<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
------- Exchange Act of 1934
For the quarter ended September 30, 1996
or
Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 {No Fee Required}
For the Transition Period From __________ to __________
Commission file number 0-9498
BELLWETHER EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-0437769
(State of incorporation) (I.R.S. Employer Identification No.)
1221 Lamar, Suite 1600, Houston, Texas 77010-3039
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 650-1025
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .01 par value NASDAQ/NMS
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ___
As of November 13, 1996, 9,145,479 shares of Common Stock of Bellwether
Exploration Company were outstanding.
================================================================================
1
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<S> <C> <C>
Condensed Consolidated Balance Sheets:
September 30, 1996 (Unaudited) and June 30, 1996................ 3
Condensed Consolidated Statements of Operations (Unaudited):
Three months ended September 30, 1996 and September 30, 1995.... 5
Condensed Consolidated Statements of Cash Flows (Unaudited):
Three months ended September 30, 1996 and September 30, 1995.... 6
Notes to Condensed Consolidated Financial Statements (Unaudited)..... 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 11
PART II. OTHER INFORMATION.................................................... 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
<TABLE>
<CAPTION>
BELLWETHER EXPLORATION COMPANY
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Amounts in Thousands)
ASSETS
------
<S> <C> <C>
September 30, 1996 June 30, 1996
------------------ -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,087 $ 783
Accounts receivable and accrued revenue 5,472 5,990
Accounts receivable - related parties 2,999 1,417
Prepaid expenses and other 467 314
-------- --------
Total current assets 12,025 8,504
-------- --------
PROPERTY AND EQUIPMENT, AT COST:
Oil and gas properties (full cost method) 76,757 76,043
Gas plant facilities 12,841 12,840
-------- --------
89,598 88,883
Accumulated depreciation, depletion
and amortization (32,703) (30,748)
-------- --------
56,895 58,135
-------- --------
OTHER ASSETS 605 586
-------- --------
$ 69,525 $ 67,225
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Amounts in Thousands, Except Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 3,080 $ 2,634
Due to affiliates 1,638 702
Current maturities of long-term debt --- ---
------------------ -------------
Total current liabilities 4,718 3,336
------------------ -------------
OTHER LIABILITIES 1,230 1,383
LONG-TERM DEBT 13,048 13,048
DEFERRED INCOME TAXES 3,049 2,861
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none issued or outstanding at
September 30, 1996 and June 30, 1996
--- ---
Common stock, $.01 par value,
15,000,000 shares authorized,
9,145,479 and 9,075,479 shares issued
and outstanding at September 30, 1996
and June 30, 1996, respectively
92 91
Additional paid-in capital 41,900 41,639
Retained earnings 5,488 4,867
------------------ -------------
Total stockholders' equity 47,480 46,597
------------------ -------------
$69,525 $67,225
================== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
(Amounts in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1996 1995
------------ ------------
<S> <C><C> <C>
REVENUES:
Oil and gas revenues $ 4,463 $ 3,289
Gas plant revenues 1,721 1,087
Gas gathering revenues --- 1,281
Interest and other income 27 21
------------ -----------
6,211 5,678
------------ -----------
COST AND EXPENSES:
Lease operating expenses 1,365 1,100
Gas plant operating expenses 893 620
Gas gathering expenses --- 837
Depreciation, depletion and
amortization 1,994 1,887
General and administrative expenses 690 700
Interest expense 288 484
Other expense --- 12
------------ -----------
5,230 5,640
------------ -----------
Income before income taxes 981 38
Provision for income taxes 363 25
------------ -----------
NET INCOME $ 618 $ 13
============ ===========
Net income per share $ 0.07 $ 0.00
============ ===========
Weighted average common and
common equivalent shares 9,090 9,045
outstanding ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net income $ 618 $ 13
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and
amortization 2,046 1,904
Deferred taxes 331 ---
Change in assets and liabilities:
Accounts receivable and accrued revenue 518 962
Accounts payable and other liabilities 293 (56)
Due (to) from affiliates (646) 175
Other (367) (215)
----------- -----------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 2,793 2,783
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,314) (1,085)
Proceeds from sales of property 1,562 ---
Other (1) (31)
----------- -----------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES (753) (1,116)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt --- (1,000)
Exercise of stock options 264 ---
----------- -----------
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES 264 (1,000)
----------- -----------
Net increase in cash and cash
equivalents 2,304 667
Cash and cash equivalents at
beginning of period 783 1,088
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 3,087 $ 1,755
=========== ===========
</TABLE>
6
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(UNAUDITED)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
1996 1995
---------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ --- $ 484
Income taxes (net of refund) $ 30 $ 133
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and, therefore,
do not include all disclosures required by generally accepted accounting
principles. However, in the opinion of management, these statements
include all adjustments, which are of a normal recurring nature, necessary
to present fairly the financial position at September 30, 1996 and June 30,
1996, and the results of operations and changes in cash flows for the
periods ended September 30, 1996 and 1995. These financial statements
should be read in conjunction with the consolidated financial statements
and notes to the consolidated financial statements in the 1996 Form 10-K of
Bellwether Exploration Company ("the Company") that was filed with the
Securities and Exchange Commission.
2. INDUSTRY SEGMENT INFORMATION
----------------------------
The Company's operations are concentrated primarily in two segments; the
exploration and production of oil and natural gas and gas plants and gas
gathering operations.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Sales to unaffiliated customers:
Oil and gas $4,463 $3,289
Gas plants and gas gathering 1,721 2,368
Other revenues 27 21
------ ------
Total revenues 6,211 5,678
====== ======
Operating profit before income tax:
Oil and gas 1,325 652
Gas plants and gas gathering 607 561
------ ------
1,932 1,213
Unallocated corporate expenses 663 712
Interest expense 288 463
------ ------
Income before taxes 981 38
====== ======
Depreciation, depletion and
amortization:
Oil and gas 1,773 1,537
Gas plants and gas gathering 221 350
------ ------
$1,994 $1,887
====== ======
</TABLE>
8
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
3. ACQUISITIONS AND MERGERS
------------------------
During fiscal 1995, the Company completed the following mergers and
acquisitions:
On February 28, 1995 the Company acquired Hampton Resources Corporation
("Hampton") in exchange for $17.0 million in cash and 1,006,458 shares of the
Company's common stock. The Company acquired common and preferred stock of
Hampton for $2.7 million prior to the merger and incurred $1.4 million in
expenses in connection with the merger. The total cash outlay of $21.1
million and the issuance of common stock valued at $4.8 million resulted in a
total cost of $25.9 million for the acquisition of Hampton. Hampton was an
energy company engaged in the exploration, acquisition and production of oil
and natural gas.
On August 26, 1994 the Company acquired Odyssey Partners, Ltd. ("Odyssey") in
exchange for $5.6 million in cash (funded from a common stock offering which
closed on the same date) and 916,665 shares of the Company's common stock,
for a total cost of $9.6 million. Odyssey is an exploration company which
assembles, exploits and operates oil and gas properties using state-of-the-
art 3-D seismic and computer-aided exploration technology. Odyssey's primary
areas of operation have been the onshore Gulf Coast region and the Permian
Basin area of West Texas and Southeast New Mexico.
4. LONG TERM DEBT
--------------
On February 28, 1995, the Company entered into a credit facility ("Credit
Facility") with a commercial bank providing an initial borrowing base of
$29.8 million. The borrowings under the Credit Facility are secured by the
Company's interest in oil and gas properties and in the Gathering System and
the Gas Plant. The maturity date, as modified in the second quarter, fiscal
1996 is March 31, 2001 and the borrowing base is $20.1 million. The credit
Facility was retired in October, 1996.
In October, 1996 the Company entered into a syndicated credit facility ("New
Credit Facility") in an amount up to $50 million with an initial borrowing
base of $27 million, to be determined semi-annually. The interest rate, at
the Company's option, will vary, based upon borrowing base usage, from LIBOR
plus 7/8% to LIBOR plus 1 1/4%, or the greater of the prime rate or Fed Funds
plus 1/2%. The New Credit Facility is unsecured with respect to oil and gas
assets and has a termination date of October 15, 2000.
The New Credit Facility contains various covenants including certain required
financial measurements for a current ratio, consolidated tangible net worth,
and interest coverage ratio. In addition, the New Credit Facility includes
certain limitations on restricted payments and dividends, incurrance of
additional funded indebtedness/guarantees and asset sales.
9
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
5. GAS CONTRACT LIABILITY
----------------------
The Company and certain third parties were the beneficiaries of an agreement
("Purchase Agreement") whereby another party had an obligation to purchase,
until May 1999, the gas produced by the Company and such third parties from
the West Monroe field in Union Parish, Louisiana at a price of $4.50 per
MMBTU. Bellwether owned a large majority of the gas produced and sold
pursuant to the Purchase Agreement. In March 1996, in exchange for
Bellwether's agreement to assume this obligation to purchase gas under the
Purchase Agreement, Bellwether was paid $9.9 million. As a result of this
transaction, the Company has written off the book value of the gas gathering
system and has recorded a liability of $2.0 million to cover estimated
liabilities under the contract. Gas gathering operations of the subsidiary
and payments to third parties are charged to the liability as incurred. From
the proceeds, $9.5 million was paid on the Company's credit facility.
10
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Capital Resources and Liquidity
- -------------------------------
The strategy of the Company has been to acquire producing oil and gas properties
through mergers, acquisitions and development, to participate in certain gas
processing and gas gathering investments, and to participate selectively in
exploration activities. The funding of these activities has been provided by
operating cash flows, bank financing and equity placements. Net cash provided
by operating activities was $2.8 million for the three months ended September
30, 1996 compared to $2.8 million used in operating activities in the same
period of 1995. The Company invested $2.3 million in oil and gas properties for
the three months ended September 30, 1996 versus $1.1 million in 1995.
Additionally, the Company spent $11,000 in the three months ended September 30,
1995 on gas plant and gas gathering facilities.
The Company and certain third parties were the beneficiaries of an agreement
("Purchase Agreement") whereby another party had an obligation to purchase,
until May 1999, the gas produced by the Company and such third parties from the
West Monroe field in Union Parish, Louisiana at a price of $4.50 per MMBTU.
Bellwether owned a large majority of the gas produced and sold pursuant to the
Purchase Agreement. In March 1996, in exchange for Bellwether's agreement to
assume this obligation to purchase gas under the Purchase Agreement, Bellwether
was paid $9.9 million. As a result of this transaction, the Company has written
off the book value of the gas gathering system and has recorded a liability to
cover the estimated losses under the contract. Gas gathering operations of the
subsidiary and payments to third parties are charged to the liability as
incurred. From the proceeds, $9.5 million was paid on the Company's credit
facility.
In the first quarter fiscal 1996, the company sold certain non strategic oil and
gas properties for $1.6 million.
Gas Balancing
- -------------
It is customary in the industry for various working interest partners to sell
more or less than their entitled share of natural gas. The settlement or
disposition of existing gas balancing positions is not anticipated to materially
impact the financial condition of the Company.
Fiscal 1997 Capital Expenditures
- --------------------------------
The Company anticipates investing approximately $10.5 million during fiscal
1997, which is comprised of $8.6 million for development drilling activities and
acquisitions, $1.9 million for exploratory drilling activities, and $0.1 million
for gas plant and gas gathering facilities. The Company believes its cash flow
provided by operating activities and the proceeds from credit facilities will be
sufficient to meet these capital commitments. The Company continues to seek
acquisition opportunities and the consummation of such a transaction may
directly impact anticipated capital expenditures.
11
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- --------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
Results of Operations (three months ended September 30, 1996 and 1995)
- ----------------------------------------------------------------------
The following table sets forth certain operating information of the Company for
the periods presented:
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------
Increase/
1996 1995 (Decrease)
------------ -------- -----------
<S> <C> <C> <C>
Production:
Oil and condensate (MBBLS)........... 68 86 (20.9%)
Natural gas (MMCF)................... 1,387 1,198 15.78%
Average sales price:
Oil and condensate (per BBL)......... $19.38 $16.03 20.9%
Natural gas (1) (per MCF)............ $ 2.29 $ 1.60 43.1%
Average unit production cost per
BOE (2)................................. $ 4.57 $ 3.85 18.7%
Gas plant operations:
Average daily inlet volumes (MMCF)... 19.4 18.9 2.6%
Average daily net production (MGALS). 41 33 (24.2%)
Average NGL sales price (per gallon). $ .37 $ .25 48.0%
Gas gathering operations:
Throughput (MMCF) (3)................ --- 366 ---
- -------------------------------------------------------------------------
</TABLE>
/(1)/ Average sales price for natural gas includes revenues received from the
sale of natural gas liquids removed from the Company's gas production.
/(2)/ Costs incurred to operate and maintain wells and related equipment and
facilities including ad valorem and severance taxes.
/(3)/ Operations charged to gas contract liability subsequent to March 1, 1996.
(See Note 5 of the Notes to Condensed Consolidated Financial Statements)
12
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
Revenues
- --------
Oil and gas revenues for the three months ended September 30, 1996 were $4.5
million or 36% higher than oil and gas revenues of $3.3 million for the same
period in 1995. The increase in oil and gas revenues was attributable primarily
to additional production from the Cove field workovers, and an increase in
prices.
Gas plant revenues of approximately $1.7 million are reflected in the three
months ended September 30, 1996 compared to $1.1 million in the same period of
1995. Increased prices were the primary cause of the increase.
Expenses
- --------
Lease operating expenses for the three months ended September 30, 1996 totaled
$1.4 million or 27% over the $1.1 million for the three months ended September
30, 1995. Lease operating expenses per barrel of oil equivalent were 18% higher
in the three months ended September 30, 1996 when compared to the same period in
1995, due primarily to increased costs from workovers.
Gas plant operating expenses approximated $0.9 million in the three months ended
September 30, 1996 as compared to $0.6 million for the prior period.
Gas gathering expenses for the three months ended September 30, 1995 were $0.8
million. In March 1996, pipeline operations were charged to the gas contract
liability as a result of the assumption of a contract to purchase gas at $4.50
per MMBTU ("Contract Assumption"). (See Note 5 of the Notes to the Condensed
Consolidated Financial Statements)
Depreciation, depletion and amortization of $2.0 million for the three months
ended September 30, 1996 reflects a 5% increase from $1.9 million in the same
period in 1995, primarily because of an increase in oil and gas production and
an increase in the depletion rate per barrel of oil equivalent, both of which
were caused by increases in reserves due to the mergers, new drilling and
workovers.
General and administrative expenses totaled $0.7 million in the three months
ended September 30, 1996 and 1995.
Interest expense decreased to $0.3 million for the three months ended September
30, 1996 from $0.5 million in the same period of 1995. The decrease in interest
expense is the result of payments on the Credit Facility from proceeds of the
Contract Assumption.
13
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
Income Taxes
- ------------
Provision for federal and state income taxes for the quarter ended September 30,
1996 is 37% of income.
Net Income
- ----------
Net income for the three ended September 30, 1996 was approximately $0.6 million
as compared to net income of $13,000 in the same period of 1995.
Other Matters
- -------------
The Company is a party to a management agreement with Torch Energy Advisors
Incorporated ("Torch"). On September 30, 1996, Torchmark, an insurance and
financial services holding company and the parent corporation of Torch, sold
Torch to an investor group composed of Torch Management. The Company does not
anticipate that this will have any impact on the services provided by Torch or
its existing management agreement with Torch.
14
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
None.
ITEM 2. CHANGES IN SECURITIES
- ------- ---------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------- -------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- ------- -----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
a. Exhibits
The following exhibits are filed with this Form 10-Q and
they are identified by the number indicated.
10.1 Credit Agreement among Bellwether Exploration
Company as borrower and The Chase Manhatten Bank
as agent.
27 Financial Data Schedule
b. Reports on Form 8-K.
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BELLWETHER EXPLORATION COMPANY
------------------------------
(Registrant)
Date: November 13, 1996 By:/s/ J. Darby Sere'
---------------------- -------------------------------------
J. Darby Sere'
President and Chief Operating Officer
Date: November 13, 1996 By:/s/ Michael B. Smith
---------------------- -------------------------------------
Michael B. Smith
Vice President and
Chief Financial Officer
16
<PAGE>
================================================================================
CREDIT AGREEMENT
Dated as of October 15, 1996
AMONG
BELLWETHER EXPLORATION COMPANY
AS BORROWER
AND
ODYSSEY PETROLEUM COMPANY
WEST MONROE GAS GATHERING CORPORATION
AS SUBSIDIARY GUARANTORS
AND
THE CHASE MANHATTAN BANK, AS AGENT
AND
THE CHASE MANHATTAN BANK
WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION
AS BANKS
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS......................... 1
SECTION 1.1. Certain Defined Terms........................... 1
SECTION 1.2. Accounting Terms................................ 23
SECTION 1.3. Interpretation.................................. 23
ARTICLE II COMMITMENTS, LOANS, AND LETTERS OF CREDIT............... 24
SECTION 2.1. Loans........................................... 24
SECTION 2.2. Borrowing Procedure for Loans................... 25
SECTION 2.3. Issuing the Letters of Credit................... 26
SECTION 2.4. Conversions or Continuation of Borrowings....... 28
SECTION 2.5. Fees............................................ 29
SECTION 2.6. Notes........................................... 30
SECTION 2.7. Interest on Loans and Payment Dates............. 30
SECTION 2.8. Interest on Overdue Amounts..................... 31
SECTION 2.9. Voluntary Termination and Reduction of the Total
Commitment..................................... 31
SECTION 2.10. Voluntary Prepayment of Loans................... 31
SECTION 2.11. Mandatory Payments on Loans..................... 32
SECTION 2.12. Alternate Rate of Interest...................... 33
SECTION 2.13. Change in Circumstances......................... 33
SECTION 2.14. Change in Legality.............................. 34
SECTION 2.15. Funding Losses.................................. 35
SECTION 2.16. Method of Payments Pro Rata Treatment........... 36
SECTION 2.17. Taxes........................................... 36
SECTION 2.18. Sharing of Payments and Setoffs................. 38
SECTION 2.19. Limitation on Reimbursement; Mitigation......... 38
SECTION 2.20. Use of Proceeds................................. 38
SECTION 2.21. Mandatory Termination of Total Commitment;
Extension of Maturity Date..................... 39
ARTICLE III DETERMINATIONS OF THE BORROWING BASE................... 39
SECTION 3.1. Initial Borrowing Base.......................... 39
SECTION 3.2. Subsequent Scheduled Determinations of Borrowing
Base........................................... 39
SECTION 3.3. Special Determinations of Borrowing Base........ 41
ARTICLE IV CONDITIONS PRECEDENT.................................... 42
SECTION 4.1. Conditions Precedent to the Loans............... 42
SECTION 4.2. Additional Conditions Precedent................. 44
SECTION 4.3. General......................................... 45
ARTICLE V REPRESENTATIONS AND WARRANTIES........................... 45
SECTION 5.1. Organization; Corporate Powers.................. 45
SECTION 5.2. Organization; Powers............................ 46
SECTION 5.3. Authority....................................... 46
SECTION 5.4. Use of Proceeds................................. 46
SECTION 5.5. No Conflict..................................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION 5.6. Ownership of Properties; Liens.................. 47
SECTION 5.7. Borrowing Base Properties....................... 47
SECTION 5.8. No Defaults..................................... 48
SECTION 5.9. Financial Position; No Material Adverse Change.. 48
SECTION 5.10. Litigation; Adverse Effects..................... 48
SECTION 5.11. ERISA........................................... 48
SECTION 5.12. Payment of Taxes................................ 49
SECTION 5.13. Environmental Matters........................... 49
SECTION 5.14. Governmental Regulation......................... 50
SECTION 5.15. Disclosure...................................... 51
SECTION 5.16. Subsidiaries; Partnerships...................... 51
SECTION 5.17. Solvency........................................ 51
SECTION 5.18. Business........................................ 51
SECTION 5.19. Designated Contracts............................ 51
SECTION 5.20. Licenses, Permits, Etc.......................... 52
SECTION 5.21. Fiscal Year..................................... 52
ARTICLE VI AFFIRMATIVE COVENANTS................................... 52
SECTION 6.1. Information..................................... 52
SECTION 6.2. Business of the Borrower........................ 55
SECTION 6.3. Corporate Existence............................. 55
SECTION 6.4. Right of Inspection............................. 55
SECTION 6.5. Maintenance of Insurance........................ 55
SECTION 6.6. Payment of Taxes and Claims..................... 56
SECTION 6.8. Maintenance of Ownership........................ 56
SECTION 6.9. Operation of Properties and Equipment........... 56
SECTION 6.10. Environmental Law Compliance and Indemnity...... 57
SECTION 6.11. ERISA Reporting Requirements.................... 57
SECTION 6.12. Security........................................ 58
SECTION 6.13. Permits, Licenses............................... 58
SECTION 6.14. Additional Documents............................ 58
SECTION 6.15. Title Assurances................................ 59
ARTICLE VII NEGATIVE COVENANTS..................................... 59
SECTION 7.1. Debt............................................ 59
SECTION 7.2. Restrictions on Distributions................... 60
SECTION 7.3. Liens; Negative Pledge.......................... 61
SECTION 7.4. Consolidation, Mergers and Acquisitions;
Fundamental Changes............................ 61
SECTION 7.5. Investments..................................... 61
SECTION 7.6. Transactions with Affiliates.................... 62
SECTION 7.7. Certain Contracts; Amendments................... 63
SECTION 7.8. Amendments to Designated Contracts.............. 63
SECTION 7.9. Sales of Properties............................. 63
SECTION 7.10. ERISA Compliance................................ 64
SECTION 7.11. Sales and Leasebacks............................ 64
SECTION 7.12. Use of Proceeds; Margin Regulations............. 64
SECTION 7.13. Fiscal Year; Fiscal Quarter..................... 64
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
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SECTION 7.14. Hedge Transactions.............................. 65
SECTION 7.15. Financial Covenants............................. 65
ARTICLE VIII EVENTS OF DEFAULT..................................... 65
SECTION 8.1. Events of Default............................... 65
SECTION 8.2. Remedies........................................ 68
SECTION 8.3. Right of Setoff................................. 68
SECTION 8.4. Indemnity....................................... 68
ARTICLE IX THE AGENT............................................... 69
SECTION 9.1. Authorization and Action........................ 69
SECTION 9.2. Agent's Reliance; Exculpatory Provisions, Etc... 69
SECTION 9.3. The Agent in its Individual Capacity and
Affiliates..................................... 70
SECTION 9.4. Bank Credit Decision............................ 70
SECTION 9.5. Indemnification and Reimbursement............... 71
SECTION 9.6. Successor Agent................................. 71
SECTION 9.7. Notice of Default............................... 72
SECTION 9.8. Delegation of Duties............................ 72
ARTICLE X MISCELLANEOUS............................................ 72
SECTION 10.1. Amendments and Waivers.......................... 72
SECTION 10.2. Notices, Etc.................................... 73
SECTION 10.3. No Waiver; Remedies Cumulative.................. 74
SECTION 10.4. Costs, Expenses and Taxes....................... 74
SECTION 10.5. Governing Law................................... 75
SECTION 10.6. Interest........................................ 75
SECTION 10.7. Survival of Representations and Warranties...... 76
SECTION 10.8. Binding Effect.................................. 76
SECTION 10.9. Participations; Assignments..................... 76
SECTION 10.10. Separability.................................... 79
SECTION 10.11. Confidentiality................................. 79
SECTION 10.12. Marshalling; Recapture.......................... 79
SECTION 10.13. Representation by the Banks..................... 80
SECTION 10.14. No Third Party Beneficiaries.................... 80
SECTION 10.15. Execution in Counterparts....................... 80
SECTION 10.16. Jurisdiction; Consent to Service of Process..... 80
SECTION 10.17. Credit Agreement Governs Conflicts.............. 81
SECTION 10.18. FINAL AGREEMENT OF THE PARTIES.................. 81
SCHEDULES
Schedule 1.1 - Names, Addresses and Commitments of the Banks
Schedule 4.1(f) - Description of Existing Liens
Schedule 5.6 - Description of Title Defects
Schedule 5.10 - Description of Existing Litigation
Schedule 5.11 - Description of all Benefit Plans
Schedule 5.13 - Description of Environmental Matters
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Schedule 5.16 - Description of Subsidiaries, Partnerships and Joint Ventures
Schedule 7.1 - Description of Debt Outstanding on the Effective Date
Schedule 7.5 - Description of Investments Existing on the Effective Date
Schedule 7.6 - Description of Transactions with Affiliates
</TABLE>
EXHIBITS
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Commitment Transfer Supplement
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Note
Exhibit E - Form of Notice of Conversion or Continuation
Exhibit F - Form of Pledge Agreement
Exhibit G - Form of Subsidiary Guaranty
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CREDIT AGREEMENT
CREDIT AGREEMENT dated as of October 15, 1996, among BELLWETHER
EXPLORATION COMPANY, a Delaware corporation (the "Borrower"), the several banks
and financial institutions from time to time parties to this Credit Agreement
(the "Banks," such term to include all financial institutions which become
parties to this Credit Agreement in accordance with Section 10.9 hereof) and THE
CHASE MANHATTAN BANK, a national banking association ("CHASE") acting in its
capacity as agent for the Banks (in such capacity, the "Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Borrower and its Subsidiaries (as herein defined) have
requested that the Banks make available to the Borrower, on the terms and
subject to the conditions stated herein, a revolving credit facility, the
proceeds of which will be used (i) to refinance existing indebtedness of the
Borrower and its Subsidiaries, (ii) to provide working capital support to the
Borrower and its Subsidiaries, (iii) to finance capital expenditures and
acquisitions of oil and gas properties, and (iv) for the issuance of stand-by
letters of credit for the account of the Borrower;
WHEREAS, the Borrower owns, either directly or indirectly, one hundred
percent (100%) of the issued and outstanding capital stock of each of Odyssey
Petroleum Company, a Delaware corporation ("Odyssey"), and West Monroe Gas
Gathering Corporation, a Louisiana corporation ("West Monroe"); and
WHEREAS, the Banks are willing, upon and subject to the terms and
conditions stated herein, to make such revolving credit facility available to
the Borrower and its Subsidiaries.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Credit Agreement, the
following terms shall have the following meanings:
"Accommodation Obligation," as applied to the Borrower or any of its
Subsidiaries, shall mean any Contractual Obligation, contingent or otherwise, of
the Borrower or such Subsidiary of the Borrower with respect to any Debt or
other obligation or liability of another, including, without limitation, any
such Debt, obligation or liability directly or indirectly guarantied, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
co-made or discounted or sold with recourse by the Borrower or such Subsidiary
of the Borrower, or in respect of which the Borrower or such Subsidiary of the
Borrower is otherwise directly or indirectly liable, including Contractual
Obligations (contingent or otherwise) arising through any agreement to purchase,
repurchase, or otherwise acquire such Debt, obligation or liability or any
security therefor, or to provide funds for the payment or discharge thereof
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain solvency, Properties, level of income, or other
financial condition, or any "keep well,"
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"take-or-pay," "throughput" or other similar arrangement or to make payment
other than for value received.
"Affiliate" shall mean, when used with respect to any Person, each other
Person that directly or indirectly controls or is controlled by or is under
common control with such Person. As used in this definition, "control" means
the possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise) and shall
include, without limitation, any Person who beneficially owns more than fifty
percent (50%) of the equity of the other Person and, as to any general or
limited partnership, any general partner thereof.
"Agent" shall have the meaning assigned to that term in the introduction to
this Credit Agreement and shall include any successor agent appointed in
accordance with Section 9.6 of this Credit Agreement.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the greatest of
(i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean, as of a particular date, the prime rate of interest per annum most
recently announced by Chase, automatically fluctuating upward or downward with
and at the time specified in each such announcement without notice to the
Borrower or any other Person; each change in the Prime Rate shall be effective
on the date such change is announced; which Prime Rate may not necessarily
represent Chase's lowest or best rate actually charged to a customer; "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published by the Federal Reserve
Bank of New York for such day on the next succeeding Business Day or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by Chase from three federal
funds brokers of recognized standing selected by it. If for any reason Chase
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including, without limitation, the inability or failure of Chase to
obtain sufficient quotations in accordance with the terms hereof, the Alternate
Base Rate shall be determined without regard to subclause (ii) of the first
sentence of this definition, as appropriate, until the circumstances giving rise
to such inability no longer exist. Any change in the Alternate Base Rate due to
a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
"Applicable Eurodollar Margin" shall mean, with respect to each Eurodollar
Borrowing:
(i) on each day on which the Utilized Percentage of Borrowing Base is
less than fifty percent (50%), seven-eighths of one percent (0.875%) per
annum;
(ii) on each day of which the Utilized Percentage of Borrowing Base
is equal to or greater than fifty percent (50%) but less than seventy-five
percent (75%), one percent (1.00%) per annum; and
(iii) on each day of which the Utilized Percentage of Borrowing Base
is equal to or greater than seventy-five percent (75%), one and one-fourth
of one percent (1.25%) per annum.
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"Approved Petroleum Engineers" shall include Williamson Petroleum
Consultants, R.T. Garcia & Co., Cawley, Gillespie & Associates or such other
reputable firm(s) of independent petroleum engineers as shall be approved by the
Required Banks.
"Bank" shall mean each of the financial institutions whose name appears on
the signature pages to this Credit Agreement and the Persons which from time to
time become a party hereto in accordance with Section 10.9.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978 as codified
under 11 U.S.C. (S)101, et seq.
"Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate Loans.
"Base Rate Loan" shall mean any Loan bearing interest at a rate determined
by reference to the Alternate Base Rate in accordance with the provisions of
Article II.
"Benefit Plan" shall mean any employee benefit plan subject to Title IV of
ERISA maintained by the Borrower or any ERISA Affiliate with respect to which
the Borrower or such ERISA Affiliate has a fixed or contingent liability.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States.
"Borrower" shall mean Bellwether Exploration Company, a Delaware
corporation.
"Borrowing" shall mean a borrowing comprised of simultaneous Loans of the
same Type made to the Borrower on the same date by the Banks, (or resulting from
conversions or continuations on a given date pursuant to Section 2.4), having
the same Interest Period distributed ratably among the Banks in the manner
described in Article II. A Borrowing is a "Base Rate Borrowing" if the Loans
comprising such Borrowing are Base Rate Loans, and a "Eurodollar Borrowing" if
the Loans comprising such Borrowing are Eurodollar Loans.
"Borrowing Base" shall mean (i) during the Initial Borrowing Base Period,
$27,000,000 and (ii) thereafter, an amount determined by the Banks in accordance
with the provisions of Section 3.2; provided, however, that in no event shall
the Borrowing Base ever exceed the Total Commitment.
"Borrowing Base Deficiency" shall mean, as of any date, the amount, if any,
by which the Utilized Credit on such date exceeds the Borrowing Base in effect
on such date.
"Borrowing Base Notice" shall mean a written notice sent to the Borrower by
the Agent pursuant to Section 3.2 notifying the Borrower of the Borrowing Base.
"Borrowing Base Period" shall mean (i) initially, the period from the
Effective Date through November 30, 1996; (ii) then, the period from and
including December 1, 1996 through April 30, 1997, and (iii) thereafter, each
six month period beginning on November 1 or May 1 of each year.
"Borrowing Base Properties" shall mean, collectively, (i) all of the Oil
and Gas Interests of the Borrower and the Subsidiary Guarantors which have
Proved Reserves attributable thereto and are described in the Initial
Engineering Report, (ii) the Related Assets described in the Initial Related
Asset
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<PAGE>
Report, and (iii) all other Oil and Gas Interests of the Borrower and the
Subsidiary Guarantors, either now owned or hereafter acquired, which (aa) have
Proved Reserves attributable thereto, (bb) are the subject of an Engineering
Report prepared by an Approved Petroleum Engineer acceptable to the Required
Banks and delivered to the Banks by the Borrower, (cc) are subject to no Liens
except as permitted by Section 6.2, (dd) are the subject of an environmental
assessment and a title review satisfactory to the Required Banks, (ee) the
Borrower has requested that the Banks consider in their determination of the
Borrowing Base, and (ff) the Required Banks, in their sole discretion, have
considered for purposes of determining the Borrowing Base (as evidenced by a
notice to such effect delivered by the Agent to the Borrower).
"Borrowing Date" shall mean, with respect to each Borrowing, the Business
Day upon which the proceeds of such Borrowing are made available to the Borrower
by the Banks.
"Borrowing Request" shall mean, with respect to each Borrowing, a request
made pursuant to Section 2.2 which request shall be in the form of Exhibit A.
"Business Day" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York on which banks are open for
business in New York, New York and; provided, however, that, when used in
connection with a Eurodollar Loan or Eurodollar Borrowing, the term "Business
Day" shall also exclude any day on which banks are not open for dealings in
dollar deposits in the interbank eurodollar market.
"Capital Lease" shall mean, when used with respect to any Person, any lease
in respect of which the obligations of such Person constitute Capitalized Lease
Obligations.
"Capitalized Lease Obligations" shall mean, when used with respect to any
Person, without duplication, all obligations of such Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations shall
have been or should be, in accordance with GAAP, capitalized on the books of
such Person.
"Cash Equivalents" shall mean, when used in connection with the Borrower or
any Subsidiary of the Borrower, the Borrower's or such Subsidiary's Investments
in:
(i) readily marketable direct full faith and credit obligations of
the United States or obligations unconditionally guaranteed by the full
faith and credit of the United States or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the
United States ("Government Securities") due within one year from the date
of acquisition thereof;
(ii) readily marketable direct obligations of any State of the United
States or any political subdivision of any such State given on the date of
such investment a credit rating of at least A2 by Moody's Investors
Service, Inc. or A by S&P, in each case due within one year from the date
of acquisition thereof;
(iii) certificates of deposit issued by, money market deposit
accounts with, eurodollar deposits through, bankers' acceptances of, and
repurchase and reverse repurchase agreements covering Government Securities
executed by a Bank or any other bank doing business in and incorporated
under the laws of the United States or any state thereof whose deposits are
insured
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<PAGE>
through the FDIC, or any successor thereto, and having (either itself or
its holding company) on the date of such Investment combined capital,
surplus and undivided profits of at least $400,000,000, or any offshore
branch of such bank, in each case maturing within one year from the date of
acquisition thereof;
(iv) readily marketable commercial paper of a Bank or such Bank's
holding company or of any other bank or bank holding company given on the
date of such Investment a credit rating of at least P-1 by Moody's
Investors Service, Inc. and A-1 by S&P, or of corporations doing business
in and incorporated under the laws of the United States or any state
thereof given on the date of such Investment a credit rating of at least
P-1 by Moody's Investors Service, Inc. and A-1 by S&P, in each case,
maturing within one year from the date of acquisition thereof; and
(v) "money-market mutual funds" investing solely in instruments of
the types described in subparagraphs (i) through (iv) above.
"Chase" shall mean The Chase Manhattan Bank, a New York state bank.
"Closing Date" shall mean October 15, 1996.
"Code" shall mean Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
"Commitment" shall mean, when used with reference to any Bank at the time
any determination thereof is to be made, the commitment of such Bank to extend
credit to the Borrower by means of Loans and participations in Letters of
Credit, which subject to Sections 2.9 and 8.1, shall be an amount equal to the
least of the amount set forth opposite the name of such Bank under the heading
"Amount of Commitment" on Schedule 1.1 to this Credit Agreement.
"Commitment Percentage" shall mean, with respect to each Bank, the
percentage determined by dividing its Commitment by the Total Commitment.
"Commitment Transfer Supplement" shall mean a Commitment Transfer
Supplement entered into by a Bank and an Eligible Assignee, and accepted by the
Agent pursuant to Section 10.9, substantially in the form of Exhibit B attached
hereto.
"Communications" shall have the meaning specified in Section 10.2.
"Consolidated" shall refer to the consolidation of any Person, in
accordance with GAAP, with its properly consolidated Affiliates. Reference to a
Person's consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated Affiliates.
"Consolidated Assets" shall mean, when used with respect to the Borrower
and its Subsidiaries, all items which should be classified as assets on the
consolidated financial statements of the Borrower delivered to the Agent
pursuant to Section 6.1, all as determined in conformity with GAAP.
"Consolidated EBITDA" shall mean, for a particular period, an amount equal
to (i) all amounts which would be included as Consolidated income of the
Borrower and its Subsidiaries on a Consolidated
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basis before income taxes and extraordinary items, if any, for such period, plus
(ii) the Borrower's Consolidated depreciation, depletion, amortization and other
non-cash items reducing said operating income under subclause (i) during such
fiscal period plus (iii) Consolidated Interest Expense during such fiscal
period, all determined in accordance with GAAP applied consistently with those
used in the preparation of the financial statements referred to in Subsection
5.9(a).
"Consolidated Equity" shall mean, with respect to the Borrower and its
Subsidiaries, at any time, the Consolidated Assets of the Borrower less the
Consolidated Liabilities of the Borrower.
"Consolidated Interest Expense" shall mean, with respect to the Borrower
and its Subsidiaries, for any fiscal period, the aggregate of all costs, fees
and expenses paid by the Borrower and its Subsidiaries in such fiscal period for
Debt, which are classified as interest expense on the Consolidated financial
statements of the Borrower and its Subsidiaries, all as determined in conformity
with GAAP.
"Consolidated Liabilities" shall mean, when used with respect to the
Borrower and its Subsidiaries, all items which should be classified as
liabilities on the consolidated financial statements of the Borrower delivered
to the Agent pursuant to Section 6.1, all as determined in conformity with GAAP.
"Consolidated Net Income" shall mean, for any period, all amounts which
would be included as Consolidated net income (or loss) of the Borrower and its
Subsidiaries on a Consolidated basis after taxes for such period determined in
conformity with GAAP.
"Consolidated Tangible Net Worth" shall mean, with respect to the Borrower
and its Subsidiaries, at any time, the Consolidated Equity of the Borrower, at
such time, less the Consolidated Intangible Assets of the Borrower at such time.
For purposes of this definition, "Intangible Assets" shall mean the amount (to
the extent reflected in determining Consolidated Equity) of all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights and organization expenses.
"Contractual Obligation" as applied to any Person, shall mean any provision
of any stock or other securities issued by that Person or any indenture,
mortgage, deed of trust, contract, undertaking, document, instrument or other
agreement or instrument to which that Person is a party or by which it or any of
its Properties is bound, or to which it or any of its Properties is subject
(including, without limitation, any restrictive covenant affecting such Person
or any of its Properties).
"Credit Agreement" shall mean this Credit Agreement dated as of the Closing
Date, among the Borrower, the Agent and the each of the Banks, as said agreement
may be amended, modified, supplemented, and/or extended from time to time.
"Credit Exposure" shall have the meaning specified in Subsection 10.9(c)
hereof.
"Debt" shall mean as to Borrower or any Subsidiary of Borrower, all
obligations and liabilities of Borrower or such Subsidiary of Borrower to any
other Person including, without limitation, all debts, claims and indebtedness,
heretofore, now and/or from time to time hereafter owing, due or payable,
however evidenced, created, incurred, acquired or owing and however arising,
whether under written or oral agreement, operation of law, or otherwise. Debt
includes, without limiting the foregoing, (i) indebtedness for borrowed money
(including without duplication obligations to reimburse the issuer of
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any letter of credit or any guarantor or surety), (ii) indebtedness for the
deferred purchase price of Property or services, except trade accounts payable
within 90 days and arising in the ordinary course of business, (iii)
indebtedness evidenced by bonds, debentures, notes or other similar instruments
(but shall not include any Debt guaranteed, or bonds posted to state and/or
federal agencies incurred in the ordinary course of business in conjunction with
Borrower's oil and gas operations but shall include Environmental Liabilities or
liabilities to the PBGC), (iv) obligations and liabilities secured by a Lien
upon Property owned by Borrower or a Subsidiary of Borrower, whether or not such
Borrower or Subsidiary of Borrower has assumed such obligations and liabilities
and the amount of which Debt shall not exceed the fair market value of the
Property subject to such Lien if Borrower or Subsidiary of Borrower has not
assumed such obligations and liabilities, (v) obligations or liabilities created
or arising under any Capital Lease, (vi) all net payments or amounts owing by
Borrower or Subsidiary of Borrower in respect of interest rate protection
agreements, foreign currency exchange agreements, commodity swap agreements or
other interest, exchange rate or commodity hedging arrangements, (vii)
liabilities in respect of unfunded vested benefits under Benefit Plans, and
(viii) liabilities relating to Borrower's obligation to purchase the gas
produced from the gas gathering system in the Monroe Gas Field. The Debt of
Borrower or Subsidiary of Borrower shall include the Debt of any partnership or
joint venture in which Borrower or Subsidiary of Borrower is a general or
venture partner. The Debt of Borrower or any Subsidiary of Borrower shall not
include trade payables and expense accruals incurred or assumed in the ordinary
course of Borrower's or such Subsidiary's business (including trade payables and
expense accruals of any partnership or joint venture in which Borrower or any
Subsidiary of Borrower is a general or venture partner), provided, such payables
have not remained unpaid for a period of ninety (90) days after the same became
due unless Borrower or such Subsidiary is diligently contesting same in good
faith.
"Debtor Relief Laws" shall mean the Bankruptcy Code and all other
applicable dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"Default" shall mean any Event of Default and the occurrence of any event
or condition which would with the giving of any requisite Default Notice and/or
the passage of time or both constitute an Event of Default.
"Default Rate" shall mean the interest rate described in Section 2.8.
"Designated Contracts" shall mean the following agreements (whether one or
more) relating to the Borrowing Base Properties, as the same may, subject to
Section 7.8, be amended, supplemented, restated or otherwise modified from time
to time:
(i) All material Production Sales Contracts;
(ii) All organizational documents, including without limitation, all
articles/certificates of incorporation, bylaws, partnership agreements,
limited liability company agreements, joint venture documents or management
agreements, including without limitation, the Management Agreement, the
NGL-Torch Joint Venture Agreement, and the Snyder Joint Venture Agreement,
governing the Borrower, any Subsidiary Guarantor, the Snyder Gas Plant
Venture or the NGL-Torch Gas Plant Venture;
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(iii) All operating agreements, including, without limitation, agency
agreements, and joint operating agreements and other similar agreements
customary in the oil and gas industry and entered into in the ordinary
course of business which are material to the Borrowing Base Properties;
(iv) All fee leases, area of mutual interests agreements, joint
development/drilling agreements, farm out agreements, and farm in
agreements and other similar arrangements customary in the oil and gas
industry and entered into in the ordinary course of business which are
material to the Borrowing Base Properties;
(v) All transportation, processing agreements, product sale
agreements, tolling agreements and throughput agreements which are material
to the Borrowing Base Properties; and
(vi) All pipeline, gas gathering, water disposal and other easements,
rights of way, surface damage, water disposal and surface use agreements
which are material to the Borrowing Base Properties.
"Determination Date" shall mean (i) each May 1 and November 1, and (b) with
respect to any Special Determination, the first day of the first month which is
not less than forty-five (45) calendar days following the date of a request for
a Special Determination.
"Diamond M - Sharon Ridge Gas Plant" shall mean the Diamond M - Sharon
Ridge Gasoline Plant located in Scurry County, Texas, certain interests in which
are owned by the Snyder Gas Plant Venture and the NGL-Torch Gas Plant Venture.
"Distribution" shall mean any dividend payable in cash or Property with
respect to any shares of capital stock of the Borrower or any Subsidiary of the
Borrower (other than dividends payable in shares of the same class of common,
preferred or other capital stock as the shares upon which the dividend is being
paid), any other distribution made with respect to any shares of capital stock
of the Borrower or any Subsidiary of the Borrower, or any purchase, redemption
or retirement of, or other payment with respect to, any shares of capital stock
of the Borrower or any Subsidiary of the Borrower.
"Dollars" and the symbol "$" shall mean the lawful currency of the United
States.
"Effective Date" shall mean the date on which all of the conditions
precedent to the making of the Loans set forth in Section 4.1 are first
satisfied or waived by the Banks or the Required Banks, as applicable, and the
initial Loans are made.
"Eligible Assignee" shall mean any of (i) a Bank or any Affiliate of a
Bank; (ii) a commercial bank organized under the laws of the United States, or
any state thereof having total assets in excess of $1,000,000,000; (iii) a
commercial bank organized under the laws of any other country which is a member
of the OECD, or a political subdivision of any such country having total assets
in excess of $1,000,000,000, provided that such bank is acting through its main
office or a branch or agency located in the country in which it is organized or
another country which is also a member of the OECD having total assets in excess
of $1,000,000,000; (iv) the central bank of any country which is a member of the
OECD or (v) a finance company, insurance company or other financial institution
or fund organized under the laws of the United States or any state thereof,
having total assets in excess of $1,000,000,000,
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provided that a holder, either directly or indirectly, of capital stock or of
any right to acquire capital stock of the Borrower or any Affiliate of the
Borrower shall not be an Eligible Assignee.
"Engineering Report" shall mean a report in form and substance satisfactory
to each Bank, which Engineering Report (i) shall be as of the next preceding
July 1 or January 1, as the case may be, (ii) shall review the Borrowing Base
Properties of the Borrower and the Subsidiary Guarantors (and showing any
additions to or deletions from the Borrowing Base Properties made by the
Borrower or a Subsidiary Guarantor since the date of the previous Engineering
Report), (iii) shall set forth and evaluate the Proved Developed Producing
Hydrocarbon Reserves, Proved Developed Non-producing Hydrocarbon Reserves and
Proved Undeveloped Hydrocarbon Reserves (the "Proved Reserves") attributable to
the Borrowing Base Properties as of the prior January 1 or July 1, as the case
may be, (iv) shall evaluate the productivity and the economic life of all wells
included in the Borrowing Base Properties; the quantity of the Proved Reserves
recoverable therefrom; the projected rate of production, net income and expenses
attributable to such Proved Reserves; the minimum development costs which are
needed to develop the Proved Reserves to their economic life; and the expediency
of any change in methods of treatment or operation of any well included in the
Borrowing Base Properties, and (v) shall contain such additional information as
the Required Banks may reasonably require, as of the date of such Engineering
Report, all in accordance with the guidelines published by the Securities and
Exchange Commission. Each Engineering Report to be submitted prior to September
1 in each such year shall be prepared by Approved Petroleum Engineers. Each
Engineering Report to be submitted prior to March 1 in each year may be limited
to information prepared by personnel of the Borrower and the Subsidiary
Guarantors which shall provide the current status of the information set forth
in the immediately preceding Engineering Report.
"Environmental Laws": any federal, state, local or tribal statute, law,
rule, regulation, ordinance, code, permit, consent, approval, license, written
policy or rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, injunction, consent decree or judgment, or
other authorization or requirement whenever promulgated, issued or modified,
including the requirement to register underground storage tanks, well plugging
and abandonment requirements, and oil and gas waste disposal requirements
relating to:
(i) emissions, discharges, spills, migration, movement, releases or
threatened releases of pollutants, contaminants, Hazardous Substances, or
hazardous or toxic materials or wastes into or onto soil, land, ambient
air, surface water, ground water, watercourses, publicly owned treatment
works, drains, sewer systems, wetlands or septic systems;
(ii) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Substances or hazardous and/or
toxic wastes, material, products or by-products containing Hazardous
Substances (or of equipment or apparatus containing Hazardous Substances);
or
(iii) otherwise relating to pollution or the protection of human
health or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
(S)(S) 9601 et seq., as amended, the Resource Conservation and Recovery
Act, 42 U.S.C. (S)(S) 6901 et seq., as amended, the Hazardous Materials
Transportation Act, 49 U.S.C. (S)(S) 1801 et seq., as amended, the Clean
Water Act, 33 U.S.C. (S)(S) 1251 et seq., as amended, the Toxic Substances
Control Act, 15 U.S.C. (S)(S) 2601 et seq., as amended; the
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Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., as amended, the federal Water
Pollution Control Act, 33 U.S.C. (S)1251 et seq., as amended, the Safe
Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq., as amended, the Atomic
Energy Act, 42 U.S.C. (S)(S) 2011 et seq., as amended, the Natural Gas
Pipeline Safety Act of 1968, 49 U.S.C. (S)1671 et seq., as amended, the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S) 136 et
seq., as amended, and the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., as amended, and all comparable statutes of the States
of Alabama, Arkansas, Colorado, Kansas, Louisiana, Michigan, Mississippi,
New Mexico, Oklahoma, Pennsylvania, Texas, Wyoming and all other states in
which the Borrower or any of its Subsidiaries own or operate real property,
and all comparable local governmental regulations in such states, and other
environmental, conservation or protection laws in effect in any
jurisdiction where any real Property of the Borrower or any Subsidiary of
the Borrower is located.
"Environmental Liabilities": with respect to any Person, any and all
liabilities, responsibilities, losses, sums paid in settlement of claims,
obligations, charges, actions (formal or informal), claims (including, without
limitation, claims for personal injury or for real or personal property damage),
liens, administrative proceedings, damages (including, without limitation, loss
or damage resulting from the occurrence of an Event of Default), punitive
damages, consequential damages, treble damages, penalties, fines, monetary
sanctions, interest, court costs, response and remediation costs, stabilization
costs, encapsulation costs, treatment, storage, or disposal costs, groundwater
monitoring or environmental sampling costs, other causes of action and any other
costs and expenses (including, without limitation, reasonable attorneys',
experts', and consultants' fees, costs of investigation and feasibility studies
and disbursements in connection with any investigative, administrative or
judicial proceeding) , whether direct or indirect, known or unknown, absolute or
contingent, past, present or future arising under, pursuant to or in connection
with any Environmental Law, or any other binding obligation of such Person
requiring abatement of pollution or protection of human health and the
environment.
"Environmental Lien": a Lien in favor of any Governmental Authority for
(i) any liability under Environmental Laws or (ii) damages arising from, or
costs incurred by such Governmental Authority in response to, a Release or
threatened Release of a Hazardous Substance into the environment.
"ERISA" shall mean the United States Employee Retirement Income Security
Act of 1974, as amended from time to time, together with all rules and
regulations promulgated with respect thereto.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Borrower, (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with the Borrower, (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as the Borrower or (iv)
other Person required to be aggregated with the Borrower or an ERISA Affiliate
thereof, as defined above, pursuant to Section 414(o) of the Code.
"Eurocurrency Liabilities" shall have the meaning assigned to that term in
Regulation D.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate in accordance with the provisions of Article
II.
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"Eurodollar Rate" shall mean, with respect to each Eurodollar Loan
comprising part of a Eurodollar Borrowing and with respect to the related
Interest Period, the rate of interest per annum (rounded upward to the nearest
1/16 of one percent) determined pursuant to the following formula:
Eurodollar (Unadjusted)
------------------------------------
Eurodollar Rate = 1.00 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" of any Bank with respect to any Interest
Period for any Eurodollar Loan of such Bank shall mean, the reserve percentage
(expressed as a decimal) equal to the actual aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and other reserves and
taking into account any transitional adjustments or other scheduled changes in
reserve requirements) required under regulations issued from time to time by the
Board of Governors of the Federal Reserve System and then applicable to assets
or liabilities consisting of and including Eurocurrency Liabilities having a
term approximately equal or comparable to such Interest Period.
"Eurodollar (Unadjusted)" shall mean, with respect to each day during each
Interest Period pertaining to each Eurodollar Loan comprising a Eurodollar
Borrowing, the rate per annum equal to the rate at which Chase is offered Dollar
deposits at or about 11:00 a.m., New York, New York time, two Business Days
prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of the Eurodollar Borrowing to be
outstanding during such Interest Period.
"Event of Default" shall have the meaning specified in Section 8.1.
"Existing Credit Agreement" shall mean that certain Third Amended and
Restated Credit Agreement dated as of February 28, 1995, between the Borrower
and Wells Fargo Bank (Texas) National Association, formerly known as First
Interstate Bank of Texas, N.A., as said Credit Agreement has heretofore been
amended, including, without limitation, pursuant to that certain First Amendment
to Third Amended and Restated Credit Agreement dated as of June 1, 1995 and that
certain Second Amendment to Third Amended and Restated Credit Agreement dated as
of November 15, 1995.
"Existing Litigation" shall mean all material actions, suits, proceedings,
governmental investigations or arbitrations pending or, to the best knowledge of
the Borrower after due inquiry, threatened against the Borrower or any
Subsidiary of the Borrower, which Existing Litigation is disclosed in Schedule
5.10 hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation (or any
successor).
"Federal Funds Effective Rate" shall have the meaning specified in the
definition of the term "Alternate Base Rate".
"Fiscal Quarter" shall mean a three-month period ending on the last day of
December, March, June or September of any year.
"Fiscal Year" shall mean a twelve-month period ending on June 30 of any
year.
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"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are consistent with those applied in the preparation of the
financial statements of the Borrower referred to in Subsection 5.9(a).
"Governmental Approval" shall mean any authorization, consent, approval,
license, franchise, lease, ruling, permit, certification, exemption, filing for,
or registration by or with any Governmental Authority required by the Borrower
or any Subsidiary of the Borrower in connection with (i) the execution, delivery
and performance of the Operative Documents by any of such Persons or the
borrowing of any funds under this Credit Agreement, (ii) the validity or
enforceability of the Operative Documents and the exercise by the Agent or any
Bank of its rights and remedies thereunder, and/or (iii) the acquisition,
maintenance, ownership and operation of the Borrowing Base Properties.
"Governmental Authority" shall mean any nation or government, any federal,
state, province, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Substances" shall mean (i) hazardous materials, hazardous
wastes, and hazardous substances including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table, 49 C.F.R. (S)172.101, as amended, or
listed by the federal Environmental Protection Agency as hazardous substances
under or pursuant to 40 C.F.R. Part 302, as amended, or substances, materials,
contaminants or wastes which are or become regulated under any Environmental
Law, including without limitation, those substances, materials, contaminants or
wastes as defined in the following statutes and their implementing regulations:
the Hazardous Materials Transportation Act, 49 U.S.C. (S)1801 et seq., as
amended, the Resource Conservation and Recovery Act, 42 U.S.C. (S)6901 et seq.,
as amended, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S)9601 et seq., as amended; the Toxic Substances Control Act, 15
U.S.C. (S)2601 et seq., as amended; the Clean Air Act, 42 U.S.C. (S)7401 et
seq., as amended, the federal Water Pollution Control Act, 33 U.S.C. (S)1251 et
seq., as amended, the Occupational Safety and Health Act, 2 U.S.C. (S)651 et
seq., as amended, the Safe Drinking Water Act, 42 U.S.C. (S)300f et seq., as
amended and the Natural Gas Pipeline Safety Act of 1968, 49 U.S.C. (S)1671 et
seq., as amended; (ii) all substances, materials, contaminants or wastes listed
in all comparable statutes of the States of States of Alabama, Arkansas,
Colorado, Kansas, Louisiana, Michigan, Mississippi, New Mexico, Oklahoma,
Pennsylvania, Texas, Wyoming and in comparable local Requirements of Law in such
states; (iii) acid gas, sour water streams or sour water vapor streams
containing hydrogen sulfide or other forms of sulphur, sodium hydrosulfide and
ammonia; (iv) Hydrocarbons; (v) natural gas, synthetic gas, and any mixtures
thereof; (vi) asbestos and/or any material which contains 1% or more, by weight,
of any hydrated mineral silicate, including but not limited to chrysotile,
amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable
or non-friable; (vii) PCB's, or PCB containing materials or fluids; (viii)
radon; (ix) naturally occurring radioactive material, radioactive substances or
waste; (x) salt water and other oil and gas wastes, and (xi) any other hazardous
or noxious substance, material, pollutant, emission, or solid, liquid or gaseous
waste.
"Hedge Transaction" shall mean a transaction pursuant to which the Borrower
or any of its Subsidiaries hedge the price to be received by them for future
production of Hydrocarbons, including price swap agreements under which the
Borrower or its Subsidiaries agree to pay a price for a specified amount of
Hydrocarbons determined by reference to a recognized market on a specified
future date and
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the contracting party agrees to pay the Borrower or its Subsidiaries a fixed
price for the same or similar amount of Hydrocarbons.
"Highest Lawful Rate" shall mean, as of a particular date and as to any
Bank, the maximum nonusurious interest rate that may under applicable law then
be contracted for, charged or received by such Bank in connection with its
Loans.
"Hostile Acquisition" shall mean any transaction in which the Borrower or
its Subsidiaries, directly or indirectly, purchases or offers to purchase or
acquire, in any transaction or series of transactions, an aggregate of 5% or
more of the equity securities or controlling interest of any Person, for any
type of consideration, without the prior written consent of such Person or such
Person's Board of Directors or controlling body.
"Hydrocarbons" shall mean oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons and all products separated, settled
and dehydrated therefrom and all products refined therefrom, including, without
limitation, kerosene, liquified petroleum gas, refined lubricating oils, diesel
fuel, drip gasoline, natural gasoline, helium, sulphur and all other minerals.
"Immaterial Oil and Gas Interests" shall have the meaning assigned to that
term in Subsection 5.7(a) hereof.
"Initial Engineering Report" shall mean the engineering report concerning
certain Oil and Gas Interests of the Borrower and the Subsidiary Guarantors
dated August 30, 1995, prepared by Williamson Petroleum Consultants, Inc. as of
July 1, 1995, complete and correct copies of which have been furnished by the
Borrower to the Banks.
"Initial Financial Statements" shall mean the audited annual Consolidated
financial statements of the Borrower and its Consolidated Subsidiaries dated as
of June 30, 1996, copies of which Initial Financial Statements have heretofore
been delivered by the Borrower to the Banks.
"Initial Related Asset Report" shall mean the Related Asset Report
concerning the Related Assets prepared by personnel of the Borrower as of July
1, 1996, complete and correct copies of which have been furnished by the
Borrower to the Agent.
"Interest Period" shall mean, (i) with respect to each Eurodollar
Borrowing, a period of one, two, three or six months, as specified in the
Borrowing Request submitted pursuant to Section 2.2 with respect thereto,
beginning on and including the date specified in such Borrowing Request (which
must be a Business Day) and ending on the date which corresponds numerically to
such beginning date one, two, three or six months thereafter (or if such month
has no numerically corresponding date, on the last Business Day of such month);
provided that each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day unless such
next succeeding Business Day is the first Business Day of a calendar month, in
which case such Interest Period shall end on the Business Day next preceding
such numerically corresponding day and (ii) with respect to each Base Rate
Borrowing, the period commencing on the date of such Borrowing and ending on the
last day of the Fiscal Quarter in which such Borrowing occurs, with subsequent
Interest Periods automatically occurring and ending on the last day of each
subsequent Fiscal Quarter unless such Borrowing is earlier prepaid in accordance
with Section 2.10. No Interest Period may be elected which would end after the
Maturity Date.
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"Investment" shall mean, as applied to the Borrower or a Subsidiary of the
Borrower, any direct or indirect purchase or other acquisition by the Borrower
or such Subsidiary of stock, partnership interest or other equity interest, or
of a beneficial interest therein, of any other Person, and any direct or
indirect loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, advances to employees and
similar items made or incurred in the ordinary course of business), or capital
contribution by the Borrower or such Subsidiary to any other Person, including
all Debt and accounts owed by that other Person which are not current assets or
did not arise from sales of goods or services to the Borrower or such Subsidiary
in the ordinary course of business. The amount of any Investment shall be
determined in conformity with GAAP.
"IRS" shall mean the Internal Revenue Service or any successor agency.
"Issuing Bank" shall mean Chase.
"LC Collateral" shall mean any amounts held by the Agent as security for LC
Obligations of the Borrower.
"LC Obligations" shall mean, at the time in question, the sum of the
Matured LC Obligations plus the aggregate face amount of all Letters of Credit
then outstanding.
"Lending Office" shall mean, with respect to each Bank, the branch or
branches (or Affiliate or Affiliates) from which such Bank's Eurodollar Loans or
Base Rate Loans, as the case may be, are made or maintained and for the account
of which payments of principal of, and interest on, such Bank's Eurodollar Loans
or Base Rate Loans are made.
"Letter of Credit" shall mean a Standby Letter of Credit requested to be
issued under the Letter of Credit Commitment.
"Letter of Credit Application" shall mean the application to the Issuing
Bank by the Borrower for the issuance of a Standby Letter of Credit in
substantially the form of Exhibit C hereto.
"Letter of Credit Commitment" shall mean with respect to each Bank, the
lesser of (i) such Bank's Commitment Percentage of $5,000,000 and (ii) such
Bank's Commitment.
"Lien" shall mean, with respect to any Property, (i) any mortgage, deed of
trust, production payment, deposit, lien, charge, pledge, security interest,
claim or encumbrance of any kind (whether voluntary or involuntary, affirmative
or negative, and whether imposed or created by operation of law or otherwise)
upon such Property, (ii) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such Property and (iii) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities
but excluding any right of offset which arises without agreement in the ordinary
course of business.
"Loan Documents" shall mean this Credit Agreement, each of the Notes, the
Pledge Agreement, the Subsidiary Guaranty, the Letters of Credit, the Letter of
Credit Applications and reimbursement agreements executed in connection
therewith, each Compliance Certificate, each Notice of Conversion or
Continuance, each Borrowing Request, all Engineering Reports prepared by the
personnel of the Borrower and its Subsidiaries, all Related Asset Reports, and
when executed and delivered by the parties
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thereto, all other agreements, certificates, instruments and documents executed
in connection with the Credit Agreement, as the same may be amended, modified,
supplemented or extended from time to time.
"Loan(s)" shall have the meaning provided in Subsection 2.1(a).
"Management Agreement" shall mean that certain Management Agreement dated
January 1, 1994, by and between Borrower and Torch Energy Advisors Incorporated,
as (subject to the provisions of Section 7.8) amended.
"Margin Stock" shall have the meaning given to such term under
Regulation U.
"Material Adverse Effect" shall mean (i) a material adverse effect on the
business, Properties, operations or condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, (ii) material
impairment of the ability of the Borrower or any of its Subsidiaries to perform
timely any of its respective Obligations under any Operative Document to which
it is or will be a party, or (iii) material impairment of the rights of or
benefits available to the Banks under any Loan Document.
"Material Contract" shall mean any Contractual Obligation to which the
Borrower or any of its Subsidiaries is a party (i) which calls for payments to
or from the Borrower or any Subsidiary of the Borrower of an amount in excess of
$500,000 during any twelve month period or (ii) pursuant to which the Borrower
or any Subsidiary of the Borrower acquires any right to an interest in real or
personal Property or a right to obtain services if the Borrower or such
Subsidiary's inability to obtain any such right could reasonably be expected to
result in a Material Adverse Effect.
"Matured LC Obligations" shall mean the aggregate amount of payments
theretofore made by the Issuing Bank in respect of draws made under Letters of
Credit and not theretofore reimbursed by the Borrower to the Issuing Bank or
deemed Loans pursuant to Subsection 2.3(d).
"Maturity Date" shall mean October 15, 2000, or the earlier date of
termination in whole of the Commitments pursuant to the provisions of Sections
2.6 or 8.1 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five (5) plan years made or accrued an obligation to make
contributions.
"Diamond M - Sharon Ridge Gas Plant" shall mean the Diamond M - Sharon
Ridge Gasoline Plant located in Scurry County, Texas, certain interests in which
are owned by the Snyder Gas Plant Venture and the NGL-Torch Gas Plant Venture.
"NGL-Torch Gas Plant Venture" shall mean NGL-Torch Gas Plant Venture, a
general partnership organized under the laws of the State of Texas.
"NGL-Torch Joint Venture Agreement" shall mean that certain Joint Venture
Agreement of NGL-Torch Gas Plant Venture, dated July 15, 1993, between Borrower,
as successor-in-interest to Torch Energy Marketing, Inc. and NGL Associates, as
venture partners, as (subject to the provisions of Section 7.13) amended.
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"NGL-Torch Related Assets" shall mean (i) all of the Borrower's right,
title and interest in, to and arising under the NGL-Torch Gas Plant Venture,
(ii) all interests of the NGL-Torch Gas Plant Venture in and to the Diamond M -
Sharon Ridge Gas Plant including, without limitation, related personal property
and other fixed asset and all easements, servitudes and similar real property
interests owned by the NGL-Torch Gas Plant Venture, on which such Gas Plant is
located and (iii) all revenues, monies, proceeds and payments accruing and to
accrue, and all sums payable and to be payable to the Borrower and to which the
Borrower is or may be entitled to under the NGL-Torch Gas Plant Venture.
"Notes" shall mean the promissory notes of the Borrower dated the Effective
Date payable to the order of each Bank, substantially in the form of Exhibit D.
"Notice of Conversion or Continuation" shall mean a Notice of Conversion or
Continuation in the form of Exhibit E signed by a Responsible Officer of the
Borrower.
"Obligations" shall mean all obligations, liabilities and indebtedness of
every nature of the Borrower and its Subsidiaries from time to time owing to any
Bank under any Loan Document to which the Borrower or such Subsidiary is a
party, including, without limitation, (i) the due and punctual payment of (x)
the principal of and interest on the Loans, Letters of Credit and reimbursement
obligations under Letter of Credit Applications, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, including, to the extent permitted by applicable law, interest that
accrues after the commencement of any proceeding by or against the Borrower or
any of its Subsidiaries under the Bankruptcy Code and all other applicable
Debtor Relief Laws, (y) all other monetary obligations of the Borrower and its
Subsidiaries to any Bank under this Credit Agreement and each of the other Loan
Documents to which the Borrower or such Subsidiary is a party, including any and
all fees, costs, expenses and indemnities, and (z) all monetary obligations of
the Borrower or any Subsidiary of the Borrower owing to any Bank or Affiliate of
such Bank under any Hedge Transaction permitted under Section 7.13, including
any and all fees, costs, expenses and indemnities under such Hedge Transaction,
and (ii) the due and punctual performance of all other obligations of the
Borrower and its Subsidiaries under this Credit Agreement and each other Loan
Document to which the Borrower or such Subsidiary is a party. "Obligation"
shall mean any part of the Obligations.
"Odyssey" shall mean Odyssey Petroleum Company, a Delaware corporation and
a wholly owned Subsidiary of the Borrower.
"Oil and Gas Interests" shall mean any and all rights, estates, titles and
interests in any oil and gas wells, oil, gas, sulphur and other mineral
leaseholds and fee interests, all overriding royalty interests, mineral
interests, royalty interests, net profits interests, oil payments, production
payments, carried interests and any and all other interests in Hydrocarbons,
whether any of the same be real or personal, now owned or hereafter acquired by
the Borrower or its Subsidiaries, directly or indirectly together with rights,
titles and interests created by or arising under the terms of any unitization,
communitization, 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.
"Operative Documents" shall mean, collectively, the Snyder Joint Venture
Agreement, the Management Agreement, the NGL-Torch Gas Plant Venture and each of
the Loan Documents.
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"Opinion of the Borrower's Counsel" shall mean the favorable written legal
opinion of Seiler, Cohn & Stebbins, L.L.P., legal counsel to the Borrower and
its Subsidiaries, dated as of the Closing Date, and in form and substance
satisfactory to the Agent.
"Participants" shall have the meaning assigned to that term in Section 10.9
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Liens" shall mean with respect to the Borrower or any Subsidiary
of the Borrower:
(i) Liens securing the Obligations in favor of the Banks;
(ii) Inchoate Liens incident to construction or maintenance of real
property, or Liens incident to construction or maintenance of real property
now or hereafter filed of record for which adequate reserves with respect
thereto are maintained on its books in accordance with GAAP and which are
being diligently contested in good faith by appropriate proceedings and
have not proceeded to judgment, provided that, by reason of nonpayment of
the obligations secured by such Liens, no such real property is subject to
a material risk of loss or forfeiture prior to judgment;
(iii) Liens for taxes and assessments on real property which are not
yet past due, or Liens for taxes and assessments on real property for which
adequate reserves with respect thereto are maintained on its books in
accordance with GAAP and which taxes and assessments are being diligently
contested in good faith by appropriate proceedings and have not proceeded
to judgment, provided that, by reason of nonpayment of the obligations
secured by such Liens, no such real property is subject to a material risk
of loss or forfeiture prior to judgment;
(iv) Imperfections and irregularities in title to any Property which
in the aggregate do not materially impair the marketability or use of such
Property for the purposes for which it is or may reasonably be expected to
be held;
(v) Easements, exceptions, reservations, or other agreements for the
purpose of pipelines, conduits, cables, wire communication lines, power
lines and substations, streets, trails, walkways, drainage, irrigation,
water, and sewerage purposes, dikes, canals, ditches, the removal of oil,
gas, or other minerals, and other like purposes affecting real property
which in the aggregate do not materially burden or impair the marketability
or use of such real property for the purposes for which it is or may
reasonably be expected to be held;
(vi) Non-consensual Liens imposed by Law, including carrier's,
mechanics', landlord's, warehousemen's or other similar Liens, other than
those described in subclauses (a) or (b) above, arising in the ordinary
course of business with respect to obligations which are not delinquent or
are being diligently contested in good faith by appropriate proceedings,
provided that, if delinquent, adequate reserves with respect thereto are
maintained on its books in accordance with GAAP and, by reason of
nonpayment, no Property is subject to a material risk of loss or forfeiture
prior to judgment;
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(vii) Liens consisting of pledges or deposits made in the ordinary
course of business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(viii) Liens consisting of deposits of Property to secure the
performance of bids, trade contracts (other than for Debt), leases (other
than Capitalized Lease Obligations), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(ix) Liens securing the payment to third parties of royalties,
overriding royalties, net profits interests, production payments or other
payments out of or with respect to the production, transportation or
processing of Hydrocarbons, and which are not delinquent and are (aa) in
existence on the Closing Date and which were deducted in the calculation of
discounted present value in the Initial Engineering Report; or (bb)
reserved by the grantor in an assignment of an oil and gas lease to
Borrower or any Subsidiary of the Borrower after the date hereof or
reserved by the lessor in any oil and gas lease entered into with the
Borrower or any Subsidiary of the Borrower after the date hereof, provided,
such lease burdens are payable to third parties, have been disclosed to the
Agent in writing, and are deducted in the calculation of discounted present
value in the Engineering Reports;
(x) Liens arising under operating agreements (including operating,
processing or marketing agreements that relate to the Diamond M Gas Plant
and/or the Snyder Gas Plant), pooling or unitization agreements, farm out
agreements, pooling orders or similar agreements of a scope and nature
customary in the oil and gas industry, and that are entered into in the
ordinary course of business to the extent such Liens are limited in
recourse to (x) the Properties subject to such interests or agreements, (y)
the Hydrocarbons produced from such Properties and (z) the proceeds of such
Hydrocarbons;
(xi) Liens in respect of margin deposits permitted under Subsection
7.5(i) securing Debt permitted under Subsection 7.1(g);
(xii) Purchase money Liens upon or in any Property acquired by the
Borrower or any of its Subsidiaries in the ordinary course of business to
secure the deferred portion of the purchase price of such Property or any
indebtedness incurred to finance the acquisition of such Property provided,
however, that (i) no such Lien shall be extended to cover Property other
than the Property being acquired, and (ii) the Debt secured thereby is
permitted pursuant to Subsection 7.1(j);
(xiii) Subject to Subsections 7.1(j) and (k), Liens on properties of
corporations which become Subsidiaries of Borrower after the Closing Date,
provided, however, that such Liens are in existence at the time the
respective corporations become Subsidiaries and were not created in
anticipation thereof;
(xiv) Liens on Margin Stock; and
(xv) All other non-consensual Liens arising in the ordinary course of
the Borrower's or such Subsidiary's business or incidental to the ownership
of their respective Properties;
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provided, that no such Lien shall secure the payment of Debt that is delinquent
and provided, further, that no Permitted Lien referred to in subclauses (ii)
through (xiv) above shall in the aggregate materially detract from the value or
marketability of the Property subject thereto or materially impair the use or
operation thereof in the operation of the business of the Borrower or such
Subsidiary.
"Person" shall mean an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a foreign state or political subdivision thereof or
any agency of such state or subdivision.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the Closing
Date, executed by the Borrower in favor of the Agent for the benefit of the
Banks, substantially in the form of Exhibit F hereto, as same may be amended,
supplemented or otherwise modified from time to time.
"Prime Rate" shall have the meaning specified in the definition of the term
"Alternate Base Rate."
"Production Sales Contracts" shall mean all Hydrocarbon sales agreements
and Hydrocarbon or water gathering, treatment and/or transportation agreements
now existing or hereafter entered into by or on behalf of the Borrower or any
Subsidiary Guarantor covering the Borrowing Base Properties of the Borrower or
such Subsidiary Guarantor.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proved Developed Behind Pipe Hydrocarbon Reserves" shall mean Proved
Hydrocarbon Reserves which are recoverable from zones behind casing in existing
wells, which will require additional completion work or a future recompletion
prior to the start of production.
"Proved Developed Non-Producing Hydrocarbon Reserves" shall mean the
summation of Proved Developed Behind Pipe Hydrocarbon Reserves and Proved
Developed Shut-in Hydrocarbon Reserves.
"Proved Developed Producing Hydrocarbon Reserves" shall mean those Proved
Hydrocarbon Reserves which are recoverable from completion intervals currently
open and producing to market. Improved recovery reserves are considered to be
producing only after an improved recovery project has been installed and is in
operation.
"Proved Developed Shut-in Hydrocarbon Reserves" shall mean Proved
Hydrocarbon Reserves that are recoverable from completion intervals open as of
the date of estimation, but which are not producing as of such date.
"Proved Hydrocarbon Reserves" shall mean those recoverable Hydrocarbons
which have been proved to a high degree of certainty by reason of existing
production, adequate testing, or in certain cases by adequate core data and
other engineering and geologic information on zones which are present in
existing wells or in known reservoirs. Reserves that can be produced
economically through the application of established improved recovery techniques
are included in the proved classification when (i) successful testing by a pilot
project or the operation of any installed program in that reservoir or one in
the immediate area with similar rock and fluid properties provides support for
the engineering analysis on which the project or program was based, and (ii) it
is reasonably certain the project will proceed. Reserves to be recovered by
improved recovery techniques that have yet to be established through
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repeated economically successful applications are included in the proved
category only after successful testing by a pilot project or after the operation
of an installed program in the reservoir provides support for the engineering
analysis on which the project or program was based. Improved recovery includes
all methods for supplement of the natural reservoir including (aa) pressure
maintenance, (bb) cycling, and (cc) secondary recovery in its original sense.
Improved recovery also includes the enhanced recovery methods of thermal,
chemical flooding, and the use of miscible and immiscible displacement fluids.
"Proved Reserves" shall have the meaning assigned to that term in the
definition of "Engineering Report".
"Proved Undeveloped Hydrocarbon Reserves" shall mean Proved Hydrocarbon
Reserves that are recoverable (i) by new wells on undrilled acreage, (ii) by
replacement wells on previously drilled and producing acreage or (iii) from
existing wells where a relatively large expenditure is required for recompletion
and from acreage where the application of an improved recovery technique is
planned and the costs required to place the project in operation are relatively
large. Proved Undeveloped Hydrocarbon Reserves on undrilled acreage shall be
limited to those drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved Hydrocarbon Reserves for other
undrilled units are Proved Undeveloped Hydrocarbon Reserves only where it can be
demonstrated with certainty that there is continuity of production from the
existing productive formation.
"Register" shall have the meaning specified in Subsection 10.9(f) hereof.
"Regulation D" shall mean Regulation D of the Board (respecting reserve
requirements), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board (respecting margin
credit extended by Persons other than banks, brokers and dealers), as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board (respecting margin
credit extended by banks), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board (respecting borrowers
who obtain margin credit), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Related Assets" shall mean, collectively, the Snyder Related Assets and
the NGL-Torch Related Assets.
"Related Asset Report" shall mean a report with respect to the Snyder Gas
Related Assets and the NGL-Torch Related Assets to be delivered by Borrower to
Banks simultaneous with each delivery by Borrower of an Engineering Report
pursuant to Sections 3.2 and 3.3 which shall (i) be in form and substance
acceptable to Required Banks, (ii) be prepared by personnel of the Borrower in
accordance with customary and prudent practices of the petroleum engineering
industry, and (iii) which shall set forth the average daily input volumes,
revenues, operating expenses and capital expenditures of the Snyder Gas Plant
for the period of six (6) months ending the preceding June 30 or December 31, as
the case may be.
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"Release" shall mean any release, spill, emission, leak, injection,
deposit, disposal, discharge, dispersal, leaching or migration of any Hazardous
Substance into the environment or into or out of any real property of the
Borrower or any Subsidiary of the Borrower, including the movement of Hazardous
Substances through or in the air, soil, surface water, groundwater and/or land
in violation of Environmental Laws.
"Remedial Action" shall mean actions required by a Governmental Agency to
(i) clean up, remove, treat or in any other way address Hazardous Substances in
the environment, (ii) prevent the Release or threat of Release or minimize the
further Release of Hazardous Substances so they do not migrate or endanger or
threaten to endanger public health or welfare or the environment or (iii)
perform pre-remedial studies and investigations and post-remedial monitoring and
care.
"Reportable Event" shall mean any of the events described in Section 4043
or Section 4068(f) of ERISA for which the thirty (30) day notice requirement of
29 C.F.R. (S) 2615.3 has not been waived.
"Required Banks" shall mean those Banks holding at least 67% of the
Utilized Credit, or, if no Utilized Credit is outstanding, at least 67% of the
Total Commitment.
"Requirements of Law" shall mean any federal, state or local law, rule or
regulation, permit or other binding determination of any Governmental Authority
applicable to the Borrower or any of its Subsidiaries or any of their respective
Properties.
"Responsible Officer" shall mean, as to any Person, its Chairman, Vice-
Chairman, President, Executive Vice President(s), Senior Vice President(s) or
Vice President duly authorized to act on behalf of such Person.
"Snyder Gas Plant" shall mean that certain cryogenic gas plant located in
Scurry County, Texas, certain interests in which are owned by the Snyder Gas
Plant Venture and the NGL-Torch Gas Plant Venture, which gas plant extracts
liquids from natural gas produced from the Sacroc Unit, a waterflood and carbon
dioxide injection project, as well as the adjacent Sharon Ridge Field.
"Snyder Gas Plant Venture" shall mean the Snyder Gas Plant Venture, a
general partnership organized under the laws of the State of Texas.
"Snyder Joint Venture Agreement" shall mean that certain Amended Joint
Venture Agreement of Snyder Gas Plant Venture, dated July 29, 1993, between the
Borrower and NGL Associates, as venture partners, as (subject to the provisions
of Section 7.8) amended.
"Snyder Related Assets" shall mean (i) all of the Borrower's right, title
and interest in, to and arising under the Snyder Gas Plant Venture, (ii) all
interests of the Snyder Gas Plant Venture in and to the Snyder Gas Plant
including, without limitation, related personal property and other fixed asset
and all easements, servitudes and similar real property interests owned by the
Snyder Gas Plant Venture, on which such Gas Plant is located and (iii) all
revenues, monies, proceeds and payments accruing and to accrue, and all sums
payable and to be payable to the Borrower and to which the Borrower is or may be
entitled to under the Snyder Gas Plant Venture.
"S&P" shall mean Standard & Poor's Corporation.
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"Special Determination" shall mean any determination of the Borrowing Base
pursuant to Section 3.4.
"Standby Letter of Credit" shall mean a Letter of Credit which represents
an obligation to the beneficiary on the part of the Issuing Bank (i) to repay
money borrowed by or advanced to or for the account of the Borrower or any of
its Subsidiaries or (ii) to make payment on account of any indebtedness
undertaken by the Borrower or any of its Subsidiaries or (iii) to make payment
on account of any default by the Borrower or any of its Subsidiaries in the
performance of an obligation.
"Subsidiary" shall mean as of any date of determination and with respect to
any Person, any corporation, partnership, joint venture or other entity whether
now existing or hereafter organized or acquired of which the securities,
partnership units or other ownership interests having ordinary voting power, in
the absence of contingencies, to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person and/or one or more Subsidiaries of such Person.
Notwithstanding the foregoing, for all purposes of this Credit Agreement, each
of Snyder Gas Plant Venture and NGL-Torch Gas Plant Venture shall be deemed a
"Subsidiary" of the Borrower.
"Subsidiary Guarantors" shall mean Odyssey, West Monroe and any such other
Person who has guaranteed some or all of the Obligations and who has been
accepted by the Banks as a Subsidiary Guarantor, including any Subsidiary of the
Borrower which now or hereafter executes and delivers an Instrument of Joinder
of the Subsidiary Guaranty in the form of Exhibit A to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall mean the guaranty of the Obligations executed
by each Subsidiary of the Borrower in favor of the Agent for the benefit of the
Banks to secure the Obligations substantially in the form of Exhibit G, either
as originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or supplanted.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Benefit Plan (other than a "reportable event" that is not subject to the
provision for 30 days notice to the PBGC); (ii) the withdrawal of the Borrower
from a Benefit Plan during a plan year in which the Borrower was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; (iii) the imposition of an
obligation on the Borrower under Section 4041 of ERISA to provide affected
parties written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Benefit Plan; (v) any other event or
condition which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan;
or (vi) the occurrence of an event described in Section 4068(f) of ERISA with
respect to a Benefit Plan.
"Texas Joint Ventures" shall mean collectively, the Snyder Gas Plant
Venture and the NGL-Torch Gas Plant Venture.
"Total Commitment" shall mean $50,000,000 as the same may be reduced from
time to time pursuant to Section 2.9.
"Type," when used in respect to any Loan or Borrowing, refers to the Rate
by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, "Rate" shall include the
Eurodollar Rate and the Alternate Base Rate.
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"United States" and "U.S." each shall mean United States of America.
"Unused Availability" shall mean at any time, an amount equal to the
Borrowing Base in effect at that time, minus the Utilized Credit.
"Utilized Credit" shall mean, at any time, without duplication, the sum of
(i) the aggregate principal amount then outstanding on Loans, plus (ii) the
aggregate LC Obligations then outstanding.
"Utilized Percentage of Borrowing Base" shall mean on any date an amount
equal to (i) the Utilized Credit divided by (ii) the Borrowing Base on such day.
"West Monroe" shall mean West Monroe Gas Gathering Corporation, a Louisiana
corporation and a wholly owned Subsidiary of the Borrower.
"Withholding Taxes" shall have the meaning provided in Subsection 2.17(a).
SECTION 1.2. Accounting Terms. All terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided, however, that, for purposes of determining compliance with any
covenant set forth in Article VII, such terms shall be construed in accordance
with GAAP as in effect on the date of this Credit Agreement, applied on a basis
consistent with the application used in the audited financial statements
referred to in Subsection 5.9(a).
SECTION 1.3. Interpretation.
(a) In this Credit Agreement, unless a clear contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Credit Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Credit Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, provided that nothing in this subclause (iv) is intended to
authorize any assignment not otherwise permitted by this Credit Agreement;
(v) reference to any agreement, document or instrument means such
agreement, document or instrument as amended, supplemented or modified and
in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof, and reference to any Note includes any Note
issued pursuant hereto in extension or renewal thereof and in substitution
or replacement therefor;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section hereof
or such Schedule or Exhibit hereto;
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(vii) the words "including" (and with correlative meaning "include")
means including, without limiting the generality of any description
preceding such term;
(viii) with respect to the determination of any period of time, the
word "from" means "from and including" and the word "to" means "to but
excluding;"
(ix) reference to any law means such as amended, modified, codified
or reenacted, in whole or in part, and in effect from time to time; and
(x) with respect to the definitions of "Proved Hydrocarbon Reserves"
and Proved Undeveloped Hydrocarbon Reserves", the standards used to
determine if a particular Oil & Gas Interest meets the criteria contained
in such definitions shall be those standards set forth in the opinions and
pronouncements of the American Petroleum Institute.
(b) The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction of this Credit
Agreement.
(c) No provision of this Credit Agreement shall be interpreted or construed
against any Person solely because that Person or its legal representative
drafted such provision.
ARTICLE II
COMMITMENTS, LOANS, AND LETTERS OF CREDIT
SECTION 2.1. Loans.
(a) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein and in the other Loan Documents,
each Bank agrees, severally and not jointly, to make its Commitment Percentage
of loans to the Borrower (collectively, the "Loans"), at any time and from time
to time on and after the Effective Date and up to, but excluding, the Maturity
Date, provided, a Bank's Commitment Percentage of the aggregate amount of the
Utilized Credit at any one time shall not exceed the lesser of (i) such Bank's
Commitment and (ii) such Bank's Commitment Percentage of the Borrowing Base.
Except as otherwise provided in this Credit Agreement, the Loans shall mature
and be due and payable in full on the Maturity Date. Subject to the terms and
provisions hereof, the Borrower may borrow, repay and reborrow hereunder. Each
Borrowing shall be made in accordance with the procedures set forth in Section
2.2 and shall be in an aggregate principal amount (i) in the case of an Base
Rate Borrowing, $500,000 or a whole multiple of $100,000 in excess thereof (or,
if then Unused Availability is less than $500,000, such lesser amount) and (ii)
in the case of a Eurodollar Borrowing, $500,000 or a whole multiple of $100,000
in excess thereof. The Loans may from time to time be (i) Eurodollar Loans,
(ii) Base Rate Loans, or (iii) a combination thereof, as determined by the
Borrower and notified to the Agent in accordance with Sections 2.3 and 2.5.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, the Issuing Bank agrees to
issue Letters of Credit upon the request of the Borrower for the account of the
Borrower or any Subsidiary of the Borrower at any time and from time to time on
and after the Effective Date and up to, but excluding, the earlier of the
Maturity Date and the termination of the Letter of Credit Commitments in
accordance with the terms hereof. Each Bank (other than the Issuing Bank)
severally agrees, on the terms and conditions hereinafter set forth, to purchase
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participations in the Letters of Credit issued by the Issuing Bank pursuant to
this Subsection 2.1(b) and Section 2.3, in an aggregate amount not to exceed
such Bank's Letter of Credit Commitment. Notwithstanding the foregoing, the
aggregate undrawn face amount of all Letters of Credit at any time outstanding
shall not exceed the aggregate Letter of Credit Commitments of all the Banks,
and no Letter of Credit will be issued if immediately after such issuance the
Utilized Credit would exceed the Borrowing Base then in effect. On each day
during the period commencing with the issuance by the Issuing Bank of any Letter
of Credit and until such Letter of Credit shall have expired or been terminated,
and, irrespective of whether such Letter of Credit has expired or terminated, if
same has been drawn upon and the amount so drawn has not been reimbursed to the
Issuing Bank or deemed a Base Rate Borrowing pursuant to Subsection 2.3(d), the
Commitment of each Bank shall be deemed to be utilized for all purposes hereof
in an amount equal to such Bank's Commitment Percentage of the undrawn face
amount of such Letter of Credit, plus the aggregate amount of all unreimbursed
drawings.
SECTION 2.2. Borrowing Procedure for Loans.
(a) In order to effect a Borrowing(s), the Borrower shall submit a
Borrowing Request in writing or by telecopy (or telephone notice promptly
confirmed in writing or by telecopy) to the Agent, (i) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York, New York time, two
(2) Business Days before the Borrowing Date specified in the Borrowing Request
for such proposed Eurodollar Borrowing(s) and (ii) in the case of a Base Rate
Borrowing, not later than 12:00 noon, New York, New York time, on the Borrowing
Date specified in the Borrowing Request for such proposed Base Rate Borrowing.
Such Borrowing Request shall be irrevocable and shall in each case refer to this
Credit Agreement and specify (i) whether the Borrowing(s) then being requested
are to be Eurodollar Borrowing(s), or Base Rate Borrowing(s), or a combination
thereof, (ii) the Borrowing Date of such Borrowing(s) (which shall be a Business
Day), (iii) the aggregate principal amount of such Borrowing(s) and (iv) in the
case of Eurodollar Borrowings, the Interest Periods with respect thereto. If no
Interest Period with respect to any Eurodollar Borrowing(s) is specified in any
such Borrowing Request, then the Borrower shall be deemed to have selected a
Interest Period of one (1) month's duration. The Agent shall promptly advise
the Banks of any Borrowing Request given pursuant to this Section 2.2 and of
each Bank's Commitment Percentage of the requested Borrowing(s) by telecopy (or
telephone notice promptly confirmed in writing or by telecopy).
(b) Each Bank may at its option make any Eurodollar Loan by causing any
Lending Office of such Bank to make such Eurodollar Loan; provided, however,
that any exercise of such option shall not affect the obligation of the Borrower
to repay such Eurodollar Loan in accordance with the terms of this Credit
Agreement and the applicable Notes.
(c) No later than 1:00 p.m., New York, New York time, on the Borrowing Date
specified in each Borrowing Request, each Bank will make available to the Agent
its Commitment Percentage of the Loans comprising the Borrowing(s) requested to
be made on such date, in Dollars and immediately available funds. Upon
fulfillment of the applicable conditions set forth in Article IV, the Agent will
make the proceeds of each Borrowing so requested available to the Borrower by
crediting the amounts so received to a general deposit account maintained by the
Borrower with Texas Commerce Bank National Association or in accordance with
written wire instructions timely received by the Agent from the Borrower, on the
Borrowing Date or, if a Borrowing shall not occur on such Borrowing Date because
any condition precedent herein specified shall not have been met, the Agent will
return the amounts so received to the respective Banks as soon as practicable.
All Borrowings shall be made by the Banks pro rata in accordance with such
Bank's Commitment Percentage of the Loans comprising such Borrowing.
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Unless the Agent shall have received notice from a Bank prior to the date of any
proposed Borrowing Date that such Bank will not make available to the Agent such
Bank's Commitment Percentage of such Borrowing, the Agent may assume that such
Bank has made its Commitment Percentage available to the Agent on such Borrowing
Date in accordance with this subparagraph (c) and the Agent, in reliance upon
such assumption, may, (but under no circumstances shall the Agent be obligated
to) make available to the Borrower on such Borrowing Date a corresponding
amount. If and to the extent that such Bank shall not have made its Commitment
Percentage of such Borrowing available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the Agent
at (i) in the case of the Borrower, the interest rate applicable to the Loans
comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds
Effective Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount shall constitute such Bank's Commitment Percentage of such
Borrowing for purposes of this Credit Agreement.
(d) No Eurodollar Borrowing may be made if, after giving effect to such
Eurodollar Borrowing, there would be more than six (6) Eurodollar Borrowings
outstanding at such time.
SECTION 2.3. Issuing the Letters of Credit.
(a) In order to effect the issuance of a Letter of Credit, the Borrower
shall submit a Borrowing Request and a Letter of Credit Application in writing
by telecopy to the Agent (who shall promptly notify the Issuing Bank) not later
than 11:00 a.m., New York, New York time, two (2) Business Days before the date
of issuance of such Letter of Credit. Each such Borrowing Request and Letter of
Credit Application shall be signed by the Borrower, specify the Business Day on
which such Letter of Credit is to be issued, and, the availability for Letters
of Credit under the Letter of Credit Commitment and the Borrowing Base as of the
date of issuance of such Letter of Credit and the expiry date thereof which
shall not be later than the earlier of (i) twelve (12) months from the date of
issuance of such Letter of Credit and (ii) the Maturity Date.
(b) Upon satisfaction of the applicable terms and conditions set forth in
Article IV, the Issuing Bank shall issue such Letter of Credit to the specified
beneficiary not later than the close of business, New York, New York time, on
the date so specified. The Agent shall provide the Borrower and each Bank with
a copy of each Letter of Credit so issued. Each such Letter of Credit shall (i)
provide for the payment of drafts, presented for honor thereunder by the
beneficiary in accordance with the terms thereon, at sight when accompanied by
the documents described therein and (II) BE SUBJECT TO THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE PUBLICATION NO. 500, (AND ANY SUBSEQUENT REVISIONS THEREOF APPROVED BY
A CONGRESS OF THE INTERNATIONAL CHAMBER OF COMMERCE) (THE "UCP") AND SHALL, AS
TO MATTERS NOT GOVERNED BY THE UCP, BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(c) Upon the issuance date of each Letter of Credit, the Issuing Bank shall
be deemed, without further action by any party hereto, to have sold to each
other Bank, and each other Bank shall be deemed, without further action by any
party hereto, to have purchased from the Issuing Bank, a participation, to the
extent of such Bank's Commitment Percentage, in such Letter of Credit, the
obligations thereunder and in the reimbursement obligations of the Borrower due
in respect of drawings made under such Letter of Credit. If requested by the
Issuing Bank, the other Banks will execute any other documents reasonably
requested by the Issuing Bank to evidence the purchase of such participation.
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(d) Upon the presentment of any draft for honor under any Letter of Credit
by the beneficiary thereof which the Issuing Bank determines is in compliance
with the conditions for payment thereunder, the Issuing Bank shall promptly
notify the Borrower, the Agent and each Bank of the intended date of honor of
such draft and the Borrower hereby promises and agrees to pay to the Agent for
the account of the Issuing Bank, by 11:00 a.m., New York, New York time, on the
date payment is due as specified in such notice, the full amount of such draft
in immediately available funds. If the Borrower fails timely to make such
payment, each Bank shall, notwithstanding any other provision of this Credit
Agreement (including the occurrence and continuance of a Default or an Event of
Default), make available to the Agent for the benefit of the Issuing Bank an
amount equal to its Commitment Percentage of the presented draft on the day the
Issuing Bank is required to honor such draft. If such amount is not in fact
made available to the Agent by such Bank on such date, such Bank shall pay to
the Agent for the account of the Issuing Bank, on demand made by the Issuing
Bank, in addition to such amount, an amount equal to the product of (i) the
average daily Federal Funds Effective Rate per annum during the period referred
to in subclause (iii) of this sentence times (ii) the amount of such Bank's
Commitment Percentage of the presented draft times (iii) the number of days that
elapse from the day the Issuing Bank honors such draft to the date on which the
amount equal to such Bank's Commitment Percentage of the presented draft becomes
immediately available to the Issuing Bank divided (iv) by 360. Upon receipt by
the Agent from the Banks of the full amount of such draft, notwithstanding any
other provision of this Credit Agreement (including the occurrence and
continuance of a Default or an Event of Default) the full amount of such draft
shall automatically and without any action by the Borrower, be deemed to have
been a Base Rate Borrowing as of the date of payment of such draft. Nothing in
this subparagraph (d) or elsewhere in this Credit Agreement shall diminish the
Borrower's obligation under this Credit Agreement to provide the funds for the
payment of, or on demand to reimburse the Issuing Bank for payment of, any draft
presented to, and duly honored by, the Issuing Bank under any Letter of Credit,
and, unless the Unused Availability is greater than the amount of such payment
and the Borrower has satisfied all of the conditions precedent set forth in
Section 4.2 hereof, the automatic funding of a Loan as in this subparagraph (d)
provided shall not constitute a cure or waiver of the Event of Default for
failure, timely to provide such funds as in this subparagraph agreed.
(e) In order to induce the issuance of Letters of Credit by the Issuing Bank
and the purchase of participations therein by the other Banks, the Borrower
agrees with the Agent, the Issuing Bank and the other Banks that neither the
Agent nor any Bank (including the Issuing Bank) shall be responsible or liable
(except as provided in the following sentence) for, and the Borrower's
unconditional obligation to reimburse the Issuing Bank through the Agent for
amounts paid by the Issuing Bank, as provided in Subsection 2.3(d), on account
of drafts so honored under the Letters of Credit shall not be affected by, any
circumstance, act or omission whatsoever (whether or not known to the Agent or
any Bank (including the Issuing Bank) other than a circumstance, act or omission
resulting from the gross negligence or willful misconduct of the Agent or any
Bank). The Borrower agrees that any action taken or omitted to be taken by the
Agent or any Bank (including the Issuing Bank) under or in connection with any
Letter of Credit or any related draft, document or Property shall be binding on
the Borrower and shall not put the Agent or any Bank (including the Issuing
Bank) under any resulting liability to the Borrower, unless such action or
omission is the result of the gross negligence or willful misconduct of the
Agent or any such Bank. The Borrower hereby waives presentment for payment
(except the presentment required by the terms of any Letter of Credit) and
notice of dishonor, protest and notice of protest with respect to drafts honored
under the Letters of Credit. The Issuing Bank agrees promptly to notify the
Borrower whenever a draft is presented under any Letter of Credit, but failure
to so notify the Borrower shall not in any way affect the Borrower's obligations
hereunder. Subject to Section 2.19, if while any Letter of Credit is
outstanding, any law, executive order or regulation is enforced, adopted or
interpreted by any public
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body, governmental agency or court of competent jurisdiction so as to affect any
of the Borrower's obligations or the compensation to any Bank in respect of the
Letters of Credit or the cost to such Bank of establishing and/or maintaining
the Letters of Credit (or any participation therein), such Bank shall promptly
notify the Borrower thereof in writing in accordance with Subsection 2.13(c) or
2.17, as the case may be, and within ten (10) Business Days after receipt by the
Borrower of such Bank's request (through the Agent) for reimbursement or
indemnification or within thirty (30) days after receipt of a notice in respect
of Withholding Taxes under Section 2.17 hereof, accompanied by a certificate
from such Bank setting forth the basis for such reimbursement or indemnification
and the calculation thereof in accordance with Subsection 2.13(c) or Section
2.17, as the case may be, the Borrower shall reimburse or indemnify such Bank,
as the case may be, with respect thereto so that such Bank shall be in the same
position as if there had been no such enforcement, adoption or interpretation,
unless the Borrower notifies the Agent of its good faith contest to, and dispute
of, the requested amount and such Bank's basis therefor and/or calculation
thereof. The foregoing agreement of the Borrower to reimburse or indemnify the
Banks shall apply in (but shall not be limited to) the following situations: an
imposition of or change in reserve, capital maintenance or other similar
requirements or in excise or similar taxes or monetary restraints, except a
change in franchise taxes imposed on such Bank or in tax on the net income of
such Bank.
(f) In the event that any provision of a Letter of Credit Application is
inconsistent with, or in conflict of, any provision of this Credit Agreement,
including provisions for the rate of interest applicable to drawings thereunder
or rights of setoff or any representations, warranties, covenants or any events
of default set forth therein, the provisions of this Credit Agreement shall
govern.
SECTION 2.4. Conversions or Continuation of Borrowings.
(a) Subject to the other provisions of this Credit Agreement, the Borrower
may elect from time to time to convert (i) all or any part of Eurodollar Loans
which comprise part of the same Eurodollar Borrowing to a Borrowing comprised of
Base Rate Loans and (ii) all or any part of Base Rate Loans which comprise part
of the same Borrowing to a Borrowing comprised of Eurodollar Loans, provided,
however, in each case that any such conversion of Loans comprising a Eurodollar
Borrowing shall, subject to the second following sentence, only be made on the
last day of a Interest Period with respect thereto. All or any part of a
Borrowing may be converted as provided herein, provided that no Borrowing may be
converted into a Eurodollar Borrowing when any Default or Event of Default has
occurred and is continuing.
(b) Any Eurodollar Borrowing may be continued as such effective upon the
expiration of the Interest Period with respect thereto; provided, that no
Eurodollar Borrowing may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically converted to
a Base Rate Borrowing on the last day of then current Interest Period with
respect thereto.
(c) In order to elect to convert or continue a Borrowing, or any portion
thereof, under this Section 2.4, the Borrower shall deliver an irrevocable
Notice of Conversion or Continuation to the Agent not later than 11:00 a.m., New
York, New York time, (i) at least two (2) Business Days in advance of the
proposed conversion or continuation date in the case of a conversion to, or
continuation of, a Eurodollar Borrowing and (ii) at least one (1) Business Day
in advance of the proposed conversion date in the case of a conversion to a Base
Rate Borrowing. Each such Notice of Conversion or Continuation shall be by
telecopy (confirmed thereafter by a delivery of the original of such Notice of
Conversion or Continuation by United States mail or a reputable courier) and
shall specify (i) the date of the requested
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conversion or continuation (which shall be a Business Day), (ii) the amount and
the Borrowing to be converted or continued, (iii) whether a conversion or
continuation is requested, and, if a conversion, into what Type of Borrowing and
(iv) in the case of a conversion to, or a continuation of, a Eurodollar
Borrowing, the requested Interest Period. Promptly after receipt of a Notice of
Conversion or Continuation under this Section 2.4, the Agent shall provide each
Bank with a copy thereof.
(d) No Borrowing, or any portion thereof, may be converted into an
Eurodollar Borrowing if, after giving effect to such conversion, there would be
more than six (6) Eurodollar Borrowings outstanding at such time.
(e) If the Borrower shall fail to deliver a timely Notice of Conversion or
Continuation with respect to any Eurodollar Borrowing, the Borrower shall be
deemed to have elected to convert such Eurodollar Borrowing to a Base Rate
Borrowing on the last day of the Interest Period with respect to such Eurodollar
Borrowing.
(f) For purposes of this Section 2.4, Borrowings having different Interest
Periods, regardless of whether they commence on the same date or are of the same
Type shall be considered Borrowings of different Types.
SECTION 2.5. Fees.
(a) In consideration of each Bank's commitment to make Loans, the Borrower
will pay to Agent for the account of each Bank a commitment fee determined on a
daily basis by applying the applicable Commitment Fee Rate to such Bank's
Commitment Percentage of the Unused Availability, determined on each day from
the Effective Date to but excluding the Maturity Date. This commitment fee shall
be due and payable in arrears on the first day of the next succeeding Fiscal
Quarter, on the date of each reduction in the Total Commitment and at Maturity
(by acceleration or otherwise). The applicable "Commitment Fee Rate" shall be
three-eighths of one percent (0.375%) per annum.
(b) In consideration of each Bank's commitment to participate in Letters of
Credit, the Borrower will pay to Agent for the account of each Bank a letter of
credit fee equal to the greater of (i) $300.00 and (ii) a fee determined by
applying the applicable Letter of Credit Fee Rate to the face amount of each
Letter of Credit from the date of issuance thereof to the date on which such
Letter of Credit expires. All such Letter of Credit fees shall be payable
quarterly in advance of the issuance of such Letter of Credit. The Agent shall
pay to each Bank its Commitment Percentage of such Letter of Credit fee. The
applicable "Letter of Credit Fee Rate" shall equal the Applicable Eurodollar
Margin in effect on the date of issuance of the applicable Letter of Credit
minus one-eighth of one percent (0.125%) per annum.
(c) the Borrower agrees to pay to the Issuing Bank as a fronting fee for the
issuance of each Letter of Credit, in an amount equal to the greater of (i)
$100.00 and (ii) one-eighth of one percent (0.125%) of the face amount of such
Letter of Credit per annum.
(d) the Borrower shall pay when due to the Agent and each of the Banks such
other fees as shall have been separately agreed by the Agent and the Borrower in
writing.
(e) All computations of fees hereunder shall be calculated on the basis of a
year of 365 or 366, as the case may be, days and the actual number of days
elapsed.
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SECTION 2.6. Notes.
(a) The Loans made by each Bank shall be evidenced by a single Note duly
executed and delivered by the Borrower, dated the Closing Date, with the blanks
appropriately completed, payable to the order of such Bank in a principal amount
equal to such Bank's Commitment as set forth in Schedule 1.1.
(b) Each Bank is hereby authorized by the Borrower, at its option, to
endorse on the schedule attached to its Note (or on a continuation of such
schedule attached to its Note and made a part thereof) or in its internal
records relating to its Note an appropriate notation evidencing the date and
amount of each Loan evidenced thereby, the date and amount of each payment of
principal or interest in respect thereof and such other information provided for
on such schedule. The aggregate unpaid principal amount so recorded shall be
presumptive evidence of the principal amount owing by the Borrower to such Bank
and unpaid under its Note. The failure of any Bank to make such a notation or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans made by such Bank in accordance with the terms of its Note
and this Credit Agreement.
SECTION 2.7. Interest on Loans and Payment Dates.
(a) Subject to the provisions of Section 2.8, the Loans shall bear interest
as follows:
(i) The Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year
of 360 days) at a rate per annum equal to the lesser of (aa) the Highest
Lawful Rate, and (bb) the Eurodollar Rate for the Interest Period in
effect for such Borrowing plus the Applicable Eurodollar Margin with
respect to such Eurodollar Loans.
(ii) The Loans comprising any Base Rate Borrowing shall bear interest
at a rate per annum equal to the lesser of (aa) the Highest Lawful Rate,
and (bb) the Alternate Base Rate (if the Alternate Base Rate is based on
the Prime Rate, computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be; if the
Alternate Base Rate is based on the Federal Funds Effective Rate,
computed on the basis of the actual number of days elapsed over a year
of 360 days).
(b) Interest on each Loan shall be payable by the Borrower (i) in respect of
each Loan comprising part of a Base Rate Borrowing, on the last day of the
Interest Period applicable to such Base Rate Borrowing, (ii) in respect of each
Loan comprising part of a Eurodollar Borrowing, on the last day of the Interest
Period applicable to such Eurodollar Borrowing, and, in the case of an Interest
Period for Eurodollar Borrowings of six (6) months, on the date occurring three
(3) months from the first day of such Interest Period and on the last day of
such Interest Period, (iii) in respect of each Loan accruing interest at the
Default Rate, on demand and (iv) in respect of all Loans, on any payment or
conversion (on the amount paid or converted), at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
(c) Interest in respect of the unpaid principal amount of each Loan shall
accrue from (and including) the date of the making of such Loan to (but not
including) the date on which such Loan shall be paid in full.
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(d) The Agent shall, upon determining a Eurodollar Rate for any Interest
Period with respect to a Eurodollar Borrowing, promptly notify the Borrower and
the Banks thereof.
SECTION 2.8. Interest on Overdue Amounts. If the Borrower shall fail to
pay the principal of or interest on any Loan or any other amount when due
hereunder (after the expiration of any applicable grace period), the Borrower
shall on demand from time to time pay interest, to the extent permitted by law,
on such defaulted amount from the date of such Event of Default up to (but not
including) the date of actual payment (after as well as before judgment) at a
rate per annum (the "Default Rate") equal to the lesser of (i) the Highest
Lawful Rate and (ii) the Alternate Base Rate plus two percent (2%) per annum
computed on the basis of the actual number of days elapsed over a year of 365 or
366 days, as the case may be.
SECTION 2.9. Voluntary Termination and Reduction of the Total Commitment.
(a) Subject to Section 2.11. The Borrower may permanently terminate, or
from time to time in part permanently reduce, the Total Commitment upon at least
five (5) Business Days' prior irrevocable written or telecopy notice (or
telephone notice promptly confirmed in writing) to the Agent (which notice the
Agent shall promptly transmit to each of the Banks). Such notice shall specify
the date and the amount of the termination or reduction of the Total Commitment.
Each partial reduction of the Total Commitment shall be in a minimum aggregate
principal amount of $1,000,000 and in integral multiples of $1,000,000.
(b) Simultaneously with any termination or reduction of the Total Commitment
pursuant to this Section 2.9, the Borrower shall pay to the Agent for the
account of each Bank the commitment fees, if any, on the amount of the Total
Commitment so terminated or reduced, accrued through the date of such
termination or reduction.
SECTION 2.10. Voluntary Prepayment of Loans.
(a) The Borrower shall have the right at any time and from time to time to
prepay the Loans, in whole or in part, (i) in the case of Eurodollar Loans upon
at least three (3) Business Days' prior written or telecopy notice (or telephone
notice promptly confirmed in writing) to the Agent, provided, however, that in
the event the Borrower prepays Eurodollar Borrowing in whole or in part on a day
which is not the last day of the Interest Period applicable thereto, the
provisions of Section 2.15 shall apply or (ii) in the case of a Base Rate Loan,
upon at least one (1) Business Day's prior written or telecopy notice or
telephone notice promptly confirmed in writing) to the Agent; provided, however,
that each such partial prepayment shall be in a minimum principal amount of
$100,000 and in integral multiples of $100,000.
(b) Each notice of prepayment under subsection (a) above shall (i) specify
the prepayment date, the principal amount of such prepayment, which Loans are to
be prepaid, and in the case of Loans comprising Eurodollar Borrowings, the
specific Borrowing(s) pursuant to which such Loans were made and the Interest
Period applicable thereto, (ii) be irrevocable and (iii) commit the Borrower to
prepay such Loan(s) by the amount stated therein on the date stated therein.
All prepayments under this Section 2.10 shall be subject to Section 2.15 (as to
prepayments of Eurodollar Loans), but otherwise without premium or penalty. All
prepayments under this Section 2.10 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.
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SECTION 2.11. Mandatory Payments on Loans.
(a) If at any time there shall exist a Borrowing Base Deficiency, the
Borrower shall (i) within ninety (90) calendar days after the Agent gives notice
of such Borrowing Base Deficiency to the Borrower, prepay the principal
outstanding on the Loans to the Agent in an amount at least equal to fifty
percent (50%) of such Borrowing Base Deficiency, and (ii) from the 90th calendar
day up to but excluding the 180th calendar day after the Agent gives notice of
such Borrowing Base Deficiency to the Borrower, prepay the principal outstanding
on the Loans to the Agent in an amount equal to at least the remaining fifty
percent (50%) of such Borrowing Base Deficiency, and, if the prepayment of all
of the outstanding Loans is less than such Borrowing Base Deficiency, the
Borrower shall prepay to the Agent an additional amount equal to such remaining
Borrowing Base Deficiency, to be applied as the Agent elects to any of the
various LC Obligations then due and payable; provided, however, that all such
amounts applied by the Agent to the LC Obligations shall be applied (i) first to
the Matured LC Obligations, and (ii) second as LC Collateral, to be held by the
Agent for the benefit of the Banks until such other LC Obligations have either
(aa) become Matured LC Obligations, at which time LC Collateral in the amount of
such Matured LC Obligations shall be applied to such Matured LC Obligations, or
(bb) expired undrawn, at which time an amount of such LC Collateral equal to
such expired and undrawn LC Obligations shall be promptly returned to the
Borrower. Each prepayment of principal under this section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid.
(b) If at any time the aggregate amount of the Utilized Credit exceeds the
Total Commitment, the Borrower shall, within five (5) calendar days following
receipt of notice from the Agent of such event, prepay the Loans in an amount
equal to such excess, and, if the prepayment of the Loans is less than such
excess, the Borrower shall prepay an additional amount equal to such remaining
excess, to be applied as the Agent elects to any of the various LC Obligations
then due and payable; provided, however, that all such amounts applied by the
Agent to the LC Obligations shall be applied (i) first to the Matured LC
Obligations, and (ii) second as LC Collateral, to be held by the Agent for the
benefit of the Banks until such other LC Obligations have either (aa) become
Matured LC Obligations, at which time LC Collateral in the amount of such
Matured LC Obligations shall be applied to such Matured LC Obligations, or (bb)
expired undrawn, at which time an amount of such LC Collateral equal to such
expired and undrawn LC Obligations shall be promptly returned to the Borrower.
(c) With respect to each payment of principal required to be made pursuant
to this Section 2.11, the Borrower may designate, by written notice to the Agent
on or before the date of such payment, the Types of Loans which are to be paid
and, in the case of Eurodollar Loans, the specific Eurodollar Borrowing(s)
pursuant to which made and the Interest Periods applicable thereto, provided
that (i) payments of Eurodollar Loans may only be made on the last day of an
Interest Period applicable thereto unless all Base Rate Loans have been paid in
full; and (ii) if any payment of Eurodollar Loans made pursuant to a single
Eurodollar Borrowing shall reduce the outstanding Loans made pursuant to such
Eurodollar Borrowing to an amount less than $500,000, such Eurodollar Borrowing
shall immediately be converted into Base Rate Loans. In the absence of a
designation by the Borrower as described in the preceding sentence, the Agent
shall apply the amount of such payment first to the payment of all outstanding
Base Rate Loans and second to the payment of the outstanding Eurodollar Loans.
(d) The unpaid principal amount of all Loans shall be due and payable in
full on or before the Maturity Date.
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SECTION 2.12. Alternate Rate of Interest. In the event, and on each
occasion, that on the day three (3) Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing, the Agent shall have reasonably
determined (which determination shall be final and binding upon the Borrower)
that (i) Dollar deposits in the principal amounts of the relevant Eurodollar
Loans comprising such Eurodollar Borrowing are not generally available in the
interbank eurodollar market, or (ii) by reason of any changes arising after the
date of this Credit Agreement affecting the interbank eurodollar market,
adequate and fair means do not exist for ascertaining such Eurodollar Rate on
the basis provided for in the definition of the Eurodollar Rate, or (iii) by
reason of any other circumstance affecting a Bank or the interbank eurodollar
market or the position of such Bank in such market, the Eurodollar Rate will not
adequately and fairly reflect the cost to any Bank of making or maintaining its
Eurodollar Loan during such Interest Period the Agent shall, as soon as
practicable thereafter, give written notice of such determination to the
Borrower and the Banks. In the event of any such determination, any request by
the Borrower for a Eurodollar Borrowing pursuant to Sections 2.3 or 2.5 shall,
until the circumstances giving rise to such notice no longer exist, be deemed to
be a request for a Borrowing comprised of Base Rate Loans.
SECTION 2.13. Change in Circumstances.
(a) Notwithstanding any other provision herein but subject to Section 2.19,
if after the Effective Date the introduction of any applicable law or regulation
or any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Banks with any
applicable guideline or request from any central bank or Governmental Authority
(whether or not having the force of law) (i) shall change the basis of taxation
of payments to any Bank of the principal of or interest on any Loan made by such
Bank or any other fees or amounts payable hereunder (other than changes in the
rate of tax imposed on the overall net income of, including penalties and
interest in respect thereof, or franchise taxes based on the net income of, such
Bank or its Lending Office), (ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against Properties of, deposits
with or for the account of, or credit extended by, any Bank or (iii) shall
impose on any Bank or the interbank eurodollar market any other condition
affecting this Credit Agreement or any Eurodollar Loan made by such Bank, and
the result of any of the foregoing shall be to increase the cost to such Bank of
making or maintaining any Eurodollar Loan or to reduce the amount of any sum
received or receivable by such Bank hereunder (whether of principal, interest or
otherwise) in respect thereof by an amount deemed in good faith by such Bank to
be material, then the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such additional costs incurred or
reductions suffered in accordance with subparagraph (c) below. Notwithstanding
the foregoing, in no event shall any Bank be permitted to receive any
compensation hereunder constituting interest in excess of the Highest Lawful
Rate.
(b) If any Bank shall have determined that the applicability of any law,
rule, regulation or guideline adopted pursuant to or arising out of the July
1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards" or the adoption or effectiveness after the date hereof of any law,
rule, regulation or guideline regarding capital adequacy, or any change in any
of the foregoing, or any change in the interpretation or administration in any
of the foregoing by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank (or its Lending Office) or such Bank's holding company with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such Governmental Authority, central bank or
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comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or on the capital of such Bank's holding company, as a
consequence of its obligations under this Credit Agreement to a level below that
which such Bank or such Bank's holding company could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
and the policies of such Bank's holding company with respect to capital
adequacy) by an amount deemed in good faith by such Bank to be material, then
the Borrower and such Bank or (as the case may be) the Agent shall thereafter
attempt to negotiate in good faith, within thirty (30) days of the day on which
the Borrower receives such notice, an adjustment payable hereunder that will
adequately compensate such Bank or the Agent in light of these circumstances.
If the Borrower and such Bank or the Agent are unable to agree to such
adjustment within thirty (30) days of the date on which the Borrower receives
such notice, then the Borrower shall pay, subject to Section 2.19, to such Bank
or the Agent, as the case may be, an amount that will, in such Bank's or the
Agent's reasonable determination, provide adequate compensation to such Bank or
such Bank's holding company (or the Agent or the Agent's holding company, as the
case may be) for any such reduction in accordance with subparagraph (c) below.
Notwithstanding the foregoing, in no event shall any Bank be permitted to
receive any compensation hereunder constituting interest in excess of the
Highest Lawful Rate.
(c) Any Bank requesting compensation pursuant to Subsections 2.13(a) or (b)
hereof shall deliver to the Borrower a certificate of such Bank setting forth
such amount or amounts as shall be necessary to compensate such Bank or its
holding company as specified in subparagraphs (a) or (b) above, as the case may
be, and such certificate shall be prima facie evidence that such amount(s) are
due and owing. In preparing such certificate, such Bank may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may be determined by any reasonable averaging and attribution
method. The Borrower shall pay to such Bank the amount shown as due on any such
certificate within fifteen (15) Business Days after the Borrower's receipt of
the same. Any decision by a Bank not to require payment of any interest, cost
or other amount payable under this Section 2.13 or to calculate any amount
payable by a particular method, on one occasion, shall in no way limit or be
deemed a waiver of such Bank's right to require full payment of any interest,
cost or other amount payable hereunder, or to calculate any amount payable by
another method, on any other or subsequent occasion.
SECTION 2.14. Change in Legality.
(a) Notwithstanding any other provision herein contained to the contrary, if
(i) any change in any law or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration or interpretation thereof
shall make it unlawful for any Bank or its Lending Office to make or maintain
its Commitment Percentage of any Eurodollar Borrowing or to give effect to its
obligations as contemplated hereby with respect to its Commitment Percentage of
any Eurodollar Borrowing or (ii) at any time the Required Banks reasonably
determine the making or continuance of any Bank's Loans comprising a portion of
any Eurodollar Borrowing has become impracticable as a result of a contingency
occurring after the date hereof which adversely affects the interbank eurodollar
market or the position of such Bank in such market, as the case may be, then,
and in any such event, such Bank shall, promptly after making such
determination, give written or telecopy notice (or by telephone promptly
confirmed in writing) to the Borrower and the Agent of such determination (which
notice the Agent shall promptly transmit to each of the other Banks); provided,
however, that before giving any such notice, such Bank shall use reasonable good
faith efforts to designate a different Lending Office to make or maintain its
Eurodollar Loans if such designation will avoid the need to suspend such Bank's
obligations to make or maintain Eurodollar Loans and will not be otherwise
disadvantageous to such Bank. Thereafter each such
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affected Bank may (i) declare that such affected Bank will no longer make
Eurodollar Loans (subject to subparagraph (b) below) whereupon any request by
the Borrower for a Eurodollar Borrowing shall, as to such Bank only, be deemed a
request for a Base Rate Loan; and (ii) require that all outstanding Eurodollar
Loans made by such affected Bank(s) be converted into Base Rate Loans at the end
of the applicable Interest Period or such earlier time as may be required by
applicable Requirements of Law, in each case by giving the Agent written or
telecopy notice (or by telephone promptly confirmed in writing) thereof (which
notice, in the case of subclause (ii) above shall specify which affected
Eurodollar Loans are to be converted); provided, however, that all Banks whose
Eurodollar Loans are affected by the circumstances described above shall be
treated in the same manner.
(b) In the event any Bank shall exercise its rights under subsection (a)
above, all payments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made, converted or continued by
such Bank or the converted Eurodollar Loans of such Bank shall instead be
applied to repay the Base Rate Loans made by the Bank in lieu of, or resulting
from the conversion of, such affected Eurodollar Loans.
SECTION 2.15. Funding Losses. Without duplication of other provisions
contained herein, the Borrower shall indemnify each Bank against any loss or
reasonable expense which such Bank may sustain or incur as a consequence of (i)
any failure by the Borrower to fulfill on the Borrowing Date for any Borrowing
hereunder the applicable conditions set forth in Article IV, (ii) any failure by
the Borrower to borrow hereunder after a Borrowing Request pursuant to this
Article II has been given, (iii) any failure by the Borrower to convert or
continue a Borrowing hereunder after a Notice of Conversion or Continuation
pursuant to this Article II has been given, (iv) any payment, prepayment,
continuance or conversion of a Eurodollar Borrowing required or permitted by any
other provision of this Credit Agreement including, without limitation, payments
made due to the acceleration of the maturity of the Notes pursuant to Section
8.1, or otherwise made on a date other than the last day of the applicable
Interest Period, (v) any default in the payment or prepayment of the principal
amount of any Eurodollar Borrowing or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, by notice of
prepayment or otherwise) including, but not limited to, any loss or reasonable
expense sustained or incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain such Bank's
Commitment Percentage of any Eurodollar Borrowing or any part thereof as a
Eurodollar Borrowing. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, as reasonably determined by
such Bank of (i) its cost of obtaining the funds for its Commitment Percentage
of the Eurodollar Borrowing being paid, prepaid or converted or not borrowed
(based on the Eurodollar Rate applicable thereto) for the period from the date
of such payment, prepayment, continuance or conversion or failure to borrow to
the last day of the Interest Period for such Eurodollar Loan (or, in the case of
a failure to borrow, the Interest Period for the Eurodollar Loan which would
have commenced on the date of such failure to borrow) over (ii) the amount of
interest (as reasonably determined by such Bank) that would be realized by such
Bank in reemploying the funds so paid, prepaid, continued or converted or not
borrowed for such period or Interest Period, as the case may be, provided that
such Bank will use its best efforts to reemploy funds in investments of similar
quality. A certificate of such Bank signed by an officer setting forth in
reasonable detail any amount or amounts which such Bank is entitled to receive
pursuant to this Section 2.15 shall be delivered to the Borrower. The Borrower
shall pay to such Bank the amount shown as due on any certificate within thirty
(30) Business Days after its receipt of the same. Notwithstanding the
foregoing, in no event shall any Bank be permitted to receive any compensation
hereunder constituting interest in excess of the Highest Lawful Rate. Without
prejudice to the survival of any other obligations
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of the Borrower hereunder, the obligations of the Borrower under this Section
2.15 shall survive the date of termination of this Credit Agreement and the
payment in full of the Obligations.
SECTION 2.16. Method of Payments Pro Rata Treatment.
(a) The Borrower shall make each payment hereunder and under the Notes
delivered hereunder not later than 1:00 p.m., New York, New York time, on the
day when due in lawful money of the United States (in freely transferable
Dollars) to the Agent for the account of the Banks entitled thereto at the
Agent's address referred to in Section 10.2 in immediately available funds and
any funds received by the Agent after such time shall, for all purposes hereof
(including the following sentence), be deemed to have been paid on the next
succeeding Business Day. Except as otherwise specifically provided herein, the
Agent shall thereafter cause to be distributed on the date of receipt thereof to
each Bank in like funds its Commitment Percentage (or, if the Loan of such Bank
with respect to which such payment is being made is not of the same Type as the
Loans of the other Banks with respect to which such payment is being made, such
Bank's appropriate share) of the payments so received for the account of such
Bank's Lending Office for the Loan in respect of which such payment is made.
(b) Except as otherwise provided herein, (i) each Borrowing comprised of
Loans hereunder shall be obtained from the Banks, each payment of fees shall be
paid for the account of the Banks and each partial reduction of the Total
Commitment under Section 2.9 shall be applied to the Commitments of the Banks,
in each case simultaneously and pro rata in accordance with each Bank's
Commitment Percentage, (ii) each conversion of a Borrowing comprised of Loans of
a particular type shall be made pro rata among the Banks according to their
respective Commitment Percentage of such Borrowing and (iii) each payment and
prepayment of principal of or interest on any Loans will be made to the Agent
for the account of each of the Banks simultaneously and pro rata in accordance
with their respective Commitment Percentage of unpaid principal amounts of such
Loans made by the Banks.
(c) Whenever any payment hereunder or under the Notes (including principal
of or interest on any Loan or any fees or other amounts), shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, fee or other amount, as the
case may be; provided, however, if such extension would cause payment of
interest on or principal of a Eurodollar Loan to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
SECTION 2.17. Taxes.
(a) All payments of principal, interest, expenses, reimbursements,
compensation, commitment, arrangement or administration fees and any other
amount from time to time due hereunder, under the Notes or any other Loan
Document made by the Borrower shall be made free and clear of and without
deduction for any present or future tax, levy, impost or any other charge, if
any, of any nature whatsoever now or hereafter imposed by any Governmental
Authority, excluding, however, in the case of the Agent and each Bank, any such
taxes, levies, costs or charges imposed on or measured by the gross receipts,
capital or overall net income of the Agent or such Bank or such Bank's Lending
Office by any jurisdiction in which the Agent or such Bank or such Bank's
Lending Office is located (all such non-excluded taxes, levies, costs, imposts,
deductions, charges or withholdings being herein called "Withholding Taxes").
If any Withholding Taxes are required to be withheld from any amounts payable to
the Agent or any Bank hereunder or under the Notes, and if such withholding does
not result from the
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breach by such Bank of its agreement set forth in subsection (b) below or would
not be required if such Bank's representation and warranty set forth in
subsection (c) below were true, then the Borrower shall pay to the Agent or such
Bank, on the date of each such payment, such additional amounts as may be
necessary in order that the net amounts received by the Bank after such
deduction or withholding shall equal the amounts which would have been received
if such deduction or withholding were not required; provided, however, that all
amounts payable under this Section 2.17 which constitute interest under
applicable law shall not exceed an amount which would result in the payment of
interest at a rate in excess of the Highest Lawful Rate. Whenever any
Withholding Taxes are withheld by the Borrower as aforesaid, as promptly as
possible thereafter, the Borrower shall send to the Agent for its own account or
for the account of such Bank, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof. If
the Borrower fails to pay any Withholding Taxes so withheld by it when due to
the appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Banks for any incremental taxes, interest or penalties that
may become payable by the Agent or any Bank as a result of any such failure.
The agreements in this Section 2.17 shall survive the termination of this Credit
Agreement and the payment of the Notes and all other Obligations.
(b) Each Bank that is not incorporated under the laws of the United States
of America or a state thereof (including each Eligible Assignee that becomes a
party to this Credit Agreement pursuant to Section 10.9) that is entitled to
receive payments under this Credit Agreement and the Notes without deduction or
withholding of any United States federal income taxes or is entitled to an
exemption from backup withholding tax agrees that, prior to the first date on
which any payment is due to it hereunder, it will deliver to the Borrower and
the Agent, as the case may be, (i) two duly completed copies of United States
IRS Forms 1001 or 4224 or successor applicable form, as the case may be,
certifying in each case that such Bank is entitled to receive payments under
this Credit Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes, and (ii) an IRS Forms W-8
or W-9 or successor applicable form, as the case may be, to establish an
exemption from United States backup withholding tax. Each Bank which delivers
to the Borrower and the Agent a Forms 1001 or 4224 and Forms W-8 or W-9 pursuant
to the preceding sentence further undertakes to deliver to the Borrower and the
Agent two further copies of the said Forms 1001 or 4224 and Forms W-8 or W-9, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, and such extensions or renewals
thereof as may reasonably be requested by the Borrower, certifying in the case
of a Forms 1001 or 4224 that such Bank is entitled to receive payments under
this Credit Agreement without deduction or withholding of any United States
federal income taxes, unless in any such case an event (including, without
limitation, any change in any Requirement of Law) has occurred prior to the date
on which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the Borrower
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax, and in the case of a Forms W-8
or W-9, establishing an exemption from United States backup withholding tax.
(c) Each Bank (including each Eligible Assignee that becomes a party to this
Credit Agreement pursuant to Section 10.9) represents and warrants to the
Borrower that each Lending Office of such Bank hereunder will be entitled to
receive payments of principal of, and interest on, the Loans made by such Bank
from such Lending Office without withholding or deduction for or on account of
any United States federal income taxes.
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SECTION 2.18. Sharing of Payments and Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower (pursuant to Section 8.3 or otherwise), including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means, obtain payment (voluntary
or involuntary) in respect of any Loan or Loans (other than pursuant to Sections
2.13, 2.15 or 2.17) as a result of which the unpaid principal portion of its
Loans shall be proportionately less than the unpaid principal portion of the
Loans of any other Bank, it shall simultaneously purchase from such other Banks
at face value a participation in the Loans of such other Banks, so that the
aggregate unpaid principal amount of Loans and participations in Loans held by
each Bank shall be in the same proportion to the aggregate unpaid principal
amount of all Loans then outstanding as the principal amount of its Loans prior
to such exercise of banker's lien, setoff, counterclaim or other event was to
the principal amount of all Loans outstanding prior to such exercise of banker's
lien, setoff, counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.18
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Bank holding a participation in a Note deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Bank as fully as if
such Bank had made a Loan directly to such the Borrower in the amount of such
participation.
SECTION 2.19. Limitation on Reimbursement; Mitigation.
(a) Notwithstanding the provisions of Section 2.13 if any Bank fails to give
notice to the Borrower of any event that would obligate the Borrower to pay any
amount owing pursuant to Section 2.13 within 90 days after such Bank obtains
knowledge of such event, and subsequently gives notice to the Borrower of such
event, the Borrower shall pay only such amounts for costs incurred for the
ninety day period immediately prior to such notice.
(b) Any Bank claiming any additional amounts payable pursuant to Sections
2.13 or 2.17 or any Bank subject to Sections 2.12 or 2.14, (i) shall use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to change the jurisdiction of its lending office for the Loans, if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue under Sections 2.13 or
2.17 or would avoid the unavailability of Eurodollar Loans under Sections 2.12
or 2.14 and would not, in any such case, in the judgment of such Bank, be
otherwise disadvantageous, and (ii) may, at the election of Borrower, be
replaced by an Eligible Assignee selected by the Borrower and approved by the
Agent and such Bank hereby agrees to promptly sell, assign, transfer and convey
its rights and obligations under this Credit Agreement and the other Loan
Documents in accordance with the provisions set forth in Subsection 10.9(c).
SECTION 2.20. Use of Proceeds.
(a) The initial Borrowing of Loans shall be an amount at least equal to the
aggregate principal amount of Debt of the Borrower and its Subsidiaries owed to
Wells Fargo Bank (Texas) National Association, formerly known as First
Interstate Bank of Texas, N.A., pursuant to the Existing Credit Agreement and
shall be used to repay said debt in full. The proceeds of all other Loans and
Letters of Credit may be used (i) to provide working capital support to the
Borrower and its Subsidiaries, (ii) to
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finance capital expenditures and acquisitions of oil and gas properties, and
(iii) for letters of credit for the account of the Borrower and its
Subsidiaries.
(b) No portion of the proceeds of any Loan under this Credit Agreement shall
be used by the Borrower in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation G, Regulation U, Regulation
T, or Regulation X or any other regulation of the Board or to violate the
Securities Exchange Act of 1934, in each case as in effect on the date or dates
of such borrowing and such use of proceeds.
(c) No portion of the proceeds of any Loan under this Credit Agreement shall
be used by the Borrower, directly or indirectly, for a Hostile Acquisition.
SECTION 2.21. Mandatory Termination of Total Commitment; Extension of
Maturity Date.
(a) The Total Commitment shall terminate on the Maturity Date, and any Loans
then outstanding (together with accrued and unpaid interest thereon) shall be
due and payable on such date.
(b) At any time after March 1 but on or before May 1 of each calendar year,
commencing with the calendar year 1997, the Borrower may request that the Banks
extend the Maturity Date for successive periods of one year. The Banks in their
sole discretion may agree to extend or decline to extend the Maturity Date;
however, if the Banks have not responded to such request in writing by June 1 of
the year of the Borrower's request such request shall be deemed to have been
denied. In the event the Banks agree to such request, the Borrower, the Agent
and the Banks shall execute a written amendment and extension agreement in form
reasonably acceptable to the Agent and the Banks evidencing such extension and
the agreed upon terms and conditions of such extension together with such other
documents as the Agent and the Banks shall reasonably request.
ARTICLE III
DETERMINATIONS OF THE BORROWING BASE
SECTION 3.1. Initial Borrowing Base. During the Initial Borrowing Base
Period, the Borrowing Base shall be $27,000,000; provided, however, that in no
event shall the Borrowing Base ever exceed the Total Commitment.
SECTION 3.2. Subsequent Scheduled Determinations of Borrowing Base.
(a) (i) No later than October 1, 1996, but effective as of July 1, 1996, the
Borrower shall furnish to the Agent all information, reports and data which the
Banks have then requested concerning the Borrower's businesses and Properties
(including all Borrowing Base Properties of the Borrower and the Subsidiary
Guarantors, and the Proved Reserves and production relating thereto), together
with the Engineering Reports and the Related Asset Reports described in
Subsection 5.2(d), and (ii) thereafter, no later than September 1 and March 1 of
each year, but effective as of the preceding July 1 and January 1, respectively,
commencing March 1, 1997, the Borrower shall furnish to the Agent all
information, reports and data which the Banks have then requested concerning the
Borrower's businesses and Properties (including all Borrowing Base Properties of
the Borrower and the Subsidiary Guarantors, and the Proved Reserves and
production relating thereto), together with the Engineering Reports and the
Related Asset Reports described in Subsection 5.2(d).
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(b) The "Borrowing Base" from time to time in effect hereunder shall be the
maximum aggregate amount of credit which the Banks have determined to be
available pursuant to the terms and provisions of this Credit Agreement. The
determination of such maximum aggregate amount of credit shall be made in good
faith by all the Banks, in the exercise of their sole discretion and in
accordance with their respective customary practices and standards for oil and
gas loans, which may include varying (from Bank to Bank) (i) assumptions
regarding appropriate existing and projected pricing, (ii) assumptions modifying
projected rates of future production and/or quantities of future production,
(iii) considerations related to the projected cash requirements of the Borrower
and its Subsidiaries assumed to be provided from production of the Borrowing
Base Properties, including present and future debt service of the Borrower and
its Subsidiaries, obligations and liabilities of the Borrower to the venture
partner(s) of the Snyder Gas Plant Venture and the NGL-Torch Gas Plant Venture,
general and administrative expenses and Distributions in respect of equity, and
(iv) such other considerations as each Bank deems appropriate, it being
recognized that the ultimate determination to be reached is more predicated upon
the aggregate amount of credit available hereunder which, at the time of the
determination, each Bank determines should be available as reasonably expected
to be repayable by the Borrower, considering all then existing and projected
other items which are expected to be payable or repayable, without undue risk of
failure to timely repay.
With respect to the first redetermination of the Borrowing Base hereunder,
and upon receipt of each Engineering Report and Related Asset Report, the Agent
shall submit to the Banks in writing on or before November 5, 1996, the Agent's
recommendation as to the Borrowing Base amount which the Agent has determined
should be available to Borrower pursuant to the Total Commitment as of December
1, 1996 (such date being a "Determination Date"). Each Bank shall then submit
to the Agent in writing on or before November 20, 1996, such Bank's approval or
disapproval of the Agent's recommended Borrowing Base and any such disapproval
shall state the maximum Borrowing Base acceptable to such Bank. If the Agent
has not received such notice from a Bank on or before the close of business on
November 20, 1996, such Bank shall be deemed to have approved the Agent's
recommended Borrowing Base. If by December 1, 1996, the Agent has not received
the approval of the Required Banks, then until the next Determination Date, the
Borrowing Base shall be the lowest determination agreed to by the Required
Banks. The Agent shall advise the Borrower of the determination of the
Borrowing Base by the Banks by providing the Borrower with a Borrowing Base
Notice by December 1, 1996; provided that if, due to any failure by the Borrower
to submit in a timely manner any Engineering Report, Related Asset Report, or
other information required to be submitted by the Borrower hereunder or, if
requested in writing by the Agent, any additional information or data needed in
connection with a determination of the Borrowing Base or due to any other reason
beyond the control of the Agent, the Agent does not provide a Borrowing Base
Notice at the time described above, then, unless the Agent gives notice to the
Borrower of a new Borrowing Base, the Borrowing Base from the previous period
shall be carried over into the new period until a Borrowing Base Notice is sent
to the Borrower by the Agent; which Borrowing Base Notice shall be sent to the
Borrower by the Agent within thirty (30) days after the cessation or cure of the
circumstances causing the Borrowing Base Notice to not be previously delivered
in a timely manner, and the remainder of the procedures described in this
Section 3.2 have been completed.
From and after December 1, 1996, in connection with any determination of the
Borrowing Base and upon receipt of each Engineering Report and Related Asset
Report, the Agent shall submit to the Banks in writing on or before April 5 or
October 5, as the case may be, the Agent's recommendation as to the Borrowing
Base amount which the Agent has determined should be available to Borrower
pursuant to the Total Commitment as of the next succeeding May 1 or November 1,
as the case may be (each such
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date being a "Determination Date"). Each Bank shall submit to the Agent in
writing on or before April 20 or October 20, as the case may be, such Bank's
approval or disapproval of the Agent's recommended Borrowing Base and any such
disapproval shall state the maximum Borrowing Base acceptable to such Bank. If
the Agent has not received such notice from a Bank on or before the close of
business on April 20 or October 20, as the case may be, such Bank shall be
deemed to have approved the Agent's recommended Borrowing Base. If by any
Determination Date the Agent has not received the approval of the Required
Banks, then until the next Determination Date, the Borrowing Base shall be the
lowest determination agreed to by the Required Banks. The Agent shall advise
the Borrower of the determination of the Borrowing Base by the Banks by
providing the Borrower with a Borrowing Base Notice by May 1 and November 1 of
each year; provided that if, due to any failure by the Borrower to submit in a
timely manner any Engineering Report, Related Asset Report, or other information
required to be submitted by the Borrower hereunder or, if requested in writing
by the Agent, any additional information or data needed in connection with a
determination of the Borrowing Base or due to any other reason beyond the
control of the Agent, the Agent does not provide a Borrowing Base Notice at the
time described above, then, unless the Agent gives notice to the Borrower of a
new Borrowing Base, the Borrowing Base from the previous period shall be carried
over into the new period until a Borrowing Base Notice is sent to the Borrower
by the Agent; which Borrowing Base Notice shall be sent to the Borrower by the
Agent within thirty (30) days after the cessation or cure of the circumstances
causing the Borrowing Base Notice to not be previously delivered in a timely
manner, and the remainder of the procedures described in this Section 3.2 have
been completed.
SECTION 3.3. Special Determinations of Borrowing Base.
(a) In addition to the redetermination of the Borrowing Base pursuant to
Section 3.2, the Borrower may request one (1) redetermination of the Borrowing
Base during any twelve month period commencing on November 1 of each year. In
the event the Borrower requests a special determination of the Borrowing Base
pursuant to this Subsection 3.3(a), the Borrower shall deliver written notice of
such request to the Agent which shall include (i) Engineering Report(s) and
Related Asset Report(s) prepared as of a date not more than sixty (60) calendar
days prior to the date of such request, (ii) such other information as the Agent
shall request prepared as of a date not more than thirty (30) calendar days
prior to the date of such request, and (iii) the amount of the Borrowing Base
requested by the Borrower to become effective on the Determination Date
applicable to such special determination of Borrowing Base. Within forty-five
(45) calendar days of receipt by the Agent of the Engineering Report(s), the
Related Asset Report(s) and other information requested by the Agent (a
"Determination Date"), the Banks shall redetermine the Borrowing Base in
accordance with the procedure set forth in Section 3.2 which Borrowing Base
shall become effective on the Determination Date applicable to such special
determination of Borrowing Base and shall remain in effect until the next
Determination Date.
(b) In addition to the determination of the Borrowing Base pursuant to
Section 3.2 and Subsection 3.3(a), the Banks shall have the right to request one
(1) redetermination of the Borrowing Base during any twelve month period
commencing on November 1 of each year. In the event the Banks exercise their
right to redetermine the Borrowing Base pursuant to this Subsection 3.3(b), the
Agent shall notify the Borrower of the Banks' decision to redetermine the
Borrowing Base and shall request that the Borrower deliver to the Agent such
information regarding the Borrowing Base Properties as the Agent shall request
prepared as of a date not more than sixty (60) calendar days prior to the date
of such request. Within forty-five (45) calendar days of receipt by the Agent of
the information requested by the Agent (a "Determination Date"), the Banks shall
redetermine the Borrowing Base in accordance with the procedure set forth in
Section 3.2, which Borrowing Base shall become effective on the Determination
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Date applicable to such special determination of Borrowing Base and shall remain
in effect until the next Determination Date.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions Precedent to the Loans. The obligation of each
Bank to make its initial Loan or for the Issuing Bank to issue its initial
Letter of Credit is subject to the satisfaction of the following conditions
precedent:
(a) The Agent shall have received, duly authorized, executed and delivered
by each Person that is a party thereto, in form and substance satisfactory to
the Banks, each of the following:
(i) each of the following Loan Documents (together with all exhibits
thereto) dated on or as of the Effective Date:
(aa) this Credit Agreement,
(bb) each of the Notes,
(cc) the Pledge Agreement, and
(dd) the Subsidiary Guaranty;
(ii) a certificate of the Secretary of the Borrower, dated the
Effective Date, certifying as to (aa) the adoption and continuing effect of
resolutions of the board of directors of the Borrower authorizing the
transactions contemplated hereby and by the other Loan Documents, (bb) the
Certificate of Incorporation of the Borrower, (cc) the Bylaws of the
Borrower and all amendments thereto, and (dd) the incumbency of all officers
of the Borrower who will execute or have executed any document or instrument
required to be delivered hereunder, containing the signature of same;
(iii) a certificate of the Secretary or Assistant Secretary of each
Subsidiary Guarantor, dated the Effective Date and certifying as to (aa) the
adoption and continuing effect of resolutions of the board of directors of
such Subsidiary Guarantor authorizing the transactions contemplated hereby
and by the other Loan Documents, (bb) the Certificate of Incorporation of
such Subsidiary Guarantor and all amendments thereto, (cc) the Bylaws of the
such Subsidiary Guarantor and all amendments thereto, and (dd) the
incumbency of all officers of such Subsidiary Guarantor who will execute or
have executed any document or instrument required to be delivered hereunder,
containing the signature of same;
(iv) with respect to the Borrower, a certificate of existence and good
standing from the Secretary of State of the State of Delaware dated no more
than thirty (30) calendar days prior to the Effective Date and certificates
of authorization to do business and good standing in the States of Alabama,
Arkansas, Colorado, Kansas, Louisiana, Michigan, New Mexico, Oklahoma,
Texas, and Wyoming;
(v) with respect to Odyssey, a certificate of existence and good
standing from the Secretary of State of Delaware dated no more than thirty
(30) calendar days prior to the Effective Date and
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certificates of authorization to do business and good standing in the States
of Louisiana, Mississippi, New Mexico and Texas;
(vi) with respect to West Monroe, a certificate of existence and good
standing from the Secretary of State of Louisiana dated no more than thirty
(30) calendar days prior to the Effective Date;
(vii) the Opinion of the Borrower's Counsel;
(viii) a certificate of insurance coverage evidencing that all
insurance required to be obtained and/or maintained by the Borrower and its
Subsidiaries as of the Effective Date pursuant to any of the Loan Documents
is in full force and effect;
(ix) (aa) the Initial Engineering Report, (bb) the Initial Related
Asset Report, and (cc) such other information regarding the Borrowing Base
Properties as the Agent or any Bank may reasonably request.
(x) (aa) the Initial Financial Statements and (bb) such other financial
information, regarding the Borrower or any of its Subsidiaries as the Agent
or any Bank may reasonably request. All of such financial statements and
financial information shall be satisfactory to the Banks;
(xi) for its account and for the account of each Bank, as applicable,
all fees and expenses due and payable hereunder on or before the Effective
Date and invoiced to the Borrower in writing prior to the Effective Date;
and
(xii) such other certificates, opinions, documents and instruments
relating to the transactions contemplated hereby as may have been reasonably
requested by the Agent or any Bank.
(b) Each of the Banks shall be satisfied that sufficient documentation
exists to (i) verify that Designated Contracts, including the Production Sales
Contracts, have been duly executed and delivered which permit the Hydrocarbons
to be produced and marketed from the Borrowing Base Properties of the Borrower
and the Subsidiary Guarantors at economic levels consistent with accepted
engineering practices; and (ii) verify that one or more of the Designated
Contracts are gas gathering, treatment, processing and transportation agreements
containing terms satisfactory to the Banks.
(c) The Agent shall have received the following, in form and substance
satisfactory to the Required Banks:
(i) the results of a review of the status of title to the Borrowing
Base Properties which review shall not reflect that the representations and
warranties contained in Section 5.7 are inaccurate in any respect, and
(ii) the results of a review of prior environmental site assessments
for the Oil and Gas Interests of the Borrower and its Subsidiaries or such
other reviews or further assessments as may be required by the Agent, in its
reasonable discretion, demonstrating (i) compliance of Environmental Laws by
the Borrower and its Subsidiaries, and (ii) the existence of any
Environmental Liabilities which could reasonably be expected to result in a
Material Adverse Effect.
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(d) Evidence satisfactory to the Agent that (i) all commitments to make
loans or issue letters of credit pursuant to the Existing Credit Agreement have
been terminated, (ii) the Borrower has authorized the disbursement of funds
under this Credit Agreement to repay in full all obligations and liabilities
owing to Wells Fargo Bank (Texas) National Association, formerly known as First
Interstate Bank of Texas, N.A., under the Existing Credit Agreement outstanding
on the Effective Date and (iii) duly executed and acknowledged releases and
termination statements releasing and terminating all Liens in favor of First
Interstate Bank of Texas, N.A. securing such indebtedness will be delivered to
the Agent contemporaneously with the disbursement of said funds to Wells Fargo
Bank (Texas) National Association, formerly known as First Interstate Bank of
Texas, N.A.
(e) The Agent shall have received a certificate of a Responsible Officer,
dated the Effective Date, certifying on behalf of the Borrower that (i) the
representation and warranties of the Borrower contained in Article V hereof and,
in all material respects, in each of the other Loan Documents to which the
Borrower is a party are true, correct and complete on the Effective Date both
before and after giving effect to the making of the initial Loans, (ii) the
representations and warranties of each Subsidiary Guarantor contained in any
Loan Document to which such Subsidiary Guarantor is a party are true, correct,
and complete in all material respects on the Effective Date both before and
after giving effect to the initial Loans, (iii) no Default or Event of Default
has occurred and is continuing on the Effective Date either before or after
giving effect to the making of the initial Loans, (iv) no material litigation
(other than Existing Litigation) is pending or, to the best knowledge of the
Borrower after due inquiry, threatened against the Borrower or any Subsidiary of
the Borrower and no material adverse development has occurred in any Existing
Litigation, as of the Effective Date, and (v) no events or state of affairs
which could reasonably be expected to result in a Material Adverse Effect have
occurred since June 30, 1996;
(f) A search, made no more than 30 days prior to the Effective Date, of the
Uniform Commercial Code filing offices in each relevant jurisdiction shall have
revealed no filings or recordings with respect to the Borrowing Base Properties
(except Permitted Liens, Liens in favor of First Interstate Bank of Texas, N.A.,
which Liens are being released contemporaneously herewith and immaterial Liens
described on Schedule 4.1(f)) in favor of any Person. The Agent shall have
received a copy of the search reports received as a result of such search and
fully executed releases effectuating the termination of any and all Liens (other
than Permitted Liens) pertaining to any of the Borrowing Base Properties;
(g) Such other conditions precedent which the Agent may reasonably have
requested or required.
SECTION 4.2. Additional Conditions Precedent. The Banks shall have no
obligation to make any Loans and the Issuing Bank has no obligation to issue any
Letter of Credit (including the initial Loans and Letter of Credit) unless the
following conditions precedent have been satisfied:
(a) The Agent shall have timely received, with a copy for each Bank, a
Borrowing Request requesting a Borrowing on such date, duly completed and
executed by a Responsible Officer of the Borrower, which Borrowing Request shall
affirmatively certify that:
(i) All representations and warranties made by the Borrower or any
Subsidiary of the Borrower in any Loan Document shall be true on and as of
the Borrowing Date (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties have been made as of
the Borrowing Date;
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(ii) No Borrowing Base Deficiency would exist after giving effect to the
Loans requested to be made, or Letters of Credit requested to be issued, on
such date;
(iii) No Default or Event of Default then exists either before or after
giving effect to the making of such Loan or the issuing of such Letter of
Credit;
(iv) No material litigation (other than Existing Litigation) is pending
or, to the best knowledge of the Borrower after due inquiry, threatened
against the Borrower or any Subsidiary of the Borrower and no material
adverse development has occurred in any Existing Litigation; and
(v) No event or state of affairs which could reasonably be expected to
result in a Material Adverse Effect has occurred since June 30, 1996.
(b) Each of the Borrower and each Subsidiary Guarantor shall have performed
and complied with all agreements and other conditions required in the Operative
Documents to be performed or complied with by it on or prior to the Borrowing
Date.
(c) The making of such Loans or the issuance of such Letter of Credit shall
not be prohibited by any Requirement of Law and shall not subject the Agent, the
Issuing Bank or any Bank to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
(d) The Maturity Date shall not have occurred.
(e) The sum of (i) the amount of the requested Borrowing and/or the face
amount of the requested Letter of Credit plus (ii) the Utilized Credit shall not
exceed the Borrowing Base then in effect.
Each Borrowing hereunder shall constitute a representation and warranty by the
Borrower and each Subsidiary Guarantor as of the Borrowing Date that all of the
conditions contained in this Section 4.2 have been satisfied.
SECTION 4.3. General. All of the agreements, instruments, reports,
opinions and other documents and papers referred to in this Article IV (except
for the Notes and the Letters of Credit), unless otherwise expressly specified,
shall be delivered to the Agent in sufficient counterparts for each of the
Banks. As soon as practicable after receipt of such documents the Agent shall
deliver such documents to each of the Banks.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and each Bank to enter into this Credit
Agreement and to make the Loans, the Borrower represents and warrants as to
itself and each of its Subsidiaries, to the Agent and each Bank that the
following statements are true, correct and complete.
SECTION 5.1. Organization; Corporate Powers. The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) is duly qualified to conduct business as a
foreign corporation and is in good standing in each other jurisdiction in which
such qualification and good standing are reasonably necessary in order for it to
conduct its
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business and own or lease its Properties as conducted and owned and (iii) has
all corporate power and all material Government Approvals required to own or
lease its Properties and to carry on its business as now conducted and as
proposed to be conducted.
SECTION 5.2. Organization; Powers (Subsidiaries). Each Subsidiary of
Borrower (i) is a corporation, limited liability company, or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) is duly qualified to
conduct business as a foreign corporation, foreign limited liability company, or
foreign limited partnership (as applicable), and is in good standing, in each
other jurisdiction in which such qualification and good standing are reasonably
necessary in order for it to conduct its business and own or lease its
Properties as conducted and owned and (iii) has all corporate, limited liability
company or partnership power (as applicable) and all material Governmental
Approvals required to own or lease its Properties and to carry on its business
as now conducted and as proposed to be conducted.
SECTION 5.3. Authority. Each of the Borrower and each of its Subsidiaries
has the corporate, limited liability company, or partnership power and authority
(as applicable) and legal right to execute, deliver and perform each of the Loan
Documents executed by, or to be executed by, the Borrower or such Subsidiary and
each other agreement or instrument contemplated thereby to which it is or will
be a party and, with respect to the Borrower, to borrow hereunder. The
execution, delivery and performance of each of the Loan Documents to which the
Borrower or any of its Subsidiaries is or will be a party and the consummation
of the transactions contemplated thereby, and, with respect to the Borrower, the
borrowing of funds under this Credit Agreement, have been duly authorized by all
necessary corporate, membership or partnership action (as applicable) and
require no action by or in respect of, or filing with, any Governmental
Authority which has not been made or obtained. This Credit Agreement
constitutes, and each of the other Loan Documents to which the Borrower or any
of its Subsidiaries is a party when executed and delivered by such Person, will
constitute the legal, valid and binding obligation of such Person, enforceable
against such Person in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws relating to creditors' rights
generally and by general principles of equity which may limit the right to
obtain equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 5.4. Use of Proceeds. The Borrower's uses of the proceeds of the
Loans shall be as set forth in Section 2.20.
SECTION 5.5. No Conflict. The execution, delivery and performance by the
Borrower and each Subsidiary of the Borrower of the Loan Documents to which the
Borrower or such Subsidiary of the Borrower is a party, the compliance by the
Borrower or such Subsidiary of the Borrower with the terms and provisions
thereof and the consummation of each of the transactions contemplated thereby,
do not and will not (i) require any consent or approval of the stockholders of
the Borrower or the stockholders, members or partners of any Subsidiary of the
Borrower, or any Governmental Approval or (ii) by the lapse of time, the giving
of notice or otherwise, (aa) constitute a violation of any Requirement of Law
binding on the Borrower or such Subsidiary of the Borrower or a breach of any
provision contained in the certificate of incorporation or bylaws of the
Borrower or the articles or incorporation, bylaws or partnership agreements of
any Subsidiary of the Borrower, (bb) constitute a breach of any material
provision contained in any Material Contract to which the Borrower or such
Subsidiary of the Borrower is a party or by which the Borrower or such
Subsidiary of the Borrower is
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bound, or (cc) result in or require the creation or imposition of any Lien
whatsoever upon any of the Properties of the Borrower or such Subsidiary of the
Borrower (other than Permitted Liens).
SECTION 5.6. Ownership of Properties; Liens. Except as disclosed on
Schedule 5.6 attached hereto, the Borrower and each of its Subsidiaries have
good and marketable title to all material Properties purported to be owned by
them, including, without limitation, all Properties reflected in the balance
sheets referred to in Subsection 5.9(a) and all Properties which are used by the
Borrower and its Subsidiaries in the operation of their respective businesses,
and none of such Properties is subject to any Lien other than Permitted Liens.
SECTION 5.7. Borrowing Base Properties.
(a) Except as disclosed on Schedule 5.6 attached hereto, each of the
Borrower and each of the Subsidiary Guarantors have good, marketable, and record
title to all of the Oil and Gas Interests described in the Initial Engineering
Report other than Immaterial Oil and Gas Interests, free and clear of all Liens
except Permitted Liens. With the exception of Immaterial Oil and Gas Interests,
all oil, gas, and other mineral leaseholds and fee interests comprising or
affecting the Oil and Gas Interests described in the Initial Engineering Report
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.
Except with respect to Immaterial Oil and Gas Interests, but without regard to
any consent or non-consent provisions of any joint operating agreement covering
any of the Proved Reserves of the Borrower and the Subsidiary Guarantors, the
Borrower's and each Subsidiary Guarantor's share of (i) the costs for each of
the Proved Reserves described in Initial Engineering Report is not greater than
the decimal fraction set forth in the Initial Engineering 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 (ii) production from, allocated to, or attributed to each
such Proved Reserves is not less than the decimal fraction set forth in the
Initial Engineering Report, before and after payout, as the case may be, and
described therein by the designations "net revenue interest", "NRI", or similar
terms. Except with respect to Immaterial Oil and Gas Interests, each well
drilled in respect of each Proved Developed Producing Hydrocarbon Reserves
described in the Initial Engineering Report (i) is capable of, and is presently,
producing Hydrocarbons in commercially profitable quantities, and each of the
Borrower and each Subsidiary Guarantor is currently receiving payments for its
share of production, with no material 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 (ii) has been drilled,
bottomed, completed, and operated in compliance with all applicable Requirements
of Law 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. For purposes of this Subsection 5.7(a), "Immaterial
Oil & Gas Interests" means Oil and Gas Interests which, in the aggregate, do not
represent more than two percent (2%) of the discounted present value of all Oil
and Gas Interests as set forth in the most recent Engineering Report delivered
to the Banks in connection with the determination of the then effective
Borrowing Base.
(b) The Snyder Gas Plant Venture has good and marketable title to the Snyder
Related Assets and all material Properties which are used by the Snyder Gas
Plant Venture in the operation of its business, and none of such Properties is
subject to any Lien other than Permitted Liens.
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(c) The NGL-Torch Gas Plant Venture has good and marketable title to the
NGL-Torch Related Assets and all material Properties which are used by the NGL-
Torch Gas Plant Venture in the operation of its business, and none of such
Properties is subject to any Lien other than Permitted Liens.
SECTION 5.8. No Defaults.
(a) Neither the Borrower nor any Subsidiary of the Borrower is a party to
any Material Contract that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) (i) No Default or Event of Default exists, and (ii) neither the
Borrower nor any Subsidiary of the Borrower is in default in any material
respect under any Material Contract.
SECTION 5.9. Financial Position; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Agent and the Banks its
Consolidated balance sheet, and the related consolidated statements of income,
cash flows and shareholders' equity of the Borrower as of and for the Fiscal
Year ended June 30, 1996, audited by and accompanied by the unqualified opinion
of Deloitte & Touche. Such financial statements present fairly the Consolidated
financial condition and results of operations and cash flows of the Borrower and
its Subsidiaries as of such date. Such financial statements were prepared in
accordance with GAAP applied on a consistent basis.
(b) Neither the Borrower nor any Subsidiary of the Borrower has any material
contingent liabilities, material liabilities for taxes, unusual and material
forward or long-term commitments or material unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in the consolidated balance sheets of the Borrower or as otherwise disclosed
to the Agent in writing.
(c) The Borrower has disclosed to the Agent in writing any and all facts
which, in the reasonable good faith judgment of the Borrower, could result in a
Material Adverse Effect.
SECTION 5.10. Litigation; Adverse Effects.
(a) Except as set forth in Schedule 5.10, there are no actions, suits,
proceedings, governmental investigations or arbitrations, at law or in equity,
before or by any Governmental Authority, pending or, to the best knowledge of
the Borrower, threatened against the Borrower or any Subsidiary of the Borrower
or any material Property of the Borrower or any Subsidiary of the Borrower.
(b) None of the business, Properties, or operations of the Borrower or any
Subsidiary of the Borrower are materially and adversely affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God, or of the public enemy or other casualty
(whether or not covered by insurance).
SECTION 5.11. ERISA. A summary of all currently existing Benefit Plans are
listed on Schedule 5.11 hereto. The Borrower and each of its Subsidiaries is in
compliance in all material respects with the applicable provisions of ERISA and
the regulations and published interpretations thereunder. No Reportable Event
has occurred as to which the Borrower or any Subsidiary of the Borrower was
required to file a report with the PBGC, and the present value of all benefit
liabilities under each Benefit Plan
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(based on those assumptions used to fund such Benefit Plan) did not, as of the
last annual valuation date applicable thereto, exceed the value of the
Properties of such Benefit Plans. Neither the Borrower nor any Subsidiary of
the Borrower has any ERISA Affiliates (other than the Borrower and its
Subsidiaries) or Multiemployer Plans.
SECTION 5.12. Payment of Taxes. The Borrower has filed, and has caused
each of its Subsidiaries to file, all federal, state and local tax returns and
other reports required by Requirements of Law to have been filed by the Borrower
or such Subsidiary of the Borrower and has paid (prior to delinquency) all taxes
and other similar charges and assessments that are due and payable, including
extensions, except taxes, charges and assessments which are being diligently
contested in good faith by appropriate proceedings and any Lien arising
thereunder constitutes a Permitted Lien. No Responsible Officer of the Borrower
or any Subsidiary of the Borrower has knowledge of any proposed tax assessment
against the Borrower or any Subsidiary of the Borrower that is likely to result
in a Material Adverse Effect.
SECTION 5.13. Environmental Matters. Except as disclosed on Schedule 5.13
or as could not reasonably be expected to result in a liability in excess of
$500,000 to the Borrower or any Subsidiary of the Borrower, individually or in
the aggregate:
(a) The Borrower and each of its Subsidiaries is in compliance with all
applicable Environmental Laws;
(b) The Borrower and each of its Subsidiaries has obtained, all Governmental
Approvals required under applicable Environmental Laws to operate its business
as presently conducted or as proposed to be conducted and all such Governmental
Approvals are in full force and effect and the Borrower and its Subsidiaries is
in compliance with all terms and conditions of such Governmental Approvals;
(c) Neither the Borrower nor any Subsidiary of the Borrower nor any of the
present Property or operations (including without limitation, Borrowing Base
Properties) or the past Property or operations of the Borrower or any Subsidiary
of the Borrower is subject to any order from or agreement with any Governmental
Authority or private party respecting (i) failure to comply with any
Environmental Law or any Remedial Action, or (ii) any Environmental Liabilities
arising from the Release or threatened Release of a Hazardous Substance into the
environment except those orders and agreements with which the Borrower or such
Subsidiary of the Borrower has complied;
(d) None of the operations of the Borrower or any Subsidiary of the Borrower
is subject to any judicial or administrative proceeding alleging a violation of,
or liability under, any Environmental Law;
(e) To the knowledge and belief of the Borrower after reasonable and good
faith inquiry with respect thereto, none of the operations of the Borrower or
any Subsidiary of the Borrower is the subject of any investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to a Release or threatened Release of a Hazardous Substance into the
environment;
(f) Neither the Borrower nor any Subsidiary of the Borrower has filed any
notice under any Environmental Law indicating past or present treatment, storage
or disposal of a Hazardous Substance under 40 CFR Part 261 or any state or local
equivalent;
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(g) Neither the Borrower nor any Subsidiary of the Borrower has filed any
notice under any applicable Environmental Law reporting a Release of a Hazardous
Substance (other than minor or de minimis emissions or releases) into the
environment;
(h) There is not now, nor, to the knowledge and belief of the Borrower
(after reasonable and good faith inquiry with respect thereto) has there ever
been, on or in any Property of the Borrower or of any Subsidiary of the Borrower
(including without limitation, Borrowing Base Properties):
(i) any generation, treatment, recycling, storage or disposal of any
Hazardous Substance under 40 CFR Part 261 or any state or local equivalent,
(ii) any underground storage tanks or surface impoundments, except pits
incidental to oil and gas wells which are in compliance with all applicable
Environmental Laws,
(iii) any asbestos-containing material, or
(iv) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment;
(i) There have been no written commitments or agreements involving the
Borrower or any Subsidiary of the Borrower from or with any Governmental
Authority or any private entity (including, without limitation, the owner of the
Property or any portion thereof) relating to the generation, storage, treatment,
presence, Release, or threatened Release of any Hazardous Substance on or into
any of the Properties of the Borrower or any Subsidiary of the Borrower
(including without limitation, the Borrowing Base Properties) or the environment
(including off-site disposal of toxic wastes or Hazardous Substances) or any
Remedial Action with respect thereto;
(j) Neither the Borrower nor any Subsidiary of the Borrower has received any
written notice or claim to the effect that it is or may be liable to any Person
as a result of the Release or threatened Release of a Hazardous Substance into
the environment;
(k) Neither the Borrower nor any Subsidiary of the Borrower has any known
liability in connection with any material Release or material threatened Release
of any Hazardous Substances into the environment; and
(l) After due inquiry, no Environmental Lien has attached to any Properties
of the Borrower or any Subsidiary of the Borrower (including without limitation,
the Borrowing Base Properties).
SECTION 5.14. Governmental Regulation. Neither the Borrower nor any
Subsidiary of the Borrower is subject to regulation under the Interstate
Commerce Act, the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act or any other Requirements of Law such
that its ability to incur indebtedness is limited or its ability to consummate
the transactions contemplated by this Credit Agreement and the other Operative
Documents or any document executed in connection therewith is impaired.
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SECTION 5.15. Disclosure.
(a) All information contained in any financial statements, Engineering
Reports, Related Asset Reports, certificates, exhibits, schedules, operating
statements and any other written statements and written information (excluding
estimates and forecasts) furnished by or on behalf of the Borrower or any
Subsidiary of the Borrower to the Banks and the Agent, (taken as a whole) in
connection with any transaction contemplated hereby or by any other Operative
Document on or prior to the date this representation is made or deemed made,
were, and will be, true, complete and correct in all material respects and do
not, and will not, contain any material misstatement of fact or omit to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
(b) The Initial Engineering Report and the Initial Related Asset Report
accurately reflect, and all Engineering Reports and Related Asset Reports
hereafter delivered pursuant to this Agreement will reflect, in all material
respects, the ownership interests in the oil and gas properties and Related
Assets referred to therein (including all before and after payout calculations).
SECTION 5.16. Subsidiaries; Partnerships. As of the Effective Date,
Schedule 5.16 contains a complete and accurate (i) list of all Subsidiaries of
the Borrower, (ii) list of all limited liability companies, joint ventures,
partnerships or unincorporated associations of which the Borrower or any
Subsidiary of Borrower is a partner or member, (iii) description of the issued
and outstanding equity interests of each such Subsidiary, limited liability
company, joint venture, partnership or unincorporated association, and (iv) the
record owners of such equity interests.
SECTION 5.17. Solvency. Neither the Borrower nor any Subsidiary of the
Borrower (i) is "insolvent" (within the meaning of Section 101(32) of the
Bankruptcy Code, Section 2 of the Uniform Fraudulent Conveyance Act or Section 2
of the Uniform Fraudulent Transfer Act) or will become insolvent as a result of
the incurrence of any obligation under any Loan Document to which it is a party;
(ii) has unreasonably small capital (after giving effect to the transactions
contemplated in any Loan Document to which it is a party) for the conduct of its
existing and contemplated business; or (iii) is able to perform its contingent
obligations and other commitments as they mature in the normal course of
business.
SECTION 5.18. Business; Compliance with Laws. The Borrower has not
conducted and is not conducting any business other than business relating to the
exploration, development, financing, acquisition, ownership, operation,
maintenance, storage, transporting, processing and marketing of the Oil and Gas
Interests as currently conducted. The Borrower has conducted, and has caused
each of its Subsidiaries to conduct, its business and affairs in compliance with
all Requirements of Law applicable thereto.
SECTION 5.19. Designated Contracts. None of the Designated Contracts
contain any unusual or burdensome provisions that will materially affect or
impair the operation of the Borrower or any of its Subsidiaries. None of the
Designated Contracts have been terminated or modified (other than modifications
made prior to the date hereof and disclosed to the Banks, or as permitted under
this Credit Agreement) and each such Designated Contract is in full force and
effect as of the date hereof. As of the date hereof such Designated Contracts
constitute all material agreements with respect to the Borrowing Base Properties
of the Borrower and the Subsidiary Guarantors. Neither the Borrower nor any
Subsidiary of the Borrower is a partner or joint venturer in any other
partnership or joint venture covering or affecting the Borrowing Base Properties
not covered by the Designated Contracts. Neither the Borrower nor any Subsidiary
or Affiliate of the Borrower is in default in any material respect under any
Designated
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Contract to which it is a party, and the Borrower has no knowledge that any
other party to any Designated Contract is in default in any material respect
thereof.
SECTION 5.20. Licenses, Permits, Etc. The Borrower and each of its
Subsidiaries possess such Governmental Approvals as are necessary to carry on
their respective businesses 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 Effect.
SECTION 5.21. Fiscal Year. The Borrower's Fiscal Year is July 1 through
June 30.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as this Credit Agreement shall remain in effect or the principal
of or interest on any Loan, or any Letter of Credit, or any reimbursement
obligation with respect to any Letter of Credit, or any commitment or other fee,
expense, compensation or any other amount payable under any Loan Document shall
remain unpaid or outstanding or the Banks shall have any Commitments hereunder,
unless the Required Banks shall otherwise consent in writing, the Borrower
covenants and agrees that:
SECTION 6.1. Information. The Borrower shall deliver, or cause to be
delivered, to the Banks at the Borrower's sole expense:
(i) as soon as practicable, and in any event within forty-five (45)
days after the end of each Fiscal Quarter in each Fiscal Year of the
Borrower, the unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly period and year to date period
then ended, and the related unaudited Consolidated statements of income,
cash flows and shareholders' equity for such quarterly period and for the
portion of the Fiscal Year ended with the last day of such quarterly period,
and in each case setting forth comparative figures for the related periods
in the prior Fiscal Year, all in reasonable detail prepared in a manner
satisfactory to the Agent and the Banks, and certified by a Responsible
Officer of the Borrower responsible for the administration of the finances
and accounting practices of the Borrower that such financial statements
fairly present the consolidated financial condition and results of
operations of, respectively, the Borrower and its Subsidiaries in accordance
with GAAP for the Fiscal Quarter and year to date period then ended, subject
to changes resulting from normal year-end audit adjustments.
(ii) within ninety (90) days after the close of each Fiscal Year of the
Borrower, the audited Consolidated balance sheet of the Borrower as of the
end of such Fiscal Year and the related audited Consolidated statements of
income, cash flows and shareholders' equity of the Borrower for such Fiscal
Year, setting forth the comparative figures for the preceding Fiscal Year
all audited by Deloitte & Touche or other independent certified public
accountants of recognized national standing satisfactory to the Required
Banks and accompanied by (aa) an unqualified opinion of such accountants to
the effect that such consolidated financial statements present fairly, in
all material respects, the financial position and results of operations and
cash flows of the Borrower and its Subsidiaries, on a consolidated basis, in
accordance with GAAP, and (bb) a certificate of such accountants certifying
that in the course of its regular audit of the financial statements of the
Borrower, which audit was conducted in accordance with generally accepted
auditing standards,
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such accounting firm has obtained no knowledge of any Default or Event of
Default, or if in the opinion of such accounting firm a Default or Event of
Default has occurred and is continuing, a statement as to the nature
thereof.
(iii) together with the delivery of statements referred to in
subclauses (i) and (ii) above, a Compliance Certificate, in form and
substance satisfactory to the Agent, signed by a Responsible Officer of the
Borrower responsible for the administration of the finances and accounting
practices of the Borrower, stating that the signer has reviewed the terms of
this Credit Agreement and the other Loan Documents and stating whether or
not he has knowledge of any such Default or Event of Default and, if so,
specifying each such condition or event of which he has knowledge and the
nature thereof and any corrective action taken or proposed to be taken with
respect thereto. Such Compliance Certificate shall set forth the
calculations required to establish compliance with the financial covenants
set forth in Section 7.14 for the fiscal period covered by such financial
statements.
(iv) promptly and in any event within five (5) Business Days after any
Responsible Officer of the Borrower obtains knowledge thereof, notice of
(aa) the institution of or threat in writing of, any material action, suit,
proceeding, governmental investigation or arbitration against or affecting
the Borrower or any Subsidiary of the Borrower not previously disclosed in
writing to the Banks, which if adversely determined, is likely to result in
a material judgment or liability in excess of $500,000 in the aggregate
and/or could reasonably be expected to result in a Material Adverse Effect,
or any material adverse development in any Existing Litigation, or (bb) the
occurrence of any event which constitutes a Default or Event of Default,
such notice to specify the nature and period of existence of such Default or
Event of Default, and what action the Borrower has taken, are taking or
propose to take with respect thereto.
(v) promptly upon the mailing thereof to the stockholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed.
(vi) promptly upon the filing thereof, copies of all final registration
statements, post effective amendments thereto and annual, quarterly or
special reports which the Borrower shall have filed with the Securities and
Exchange Commission; provided, that the Borrower must deliver, or cause to
be delivered, any annual reports which the Borrower shall have filed with
the Securities and Exchange Commission, within one hundred (100) days after
the end of each Fiscal Year of the Borrower, and any quarterly reports which
the Borrower shall have filed with the Securities and Exchange Commission,
within fifty (50) days after the end of each of the first three (3) quarters
of each Fiscal Year of the Borrower.
(vii) promptly upon request therefor by the Agent, copies of such title
opinions and other information in either the Borrower's possession, control
or direction regarding title to the Borrowing Base Properties as are
appropriate to determine the status of title with respect thereto.
(viii) promptly upon receipt of same, copies of any notice or other
information received by the Borrower or any Subsidiary of the Borrower
indicating any potential, actual or alleged (aa) non-compliance with or
violation of the requirements of any Environmental Law which could
reasonably be expected to result in liability to the Borrower or any
Subsidiary for fines, clean up or any other remediation obligations or any
other liability in excess of $500,000, individually or in the aggregate;
(bb) release or threatened release of any toxic or hazardous waste,
substance, or
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constituent, or other substance into the environment which release would
impose on the Borrower or any Subsidiary of the Borrower a duty to report to
a Governmental Authority or to pay cleanup costs or to take remedial action
under any Environmental Law which is likely to result in liability to the
Borrower or any Subsidiary of the Borrower for fines, clean up and other
remediation obligations or any other liability in excess of $500,000 in the
aggregate; or (cc) the existence of any Lien arising under any Environmental
Law securing any obligation to pay fines, clean up or other remediation
costs or any other liability in excess of $500,000 in the aggregate.
Without limiting the foregoing, the Borrower shall provide to Agent,
promptly upon request, copies of all environmental consultants or engineers
reports received by the Borrower or any Subsidiary of the Borrower which
reflect the existence of any circumstance or condition which would require
delivery of a notice or other information to the Banks pursuant to this
Subsection 6.1(h).
(ix) in the event any notification is provided by the Borrower to any
Bank or the Agent pursuant to Subsection 6.1(h) hereof or the Agent or any
Bank otherwise learns of any event or condition under which any such notice
would be required, then, upon request of the Required Banks, the Borrower
shall, within ninety (90) days of such request, cause to be furnished to
each Bank a report by an environmental consulting firm acceptable to Agent
and the Required Banks, stating that a review of such event, condition or
circumstance has been undertaken (the scope of which shall be acceptable to
Agent and the Required Banks) and detailing the findings, conclusions, and
recommendations of such consultant. The Borrower shall bear all expenses
and costs associated with such review and updates thereof, as well as all
remediation or curative action, which (aa) the Borrower and/or any
Subsidiary of the Borrower is required by contract or Requirements of Law to
make or (bb) is recommended by any such environmental consultant and
undertaken by the Borrower.
(x) promptly (but in all events within five (5) Business Days) after
any Responsible Officer becomes aware of the occurrence of any Default, a
certificate of a Responsible Officer setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto.
(xi) promptly upon request, but not more often than once during any six
(6) month period, reports prepared by the personnel of the Borrower setting
forth the production volumes, revenue, prices received, and expenses for all
Oil and Gas Interests owned by the Borrower and the Subsidiary Guarantors
for the most recent six (6) month period ending December 31 or June 30, as
the case may be. Such reports shall be prepared on a cash basis and shall be
reported on a well by well, lease by lease or field by field basis or on
such other basis for which such Properties are normally reported in
Borrower's ordinary course of business.
(xii) promptly notify the Banks of any material adverse change in the
business, financial condition, operations or prospects of the Borrower, any
Subsidiary Guarantor or of the Borrower and its Subsidiaries taken as a
whole.
(xiii) promptly notify the Agent of any intended sale, transfer,
encumbrance or other disposition of any Borrowing Base Property other than a
sale, transfer, encumbrance or other disposition permitted pursuant to
Section 7.8.
(xiv) (aa) as soon as available and in any event within sixty (60) days
after the close of each Fiscal Quarter in each Fiscal Year (other than the
fourth quarter) of each Texas Joint Venture, the
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unaudited balance sheet of such Texas Joint Venture as of the end of such
quarterly period and the related unaudited statements of income and cash
flows for such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year, along with a pay-
out analysis, (bb) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year of each Texas Joint Venture, an
unaudited balance sheet as of the end of such Fiscal Year and the unaudited
statements of operations, Joint Venturers' capital and changes in financial
position for such Fiscal Year along with a payout analysis, a statement of
cash flow and a certificated from the chief financial officer of the
Borrower as to the accuracy of the reports and the Borrower's compliance, as
"Managing Venturer" with the provisions of the Snyder Joint Venture
Agreement and the NGL-Torch Joint Venture Agreement. If either of the Texas
Joint Ventures produces audited financial statements, then within ninety
(90) days after the close of such Texas Joint Venture's Fiscal Year, the
audited balance sheet of such Texas Joint Venture as of the end of such
Fiscal Year and the related audited Consolidated statements of income, cash
flows and Joint Venturers' capital of such Texas Joint Venture for such
Fiscal Year, setting forth the comparative figures for the preceding Fiscal
Year.
(xv) from time to time promptly furnish such additional information
regarding the financial position or business of the Borrower and its
Subsidiaries as the Agent, at the request of any Bank, may reasonably
request.
SECTION 6.2. Business of the Borrower. The primary business of the
Borrower and its Subsidiaries on a consolidated basis is and will continue to be
the acquisition, exploration for, development, production, transportation,
processing and marketing of Hydrocarbons and accompanying elements.
SECTION 6.3. Corporate Existence. The Borrower shall, and shall cause each
of its Subsidiaries to, maintain its (i) existence and good standing in the
jurisdiction of its organization or incorporation, and (ii) qualification and
good standing in all jurisdictions in which such qualification and good standing
are necessary in order for the Borrower or such Subsidiary to conduct its
business and own its Property as conducted and owned in such jurisdiction except
where the failure to be so qualified or in good standing would not, individually
or in the aggregate, result in a Material Adverse Effect.
SECTION 6.4. Right of Inspection. The Borrower will permit, and will cause
each Subsidiary of the Borrower to permit, any officer, employee or agent of the
Agent or any of the Banks to visit and inspect any of the Properties of the
Borrower and its Subsidiaries (including without limitation, each of the
Borrowing Base Properties), examine the Borrower's and its Subsidiaries' books
of record and accounts, take copies and extracts therefrom, and discuss the
affairs, finances and accounts of the Borrower and its Subsidiaries with the
Borrower's and its Subsidiaries' officers, accountants and auditors, all at such
reasonable times and during normal business hours and as often as the Agent or
any of the Banks may reasonably desire.
SECTION 6.5. Maintenance of Insurance. The Borrower will maintain or cause
to be maintained, and will cause each Subsidiary of the Borrower to maintain or
cause to be maintained (and will use all reasonable and necessary efforts to
cause all operators of Borrowing Base Properties to maintain or cause to be
maintained) at all times, insurance covering such risks as are customarily
carried by businesses similarly situated.
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SECTION 6.6. Payment of Taxes and Claims. The Borrower will pay, and will
cause each of its Subsidiaries to pay, (i) all taxes imposed upon it or any of
its Properties or with respect to any of its franchises, business, income or
profits before any material penalty or interest accrues thereon and (ii) 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 Lien) on any of its
Properties; 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
Properties of the Borrower or any of its Subsidiaries are subject to levy or
execution, (ii) the Borrower as and to the extent required in accordance with
GAAP, shall have set aside on its books reserves (segregated to the extent
required by GAAP) deemed by it to be adequate with respect thereto, and (iii) to
the extent the amount of the contested taxes or claims are in excess of $100,000
(in the aggregate), the Borrower has notified the Agent of such circumstances,
in detail satisfactory to the Agent.
SECTION 6.7. Compliance with Laws and Documents. The Borrower will comply,
and will cause each of its Subsidiaries to comply, with all Requirements of Law,
their respective certificates (or articles) of incorporation, bylaws and similar
charter documents and all Material Contracts to which the Borrower or any of its
Subsidiaries is a party, if a violation, alone or when combined with all other
such violations, could reasonably be expected to result in a Material Adverse
Effect.
SECTION 6.8. Maintenance of Ownership.
(a) Except as expressly permitted by the terms of this Credit Agreement and
except for Immaterial Oil and Gas Interests, each of the Borrower and each
Subsidiary Guarantor shall maintain at all times (i) a net revenue interest in
the Borrowing Base Properties of such Borrower or Subsidiary Guarantor, as
applicable, not less than the net revenue interest set forth in the most recent
Engineering Report utilized by the Banks in determining the then effective
Borrowing Base, and (ii) a working interest in the Borrowing Base Properties of
such Borrower or Subsidiary Guarantor, as applicable, not greater than the
working interest set forth in the most recent Engineering Report utilized by the
Banks in determining the then effective Borrowing Base.
(b) Except as expressly permitted by the terms of this Credit Agreement, (i)
the Borrower shall maintain at all times at least an 80% ownership interest in
the Snyder Gas Plant Venture, (ii) the Borrower shall maintain at all times at
least an 80% ownership interest in the NGL-Torch Gas Plant Venture, (iii) the
Snyder Gas Plant Venture shall maintain at all times at least a 7.787% ownership
interest in the Snyder Gas Plant, (iv) the NGL-Torch Gas Plant Venture shall
maintain at all times at least a 4.193% ownership interest in the Snyder Gas
Plant, (v) the Snyder Gas Plant Venture shall maintain at all times at least an
23.256% ownership interest in the Diamond M - Sharon Ridge Gas Plant, and (vi)
the NGL-Torch Gas Plant Venture shall maintain at all times at least an 12.522%
ownership interest in the Diamond M - Sharon Ridge Gas Plant.
SECTION 6.9. Operation of Properties and Equipment.
(a) The Borrower will maintain and operate, and will cause each of its
Subsidiaries to maintain and operate, their respective Properties (including
without limitation, the Borrowing Base Properties) in a good and workmanlike
manner, and, with respect to the Oil and Gas Interests, observe and comply, in
all material respects, with all of the terms and provisions, express or implied,
of all oil and gas leases
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relating to such Oil and Gas Interests so long as such Oil and Gas Interests are
capable of producing Hydrocarbons and accompanying elements in paying
quantities.
(b) The Borrower will comply, and will cause each of its Subsidiaries to
comply, in all material respects with all Material Contracts applicable to or
relating to the Borrowing Base Properties.
(c) The Borrower will maintain, preserve and keep, and will cause each of
its Subsidiaries to maintain, preserve and keep, at all times, all equipment
used with respect to their respective businesses 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 the 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 the Borrower and its Subsidiaries.
SECTION 6.10. Environmental Law Compliance and Indemnity. The Borrower
will comply, and will cause each of its Subsidiaries to comply, in all material
respects with all Environmental Laws binding on the Borrower or such Subsidiary,
including, without limitation, (i) all licensing, permitting, notification and
similar requirements of Environmental Laws, and (ii) all provisions of all
Environmental Laws regarding storage, discharge, release, transportation,
treatment and disposal of Hazardous Substances. The Borrower will promptly pay
and discharge when due, and will cause each of its Subsidiaries to promptly pay
and discharge when due, all debts, claims, liabilities and obligations with
respect to any clean-up or remediation measures necessary to comply with
Environmental Laws binding on the Borrower or any Subsidiary of the Borrower.
The Borrower hereby indemnifies, and agrees to defend and hold harmless each of
the Banks, the Agent and their respective agents, affiliates, officers,
directors, and employees from and against any and all claims, losses, demands,
actions, causes of action, and liabilities whatsoever (including without
limitation reasonable attorney's fees and expenses, and costs and expenses
reasonably incurred in investigating, preparing or defending against any
litigation or claim, action, suit, proceeding or demand of any kind or
character) arising out of or resulting from the contamination by any Hazardous
Substance or environmental pollutant in violation of any federal, state or local
Environmental Laws, including without limitation violation of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended from time to
time, or of the Resource Conservation and Recovery Act, as amended from time to
time; but excluding any such losses, liabilities, claims, damages, expenses,
penalties, actions, judgments, suits, costs or disbursements resulting from the
gross negligence or willful misconduct of such indemnitee.
SECTION 6.11. ERISA Reporting Requirements. The Borrower shall furnish or
cause to be furnished to Agent:
(a) Promptly and in any event (i) within fifteen (15) days after the
Borrower or any ERISA Affiliate knows or has reason to know that any Reportable
Event described in clause (a) of the definition of Reportable Event or any event
described in section 4063(a) of ERISA with respect to any Benefit Plan of the
Borrower or any ERISA Affiliate has occurred, and (ii) within ten (10) days
after the Borrower or any ERISA Affiliate knows or has reason to know that any
other Reportable Event with respect to any Benefit Plan of the Borrower or any
ERISA Affiliate has occurred or a request for minimum funding waiver under
section 412 of the Code with respect to any Benefit Plan of the Borrower or any
ERISA Affiliate has been made, a written notice describing such event and
describing what action is being taken
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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) Business Days after receipt
thereof by the Borrower or any ERISA Affiliate from the PBGC, copies of each
notice received by the Borrower or any ERISA Affiliate of the PBGC's intention
to terminate any Plan or to have a trustee appointed to administer any Benefit
Plan;
(c) Promptly and in any event within fifteen (15) days after the receipt by
the Borrower of a request therefor by a Bank, copies of any annual and other
report (including Schedule B thereto) with respect to a Benefit Plan filed by
the Borrower or any ERISA Affiliate with the United States Department of Labor,
the IRS or the PBGC;
(d) Promptly, and in any event within ten (10) Business Days after receipt
thereof, a copy of any correspondence the Borrower or any ERISA Affiliate
receives from the Plan Sponsor (as defined by section 4001(a)(10) of ERISA) of
any Benefit Plan asserting withdrawal liability pursuant to section 4219 or 4202
of ERISA upon the Borrower or any ERISA Affiliate, and a statement from a
Responsible Officer of the Borrower or such ERISA Affiliate setting forth
details as to the events giving rise to such withdrawal liability and the action
which the Borrower or such ERISA Affiliate is taking or proposes to take with
respect thereto;
(e) Notification within three (3) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that the Borrower or any such ERISA
Affiliate has or intends to file a notice of intent to terminate any Benefit
Plan under a distress termination within the meaning of section 4041(c) of ERISA
and a copy of such notice; and
(f) Promptly after receipt of written notice of commencement thereof, notice
of all (i) claims made by participants or beneficiaries with respect to any
Benefit Plan and (ii) actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower or any ERISA Affiliate with respect
to any Benefit Plan, except those which, in the aggregate, if adversely
determined could not result in a Material Adverse Effect.
SECTION 6.12. Security. The Obligations shall be unsecured with the
exception that the Obligations shall be secured by first and prior Liens
(subject only to Permitted Liens) covering all partnership interests and other
outstanding equity interests of the Borrower in the Snyder Gas Plant Venture and
in the NGL-Torch Gas Plant Venture and all rights of the Borrower attributable
to its interests in both the Snyder Gas Plant Venture and in the NGL-Torch Gas
Plant Venture.
SECTION 6.13. Permits, Licenses. The Borrower shall, and shall cause each
Subsidiary to, maintain all material Properties, Governmental Approvals, and
other third party consents, licenses, patents, copyrights, trademarks, service
marks, trade names, permits and other approvals and authorizations necessary to
conduct its business, including, without limitation all Governmental Approvals
and third party consents, permits, licensees and agreements relating to the
Borrowing Base Properties.
SECTION 6.14. Additional Documents. The Borrower will cure promptly, and
will cause each of its Subsidiaries to cure promptly, any defects in the
creation and issuance of each Note, and the execution and delivery of this
Credit Agreement and the other Operative Documents and, at the
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Borrower's expense, the Borrower shall promptly and duly execute and deliver,
and cause each Subsidiary of the Borrower to promptly execute and deliver, to
each Bank, upon reasonable request, all such other and further documents,
agreements and instruments in compliance with or accomplishment of the covenants
and agreements of each the Borrower and each Subsidiary of the Borrower in this
Credit Agreement and the other Loan Documents as may be reasonably necessary or
appropriate in connection therewith.
SECTION 6.15. Title Assurances. The Borrower shall furnish or cause to be
furnished to the Agent such information in its possession or reasonably
available to it with respect to title to the Borrowing Base Properties as the
Required Banks may reasonably request and shall cooperate with the Agent and its
counsel in analyzing and, where appropriate in the opinion of the Required
Banks, correcting defects in such title.
ARTICLE VII
NEGATIVE COVENANTS
So long as this Credit Agreement shall remain in effect or the principal
of or interest on any Loan, or any Letter of Credit, or any reimbursement
obligation with respect to any Letter of Credit, or any commitment or other fee,
expense, compensation or any other amount payable under any Loan Document shall
remain unpaid or outstanding or the Banks shall have any Commitments hereunder,
unless the Required Banks shall otherwise consent in writing, the Borrower
covenants and agrees that:
SECTION 7.1. Debt. The Borrower shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or otherwise become or remain liable with
respect to, any Debt or Accommodation Obligations, except for:
(a) Debt and Accommodation Obligations arising hereunder and under the other
Loan Documents;
(b) Unsecured Debt and Accommodation Obligations outstanding on the date
hereof described in Schedule 7.1, in each case in a principal amount at any one
time outstanding not to exceed the amount set forth on Schedule 7.1 hereof, and
all extensions and renewals thereof;
(c) Endorsements of negotiable instruments for collection in the ordinary
course of business;
(d) Debt relating to Borrower's obligations to purchase the natural gas
pursuant to the terms of that certain Gas Purchase Contract dated February 7,
1979, as amended, between the Borrower, successor to Texas Gas Transmission
Corporation, as buyer, and West Monroe Gas Gathering Corporation, et al.,
successor to Reliance Trust, et al., as sellers, covering the sale and purchase
of natural gas from the West Monroe Field, Union Parish, Louisiana, as in effect
on the Closing Date;
(e) Current liabilities (exclusive of Debt) for accounts payable and expense
accruals incurred or assumed in the ordinary course of business, provided such
accounts payable have not remained unpaid for a period of ninety (90) days after
the same became due unless currently being contested in good faith or by
appropriate proceedings;
(f) Liabilities for taxes, assessments, governmental charges or levies;
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(g) Liabilities incurred under Hedge Transactions permitted pursuant to
Section 7.13 hereof;
(h) Debt and Accommodation Obligations among the Borrower and any Subsidiary
Guarantor, provided, that all such Debt and Accommodation Obligations incurred
by the Borrower or any Subsidiary Guarantor shall be subordinated to the
Obligations on terms acceptable to the Required Banks and provided, further,
that at the time of the incurrence of such Debt or Accommodation Obligation
there exists no Default or Event of Default and no Default or Event of Default
will exist as a result of the incurrence of such Debt or Accommodation
Obligation;
(i) Debt and Accommodation Obligations of the Borrower and its Subsidiaries
which are Investments to the extent permitted by Subsection 7.5(d), (e) or (f)
hereof;
(j) Purchase money Debt in respect of property acquired by the Borrower and
its Subsidiaries in the ordinary course of business provided, however, that the
aggregate amount of all Debt incurred by the Borrower and its Subsidiaries
pursuant to this Subsection 7.1(j) shall not exceed $1,500,000 at any one time
outstanding; and
(k) Additional Debt not permitted by Subsections 7.1(a) through (j) above,
provided, however, that the aggregate amount of all Debt incurred by the
Borrower and its Subsidiaries pursuant to this Subsection 7.1(k) shall not
exceed $1,000,000 at any one time outstanding.
SECTION 7.2. Restrictions on Distributions. The Borrower will not directly
or indirectly declare or make or incur any liability to make, and the Borrower
will not permit any of its Subsidiaries to directly or indirectly declare or
make, or incur any liability to make, Distributions, except that:
(a) The Borrower may pay Distributions to its shareholders from funds
legally available for such purpose, provided, that the Borrower will not,
directly or indirectly, declare or make, or incur any liability to make,
Distributions to its shareholders in any Fiscal Quarter in excess of an amount
equal to (i) twenty percent (20%) of Consolidated Net Income for the previous
four (4) Fiscal Quarters for which financial statements have been delivered to
the Banks pursuant to Section 6.1 less (ii) the aggregate amount of quarterly
Distributions made to its shareholders during such four (4) fiscal quarter
period.
(b) It shall be a condition to each Distribution permitted by the provisions
of Subsection 7.2(a) that at the time such Distribution is made: (i) no payment
of principal, interest, fees or other amount required hereunder or under the
Loan Documents has become due and has not been paid, (ii) no Default or Event of
Default (other than as described in subclause (i) of this proviso) has occurred,
is continuing and has not been waived by the Required Banks (or if required
under Section 10.1, all of the Banks) has occurred or would occur as a result of
the making of such Distribution, (iii) no Borrowing Base Deficiency exists or is
reasonably expected to exist as of the next Determination Date, and (iv) after
giving effect to the proposed Distribution the Borrower is in compliance with
covenants contained in Section 7.15 as of (and as if the most recently ended
Fiscal Quarter of the Borrower had ended on) the date such Distribution is made.
Notwithstanding the foregoing, (i) any Subsidiary Guarantor may make
Distributions to the Borrower or any other Subsidiary Guarantor, (ii) any other
Subsidiary of the Borrower may make Distributions to the Borrower or any
Subsidiary Guarantor, (iii) the Snyder Gas Plant Venture may make Distributions
from "Distributable Funds", as that term is defined in the Snyder Joint Venture
Agreement, to the Borrower and NGL Associates in accordance with the terms of
the Snyder Joint Venture Agreement and
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their respective sharing ratios so long as the Borrower owns at least 80% of the
equity interests in the Snyder Gas Plant Venture, and (iv) the NGL-Torch Gas
Plant Venture may make Distributions from "Distributable Funds", as that term is
defined in the NGL-Torch Joint Venture Agreement, to the Borrower and NGL
Associates in accordance with the terms of the NGL-Torch Joint Venture Agreement
and their respective sharing ratios so long as the Borrower owns at least 80% of
the equity interests in the NGL-Torch Gas Plant Venture. The Borrower will not
enter into or become subject to, and the Borrower will not permit any of its
Subsidiaries to enter into, or become subject to, any agreement or order of any
Governmental Authority which prohibits or restricts in any way the right of any
of the Borrower's Subsidiaries to make Distributions to the Borrower or any
Subsidiary Guarantor.
SECTION 7.3. Liens; Negative Pledge. The Borrower will not create, incur,
assume or suffer to exist, and the Borrower will not permit any Subsidiary of
the Borrower to create, incur, assume or suffer to exist, any Lien on any
Property of the Borrower or any of its Subsidiaries (including without
limitation, the Borrowing Base Properties), other than Permitted Liens. Except
as may exist or arise due to any Requirement of Law, the Borrower will not enter
into or become subject to, and the Borrower will not permit any Subsidiary of
the Borrower to enter into or become subject to, any agreement (other than this
Credit Agreement) that prohibits or otherwise restricts the right of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
Liens on any of its or their Property.
SECTION 7.4. Consolidation, Mergers and Acquisitions; Fundamental Changes.
The Borrower shall not, and shall not permit any of its Subsidiaries to, merge
or consolidate with or acquire substantially all of the outstanding capital
stock or Properties of any other Person or liquidate, wind up or dissolve (or
suffer any liquidation or dissolution), or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of transactions, all or any
substantial part of its business, Properties, whether now or hereafter acquired,
except for transactions in the nature of a consolidation and/or merger (i)
involving the Borrower in which the Borrower is the surviving entity, or (ii)
involving a Subsidiary Guarantor in which the surviving entity is a Subsidiary
Guarantor or a wholly owned Subsidiary of the Borrower and has duly executed and
delivered a joinder to the Subsidiary Guaranty pursuant to Section 6.11, or
(iii) involving any other Subsidiary of the Borrower in which such Subsidiary is
the surviving entity, subject in each case to the condition that immediately
after such merger or consolidation and after giving effect and pro forma effect
thereto for the immediately preceding twelve-month period, no Event of Default
or Default shall have occurred, exist or be continuing. The Borrower shall not,
and shall not permit any of its Subsidiaries to, purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding.
SECTION 7.5. Investments. The Borrower shall not, and shall not permit any
of its Subsidiaries to, make, directly or indirectly, any Investments, except:
(a) Investments existing on the date hereof and disclosed on Schedule 7.5;
(b) Investments consisting of Cash Equivalents;
(c) Accounts receivable from customers in the ordinary course of business;
(d) Investments by the Borrower or any Subsidiary Guarantor in Subsidiary
Guarantors;
(e) Investments in general or limited partnerships entered into by the
Borrower or a Subsidiary of the Borrower with industry partners in the ordinary
course of its business or capital contributions to
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such partnerships, provided, that (i) the Borrower's or such Subsidiary's equity
interests in such partnership are pledged to the Agent for the benefit of the
Banks as security for the Obligations, (ii) such partnership is engaged
exclusively in oil and gas exploration, development, production, processing or
transportation activities, (iii) the Borrower's or such Subsidiary's equity
interests in such partnerships were acquired in the ordinary course of
Borrower's or such Subsidiary's business and upon fair and reasonable terms; and
(iv) such partnership interests acquired and capital contributions made do not
exceed, in the aggregate for all such interests acquired or capital
contributions made, the sum of $1,000,000;
(f) Investments by the Borrower or its Subsidiaries in any Subsidiaries or
partnerships not permitted by the provisions of Subsections 7.5(d) or (e),
provided, however, that the aggregate amount of all such sums invested pursuant
to this Subsection 7.5(f) shall not exceed $1,000,000;
(g) Investments in the following marketable securities of a Person provided,
(i) such Person is engaged exclusively in oil and gas exploration, development,
production, processing or transportation activities, and (ii) the cost basis
thereof, in the aggregate for all such stocks, bonds, or other securities, does
not exceed $3,000,000:
(aa) stocks, bonds, and other securities which are listed on either the
New York Stock Exchange or the American Stock Exchange, or
(bb) stocks traded through the NASDAQ system or other system of
transfer or exchange generally recognized in the industry;
(h) Securities received in the settlement of Debts (created in the ordinary
course of business) owing to the Borrower or any Subsidiary of the Borrower;
(i) Margin deposits in connection with any Hedge Transaction permitted
pursuant to Section 7.13, provided such margin deposits do not exceed, in the
aggregate for all such margin deposits at any one time outstanding, the sum of
$2,000,000; and
(j) Investments in connection with or related to farm-out, farm-in, joint
operating, joint venture or area of mutual interest agreements, gathering
systems, pipelines or other similar or customary arrangements, and the
performance of Borrower's or such Subsidiary's obligations thereunder in
accordance with prudent operating standards and in the ordinary course of
business, but only insofar as they do not (i) reduce the net revenue interest of
the Borrower or any Subsidiary Guarantor in any Borrowing Base Property below
the undivided net revenue interest specified for such the Borrower or such
Subsidiary Guarantor in the most recent Engineering Report utilized by the Banks
in determining the then effective Borrowing Base, and/or (ii) increase the
undivided working interest specified for the Borrower or such Subsidiary
Guarantor in the most recent Engineering Report utilized by the Banks in
determining the then effective Borrowing Base.
SECTION 7.6. Transactions with Affiliates. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into, or be a party to any
transaction with any of such Person's Affiliates or stockholders, except for (i)
the transactions provided for in the Operative Documents, (ii) transactions
disclosed in Schedule 7.6 or (iii) transactions entered into in the ordinary
course of business and pursuant to the reasonable requirements of such Person's
business and upon such fair and reasonable terms as
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could reasonably be obtained in a arm's length transaction with an unaffiliated
Person in accordance with prevailing industry customs and practices.
SECTION 7.7. Certain Contracts; Amendments. Except as expressly provided
for in the Loan Documents, the Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, enter into, create, or otherwise
allow to exist any contract or other consensual restriction on the ability of
any Person to: (i) make Distributions to the Borrower or any Subsidiary
Guarantor, (ii) to redeem equity interests held in it by the Borrower or any
Subsidiary Guarantor, (iii) repay loans and other indebtedness owing by it to
the Borrower or any Subsidiary Guarantor, (iv) transfer any of its Properties to
the Borrower or any Subsidiary Guarantor, or (v) create, incur, assume or suffer
to exist any Lien in favor of Agent for the benefit of the Banks on any of the
Borrower's or any of its Subsidiaries' Properties. Neither the Borrower nor any
Subsidiary of the Borrower will enter into any "take-or-pay" contract or other
contract or arrangement for the purchase of goods or services which is a
Material Contract and obligates it to pay for such goods or service regardless
of whether they are delivered or furnished to it. Neither the Borrower nor any
Subsidiary of the Borrower will amend or permit any amendment to any Material
Contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects any material right or benefit of the Agent, the
Issuing Bank or any Bank under or acquired pursuant to any Security Documents.
The Borrower shall not, and shall not permit any of its Subsidiaries to, enter
into any contract, agreement or transaction which at the time such contract,
agreement or transaction was entered into could reasonably be expected to result
in a Material Adverse Effect.
SECTION 7.8 Amendments to Designated Contracts. Neither Borrower nor any
Subsidiary of Borrower, shall enter into or permit any modification or amendment
of, or waive any material right or obligation of any Person under, or terminate
(i) its certificate or articles of incorporation, bylaws or other organizational
document other than amendments, modifications and waivers which are not,
individually or in the aggregate, material, (ii) the Management Agreement, or
(iii) except as specifically permitted under the Pledge Agreement, the Snyder
Joint Venture Agreement, or the NGL-Torch Joint Venture Agreement, other than
amendments, modifications and waivers which are not, individually or in the
aggregate material.
SECTION 7.9. Sales of Properties. The Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign, transfer, lease, convey or
otherwise dispose of any of its Properties, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
(a) Sales of inventory in the ordinary course of its business;
(b) Sales or transfers constituting Investments permitted pursuant to
Subsections 7.5(d), (e), or (f);
(c) Sales or dispositions of worn out or obsolete tools or equipment no
longer used or useful in the business of the Borrower or such Subsidiary of the
Borrower;
(d) Sales of Margin Stock; and
(e) Sales of Oil and Gas Interests for fair market value on an arm's length
basis in an aggregate amount for the Borrower and its Subsidiaries not to exceed
$2,000,000 during any Borrowing Base
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Period, provided, however, that (i) if the Utilized Percentage of Borrowing Base
is greater than seventy-five percent (75%) at the time of any proposed sales or
other dispositions, such sales shall only be permitted if the amount thereof,
when added to all other sales or dispositions made during such Borrowing Base
Period, will not exceed $1,000,000, and (ii) no Event of Default has occurred
and is continuing and no Borrowing Base Deficiency then exists or would exist as
a result of such sale.
SECTION 7.10. ERISA Compliance. The Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in a "prohibited transaction", as
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Benefit Plan or knowingly consent to any other "interested party" or any
"disqualified person", as such terms are defined in Section 3(14) of ERISA and
Section 4975(e)(2) of the Code, respectively, engaging in any "prohibited
transaction", with respect to any Benefit Plan maintained by the Borrower or
such Subsidiary of the Borrower, or permit any Benefit Plan maintained by the
Borrower or such Subsidiary of the Borrower to incur any "accumulated funding
deficiency", as defined in Section 302 of ERISA or Section 412 of the Code,
unless such incurrence shall have been waived in advance by the IRS; or
terminate any Benefit Plan in a manner which could result in the imposition of a
Lien on any Property of the Borrower or such Subsidiary of the Borrower pursuant
to Section 4068 of ERISA; or breach any fiduciary responsibility imposed under
Title I of ERISA with respect to any Benefit Plan; engage in any transaction
which would result in the incurrence of a liability under Section 4069 of ERISA;
or fail to make contributions to a Benefit Plan which results in the imposition
of a Lien on any Property of the Borrower or such Subsidiary of the Borrower
pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if the
occurrence of any of the foregoing events would constitute a Material Adverse
Effect. The Borrower shall not, and shall not permit any of its Subsidiaries to
(nor will any trade or business, whether or not incorporated, that is a member
of a group of which the Borrower or such Subsidiary of the Borrower is a member
and which is treated as a single employer under Section 414 of the Code)
sponsor, maintain or contribute to any Multiemployer Plan(s). The Borrower
shall not, and shall not permit any of its Subsidiaries to, become a member of
any other group which is treated as a single employer under Section 414 of the
Code.
SECTION 7.11. Sales and Leasebacks. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become liable, directly or by way of
Accommodation Obligation, with respect to any lease or any Property (whether
real or personal or mixed) whether now owned or hereafter acquired, (i) which
the Borrower or such Subsidiary of the Borrower has sold or transferred or is to
sell or transfer to any other Person, or (ii) which the Borrower or such
Subsidiary of the Borrower intends to use for substantially the same purposes as
any other Property which has been or is to be sold or transferred by the
Borrower or such Subsidiary of the Borrower to any other Person in connection
with such lease.
SECTION 7.12. Use of Proceeds; Margin Regulations. The proceeds of
Borrowings will not be used for any purpose other than those set forth in
Section 2.20; provided, however, that none of such proceeds (including, without
limitation, proceeds of Letters of Credit issued hereunder) will be used,
directly or indirectly, in any manner which might cause the extension of credit
or the application of such proceeds to violate the Securities Act of 1933 or
Securities Exchange Act of 1934 (each as amended to the date hereof and from
time to time hereafter, and any successor statute) or to violate Regulation G,
Regulation U, or Regulation X, or any other regulation of the Federal Reserve
Board, in each case as in effect on the date or dates of such extension of
credit and such use of proceeds.
SECTION 7.13. Fiscal Year; Fiscal Quarter. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its Fiscal Year or any of
its Fiscal Quarters.
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SECTION 7.14. Hedge Transactions. The Borrower will not enter into, and
the Borrower will not permit any of its Subsidiaries to enter into, any Hedge
Transactions except contracts entered into with the purpose and effect of fixing
pricing on oil and/or gas expected to be produced by Borrower or such
Subsidiary, provided that at all times: (i) no such contract fixes a price for a
term of more than forty-eight (48) months; (ii) the aggregate monthly production
covered by all such contracts (determined, in the case of contracts that are not
settled on a monthly basis, by a monthly proration acceptable to the Banks) for
any single month does not in the aggregate exceed eighty percent (80%) of
Borrower's and its Subsidiaries' aggregate projected oil and gas production from
Proved Developed Producing Hydrocarbon Reserves anticipated to be sold in the
ordinary course of business for such month, (iii) no such contract requires
Borrower or such Subsidiary to put up any security against the event of its
nonperformance other than letters of credit or deposits of money prior to actual
default by such Borrower or Subsidiary of Borrower in performing its obligations
thereunder and (iv) each such contract shall be either in existence as of the
Closing Date or with a Bank or any Affiliate of such Bank, or with a
counterparty or have a guarantor of the obligation of the counterparty who, at
the time the contract is made, has long-term obligations rated A- or A3 or
better, respectively, by Standard & Poor's Corporation or Moody's Investors
Services, Inc. (or a successor credit rating agency).
SECTION 7.15. Financial Covenants. From and after the Effective Date, the
Borrower on a Consolidated basis shall not:
(a) Tangible Net Worth. Permit its Consolidated Tangible Net Worth at any
time to be less than the sum of (i) $37,000,000 plus, (ii) if positive, fifty
percent (50%) of Consolidated Net Income for the period from the Effective Date
plus, (iii), if any, seventy-five percent (75%) of the net proceeds from the
sale of equity securities of the Borrower and its Subsidiaries for the period
from the Effective Date; or
(b) Current Ratio. Permit the ratio of the Borrower's Consolidated current
assets (as determined in conformity with GAAP) to the Borrower's Consolidated
current liabilities (as determined in conformity with GAAP) as of the end of any
Fiscal Quarter to be less than 1.0 to 1.0. For purposes of this Subsection
7.14(b), Consolidated current assets shall include the Unused Availability.
(c) Interest Coverage Ratio. Permit, as of the end of any Fiscal Quarter,
the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense to be
less than 3.0 to 1.0, to be calculated at the end of each Fiscal Quarter, for
the four-Fiscal Quarter period ending with such Fiscal Quarter.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default. If any of the following events, acts,
occurrences or conditions (each an "Event of Default") shall occur and be
continuing:
(a) The Borrower shall fail to pay when due any payment of any principal of
the Loans; or
(b) The Borrower shall fail to pay when due the payment of any accrued
interest on the Loans and such failure shall continue for two (2) Business Days;
or
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(c) The Borrower shall fail to pay when due the payment of any fee, expense,
compensation, reimbursement or other amount when due under this Credit
Agreement, the Notes or any other Loan Document or other agreement or document
contemplated by or delivered pursuant to or in connection with this Credit
Agreement or such Loan Document or any material document executed in connection
therewith and, in any event, such failure shall continue for two (2) Business
Days after written notice thereof from the Agent to the Borrower; or
(d) The Borrower or any Subsidiary of the Borrower shall fail to perform or
observe any term, covenant or agreement contained in Subsections 6.1(c) and
6.1(d)(ii), or Article VII (other than Sections 7.7 or 7.13) of this Credit
Agreement; or
(e) The Borrower or any Subsidiary of the Borrower shall fail to perform any
term, covenant or agreement contained in this Credit Agreement other than those
referenced in Subsections 8.1(a), (b) or (c), or in any other Loan Document to
which it is a party and, in the case of any such failure that is capable of
being remedied, such failure shall not have been remedied within thirty (30)
days after the earlier of (i) notice thereof from the Agent to the Borrower and
(ii) discovery thereof by a Responsible Officer of the Borrower or such
Subsidiary of the Borrower; or
(f) Any Subsidiary shall fail to perform any term, covenant or agreement
contained in the Subsidiary Guaranty other than those referenced in Subsections
8.1(a), (b), and (c), and, in the case of any such failure that is capable of
being remedied, such failure shall not have been remedied within thirty (30)
days after the earlier of (i) notice thereof from the Agent to such Subsidiary
and (ii) discovery thereof by a Responsible Officer of such Subsidiary; or
(g) Any Termination Event occurs which would subject the Borrower or any
Subsidiary of the Borrower, to a liability in excess of $1,000,000, or the plan
administrator of any Benefit Plan applies under Section 412(d) of the Code for
a waiver of the minimum funding standards of Section 412(a) of the Code which
would subject the Borrower or any Subsidiary of the Borrower, to a liability in
excess of $1,000,000; or
(h) Any representation or warranty made or incorporated by the Borrower or
any Subsidiary of the Borrower in any Loan Document to which such Person is a
party or in any certificate, agreement or instrument delivered in connection
with, any Loan Document shall prove to have been incorrect or misleading in any
material respect when made or deemed made; or
(i) The Borrower or any Subsidiary of the Borrower, shall (i) fail to pay
any Debt having a principal amount in excess of $1,000,000 (other than the
amounts referred to in Subsections 8.1(a), (b), and (c), owing by such Person,
or any interest or premium thereon, when due (or, if permitted by the terms of
the relevant document, within any applicable grace period), whether such Debt
shall become due by scheduled maturity, by required prepayment, by acceleration,
by demand or otherwise unless effectively waived or consented to in accordance
with the documents evidencing such Debt or (ii) fail to observe or perform any
material term, covenant or condition on its respective part to be performed
under any agreement or instrument evidencing, securing or relating to any such
Debt, when required to be performed, and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument if
the effect of any failure is to cause, or to permit the holder or holders of
such Debt or a trustee on its or their behalf (with or without the giving of
notice, the lapse of time, or both), to cause such Debt to become due prior to
its stated maturity; or
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(j) Any Loan Document shall, at any time after its execution and delivery
and for any reason, cease to be in full force and effect or shall be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Person party thereto (other than the Agent or any Bank) or any such
Person party thereto (other than the Agent or any Bank) shall deny that it has
any or further liability or obligation thereunder, or the rights and/or benefits
afforded to the Banks thereunder are materially impaired; or
(k) The Borrower or any Subsidiary of the Borrower shall be adjudicated
insolvent, or shall generally not pay, or admit in writing its inability to pay,
its debts as they mature, or make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by any such Person seeking to
adjudicate it insolvent, seeking liquidation, dissolution, winding-up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any Debtor Relief Law, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its Property, or any such Person shall take
any corporate action in furtherance of any of the actions set forth above in
this Subsection 8.1(k); or
(l) Any proceeding of the type referred to in Subsection 8.1(k) is filed, or
any such proceeding is commenced against the Borrower or any Subsidiary of the
Borrower, or any such Person by any act indicates its approval thereof, consent
thereto or acquiescence therein, or an order for relief is entered in an
involuntary case under the bankruptcy law of the United States, or an order,
judgment or decree is entered appointing a trustee, receiver, custodian,
liquidator or similar official or adjudicating any such Person insolvent, or
approving the petition in any such proceedings, and such order, judgment or
decree remains in effect for thirty (30) days; or
(m) Final judgments or orders involving liabilities in excess of $1,500,000
in the aggregate which are not otherwise covered by insurance shall be rendered
against the Borrower or any Subsidiary of the Borrower and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay of
execution thereof shall not be procured, within sixty (60) days from the date of
entry thereof, or the Borrower or any Subsidiary of the Borrower shall not,
within said period of sixty (60) days or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(n) (i) Environmental Liabilities in excess of $1,000,000 in the aggregate
shall have been assessed under any applicable Environmental Law against the
Borrower or any Subsidiary of the Borrower or (ii) Releases of any Hazardous
Substance shall have occurred, and such event(s) could reasonably be expected to
form the basis of Environmental Liabilities against the Borrower or any
Subsidiary of the Borrower in excess of $1,000,000 in the aggregate;
THEN, (x) upon the occurrence of any Event of Default described in Subsection
8.1(k) or Subsection 8.1(l) with respect to the Borrower or any Subsidiary of
the Borrower (aa) all of the Commitments shall automatically terminate, and the
Borrower shall deposit with the Agent cash equal to the aggregate face amount of
all outstanding Letters of Credit issued hereunder and (bb) the entire unpaid
amount of all Obligations shall automatically become immediately due and
payable, without presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration or further notice of any kind, all of which
are hereby expressly waived by the Borrower and each of its Subsidiaries and the
obligation of each Bank to make any Loan hereunder shall thereupon terminate and
(cc) upon the occurrence of any other Event of Default, the Agent shall at the
request, or may with the consent, of the Required Banks, (A) by written notice
to the Borrower declare all of the Commitments to be terminated, whereupon all
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of the Commitments and the obligations of each Bank to make any Loan hereunder
shall forthwith terminate, and the Borrower shall deposit with the Agent cash
equal to the aggregate face amount of all outstanding Letters of Credit issued
hereunder and (B) by written notice to the Borrower declare the entire unpaid
amount of all Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be forthwith due and payable, without presentment
for payment, demand, protest, notice of intent to accelerate, notice of
acceleration or further notice of any kind, all of which are hereby expressly
waived by the Borrower and each Subsidiary of the Borrower. The Borrower hereby
grants to the Agent for the ratable benefit of the Banks a security interest in,
and Lien on, any Dollars delivered to the Agent pursuant to this Section 8.1, as
security for the Obligations.
SECTION 8.2. Remedies. If any Event of Default shall occur, the Agent for
the ratable benefit of the Banks, may (and upon the request of the Required
Banks shall) protect and enforce the Banks' rights and remedies under the Loan
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Loan Document, and the
Banks may enforce the payment of any Obligations due or enforce any other legal
or equitable right. All rights and remedies and powers conferred upon the Agent
and/or the Banks under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at law or in equity.
SECTION 8.3. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of any Event of
Default each Bank is hereby authorized at any time or from time to time, to the
fullest extent permitted by law and without presentment, demand, protest or
other notice of any kind to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held, and
other Debt at any time owing, by such Bank (including, without limitation, by
Affiliates, branches or agencies of such Bank wherever located) to or for the
credit or the account of the Borrower against any of and all the Obligations,
including, without limitation, all interests in Obligations purchased by such
Bank pursuant to Section 2.18, and all other claims of any nature or description
arising out of or in connection with this Credit Agreement or any other Loan
Document, irrespective of whether or not such Bank shall have made any demand
under this Credit Agreement or the Notes or other Loan Documents and although
such Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured. Such Bank agrees promptly to notify the Borrower after any such
setoff and application made by such Bank, but the failure to give such notice
shall not affect the validity of such setoff and application. The rights of the
Banks under this Section 8.3 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which the Banks may
have.
SECTION 8.4. Indemnity. The Borrower shall indemnify the Agent and each
Bank and each Affiliate thereof and their respective directors, officers,
employees, shareholders and agents (each an "Indemnitee") from, and hold each of
them harmless against, any and all losses, liabilities, claims, damages,
expenses, penalties, actions, judgments, suits, costs or disbursements of any
kind or nature whatsoever that are asserted against an Indemnitee by any Person
if such losses, liabilities, claims, damages, expenses, penalties, actions,
judgments, suits, costs or disbursements arise out of or result from (i) any use
by the Borrower of the proceeds of any extension of credit by the Banks
hereunder or (ii) any investigation, litigation or other proceeding (including
any threatened investigation or proceeding) relating to the foregoing or arising
out of or based upon any Loan Document or any of the transactions contemplated
by any Loan Document, and the Borrower shall reimburse such Indemnitee, within
ten (10) Business Days after receipt of a composite statement of account for any
reasonable expenses (including
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reasonable legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages,
expenses, penalties, actions, judgments, suits, costs or disbursements resulting
from the gross negligence or willful misconduct of such Indemnitee. It is the
express intention of the parties hereto that each Indemnitee to be indemnified
hereunder or thereunder shall be indemnified and held harmless against any and
all losses, liabilities, claims, damages, expenses, penalties, actions,
judgments, suits, costs or disbursements arising out of or from the ordinary
negligence of such Indemnitee. Without prejudice to the survival of any other
Obligations of the Borrower hereunder and the other Loan Documents, the
Obligations of the Borrower under this Section 8.4 shall survive the termination
of this Credit Agreement, the payment in full of the Obligations and/or
assignment of the Notes.
ARTICLE IX
THE AGENT
SECTION 9.1. Authorization and Action. The general administration of the
Loan Documents and any other documents contemplated by this Credit Agreement
shall be by the Agent or its designees. Each of the Banks authorizes the Agent
to take such actions on its behalf and to exercise such powers and to perform
such duties as are expressly delegated to the Agent by the terms of this Credit
Agreement and the other Loan Documents, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Credit Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Agent
shall be read into this Credit Agreement or otherwise exist against the Agent.
(b) The provisions of this Article IX are solely for the benefit of the
Agent and the Banks, and neither the Borrower nor any Subsidiary of the Borrower
shall have any rights as a third party beneficiary or otherwise under, or be
bound by, the provisions of this Article IX.
(c) In performing its functions and duties hereunder and under the other
Loan Documents, the Agent shall act solely as the agent of the Banks and the
Agent does not assume nor shall it be deemed to have assumed any obligation or
relationship of trust or agency with or for the Borrower, any Subsidiary of the
Borrower or any of their respective successors and assigns.
SECTION 9.2. Agent's Reliance; Exculpatory Provisions, Etc.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable to any Bank for any action taken or omitted to be
taken by it or them under or in connection with this Credit Agreement or the
other Loan Documents (i) with the consent or at the request of the Required
Banks or if required under Section 10.1, all of the Banks or (ii) in the absence
of its or their own gross negligence or willful misconduct (it being the express
intention of the parties that the Agent and its directors, officers, agents and
employees shall have no liability for actions and omissions under this Section
9.2 resulting from their sole ordinary or contributory negligence). Without
limitation of the generality of the foregoing, the Agent: (i) may treat the
payee of each Note as the holder thereof until the Agent receives a Commitment
Transfer Supplement from such payee in accordance with the terms of Section
10.9, (ii) may consult with legal counsel (including counsel to the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts, (iii) makes
no warranty
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or representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Credit Agreement or the other Loan Documents, (iv) except as otherwise expressly
provided herein, shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Credit Agreement or the other Loan Documents or to inspect the Property
(including the books and records) of the Borrower or its Subsidiaries, (v) shall
not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto, (vi) shall incur no liability under or in respect of this
Credit Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram,
telecopier, cable or telex) reasonably believed by it to be genuine and signed
or sent by the proper party or parties, (vii) shall incur no liability to any
Bank or the Issuing Bank as a result of any act or failure to act in respect of
a Letter of Credit that would not form the basis for liability against the Agent
acting either as the Agent or the Issuing Bank with respect to such Letter of
Credit, in an action between the Agent, in either such capacity, and either the
customer arranging for such Letter of Credit, the beneficiary thereof or the
holder of the draft drawn thereunder, and (viii) the provisions of this Section
9.2 shall survive the termination of this Credit Agreement and/or the payment or
assignment of any of the Obligations. The Agent shall be fully justified in
failing or refusing to take any action under this Credit Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of the
Required Banks (or if required under Section 10.1, all of the Banks) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense (other than that resulting from its
own gross negligence or willful misconduct) which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Credit Agreement and the other Loan Documents in accordance with a request of
the Required Banks or all of the Banks, as the case may be, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks and all future holders of the Notes.
(b) Neither the Agent nor any of its directors, officers, employees, or
agents shall have any responsibility to the Borrower, any Subsidiary of the
Borrower or any other Person on account of the failure or delay in performance
or breach by any of the Banks or the Borrower or any Subsidiary of the Borrower
of any of their respective Obligations under this Credit Agreement, the Notes,
the Loan Documents or any related agreement or document or in connection
herewith or therewith.
SECTION 9.3. The Agent in its Individual Capacity and Affiliates. With
respect to its Commitment, any of the Loans made by it and/or the Notes issued
to it as a Bank, Chase shall have the same rights and powers under this Credit
Agreement or the other Loan Documents as any other Bank and may exercise the
same as though it were not the Agent. The terms "Bank" or "Banks" shall, unless
otherwise expressly indicated, include the Agent in its individual capacity.
Chase and its Affiliates may accept deposits from, lend money, act as trustee
under indentures of, and generally engage in any kind of business with, the
Borrower, its Subsidiaries and/or any Person who may do business with or own
securities of the Borrower or any Subsidiary of the Borrower, all as if it were
not the Agent and without any duty to account therefor to the other Banks.
SECTION 9.4. Bank Credit Decision. Each Bank acknowledges and agrees that
it has, independently and without reliance upon the Agent or any other Bank and
based on the financial statements referred to in Section 5.9 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Agent or any other
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Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Credit Agreement and the other Loan Documents.
SECTION 9.5. Indemnification and Reimbursement. The Agent shall not be
required to take any action hereunder or to prosecute or defend any suit in
respect of this Credit Agreement or the other Loan Documents unless indemnified
to the Agent's satisfaction by the Banks against loss, cost, liability and
expense. If any indemnity furnished to the Agent shall become impaired, it may
call for additional indemnity and cease to do the acts indemnified against until
such additional indemnity is given. In addition, the Banks agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Notes then held by each of them (or if
no Notes are at the time outstanding, ratably according to the respective
amounts of their Commitments, or if no Commitments are outstanding, the
respective amounts of the Commitments immediately prior to the time the
Commitments ceased to be outstanding), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Credit Agreement or any action taken or omitted by the Agent under
this Credit Agreement or the other Loan Documents (including, without
limitation, any action taken or omitted under Article II of this Credit
Agreement); provided, that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. EACH BANK AGREES, HOWEVER, THAT IT EXPRESSLY INTENDS, UNDER
THIS SECTION 9.5, TO INDEMNIFY THE AGENT RATABLY AS AFORESAID FOR ALL SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR RESULTING FROM THE AGENT'S
ORDINARY OR CONTRIBUTORY NEGLIGENCE. Without limitation of the foregoing, each
Bank agrees to reimburse the Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including reasonable counsel fees) incurred by the
Agent in connection with the preparation, execution, administration, or
enforcement of, or legal advice in respect of rights or responsibilities under,
this Credit Agreement and the other Loan Documents to the extent that the Agent
is not reimbursed for such expenses by the Borrower. The provisions of this
Section 9.5 shall survive the termination of Credit Agreement and/or the payment
or assignment of any of the Obligations.
SECTION 9.6. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and the Borrower and may be removed as Agent
at any time for cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint from among the Banks
a successor Agent (with the written consent of the Borrower which shall not be
unreasonably withheld or delayed, provided that if an Event of Default shall
have occurred and be continuing the consent of the Borrower need not be
obtained). If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 calendar days after
the retiring Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks and with the concurrence of the Borrower, appoint a successor Agent, which
shall be an Eligible Assignee. Upon the acceptance of any appointment as Agent
hereunder and under the other Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Credit
Agreement and the other Loan Documents. After any retiring Agent's resignation
or removal as Agent hereunder and under the other Loan Documents, the provisions
of this Article IX shall inure to its benefit
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as to any actions taken or omitted to be taken by it while it was Agent under
this Credit Agreement and the other Loan Documents.
SECTION 9.7. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent shall have received notice from a Bank or the
Borrower referring to this Credit Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." If the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Banks; provided, however, if such notice is received from a Bank, the Agent also
shall give notice thereof to the Borrower. The Agent shall be entitled to take
action or refrain from taking action with respect to such Default or Event of
Default as provided in Section 9.1 and Section 9.2.
SECTION 9.8. Delegation of Duties. The Agent may execute any of its duties
under this Credit Agreement or the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Amendments and Waivers. Neither this Credit Agreement or any
other Loan Document to which the Borrower or any Subsidiary is a party nor any
terms hereof or thereof may be amended, supplemented, waived or otherwise
modified except in accordance with the provisions of this subsection. Any
provision of this Credit Agreement or any other Loan Document may be amended,
supplemented, waived, or otherwise modified if and only if such amendment,
supplement, waiver or other modification (i) is in writing, (ii) is signed by
the Required Banks (if the Banks are a party thereto) or by the Agent with the
consent of the Required Banks (if the Agent is a party thereto and the Banks are
not) and (iii) is signed by each other party thereto except that in the case of
a waiver, the party whose performance is being waived need not be a signatory;
provided no such amendment, supplement, waiver or other modification shall do
any of the following unless signed by all of the Banks (if the Banks are a party
thereto) and by the Agent with the consent of all of the Banks (if the Agent is
a party thereto and the Banks are not):
(a) Extend the Maturity Date, the date of payment of any principal, interest
or fees, or the date of payment of any required principal prepayment;
(b) Reduce the amount of any principal, interest or fees, the rate of
interest paid with respect to any unpaid principal, interest or fees, or the
amount of any fee payable to the Banks hereunder;
(c) Change the amount of any Commitment of any Bank;
(d) Amend, modify, or waive any of the conditions set forth in Article IV
(other than any condition which refers therein to the Required Banks);
(e) Amend, modify or waive any provision which calls for the consent of, the
approval of, or direction from all of the Banks;
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(f) Amend, modify or waive any provision of this Section 10.1 or the
definition of Required Banks; or
(g) Consent to or permit the assignment or transfer by the Borrower or any
Subsidiary of Borrower of any of its rights and obligations under this Credit
Agreement or any other Loan Document to which it is a party;
and provided, further, without the prior written consent of the Agent, no such
amendment, supplement, waiver or modification shall amend, supplement, waive or
otherwise modify any provision of Article IX or any other provision of any Loan
Document if the effect thereof is to affect the rights or duties of the Agent;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Banks required above
to take such action, affect the rights and duties of the Issuing Bank with
respect to the Letters of Credit and the Letter of Credit Applications, if any,
outstanding under this Credit Agreement. Any such amendment, supplement,
modification or waiver shall apply to each of the Banks equally and shall be
binding upon the Banks, the Agent, all future holders of the Notes and
Obligations, and all parties to the Loan Document so amended, supplemented,
waived or otherwise modified.
SECTION 10.2. Notices, Etc.
(a) Notices, consents, requests, approvals, demands and other communications
(collectively "Communications") provided for herein shall be in writing
(including telecopy, telegraphic, telex or cable communications) and mailed,
telecopied, telegraphed, telexed, cabled or delivered:
If to the Borrower or any of its Subsidiaries, to it at:
Bellwether Exploration Company
1331 Lamar, Suite 1455
Houston, Texas 77010-3039
Telephone Number: (713) 650-1025
Telecopy Number: (713) 652-2916
Attention: J. Darby Sere
If to the Agent, to it at:
The Chase Manhattan Bank
Texas Commerce Bank National Association
707 Travis, 5 TCBN-86
Houston, Texas 77002
Telephone Number: (713) 216-4332
Telecopy Number: (713) 216-4117
Attention: Lori H. Vetters
If such notice to the Agent relates to fundings or payments, with a copy
to:
The Chase Manhattan Bank
140 East 45th Street, 29th Floor
New York, New York 10017
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Telephone Number: (212) 622-0005
Telecopy Number: (212) 622-0002
Attention: Sandra Miklave, Vice President
If to any Bank, as specified on Schedule 1.1 hereto or in the appropriate
Commitment Transfer Supplement pursuant to Section 10.9.
(b) All Communications, except as otherwise expressly provided in the Loan
Documents, must be in writing and must be mailed, telecopied or delivered, to
the appropriate party at the address set forth herein or other applicable Loan
Document or, as to any party to any Loan Document, at any other address as may
be designated by it in a written notice sent to all other parties to such Loan
Document in accordance with this Section 10.2.
(c) Any Communication given by telecopier must be confirmed within 48 hours
by letter mailed or delivered to the appropriate party at its respective
address. Except as otherwise expressly provided in any Loan Document, any
Communication required or permitted by any Loan Document given in compliance
with this Section 10.2 shall be effective when received or delivered.
SECTION 10.3. No Waiver; Remedies Cumulative. No failure on the part of
the Agent or any Bank or any holder of a Note to exercise, and no delay in
exercising, any right, power or privilege hereunder or under any other Loan
Document and no course of dealing between the Borrower, its Subsidiaries, or any
of them and the Agent or any Bank or any holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or privilege, or any abandonment or discontinuance of any steps to enforce
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 10.4. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay within ten (10) Business Days after
presentation of a composite statement of account: (i) all reasonable costs and
expenses of the Agent in connection with the negotiation, preparation,
distribution, execution and delivery of this Credit Agreement, the Notes and the
other Loan Documents and the documents and instruments referred to therein, and
(ii) the negotiation, preparation, distribution, execution and delivery of any
amendment, supplement, modification, waiver or consent, including the Agent's
review and due diligence with respect to any such amendment, supplement,
modification, waiver or consent or the addition of Borrowing Base Properties not
engineered in connection with the initial funding under this Credit Agreement
relating to any of the Loan Documents (including, without limitation, as to each
of the foregoing, the reasonable fees and disbursements of legal counsel to the
Agent, provided, however, that the fees for services rendered (exclusive of out-
of-pocket disbursements) of legal counsel to the Agent in connection with costs
referenced in the immediately preceding subclause (i) shall not exceed, in the
aggregate $25,000.00;
(b) The Borrower shall pay all reasonable out-of-pocket costs and expenses
of the Agent and, upon the occurrence and during the continuance of any Event of
Default, each Bank in connection with (i) the preservation of their rights
under, and enforcement of, the Loan Documents to which the Borrower or any
Subsidiary of the Borrower is a party and the documents and instruments referred
to therein and
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(ii) any workout, restructuring or rescheduling of the Obligations or any
proceeding under any Debtor Relief Law with respect to the Borrower or any
Subsidiary of the Borrower (including, without limitation, in each case, the
reasonable fees and disbursements of counsel for the Agent and the Banks).
(c) The Borrower shall pay, and hold the Agent and each of the Banks
harmless from and against, any and all present and future stamp, excise, and
other similar taxes and fees with respect to the foregoing matters and hold the
Agent and each Bank harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to the Agent or such Bank) to pay such taxes.
(d) Without prejudice to the survival of any other obligations of the
Borrower hereunder, under the other Loan Documents, the obligations of the
Borrower under this Section 10.4 shall survive the termination of this Credit
Agreement and/or the payment or assignment of the Notes.
SECTION 10.5. Governing Law. This Credit Agreement, the Notes and, unless
otherwise specified therein, all other Loan Documents and all other documents
executed in connection herewith or therewith, shall be deemed to be contracts
and agreements executed by the Borrower, the Agent and the Banks under the laws
of the State of New York and of the United States and for all purposes shall be
construed in accordance with, and governed by, the laws of said State and of the
United States. Without limitation of the foregoing, nothing in this Credit
Agreement, the Notes or any other Loan Document shall be deemed to constitute a
waiver of any rights which any Bank may have under applicable federal
legislation relating to the amount of interest which such Bank may contract for,
take, receive or charge in respect of any Loans, including any right to take,
receive, reserve and charge interest at the rate allowed by the law of the state
where such Bank is located. The Agent, the Banks and the Borrower further agree
that insofar as the laws of the State of Texas apply, the provisions of Article
1.04, Subtitle 1, Title 79, of the Revised Civil Statutes of Texas, 1925, as
amended, are applicable to the determination of the Highest Lawful Rate with
respect to the Notes, the indicated rate ceiling computed from time to time
pursuant to Section (a) of such Article shall apply to the Notes; provided,
however, that to the extent permitted by such Article, the Agent may from time
to time by notice from the Agent to the Borrower revise the election of such
interest rate ceiling as such ceiling affects then current or future balances of
the Loans outstanding under the Notes. The provisions of Chapter 15 of Subtitle
3 of the said Title 79 do not apply to this Credit Agreement or the Notes issued
hereunder.
SECTION 10.6. Interest. Each provision in this Credit Agreement and each
other Loan Document is expressly limited so that in no event whatsoever shall
the amount paid, or otherwise agreed to be paid, to the Agent or any Bank for
the use, forbearance or detention of the money to be loaned under this Credit
Agreement or any Loan Document or otherwise (including any sums paid as required
by any covenant or obligation contained herein or in any other Loan Document
which is for the use, forbearance or detention of such money), exceed that
amount of money which would cause the effective rate of interest to exceed the
Highest Lawful Rate, and all amounts owed under this Credit Agreement and each
other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Credit Agreement or such Loan Document shall in no
event exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate. Anything in this Credit Agreement,
any Note or any other Loan Document to the contrary notwithstanding, with
respect to each Note the Borrower shall never be required to pay unearned
interest on such Note or ever be required to pay interest on such Note at a rate
in excess of the Highest Lawful Rate, and if the effective rate of interest
which would otherwise be payable with respect to such Note would exceed the
Highest Lawful Rate, or
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if the holder of such Note shall receive any unearned interest or shall receive
monies that are deemed to constitute interest which would increase the effective
rate of interest payable by the Borrower with respect to such Note to a rate in
excess of the Highest Lawful Rate, then (i) the amount of interest which would
otherwise be payable by the Borrower with respect to such Note shall be reduced
to the amount allowed under applicable law and (ii) any unearned interest paid
by the Borrower or any interest paid by the Borrower in excess of the Highest
Lawful Rate shall be in the first instance credited on the principal of such
Notes with the excess thereof, if any, refunded to the Borrower. It is further
agreed that, without limitation of the foregoing, all calculations of the rate
of interest contracted for, charged or received by any Bank under the Notes held
by it, or under this Credit Agreement or the other Loan Documents, are made for
the purpose of determining whether such rate exceeds the Highest Lawful Rate
applicable to such Bank (such Highest Lawful Rate being the Bank's "Maximum
Permissible Rate"), shall be made, to the extent permitted by usury laws
applicable to such Bank (now or hereafter enacted), by (i) characterizing any
non-principal payment as an expense, fee or premium rather than as interest and
(ii) amortizing, prorating and spreading in equal parts during the period of the
full stated term of the Loans evidenced by said Notes all interest at any time
contracted for, charged or received by such Bank in connection therewith.
SECTION 10.7. Survival of Representations and Warranties. All
representations, warranties and covenants contained or incorporated herein or
made in writing by the Borrower or any Subsidiary of the Borrower in connection
herewith shall survive the execution and delivery of this Credit Agreement, the
Notes and the other Loan Documents.
SECTION 10.8. Binding Effect. This Credit Agreement shall become effective
when it shall have been executed by the Borrower, the Agent and each of the
Banks and shall be binding upon and inure to the benefit of the Borrower and the
Banks and their respective successors and assigns, whether so expressed or not,
provided, that the undertaking of the Banks to make Loans to the Borrower shall
not inure to the benefit of any successor or assign of the Borrower.
SECTION 10.9. Participations; Assignments.
(a) This Credit Agreement shall be binding upon and inure to the benefit of
the Borrower, the Banks, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Credit Agreement without
the prior written consent of each Bank.
(b) Any Bank may, in the ordinary course of its commercial banking business
and in accordance with applicable law at any time sell to one or more banks or
other financial institutions ("Participants") participating interests in any
Loan owing to such Bank, any Note held by such Bank, any LC Obligations held by
it, any Commitment of such Bank, including such Bank's Commitment Percentage of
the Letter of Credit Commitment, or any other interest of such Bank hereunder
and under the other Loan Documents. In the event of any such sale by a Bank of
participating interests to a Participant, such Bank's obligations under this
Credit Agreement to the other parties to this Credit Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Credit Agreement and the other Loan Documents, and the Borrower and
the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Credit Agreement
and the other Loan Documents. The Borrower agrees that if amounts outstanding
under this Credit Agreement and the Notes are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence
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of an Event of Default, each Participant shall be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Credit Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Credit
Agreement or any Note, provided that such Participant shall only be entitled to
such right of setoff if it shall have agreed in the agreement pursuant to which
it shall have acquired its participating interest to share with the Banks the
proceeds thereof as provided in Section 8.3. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.13, 2.15, 2.17 and
10.4 with respect to its participation in the Commitments and the Utilized
Credit outstanding from time to time, provided, that no Participant shall be
entitled to receive any greater amount pursuant to such sections than the
transferor Bank would have been entitled to receive in respect of the amount of
the participation transferred by such transferor Bank to such Participant had no
such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking business
and in accordance with applicable law at any time sell to any Bank or any
Affiliate thereof and, so long as no Event of Default has occurred and is
continuing, with the consent of the Borrower and the Agent (which in each case
shall not be unreasonably withheld) and if an Event of Default has occurred and
is continuing, without the consent of the Borrower, to one or more Eligible
Assignees, all or any part of its rights and obligations under this Credit
Agreement, its Commitment, including, without limitation, its Commitment
Percentage of the Letter of Credit Commitment, the Loans owning to it, the
Note(s) held by it, the LC Obligations held by it (in respect of any such Bank,
the "Credit Exposure"), pursuant to a Commitment Transfer Supplement,
substantially in the form of Exhibit B, provided; however, that (i) the parties
to such Commitment Transfer Supplement shall have executed and delivered to the
Agent for its acceptance and recording in the Register, a Commitment Transfer
Supplement, together with the Note(s) subject to such assignment, (ii) each such
assignment shall be of a constant, and not a varying, percentage of the
transferor Bank's Credit Exposure, i.e., any such assignment shall include a
constant percentage of, inter alia the rights and obligations of such transferor
Bank with respect to its Commitment, including, without limitation, its
Commitment Percentage of the Letter of Credit Commitment, the Loans owning to
it, the Note(s) held by it, and the LC Obligations held by it, (iii) the amount
of each such assignment (determined as of the date the Commitment Transfer
Supplement with respect to such assignment is delivered to the Agent) shall be
in a minimum principal amount of $10,000,000, and (iv) if the transferor Bank
has retained any Commitment hereunder, such transferor Bank's remaining
Commitment shall be at least $10,000,000 after giving effect to such assignment.
Upon such execution, delivery, acceptance and recording, from and after the
Transfer Effective Date determined pursuant to such Commitment Transfer
Supplement, (i) the Eligible Assignee thereunder shall be a party hereto and, to
the extent provided in such Commitment Transfer Supplement, have the rights and
obligations of a Bank hereunder with a Commitment as set forth therein, and (ii)
the transferor Bank thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Credit
Agreement (and, in the case of a Commitment Transfer Supplement covering all or
the remaining portion of a transferor Bank's rights and obligations under this
Credit Agreement, such transferor Bank shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Credit Agreement to
the extent, and only to the extent, necessary to reflect the addition of such
Eligible Assignee and the resulting adjustment of Commitment Percentages arising
from the purchase by such Eligible Assignee of all or a portion of the rights
and obligations of such transferor Bank under this Credit Agreement and the
Notes. On or prior to the Transfer Effective Date determined pursuant to such
Commitment Transfer Supplement, the Borrower, at its expense, shall execute and
deliver to the Agent in exchange for the surrendered Note a new Note to the
order of such Eligible Assignee in an amount equal to the Commitment and Loans
assumed by it pursuant to such Commitment Transfer Supplement and, if the
transferor Bank has retained a Commitment and Loans hereunder, a new Note to the
order
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of the transferor Bank in an amount equal to the Commitment and Loans retained
by it hereunder. Such new Notes shall be in the form of the Notes replaced
thereby.
(d) The Agent shall maintain at its address referred to in Section 10.2 a
copy of each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Banks and the
Commitment of, the principal amount of the Loans owing to, and the LC
Obligations of, each Bank from time to time. The entities in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register as the
owner of the Loan and/or the LC Obligations recorded therein for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by a
transferor Bank and an Eligible Assignee (and, in the case of an Eligible
Assignee that is not then a Bank or an affiliate thereof, by the Borrower and
the Agent) together with payment to the Agent of a registration and processing
fee of $2,500, the Agent shall (i) promptly accept such Commitment Transfer
Supplement, and (ii) on the Transfer Effective Date determined pursuant thereto,
record the information contained therein in the Register and give notice of such
acceptance and recordation to the Banks and the Borrower.
(f) The Borrower hereby authorizes each Bank to disclose to any (i)
Participant, (ii) Eligible Assignee approved in writing by the Borrower, or
(iii) any prospective Eligible Assignee approved in writing by the Borrower, any
and all financial information in such Bank's possession concerning the Borrower
and its Affiliates which has been delivered to such Bank by or on behalf of the
Borrower pursuant to this Credit Agreement or which has been delivered to such
Bank by or on behalf of the Borrower in connection with such Bank's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Credit Agreement, provided that, prior to any such disclosure, each such
Eligible Assignee or Participant or proposed Eligible Assignee or Participant
shall agree in writing to be bound by the confidentiality provisions contained
in Section 10.11.
(g) If, pursuant to this section, any interest in this Credit Agreement or
any Note is transferred to any Eligible Assignee which is organized under the
laws of any jurisdiction other than the United States or any state thereof, the
transferor Bank shall cause such Eligible Assignee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for the
benefit of the transferor Bank, the Agent and the Borrower) that under
applicable law and treaties no taxes will be required to be withheld by the
Agent, the Borrower or the transferor Bank with respect to any payments to be
made to such Eligible Assignee in respect of the Loans, (ii) to furnish to the
transferor Bank (and, in the case of any Eligible Assignee registered in the
Register, the Agent and the Borrower) either U.S. Internal Revenue Service Form
4224 or U.S. Internal Revenue Service Form 1001 (wherein such Eligible Assignee
claims entitlement to complete exemption from U.S. federal withholding tax on
all interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Bank, the Agent and the Borrower) to provide the transferor Bank
(and, in the case of any Eligible Assignee registered in the Register, the Agent
and the Borrower) a new Form 4224 or Form 1001 upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such Eligible Assignee, and to comply in all material
respects from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
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(h) Nothing herein shall prohibit any Bank from (i) pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law, or (ii)
selling or assigning its Notes and its rights under the Credit Agreement and the
other Loan Documents to any Person after the occurrence and during the
continuance of an Event of Default.
SECTION 10.10. Separability. Should any clause, sentence, paragraph or
section of this Credit Agreement or any other Loan Document be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Credit Agreement or such
other Loan Document, as the case may be, and the parties hereto agree that the
part or parts of this Credit Agreement or such Loan Document so held to be
invalid, unenforceable or void will be deemed to have been stricken here from or
therefrom and the remainder will have the same force and effectiveness as if
such part or parts had never been included herein or therein.
SECTION 10.11. Confidentiality. Each Bank and the Agent acknowledge that
any information furnished to it directly by the Borrower is and shall be
confidential unless designated otherwise by the Borrower (however, such Bank or
the Agent may disclose or furnish any or all of such information to its
employees, officers, board members, auditors, counsel and agents after informing
them of the confidential nature of such information), and each Bank and the
Agent agrees that (i) it will maintain, and direct its employees, officers,
board members, auditors, counsel and agents to maintain, the confidentiality of
such information, (ii) it will not disclose, and will direct its employees,
officers, board members, auditors, counsel and agents not to disclose, in any
event such information to any third party (except as herein set forth), and
(iii) it will not use, and will direct its employees, officers, board members,
auditors, counsel or agents not to use such information for any purposes other
than as contemplated by this Credit Agreement; provided, however, that such Bank
or the Agent or its employees, officers, board members, auditors, counsel or
agents may disclose any such information that is (i) in the public domain or
that becomes part of the public domain after the execution hereof, as a result
of filing or recording with any Governmental Authority or for any other reason,
(ii) in the possession of such Bank or the Agent as a result of disclosure by a
third party, except to the extent that the Person making such disclosure is
aware that such third party is bound by a confidentiality obligation to the
Borrower, (iii) required in such Bank's or the Agent's good faith judgment to be
disclosed in order to comply with any applicable Requirement of Law, in order to
comply with legal process, or in order to comply with the request of any
Governmental Authority having authority or purported authority to regulate the
Agent or such Bank, provided, such Bank or the Agent will give notice to the
Borrower of any such requirement, (iv) permitted to be disclosed to an Eligible
Assignee or prospective Eligible Assignee pursuant to Subsection 10.9(i), or (v)
disclosed in connection with any suit or other proceeding brought by the Agent
or such Bank against the Borrower or any Subsidiary of the Borrower or by the
Borrower or any Subsidiary of the Borrower against the Agent or such Bank. Each
Bank and the Agent agrees that if it is required by any applicable Requirement
of Law to disclose any confidential information, such Bank or the Agent will, as
soon as practicable notify the Borrower of the applicable Requirement of Law and
the date on which a response to the same is due from it, provided that this
sentence shall not apply to any disclosure the Agent or any Bank is required by
applicable Requirements of Law to make to any Governmental Authority having
authority to regulate the Agent or such Bank.
SECTION 10.12. Marshalling; Recapture. Neither the Agent nor any Bank
shall be under any obligation to marshal any Properties in favor of the Borrower
or any other Person or against or in payment of any or all of the Obligations.
To the extent any Bank receives any payment by or on behalf of the Borrower,
which payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to the Borrower
or its estate, trustee, receiver, custodian
-79-
<PAGE>
or any other party under any Debtor Relief Law, state or federal law, common law
or equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of the Borrower to such Bank as of the date such
initial payment, reduction or satisfaction occurred, except that no interest
shall accrue or be or be deemed due with respect thereto during the time such
Bank was in receipt of such funds.
SECTION 10.13. Representation by the Banks. Each of the Banks represents
that it is the present intention of such Bank to acquire its Notes for its own
account or for the account of its Affiliates and not with a view to the
distribution or sale thereof, subject, nevertheless to the necessity that such
Bank remain in control at all times of the disposition of Property held by it
for its own account; it being understood that the foregoing representations
shall not affect the characterization of the Loans as commercial lending
transactions.
SECTION 10.14. No Third Party Beneficiaries. The agreement of each Bank to
make its Loans on the terms and conditions set forth in this Credit Agreement,
is solely for the benefit of the Borrower, and no other Person (including any
obligor, contractor, subcontractor, supplier or materialman furnishing supplies,
goods or services to or for the benefit of the Borrower) shall have any rights
hereunder, as against the Agent or any Bank, under any other Loan Document, or
with respect to the Loans or the proceeds thereof.
SECTION 10.15. Execution in Counterparts. This Credit Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 10.16. Jurisdiction; Consent to Service of Process.
(a) The Borrower hereby irrevocably and unconditionally submits, for itself
and its Property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York County, New
York, in any action or proceeding arising out of or relating to this Credit
Agreement or the Loan Documents, or for recognition or enforcement of any order
or judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court, or to the
extent permitted by law, in such Federal court in New York County, New York.
Each party to this Credit Agreement irrevocably consents to the service of
process out of any New York State court or Federal court of the United States of
America sitting in New York County, New York in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address referred to in Section 10.2. The Borrower
agrees that a final judgment in 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. Nothing in this Credit Agreement shall
affect any right that the Agent or any Bank may otherwise have to bring any
action or proceeding relating to this Credit Agreement or the Loan Documents
against the Borrower or any Subsidiary of the Borrower or its respective
Properties in the courts of any other jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Credit Agreement or the Loan
-80-
<PAGE>
Documents in any New York State or Federal court sitting in New York County, New
York. The Borrower hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
SECTION 10.17. Credit Agreement Governs Conflicts. To the fullest extent
possible, the terms and provisions of the Loan Documents shall be read together
with the terms and provisions of this Credit Agreement so that the terms and
provisions thereof do not conflict with the terms and provisions of this Credit
Agreement; provided, however, notwithstanding the foregoing, in the event that
any of the terms of provisions of the Loan Documents conflict with any terms or
provisions of this Credit Agreement, the terms or provisions of this Credit
Agreement shall govern and control for all purposes, provided that the inclusion
of additional terms and provisions, supplemental rights or remedies in favor of
the Agent in any Loan Document shall not be deemed to be a conflict with this
Credit Agreement.
SECTION 10.18. FINAL AGREEMENT OF THE PARTIES. THIS CREDIT AGREEMENT
(INCLUDING THE EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN DOCUMENTS TO WHICH
THE BORROWER OR ANY OF ITS SUBSIDIARIES IS A PARTY CONSTITUTE A "LOAN AGREEMENT"
AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BELLWETHER EXPLORATION COMPANY
By: /s/ J. DARBY SERE
-----------------------------------------
Name: J. Darby Sere'
Title: President and Chief Executive Officer
THE SUBSIDIARY GUARANTORS
ODYSSEY PETROLEUM COMPANY
By: /s/ J. DARBY SERE
-----------------------------------------
Name: J. Darby Sere'
Title: Chief Executive Officer
WEST MONROE GAS GATHERING CORPORATION
By: /s/ J. DARBY SERE
-----------------------------------------
Name: J. Darby Sere'
Title: President
-81-
<PAGE>
THE AGENT
THE CHASE MANHATTAN BANK
By: /s/ RONALD POTTER
-----------------------------------------
Name: Ronald Potter
Title: Managing Director
Address of the Agent:
c/o Texas Commerce Bank National Association
707 Travis, 5 TCB-N 86
Houston, Texas 77002
Attention: Lori H. Vetters
Telephone: 713/216-4332
Telecopy: 713/216-4117
THE BANKS:
THE CHASE MANHATTAN BANK
By: /s/ RONALD POTTER
-----------------------------------------
Name: Ronald Potter
Title: Managing Director
WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-82-
<PAGE>
THE AGENT
THE CHASE MANHATTAN BANK
By: /s/ EDWARD L. NELSON, JR.
-----------------------------------------
Name: Edward L. Nelson, Jr.
Title: Managing Director
Address of the Agent:
c/o Texas Commerce Bank National Association
707 Travis, 5 TCB-N 86
Houston, Texas 77002
Attention: Lori H. Vetters
Telephone: 713/216-4332
Telecopy: 713/216-4117
THE BANKS:
THE CHASE MANHATTAN BANK
By: /s/ EDWARD L. NELSON, JR.
-----------------------------------------
Name: Edward L. Nelson, Jr.
Title: Managing Director
WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION
By: /s/ JOHN A. FIELDS
-----------------------------------------
Name: John A. Fields
---------------------------------------
Title: Vice President
--------------------------------------
-83-
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<PERIOD-START> JUL-01-1996
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0
0
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