge
Transactions expressly includes Oil and Gas Hedge Transactions.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasolines, natural
gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons
produced or to be produced in conjunction therewith, and all products,
by-products and all other substances derived therefrom or the processing
thereof, and all other minerals and substances, including, but not limited to,
sulphur, lignite, coal,
11
<PAGE> 17
uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium, and any
and all other minerals, ores, or substances of value, and the products and
proceeds therefrom, including, without limitation, all gas resulting from the
in-situ combustion of coal or lignite.
"Initial Borrowing Base" means a Borrowing Base in the amount of
$45,000,000, which shall be in effect during the period commencing on the
Closing Date and continuing until the first Redetermination after the Closing
Date.
"Interest Period" means, with respect to each Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending one (1), two (2),
three (3), and, if available to all Banks, six (6) months thereafter, as
Borrower may elect in the applicable Request for Borrowing; provided that:
(i) any Interest Period which would otherwise end on a day which is
not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end
on the next preceding Eurodollar Business Day;
(ii) any Interest Period which begins on the last Eurodollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iii) below, end on the last
Eurodollar Business Day of a calendar month;
(iii) if any Interest Period includes a date on which any payment of
principal of any Eurodollar Loan is required to be made hereunder, but
does not end on such date, then (A) the principal amount of each
Eurodollar Loan required to be repaid on such date shall have an
Interest Period ending on such date, and (B) the remainder of each
such Eurodollar Loan shall have an Interest Period determined as set
forth above; and
(iv) no Interest Period applicable to a Eurodollar Loan shall extend
past the Termination Date.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase of the
stock or other securities of, or interests in, any other Person; provided, that
"Investment" shall not include current customer and trade accounts which are
payable in accordance with customary trade terms.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality or Governmental
Authority.
"Letters of Credit" means letters of credit issued for the account of
Borrower pursuant to Section 3.1(b).
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<PAGE> 18
"Letter of Credit Exposure" of any Bank means such Bank's aggregate
participation in the unfunded portion and the funded but unreimbursed portion of
Letters of Credit outstanding at any time.
"Letter of Credit Fee" means, with respect to any Letter of Credit issued
hereunder, a fee in an amount equal to a percentage of the stated amount of such
Letter of Credit (calculated on a per annum basis based on the stated term of
such Letter of Credit) determined by reference to the ratio of the Outstanding
Credit to the Borrowing Base in effect on the date such Letter of Credit is
issued in accordance with the table below:
<TABLE>
<CAPTION>
Ratio of Outstanding Credit
to Borrowing Base Per Annum Letter of Credit Fee
-------------------------------- ------------------------------
<S> <C>
< .50 to 1 1.00%
> .50 to 1 < .70 to 1 1.25%
= =
> .70 to 1 < .90 to 1 1.50%
=
> .90 to 1 1.75%
</TABLE>
"Letter of Credit Fronting Fee" means, with respect to any Letter of Credit
issued hereunder, a fee equal to one hundred twenty five one thousandths of one
percent (.125%) per annum of the stated amount of such Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, financing statement, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, Borrower and its
Subsidiaries shall be deemed to own subject to a Lien any asset which is
acquired or held subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan Papers" means this Agreement, the Notes, all Mortgages now or at any
time hereafter delivered pursuant to Section 7.1, and all other certificates,
documents or instruments delivered in connection with this Agreement, as the
foregoing may be amended from time to time.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Adverse Change" means any circumstance or event that has had or
would reasonably be expected to have (a) a material and adverse effect on the
financial condition, business operations, prospects, properties or assets of
Borrower or any of its Subsidiaries, (b) an adverse effect on (i) the validity
and enforceability of any Loan Paper, or (ii) the perfection or priority of any
13
<PAGE> 19
Lien purported to be created thereby, or (c) a material adverse effect on the
right or ability of Borrower or any of its Subsidiaries to fully, completely and
timely pay and perform its obligations under the Loan Papers.
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by which
such Person is directly or indirectly bound, or to which any assets of such
Person may be subject, which involves the payment of $250,000 or more in any
Fiscal Year or goods or services with a value in any Fiscal Year of $250,000 or
more and is not cancelable by such Person upon notice of thirty (30) days or
less without liability for further payment other than nominal penalty.
"Material Gas Imbalance" means, with respect to all Gas Balancing
Agreements to which Borrower or any of its Subsidiaries is a party or by which
any Mineral Interest owned by Borrower or any of its Subsidiaries is bound, a
net gas imbalance to Borrower or any of its Subsidiaries in excess of $250,000.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if the
context so permits or requires, an amount calculated at such rate) of interest
which, at the time in question would not cause the interest charged on the
portion of the Loans owed to such Bank at such time to exceed the maximum amount
which such Bank would be allowed to contract for, charge, take, reserve, or
receive under applicable Laws after taking into account, to the extent required
by applicable Laws, any and all relevant payments or charges under the Loan
Papers. To the extent the Laws of the State of Texas are applicable for purposes
of determining the "Maximum Lawful Rate," such term shall mean the "interest
rate ceiling" from time to time in effect under Chapter 1D of the Texas Credit
Title, Revised Civil Statutes of Texas, 1925, as amended, substituted for or
restated, or, if permitted by applicable Law and effective upon the giving of
the notices required by such Chapter 1D (or effective upon any other date
otherwise specified by applicable Law), the "quarterly ceiling" or "annualized
ceiling" from time to time in effect under such Chapter 1D, whichever
Administrative Agent (with the approval of Required Banks) shall elect to
substitute for the "interest rate ceiling," and vice versa, each such
substitution to have the effect provided in such Chapter 1D, and Administrative
Agent (with the approval of Required Banks) shall be entitled to make such
election from time to time and one or more times and, without notice to
Borrower, to leave any such substitute rate in effect for subsequent periods in
accordance with such Chapter 1D.
"Mineral Interests" means rights, estates, titles, and interests in and to
oil and gas leases and any oil and gas interests, royalty and overriding royalty
interest, production payment, net profits interests, oil and gas fee interests,
and other rights therein, including, without limitation, any reversionary or
carried interests relating to the foregoing, together with rights, titles, and
interests created by or arising under the terms of any unitization,
communization, and pooling agreements or arrangements, and all properties,
rights and interests covered thereby, whether arising by contract, by order, or
by operation of Laws, which now or hereafter include all or any part of the
foregoing.
"Monthly Date" means the last day of each calendar month.
14
<PAGE> 20
"Mortgages" means all mortgages, deeds of trusts, security agreements,
pledge agreements, collateral mortgages, collateral chattel mortgages, financing
statements and other documents, instruments and agreements evidencing, creating,
perfecting or otherwise establishing the Liens required by Section 7.1 hereof.
All Mortgages shall be in form and substance reasonably satisfactory to
Administrative Agent.
"Net Revenues" means, for Borrower and its Consolidated Subsidiaries for a
month (a) the gross cash receipts of Borrower and its Consolidated Subsidiaries
for such month from whatever source derived, minus (b) the sum of each of the
following for such month (i) severance taxes payable in cash with respect to
Hydrocarbons produced from Borrower's and its Subsidiaries' Mineral Interests
during such month, (ii) lease operating expenses paid by Borrower and its
Subsidiaries in cash during such month, and (iii) ad valorem tax expense accrual
attributable to Borrower and its Subsidiaries' Mineral Interests for such month.
"New Banks" means Bank One and Bank of Texas.
"Note" means a promissory note of Borrower payable to the order of a Bank,
in substantially the form of Exhibit A hereto, in the amount of such Bank's
Commitment, evidencing the obligation of Borrower to repay to such Bank the
Loans made by such Bank, together with all modifications, extensions, renewals
and rearrangement thereof, and "Notes" means all of such Notes collectively.
"Obligations" means all present and future indebtedness, obligations and
liabilities, and all renewals and extensions thereof, or any part thereof, of
Borrower to Administrative Agent or to any Bank or any Affiliate of any Bank
arising pursuant to the Loan Papers or pursuant to any Hedge Transaction entered
into with any Bank or any Affiliate of any Bank, and all interest accrued
thereon and costs, expenses, and attorneys' fees incurred in the enforcement or
collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several or joint and several.
"Oil & Gas Hedge Transaction" means a Hedge Transaction pursuant to which
any Person hedges the price to be received by it for future production of
Hydrocarbons.
"Outstanding Credit" means, on any date, the sum of (a) aggregate
outstanding principal balance of the Revolving Loan on such date, including the
amount of any Borrowing to be made on such date, and (b) the aggregate
outstanding Letter of Credit Exposure on such date, including Letter of Credit
Exposure attributable to Letters of Credit to be issued on such date.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Pecos-Gomez Credit Facility" means the credit facility in the maximum
amount of $25,000,000 from Bank of America, N.A. to Pecos-Gomez, L.P. (f/k/a
Humphrey-Hill, L.P.) governed by that certain Credit Agreement dated March 24,
2000 by and among Bank of America,
15
<PAGE> 21
N.A. as Administrative Agent, Bank of America, N.A. as the sole Bank and
Pecos-Gomez, L.P. (f/k/a Humphrey-Hill, L.P.) as Borrower.
"Permitted Encumbrances" means with respect to any asset:
(a) Liens (if any) securing the Obligations in favor of Banks;
(b) Minor defects in title which do not secure the payment of money
and otherwise have no material adverse effect on the value or the operation
of the subject property, and for the purposes of this Agreement, a minor
defect in title shall include, but not be limited to, easements,
rights-of-way, servitudes, permits, surface leases and other similar rights
in respect of surface operations, and easements for pipelines, streets,
alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
properties of Borrower or any of its Subsidiaries that are customarily
granted in the oil and gas industry;
(c) Inchoate statutory or operators' liens securing obligations for
labor, services, materials and supplies furnished to Mineral Interests in
the ordinary course of business which are not delinquent (except to the
extent permitted by Section 10.7);
(d) Mechanic's, materialmen's, warehouseman's, journeyman's and
carrier's liens and other similar liens arising by operation of Law in the
ordinary course of business which are not delinquent (except to the extent
permitted by Section 10.7);
(e) Liens for Taxes or assessments not yet due or not yet delinquent,
or, if delinquent, that are being contested in good faith in the normal
course of business by appropriate action, as permitted by Section 10.7;
(f) Lease burdens payable to third parties encumbering Mineral
Interests at the time such Mineral Interests are acquired by Borrower or
its Subsidiaries and which are deducted in the calculation of discounted
present value in the Reserve Report including, without limitation, any
royalty, overriding royalty, net profits interest, production payment,
carried interest or reversionary working interest;
(g) Liens encumbering the partnership interests in and assets of
Pecos-Gomez, L.P. securing the Pecos-Gomez Credit Facility; and
(h) Liens securing Borrower's obligations under Oil and Gas Hedge
Transactions consisting of deposits or pledges of cash or Permitted
Investments of the types described in clauses (a) through (c) of the
definition of Permitted Investments or the posting of Letters of Credit;
provided, that the aggregate amount of such cash, Permitted Investments and
Letters of Credit securing Oil and Gas Hedge Transactions shall not exceed
$2,500,000 at any time.
"Permitted Investments" means (a) readily marketable direct obligations of
the United States of America (or investments in mutual funds or similar funds
which invest solely in such obligations), (b) fully insured time deposits and
certificates of deposit with maturities of one year or less of any
16
<PAGE> 22
commercial bank operating in the United States having capital and surplus in
excess of $500,000,000, (c) commercial paper of a domestic issuer if at the time
of purchase such paper is rated in one of the two highest ratings categories of
Standard and Poor's Corporation or Moody's Investors Service, and (d) other
Investments; provided that, the aggregate amount of all other Investments made
pursuant to this clause (d) outstanding at any time shall not exceed $2,500,000
(measured at cost on a cumulative basis).
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a Government Authority.
"Plan" means an employee benefit plan within the meaning of Section 3(3) of
ERISA, and any other similar plan, policy or arrangement, including an
employment contract, whether formal or informal and whether legally binding or
not, under which Borrower or an ERISA Affiliate of Borrower has any current or
future obligation or liability or under which any present or former employee of
Borrower or an ERISA Affiliate of Borrower, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits
resulting from the present or former employee's employment relationship with
Borrower or an ERISA Affiliate of Borrower.
"Proved Mineral Interests" means, collectively, Proved Producing Mineral
Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped Mineral
Interests.
"Proved Nonproducing Mineral Interests" means all Mineral Interests which
constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" means all Mineral Interests which
constitute proved developed producing reserves.
"Proved Undeveloped Mineral Interests" means all Mineral Interests which
constitute proved undeveloped reserves.
"Quarterly Date" means the last day of each March, June, September and
December.
"Recognized Value" means, with respect to oil and gas properties, the
pre-tax value of such properties determined in accordance with Financial
Accounting Standards Board Statement 69, generally known as the "standardized
measure of discounted cash flow".
"Redetermination" means (i) any Scheduled Redetermination, or (ii) any
Special Redetermination.
"Redetermination Date" means (a) in the case of each Scheduled
Redetermination, each April 30 and October 31, and (b) with respect to any
Special Redetermination, the first day of the first month which is not less than
twenty (20) Domestic Business Days following the date of a request for a Special
Redetermination.
17
<PAGE> 23
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, 12 C.F.R. Part 221, as in effect from time to time.
"Request for Borrowing" has the meaning set forth in Section 3.1(d).
"Required Banks" means Banks holding at least sixty-six and sixty-seven one
hundredths of one percent (66.67%) of the Total Commitment.
"Required Consolidated Tangible Net Worth" means, initially, $35,000,000;
provided, that, the Required Consolidated Tangible Net Worth shall (a) increase
(but not decrease) on each Quarterly Date after June 30, 2000 by an amount equal
to fifty percent (50%) of Borrower's Consolidated Net Income for the Fiscal
Quarter then ended, and (b) increase on the date of any issuance by Borrower of
its equity securities after June 30, 2000, by an amount equal to seventy-five
percent (75%) of the net proceeds received by Borrower from the issuance of such
securities.
"Reserve Report" means an unsuperseded engineering analysis of the Mineral
Interests owned by Borrower, in form and substance reasonably acceptable to
Required Banks, prepared in accordance with customary and prudent practices in
the petroleum engineering industry and Financial Accounting Standards Board
Statement 69. Each Reserve Report required to be delivered by March 31 of each
year pursuant to Section 6.1 shall be prepared by the Approved Petroleum
Engineer. Each other Reserve Report shall be prepared by Borrower's in-house
engineering staff. Notwithstanding the foregoing, in connection with any Special
Redetermination requested by Borrower, the Reserve Report shall be in form and
scope mutually acceptable to Borrower and Required Banks. Until superseded, each
of (i) the Existing Reserve Report, and (ii) the Central Resources Reserve
Report shall be considered a Reserve Report.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
"Restricted Payment" means, with respect to any Person, (a) any
Distribution by such Person, or (b) the retirement, redemption or prepayment
prior to scheduled maturity by such Person or any Affiliates of such Person of
any Debt of such Person other than (i) the Obligations, and (ii) the
"Obligations" under and as defined in the Credit Agreement evidencing the
Pecos-Gomez Credit Facility.
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<PAGE> 24
"Revolving Loan" means the revolving credit loan in an aggregate amount
outstanding at any time not to exceed the amount of the Total Commitment then in
effect less the amount of the Letter of Credit Exposure then outstanding to be
made by Banks to Borrower in accordance with Section 3.1 hereof. The Revolving
Loan may be comprised of the Base Rate Loan and one or more Eurodollar Loans as
Borrower may select in a Request for Borrowing or a Notice of Continuation or
Conversion.
"Schedule" means a "schedule" attached to this Agreement and incorporated
herein by reference, unless specifically indicated otherwise.
"Scheduled Redetermination" means any Redetermination of the Borrowing Base
pursuant to Section 6.2.
"Section" refers to a "section" or "subsection" of this Agreement unless
specifically indicated otherwise.
"Sole Lead Arranger" means BAS in its capacity as the sole lead arranger
for the credit facility provided hereunder and any successor thereto.
"Special Redetermination" means any Redetermination of the Borrowing Base
pursuant to Section 6.3.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Syndication Agent" means Bank One, Texas, N.A. in its capacity as
Syndication Agent for the Banks hereunder or any successor thereto.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, capital transaction
taxes, foreign exchange taxes or other charges, or other charges of any nature
whatsoever, from time to time or at any time imposed by Law or any Governmental
Authority. "Tax" means any one of the foregoing.
"Termination Date" means September 22, 2003.
"Total Commitment" means the Commitments of all Banks in an initial
aggregate amount of $150,000,000 as such amount shall be reduced from time to
time pursuant to Section 3.6.
"Tribunal" means any state, commonwealth, federal, foreign, territorial or
other court or governmental body, subdivision, agency, department, commission,
board, bureau or instrumentality of a governmental body.
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<PAGE> 25
"Type" shall mean any type of Loan (i.e., the Base Rate Loan or Eurodollar
Loan).
"Unrestricted Oil and Gas Hedge Transactions" means an Oil and Gas Hedge
Transaction consisting of put options, price floors or similar arrangements
under which Borrower makes an up front payment in exchange for protection
against falling prices for Hydrocarbons and under which neither Borrower nor any
of its Subsidiaries has any obligation or liability (including contingent
liability) for future payments or performance.
"Unused Commitment Fee Percentage" means, for any day, the percentage
determined pursuant to the table below based on the ratio of (a) Outstanding
Credit on such day, to (b) the Borrowing Base in effect on such day:
<TABLE>
<CAPTION>
Ratio of Outstanding Unused Commitment
Credit to Borrowing Base Fee Percentage
------------------------ -----------------
<S> <C>
< .50 to 1 .300%
> .50 to 1 < .70 to 1 .350%
= =
> .70 to 1 < .90 to 1 .375%
=
> .90 to 1 .425%
</TABLE>
SECTION 2.2 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP, applied on a
basis consistent with the most recent audited consolidated financial statements
of Borrower delivered to Banks prior to the date hereof except for changes
concurred in by Borrower's independent certified public accountants and which
are disclosed to Administrative Agent on the next date on which financial
statements are required to be delivered to Banks pursuant to Section 10.1.
SECTION 2.3 Petroleum Terms. As used herein, the terms "proved reserves,"
"proved developed reserves," "proved developed producing reserves," "proved
developed nonproducing reserves," and "proved undeveloped reserves" have the
meaning given such terms from time to time and at the time in question by the
Society of Petroleum Engineers of the American Institute of Mining Engineers.
SECTION 2.4 Money. Unless expressly stipulated otherwise, all references
herein to "dollars," "money," "funds," "payments," "prepayments" or other
similar financial or monetary terms, are references to currency of the United
States of America.
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<PAGE> 26
ARTICLE 3 THE CREDIT
SECTION 3.1 Commitments.
(a) Each Bank severally agrees, subject to Sections 3.1(c), 8.1 and 8.2
and the other terms and conditions set forth in this Agreement, to lend to
Borrower from time to time prior to the Termination Date amounts not to exceed
in the aggregate at any one time outstanding, the amount of such Bank's
Commitment reduced by an amount equal to such Bank's Letter of Credit Exposure.
Each Borrowing shall be in an aggregate principal amount of $500,000 or any
larger integral multiple of $100,000 (except that any Base Rate Borrowing may be
in an amount equal to the Availability at such time), and (ii) shall be made
from Banks ratably in accordance with their respective Commitment Percentages.
Subject to the foregoing limitations and the other provisions of this Agreement,
prior to the Termination Date Borrower may borrow under this Section 3.1(a),
repay amounts borrowed and request new Borrowings to be made under this Section
3.1.
(b) Administrative Agent will, from time to time prior to the
Termination Date, upon request by Borrower issue Letters of Credit for the
account of Borrower, so long as (i) the sum of (A) the total of Letter of Credit
Exposure then existing, and (B) the amount of the requested Letter of Credit
does not exceed $5,000,000, and (ii) Borrower would be entitled to a Borrowing
under Sections 3.1(a) and 3.1(c) in the amount of the requested Letter of
Credit. Not less than three (3) Domestic Business Days prior to the requested
date of issuance of any such Letter of Credit, Borrower shall execute and
deliver to Administrative Agent, Administrative Agent's customary letter of
credit application. Each Letter of Credit shall be in the minimum amount of
$10,000 and shall be in form and substance acceptable to Administrative Agent.
No Letter of Credit shall have an expiration date later than the earlier of (i)
the Termination Date, or (ii) one (1) year from the date of issuance. Upon the
date of issuance of a Letter of Credit, Administrative Agent shall be deemed to
have sold to each other Bank, and each other Bank shall be deemed to have
unconditionally and irrevocably purchased from Administrative Agent, a
non-recourse participation in the related Letter of Credit and Letter of Credit
Exposure equal to such Bank's Commitment Percentage of such Letter of Credit and
Letter of Credit Exposure. Upon request of any Bank, but not less often than
quarterly, Administrative Agent shall provide notice to each Bank by telephone,
teletransmission or telex setting forth each Letter of Credit issued and
outstanding pursuant to the terms hereof and specifying the beneficiary and
expiration date of each such Letter of Credit, each Bank's percentage of each
such Letter of Credit and the actual dollar amount of each Bank's participation
held by Administrative Agent thereof for such Bank's account and risk. At the
time of issuance of each Letter of Credit, Borrower shall pay to Administrative
Agent in respect of such Letter of Credit the applicable Letter of Credit Fee
and Letter of Credit Fronting Fee. Administrative Agent shall distribute the
Letter of Credit Fee payable upon the issuance of each Letter of Credit to Banks
in accordance with their respective Commitment Percentages and shall retain the
Letter of Credit Fronting Fee for its own account. Borrower, Administrative
Agent and each Bank acknowledge and agree that the letters of credit described
on Schedule 2 hereto, each of which were issued under the Existing Credit
Agreement, shall be deemed to be Letters of Credit issued and outstanding
hereunder for all purposes of this Agreement and the other Loan Papers.
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<PAGE> 27
Immediately upon the occurrence of an Event of Default Borrower shall
deposit with Administrative Agent cash in such amounts as Administrative Agent
may request, up to a maximum amount equal to the aggregate existing Letter of
Credit Exposure of all Banks. Any amounts so deposited shall be held by
Administrative Agent for the ratable benefit of all Banks as security for the
outstanding Letter of Credit Exposure and the other Obligations, and Borrower
will, in connection therewith, execute and deliver such security agreements in
form and substance satisfactory to Administrative Agent which it may, in its
discretion, require. As drafts or demands for payment are presented under any
Letter of Credit, Administrative Agent shall apply such cash to satisfy such
drafts or demands. When all Letters of Credit have expired and the Obligations
have been repaid in full (and no Bank has any obligation to lend or issue
Letters of Credit hereunder) or such Event of Default has been cured to the
satisfaction of Required Banks, Administrative Agent shall release to Borrower
any remaining cash deposited under this Section 3.1(b). Whenever Borrower is
required to make deposits under this Section 3.1(b) and fails to do so on the
day such deposit is due, Administrative Agent or any Bank may, without notice to
Borrower, make such deposit (whether by application of proceeds of any
collateral for the Obligations, by transfers from other accounts maintained with
any Bank or otherwise) using any funds then available to any Bank of any Credit
Party, any guarantor, or any other party liable for repayment of the
Obligations.
Notwithstanding anything to the contrary contained herein, Borrower
hereby agrees to reimburse Administrative Agent immediately upon demand by
Administrative Agent, and in immediately available funds, for any payment or
disbursement made by Administrative Agent under any Letter of Credit issued by
it. Payment shall be made by Borrower with interest on the amount so paid or
disbursed by Administrative Agent from and including the date payment is made
under any Letter of Credit to and including the date of payment, at the lesser
of (i) the Maximum Lawful Rate, or (ii) the sum of (a) two percent (2%), plus
(b) the Base Rate in effect from day to day. The obligations of Borrower under
this paragraph will continue until all Letters of Credit have expired and all
reimbursement obligations with respect thereto have been paid in full by
Borrower and until all other Obligations shall have been paid in full.
Borrower shall be obligated to reimburse Administrative Agent upon
demand for all amounts paid under Letters of Credit as set forth in the
immediately preceding paragraph hereof; provided, however, if Borrower for any
reason fails to reimburse Administrative Agent in full upon demand, Banks shall
reimburse Administrative Agent in accordance with each Banks' Commitment
Percentage for amounts due and unpaid from Borrower as set forth hereinbelow;
provided, however, that no such reimbursement made by Banks shall discharge
Borrower's obligations to reimburse Administrative Agent. All reimbursement
amounts payable by any Bank under this Section 3.1(b) shall include interest
thereon at the Federal Funds Rate, from the date of the payment of such amounts
by Administrative Agent to the date of reimbursement by such Bank. No Bank shall
be liable for the performance or nonperformance of the obligations of any other
Bank under this paragraph. The reimbursement obligations of Banks under this
paragraph shall continue after the Termination Date and shall survive
termination of this Agreement and the other Loan Papers.
Borrower shall indemnify and hold Administrative Agent and each Bank,
and their respective officers, directors, representatives and employees harmless
from loss for any claim,
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<PAGE> 28
demand or liability which may be asserted against any or such indemnified party
in connection with actions taken under Letters of Credit or in connection
therewith (including losses resulting from the negligence of any or such
indemnified party), and shall pay each indemnified party for reasonable fees of
attorneys and legal costs paid or incurred by each indemnified party in
connection with any matter related to Letters of Credit, except for losses and
liabilities incurred as a direct result of the gross negligence or willful
misconduct of such indemnified party, IT BEING THE EXPRESS INTENTION OF THE
PARTIES THAT EACH INDEMNIFIED PARTY SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF
ITS OWN ORDINARY NEGLIGENCE. If Borrower for any reason fails to indemnify or
pay such indemnified party as set forth herein in full, Banks shall indemnify
and pay such indemnified party upon demand, in accordance with each Bank's
Commitment Percentage of such amounts due and unpaid from Borrower. The
provisions of this paragraph shall survive the termination of this Agreement.
Administrative Agent does not make any representation or warranty, and
does not assume any responsibility with respect to the validity, legality,
sufficiency or enforceability of any letter of credit application executed and
delivered in connection with any Letter of Credit issued hereunder or any
document relative thereto or to the collectability thereunder. Administrative
Agent does not assume any responsibility for the financial condition of Borrower
or for the performance of any obligation of Borrower. Administrative Agent may
use its discretion with respect to exercising or refraining from exercising any
rights, or taking or refraining from taking any action which may be vested in it
or which it may be entitled to take or assert with respect to any Letter of
Credit or any Letter of Credit application. FURTHERMORE, EXCEPT AS SET FORTH
HEREIN, ADMINISTRATIVE AGENT SHALL BE UNDER NO LIABILITY TO ANY BANK, WITH
RESPECT TO ANYTHING ADMINISTRATIVE AGENT MAY DO OR REFRAIN FROM DOING IN THE
EXERCISE OF ITS JUDGMENT, THE SOLE LIABILITY AND RESPONSIBILITY OF
ADMINISTRATIVE AGENT BEING TO HANDLE EACH BANK'S SHARE ON AS FAVORABLE A BASIS
AS ADMINISTRATIVE AGENT HANDLES ITS OWN SHARE. ADMINISTRATIVE AGENT SHALL NOT
HAVE ANY DUTIES OR RESPONSIBILITIES EXCEPT THOSE EXPRESSLY SET FORTH HEREIN AND
THOSE DUTIES AND LIABILITIES SHALL BE SUBJECT TO THE LIMITATIONS AND
QUALIFICATIONS SET FORTH HEREIN. FURTHERMORE, NEITHER ADMINISTRATIVE AGENT, NOR
ANY OF ITS DIRECTORS, OFFICERS, OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION
TAKEN OR OMITTED (WHETHER OR NOT SUCH ACTION TAKEN OR OMITTED IS EXPRESSLY SET
FORTH HEREIN) UNDER OR IN CONNECTION HEREWITH OR UNDER ANY OTHER INSTRUMENT OR
DOCUMENT IN CONNECTION HEREWITH, EXCEPT FOR GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Administrative Agent shall not incur any liability to any Bank,
Borrower, or any Affiliate of any Bank, or Borrower, in acting upon any notice,
document, order, consent, certificate, warrant or other instrument reasonably
believed by Administrative Agent to be genuine or authentic and to be signed by
the proper party.
(c) No Bank will be obligated to lend to Borrower hereunder or incur
Letter of Credit Exposure, and Borrower shall not be entitled to borrow
hereunder or obtain Letters of Credit hereunder at any time that a Borrowing
Base Deficiency exists or in an amount which would cause the Outstanding Credit
to exceed the Borrowing Base then in effect. Nothing in this Section
23
<PAGE> 29
3.1(c) shall be deemed to limit any Bank's obligation to reimburse
Administrative Agent with respect to its participation in Letters of Credit as a
result of the drawing under any Letter of Credit pursuant to Section 3.1(c).
(d) In order to request any Borrowing under this Section 3.1, Borrower
shall hand deliver, telex or telecopy to Administrative Agent a duly completed
Request for Borrowing (herein so called) prior to 12:00 noon (Dallas, Texas
time), (i) at least one (1) Domestic Business Day before the Borrowing Date
specified for a proposed Base Rate Borrowing, and (ii) at least three (3)
Eurodollar Business Days before the Borrowing Date of a proposed Eurodollar
Borrowing. Each such Request for Borrowing shall be substantially in the form of
Exhibit B hereto, and shall specify:
(i) the Borrowing Date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing or
a Eurodollar Business Day in the case of a Eurodollar
Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether such Borrowing is to be a Base Rate Borrowing or a
Eurodollar Borrowing; and
(iv) in the case of a Eurodollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions
of the definition of Interest Period.
Upon receipt of a Request for Borrowing, Administrative Agent shall promptly
notify each Bank of the contents thereof and the amount of the Borrowing to be
loaned by such Bank pursuant thereto, and such Request for Borrowing shall not
thereafter be revocable by Borrower. Not later than 12:00 noon (Dallas, Texas
time) on the date of each Borrowing, each Bank shall make available its
Commitment Percentage of such Borrowing, in Federal or other funds immediately
available in Dallas, Texas to Administrative Agent at its address set forth on
Schedule 1 hereto. Notwithstanding the foregoing, if Borrower delivers to
Administrative Agent a Request for Borrowing prior to 10:00 a.m. (Dallas, Texas
time) on a Domestic Business Day requesting a Base Rate Borrowing on such day,
each Bank shall use its best efforts to make available to Administrative Agent
its Commitment Percentage of such Borrowing by 1:00 p.m. (Dallas, Texas time) on
the same day. Unless Administrative Agent determines that any applicable
condition specified in Section 8.2 has not been satisfied, Administrative Agent
will make the funds so received from Banks available to Borrower at
Administrative Agent's aforesaid address.
(e) In order to request any Letter of Credit hereunder, Borrower shall
hand deliver, telex or telecopy to Administrative Agent a duly completed Request
for Letter of Credit (herein so called) prior to 12:00 noon (Dallas, Texas time)
at least three (3) Domestic Business Days before the date specified for issuance
of such Letter of Credit. Each Request for Letter of Credit shall be
substantially in the form of Exhibit C hereto, shall be accompanied by
Administrative Agent's duly completed and executed letter of credit application
and agreement and shall specify:
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<PAGE> 30
(i) the requested date for issuance of such Letter of Credit;
(ii) the terms of such requested Letter of Credit, including the
name and address of the beneficiary, the stated amount, the
expiration date and the conditions under which drafts under
such Letter of Credit are to be available; and
(iii) the purpose of such Letter of Credit.
(iv) Upon receipt of a Request for Letter of Credit, Administrative
Agent shall promptly notify each Bank of the contents thereof,
including the amount of the requested Letter of Credit, and
such Request for Letter of Credit shall not thereafter be
revocable by Borrower. No later than 12:00 noon (Dallas, Texas
time) on the date each Letter of Credit is requested, unless
Administrative Agent determines that any applicable condition
precedent set forth in Section 8.2 hereof has not been
satisfied, Administrative Agent will issue and deliver such
Letter of Credit pursuant to the instructions of Borrower.
SECTION 3.2 Notes. Each Bank's Commitment Percentage of the Revolving
Loan shall be evidenced by a single Note payable to the order of such Bank in an
amount equal to such Bank's Commitment.
SECTION 3.3 Interest Rates; Payments.
(a) The principal amount of the Base Rate Loan outstanding from day to
day shall bear interest at a rate per annum equal to the Base Rate in effect
from day to day; provided that in no event shall the rate charged hereunder or
under the Notes exceed the Maximum Lawful Rate. Interest on the principal of the
Base Rate Loan shall be payable as it accrues on each Quarterly Date, and on the
Termination Date.
(b) The principal amount of each Eurodollar Loan shall bear interest
for the Interest Period applicable thereto at a rate per annum equal to the sum
of (i) the Applicable Margin, plus (ii) the applicable Adjusted Eurodollar Rate;
provided that in no event shall the rate charged hereunder or under the Notes
exceed the Maximum Lawful Rate. Interest on any portion of the principal of each
Eurodollar Loan subject to an Interest Period of one (1), two (2) or three (3)
months shall be payable on the last day of the Interest Period applicable
thereto. Interest on any portion of the principal of each Eurodollar Loan having
an Interest Period of more than three (3) months shall be payable on the last
day of the Interest Period applicable thereto and on each Quarterly Date.
(c) So long as no Default or Event of Default shall be continuing,
subject to the provisions of this Section 3.3, Borrower shall have the option of
having all or any portion of the principal outstanding under the Revolving Loan
be a Base Rate Loan or one (1) or more Eurodollar Loans, which shall bear
interest at rates determined by reference to the Base Rate and the Adjusted
Eurodollar Rate, respectively; provided, that each Eurodollar Loan shall be in a
minimum amount
25
<PAGE> 31
of $500,000 and shall be in an amount which is an integral multiple of $100,000.
Prior to the termination of each Interest Period with respect to each Eurodollar
Loan, Borrower shall give written notice (a "Notice of Continuation or
Conversion") in the form of Exhibit D attached hereto to Administrative Agent of
the Type of Loan which shall be applicable to the principal of such Eurodollar
Loan upon the expiration of such Interest Period. Such Notice of Continuation or
Conversion shall be given to Administrative Agent at least one (1) Domestic
Business Day, in the case of a Base Rate Loan selection and three (3) Eurodollar
Business Days, in the case of a Eurodollar Loan selection, prior to the
termination of the Interest Period then expiring. If Borrower shall specify a
Eurodollar Loan, such Notice of Continuation or Conversion shall also specify
the length of the succeeding Interest Period (subject to the definition of such
term) selected by Borrower. Each Notice of Continuation or Conversion shall be
irrevocable and effective upon notification thereof to Administrative Agent. If
the required Notice of Continuation or Conversion shall not have been timely
received by Administrative Agent, Borrower shall be deemed to have elected that
the principal of the Eurodollar Loan subject to the Interest Period then
expiring be a part of the Base Rate Loan upon the expiration of such Interest
Period and Borrower will be deemed to have given Administrative Agent notice of
such election. Subject to the limitations set forth in this Section 3.3(c) on
the amount and number of Eurodollar Loans, Borrower shall have the right to
convert (a "Conversion") all or any part of the Base Rate Loan to a Eurodollar
Loan by giving Administrative Agent a Notice of Continuation or Conversion of
such election at least three (3) Eurodollar Business Days prior to the date on
which Borrower elects to make such conversion (a "Conversion Date"). The
Conversion Date selected by Borrower shall be a Eurodollar Business Day.
Notwithstanding anything in this Section 3.3 to the contrary, no portion of the
principal of the Base Rate Loan may be Converted to a Eurodollar Loan and no
Eurodollar Loan may be Continued as such when any Default or Event of Default
has occurred and is continuing, but each such Eurodollar Loan shall be
automatically Converted to the Base Rate Loan on the last day of each applicable
Interest Period. Borrower shall not be permitted to have more than four (4)
Eurodollar Loans in effect at any time.
(d) Notwithstanding anything to the contrary set forth in Sections
3.3(a) or 3.3(b) above, all overdue principal of the Obligations and, to the
extent permitted by law, overdue interest, shall bear interest from the date
due, payable on demand, for each day until paid at a rate per annum equal to the
lesser of (a) the sum of (i) two percent (2%), plus (ii) the Base Rate in effect
from day to day, and (b) the Maximum Lawful Rate.
(e) Administrative Agent shall determine each interest rate applicable
to the Revolving Loan in accordance with the terms hereof. Administrative Agent
shall promptly notify Borrower and Banks by telex, telecopy or cable of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of interest
calculated with reference to the Base Rate or the Eurodollar Rate hereunder (the
"contract rate") is limited to the Maximum Lawful Rate, any subsequent
reductions in the contract rate shall not, to the extent permitted by law,
reduce the rate of interest on the affected Loan below the Maximum Lawful Rate
until the total amount of interest accrued equals the amount of interest which
would have accrued if the contract rate had at all times been in effect. In the
event that at maturity (stated or by
26
<PAGE> 32
acceleration), or at final payment of any Note, the total amount of interest
paid or accrued on such Note is less than the amount of interest which would
have accrued if the contract rate had at all times been in effect with respect
thereto, then at such time, to the extent permitted by law, Borrower shall pay
to the holder of such Note an amount equal to the difference between (i) the
lesser of the amount of interest which would have accrued if the contract rate
had at all times been in effect and the amount of interest which would have
accrued if the Maximum Lawful Rate had at all times been in effect, and (ii) the
amount of interest actually paid on such Note.
(g) Interest payable hereunder computed by reference to the Eurodollar
Rate shall be computed based on the number of actual days elapsed assuming that
each calendar year consisted of 360 days. Interest payable hereunder computed by
reference to the Base Rate shall be computed based on the actual number of days
elapsed assuming that each calendar year consisted of 365 days.
SECTION 3.4 Mandatory Prepayments During Borrowing Base Deficiency. In the
event a Borrowing Base Deficiency exists after giving effect to any
Redetermination, Borrower shall, at its option, either (a) eliminate such
Borrowing Base Deficiency by making a single mandatory prepayment of principal
on the Revolving Loan in an amount equal to the entire amount of such Borrowing
Base Deficiency on the first Monthly Date following the date on which such
Borrowing Base Deficiency is determined to exist, (b) eliminate such deficiency
by making six (6) consecutive mandatory prepayments of principal on the
Revolving Loan each of which shall be in the amount of one sixth (1/6th) of the
amount of such Borrowing Base Deficiency commencing on the first Monthly Date
following the date on which such Borrowing Base Deficiency is determined to
exist and continuing on each Monthly Date thereafter, or (c) eliminate such
Borrowing Base Deficiency by submitting additional Mineral Interests to Banks on
the first Monthly Date following the date on which such Borrowing Base
Deficiency is determined to exist for evaluation as Borrowing Base Properties
which Banks, in their sole discretion, determine have a value sufficient to
increase the Borrowing Base by at least the amount of the Borrowing Base
Deficiency. If a Borrowing Base Deficiency cannot be eliminated pursuant to this
Section 3.4 by prepayment of the Revolving Loan in full (as a result of
outstanding Letter of Credit Exposure), on each Monthly Date, Borrower shall
also deposit cash with Administrative Agent, to be held by Administrative Agent
to secure outstanding Letter of Credit Exposure in the manner contemplated by
Section 3.1(b), in an amount at least equal to one sixth (1/6th) of the balance
of such Borrowing Base Deficiency (i.e., one-sixth of the difference between the
Borrowing Base Deficiency and the remaining outstanding principal of the
Revolving Loan on the date such Borrowing Base Deficiency is first determined to
occur). Notwithstanding the foregoing, if a Borrowing Base Deficiency exists as
a result of any Special Redetermination pursuant to Sections SECTION 8.3 hereof
or an automatic reduction in the Borrowing Base pursuant to Section SECTION 11.5
hereof, Borrower shall be required to immediately make a mandatory prepayment of
the Revolving Loan in the amount of such deficiency.
SECTION 3.5 Voluntary Prepayments. Borrower may, subject to Section 5.5 and
the other provisions of this Agreement, upon three (3) Domestic Business Days
advance notice to
27
<PAGE> 33
Administrative Agent, prepay the principal of the Loan in whole or in part. Any
partial prepayment shall be in a minimum amount of $1,000,000 and shall be in an
integral multiple of $100,000.
SECTION 3.6 Voluntary Reduction of Commitments. Borrower may, by notice to
Administrative Agent five (5) Domestic Business Days prior to the effective date
of any such reduction, reduce the Total Commitment (and thereby reduce the
Commitment of each Bank ratably) in amounts not less than $5,000,000 and in an
amount which is an integral multiple of $1,000,000. On the effective date of any
such reduction, Borrower shall, to the extent required as a result of such
reduction, make a principal payment on the Revolving Loan in an amount
sufficient to cause the principal balance of the Revolving Loan to be equal to
or less than the Total Commitment as thereby reduced. Notwithstanding the
foregoing, Borrower shall not be permitted to voluntarily reduce the Total
Commitment to an amount less than the aggregate Letter of Credit Exposure of all
Banks.
SECTION 3.7 Termination of Commitments; Final Maturity of Revolving Loan.
The Total Commitment (and the Commitment of each Bank) shall terminate, and the
entire outstanding principal balance of the Revolving Loan, all interest accrued
thereon, all accrued but unpaid fees hereunder and all other outstanding
Obligations shall be due and payable in full on the Termination Date.
SECTION 3.8 Unused Commitment Fee. On the Termination Date, on each
Quarterly Date prior to the Termination Date, and, in the event the Commitments
are terminated in their entirety prior to the Termination Date, on the date of
such termination, Borrower shall pay to Administrative Agent, for the ratable
benefit of each Bank, a commitment fee equal to the Unused Commitment Fee
Percentage in effect from day to day (computed on a per annum basis on the basis
of actual days elapsed and as if each calendar year consisted of 365 days) of
the average daily Availability for the Fiscal Quarter (or portion thereof)
ending on the date such payment is due.
SECTION 3.9 Borrowing Base Increase Fee. Simultaneously with each increase
in the Borrowing Base, Borrower shall pay to Administrative Agent for the
ratable benefit of each Bank, a borrowing base increase fee in an amount equal
to one fourth of one percent (.25%) of the amount of such increase; provided,
that no such fee shall be payable in connection with the increase in the
Borrowing Base from the Borrowing Base in effect under the Existing Credit
Agreement to the Initial Borrowing Base.
SECTION 3.10 Agency and other Fees. Borrower shall pay to Administrative
Agent and its Affiliates such other reasonable fees and amounts as Borrower
shall be required to pay to Administrative Agent and its Affiliates from time to
time pursuant to any separate agreement between Borrower and Administrative
Agent or such Affiliates. Such fees and other amounts shall be retained by
Administrative Agent and its Affiliates, and no Bank (other than Administrative
Agent) shall have any interest therein.
SECTION 3.11 Closing Fee. On the Closing Date, Borrower shall pay to
Administrative Agent the applicable non-refundable closing fee for each Bank set
forth on Schedule
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<PAGE> 34
1 hereto. Administrative Agent shall distribute to each Bank its respective
non-refundable closing fee in the amount set forth beside its name or Schedule 1
hereto.
ARTICLE 4 GENERAL PROVISIONS
SECTION 4.1 Delivery and Endorsement of Notes. Simultaneously with the
execution of this Agreement, Administrative Agent shall deliver to each Bank the
Note payable to such Bank. Each Bank may endorse (and prior to any transfer of
its Note shall endorse) on the schedules attached and forming a part thereof
appropriate notations to evidence the date and amount of its Commitment
Percentage of each Borrowing and type of each Loan made by it, the Interest
Period applicable thereto, and the date and amount of each payment of principal
made by Borrower with respect thereto; provided that the failure by any Bank to
so endorse its Note shall not affect the liability of Borrower for the repayment
of all amounts outstanding under such Note together with interest thereon. Each
Bank is hereby irrevocably authorized by Borrower to endorse its Note and to
attach to and make a part of any Note a continuation of any such schedule as
required.
SECTION 4.2 General Provisions as to Payments.
(a) Borrower shall make each payment of principal of, and interest on,
the Revolving Loan and all fees payable hereunder shall be paid not later than
12:00 noon (Dallas, Texas time) on the date when due, in Federal or other funds
immediately available in Dallas, Texas, to Administrative Agent at its address
set forth on Schedule 1 hereto. Administrative Agent will promptly (and if such
payment is received by Administrative Agent by 10:00 a.m. (Dallas, Texas time)
and otherwise if reasonably possible, on the same Domestic Business Day)
distribute to each Bank its Commitment Percentage of each such payment received
by Administrative Agent for the account of Banks. Whenever any payment of (a)
principal of, or interest on, any portion of the Base Rate Loan, or (b) fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, any Eurodollar Loan shall be due on
a day which is not a Eurodollar Business Day, the date for payment thereof shall
be extended to the next succeeding Eurodollar Business Day (subject to the
definition of Interest Period). If the date for any payment of principal is
extended by operation of Law or otherwise, interest thereon shall be payable for
such extended time. Borrower hereby authorizes Administrative Agent to charge
from time to time against Borrower's accounts with Administrative Agent any
amount then due.
(b) Prior to the occurrence of an Event of Default, all principal
payments received by Banks shall be applied first to Eurodollar Loans
outstanding with Interest Periods ending on the date of such payment, then to
the Base Rate Loan, and then to Eurodollar Loans, next maturing until such
principal payment is fully applied.
(c) After the occurrence of an Event of Default, all amounts collected
or received by Administrative Agent or any Bank shall be applied first to the
payment of all proper costs incurred by Administrative Agent in connection with
the collection thereof (including reasonable expenses and disbursements of
Administrative Agent), second to the payment of all proper costs incurred by
Banks in connection with the collection thereof (including reasonable
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expenses and disbursements of Banks), third to the reimbursement of any advances
made by Banks to effect performance of any unperformed covenants of Borrower or
any of its Subsidiaries under any of the Loan Papers, fourth to the payment of
any unpaid fees required pursuant to Section 3.9, fifth to the payment of any
unpaid fees required pursuant to Sections 3.1(b), 3.7 and 3.8, sixth, to payment
to each Bank of its Commitment Percentage of the outstanding principal of the
Revolving Loan and accrued but unpaid interest thereon, and seventh to establish
the deposits required in Section 3.1(b). All payments received by a Bank after
the occurrence of an Event of Default for application to the principal of the
Revolving Loan shall be applied by such Bank in the manner provided in Section
4.2(b).
ARTICLE 5 CHANGE IN CIRCUMSTANCES
SECTION 5.1 Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable Law,
rule, or regulation, or any change in any applicable Law, rule, or regulation,
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of Law) of any such Governmental Authority, central bank, or
comparable agency:
(i) shall subject such Bank (or its Applicable Lending Office) to
any Tax, duty, or other charge with respect to any Eurodollar
Loans, its Note, or its obligation to make Eurodollar Loans,
or change the basis of taxation of any amounts payable to such
Bank (or its Applicable Lending Office) under this Agreement
or its Note in respect of any Eurodollar Loans (other than
Taxes imposed on the overall net income of such Bank by the
jurisdiction in which such Bank has its principal office or
such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the
Adjusted Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities
or commitments of, such Bank (or its Applicable Lending
Office), including the Commitment of such Bank hereunder; or
(iii) shall impose on such Bank (or its Applicable Lending Office)
or on the London interbank market any other condition
affecting this Agreement or its Note or any of such extensions
of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce
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any sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or its Note with respect to any Eurodollar Loans, then
Borrower shall pay to such Bank on demand such amount or amounts as will
compensate such Bank for such increased cost or reduction. If any Bank requests
compensation by Borrower under this Section 5.1(a), Borrower may, by notice to
such Bank (with a copy to Administrative Agent), suspend the obligation of such
Bank to make or Continue Eurodollar Loans, or to Convert all or part of the Base
Rate Loan owing to such Bank to Eurodollar Loans, until the event or condition
giving rise to such request ceases to be in effect (in which case the provisions
of Section 5.4 shall be applicable); provided that such suspension shall not
affect the right of such Bank to receive the compensation so requested.
(b) If, after the date hereof, any Bank shall have determined that the
adoption of any applicable Law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of Law) of any such
Governmental Authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Bank or any
corporation controlling such Bank as a consequence of such Bank's obligations
hereunder to a level below that which such Bank or such corporation could have
achieved but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then from time to
time upon demand Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
(c) Each Bank shall promptly notify Borrower and Administrative Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section 5.1 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to it. Any Bank claiming
compensation under this Section 5.1 shall furnish to Borrower and Administrative
Agent a statement setting forth the additional amount or amounts to be paid to
it hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 5.2 Limitation on Types of Loans. If on or prior to the first day
of any Interest Period for any Eurodollar Loan:
(a) Administrative Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(b) Required Banks determine (which determination shall be conclusive)
and notify Administrative Agent that the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to Banks of funding Eurodollar Loans for
such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, Banks shall be under no
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obligation to make additional Eurodollar Loans, Continue Eurodollar Loans, or to
Convert all or any part of the Base Rate Loan into Eurodollar Loans and Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Eurodollar Loans or Convert
such Eurodollar Loans into the Base Rate Loan in accordance with the terms of
this Agreement.
SECTION 5.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such
Bank shall promptly notify Borrower thereof and such Bank's obligation to make
or Continue Eurodollar Loans and to Convert all or any part of the Base Rate
Loan into Eurodollar Loans shall be suspended until such time as such Bank may
again make, maintain, and fund Eurodollar Loans (in which case the provisions of
Section 5.4 shall be applicable).
SECTION 5.4 Treatment of Affected Loans. If the obligation of any Bank to
make a Eurodollar Loan or to Continue Eurodollar Loans, or to Convert all or any
part of the Base Rate Loan into Eurodollar Loans shall be suspended pursuant to
Sections 5.1 or 5.3 hereof, such Bank's Eurodollar Loans shall be automatically
Converted into the Base Rate Loan on the last day(s) of the then current
Interest Period(s) for such Eurodollar Loans (or, in the case of a Conversion
required by Section 5.3 hereof, on such earlier date as such Bank may specify to
Borrower with a copy to Administrative Agent) and, unless and until such Bank
gives notice as provided below that the circumstances specified in Sections 5.1
or 5.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Bank's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Bank's Eurodollar Loans shall be applied instead to its
Commitment Percentage of the Base Rate Loan; and
(b) all Loans that would otherwise be made or Continued by such Bank as
Eurodollar Loans shall be made or Continued instead as a part of the Base Rate
Loan, and all or any part of the Base Rate Loan held by such Bank that would
otherwise be Converted into Eurodollar Loans shall remain as part of the Base
Rate Loan.
If such Bank gives notice to Borrower (with a copy to Administrative Agent) that
the circumstances specified in Sections 5.1 or 5.3 hereof that gave rise to the
Conversion of such Bank's Eurodollar Loans pursuant to this Section 5.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Banks are
outstanding, such Bank's portion of the Base Rate Loan shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Eurodollar Loans held by Banks holding Eurodollar Loans are
held pro rata (as to principal amounts and Interest Periods) in accordance with
their respective Commitments.
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SECTION 5.5 Compensation. Upon the request of any Bank, Borrower shall pay
to such Bank such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate it for any loss, cost, or expense incurred
by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 13.1) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article 8 to be
satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan on the date
for such Borrowing, Conversion, Continuation, or prepayment specified in the
relevant Request for Borrowing, or notice of prepayment, Continuation, or
Conversion under this Agreement.
SECTION 5.6 Taxes.
(a) Any and all payments by Borrower to or for the account of any Bank
or Administrative Agent hereunder or under any other Loan Paper shall be made
free and clear of and without deduction for any and all present or future Taxes,
and all liabilities with respect thereto, excluding, in the case of each Bank
and Administrative Agent, Taxes imposed on its income, and franchise Taxes
imposed on it, by the jurisdiction under the Laws of which such Bank (or its
Applicable Lending Office) or Administrative Agent (as the case may be) is
organized or any political subdivision thereof. If Borrower shall be required by
Law to deduct any Taxes from or in respect of any sum payable under this
Agreement or any other Loan Paper to any Bank or Administrative Agent, (i) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.6) such Bank or Administrative Agent receives an amount equal to
the sum it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, (iii) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
Law, and (iv) Borrower shall furnish to Administrative Agent, at its address set
forth on Schedule 1 hereto, the original or a certified copy of a receipt
evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary Taxes and any other excise or property Taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Paper or from the execution or delivery of, or otherwise with respect
to, this Agreement or any other Loan Paper (hereinafter referred to as "Other
Taxes").
(c) Borrower agrees to indemnify each Bank and Administrative Agent for
the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 5.6) paid by such Bank or Administrative Agent (as the case
may be) and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
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(d) Each Bank organized under the Laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on Schedule 1 hereto and on or prior
to the date on which it becomes a Bank in the case of each other Bank, and from
time to time thereafter if requested in writing by Borrower or Administrative
Agent (but only so long as such Bank remains lawfully able to do so), shall
provide Borrower and Administrative Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Bank is entitled to benefits under an
income Tax treaty to which the United States is a party which reduces the rate
of withholding Tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form
W-8 or W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Code), certifying that such Bank is entitled to an exemption from or a
reduced rate of Tax on payments pursuant to this Agreement or any of the other
Loan Papers.
(e) For any period with respect to which a Bank has failed to provide
Borrower and Administrative Agent with the appropriate form pursuant to Section
5.6(d) (unless such failure is due to a change in treaty, Law, or regulation
occurring subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Sections
5.6(a) or 5.6(b) with respect to Taxes imposed by the United States; provided,
however, that should a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding Tax, become subject to Taxes because of its failure
to deliver a form required hereunder, Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 5.6, then such Bank will agree to
use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Bank, is not otherwise
disadvantageous to such Bank.
(g) Within thirty (30) days after the date of any payment of Taxes
Borrower is required to pay pursuant to this Section 5.6, Borrower shall furnish
to Administrative Agent the original or a certified copy of a receipt evidencing
such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 5.6 shall survive the termination of the Commitments and the payment in
full of the Notes.
SECTION 5.7 Discretion of Banks as to Manner of Funding. Notwithstanding
any provisions of this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of its Commitment in any manner
it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if such Bank
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had actually funded and maintained each Eurodollar Loan through the purchase of
deposits having a maturity corresponding to the last day of the Interest Period
applicable to such Eurodollar Loan and bearing an interest rate equal to the
Adjusted Eurodollar Rate for such Interest Period.
ARTICLE 6 BORROWING BASE
SECTION 6.1 Reserve Report; Proposed Borrowing Base. As soon as available
and in any event by March 31 and September 30 of each year commencing March 31,
2001, Borrower shall deliver to each Bank a Reserve Report prepared as of the
immediately preceding December 31 and June 30 respectively. Simultaneously with
the delivery to Administrative Agent and each Bank of each Reserve Report,
Borrower shall notify each Bank of the amount of the Borrowing Base which
Borrower requests become effective on the next Redetermination Date (or such
date promptly following such Redetermination Date as Required Banks shall
elect).
SECTION 6.2 Scheduled Redeterminations of the Borrowing Base; Procedures
and Standards. Based in part on the Reserve Reports made available to Banks
pursuant to Section 6.1, Banks shall redetermine the Borrowing Base on the next
Redetermination Date (or, in each such case, on a date promptly thereafter as
reasonably possible based on the engineering and other information available to
Banks). Any Borrowing Base which becomes effective as a result of any
Redetermination of the Borrowing Base shall be subject to the following
restrictions: (a) such Borrowing Base shall not exceed the Borrowing Base
requested by Borrower pursuant to Sections 6.1 or 6.3 (as applicable), (b) such
Borrowing Base shall not exceed the Total Commitment then in effect, (c) to the
extent such Borrowing Base represents an increase from the Borrowing Base in
effect prior to such Redetermination, such Borrowing Base shall be approved by
all Banks, and (d) any Borrowing Base which represents a decrease in the
Borrowing Base in effect prior to such Redetermination, or a reaffirmation of
such prior Borrowing Base, shall be approved by Required Banks. Each
Redetermination shall be made by Banks in their sole discretion. Without
limiting such discretion, Borrower acknowledges and agrees that Banks (i) may
make such assumptions regarding appropriate existing and projected pricing for
Hydrocarbons as they deem appropriate in their sole discretion, (ii) may make
such assumptions regarding projected rates and quantities of future production
of Hydrocarbons from the Mineral Interests owned by Borrower as they deem
appropriate in their sole discretion, (iii) may consider the projected cash
requirements of Borrower and its Subsidiaries, (iv) are not required to consider
any asset other than Proved Mineral Interests owned by Borrower which are
subject to first and prior Liens in favor of Administrative Agent for the
ratable benefit of Banks to the extent required by Section 7.1 hereof, and (v)
may make such other assumptions, considerations and exclusions as each Bank
deems appropriate in the exercise of its sole discretion. It is further
acknowledged and agreed that each Bank may consider such other credit factors as
it deems appropriate in the exercise of its sole discretion and shall have no
obligation in connection with any Redetermination to approve any increase from
the Borrowing Base in effect prior to such Redetermination. Promptly following
any Redetermination of the Borrowing Base, Administrative Agent shall notify
Borrower of the amount of the Borrowing Base as redetermined, which Borrowing
Base shall be effective as of the date specified in such notice, and shall
remain in effect for all purposes of this Agreement until the next
Redetermination.
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SECTION 6.3 Special Redetermination
(a) In addition to Scheduled Redeterminations, Required Banks and
Borrower shall each be permitted to make a Special Redetermination of the
Borrowing Base (i) once in each period between Scheduled Redeterminations, and
(ii) at the times contemplated by Sections SECTION 8.3 and SECTION 11.5 hereof.
Any request by Required Banks pursuant to this Section 6.3(a) shall be submitted
to Administrative Agent and Borrower, and any request by Borrower shall be
submitted to Administrative Agent and Banks and at the time of such request
Borrower shall deliver to each Bank a Reserve Report. Together with such
request, Borrower shall also notify each Bank of the Borrowing Base requested by
Borrower in connection with such Special Redetermination.
(b) Any Special Redetermination shall be made by Banks in accordance
with the procedures and standards set forth in Section 6.2; provided, that, no
Reserve Report will be required to be delivered to Banks in connection with any
Special Determination requested by Required Banks pursuant to clause (a) above.
SECTION 6.4 Borrowing Base Deficiency. If a Borrowing Base Deficiency
exists after giving effect to any Redetermination, Borrower shall be obligated
to eliminate such Borrowing Base Deficiency by making the mandatory prepayments
of the Loans or taking the other actions required by Section 3.4.
SECTION 6.5 Initial Borrowing Base. The Borrowing Base shall be $45,000,000
for the period commencing on the Closing Date and ending on the effective date
of the first Redetermination after the Closing Date.
ARTICLE 7 COLLATERAL AND GUARANTEES
SECTION 7.1 Security.
(a) The Obligations shall be secured by first and prior Liens (subject
only to Permitted Encumbrances) covering and encumbering Proved Mineral
Interests with a Recognized Value not less than eighty percent (80%) of the
Recognized Value of all Proved Mineral Interests owned by Borrower. On the
Closing Date, Borrower shall deliver to Administrative Agent for the ratable
benefit of each Bank, Mortgages in form and substance acceptable to
Administrative Agent and duly executed by Borrower together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements (each duly authorized and
executed) as Administrative Agent shall deem necessary or appropriate to grant,
evidence and perfect first and prior Liens in Proved Mineral Interests with a
Recognized Value not less than eighty percent (80%) of the Recognized Value of
all Proved Mineral Interests held by Borrower.
(b) On or before each Redetermination Date and at such other times as
Administrative Agent or Required Banks shall request, Borrower shall execute and
deliver to Administrative Agent, for the ratable benefit of each Bank, Mortgages
granting, evidencing and
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perfecting the Liens required by Section 7.1(a) above preceding with respect to
all Proved Mineral Interests acquired by Borrower subsequent to the last date on
which Borrower was required to execute and deliver Mortgages pursuant to this
Section 7.1(b), or which, for any other reason are not the subject of valid,
enforceable, perfected first priority Liens (subject only to Permitted
Encumbrances) in favor of Administrative Agent for the ratable benefit of Banks.
(c) At any time Borrower is required to execute and deliver Mortgages
to Administrative Agent pursuant to this Section 7.1, Borrower shall also
deliver to Administrative Agent such opinions of counsel (addressed to
Administrative Agent) and other evidence of title as Administrative Agent shall
deem necessary or appropriate to verify (i) Borrower's title to the Proved
Mineral Interests which are subject to such Mortgages, and (ii) the validity,
perfection and priority of the Liens created by such Mortgages and such other
matters regarding such Mortgages as Administrative Agent shall reasonably
request.
ARTICLE 8 CONDITIONS PRECEDENT
SECTION 8.1 Conditions to Initial Borrowing and Participation in Letter of
Credit Exposure. The obligation of each Bank to loan its Commitment Percentage
of the initial Borrowing made hereunder, and the obligation of Administrative
Agent to issue (or cause another Bank to issue) the initial Letter of Credit
issued hereunder is subject to the satisfaction of each of the following
conditions prior to or simultaneously with the initial Borrowing made hereunder:
(a) Closing Deliveries. Administrative Agent shall have received each
of the following documents, instruments and agreements, each of which shall be
in form and substance and executed in such counterparts as shall be acceptable
to Administrative Agent and each Bank and each of which shall, unless otherwise
indicated, be dated the Closing Date:
(i) a Note payable to the order of each Bank, each in the amount
of such Bank's Commitment, duly executed by Borrower;
(ii) Mortgages (including, to the extent applicable, amendments to
all Mortgages securing the Obligations under the Existing
Credit Agreement) duly executed and delivered by Borrower
creating first and prior Liens on Proved Mineral Interests
with a Recognized Value not less than 80% of the aggregate
Recognized Value of all Proved Mineral Interests owned by
Borrower;
(iii) such financing statements on form UCC-1 (or any other form
required by Lender in its reasonable discretion) as
Administrative Agent shall require to evidence and perfect the
Liens created by the Mortgages, each of which shall be
executed and delivered by Borrower and filed of record in such
jurisdictions as Administrative Agent shall require in its
sole discretion;
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(iv) a copy of the Articles of Incorporation and all amendments
thereto, of Borrower accompanied by a certificate that such
copy is true, correct and complete, and dated within ten (10)
days of the Closing Date, issued by the appropriate
Governmental Authority of the jurisdiction of incorporation or
organization of Borrower, and accompanied by a certificate of
the Secretary or comparable Authorized Officer of Borrower
that such copy is true, correct and complete on the Closing
Date;
(v) a copy of the Bylaws and all amendments thereto, of Borrower
accompanied by a certificate of the Secretary or comparable
Authorized Officer of Borrower that such copy is true, correct
and complete as of the date hereof;
(vi) certain certificates and other documents issued by the
appropriate Governmental Authorities of such jurisdictions as
Administrative Agent has requested relating to the existence
of Borrower and to the effect that Borrower is in good
standing with respect to the payment of franchise and similar
Taxes and is duly qualified to transact business in such
jurisdictions;
(vii) a certificate of incumbency of all officers of Borrower who
will be authorized to execute or attest to any Loan Paper,
dated the date hereof, executed by the Secretary or comparable
Authorized Officer of Borrower;
(viii) copies of resolutions or comparable authorizations approving
the Loan Papers and authorizing the transactions contemplated
by this Agreement and the other Loan Papers, duly adopted by
the Board of Directors of Borrower accompanied by certificates
of the Secretary or comparable Authorized Officer of Borrower
that such copies are true and correct copies of resolutions
duly adopted at a meeting of or (if permitted by applicable
Law and, if required by such Law, by the Bylaws of Borrower)
by the unanimous written consent of the Board of Directors of
Borrower, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have
not been amended, modified, or revoked in any respect, and are
in full force and effect as of the date hereof;
(ix) an opinion of Haynes & Boone, L.L.P., counsel for Borrower,
dated the date hereof, favorably opining as to the
enforceability of each of the Loan Papers and otherwise in
form and substance satisfactory to Administrative Agent and
Banks;
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(x) Opinions of special counsel for Administrative Agent,
favorably opining as to the enforceability of the Mortgages in
the States of Kansas, Louisiana, Mississippi, New Mexico, and
Oklahoma and otherwise in form and substance satisfactory to
Administrative Agent and Banks;
(xi) such UCC-11 search reports as Administrative Agent shall
require, prepared as of a date not more than twenty (20) days
prior to the Closing Date, conducted in such jurisdictions and
reflecting such names as Administrative Agent shall request;
(xii) a certificate signed by an Authorized Officer of Borrower
stating that (A) the representations and warranties contained
in this Agreement and the other Loan Papers are true and
correct in all material respects, (B) no Default or Event of
Default has occurred and is continuing, and (C) all conditions
set forth in this Sections 8.1 and 8.2 below have been
satisfied;
(xiii) a Certificate of Ownership Interests signed by an Authorized
Officer of Borrower in the form of Exhibit E attached hereto;
(xiv) a report or reports in form, scope and detail acceptable to
Administrative Agent from environmental engineering firms
acceptable to Administrative Agent setting forth the results
of a current environmental review of the Mineral Interests,
which report(s) shall not reflect the existence of facts or
circumstances which would constitute a material violation of
any Applicable Environmental Law or which are likely to result
in a material liability to Borrower or any of its
Subsidiaries; and
(xv) certificates from Borrower's insurance broker setting forth
the insurance maintained by Borrower, stating that such
insurance is in full force and effect, that all premiums due
have been paid and stating that such insurance is adequate and
complies with the requirements of Section 10.6 below.
(b) Title Review. Administrative Agent or its counsel shall have
completed a review of title (including opinions of title) to the Proved Mineral
Interests owned by Borrower having a Recognized Value not less than eighty
percent (80%) of the Recognized Value of all Proved Mineral Interests on the
Closing Date (as determined by Administrative Agent), and such review shall not
have revealed any condition or circumstance which would reflect that the
representations and warranties contained in Section 9.9 hereof are inaccurate in
any respect.
(c) Completion of Central Resources Acquisition. Borrower shall have
completed (or simultaneously with the funding of the initial Borrowing
hereunder, Borrower shall
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complete) the Central Resources Acquisition with respect to one hundred percent
(100%) of the Central Resources Properties substantially in accordance with the
Central Resources Acquisition Agreement as in effect on the date hereof, and as
a result thereof Borrower shall have acquired, or simultaneously with the
funding of such Borrowing Borrower shall acquire, good and defensible title to
all such Central Resources Properties, free and clear of all Liens except
Permitted Encumbrances.
(d) No Material Adverse Change. In the sole discretion of each Bank,
since June 30, 2000, no Material Adverse Change shall have occurred.
(e) No Legal Prohibition. The transactions contemplated by this
Agreement shall be permitted by applicable Law and regulation and shall not
subject Administrative Agent, any Bank, Borrower or any Subsidiary of Borrower
to any Material Adverse Change.
(f) No Litigation. No litigation, arbitration or similar proceeding
shall be pending or threatened which calls into question the validity or
enforceability of this Agreement, the other Loan Papers or the transactions
contemplated hereby or thereby.
(g) Closing Fees. Borrower shall have paid to Administrative Agent for
the ratable benefit of each Bank, and shall have paid to Administrative Agent,
the fees to be paid on the Closing Date pursuant to Sections 3.8, 3.10 and 3.11.
(h) Other Matters. All matters related to this Agreement, the other
Loan Papers and Borrower shall be acceptable to each Bank in its sole
discretion, and Borrower shall have delivered to Administrative Agent and each
Bank such evidence as they shall request to substantiate any matters related to
this Agreement and the other Loan Papers, as Administrative Agent or any Bank
shall request.
SECTION 8.2 Conditions to Each Borrowing and each Letter of Credit. The
obligation of each Bank to loan its Commitment Percentage of each Borrowing and
the obligation of Administrative Agent to issue a Letter of Credit on the date
such Letter of Credit is to be issued is subject to the further satisfaction of
the following conditions:
(a) timely receipt by Administrative Agent of a Request for Borrowing
or a Request for Letter of Credit (as applicable);
(b) immediately before and after giving effect to such Borrowing or
issuance of such Letter of Credit, no Default or Event of Default shall have
occurred and be continuing and the funding of such Borrowing or the issuance of
the requested Letter of Credit (as applicable) shall not cause a Default or
Event of Default;
(c) the representations and warranties of Borrower contained in this
Agreement and the other Loan Papers shall be true and correct in all material
respects on and as of the date of such Borrowing or issuance of such Letter of
Credit (as applicable), with the same effect as though such representations and
warranties had been made on and as of the date of such
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Borrowing or issuance of such Letter of Credit (as applicable) or, if such
representations and warranties are expressly limited to particular dates, as of
such particular dates;
(d) after giving effect to such Borrowing or issuance of such Letter of
Credit, the Outstanding Credit shall not exceed the Borrowing Base;
(e) no Material Adverse Change shall have occurred; and
(f) the funding of such Borrowing or the issuance of such Letter of
Credit (as applicable) shall be permitted by applicable Law.
The funding of each Borrowing and the issuance of each Letter of Credit
hereunder shall be deemed to be a representation and warranty by Borrower on the
date of such Borrowing and the date of issuance of each Letter of Credit as to
the facts specified in Sections 8.2(b) through 8.2(e).
SECTION 8.3 Post Closing Deliveries. Not later than October 6, 2000,
Borrower shall enter into Oil and Gas Hedge Transactions acceptable to
Administrative Agent pursuant to which Borrower shall hedge the prices to be
received by it for crude oil production for not less than 30 months following
the Closing Date. The volumes of crude oil hedged each month under such Oil and
Gas Hedge Transactions shall not be less than the volumes set forth on Schedule
6. In the event such Oil and Gas Hedge Transactions are effected through any
arrangement other than a price swap transaction, Required Banks shall have the
right, exercisable promptly following the effective date of such Oil and Gas
Hedge Transactions, to make a Special Redetermination of the Borrowing Base.
SECTION 8.4 Materiality of Conditions. Each condition precedent herein is
material to the transactions contemplated herein, and time is of the essence in
respect of each thereof.
ARTICLE 9 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and each Bank that
each of the following statements is true and correct on the date hereof, and
will be true and correct on the occasion of each Borrowing and the issuance of
each Letter of Credit:
SECTION 9.1 Existence and Power. Each of Borrower and its Subsidiaries (a)
is a corporation, limited liability company or partnership duly incorporated or
organized (as applicable), validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization (as applicable), (b) has
all corporate, limited liability company or partnership power (as applicable)
and all material governmental licenses, authorizations, consents and approvals
required to carry on its businesses as now conducted and as proposed to be
conducted, and (c) is duly qualified to transact business as a foreign
corporation, foreign limited liability company or foreign partnership (as
applicable) in each jurisdiction where a failure to be so qualified could result
in a Material Adverse Change.
SECTION 9.2 Necessary Authorization; Contravention. The execution, delivery
and performance of this Agreement and the other Loan Papers by Borrower is
within Borrower's
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corporate powers, when executed will be duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Governmental Authority and do not contravene, or constitute a default under, any
provision of applicable Law (including, without limitation, the Margin
Regulations) or of the Articles of Incorporation or Bylaws of Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
Borrower or result in the creation or imposition of any Lien on any asset of
Borrower other than the Liens securing the Obligations.
SECTION 9.3 Binding Effect. This Agreement constitutes a valid and binding
agreement of Borrower; the other Loan Papers when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
Borrower; and each Loan Paper is, or when executed and delivered, will be,
enforceable against Borrower in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally, and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability.
SECTION 9.4 Financial Information.
(a) The most recent annual audited consolidated balance sheet of
Borrower and the related consolidated statements of operations and cash flows
for the Fiscal Year then ended, copies of which have been delivered to each
Bank, fairly present, in conformity with GAAP, the consolidated financial
position of Borrower as of the end of such Fiscal Year and its consolidated
results of operations and cash flows for such Fiscal Year.
(b) The most recent quarterly unaudited consolidated balance sheet of
Borrower delivered to Banks, and the related unaudited consolidated statements
of operations and cash flows for the portion of Borrower's Fiscal Year then
ended, fairly present, in conformity with GAAP applied on a basis consistent
with the financial statements referred to in Section 9.4(a), the consolidated
financial position of Borrower as of such date and its consolidated results of
operations and cash flows for such portion of Borrower's Fiscal Year.
(c) Except as disclosed in writing to Banks prior to the execution and
delivery of this Agreement, since the date of Borrower's most recent annual and
quarterly consolidated balance sheet and consolidated statements of operations
and cash flow delivered to Banks, no Material Adverse Change has occurred.
(d) After giving effect to the transactions contemplated by this
Agreement, (i) the fair value of the property of Borrower and each of its
Subsidiaries is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of Borrower or its Subsidiaries, (ii) the
present fair saleable value of the assets of Borrower and each of its
Subsidiaries is not less than the amount that will be required to pay the
liability of Borrower and each of its Subsidiaries on their debts as they become
absolute and matured, (iii) Borrower and each of its Subsidiaries is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (iv) neither Borrower nor any of its Subsidiaries intends to, and
neither Borrower nor any of its Subsidiaries
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believes that it will, incur debts or liabilities beyond its ability to pay as
such debts and liabilities mature, and (v) neither Borrower nor any of its
Subsidiaries is engaged in a business or transaction, and neither Borrower nor
any of its Subsidiaries is about to engage in business or a transaction for
which Borrower's or its Subsidiaries' property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which Borrower or its Subsidiaries is engaged.
SECTION 9.5 Litigation. Except for matters disclosed on Schedule 3 attached
hereto, there is no action, suit or proceeding pending against, or to the
knowledge of Borrower, threatened against or affecting Borrower or any of its
Subsidiaries before any Governmental Authority in which there is a reasonable
possibility of an adverse decision which could result in a Material Adverse
Change or which could in any manner draw into question the validity of the Loan
Papers.
SECTION 9.6 ERISA. Neither Borrower nor any ERISA Affiliate of Borrower
maintains or has ever maintained or been obligated to contribute to any Plan
covered by Title IV of ERISA or subject to the funding requirements of Section
412 of the Code or Section 302 of ERISA. Each Plan maintained by Borrower or any
ERISA Affiliate of Borrower is in compliance in all material respects with all
applicable Laws. Except in such instances where an omission or failure would not
result in a Material Adverse Change on the business, financial condition or
prospects of Borrower, (a) all returns, reports and notices required to be filed
with any regulatory agency with respect to any Plan have been filed timely, and
(b) neither Borrower nor any ERISA Affiliate of Borrower has failed to make any
contribution or pay any amount due or owing as required by the terms of any
Plan. There are no pending or, to the best of Borrower's knowledge, threatened
claims, lawsuits, investigations or actions (other than routine claims for
benefits in the ordinary course) asserted or instituted against, and neither
Borrower nor any ERISA Affiliate of Borrower has knowledge of any threatened
litigation or claims against, the assets of any Plan or its related trust or
against any fiduciary of a Plan with respect to the operation of such Plan that
are likely to result in liability of Borrower causing a Material Adverse Change.
Except in such instances where an omission or failure would not result in a
Material Adverse Change, each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is, and has been during the period from
its adoption to date, so qualified, both as to form and operation and all
necessary governmental approvals, including a favorable determination as to the
qualification under the Code of such Plan and each amendment thereto, have been
or will be timely obtained. Neither Borrower nor any ERISA Affiliate of Borrower
has engaged in any prohibited transactions, within the meaning of Section 406 of
ERISA or Section 4975 of the Code, in connection with any Plan which would
result in liability of Borrower causing a Material Adverse Change. Neither
Borrower nor any ERISA Affiliate of Borrower maintains or contributes to any
Plan that provides a post-employment health benefit, other than a benefit
required under Section 601 of ERISA, or maintains or contributes to a Plan that
provides health benefits that is not fully funded except where the failure to
fully fund such Plan would not result in a Material Adverse Change. Neither
Credit Party nor any ERISA Affiliate of Borrower maintains, has established or
has ever participated in a multiple employer welfare benefit arrangement within
the meaning of Section 3(40)(A) of ERISA.
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SECTION 9.7 Taxes and Filing of Tax Returns. Borrower and each of its
Subsidiaries has filed all tax returns required to have been filed and has paid
all Taxes shown to be due and payable on such returns, including interest and
penalties, and all other Taxes which are payable by such party, to the extent
the same have become due and payable. Borrower does not know of any proposed
material Tax assessment against it or any of its Subsidiaries and all Tax
liabilities of Borrower and its Subsidiaries are adequately provided for. Except
as disclosed in writing to Banks prior to the date hereof, no income tax
liability of Borrower or any of its Subsidiaries has been asserted by the
Internal Revenue Service or other Governmental Authority for Taxes in excess of
those already paid.
SECTION 9.8 Ownership of Properties Generally. Borrower and each of its
Subsidiaries has good and valid fee simple or leasehold title to all material
properties and assets purported to be owned by it, including, without
limitation, all assets reflected in the balance sheets referred to in Sections
9.4(a) and 9.4(b) and all assets which are used by Borrower and its Subsidiaries
in the operation of their respective businesses, and none of such properties or
assets is subject to any Lien other than Permitted Encumbrances.
SECTION 9.9 Mineral Interests. Borrower has good and defensible title to
all Mineral Interests described in the Reserve Report, including, after giving
effect to the Central Resources Acquisition, the Central Resources Properties,
free and clear of all Liens except Permitted Encumbrances. All such Mineral
Interests are valid, subsisting, and in full force and effect, and all rentals,
royalties, and other amounts due and payable in respect thereof have been duly
paid. Without regard to any consent or non-consent provisions of any joint
operating agreement covering any of Borrower's Proved Mineral Interests,
Borrower's share of (a) the costs for each Proved Mineral Interest described in
the Reserve Report is not greater than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and described
therein by the respective designations "working interests", "WI", "gross working
interest", "GWI", or similar terms, and (b) production from, allocated to, or
attributed to each such Proved Mineral Interest is not less than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the designations net revenue interest, NRI, or
similar terms. Each well drilled in respect of each Proved Producing Mineral
Interest described in the Reserve Report (y) is capable of, and is presently,
producing Hydrocarbons in commercially profitable quantities, and Borrower is
currently receiving payments for its share of production, with no funds in
respect of any thereof being presently held in suspense, other than any such
funds being held in suspense pending delivery of appropriate division orders,
and (z) has been drilled, bottomed, completed, and operated in compliance with
all applicable Laws and no such well which is currently producing Hydrocarbons
is subject to any penalty in production by reason of such well having produced
in excess of its allowable production.
SECTION 9.10 Licenses, Permits, Etc. Borrower and each of its Subsidiaries
possesses such valid franchises, certificates of convenience and necessity,
operating rights, licenses, permits, consents, authorizations, exemptions and
orders of Governmental Authorities, as are
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necessary to carry on its business as now conducted and as proposed to be
conducted, except to the extent a failure to obtain any such item would not
result in a Material Adverse Change.
SECTION 9.11 Compliance with Law. The business and operations of Borrower
and its Subsidiaries have been and are being conducted in accordance with all
applicable Laws other than violations of Laws which do not (either individually
or collectively) result in a Material Adverse Change.
SECTION 9.12 Full Disclosure. All information heretofore furnished by
Borrower to Administrative Agent or any Bank for purposes of or in connection
with this Agreement, any Loan Paper or any transaction contemplated hereby or
thereby is, and all such information hereafter furnished by or on behalf of
Borrower to Administrative Agent or any Bank will be, true, complete and
accurate in every material respect. Borrower has disclosed or has caused to be
disclosed to Banks in writing any and all facts (other than facts of general
public knowledge) which might reasonably be expected to result in a Material
Adverse Change.
SECTION 9.13 Organizational Structure; Nature of Business. Borrower and
each of its Subsidiaries is engaged only in the business of acquiring, owning,
exploring, developing and operating Mineral Interests and the production,
marketing, processing and transporting of Hydrocarbons therefrom. Schedule 4
hereto accurately reflects (i) the jurisdiction of incorporation or organization
of Borrower and each of its Subsidiaries, (ii) each jurisdiction in which
Borrower and each of its Subsidiaries is qualified to transact business as a
foreign corporation, foreign partnership or foreign limited liability company,
(iii) the authorized, issued and outstanding stock, limited partnership or
limited liability interests of Borrower and each of its Subsidiaries (and the
legal and beneficial owners of such capital stock and other equity interests),
and (iv) all outstanding warrants, options, subscription rights, convertible
securities or other rights to purchase capital stock, limited partnership or
limited liability interests of Borrower.
SECTION 9.14 Environmental Matters. Except for matters disclosed on
Schedule 5 hereto, no operation conducted by Borrower or any Subsidiary of
Borrower and no real or personal property now or previously owned or leased by
Borrower or any Subsidiary of Borrower (including, without limitation, Mineral
Interests) and no operations conducted thereon, and to Borrower's knowledge, no
operations of any prior owner, lessee or operator of any such properties, is or
has been in violation of any Applicable Environmental Law other than violations
which neither individually nor in the aggregate could result in a Material
Adverse Change. Except for matters disclosed on Schedule 5 hereto, neither
Borrower, any Subsidiary of Borrower, nor any such property or operation is the
subject of any existing, pending or, to Borrower's knowledge, threatened
Environmental Complaint which could, individually or in the aggregate, result in
Material Adverse Change. All notices, permits, licenses, and similar
authorizations, required to be obtained or filed in connection with the
ownership of each tract of real property or operations of Borrower or any
Subsidiary of Borrower thereon and each item of personal property owned, leased
or operated by Borrower or any Subsidiary of Borrower, including, without
limitation, notices, licenses, permits and authorizations required in connection
with any past or present treatment, storage, disposal, or release of Hazardous
Substances into the environment, have been duly obtained or filed except to the
extent
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the failure to obtain or file such notices, licenses, permits and authorizations
would not result in a Material Adverse Change. All Hazardous Substances,
generated at each tract of real property and by each item of personal property
owned, leased or operated by Borrower or any Subsidiary of Borrower have been
transported, treated, and disposed of only by carriers or facilities maintaining
valid permits under RCRA and all other Applicable Environmental Laws for the
conduct of such activities except in such cases where the failure to obtain such
permits could not, individually or in the aggregate, result in a Material
Adverse Change. Except for matters disclosed on Schedule 5 hereto, there have
been no Hazardous Discharges which were not in compliance with Applicable
Environmental Laws other than Hazardous Discharges which would not, individually
or in the aggregate, result in a Material Adverse Change. Except for matters
disclosed on Schedule 5 hereto, neither Borrower nor any Subsidiary of Borrower
has any contingent liability in connection with any Hazardous Discharge which
could reasonably be expected to result in a Material Adverse Change.
SECTION 9.15 Burdensome Obligations. Neither Borrower, nor any Subsidiary
of Borrower, nor any of their respective properties is subject to any Law or any
pending or threatened change of Law or subject to any restriction under its
articles (or certificate) of incorporation, bylaws, regulations, partnership
agreement or comparable charter or other organizational documents or under any
agreement or instrument to which Borrower or any Subsidiary of Borrower or by
which Borrower or any Subsidiary of Borrower or any of their respective
properties may be subject or bound, which is so unusual or burdensome as to be
likely in the foreseeable future to result in a Material Adverse Change. Without
limiting the foregoing, neither Borrower nor any Subsidiary of Borrower is a
party to or bound by any agreement or subject to any order of any Governmental
Authority which prohibits or restricts in any way the right of Borrower or any
Subsidiary of Borrower to make Distributions.
SECTION 9.16 Fiscal Year. Borrower's Fiscal Year is January 1 through
December 31.
SECTION 9.17 No Default. Neither a Default nor an Event of Default has
occurred or will exist after giving effect to the transactions contemplated by
this Agreement or the other Loan Papers.
SECTION 9.18 Government Regulation. Neither Borrower nor any Subsidiary of
Borrower is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act (as any of the
preceding acts have been amended), the Investment Company Act of 1940 or any
other law which regulates the incurring by Borrower or any Subsidiary of
Borrower of Debt, including, but not limited to laws relating to common contract
carriers or the sale of electricity, gas, steam, water or other public utility
services.
SECTION 9.19 Insider. Neither Borrower nor any Subsidiary of Borrower is,
and no Person having "control" (as that term is defined in 12 U.S.C. Section
375(b) or regulations promulgated thereunder) of Borrower or any Subsidiary of
Borrower is an "executive officer", "director" or "shareholder" of any Bank or
any bank holding company of which any Bank is a Subsidiary or of any Subsidiary
of such bank holding company.
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SECTION 9.20 Gas Balancing Agreements and Advance Payment Contracts. On the
date of this Agreement, (a) there is no Material Gas Imbalance, and (b) the
aggregate amount of all Advance Payments received by Borrower under Advance
Payment Contracts which have not been satisfied by delivery of production does
not exceed $250,000.
SECTION 9.21 Central Resources Acquisition Documents. Borrower has provided
each Bank with a true and correct copy of each of the Central Resources
Acquisition Documents including all amendments and modifications thereto. No
material rights or obligations of any party to any of such Central Resources
Acquisition Documents have been waived and neither Borrower nor any of its
Subsidiaries, nor to the best knowledge of Borrower or any other party to any of
such Central Resources Acquisition Documents, is in default of its obligations
thereunder. Each of the Central Resources Acquisition Documents is a valid,
binding and enforceable obligation of the parties thereto in accordance with its
terms and is in full force and effect. Each representation and warranty made by
Borrower, and to the best knowledge of Borrower, by Sellers in the Central
Resources Acquisition Agreement and the other Central Resources Acquisition
Documents (a) was true and correct when made, and (b) will be true and correct
on the Closing Date.
ARTICLE 10 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
SECTION 10.1 Information. Borrower will deliver, or cause to be delivered,
to each Bank:
(a) as soon as available and in any event within ninety (90) days after
the end of each Fiscal Year, a consolidated balance sheet of Borrower as of the
end of such Fiscal Year and the related consolidated statements of income and
statements of cash flow for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported by
Borrower in accordance with GAAP and audited by a firm of independent public
accountants of nationally recognized standing and acceptable to Administrative
Agent;
(b) (i) as soon as available and in any event within forty-five (45)
days after the end of each of the first three (3) Fiscal Quarters of each Fiscal
Year, consolidated balance sheets of Borrower as of the end of such Fiscal
Quarter and the related consolidated statements of income and statements of cash
flow for such quarter and for the portion of Borrower's Fiscal Year ended at the
end of such Fiscal Quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of
Borrower's previous Fiscal Year;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 10.1(a) and 10.1(b), a certificate of a
Financial Officer of Borrower in the form of Exhibit F attached hereto, (i)
setting forth in reasonable detail the calculations required to establish
whether Borrower was in compliance with the requirements of Article 12 below on
the date of such financial statements, (ii) stating whether there exists on the
date of such certificate any
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Default and, if any Default then exists, setting forth the details thereof and
the action which Borrower is taking or proposes to take with respect thereto,
(iii) stating whether or not such financial statements fairly reflect in all
material respects the results of operations and financial condition of Borrower
as of the date of the delivery of such financial statements and for the period
covered thereby, (iv) setting forth (A) whether as of such date there is a
Material Gas Imbalance and, if so, setting forth the amount of net gas
imbalances under Gas Balancing Agreements to which Borrower or any of its
Subsidiaries is a party or by which any Mineral Interests owned by Borrower or
any of its Subsidiaries are bound, and (B) the aggregate amount of all Advance
Payments received under Advance Payment Contracts to which Borrower or any of
its Subsidiaries is a party or by which any Mineral Interests owned by Borrower
or any of its Subsidiaries are bound which have not been satisfied by delivery
of production, if any, and (v) a summary of the Hedge Transactions to which
Borrower or any of its Subsidiaries is a party on such date;
(d) as soon as available and in any event on or before the last day of
each calendar month, a report of Borrower's Financial Officer setting forth in
reasonable detail Borrower's Net Revenues for the preceding calendar month;
(e) promptly upon the mailing thereof to the stockholders of Borrower
generally, copies of all financial statements, material reports and proxy
statements so mailed;
(f) promptly upon the filing thereof, copies of all final registration
statements, post effective amendments thereto and annual, quarterly or special
reports which Borrower shall have filed with the Securities and Exchange
Commission; provided that Borrower must deliver, or cause to be delivered, any
annual reports which Borrower shall have filed with the Securities and Exchange
Commission, within ninety (90) days after the end of each Fiscal Year of
Borrower, and any quarterly reports which Borrower shall have filed with the
Securities and Exchange Commission, within forty-five (45) days after the end of
each of the first three (3) Fiscal Quarters of each Fiscal Year of Borrower;
(g) promptly upon receipt of same, any notice or other information
received by Borrower or any Subsidiary of Borrower indicating any potential,
actual or alleged (i) non-compliance with or violation of the requirements of
any Applicable Environmental Law which could result in liability to Borrower or
any Subsidiary of Borrower for fines, clean up or any other remediation
obligations or any other liability in excess of $100,000 in the aggregate; (ii)
threatened Hazardous Discharge which Hazardous Discharge would impose on
Borrower or any Subsidiary of Borrower a duty to report to a Governmental
Authority or to pay cleanup costs or to take remedial action under any
Applicable Environmental Law which could result in liability to Borrower or any
Subsidiary of Borrower for fines, clean up and other remediation obligations or
any other liability in excess of $100,000 in the aggregate; or (iii) the
existence of any Lien arising under any Applicable Environmental Law securing
any obligation to pay fines, clean up or other remediation costs or any other
liability in excess of $100,000 in the aggregate. Without limiting the
foregoing, Borrower or any Subsidiary of Borrower shall provide to Banks
promptly upon receipt of same by Borrower or any Subsidiary of Borrower copies
of all environmental consultants or engineers reports
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received by Borrower or any Subsidiary of Borrower which would render the
representation and warranty contained in Section 9.14 untrue or inaccurate in
any respect;
(h) in the event any notification is provided to any Bank or
Administrative Agent pursuant to Section 10.1(f) hereof or Administrative Agent
or any Bank otherwise learns of any event or condition under which any such
notice would be required, then, upon request of Required Banks, Borrower shall
within thirty (30) days of such request, cause to be furnished to Administrative
Agent and each Bank a report by an environmental consulting firm acceptable to
Administrative Agent and Required Banks, stating that a review of such event,
condition or circumstance has been undertaken (the scope of which shall be
acceptable to Administrative Agent and Required Banks) and detailing the
findings, conclusions and recommendations of such consultant. Borrower shall
bear all expenses and costs associated with such review and updates thereof;
(i) immediately upon any Authorized Officer becoming aware of the
occurrence of any Default, a certificate of an Authorized Officer setting forth
the details thereof and the action which Borrower is taking or proposes to take
with respect thereto;
(j) [Intentionally Deleted].
(k) promptly notify Banks of any Material Adverse Change; and
(l) from time to time such additional information regarding the
financial position or business of Borrower and its Subsidiaries as
Administrative Agent, at the request of any Bank, may reasonably request.
SECTION 10.2 Business of Borrower. The sole business of Borrower is and
shall continue to be solely the acquisition, ownership, exploration, development
and operation of Mineral Interests and the production, marketing, processing and
transportation of Hydrocarbons therefrom.
SECTION 10.3 Maintenance of Existence. Borrower shall, and shall cause each
of its Subsidiaries to, at all times (a) maintain its corporate, partnership or
limited liability company existence in its state of incorporation or
organization, and (b) maintain its good standing and qualification to transact
business in all jurisdictions where the failure to maintain good standing or
qualification to transact business could result in a Material Adverse Change.
SECTION 10.4 Title Data. In addition to the title information required by
Article 8, Borrower shall, upon the request of Required Banks, cause to be
delivered to Administrative Agent such title opinions and other information
regarding title to Mineral Interests owned by Borrower and the perfection and
priority of Administrative Agent's Liens therein as are appropriate to determine
the status thereof.
SECTION 10.5 Right of Inspection. Borrower will permit, and will cause each
of its Subsidiaries to permit, any officer, employee or agent of Administrative
Agent or of any Bank
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to visit and inspect any of the assets of Borrower and its Subsidiaries, examine
Borrower's and its Subsidiaries' books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of Borrower
and its Subsidiaries with Borrower's and its Subsidiaries' officers, accountants
and auditors, all at such reasonable times and as often as Administrative Agent
or any Bank may reasonably request, all at the expense of Borrower; provided,
that, in the absence of a Default or Event of Default, neither Administrative
Agent nor any Bank will require Borrower to incur any unreasonable cost or
expense under this Section 10.5.
SECTION 10.6 Maintenance of Insurance. Borrower will, and will cause each
of its Subsidiaries to, at all times maintain or cause to be maintained
insurance covering such risks as are customarily carried by businesses similarly
situated, including, without limitation, the following: (a) workmen's
compensation insurance; (b) employer's liability insurance; (c) comprehensive
general public liability and property damage insurance; (d) comprehensive
automobile liability insurance, and (e) such other perils as are customarily
insured against in the oil and gas industry. All loss payable clauses or
provisions in all policies of insurance maintained by Borrower and its
Subsidiaries pursuant to this Section 10.6 shall be endorsed in favor of and
made payable to Administrative Agent for the ratable benefit of Banks, as their
interests may appear. Administrative Agent shall have the right, for the ratable
benefit of the Banks, to collect, and Borrower hereby assigns to Administrative
Agent for the ratable benefit of Banks (and hereby agrees to cause each
Subsidiary of Borrower to assign), any and all monies that may become payable
under any such policies of insurance by reason of damage, loss or destruction of
any of property which stands as security for the Obligations or any part
thereof, and Administrative Agent may, at its election, either apply for the
ratable benefit of Banks all or any part of the sums so collected toward payment
of the Obligations, whether or not such Obligations are then due and payable, in
such manner as Administrative Agent may elect or release same to Borrower or the
applicable Subsidiary of Borrower.
SECTION 10.7 Payment of Taxes and Claims. Borrower will, and will cause
each of its Subsidiaries to, pay (a) all Taxes imposed upon it or any of its
assets or with respect to any of its franchises, business, income or profits
before any material penalty or interest accrues thereon, and (b) all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by Law have or
might become a Lien (other than a Permitted Encumbrance) on any of its assets;
provided, however, no payment of Taxes or claims shall be required if (i) the
amount, applicability or validity thereof is currently being contested in good
faith by appropriate action promptly initiated and diligently conducted in
accordance with good business practices and no material part of the property or
assets of Borrower or any of its Subsidiaries is subject to any pending levy or
execution, (ii) Borrower and its Subsidiaries, as and to the extent required in
accordance with GAAP, shall have set aside on their books reserves (segregated
to the extent required by GAAP) deemed by them to be adequate with respect
thereto, and (iii) the Borrower has notified Administrative Agent of such
circumstances in detail satisfactory to Administrative Agent.
SECTION 10.8 Compliance with Laws and Documents. Borrower will, and will
cause each of its Subsidiaries to, comply with all Laws, their respective
certificates (or articles)
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of incorporation, bylaws, regulations and similar organizational documents and
all Material Agreements to which Borrower or any of its Subsidiaries is a party,
if a violation, alone or when combined with all other such violations, could
result in a Material Adverse Change.
SECTION 10.9 Operation of Properties and Equipment.
(a) Borrower will, and will cause each of its Subsidiaries to,
maintain, develop and operate (or cause the operator to maintain and operate to
the extent Borrower or any of its Subsidiaries is not the operator) its Mineral
Interests in a good and workmanlike manner, and observe and comply with all of
the terms and provisions, express or implied, of all oil and gas leases relating
to such Mineral Interests so long as such Mineral Interests are capable of
producing Hydrocarbons and accompanying elements in paying quantities.
(b) Borrower will, and will cause each of its Subsidiaries to, comply
in all respects with all contracts and agreements applicable to or relating to
its Mineral Interest or the production and sale of Hydrocarbons and accompanying
elements therefrom.
(c) Borrower will, and will cause each of its Subsidiaries to, at all
times maintain, preserve and keep all operating equipment used with respect to
its Mineral Interests in proper repair, working order and condition, and make
all necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such operating equipment shall at
all times be properly preserved and maintained; provided that, no item of
operating equipment need be so repaired, renewed, replaced, added to or improved
if Borrower shall in good faith determine that such action is not necessary or
desirable for the continued efficient and profitable operation of the business
of Borrower and its Subsidiaries.
SECTION 10.10 Environmental Law Compliance. Borrower will, and will cause
each of its Subsidiaries to, comply with all Applicable Environmental Laws,
including, without limitation, (a) all licensing, permitting, notification and
similar requirements of Applicable Environmental Laws, and (b) all provisions of
all Applicable Environmental Laws regarding storage, discharge, release,
transportation, treatment and disposal of Hazardous Substances. Borrower will,
and will cause each of its Subsidiaries to, promptly pay and discharge when due
all legal debts, claims, liabilities and obligations with respect to any
clean-up or remediation measures necessary to comply with Applicable
Environmental Laws.
SECTION 10.11 ERISA Reporting Requirements. Borrower shall furnish, or
cause to be furnished, to Administrative Agent:
(a) Promptly and in any event (i) within thirty (30) days after
Borrower or any ERISA Affiliate knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of Borrower or any ERISA
Affiliate has occurred, and (ii) within fifteen (15) days after Borrower or any
ERISA Affiliate knows or has reason to know that any other ERISA Event with
respect to any Plan of Borrower or any ERISA Affiliate has occurred or a request
for minimum funding waiver under Section 412 of the Code with respect to any
Plan of Borrower or any ERISA
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Affiliate has been made, a written notice describing such event and describing
what action is being taken or is proposed to be taken with respect thereto,
together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within five (5) Domestic Business Days
after receipt thereof by Borrower or any ERISA Affiliate from the PBGC, copies
of each notice received by Borrower or any ERISA Affiliate of the PBGC's
intention to terminate any Plan or to have a trustee appointed to administer any
Plan;
(c) Promptly and in any event within thirty (30) days after the receipt
by Borrower of a request therefor by a Bank, copies of any annual and other
report (including Schedule B thereto) with respect to a Plan filed by Borrower
or any ERISA Affiliate with the United States Department of Labor, the Internal
Revenue Service or the PBGC;
(d) Promptly, and in any event within ten (10) Domestic Business Days
after receipt thereof, a copy of any correspondence Borrower or any ERISA
Affiliate receives from the Plan Sponsor (as defined by Section 4001(a)(10) of
ERISA) of any Plan asserting withdrawal liability pursuant to Section 4219 or
4202 of ERISA upon Borrower or any ERISA Affiliate, and a statement from the
chief financial officer of Borrower or such ERISA Affiliate setting forth
details as to the events giving rise to such withdrawal liability and the action
which Borrower or such ERISA Affiliate is taking or proposes to take with
respect thereto;
(e) Notification within thirty (30) days of the effective date thereof
of any material increases in the benefits of any existing Plan which is not a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA), or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which Borrower or any ERISA Affiliate was not previously contributing;
(f) Notification within five (5) Domestic Business Days after Borrower
or any ERISA Affiliate knows or has reason to know that Borrower or any such
ERISA Affiliate has or intends to file a notice of intent to terminate any Plan
under a distress termination within the meaning of Section 4041(c) of ERISA and
a copy of such notice; and
(g) Promptly after receipt of written notice of commencement thereof,
notice of all (i) claims made by participants or beneficiaries with respect to
any Plan and (ii) actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting Borrower or any ERISA Affiliate with respect to
any Plan, except those which, in the aggregate, if adversely determined would
not result in a Material Adverse Change.
SECTION 10.12 Additional Documents. Borrower will, and will cause each of
its Subsidiaries (to the extent each is party thereto) to, cure promptly any
defects in the creation and issuance of each Note, and the execution and
delivery of this Agreement and the other Loan Papers and, at Borrower's expense,
Borrower shall promptly and duly execute and deliver to each Bank, and cause
each of its Subsidiaries to promptly and duly execute and deliver to each Bank,
upon
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reasonable request, all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and agreements
of Borrower and each of its Subsidiaries in this Agreement and the other Loan
Papers as may be reasonably necessary or appropriate in connection therewith.
SECTION 10.13 Environmental Review. Not later than ten (10) days prior to
the date of any acquisition by Borrower of Mineral Interests or related assets,
other than an acquisition of additional interests in Mineral Interests in which
Borrower previously held an interest, Borrower shall deliver to Administrative
Agent a report in form, scope and detail acceptable to Administrative Agent from
environmental engineering firms acceptable to Administrative Agent, which report
or reports shall set forth the results of a Phase I environmental review of such
Mineral Interests and related assets.
SECTION 10.14 Oil and Gas Hedge Transactions. Borrower will not cancel,
terminate, violate or otherwise breach the terms of, and shall maintain in full
force and effect, the Oil and Gas Hedge Transactions that Borrower is required
to enter into pursuant to Section SECTION 8.3.
ARTICLE 11 NEGATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 11.1 Incurrence of Debt. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, incur, become or remain liable for any Debt
other than (a) the Obligations, (b) the Pecos-Gomez Credit Facility, and (c)
other Debt in an aggregate amount outstanding at any time not to exceed
$500,000.
SECTION 11.2 Restricted Payments. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, directly or indirectly, declare or pay, or
incur any liability to declare or pay, any Restricted Payment.
SECTION 11.3 Negative Pledge. Borrower will not, nor will Borrower permit
any of its Subsidiaries to, create, assume or suffer to exist any Lien on any
asset of Borrower or any of its Subsidiaries other than Permitted Encumbrances.
Borrower will not, nor will Borrower permit any of its Subsidiaries to, enter
into or become bound by any agreement (other than this Agreement) that prohibits
or otherwise restricts the right of Borrower or any of its Subsidiaries to
create, assume or suffer to exist any Lien on any of Borrower's or any of its
Subsidiaries' assets in favor of Administrative Agent for the ratable benefit of
Banks.
SECTION 11.4 Consolidations and Mergers. Borrower will not, nor will
Borrower permit any Subsidiary to, consolidate or merge with or into any other
Person.
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SECTION 11.5 Asset Dispositions. Borrower will not, nor will Borrower
permit any of its Subsidiaries (other than Pecos-Gomez, L.P.), to sell, lease,
transfer, abandon or otherwise dispose of any Proved Producing Mineral Interests
with an aggregate value greater than $5,000,000 during any period between
Scheduled Redeterminations. Borrower shall deliver to Administrative Agent
written notice (a "Regulated Sale Notice") of any proposed sale, lease,
transfer, abandonment or other disposition by Borrower or any of its
Subsidiaries (other than Pecos-Gomez, L.P.) of Proved Producing Mineral
Interests not less than fifteen (15) days prior to completing any such
transaction if, after giving effect thereto, the aggregate value of all Mineral
Interests sold, leased, transferred, abandoned or disposed of by Borrower and
its Subsidiaries subsequent to the most recent preceding Scheduled
Redetermination would exceed $2,500,000 (a "Regulated Sale"). Such notice shall
set forth all of the material terms of such Regulated Sale, including the amount
and type of consideration payable to Borrower and its Subsidiaries in connection
therewith. In the event Borrower or any of its Subsidiaries completes a
Regulated Sale, (a) the Borrowing Base shall reduce automatically simultaneously
with the closing of such sale in an amount equal to the value of the Proved
Producing Mineral Interests which are the subject of such Regulated Sale, and
(b) immediately upon closing of such Regulated Sale, and as a condition thereto,
Borrower shall make the mandatory prepayment of the Revolving Loan then required
pursuant to Section SECTION 3.4. For purposes of this Section SECTION 11.5, the
"value" of Proved Producing Mineral Interests shall be the cash purchase price
paid therefor in connection with any sale of such Proved Producing Mineral
Interests for cash. In all other events, "value" shall be the value determined
by Administrative Agent in good faith in the exercise of its reasonable
discretion with the approval of Required Banks. In no event will Borrower sell,
transfer or dispose of any capital stock or other equity interest, in any
Subsidiary of Borrower nor will any Subsidiary of Borrower issue or sell, any
capital stock or other equity interest or any option, warrant or other right to
acquire such capital stock or equity interest or security convertible into such
capital stock or equity interest to any Person other than the direct parent of
such issuer on the Closing Date.
SECTION 11.6 Amendments to Organizational Documents; Other Material
Agreements. Borrower will not, nor will Borrower permit any of its Subsidiaries
to, enter into or permit any modification or amendment of, or waive any material
right or obligation of any Person under, its certificate or articles of
incorporation, bylaws, partnership agreement, regulations or other
organizational documents other than amendments, modifications and waivers which
could not, individually or in the aggregate, result in a Material Adverse
Change.
SECTION 11.7 Use of Proceeds. The proceeds Borrowings and Letters of Credit
issued hereunder shall be used only (a) to complete the Central Resources
Acquisition, (b) to acquire, drill, develop and produce Mineral Interests, and
(c) for other general corporate purposes, including working capital. None of
such proceeds (including, without limitation, proceeds of Letters of Credit
issued hereunder) will be used, directly or indirectly, for any other purpose,
including, without limitation, the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, and none of such proceeds
will be used in violation of applicable Law (including, without limitation, the
Margin Regulations). Letters of Credit will be issued hereunder only for the
purpose of securing bids, tenders, bonds, contracts and other obligations
entered into in the ordinary course of Borrower's business. Without limiting the
foregoing, except as expressly provided in the
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following sentence, no Letters of Credit will be issued hereunder for the
purpose of providing credit enhancement with respect to any Debt or equity
security of Borrower or any Subsidiary of Borrower or to secure Borrower's or
any of its Subsidiaries' obligations with respect to Hedge Transactions other
than Hedge Transactions with a Bank. Notwithstanding the preceding sentence but
subject to the other provisions of this Agreement regarding the issuance of
Letters of Credit hereunder, Letters of Credit may be issued hereunder to secure
Borrower's obligations with respect to Oil and Gas Hedge Transactions; provided,
that the aggregate amount of such Letters of Credit and all cash and Permitted
Investments securing such Oil and Gas Hedge Transactions shall not exceed
$2,500,000 at any time.
SECTION 11.8 Investments. Borrower will not, nor will Borrower permit any
of its Subsidiaries to, directly or indirectly, make or have outstanding any
Investment; provided that so long as no Borrowing Base Deficiency exists
Borrower may, and may permit its Subsidiaries to, make Permitted Investments.
SECTION 11.9 Transactions with Affiliates. Borrower will not, nor will
Borrower permit any of its Subsidiaries to, engage in any transaction with an
Affiliate unless such transaction is as favorable to such party as could be
obtained in an arm's length transaction with an unaffiliated Person in
accordance with prevailing industry customs and practices.
SECTION 11.10 ERISA. Except in such instances where an omission or failure
would not result in a Material Adverse Change, Borrower will not, nor will
Borrower permit any of its Subsidiaries to (a) take any action or fail to take
any action which would result in a violation of ERISA, the Code or other laws
applicable to the Plans maintained or contributed to by it or any ERISA
Affiliate, or (b) modify the term of, or the funding obligations or contribution
requirements under any existing Plan, establish a new Plan, or become obligated
or incur any liability under a Plan that is not maintained or contributed to by
a Borrower or any ERISA Affiliate as of the Closing Date.
SECTION 11.11 Hedge Transactions. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, enter into (a) Oil and Gas Hedge Transactions
(other than Unrestricted Oil and Gas Hedge Transactions) which would cause the
volume of crude oil with respect to which a payment is calculated under such Oil
and Gas Hedge Transactions to exceed eighty percent (80%) of Borrower's
anticipated production of crude oil from Proved Producing Mineral Interests
during the period from the immediately preceding settlement date (or the
commencement of such Hedge Transaction if there is no prior settlement date) to
such settlement date and (b) Oil and Gas Hedge Transactions which would cause
the volume of natural gas with respect to which a settlement is calculated under
such Oil and Gas Hedge Transactions to exceed seventy-five percent (75%) of
Borrower's anticipated production of natural gas from Proved Producing Mineral
Interests during the period from the immediately preceding settlement date (or
the commencement of such Hedge Transaction if there is no prior settlement date)
to such settlement date.
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SECTION 11.12 Fiscal Year. Borrower will not change its fiscal year.
SECTION 11.13 Change in Business. Borrower will not engage in any business
other than the business engaged in by Borrower on the date hereof as described
in Section 9.13 hereof.
ARTICLE 12 FINANCIAL COVENANTS
Borrower agrees that so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 12.1 Current Ratio of Borrower. Borrower will not permit its ratio
of Consolidated Current Assets to its Consolidated Current Liabilities to be
less than 1.0 to 1.0 at any time.
SECTION 12.2 Minimum Consolidated Tangible Net Worth. Borrower will not
permit its Consolidated Tangible Net Worth to be less than the Required
Consolidated Tangible Net Worth at any time.
ARTICLE 13 DEFAULTS
SECTION 13.1 Events of Default. If one or more of the following events
(collectively "Events of Default" and individually an "Event of Default") shall
have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal on any Note;
(b) Borrower shall fail to pay when due accrued interest on any Note or
any fees or any other amount payable hereunder and such failure shall continue
for a period of three (3) days following the due date;
(c) Borrower shall fail to observe or perform any covenant or agreement
contained in Section SECTION 8.3 or Articles 11 or 12 of this Agreement;
(d) Borrower shall fail to observe or perform any covenant or agreement
contained in this Agreement or any other Loan Papers (other than those
referenced in Sections 13.1(a), 13.1(b), or 13.1(c)) and such failure continues
for a period of twenty (20) days after the earlier of (i) the date any
Authorized Officer of Borrower acquires knowledge of such failure, or (ii)
written notice of such failure has been given to Borrower by Administrative
Agent or any Bank;
(e) any representation, warranty, certification or statement made or
deemed to have been made by Borrower or any Subsidiary of Borrower in any
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when made;
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(f) Borrower or any Subsidiary of Borrower shall fail to make any
payment when due on any Debt of such Person in a principal amount equal to or
greater than $100,000 or any other event or condition shall occur which (i)
results in the acceleration of the maturity of any such Debt, or (ii) entitles
the holder of such Debt to accelerate the maturity thereof;
(g) Borrower or any Subsidiary of Borrower shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against
Borrower or any Subsidiary of Borrower seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against Borrower or any Subsidiary of Borrower
under the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more final judgments or orders for the payment of money
aggregating in excess of $100,000 shall be rendered against Borrower or any
Subsidiary of Borrower and such judgment or order shall continue unsatisfied and
unstayed for thirty (30) days;
(j) any event occurs with respect to any Plan or Plans pursuant to
which Borrower and/or any ERISA Affiliate incur a liability due and owing at the
time of such event, without existing funding therefor, for benefit payments
under such Plan or Plans in excess of $250,000; or (ii) Borrower, any ERISA
Affiliate, or any other "party-in-interest" or "disqualified person", as such
terms are defined in Section 3(14) of ERISA and Section 4975(e)(2) of the Code,
shall engage in transactions which in the aggregate would reasonably result in a
direct or indirect liability to Borrower or any ERISA Affiliate in excess of
$250,000 under Section 409 or 502 of ERISA or Section 4975 of the Code;
(k) Borrower or any Subsidiary of Borrower shall incur Environmental
Liabilities which, individually or when considered in the aggregate, exceed
$500,000;
(l) this Agreement or any other Loan Paper shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower or any
Subsidiary of Borrower, or Borrower or any Subsidiary of Borrower shall deny
that it has any further liability or obligation under any of the Loan Papers to
which it is a party, or any Lien created by the Loan Papers shall for any reason
(other than the release
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thereof in accordance with the Loan Papers) cease to be a valid, first priority,
perfected Lien upon any of the Proved Mineral Interests purported to be covered
thereby;
(m) a Material Adverse Change shall occur with respect to Borrower or
any Subsidiary of Borrower; or
(n) Douglas H. Miller or Ted Eubank shall cease for any reason to serve
as the Chief Executive Officer or President, respectively, of Borrower on a full
time basis; or
(o) the ownership, directly or indirectly, beneficially or of record,
by any Person or group (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) of shares representing fifty percent (50%) or more of
the aggregate ordinary voting power represented by the issued and outstanding
capital stock of Borrower; or (ii) as of any date, more than fifty percent (50%)
of the Persons comprising the Board of Directors of Borrower were not members of
the Board of Directors of Borrower one year prior to such date;
then, and in every such event, Administrative Agent shall without presentment,
notice or demand (unless expressly provided for herein) of any kind (including,
without limitation, notice of intention to accelerate and acceleration), all of
which are hereby waived, (a) if requested by Required Banks, terminate the
Commitments and they shall thereupon terminate, and (b) if requested by Required
Banks, take such other actions as may be permitted by the Loan Papers including,
declaring the Notes (together with accrued interest thereon) to be, and the
Notes shall thereupon become, immediately due and payable; provided that in the
case of any of the Events of Default specified in Sections 13.1(g) or 13.1(h),
without any notice to Borrower or any other act by Administrative Agent or
Banks, the Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable.
ARTICLE 14 AGENTS
SECTION 14.1 Appointment, Powers, and Immunities. Each Bank hereby
irrevocably appoints and authorizes each Agent to act as its Agent under this
Agreement and the other Loan Papers with such powers and discretion as are
specifically delegated to Agent by the terms of this Agreement and the other
Loan Papers, together with such other powers as are reasonably incidental
thereto. Each Agent (which term as used in this sentence and in Section 14.5 and
the first sentence of Section 14.6 hereof shall include its Affiliates of each
Agent and each Agent's own and its Affiliates' officers, directors, employees,
and Agents): (a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or fiduciary
for any Bank; (b) shall not be responsible to Banks for any recital, statement,
representation, or warranty (whether written or oral) made in or in connection
with any Loan Paper or any certificate or other document referred to or provided
for in, or received by any of them under, any Loan Paper, or for the value,
validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan
Paper, or any other document referred to or provided for therein or for any
failure by Borrower, any Subsidiary of Borrower or any other Person to perform
any of its obligations thereunder; (c) shall not be responsible for or have any
duty to ascertain, inquire into, or verify the
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performance or observance of any covenants or agreements by Borrower or any of
its Subsidiaries or the satisfaction of any condition or to inspect the property
(including the books and records) of Borrower, any of its Subsidiaries or
Affiliates; (d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Paper; and (e) shall not be responsible
for any action taken or omitted to be taken by it under or in connection with
any Loan Paper, except for its own gross negligence or willful misconduct. Each
Agent may employ Agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such Agents or attorneys-in-fact selected by
it with reasonable care. Banks identified as the Syndication Agent under this
Agreement shall not have any right, power, obligation, liability, responsibility
or duty under this Agreement in such capacity. Each Bank acknowledges that it
has not relied, and will not rely, on any Bank identified as the Syndication
Agent in deciding to enter into this Agreement or in taking or not taking action
hereunder.
SECTION 14.2 Reliance by Agents. Each Agent shall be entitled to rely upon
any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for Borrower), independent accountants, and other
experts selected by such Agent. Administrative Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
Administrative Agent receives and accepts an Assignment and Acceptance Agreement
executed in accordance with Section 15.10 hereof. As to any matters not
expressly provided for by this Agreement, the Agents shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of Required Banks, and such instructions
shall be binding on Banks; provided, however, that no Agent shall be required to
take any action that exposes Agents to personal liability or that is contrary to
any Loan Paper or applicable Law or unless it shall first be indemnified to its
satisfaction by Banks against any and all liability and expense which may be
incurred by it by reason of taking any such action.
SECTION 14.3 Defaults. No Agent shall be deemed to have knowledge or notice
of the occurrence of a Default or Event of Default unless Agent has received
written notice from a Bank or Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
Administrative Agent receives such a notice of the occurrence of a Default or
Event of Default, Administrative Agent shall give prompt notice thereof to
Banks. Administrative Agent shall (subject to Section 14.2 hereof) take such
action with respect to such Default or Event of Default as shall reasonably be
directed by Required Banks; provided that, unless and until Administrative Agent
shall have received such directions, Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interest of Banks.
SECTION 14.4 Rights as Bank. With respect to its Commitment and the Loans
made by it, Bank of America (and any successor acting as Administrative Agent)
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and
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may exercise the same as though it were not acting as Administrative Agent, and
the term "Bank" or "Banks" shall, unless the context otherwise indicates,
include Administrative Agent in its individual capacity. Bank of America (and
any successor acting as Administrative Agent) and its Affiliates may (without
having to account therefor to any Bank) accept deposits from, lend money to,
make investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with Borrower or any of its Subsidiaries or
Affiliates as if it were not acting as Administrative Agent, and Bank of America
(and any successor acting as Agent) and its Affiliates may accept fees and other
consideration from Borrower or any of its Subsidiaries or Affiliates for
services in connection with this Agreement or otherwise without having to
account for the same to Banks.
SECTION 14.5 Indemnification. Banks agree to indemnify each Agent (to the
extent not reimbursed by Borrower or any Subsidiary of Borrower hereof, but
without limiting the obligations of Borrower or any Subsidiary of Borrower to so
reimburse) ratably in accordance with their respective Commitments, for any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees), or disbursements of any kind
and nature whatsoever that may be imposed on, incurred by or asserted against
any Agent (including by any Bank) in any way relating to or arising out of any
Loan Paper or the transactions contemplated thereby or any action taken or
omitted by any Agent under any Loan Paper (INCLUDING ANY OF THE FOREGOING
ARISING FROM THE NEGLIGENCE OF ANY AGENT); provided that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Person to be indemnified. Without limitation of the
foregoing, each Bank agrees to reimburse each Agent promptly upon demand for its
ratable share of any costs or expenses payable by Borrower hereunder, to the
extent that such Agent is not promptly reimbursed for such costs and expenses by
Borrower. The agreements contained in this Section 14.5 shall survive payment
and performance in full of the Obligations and all other amounts payable under
this Agreement.
SECTION 14.6 Non-Reliance on Agent and Other Banks. Each Bank agrees that
it has, independently and without reliance on any Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of Borrower and its Subsidiaries and decision to enter into
this Agreement and that it will, independently and without reliance upon any
Agent or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Loan Papers. Except for notices, reports,
and other documents and information expressly required to be furnished to Banks
by Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition, or business of Borrower or any of
its Subsidiaries or Affiliates that may come into the possession of Agent or any
of its Affiliates.
SECTION 14.7 Resignation of Agent. Each Agent may resign at any time by
giving notice thereof to Banks and Borrower. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent to serve in the
capacity of the resigning Agent. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such
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appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of Banks, appoint a
successor Agent which shall be a commercial bank organized under the Laws of the
United States of America having combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor shall thereupon succeed to and become vested with all
the rights, powers, discretion, privileges, and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this 14 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
ARTICLE 15 MISCELLANEOUS
SECTION 15.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telecopy or similar
writing) and shall be given, if to Administrative Agent or any Bank, at its
address or telecopier number set forth on Schedule 1 hereto, and if given to
Borrower, at its address or telecopy number set forth on the signature pages
hereof (or in either case, at such other address or telecopy number as such
party may hereafter specify for the purpose by notice to the other parties
hereto). Each such notice, request or other communication shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 15.1 and the appropriate answerback is received or
receipt is otherwise confirmed, (b) if given by mail, three (3) Domestic
Business Days after deposit in the mails with first class postage prepaid,
addressed as aforesaid or (c) if given by any other means, when delivered at the
address specified in this Section 15.1; provided that notices to Administrative
Agent under Articles 3 or 4 shall not be effective until received.
SECTION 15.2 No Waivers. No failure or delay by Administrative Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note or
other Loan Paper shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law or in any of the other Loan Papers.
SECTION 15.3 Expenses; Indemnification.
(a) Borrower agrees to pay on demand all reasonable costs and expenses
of each Agent in connection with the syndication, preparation, execution,
delivery, modification, and amendment of this Agreement, the other Loan Papers,
and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for each Agent
(including the cost of internal counsel) with respect thereto and with respect
to advising each Agent as to its rights and responsibilities under the Loan
Papers. Borrower further agrees to pay on demand all reasonable costs and
expenses of Administrative Agent and Banks, if any (including, without
limitation, reasonable attorneys' fees and expenses and the cost of internal
counsel), in connection with the enforcement (whether through negotiations,
legal proceedings, or otherwise) of the Loan Papers and the other documents to
be delivered hereunder.
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(b) Borrower agrees to indemnify and hold harmless each Agent and each
Bank and each of their Affiliates and their respective officers, directors,
employees, agents, and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees) that may be incurred
by or asserted or awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation, or proceeding or preparation of
defense in connection therewith) the Loan Papers, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Revolving Loan (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF
THE INDEMNIFIED PARTY), except to the extent such claim, damage, loss,
liability, cost, or expense is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section 15.3
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by Borrower, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any Indemnified Party
is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. Borrower agrees not to assert any claim against any
Agent, any Bank, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys, agents, and advisers, on any theory of
liability, for special, indirect, consequential, or punitive damages arising out
of or otherwise relating to the Loan Papers, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Revolving Loan.
(c) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 15.3 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
SECTION 15.4 Right of Set-off; Adjustments.
(a) Upon the occurrence and during the continuance of any Event of
Default, each Bank (and each of its Affiliates) is hereby authorized at any time
and from time to time, to the fullest extent permitted by Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Bank
(or any of its Affiliates) to or for the credit or the account of Borrower
against any and all of the Obligations, irrespective of whether such Bank shall
have made any demand under this Agreement or Note held by such and although such
obligations may be unmatured. Each Bank agrees promptly to notify Borrower after
any such set-off and application made by such Bank; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section 15.4 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Bank may have.
(b) If any Bank (a "benefitted Bank") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Bank, if any, in respect of such other Bank's
Loans owing to it, or interest thereon, such benefitted Bank shall purchase for
cash from the other Banks a participating interest in such portion of each such
other Bank's Loans
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owing to it, or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with each Banks; provided, however, that if all or any portion
of such excess payment or benefits is thereafter recovered from such benefitted
Bank, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. Borrower agrees
that any Bank so purchasing a participation from a Bank pursuant to this Section
15.4 may, to the fullest extent permitted by Law, exercise all of its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Person were the direct creditor of Borrower in the amount of
such participation.
SECTION 15.5 Amendments and Waivers. Any provision of this Agreement or any
other Loan Paper may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by Borrower and the Required Banks (and, if
14 or the rights or duties of any Agent are affected thereby, by such Agent);
provided that no such amendment or waiver shall, unless signed by each Bank
directly affected thereby, (i) increase the Commitments of Banks, (ii) reduce
the principal of or rate of interest on any Loan or any fees or other amounts
payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled installment of principal of or interest on any Loan or any fees or
other amounts payable hereunder or for termination of any Commitment, (iv)
change the percentage of the Commitments or of the unpaid principal amount of
the Notes, or the number of Banks, which shall be required for Banks or any of
them to take any action under this Section 15.5 or any other provision of this
Agreement, or (v) release any guarantor of the Obligations or all or
substantially all of the collateral securing the Obligations.
SECTION 15.6 Survival. All representations, warranties and covenants made
by Borrower or any of its Subsidiaries herein or in any certificate or other
instrument delivered by it or in its behalf under the Loan Papers shall be
considered to have been relied upon by Banks and shall survive the delivery to
Banks of such Loan Papers or the extension of the Loans (or any part thereof),
regardless of any investigation made by or on behalf of Banks. The indemnity
provided in Section 15.3 herein shall survive the repayment of all credit
advances hereunder and/or the discharge or release of any Lien granted hereunder
or in any other Loan Paper, contract or agreement between Borrower or any of its
Subsidiaries and Administrative Agent or any Bank.
SECTION 15.7 Limitation on Interest. Regardless of any provision contained
in the Loan Papers, Banks shall never be entitled to receive, collect, or apply,
as interest on the Revolving Loan, any amount in excess of the Maximum Lawful
Rate, and in the event any Bank ever receives, collects or applies as interest
any such excess, such amount which would be deemed excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as such; and if
the Revolving Loan is paid in full, any remaining excess shall promptly be paid
to Borrower. In determining whether or not the interest paid or payable under
any specific contingency exceeds the Maximum Lawful Rate, Borrower and Banks
shall, to the extent permitted under applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effects thereof and (c) amortize, prorate,
allocate and
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spread, in equal parts, the total amount of the interest throughout the entire
contemplated term of the Notes, so that the interest rate is the Maximum Lawful
Rate throughout the entire term of the Notes; provided, however, that if the
unpaid principal balance thereof is paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Lawful Rate, Banks shall
refund to Borrower the amount of such excess and, in such event, Banks shall not
be subject to any penalties provided by any laws for contracting for, charging,
taking, reserving or receiving interest in excess of the Maximum Lawful Rate.
SECTION 15.8 Invalid Provisions. If any provision of the Loan Papers is
held to be illegal, invalid, or unenforceable under present or future Laws
effective during the term thereof, such provision shall be fully severable, the
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of the Loan Papers a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 15.9 Waiver of Consumer Credit Laws. Pursuant to Article 15.10(b)
of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended,
Borrower agrees that such Chapter 15 shall not govern or in any manner apply to
the Revolving Loan.
SECTION 15.10 Assignments and Participations.
(a) Each Bank may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its interest in the Revolving Loan, its Note,
and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Bank or an
assignment of all of a Bank's rights and obligations under
this Agreement, any such partial assignment shall be in an
amount at least equal to $5,000,000 or an integral multiple of
$100,000 in excess thereof;
(iii) each such assignment by a Bank shall be of a constant, and not
varying, percentage of all of its rights and obligations under
this Agreement and its Note; and
(iv) the parties to such assignment shall execute and deliver to
Administrative Agent for its acceptance an Assignment and
Acceptance Agreement (herein so called) in the form of Exhibit
G hereto, together with any Note subject to such assignment
and a processing fee of $3,500, which shall be payable by the
assignor thereunder.
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Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the extent of
such assignment, have the obligations, rights, and benefits of a Bank hereunder
and the assigning Bank shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section 15.10(a), the assignor,
Administrative Agent and Borrower shall make appropriate arrangements so that,
if required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the Laws of the United States of America or a
state thereof, it shall deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 5.6(d).
(b) Administrative Agent shall maintain at its address set forth on
Schedule 1 hereto, a copy of each Assignment and Acceptance Agreement delivered
to and accepted by it and a register for the recordation of the names and
addresses of Banks and the Commitment of, and principal amount of the Revolving
Loan owing to, each Bank and the Commitment Percentage of each Bank from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and Borrower, Administrative
Agent and Banks may treat each Person whose name is recorded in the Register as
a Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Bank at any reasonable time and from
time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance Agreement executed
by the parties thereto, together with any Note subject to such assignment and
payment of the processing fee, Administrative Agent shall, if such Assignment
and Acceptance Agreement has been completed and is in substantially the form of
Exhibit G hereto, (i) accept such Assignment and Acceptance Agreement, (ii)
record the information contained therein in the Register, and (iii) give prompt
notice thereof to the parties thereto.
(d) Each Bank may sell participations to one or more Persons in all or
a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and its interest in the Revolving Loan); provided,
however, that (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participant shall be
entitled to the benefit of the yield protection provisions contained in Article
5 and the right of set-off contained in Section 15.4, and (iv) Borrower shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, and such Bank shall retain
the sole right to enforce the obligations of Borrower relating to its interest
in the Revolving Loan and its Note and to approve any amendment, modification,
or waiver of any provision of this Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal of or the rate at
which interest is payable on the Revolving Loan or Note,
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extending any scheduled principal payment date or date fixed for the payment of
interest on the Revolving Loan or Note, or extending its Commitment).
(e) Notwithstanding any other provision set forth in this Agreement,
any Bank may at any time assign and pledge all or any portion of its interest in
the Revolving Loan and its Note to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the assigning Bank from
its obligations hereunder.
(f) Any Bank may furnish any information concerning Borrower or any of
its Subsidiaries in the possession of such Bank from time to time to assignees
and participants (including prospective assignees and participants).
SECTION 15.11 TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE
EXTENT THAT THE LAWS OF ANY STATE IN WHICH ANY PROPERTY INTENDED AS SECURITY FOR
THE OBLIGATIONS IS LOCATED NECESSARILY GOVERN (A) THE PERFECTION AND PRIORITY OF
THE LIENS IN FAVOR OF AGENT AND BANKS WITH RESPECT TO SUCH PROPERTY, AND (B) THE
EXERCISE OF ANY REMEDIES (INCLUDING FORECLOSURE) WITH RESPECT TO SUCH PROPERTY.
SECTION 15.12 Consent to Jurisdiction; Waiver of Immunities.
(a) Borrower hereby irrevocably submits to the jurisdiction of any
Texas State or Federal court sitting in the Northern District of Texas over any
action or proceeding arising out of or relating to this Agreement or any other
Loan Papers, and Borrower hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such Texas State or
Federal court. As an alternative, Borrower irrevocably consents to the service
of any and all process in any such action or proceeding by the mailing of copies
of such process to such Person at its address specified in Section 15.1.
Borrower agrees that a final unappealable judgment on any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 15.12 shall affect any right of Banks to
serve legal process in any other manner permitted by law or affect the right of
any Bank to bring any action or proceeding against Borrower or its Subsidiaries
or their respective properties in the courts of any other jurisdictions.
(c) To the extent that Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect
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to itself or its property, Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Agreement and the other Loan Papers.
SECTION 15.13 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when Agent shall have received
counterparts hereof signed by all of the parties hereto or, in the case of any
Bank as to which an executed counterpart shall not have been received,
Administrative Agent shall have received telegraphic or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank.
SECTION 15.14 No Third Party Beneficiaries. It is expressly intended that
there shall be no third party beneficiaries of the covenants, agreements,
representations or warranties herein contained other than third party
beneficiaries permitted pursuant to 15.10.
SECTION 15.15 COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS, AGENTS AND
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENT AND BORROWER. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG BANKS, AGENT AND BORROWER.
SECTION 15.16 WAIVER OF JURY TRIAL. BORROWER, AGENTS AND BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND FOR
ANY COUNTERCLAIM THEREIN.
(signature page to immediately follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
BORROWER:
EXCO RESOURCES, INC.,
a Texas corporation
By: /s/ T.W. EUBANK
------------------------------
Name: T. W. Eubank
Title: President
Address for Notice:
5735 Pineland Drive, Suite 235
Dallas, TX 75231
Attn: Douglas H. Miller
Fax No.: (214) 368-2087
BANKS:
BANK OF AMERICA, N.A.,
a national banking association
By: /s/ DENISE SMITH
------------------------------
Name: Denise Smith
Title: Managing Director
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ REED V. THOMPSON
------------------------------
Name: Reed V. Thompson
Title: Vice President
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BANK OF TEXAS, N.A.
a national banking association
By: /s/ TIMOTHY MERRELL
---------------------------
Name: Timothy Merrell
Title: Vice President
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A.,
a national banking association
By: /s/ DENISE SMITH
---------------------------
Name: Denise Smith
Title: Managing Director
69
