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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
April 9, 1997
BELLWETHER EXPLORATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-9498 76-0437769
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1331 LAMAR, SUITE 1455
HOUSTON, TEXAS 77010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(713) 650-1025
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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This Report includes "forward Looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. All statements other than statements of
historical fact included in this Report, including without limitation,
statements under "Item 2. Acquisition or Disposition of Assets" regarding the
financial position and estimated quantities and net present values of reserves
of Bellwether Exploration Company, a Delaware corporation (the "Company"), are
forward looking statements. Although the Company believes that the assumptions
upon which such forward-looking statements are based are reasonable, it can give
no assurances that such assumptions will prove to have been correct. Important
factors that could cause actual results to differ materially form the Company's
expectations ("Cautionary Statements") are disclosed in the section "Risk
Factors" included in the Company's final prospectus (the "Prospectus") included
as part of the Company's Registration Statement on Form S-1 (Registration No.
333-21813), ("Registration Statement") which section is herein incorporated by
reference. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified by the Cautionary Statements.
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 9 and April 15, 1997, the Company consummated the acquisition
(the "Acquisition") of the oil and gas properties (the "Acquired Properties")
and associated working capital owned by partnerships and other entities (the
"Sellers") managed or sponsored by Torch Energy Advisors Incorporated ("Torch").
The Company agreed to purchase the Acquired Properties and working capital for
$188.3 million effective as of July 1, 1996 (the "Effective Date"), plus a
contingent payment of up to $9.0 million ("Contingent Payment") to be paid on
May 10, 1997, the actual amount of which will be based on 1997 gas prices. The
purchase price, after making adjustments for distributions paid to Sellers from
the Effective Date until the closing date, was $141.8 million, plus the
Contingent Payment. The Sellers are identified in the Acquisition Agreement
included as Exhibit Number 2.2 to the Registration Statement which agreement is
incorporated herein by reference.
The Company financed the purchase price of the Acquired Properties and
related fees, and the repayment of $12.0 million of indebtedness under a
previously existing credit agreement, with $34,192,891 from the issuance and
sale to the public of 4,411,986 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), such shares including the sale of 11,986 shares
of Common Stock (the "Over-Allotment Shares") issued upon exercise of an
over-allotment option granted to the underwriters, (ii) $97.0 million from the
issuance and sale to the public of $100.0 million of the Company's 10-7/8%
Senior Subordinated Notes due 2007 (the "Notes") and (iii) borrowings under a
new credit facility (the "New Credit Facility") with Morgan Guaranty Trust
Company of New York ("Morgan Guaranty"), as Agent thereunder. The sale to
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the public of such Common Stock and Notes, and the execution and delivery of the
New Credit Facility, closed simultaneously with the purchase of the Acquired
Properties on April 9, 1997 (except for the sale of the Over-Allotment Shares,
which closed on April 14, 1997).
As of June 30, 1996, estimated net proved reserves attributable to the
Acquired Properties were 39.2 million barrels of oil equivalent (determined
using the ratio of six thousand cubic feet of gas to one barrel of oil,
condensate or natural gas liquids), with 89% of such reserves being proved
developed and 59% of such reserves being natural gas. The Acquired Properties
had a pre-tax, present value of future net cash flows from estimated proved
reserves (discounted at 10% and calculated in accordance with standards
established by the Securities and Exchange Commission) of $212.0 million as of
June 30, 1996. For further information with respect to the Acquired Properties,
see "Prospectus Summary," "Risk Factors" and "Business and Properties," as set
forth in the Prospectus, which sections are herein incorporated by reference.
Pursuant to agreements with Torch and its subsidiaries, Torch administers
certain business activities of the Company. Torch is primarily engaged in the
business of providing management and advisory services relating to oil and gas
assets for institutional and public investors. For information on relationships
between the Sellers, the Company and Torch, see "Risk Factors - Conflicts of
Interest" and "Management - Transactions with Related Persons" as set forth in
the Prospectus, which sections are herein incorporated by reference.
On April 21, 1997, the Company entered into another credit facility with
Morgan Guaranty, as Administrative Agent thereunder, replacing its obligations
under the New Credit Facility and adding certain subsidiaries of the Company as
guarantors of indebtedness of the Company thereunder, and entered into a
supplemental indenture which added certain subsidiaries of the Company as
guarantors of the Company's Notes and obligations under the indenture pursuant
to which the Notes were issued.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
Not applicable
ITEM 5. OTHER EVENTS
Not applicable
ITEM 6. REGISTRATION OF REGISTRANT'S DIRECTORS
Not applicable
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
1. Acquired Properties
1.1 Acquired Properties - Statements of Assets Acquired (Other
than Productive Oil and Gas Properties) and Liabilities as of
December 31, 1995 and 1996, Statements of Revenues and Direct
Operating Expenses for the Years Ended December 31, 1994, 1995
and 1996 and the Notes to Statements of Assets Acquired (Other
than Productive Oil and Gas Properties) and Liabilities and
related Statements of Revenues and Direct Operating Expenses
(incorporated herein by reference to pages F-31 through F-35
of the Company's Registration Statement on Form S-1
(Securities and Exchange Commission ("Commission") file number
333-21813) filed with the Commission on February 14, 1997, as
amended).
1.2 Independent Auditors' Report (incorporated herein by reference
to page F-30 of the Company's Registration Statement on Form
S-1 (Commission file number 333-21813) filed with the
Commission on February 14, 1997, as amended).
(b) Pro forma Financial Information
1. The following information shows the pro forma effect of the
purchase of the Acquired Properties:
1.1 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1996, Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 1996
and Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended December 31, 1996, and the
notes thereto and accompanying text (incorporated herein by
reference to pages 19 through 26 of the Company's Registration
Statement on Form S-1 (Commission file number 333-21813) filed
with the Commission on February 14, 1997, as amended).
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(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
1. Underwriting Agreement*
2. Plan of acquisition, reorganization, arrangement, liquidation or
succession
2.1 Acquisition Agreement, dated March 31,
1997, among the Company, Program Acquisition Company, and
the other parties thereto (incorporated by reference to
Exhibit 2.2 of the Company's Registration Statement on Form
S-1 (Commission file number 333-21813) filed with the
Commission on February 14, 1997, as amended)
4. Instruments defining the rights of security holders,
including indentures
4.1 First Supplemental Indenture dated April 21, 1997
among the Company, Odyssey Petroleum Company, Black
Hawk Oil Company, 1989-I TEAI Limited Partnership
and Bank of Montreal Trust Company, as Trustee
16. Letter re change in certifying accountant*
17. Letter re director resignation*
20. Other documents or statements to securityholders*
23. Consents of experts and counsel 23.1 Consent of KPMG Peat
Marwick LLP
24. Power of attorney*
27. Financial Data Schedule*
99. Additional exhibits
99.1 Credit Agreement dated April 21, 1997 among the Company,
Odyssey Petroleum Company, Black Hawk Oil Company, 1989-I
TEAI Limited Partnership, Morgan Guarantee Trust Company of
New York, as Administrative Agent, and certain banking
institutions
99.2 Final Prospectus of the Company dated
April 3, 1997 (incorporated herein by
reference to the Company's Registration
Statement on Form S-1 (Registration No.
333-21813) as filed with the Commission on
April 7, 1997)
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* Inapplicable to this filing
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable
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ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not applicable
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 hereunto duly authorized.
BELLWETHER EXPLORATION COMPANY
April 23, 1997 By: /S/J. DARBY SERE
Name: J. Darby Sere
Title: President and Chief Executive
Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
1. Underwriting Agreement*
2. Plan of acquisition, reorganization, arrangement, liquidation or
succession
2.1 Acquisition Agreement, dated March 31, 1997, among
the Company, Program Acquisition Company, and the other
parties thereto (incorporated by reference to Exhibit 2.2
of the Company's Registration Statement on Form S-1
(Commission file number 333-21813) filed with the
Commission on February 14, 1997, as amended)
4. Instruments defining the rights of security
holders, including indentures
4.1 First Supplemental Indenture dated April 21, 1997 among the
Company, Odyssey Petroleum Company, Black Hawk Oil Company,
1989-I TEAI Limited Partnership and Bank of Montreal Trust
Company, as Trustee
16. Letter re change in certifying accountant*
17. Letter re director resignation*
20. Other documents or statements to securityholders*
23. Consents of experts and counsel
23.1 Consent of KPMG Peat Marwick LLP
24. Power of attorney*
27. Financial Data Schedule*
99. Additional exhibits
99.1 Credit Agreement dated April 21, 1997 among the Company,
Odyssey Petroleum Company, Black Hawk Oil Company, 1989-I
TEAI Limited Partnership, Morgan Guarantee Trust Company of
New York, as Administrative Agent, and certain banking
institutions
99.2 Final Prospectus of the Company dated
April 3, 1997 (incorporated herein by
reference to the Company's Registration
Statement on Form S-1 (Registration No.
333-21813) as filed with the Commission on
April 7, 1997)
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* Inapplicable to this filing
Exhibit 4.1
BELLWETHER EXPLORATION COMPANY,
VARIOUS SUBSIDIARIES,
AS THE SUBSIDIARY GUARANTORS,
and
BANK OF MONTREAL TRUST COMPANY,
as the Trustee
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FIRST SUPPLEMENTAL INDENTURE
Dated as of April 21, 1997
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Supplementing and Amending the Indenture
dated as of
April 9, 1997
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THIS FIRST SUPPLEMENTAL INDENTURE dated as of April 21, 1997 is among
BELLWETHER EXPLORATION COMPANY, a Delaware corporation (the "Company"), the
SUBSIDIARY GUARANTORS (as defined herein) and BANK OF MONTREAL TRUST COMPANY, a
New York trust company (the "Trustee").
RECITALS OF THE COMPANY
The Company and various Subsidiaries, specified as Subsidiary Guarantors
have duly authorized the creation of an issue of 10-7/8 % Senior Subordinated
Securities due 2007 (the "Securities"), in accordance with the terms of the
Indenture dated as of April 9, 1997 (such Indenture as the same has been
supplemented or amended heretofore being sometimes referred to herein as the
"Original Indenture"), among the Company, the Subsidiary Guarantors and the
Trustee.
The Securities are guaranteed by the Subsidiary Guarantors (as defined in
the Indenture) on the terms provided in the Indenture.
It is deemed desirable to supplement and amend the Original Indenture to
add two Material Subsidiaries as Subsidiary Guarantors (the Original Indenture,
as so supplemented and amended by this First Supplemental Indenture, being
sometimes referred to herein as the "Indenture").
Article IX, Section 9.1(vii) of the Original Indenture provides that under
certain conditions the Company, each of the Subsidiary Guarantors and Trustee,
may, without the consent of any Holders, at any time and from time to time,
enter into one or more indentures supplemental thereto, in form satisfactory to
the Trustee, for the purpose, inter alia, of adding any Restricted Subsidiary as
an additional Subsidiary Guarantor as provided in Section 10.13(i) of the
Original Indenture.
In addition, Article X, Section 10.13(i) of the Original Indenture
requires that each Person that becomes, or comes into existence as, a Restricted
Subsidiary after the date of the Original Indenture, prior to its incurrence of
any obligations that guarantee or secure any other Indebtedness of the Company,
to execute and deliver a supplemental indenture to the Original Indenture
agreeing to be bound by those terms applicable to a Subsidiary Guarantor and
providing for a Subsidiary Guarantee of the Securities by such Restricted
Subsidiary.
All things necessary to authorize the execution and delivery of this First
Supplemental Indenture, to effect the modifications of the Original Indenture
provided for in this First Supplemental Indenture, and to make the Original
Indenture, as supplemented and amended by this First Supplemental Indenture, a
valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Securities by the Holders, the Company, the Subsidiary Guarantors and the
Trustee mutually covenant and agree for the equal and proportionate benefit of
the respective Holders from time to time of the Securities as follows:
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ARTICLE I
ADDITIONAL SUBSIDIARY GUARANTOR
SECTION 1.1 ADDITION OF SUBSIDIARY GUARANTORS. (a) Black Hawk Oil Company,
a Delaware corporation and wholly owned subsidiary of the Company ("Black
Hawk"), by execution of this First Supplemental Indenture, hereby agrees to be
bound by the terms of the Indenture as a Subsidiary Guarantor.
(b) 1989-I TEAI Limited Partnership, a Texas limited partnership and
wholly owned subsidiary of the Company ("LP" and, together with Black Hawk, the
"New Subsidiary Guarantors"), by execution of this First Supplemental Indenture,
hereby agrees to be bound by the terms of the Indenture as a Subsidiary
Guarantor.
SECTION 1.2 SUBSIDIARY GUARANTEE OF THE SECURITIES. EXHIBIT A, attached
hereto and incorporated herein by reference, sets forth the form of Subsidiary
Guarantee from the Indenture to which each of the New Subsidiary Guarantors
agrees to be bound by execution and delivery of this First Supplemental
Indenture.
ARTICLE II
PARTICULAR REPRESENTATIONS
AND COVENANTS
SECTION 2.1 AUTHORITY OF THE COMPANY. The Company is duly authorized by a
resolution of the Board of Directors to execute and deliver this First
Supplemental Indenture, and all corporate action on its part required for the
execution and delivery of this First Supplemental Indenture has been duly and
effectively taken.
SECTION 2.2 AUTHORITY OF THE SUBSIDIARIES. Each of the corporate
Subsidiary Guarantors is duly authorized by a resolution of its respective Board
of Directors to execute and deliver this First Supplemental Indenture, and all
corporate action on the part of each Subsidiary Guarantor required for the
execution and delivery of this First Supplemental Indenture has been duly and
effectively taken. LP is duly authorized by resolution of the Board of Directors
of its sole general partner to execute and deliver this First Supplemental
Indenture, and all corporate action on the part of LP's general partner and all
partnership action on the part of LP required for the execution and delivery of
this First Supplemental Indenture has been duly and effectively taken.
SECTION 2.3 BINDING EFFECT. The Subsidiary Guarantee of each of the New
Subsidiary Guarantors evidenced by this First Supplemental Indenture constitutes
a valid, binding and enforceable obligation of each such New Subsidiary
Guarantor, except insofar as enforcement thereof may be limited by bankruptcy,
insolvency or similar laws (including, without limitation, all laws relating to
fraudulent transfers) and except insofar as enforcement thereof is subject to
general principles of equity.
SECTION 2.4 TRUTH OF RECITALS AND STATEMENTS. The Company warrants that
the recitals of fact and statements contained in this First Supplemental
Indenture are true and correct.
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ARTICLE III
CONCERNING THE TRUSTEE
SECTION 3.1 ACCEPTANCE OF TRUSTS. The Trustee accepts the trusts hereunder
and agrees to perform the same, but only upon the terms and conditions set forth
in the Original Indenture and in this First Supplemental Indenture.
SECTION 3.2 RESPONSIBILITY OF TRUSTEE FOR RECITALS, ETC. The recitals and
statements contained in this First Supplemental Indenture shall be taken as the
recitals and statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this First Supplemental
Indenture, except that the Trustee is duly authorized to execute and deliver
this First Supplemental Indenture.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1 RELATION TO THE INDENTURE. The provisions of this First
Supplemental Indenture shall become effective immediately upon the execution and
delivery hereof. This First Supplemental Indenture and all the terms and
provisions herein contained shall form a part of the Original Indenture as fully
and with the same effect as if all such terms and provisions had been set forth
in the Original Indenture. The Original Indenture is hereby ratified and
confirmed and shall remain and continue in full force and effect in accordance
with the terms and provisions thereof, as supplemented and amended by this First
Supplemental Indenture, and the Original Indenture and this First Supplemental
Indenture shall be read, taken and construed together as one instrument.
SECTION 4.2 MEANING OF TERMS. Any capitalized term used in this First
Supplemental Indenture and not defined herein that is defined in the Original
Indenture shall have the meaning specified in the Original Indenture, unless the
context shall otherwise require.
SECTION 4.3 COUNTERPARTS OF FIRST SUPPLEMENTAL INDENTURE. This First
Supplemental Indenture may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.
SECTION 4.4 GOVERNING LAW. This First Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, all as of the day and year first above written.
BELLWETHER EXPLORATION COMPANY
By:___________________________
Name:
Company: Title:
Subsidiary Guarantors: ODYSSEY PETROLEUM COMPANY
By:___________________________
Name:
Title:
BLACK HAWK OIL COMPANY,
A DELAWARE CORPORATION
By:___________________________
Name:
Title:
1989-I TEAI LIMITED PARTNERSHIP,
A TEXAS LIMITED PARTNERSHIP
By: Black Hawk Oil Company, as General Partner
By:___________________________
Name:
Title:
Trustee: BANK OF MONTREAL TRUST COMPANY,
A NEW YORK TRUST COMPANY
By:___________________________
Name:
Title:
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EXHIBIT A
The form of notation to be set forth on each Security relating to the
Subsidiary Guarantees shall be in substantially the following form:
SUBSIDIARY GUARANTEES
Subject to the limitations set forth in the Indenture, the initial
Subsidiary Guarantors and, if any, all additional Subsidiary Guarantors (as
defined in the Indenture referred to in the Security upon which this notation is
endorsed and each being hereinafter referred to as a "Subsidiary Guarantor,"
which term includes any additional or successor Subsidiary Guarantor under the
Indenture) have, jointly and severally, unconditionally guaranteed (a) the due
and punctual payment of the principal of (and premium, if any) and interest on
the Securities, whether at maturity, acceleration, redemption or otherwise, (b)
the due and punctual payment of interest on the overdue principal of and
interest on the Securities, if any, to the extent lawful, (c) the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in the Indenture, and
(d) in case of any extension of time of payment or renewal of any Securities or
any of such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at Stated Maturity, by acceleration or otherwise.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in a pro rata amount based on
the Adjusted Net Assets of each Subsidiary Guarantor.
The obligations of the Subsidiary Guarantors to the Holders or the Trustee
pursuant to the Subsidiary Guarantees and the Indenture are expressly
subordinate to all Guarantor Senior Indebtedness to the extent set forth in
Article XIII of the Indenture and reference is made to such Indenture for the
precise terms of such subordination.
No stockholder, officer, director, employee, incorporator or Affiliate as
such, past, present or future, of any Subsidiary Guarantor shall have any
personal liability under its Subsidiary Guarantee by reason of his or its status
as such stockholder, officer, director, employee, incorporator or Affiliate, or
any liability for any obligations of any Subsidiary Guarantor under the
Securities or the Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation.
Any Subsidiary Guarantor may be released from its Subsidiary Guarantee
upon the terms and subject to the conditions provided in the Indenture.
All terms used in this notation of Subsidiary Guarantee which are defined
in the Indenture referred to in this Security upon which this notation of
Subsidiary Guarantees is endorsed shall have the meanings assigned to them in
such Indenture.
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The Subsidiary Guarantees shall be binding upon the Subsidiary Guarantors
and shall inure to the benefit of the Trustee and the Holders and, in the event
of any transfer or assignment of rights by any Holder or the Trustee respecting
the Security upon which the foregoing Subsidiary Guarantees are noted, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof and in the Indenture.
The Subsidiary Guarantees shall not be valid or obligatory for any
purposes until the certificate of authentication on the Security upon which the
foregoing Subsidiary Guarantees are noted shall have been executed by the
Trustee under the Indenture by the manual signature of one of its authorized
signatories.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Torch Energy Advisors Incorporated
We consent to the incorporation by reference in the registration statements (No.
33-91236 and 33-91230) on Form S-8 and in the Form 8-K (dated April 9, 1997) of
Bellwether Exploration Company of our report dated February 10, 1997, with
respect to the statements of assets acquired (other than productive oil and gas
properties) and liabilities of certain oil and gas property interests owned by
Torch Energy Advisors Incorporated (Torch) and certain partnerships and other
entities managed or sponsored by Torch (the Acquired Properties) as of December
31, 1995 and 1996, and the related statements of revenues and direct operating
expenses for each of the years in the three-year period ended December 31, 1996,
which report appears in the registration statement (No. 333-21813) on Form S-1
of Bellwether Exploration Company dated February 14, 1997, as amended March 14,
1997 and April 3, 1997.
Houston, Texas
April 22, 1997
KPMG PEAT MARWICK LLP
SENIOR REDUCING REVOLVING
CREDIT FACILITY
dated as of
April 21, 1997
among
Bellwether Exploration Company,
The Guarantors Party Hereto,
The Banks Party Hereto,
The LC Issuing Banks Referred to Herein
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
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The Chase Manhattan Bank,
Documentation Agent
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
PAGE
SECTION 1.01. DEFINITIONS...................................................1
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS..........................23
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS................................23
ARTICLE 2
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND..........................................23
SECTION 2.02. METHOD OF BORROWING..........................................24
SECTION 2.03. MATURITY OF LOANS............................................25
SECTION 2.04. INTEREST RATES...............................................25
SECTION 2.05. METHOD OF ELECTING INTEREST RATES............................27
SECTION 2.06. FEES.........................................................28
SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS......................29
SECTION 2.08. OPTIONAL PREPAYMENTS.........................................30
SECTION 2.09. MANDATORY PREPAYMENTS........................................30
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS............................31
SECTION 2.11. FUNDING LOSSES...............................................32
SECTION 2.12. COMPUTATION OF INTEREST AND FEES.............................32
SECTION 2.13. NOTES........................................................32
SECTION 2.14. REGULATION D COMPENSATION....................................33
SECTION 2.15. BORROWING BASE...............................................33
SECTION 2.16. LETTERS OF CREDIT............................................34
ARTICLE 3
CONDITIONS
SECTION 3.01. CLOSING......................................................41
SECTION 3.02. BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT................42
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. CORPORATE EXISTENCE AND POWER................................43
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION............................................44
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PAGE
SECTION 4.03. BINDING EFFECT...............................................44
SECTION 4.04. FINANCIAL INFORMATION........................................44
SECTION 4.05. LITIGATION...................................................45
SECTION 4.06. COMPLIANCE WITH ERISA........................................45
SECTION 4.07. ENVIRONMENTAL COMPLIANCE.....................................45
SECTION 4.08. TAXES........................................................47
SECTION 4.09. SUBSIDIARIES.................................................47
SECTION 4.10. NO REGULATORY RESTRICTIONS ON BORROWING......................47
SECTION 4.11. FULL DISCLOSURE..............................................47
SECTION 4.12. REPRESENTATIONS OF GUARANTORS................................48
SECTION 4.13. OWNERSHIP OF PROPERTY, LIENS.................................49
SECTION 4.14. REPRESENTATIONS IN PURCHASE AND SALE AGREEMENT
TRUE AND CORRECT.........................................49
ARTICLE 5
COVENANTS
SECTION 5.01. INFORMATION..................................................49
SECTION 5.02. RESERVE REPORTS..............................................51
SECTION 5.03. PAYMENT OF OBLIGATIONS.......................................52
SECTION 5.04. MAINTENANCE OF PROPERTY AND INSURANCE........................53
SECTION 5.05. CONDUCT OF BUSINESS AND MAINTENANCE OF
EXISTENCE................................................53
SECTION 5.06. COMPLIANCE WITH LAWS.........................................54
SECTION 5.07. INSPECTION OF PROPERTY, BOOKS AND RECORDS....................54
SECTION 5.08. MERGERS AND SALES OF ASSETS..................................54
SECTION 5.09. USE OF PROCEEDS..............................................55
SECTION 5.10. NEGATIVE PLEDGE..............................................55
SECTION 5.11. LIMITATION ON DEBT...........................................58
SECTION 5.12. DEBT OF SUBSIDIARIES.........................................58
SECTION 5.13. CASH INTEREST COVERAGE RATIO.................................58
SECTION 5.14. MINIMUM CONSOLIDATED TANGIBLE NET WORTH......................58
SECTION 5.15. RESTRICTED PAYMENTS AND INVESTMENTS..........................59
SECTION 5.16. INVESTMENTS..................................................59
SECTION 5.17. TRANSACTIONS WITH AFFILIATES.................................60
SECTION 5.18. ADDITIONAL GUARANTORS........................................60
SECTION 5.19. PRICE HEDGE..................................................61
SECTION 5.20. AMENDMENTS OF THE ACQUISITION DOCUMENTS......................61
SECTION 5.21. EXTRAORDINARY BORROWING BASE REDETERMINATIONS................61
ii
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ARTICLE 6
DEFAULTS
PAGE
SECTION 6.01. EVENTS OF DEFAULT............................................63
SECTION 6.02. NOTICE OF DEFAULT............................................66
SECTION 6.03. CASH COVER...................................................66
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION................................67
SECTION 7.02. ADMINISTRATIVE AGENTS AND AFFILIATES.........................67
SECTION 7.03. ACTION BY ADMINISTRATIVE AGENT...............................67
SECTION 7.04. CONSULTATION WITH EXPERTS....................................67
SECTION 7.05. LIABILITY OF ADMINISTRATIVE AGENT............................67
SECTION 7.06. INDEMNIFICATION..............................................68
SECTION 7.07. CREDIT DECISION..............................................68
SECTION 7.08. SUCCESSOR ADMINISTRATIVE AGENT...............................68
SECTION 7.09. ADMINISTRATIVE AGENT'S FEE...................................69
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR...................................................69
SECTION 8.02. ILLEGALITY...................................................70
SECTION 8.03. INCREASED COST AND REDUCED RETURN............................70
SECTION 8.04. TAXES........................................................72
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-
DOLLAR LOANS.............................................73
SECTION 8.06. SUBSTITUTION OF BANK; NOTICE OF COSTS OR EXPENSES............74
ARTICLE 9
GUARANTY
SECTION 9.01. THE GUARANTY.................................................75
SECTION 9.02. GUARANTY UNCONDITIONAL.......................................75
SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES...................76
SECTION 9.04. WAIVER BY EACH GUARANTOR.....................................76
SECTION 9.05. SUBROGATION AND CONTRIBUTION.................................76
iii
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SECTION 9.06. STAY OF ACCELERATION.........................................76
SECTION 9.07. LIMIT OF LIABILITY...........................................77
SECTION 9.08. RELEASE OF GUARANTOR.........................................77
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. NOTICES.....................................................77
SECTION 10.02. NO WAIVERS..................................................78
SECTION 10.03. EXPENSES; INDEMNIFICATION...................................78
SECTION 10.04. SHARING OF SET-OFFS.........................................79
SECTION 10.05. AMENDMENTS AND WAIVERS......................................79
SECTION 10.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS..................80
SECTION 10.07. NO RELIANCE ON MARGIN STOCK.................................81
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION...................82
SECTION 10.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS....................82
SECTION 10.10. WAIVER OF JURY TRIAL........................................82
SECTION 10.11. APPOINTMENT OF AGENT FOR SERVICES OF PROCESS................82
SECTION 10.12. JUDGMENT CURRENCY...........................................83
SECTION 10.13. MAXIMUM INTEREST RATE.......................................83
EXHIBITS AND SCHEDULES
Exhibit A - Note
Exhibit B - Opinion of Counsel for the Borrower
Exhibit C - Opinion of Special Counsel for the Agent
Exhibit D - Assignment and Assumption Agreement
Commitment Schedule
Schedule 4.05 - Litigation
Schedule 4.07 - Environmental Liabilities
Schedule 4.09 - Subsidiaries
Schedule 5.04 - Insurance
Schedule 5.11 - Debt
Schedule 5.16 - Investments
<PAGE>
AGREEMENT dated as of April 21, 1997 among BELLWETHER EXPLORATION
COMPANY, the GUARANTORS party hereto, the BANKS party hereto, the LC ISSUING
BANKS referred to herein and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent.
WHEREAS, the Borrower and Acquisition Corp., a wholly-owned Subsidiary
of the Borrower, acquired the Torch Acquired Properties from the Sellers on and
as of April 9, 1997 (in each case as defined below);
WHEREAS, the Borrower funded its cash obligations with respect to the
Acquisition by using the proceeds of (i) one borrowing under the Existing Credit
Agreement and (ii) a Long Term Junior Financing, and lending a portion of the
proceeds of the foregoing to Acquisition Corp. (in each case as defined below);
WHEREAS, ON APRIL 9, 1997, FOLLOWING THE ACQUISITION, ACQUISITION
CORP. WAS MERGED WITH AND INTO THE BORROWER; AND
WHEREAS, the Borrower intends to use the proceeds of one or more
Borrowings under this Agreement (i) to pay off all of its obligations under the
Existing Credit Agreement on the Closing Date which will thereupon be terminated
and (ii) for general corporate purposes;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"ACQUISITION" means the acquisition by the Borrower and Acquisition
Corp. of the Torch Acquired Properties on and as of April 9, 1997 pursuant to
the Acquisition Documents.
"ACQUISITION CORP." means Program Acquisition Company, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
"ACQUISITION DOCUMENTS" means the Purchase and Sale Agreement, the
assignments and conveyances entered into in connection therewith, the Release
and Confidentiality Agreement dated as of April 9, 1997 among the Borrower,
Acquisition Corp. and the other parties thereto and the Escrow Agreement dated
<PAGE>
as of March 31, 1997 among the Borrower, Acquisition Corp. and the escrow
agent party thereto.
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New York
in its capacity as agent for the Banks hereunder, and its successors in such
capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent,
completed by such Bank and returned to the Administrative Agent (with a copy to
the Borrower).
"AFFILIATE" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "CONTROLLING PERSON") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled by
or is under common control with a Controlling Person. As used herein, the term
"CONTROL" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGGREGATE LC EXPOSURE" means, at any time, the sum, without
duplication, of (i) the aggregate amount that is (or may thereafter become)
available for drawing under all Letters of Credit outstanding at such time and
(ii) the aggregate unpaid amount of all LC Reimbursement Obligations at such
time.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
case of its Base Rate Loans and its participations in Letters of Credit, its
Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its
Euro-Dollar Lending Office.
"APPROVED PETROLEUM ENGINEERS" means (i) H. J. Gruy & Associates, (ii)
Miller & Lents, Ltd., (iii) Netherland, Sewell, & Associates, Inc., (iv) Ryder
Scott Company, (v) Williamson Petroleum Consultants, Inc. or (vi) any other
independent petroleum engineers that, prior to the submission of any relevant
Reserve Report hereunder, has been selected by the Borrower by notice to the
Administrative Agent and approved in writing by the Required Banks. In addition,
if the Borrower furnishes a Reserve Report in the form of multiple reports
covering different Borrowing Base Properties and if one or more of such multiple
reports is prepared by other independent petroleum engineering firms or by the
Borrower's or Torch's internal reserve engineers, such other firms or internal
reserve engineers shall also be considered to be "APPROVED PETROLEUM ENGINEERS"
for the purposes of such report; PROVIDED that the Borrowing Base
2
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Properties which are covered by the reports prepared by any of such Persons do
not, in the aggregate, have present values as shown in such reports which exceed
ten percent of the aggregate present values of all Borrowing Base Properties
covered by such Reserve Report taken as a whole.
"ASSET SALE" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation and any condemnation
of property (or any transfer or disposition of property in lieu of condemnation
for which the Borrower or any of its Subsidiaries receives a condemnation award
or other compensation)) by the Borrower or any of its Subsidiaries of any asset,
including without limitation any sale-leaseback transaction, whether or not
involving a Capitalized Lease, but excluding (i) dispositions of oil, gas and
other Hydrocarbons after severance, other inventory, cash, Temporary Cash
Investments and obsolete, unused or unnecessary equipment and undeveloped real
estate, in each case in the ordinary course of business, (ii) dispositions of
any Property to the Borrower or a Guarantor and (iii) mineral leases by the
Borrower and its Subsidiaries entered into in the ordinary course of their
respective businesses.
"ASSIGNEE" has the meaning set forth in Section 10.06(c).
"BANK" means (i) each bank listed on the Commitment Schedule and (ii)
each Assignee which becomes a Bank pursuant to Section 10.06(c) and (iii) their
respective successors.
"BANK PARTIES" means the Banks, the LC Issuing Banks and the
Administrative Agent.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% PLUS the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Loan which bears interest at the Base Rate, as
provided in Section 2.04 and pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election or the provisions of Section 2.05(a) or Article
8.
"BORROWER" means Bellwether Exploration Company, a Delaware
corporation, and its successors.
"BORROWER'S 1996 FORM 10-K" means the Borrower's annual report on Form
10-K for the Fiscal Year ended June 30, 1996, as filed with the SEC pursuant to
the Exchange Act.
3
<PAGE>
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the Fiscal Quarter ended December 31, 1996, as filed with the SEC
pursuant to the Exchange Act.
"BORROWING" means a borrowing hereunder consisting of Loans made to the
Borrower on the same day pursuant to Article 2, all of which Loans are of the
same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period; PROVIDED that neither the continuation of
any Euro-Dollar Loan nor the conversion of any Loan shall be deemed to be a
Borrowing. A Borrowing is a Base Rate Borrowing if such Loans are Base Rate
Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans.
"BORROWING BASE" means, on any date, the lesser of (i) the aggregate
amount of the Commitments at such time and (ii) the amount that is determined in
accordance with Section 2.15 or Section 5.21 and that is specified in the most
recent Borrowing Base Notice received by the Borrower, as reduced by the
Borrower pursuant to Section 2.15(d) .
"BORROWING BASE CERTIFICATE" means a certificate from the President,
Treasurer, Controller or Chief Financial Officer of the Borrower that, to the
best of his or her knowledge and in all material respects, (i) the information
contained in the most recent Reserve Report is true and correct (subject to the
qualifications set forth in Section 4.11 with respect to the information
contained in such Reserve Report), (ii) except as set forth on an exhibit to the
certificate, either of the Borrower or a Subsidiary owns good and marketable
title to the Properties evaluated in such Reserve Report free and clear of all
Liens except for Liens permitted under Section 5.10, and (iii) except as set
forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments in excess of $1,000,000 at any one
time outstanding with respect to the Borrower's or any Subsidiary's Oil and Gas
Properties which would require the Borrower or any Subsidiary to deliver
Hydrocarbons produced from the Borrower's or any Subsidiary's Oil and Gas
Properties in the future without receiving full payment therefor substantially
contemporaneously with such delivery.
A "BORROWING BASE EXCESSION" exists at any date if and to the extent
that the Total Outstanding Amount exceeds the Borrowing Base at such date.
"BORROWING BASE NOTICE" means a written notice sent to the Borrower by
the Administrative Agent pursuant to Section 2.15 or 5.21, notifying the
Borrower of the Borrowing Base.
4
<PAGE>
"BORROWING BASE PROPERTIES" means at any time (i) all of the Oil and
Gas Properties of the Borrower or any Subsidiary which at such time (A) have
Proved Reserves attributable thereto, (B) the Borrower has requested that the
Banks consider in determining the Borrowing Base, (C) have been evaluated in the
most recent Reserve Report delivered to the Banks and (D) the Banks have given
loan value to in determining the Borrowing Base and (ii) the Related Assets
which at such time (A) the Borrower has requested that the Banks consider in
determining the Borrowing Base, (B) are included among the Related Assets
addressed in the cash flow information then most recently given under Section
5.02(d) (or, prior to receipt of the first such cash flow information, addressed
in any information heretofore provided to the Banks concerning Related Assets)
and (C) the Banks have given loan value to in determining the Borrowing Base.
"CAPITAL COSTS" means, with respect to any Oil and Gas Property, all
Consolidated Capital Expenditures incurred in connection with (i) the conversion
or attempted conversion of such Property from Proved Undeveloped Reserves to
Proved Developed Reserves and (ii) the maintenance of such Property as Proved
Developed Reserves.
"CAPITALIZED LEASE" means, as applied to any Person, any lease
(including, without limitation, any financial lease) of any property (whether
real, personal or mixed) of which the discounted present value of the rental
obligations of such Person as lessee would be required to be capitalized on the
balance sheet of such Person if such balance sheet were prepared in accordance
with GAAP; and "CAPITALIZED LEASE OBLIGATIONS" means, for any Capitalized Lease,
the discounted present value of the rental obligations under such lease.
"CASH INTEREST COVERAGE RATIO" means at any date the ratio of (i)
Consolidated EBITDA for the four consecutive fiscal quarters of the Borrower and
its Consolidated Subsidiaries ending on such date to (ii) the sum of (x)
Consolidated Cash Interest Expense for such period, PLUS (y) any dividends or
other distributions for such period (1) on any shares of preferred stock of the
Borrower and (2) on account of the purchase, redemption, retirement or
acquisition of any shares of the preferred stock of the Borrower or any option,
warrant or other right to acquire shares of the preferred stock of the Borrower.
"CEILING TEST ADJUSTMENT" means any recognition by the Borrower and its
Consolidated Subsidiaries, in accordance with the Borrower's full cost
accounting election, of a charge for consolidated accumulated depletion,
depreciation and amortization expense due to a valuation adjustment which
reduces the net book value of the Borrower's and its Consolidated Subsidiaries'
consolidated Oil and Gas Properties to the net present value of their
consolidated oil and gas reserves.
5
<PAGE>
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder.
"CLOSING DATE" means the date on or after the Effective Date on which
the Administrative Agent shall have received all the documents specified in or
pursuant to Section 3.01.
"COMMITMENT" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite such Bank's name on the
Commitment Schedule, and (ii) with respect to any Assignee which becomes a Bank
pursuant to Section 10.06(c), the amount of the transferor Bank's Commitment
assigned to it pursuant to Section 10.06(c), in each case as such amount may be
changed from time to time pursuant to Article 2 or 10.06(c).
"COMMITMENT FEE RATE" means for any day a rate per annum equal to the
amount set forth opposite the pricing level that applies on such day:
PRICING LEVEL RATE
- ------------- ----
For any day on which Level I Pricing applies.................. 0.250%
For any day on which Level II Pricing applies................. 0.375%
For any day on which Level III Pricing applies................ 0.375%
"COMMITMENT PERCENTAGE" means, with respect to any Bank at any time,
the percentage which the amount of its Commitment at such time represents of the
aggregate amount of all the Commitments at such time. At any time after the
Commitments shall have terminated, the term "COMMITMENT PERCENTAGE" shall refer
to a Bank's Commitment Percentage immediately before such termination, adjusted
to reflect any subsequent assignments pursuant to Section 10.06(c).
"COMMITMENT REDUCTION DATE" means each date on which the Commitments
are to be reduced pursuant to Section 2.07, including without limitation the
Maturity Date.
"COMMITMENT SCHEDULE" means the Commitment Schedule attached
hereto.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are or
would be set forth in a consolidated statement of cash flows of the Borrower and
its Consolidated Subsidiaries for such period.
6
<PAGE>
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, the
Consolidated Interest Expense paid in cash during such period.
"CONSOLIDATED EBIT" means, for any period, the sum of (i) Consolidated
Net Income for such period PLUS (ii) to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of (A)
Consolidated Interest Expense and (B) income tax expense.
"CONSOLIDATED EBITDA" means, for any period, the sum of (i)
Consolidated EBIT for such period PLUS (ii) to the extent deducted in
determining Consolidated Net Income for such period, the aggregate amount of
depreciation, amortization and other similar non-cash charges.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries (including
amortization of debt discounts, net cost under interest rate contracts and all
of the interest but not the principal component of rentals in respect of
Capitalized Lease Obligations) determined on a consolidated basis for such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis
for such period, adjusted to exclude the effect of any extraordinary or other
non-recurring gain (but not loss).
"CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries MINUS
their consolidated Intangible Assets, all determined as of such date, PLUS to
the extent deducted in determining such consolidated stockholders' equity at
such date, the aggregate amount of non-cash write-downs (including Ceiling Test
Adjustments) taken after January 1, 1996 in the book value of assets as a result
of the reevaluation thereof. As used herein, "INTANGIBLE ASSETS" means the
amount (to the extent reflected in determining such consolidated stockholders'
equity) of (i) all write-ups (except write-ups resulting from foreign currency
translations and write- ups of assets of a going concern business made within
twelve months after the acquisition of such business, but in such case net of
any write-downs with respect to such business added back in the immediately
preceding sentence in determining Consolidated Tangible Net Worth) in the book
value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all
Investments in unconsolidated
7
<PAGE>
Subsidiaries and all equity Investments in Persons which are not Subsidiaries
and (iii) all unamortized debt discount and expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, anticipated
future benefit of tax loss carry-forwards, copyrights, organization or
developmental expenses and other intangible assets.
"CREDIT EVENT" has the meaning set forth in Section 3.02.
"CREDIT EXPOSURE" means, with respect to any Bank at any time, (i) the
amount of its Commitment (whether used or unused) at such time or (ii) if the
Commitments have terminated in their entirety, such Bank's Outstanding Amount.
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person under Capitalized Leases, (v) all
non-contingent obligations (and, for purposes of Section 5.10 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit (including a Letter of Credit) or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the amount of such other Person's Debt
Guaranteed thereby); PROVIDED, HOWEVER, that the Debt of any Person shall not
include (i) any liability for gas balancing that was incurred by such Person in
the ordinary course of business, (ii) any Production Payments and Reserve Sales
or (iii) any net liabilities under Derivatives Obligations.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
8
<PAGE>
"DETERMINATION DATE" (i) has the meaning set forth in Section 2.15(d)
and (ii) also means the date that is five Domestic Business Days after the date
of the consummation of the sale of any Permitted Subordinated Debt (other than
Debt issued in the Senior Subordinated Securities Sale).
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 10.09.
"ENVIRONMENTAL LAWS" means any and all applicable federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
decrees and other governmental restrictions and any and all judgments, orders
and licenses to which the business, assets, presently owned, leased or operated
properties, activities or operations of the Borrower or any of its Subsidiaries
(including their respective predecessors) have been or are subject, relating to
the environment or the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including (without limitation)
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ENVIRONMENTAL LIABILITIES" means all liabilities in connection with or
relating to the business, assets, presently or previously owned, leased or
operated property, activities (including, without limitation, off-site disposal)
or operations of the Borrower and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws (including without limitation
any matter disclosed or required to be disclosed in Schedule 4.07 hereto).
"EQUITY SALE" means the public sale of common stock of the Borrower by
the Borrower that occurred on April 9, 1997 pursuant to the Registration
Statement of the Borrower on Form S-3, as amended as of April 3, 1997.
9
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.04(b).
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "EUROCURRENCY LIABILITIES" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
10
<PAGE>
"EXCLUDED PERIOD" means, with respect to any additional costs or
expenses payable pursuant to Article 8, a period that is more than 90 days prior
to the applicable Bank's delivery of notice of such costs or expenses to the
Borrower.
"EXISTING CREDIT FACILITY" means the Credit Agreement dated as of April
9, 1997 among the Borrower, the guarantor party thereto, the banks party thereto
and Morgan Guaranty Trust Company of New York, as agent for such banks.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, PROVIDED that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Administrative Agent.
"FINANCING DOCUMENTS" means this Agreement and the Notes.
"FISCAL QUARTER" means a fiscal quarter of the Borrower.
"FISCAL YEAR" means a fiscal year of the Borrower.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
the Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks, subject to Section 1.02.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time, PROVIDED that, if a Euro-Dollar
Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant
to Article 8, such Loan shall be included in the same Group or Groups of Loans
from time to time as it would have been in if it had not been so converted or
made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
11
<PAGE>
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise), (ii) to reimburse a bank for amounts drawn under a
letter of credit for the purpose of paying such Debt or (iii) entered into for
the purpose of assuring in any other manner the holder of such Debt or other
obligation of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), PROVIDED that the term "GUARANTEE" shall
not include obligations under gas balancing arrangements or endorsements for
collection or deposit, in each case in the ordinary course of business. The term
"GUARANTEE" used as a verb has a corresponding meaning.
"GUARANTOR" means, subject to Sections 5.18 and 9.08, each Person who
has executed this Agreement as a guarantor.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other Hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"HYDROCARBON INTERESTS" of any Person means all rights, titles,
interests and estates of such Person in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interest of
whatever nature.
"HYDROCARBONS" mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all
products refined from the foregoing and all other minerals.
"INDEMNITEE" has the meaning set forth in Section 10.03(b).
"INFORMATION MEMORANDUM" means the confidential Information Package
dated March 19, 1997 furnished to the Banks in connection with the transactions
contemplated hereby.
"INITIAL RESERVE REPORTS" means the reserve reports as of June 30, 1996
referred to in the Registration Statements of the Borrower on Form S-3 with
respect to the Equity Sale and the Senior Subordinated Securities Sale, in each
case as amended as of April 3, 1997, or, in lieu of, or, in addition to, such
reserve
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reports, such other reserve reports as were agreed upon between the Borrower and
the Sellers prior to the Acquisition, in form and substance satisfactory to the
Administrative Agent in its sole good faith discretion and in accordance with
the standards set forth in Section 2.15(c).
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in such notice, PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) if any Interest Period includes a Commitment Reduction Date
(determined on the first day of such Interest Period) but does not end
on such date, then (i) the principal amount (if any) of each
Euro-Dollar Loan required to be repaid on such date shall have an
Interest Period ending on such Commitment Reduction Date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall have an Interest
Period determined as set forth above.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or otherwise
(but not including any demand deposit); PROVIDED that a Derivatives Obligation
shall not be considered an Investment.
"LC EXPOSURE" means, with respect to any Bank at any time, an amount
equal to its Commitment Percentage of the Aggregate LC Exposure at such time.
"LC INDEMNITEES" has the meaning set forth in Section 2.16.
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"LC ISSUING BANK" means Morgan Guaranty Trust Company of New York, in
its capacity as an issuer of Letters of Credit (and any other Bank which, at the
Borrower's request, shall have agreed to issue Letters of Credit hereunder and
confirmed such agreement in a notice to the Administrative Agent), each in its
capacity as an LC Issuing Bank under the Letter of Credit facility described in
Section 2.16.
"LC OFFICE" means, with respect to any LC Issuing Bank, the office at
which it books any Letter of Credit issued by it.
"LC PAYMENT DATE" has the meaning set forth in Section 2.16.
"LC REIMBURSEMENT DUE DATE" has the meaning set forth in Section
2.16.
"LC REIMBURSEMENT OBLIGATIONS" means, at any time, all obligations of
the Borrower to reimburse the LC Issuing Banks for amounts paid by the LC
Issuing Banks in respect of drawing under Letters of Credit, including any
portion of any such obligations to which a Bank has become subrogated pursuant
to Section 2.16(i)(i).
"LETTER OF CREDIT" means a letter of credit issued hereunder by an LC
Issuing Bank.
"LETTER OF CREDIT FEE RATE" means for any date a rate equal to the
Euro-Dollar Margin for such date.
"LEVEL I PRICING" applies on any date on which the Total Outstanding
Amount is less than 50% of the Borrowing Base then in effect.
"LEVEL II PRICING" applies on any date on which the Total Outstanding
Amount is greater than or equal to 50% but less than or equal to 75% of the
Borrowing Base then in effect.
"LEVEL III PRICING" applies on at any date on which the Total
Outstanding Amount exceeds 75% of the Borrowing Base then in effect.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset (including any production payment,
any obligation to deliver Hydrocarbons in the future in satisfaction of an
advance payment previously received or any similar arrangement which has the
same
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practical effect). For purposes hereof, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien (i) any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement or other title retention agreement relating to such asset (other than
a Hydrocarbon Interest consisting of a royalty interest) or any Capital Lease or
(ii) any account receivable transferred by it with recourse for collectibility
(including any such transfer subject to a holdback or similar arrangement which
effectively imposes the risk of collectibility upon the transferor).
"LOAN" means a loan made by a Bank pursuant to Section 2.01; PROVIDED
that if any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term "LOAN" shall refer to
the combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.04(b).
"LONG TERM JUNIOR FINANCING" means (i) the Senior Subordinated
Securities Sale together with (ii) the Equity Sale.
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect upon
the financial condition, results of operations, properties, assets or business
of the Borrower and its Subsidiaries, taken as a whole; (ii) a material adverse
effect on the ability of the Borrower or any other Person to consummate the
transactions contemplated hereby to occur on the Closing Date; (iii) a material
adverse effect on the ability of the Borrower to perform under the Financing
Documents or (iv) a material adverse effect on the rights and remedies of the
Administrative Agent and the Banks under the Financing Documents.
"MATERIAL DEBT" means Debt (other than the Loans and LC Reimbursement
Obligations) of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate principal or face
amount exceeding $5,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt (other than the Loans and LC Reimbursement Obligations) and/or payment or
collateralization obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $5,000,000.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
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"MATERIAL SUBSIDIARY" means, at any time, any Subsidiary that, together
with its Subsidiaries, (a) accounted for more than 5% of the revenue of the
Borrower and its Subsidiaries determined on a consolidated basis for the then
most recently completed Fiscal Year, or (b) was the owner of more than 5% of the
assets of the Borrower and its Subsidiaries determined on a consolidated basis
at the end of such Fiscal Year, all as shown in the case of (a) and (b) on the
consolidated financial statements of the Borrower and its Subsidiaries for such
Fiscal Year.
"MATURITY DATE" means March 31, 2002.
"MULTIEMPLOYER PLAN" means, at any time, an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"NET CASH PROCEEDS" means, with respect to any transaction or event, an
amount equal to the cash proceeds received by the Borrower or any or its
Subsidiaries from or in respect of such transaction or event (including any cash
proceeds received as income or other proceeds of any noncash proceeds of any
Asset Sale), LESS (x) any expenses reasonably incurred by such Person in respect
of such transaction or event and (y) if such transaction or event is an Asset
Sale, (i) the amount of any Debt secured by a Lien on any asset disposed of in
such Asset Sale and discharged from the proceeds thereof and (ii) any taxes
actually paid or to be payable by such Person (as estimated by a senior
financial or accounting officer of the Borrower, giving effect to the overall
tax position of the Borrower) in respect of such Asset Sale.
"NGL-TORCH GAS PLANT VENTURE" means NGL-Torch Gas Plant Venture, a
general partnership organized under the laws of the State of Texas.
"NGL-TORCH RELATED ASSETS" means (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.
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"NON-REDEEMABLE STOCK" means capital stock issued by the Borrower,
PROVIDED that neither the Borrower nor any of its Subsidiaries has any
obligation to redeem or purchase such stock or to exchange such stock for, or
convert such stock to, any other security (other than Non-Redeemable Common
Stock), whether such obligation arises pursuant to the terms of such stock or of
any agreement relating thereto or otherwise and whether or not such obligation
exists in all circumstances or only upon the occurrence of a particular event or
condition or upon the passage of time or otherwise. "NON-REDEEMABLE COMMON
STOCK" means Non-Redeemable Stock that is common stock issued by Borrower.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the Borrower's obligation to repay the
Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.05.
"OBLIGOR" means the Borrower and each Guarantor.
"OIL AND GAS PROPERTIES" means all of a Person's interest in and to
Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with
Hydrocarbon Interests; all presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any governmental body or agency having jurisdiction) which may affect
all or any portion of the Hydrocarbon Interests; all operating agreements,
contracts and other agreements which relate to any of the Hydrocarbon Interests
or the production, sale, purchase, exchange or processing of Hydrocarbons from
or attributable and saved to such Hydrocarbon Interests; all Hydrocarbons in and
under and which may be produced and saved or attributable and saved to the
Hydrocarbon Interests, the lands covered thereby and all oil in tanks and all
rents, issues, profits, proceeds, products, revenues and other income from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any way appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, Properties, rights, titles, interests
and estates described or referred to above, including any and all Property, real
or personal, now owned or hereafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells,
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injection wells or other wells, building, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitude together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.
"OUTSTANDING AMOUNT" means, with respect to any Bank at any time, the
sum of (i) the aggregate outstanding principal amount of its Loans and (ii) its
LC Exposure, all determined at such time after giving effect to any prior
assignments by or to such Bank pursuant to Section 10.06(c).
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 10.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED SUBORDINATED DEBT" means (i) Debt issued in the Senior
Subordinated Securities Sale and (ii) any other subordinated debt issued by the
Borrower or its Subsidiaries which contains terms and conditions, including
subordination provisions, approved by the Required Banks in accordance with
Section 5.21(c).
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" means, at any time, an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
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"PRICE HEDGE" has the meaning set forth in Section 5.19.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"PRODUCTION EXPENSES" means, with respect to any Oil and Gas Property,
all cash costs and expenses incurred for or payable in connection with the
lifting, producing, gathering, separating, treating, compressing, storing,
processing, marketing, transporting or otherwise handling Hydrocarbons from such
Property, or developing, reworking, equipping, operating, maintaining and
plugging and abandoning such Property.
"PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer to
any Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar dominated), master limited partnership
interest or other interest in Oil and Gas Properties, reserves or the right to
receive all or a portion of the production or the proceeds from the sale of
production attributable to such Properties where the holder of such interest has
recourse solely to such production or proceeds of production, subject to the
obligation of the grantor or transferor to operate and maintain, or cause the
subject interests to be operated and maintained, in a reasonably prudent manner
or other customary standard or subject to the obligation of the grantor or
transferor to indemnify for environmental, title or other matters customary in
the oil and gas business.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PROVED DEVELOPED RESERVES" means "proved developed oil and gas
reserves" as specified under Rule 4-10(a)(3) of Regulation S-X of the Exchange
Act.
"PROVED RESERVES" means Proved Developed Reserves and Proved
Undeveloped Reserves.
"PROVED UNDEVELOPED RESERVES" means "proved undeveloped oil and gas
reserves" as specified under Rule 4-10(a)(4) of Regulation S-X of the Exchange
Act.
"PURCHASE AND SALE AGREEMENT" means the Acquisition and Consolidation
Agreement dated as of March 31, 1997 by and among the Borrower, Acquisition
Corp. and the Sellers for the purchase and sale of the Torch Acquired
Properties.
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"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30
and December 31.
"REFERENCE BANKS" means the principal London offices of The Chase
Manhattan Bank and Morgan Guaranty Trust Company of New York.
"REGULATED ACTIVITY" means any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RELATED ASSETS" means, collectively, all gathering, processing,
storage, transportation or gas plant facilities, to the extent any interest
therein is directly or indirectly owned by the Borrower or any Subsidiary at the
time in question and is not accounted on the books of any of the Borrower or its
Subsidiaries as equipment that is part of a producing oil and gas property. On
the date hereof, the principal Related Assets are the Snyder Related Assets and
the NGL-Torch Related Assets.
"RELEASE" means any discharge, emission or release, including a Release
as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "RELEASED" has a
corresponding meaning.
"REQUIRED BANKS" means, at any time, Banks having at least 66-2/3% of
the aggregate amount of the Credit Exposures at such time.
"RESERVE REPORT" means the Initial Reserve Report and any report
prepared and delivered in accordance with Sections 5.02(a) or (b).
"RESPONSIBLE OFFICER" means, as to any Person, its Chairman, Vice
Chairman, President, or any Vice President duly authorized to act on behalf of
such Person.
"RESTRICTED INVESTMENT" means any Investment in any Person made by the
Borrower or any of its Subsidiaries other than Investments described in clauses
(a) through (j) of Section 5.16.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of Non-Redeemable Stock), (ii) any payment on account of (A) the
purchase, redemption, retirement or acquisition of (1) any shares of the
Borrower's capital stock or (2) any option, warrant or other right to acquire
shares of the Borrower's
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capital stock (but not including payments of principal, premium (if any) or
interest made pursuant to the terms of convertible debt securities prior to
conversion) or (B) the settlement of any Derivative Obligation the terms of
which were tied to or based upon the movement in the trading price of the
capital stock of the Borrower on the NASDAQ during any period, or (iii) any
payment of principal on, or on account of, the purchase, redemption, retirement
or other acquisition, in each case prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment of, any Permitted Subordinated Debt.
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but excluding the last Commitment Reduction Date.
"SEC" means the Securities and Exchange Commission.
"SELLERS" means each of the entities described as a Seller pursuant to
the Purchase and Sale Agreement.
"SENIOR SUBORDINATED SECURITIES SALE" means the public sale by the
Borrower on April 9, 1997 of 10 7/8% Senior Subordinated Notes of the Borrower
due 2007 in an original principal amount of $100,000,000 pursuant to a
Registration Statement of the Borrower on Form S-3, as amended as of April 3,
1997.
"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" means Snyder Gas Plant Venture, a general
partnership organized under the laws of the State of Texas.
"SNYDER RELATED ASSETS" means (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 assets
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.
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"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" means a Subsidiary of the Borrower; PROVIDED
that associations, joint ventures or other relationships (a) which are
established pursuant to a standard form operating agreement or similar agreement
or which are partnerships for purposes of income taxation only, (b) which are
not corporations, limited liability companies or partnerships (or subject to the
Uniform Partnership Act) under applicable state law, and (c) whose businesses
are limited to the exploration, development and operation of Oil and Gas
Properties and interests owned directly by the parties in such associations,
joint ventures or relationships, shall not be deemed to be "SUBSIDIARIES" of
such Person.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof or obligations guaranteed
by the United States or any agency thereof, (ii) commercial paper rated at least
A-1 by Standard & Poor's Ratings Services and P-1 by Moody's Investors Service,
Inc., (iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized or licensed under the laws of the United States or any State thereof
and, either itself or its holding company, has capital, surplus and undivided
profits aggregating at least $400,000,000 or (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with an office
of a bank or trust company meeting the criteria specified in clause (iii) above,
PROVIDED in each case that such Investment matures within one year after it is
acquired by the Borrower or a Subsidiary.
"TORCH" means Torch Energy Advisors Incorporated, a Delaware
corporation.
"TORCH ACQUIRED PROPERTIES" means the Oil and Gas Properties acquired
pursuant to the Purchase and Sale Agreement on April 9, 1997.
"TOTAL OUTSTANDING AMOUNT" means, at any time, the sum of (i) the
aggregate outstanding principal amount of the Loans and (ii) the Aggregate LC
Exposure.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding
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any accrued but unpaid contributions), all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess represents
a potential liability of a member of the ERISA Group to the PBGC or any other
Person under Title IV of ERISA.
"UNITED STATES" means the United States of America.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
PROVIDED that, if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any provision hereof to eliminate the effect of any
change in GAAP (or if the Administrative Agent notifies the Borrower that the
Required Banks wish to amend any provision hereof for such purpose), then such
provision shall be applied on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such provision is amended in a manner satisfactory to the Borrower and the
Required Banks.
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01 may,
unless the context otherwise requires, be used in the singular or plural
depending on the reference. "Include", "includes" and "including" shall be
deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing", "written" and
comparable terms refer to printing, typing and other means of reproducing words
in a visible form. References to any agreement or contract are to such agreement
or contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof.
ARTICLE 2
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make loans to the Borrower
from time to time during the Revolving Credit Period; PROVIDED that immediately
after each such Loan is made, (i) the aggregate outstanding principal amount of
such Bank's Loans shall not exceed its Commitment and (ii) the Total Outstanding
Amount shall not exceed the Borrowing Base at such time. Each Borrowing under
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this Section shall be in an aggregate principal amount of $1,000,000 or any
larger multiple of $500,000 (except that (i) any such Borrowing may be in the
aggregate amount of the unused Commitments and (ii) any Base Rate Borrowing
pursuant to Section 2.16(h) may be in the amount provided in such Section) and
shall be made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, prepay Loans to the extent permitted by Section 2.08 and reborrow at
any time during the Revolving Credit Period under this Section.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the
Administrative Agent notice (a "NOTICE OF BORROWING") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing and (y) the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions
of the definition of Interest Period.
(b) Promptly after receiving a Notice of Borrowing, the Administrative
Agent shall notify each Bank of the contents thereof and of such Bank's ratable
share of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower. The Borrower shall not give a Notice of Borrowing at
any time if, after giving effect thereto, more than 12 Groups of Loans would be
outstanding.
(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant to Section 10.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Administrative Agent's aforesaid address.
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(d) Unless the Administrative Agent shall have received notice from a
Bank before the date of any Borrowing that such Bank will not make available to
the Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative 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
Administrative Agent, at (i) if such amount is repaid by the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.04 and (ii) if such amount is repaid by
such Bank, the Federal Funds Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, the Borrower shall not be
required to repay such amount and the amount so repaid by such Bank shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.03. MATURITY OF LOANS. Each Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Maturity Date.
SECTION 2.04. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, from the date such Loan is
made until it becomes due for each day at a rate per annum equal to the Base
Rate. Such interest shall be payable quarterly in arrears on each Quarterly
Payment Date. Any overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% PLUS the interest rate otherwise applicable to such Base
Rate Loan for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day PLUS the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"EURO-DOLLAR MARGIN" means for any day the amount set forth below
opposite the pricing level that applies on such day:
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PRICING LEVEL RATE
- ------------- ----
For any day on which Level I Pricing applies.................. 0.875%
For any day on which Level II Pricing applies................. 1.00%
For any day on which Level III Pricing applies................ 1.25%
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the arithmetic mean (rounded upwards, if necessary, to the next higher
1/16 of 1%) of the offered rates for deposits in Dollars quoted as of 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period on Telerate Page 3750 in an amount approximately equal to the
principal amount of the Euro-Dollar Loans to which such Interest Period is to
apply and for the approximate duration of such Interest Period; PROVIDED that if
there are more than six of such rates quoted then the highest and lowest rates
shall be eliminated for these purposes; and PROVIDED FURTHER that if no, or only
one, such offered quotation appears, the relevant arithmetic mean (calculated as
mentioned above) shall be determined (i) on the basis of the offered rates for
deposits in Dollars on the Reuters Screen LIBO Page and (ii) if such rate or
rates do not appear on either Telerate Page 3750 or the Reuters Screen LIBO
Page, on the basis of the respective rates per annum at which deposits in
Dollars are offered to each of the Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro- Dollar Loan of such Reference Bank to which
such Interest Period is to apply and for a period of time comparable to such
Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% PLUS the Euro-Dollar Margin for such
day PLUS the London Interbank Offered Rate applicable to such Loan on the day
before such payment was due and (ii) the sum of 2% PLUS the Euro-Dollar Margin
for such day PLUS a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by DIVIDING (x) the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Administrative Agent may select)
deposits in dollars in an amount approximately equal to such overdue payment due
to each of the Reference Banks are offered to such Reference Bank in the London
interbank market for the applicable period determined as provided above by (y)
1.00 MINUS the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 2% PLUS the Base Rate for such day).
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(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall promptly
notify the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis for the reasons set forth in
clause (a) or (b) of Section 8.01, the provisions of Section 8.01 shall apply.
SECTION 2.05. METHOD OF ELECTING INTEREST RATES. (a) The Loans included
in each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject to subsection (d) of this Section and the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business
Day and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day
or elect to continue such Loans as Euro-Dollar Loans for an additional
Interest Period, subject to Section 2.11 if any such conversion is
effective on any day other than the last day of an Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 11:00 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; PROVIDED that (A) such portion
is allocated ratably among the Loans comprising such Group, (B) the portion to
which such Notice applies, and the remaining portion to which it does not apply,
are each at least $1,000,000 (unless such portion is comprised of Base Rate
Loans) and (C) immediately after giving effect to such Notice, there shall be
not more than 12 Groups of Loans outstanding. If no such notice is timely
received before the end of an Interest Period for any Group of Euro-Dollar
Loans, the Borrower shall be
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deemed to have elected that such Group of Loans be converted to Base Rate Loans
at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if the Loans resulting from such conversion are to
be Euro-Dollar Loans, the duration of the next succeeding Interest
Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Administrative Agent shall
notify each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amount of any Group of Euro-Dollar Loans
created or continued as a result of such election would be less than
$1,000,000.00 or (ii) a Default shall have occurred and be continuing when the
Borrower delivers notice of such election to the Administrative Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.
SECTION 2.06. FEES. (a) The Borrower shall pay to the Administrative
Agent, for the account of the Banks ratably in proportion to their respective
Commitment Percentages, a commitment fee at the Commitment Fee Rate on the
daily average amount by which the aggregate amount of the Borrowing Base
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exceeds the Total Outstanding Amount. Such commitment fee shall accrue from
and including the Effective Date to but excluding the date on which the
Commitments terminate in their entirety.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the Banks ratably in proportion to their Commitment Percentages, a
letter of credit fee calculated for each day at the Letter of Credit Fee Rate
for such day on the aggregate amount available for drawing under all Letters of
Credit at the close of business on such day.
(c) The Borrower shall pay to each LC Issuing Bank fronting fees and
other charges in the amounts and at the times agreed between the Borrower and
such LC Issuing Bank.
(d) Fees accrued for the account of the Banks under subsections (a)
and (b) of this Section shall be payable quarterly in arrears on each Quarterly
Payment Date and on the day on which the Commitments terminate in their entirety
and, in the case of clause (b), on the first date thereafter on which there is
no Aggregate LC Exposure.
(e) The Borrower shall pay to the Administrative Agent such other fees
in amounts, and at the time and in the manner, previously agreed upon between
the Borrower and the Administrative Agent in the letter dated March 11, 1997
from Morgan Guaranty Trust Company of New York and J.P. Morgan Securities, Inc.
and agreed to by Bellwether Exploration Company.
SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS. (a) VOLUNTARY
REDUCTION. The Borrower may, upon at least three Domestic Business Days' notice
to the Administrative Agent, (i) terminate the Commitments at any time, if there
are no Outstanding Amounts at such time, or (ii) ratably reduce from time to
time by an aggregate amount of $5,000,000 or a larger multiple of $1,000,000,
the aggregate amount of the Commitments on such date in excess of the Total
Outstanding Amount. Promptly after receiving a notice pursuant to this
subsection, the Administrative Agent shall notify each Bank of the contents
thereof.
(b) MANDATORY SCHEDULED REDUCTION. The aggregate amount of the
Commitments shall be reduced (x) on December 31, 1998, by the aggregate amount
by which the Commitments on such date are greater than the Borrowing Base in
effect on such date and (y) on each Quarterly Date thereafter until the Maturity
Date, by an aggregate amount equal to the product of 1/12 TIMES the aggregate
amount of the Commitments on December 31, 1998 after giving effect to the
reduction on such date pursuant to clause (x) above.
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(c) APPLICATION OF REDUCTIONS. Each reduction of Commitments under
this Section 2.07 shall be applied to reduce the Commitments of the Banks pro
rata in accordance with the respective amounts thereof.
(d) TERMINATION. Unless previously terminated, the Commitments shall
terminate in their entirety on the Maturity Date.
SECTION 2.08. OPTIONAL PREPAYMENTS. (a) Subject in the case of Euro-
Dollar Loans to Section 2.11, the Borrower may, upon at least one Domestic
Business Day's notice to the Administrative Agent, prepay any Group of Base Rate
Loans or, upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in
whole at any time, or from time to time in part in amounts aggregating
$1,000,000 or any larger multiple of $500,000, by paying the principal amount to
be prepaid together with interest accrued thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Administrative Agent shall notify each Bank of the contents thereof
and of such Bank's ratable share of such prepayment, and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.09. MANDATORY PREPAYMENTS. (a) Upon the date of any reduction
of Commitments pursuant to Section 2.07, the Borrower shall prepay an amount of
Loans and provide cash cover for outstanding Letters of Credit in accordance
with Section 6.03 in such amounts as may be necessary so that immediately after
giving effect to such payment and/or collateralization, (i) the Total
Outstanding Amount LESS the amount of collateral so deposited with respect to
Aggregate LC Exposure is not greater than (ii) the aggregate amount of the
Commitments as so reduced.
(b) Without limitation of clause (a) above, if at any time the
Administrative Agent shall determine that a Borrowing Base Excession exists, the
Administrative Agent shall forthwith notify the Banks and the Borrower. On or
before the date falling 6 months after the inception of a Borrowing Base
Excession, the Borrower shall remedy such Borrowing Base Excession by (i)
prepaying such principal amount of the Loans as may be necessary to reduce the
outstanding principal amount thereof to the Borrowing Base at the date of
prepayment, (ii) providing cash cover for Aggregate LC Exposure in accordance
with Section 6.03, (iii) increasing the Borrowing Base through the addition of
Borrowing Base Properties in accordance with Sections 2.15, 5.02 and 5.21;
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PROVIDED that, the value of any such Borrowing Base Properties and whether such
value is sufficient to remedy such Borrowing Base Excession shall be determined
by the Required Banks, in their good faith discretion and in a manner that is
consistent with the standards set forth in Section 2.15(c), or (iv) a
combination of (i), (ii) and/or (iii).
(c) Each repayment or prepayment of Loans pursuant to this Section
2.09 shall be made together with accrued interest to the date of payment, and
shall be applied ratably to payment of the Loans of the several Banks in
proportion to their Commitments (or, if the Commitments have been terminated, to
the aggregate outstanding principal amounts of their Loans). Within the
foregoing limits of this Section 2.09, each required payment or prepayment shall
be made with respect to such outstanding Group or Groups of Loans as the
Borrower may designate to the Administrative Agent not less than three
Euro-Dollar Business Days prior to the date required for such payment or
prepayment or, failing such designation by the Borrower, as the Administrative
Agent may specify by notice to the Borrower and the Banks.
SECTION 2.10. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and LC
Reimbursement Obligations and each payment of fees hereunder (other than fees
payable directly to the LC Issuing Banks) not later than 1:00 P.M. (New York
City time) on the date when due, in Federal or other funds immediately available
in New York City, to the Administrative Agent at its address specified in or
pursuant to Section 10.01. The Administrative Agent will promptly distribute to
each Bank its ratable share of each such payment received by the Administrative
Agent for the account of the Banks. Whenever any payment of principal of, or
interest on, the Base Rate Loans or LC Reimbursement Obligations or any payment
of fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Administrative Agent before the
date on which any payment is due to the Banks hereunder that the Borrower will
not make such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on such date
and the Administrative Agent may, in reliance on such assumption, cause to be
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distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.11. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.05(b), or if the Borrower fails to borrow, prepay,
convert or continue any Euro-Dollar Loans after notice has been given to any
Bank in accordance with Section 2.02(b), 2.05(c) or 2.08(b), the Borrower shall
reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after such payment or conversion or failure to borrow,
prepay, convert or continue; PROVIDED that such Bank shall promptly have
delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.12. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.13. NOTES. (a) The Borrower's obligation to repay the Loans
of each Bank shall be evidenced by a single Note payable to the order of such
Bank for the account of its Applicable Lending Office.
(b) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that the Borrower's obligation to repay such Bank's Loans of a
particular type be evidenced by a separate Note. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it relates solely to Loans of the relevant type. Each
reference in this Agreement to the "Note" of such Bank shall be deemed to refer
to and include any or all of such Notes, as the context may require.
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(c) Promptly after it receives each Bank's Note pursuant to Section
3.01(a), the Administrative Agent shall forward such Note to such Bank. Each
Bank shall record the date, amount and type of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding; PROVIDED that a Bank's failure to make (or any error
in making) any such recordation or endorsement shall not affect the Borrower's
obligations hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.14. REGULATION D COMPENSATION. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one MINUS the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Administrative Agent, in which
case such additional interest on the Euro-Dollar Loans of such Bank shall be
payable to such Bank at the place indicated in such notice with respect to each
Interest Period commencing at least three Euro-Dollar Business Days after such
Bank gives such notice and (y) shall notify the Borrower at least five
Euro-Dollar Business Days before each date on which interest is payable on the
Euro-Dollar Loans of the amount then due it under this Section.
SECTION 2.15. BORROWING BASE. (a) INITIAL BORROWING BASE. During the
period from the Closing Date until the next Determination Date, the Borrowing
Base shall be $90,000,000.
(b) BORROWING BASE REDETERMINATIONS PURSUANT TO SECTION 5.02. Within
30 days after the receipt of (i) any reports delivered pursuant to Section 5.02,
together with (ii) the Borrowing Base Certificate, the Administrative Agent
shall notify the Borrower and the Banks of a proposed Borrowing Base (such date,
the "BB PROPOSAL DATE"). Within 30 days after the BB Proposal Date, if any Bank
disapproves of the proposed Borrowing Base, such Bank shall submit to the
Administrative Agent in writing, its disapproval of the proposed Borrowing Base
which disapproval shall state the maximum Borrowing Base acceptable to such
Bank. The Borrowing Base proposed by the Administrative Agent shall become the
new Borrowing Base after the close of business on the thirtieth day following
the BB Proposal Date (or the next succeeding Domestic Business Day if such date
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is not a Domestic Business Day) unless, on or prior to such time, (i) the
Administrative Agent shall have received the written consent of the Required
Banks to such proposed Borrowing Base, in which case the Administrative Agent
shall notify the Borrower of the determination of the Borrowing Base by the
Banks or (ii) Banks having more than 33 1/3% of the Credit Exposure at such time
shall have expressed their disapproval to the Administrative Agent in the manner
set forth in the previous sentence, in which case, until the next Determination
Date, the Borrowing Base shall be the lowest determination agreed to by the
Required Banks and the Administrative Agent shall notify the Borrower of such
determination.
(c) BORROWING BASE REDETERMINATION STANDARDS. Each redetermination of
the Borrowing Base pursuant to this Section 2.15 and Section 5.21 below shall be
made in good faith by all of the Banks and the Administrative Agent, in the
exercise of their reasonable discretion and in accordance with their respective
customary and prudent standards for oil and gas lending and credit transactions
as they exist at such time; PROVIDED that each of the Borrower, the Banks and
the Administrative Agent agree that the Banks will only give loan value to any
Property that is subject to a Lien or Production Payments and Reserve Sales if,
and to the extent that, the value of such Property exceeds the value of such
Lien or such Production Payments and Reserve Sales.
(d) BORROWING BASE ELECTION. Within five Domestic Business Days after
receipt of a Borrowing Base Notice from the Administrative Agent, the Borrower
shall by notice to the Administrative Agent either accept such amount as the new
Borrowing Base or reduce the Borrowing Base from the amount proposed by the
Administrative Agent to any lesser amount. Failure by the Borrower to take
either such action within such five Domestic Business Day period shall be deemed
acceptance of such amount. Upon any such acceptance or deemed acceptance by the
Borrower, a new Borrowing Base in the amount accepted shall take effect on such
date (herein called a "DETERMINATION DATE") and shall remain in effect until but
not including the next Determination Date. Upon any such reduction by the
Borrower, a new Borrowing Base in the reduced amount specified by the Borrower
shall take effect on such date (herein also called a "DETERMINATION DATE") and
shall remain in effect until but not including the next Determination Date.
(e) OTHER BORROWING BASE REDETERMINATIONS. The Borrowing Base shall
also be adjusted as provided in Section 5.21.
SECTION 2.16. LETTERS OF CREDIT. (a) ISSUANCE. Each LC Issuing Bank
agrees, on the terms and conditions set forth in this Agreement, to issue
standby or financial (but not trade or documentary) letters of credit hereunder,
with a
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minimum stated amount for each such letter of credit of $1,000,000, at the
request of the Borrower from time to time prior to the date that is 30 days
before the Maturity Date; PROVIDED that, immediately after each such Letter of
Credit is issued and participations therein are sold to the Banks as provided in
this subsection:
(i) the Aggregate LC Exposure shall not exceed $15,000,000;
(ii) in the case of each Bank, its Outstanding Amount shall not
exceed its Commitment; and
(iii) the Total Outstanding Amount shall not exceed the amount of the
Borrowing Base at such time.
Whenever an LC Issuing Bank issues a Letter of Credit hereunder, such LC Issuing
Bank shall be deemed, without further action by any party hereto, to have sold
to each Bank, and each Bank shall be deemed, without further action by any party
hereto, to have purchased from such LC Issuing Bank, a participation in such
Letter of Credit, on the terms specified in this Section, equal to such Bank's
Commitment Percentage thereof
(b) NOTICE OF PROPOSED ISSUANCE. With respect to each Letter of
Credit, the Borrower shall give the relevant LC Issuing Bank and the
Administrative Agent at least three Domestic Business Days' (or such shorter
time as the LC Issuing Bank may agree in a particular instance) prior notice (i)
specifying the date such Letter of Credit is to be issued and (ii) describing
the proposed terms of such Letter of Credit and the nature of the transactions
to be supported thereby. Promptly after it receives such notice, the
Administrative Agent shall notify each Bank of the contents thereof.
(c) CONDITIONS TO ISSUANCE. No LC Issuing Bank shall issue any Letter
of Credit under this Section unless:
(i) such proposed Letter of Credit is a standby or financial letter of
credit, and not a documentary or trade letter of credit, and shall have
a stated amount not less than $1,000,000,
(ii) such proposed Letter of Credit is otherwise satisfactory in
form and substance to such LC Issuing Bank,
(iii) the Borrower shall have executed and delivered such other
instruments and agreements relating to such proposed Letter of Credit
as such LC Issuing Bank shall have reasonably requested,
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(iv) such LC Issuing Bank shall have confirmed with the Administrative
Agent on the date of such issuance that the limitations specified in
subsection (a) of this Section will not be exceeded immediately after
such proposed Letter of Credit is issued, and
(v) such LC Issuing Bank shall not have been notified in writing by
the Borrower or the Administrative Agent expressly to the effect that
any condition specified in Section 3.02(c) or Section 3.02(d) is not
satisfied at the time such proposed Letter of Credit is to be issued.
(d) NOTICE OF ACTUAL ISSUANCE. Promptly after it issues any Letter of
Credit, the relevant LC Issuing Bank shall notify the Administrative Agent of
the date, face amount, beneficiary or beneficiaries and expiry date of such
Letter of Credit. Promptly after it receives such notice, the Administrative
Agent shall notify each Bank of the contents thereof and the amount of such
Bank's participation in such Letter of Credit. Promptly after it issues any
Letter of Credit, the relevant LC Issuing Bank shall send a copy of such Letter
of Credit to the Administrative Agent.
(e) EXPIRY DATES. No Letter of Credit shall have an expiry date later
than the fifth Domestic Business Day before the Maturity Date. Subject to the
preceding sentence, each Letter of Credit issued hereunder shall expire on or
before the first anniversary of the date of such issuance; PROVIDED that,
subject to the first sentence of this clause (e), the expiry date of any Letter
of Credit may be extended from time to time at the Borrower's request, so long
as such extension is for a period not exceeding one year and is granted (or the
last day on which notice can be given to prevent such extension occurs) no
earlier than three months before the then existing expiry date thereof.
(f) NOTICE OF PROPOSED EXTENSIONS OF EXPIRY DATES. The relevant LC
Issuing Bank shall give the Administrative Agent at least three Domestic
Business Days' notice before such LC Issuing Bank extends (or allows an
automatic extension of) the expiry date of any Letter of Credit issued by it.
Such notice shall identify such Letter of Credit, the date on which it is to be
extended (or the last day on which notice can be given to prevent such
extension) and the date to which it is to be extended. Promptly after it
receives such notice, the Administrative Agent shall notify each Bank of the
contents thereof. No LC Issuing Bank shall extend (or allow the extension of)
the expiry date of any Letter of Credit if:
(i) such extension does not comply with subsection (e) of this
Section, or
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(ii) such LC Issuing Bank shall have been notified by the Borrower or
the Administrative Agent expressly to the effect that any condition
specified in Section 3.02(c) or Section 3.02(d) is not satisfied at the
time of such proposed extension.
If any Letter of Credit is not extended after notice of a proposed extension
thereof has been given to the Banks, the relevant LC Issuing Bank shall promptly
notify the Administrative Agent of such failure to extend. Promptly after it
receives such notice, the Administrative Agent shall notify each Bank thereof.
(g) DRAWINGS. If an LC Issuing Bank receives a demand for payment
under any Letter of Credit issued by it and determines that such demand should
be honored, such LC Issuing Bank shall (i) promptly notify the Borrower and the
Administrative Agent as to the amount to be paid by such LC Issuing Bank as a
result of such demand and the date of such payment (an "LC PAYMENT DATE") and
(ii) make such payment in accordance with the terms of such Letter of Credit.
Upon such notice by such LC Issuing Bank, the Administrative Agent shall
promptly notify each of the Banks as to the amount to be paid by such LC Issuing
Bank as a result of such demand and the date of such payment.
(h) REIMBURSEMENT BY THE BORROWER.
(i) If any amount is drawn under any Letter of Credit, the Borrower
irrevocably and unconditionally agrees to reimburse the relevant LC
Issuing Bank for such amount, together with any and all reasonable
charges and expenses which such LC Issuing Bank may pay or incur
relative to such drawing. Such reimbursement shall be due and payable
on the relevant LC Payment Date or the date on which such LC Issuing
Bank notifies the Borrower of such drawing, whichever is later;
PROVIDED that, if such notice is given after 12:00 noon (New York City
time) on the later of such dates, such reimbursement shall be due and
payable on the next following Domestic Business Day (the date on which
it is due and payable being an "LC REIMBURSEMENT DUE DATE").
(ii) In addition, the Borrower agrees to pay, on the applicable LC
Reimbursement Due Date, interest on each amount drawn under a Letter of
Credit, for each day from and including the date such amount is drawn
to but excluding such LC Reimbursement Due Date, at the Base Rate for
such day. The Borrower also agrees to pay, on demand, interest on any
overdue amount (including any overdue interest) payable under this
subsection (h), for each day from and including the day such amount
becomes due to but excluding the day such amount is paid in full, at a
rate per annum equal to the sum of 2% PLUS the Base Rate for such day.
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(iii) Each payment by the Borrower pursuant to this subsection (h) shall
be made to the relevant LC Issuing Bank in Federal or other funds
immediately available to it at its address specified in or pursuant to
Section 10.01.
(iv) Unless it gives not less than one Domestic Business Day's notice
to the Administrative Agent to the contrary, the Borrower shall be
deemed to have timely given a Notice of Borrowing for a Base Rate Loan
on the date of any drawing under a Letter of Credit in the exact amount
due the LC Issuing Bank hereunder on such date, and the Administrative
Agent shall apply the proceeds of such Base Rate Loan to make payment
thereof.
(i) PAYMENTS BY BANKS.
(i) If the Borrower fails to pay any LC Reimbursement Obligation in
full when due, the relevant LC Issuing Bank may notify the
Administrative Agent of the unreimbursed amount and request that the
Banks reimburse such LC Issuing Bank for their respective Commitment
Percentages thereof. Promptly after it receives any such notice, the
Administrative Agent shall notify each Bank of the unreimbursed amount
and such Bank's Commitment Percentage thereof. Upon receiving such
notice from the Administrative Agent, each Bank shall make available to
such LC Issuing Bank, at its address specified in or pursuant to
Section 10.01, an amount equal to such Bank's Commitment Percentage of
such unreimbursed amount, in Federal or other funds immediately
available to such LC Issuing Bank, by 3:00 P.M. (New York City time)
(A) on the day such Bank receives such notice if it is received at or
before 12:00 Noon (New York City time) on such day or (B) on the next
Domestic Business Day if such notice is received after 12:00 Noon (New
York City time) on the date of receipt, in each case together with
interest on such amount for each day from and including the relevant LC
Payment Date to but excluding the day such payment is due from such
Bank at the Federal Funds Rate for such day. Upon payment in full
thereof, such Bank shall be subrogated to the rights of such LC Issuing
Bank against the Borrower to the extent of such Bank's Commitment
Percentage of the related LC Reimbursement Obligation (including
interest accrued thereon).
(ii) If any Bank fails to pay when due any amount to be paid by it
pursuant to clause (i) of this subsection, interest shall accrue on
such Bank's obligation to make such payment, for each day from and
including the date such payment became due to but excluding the date
such Bank
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makes such payment, at a rate per annum equal to (x) for each day from
the day such payment is due to the third succeeding Domestic Business
Day, inclusive, the Federal Funds Rate for such day and (y) for each
day thereafter the sum of 2% PLUS the Base Rate for such day.
(iii) If the Borrower shall reimburse any LC Issuing Bank for any
drawing with respect to which any Bank shall have made funds available
to such LC Issuing Bank in accordance with clause (i) of this
subsection, such LC Issuing Bank shall promptly upon receipt of such
reimbursement distribute to such Bank its Commitment Percentage
thereof, including interest, to the extent received by such LC Issuing
Bank.
(j) EXCULPATORY PROVISIONS. The obligations of the Borrower and the
Banks under this Section shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower or any Bank may have or have had against any LC Issuing Bank,
any Bank, any beneficiary of any Letter of Credit or any other Person. The
Borrower assumes all risks of the acts or omissions of any beneficiary of any
Letter of Credit with respect to the use of such Letter of Credit by such
beneficiary. None of the LC Issuing Banks, the Banks and their respective
officers, directors, employees and agents shall be responsible for, and the
obligations of each Bank to make payments to each LC Issuing Bank and of the
Borrower to reimburse each LC Issuing Bank for drawings pursuant to this Section
shall not be excused or affected by, among other things, (i) the use which may
be made of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (ii) the validity, sufficiency or
genuineness of documents presented under any Letter of Credit or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (iii) payment by
any LC Issuing Bank against presentation of documents to it which do not comply
with the terms of the relevant Letter of Credit or (iv) any dispute between or
among the Borrower, any beneficiary of any Letter of Credit or any other Person
or any claims or defenses whatsoever of the Borrower or any other Person against
any beneficiary of any Letter of Credit. No LC Issuing Bank shall be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit. Any action taken or omitted by any LC Issuing Bank in connection with
any Letter of Credit and the related drafts and documents shall be binding upon
the Borrower and shall not place any LC Issuing Bank or any Bank under any
liability to the Borrower. Notwithstanding the foregoing, the provisions of this
subsection (j) shall not relieve any LC Issuing Bank from responsibility for its
own gross negligence or willful misconduct.
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(k) INDEMNIFICATION BY BORROWER. The Borrower agrees to indemnify and
hold harmless each Bank, each LC Issuing Bank and the Administrative Agent
(collectively, the "LC INDEMNITEES") from and against any and all claims and
damages, losses, liabilities, costs or expenses (including, without limitation,
the reasonable fees and disbursements of counsel) which such LC Indemnitee may
reasonably incur (or which may be claimed against such LC Indemnitee by any
Person whatsoever) by reason of or in connection with any execution and delivery
or transfer of or payment or failure to pay under any Letter of Credit or any
actual or proposed use of any Letter of Credit; PROVIDED that the Borrower shall
not be required to indemnify any LC Indemnitee for any such claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) its own willful misconduct or gross negligence or (ii) its failure
to pay under any Letter of Credit issued by it after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this subsection is intended to limit the obligations of the
Borrower under any other provision of this Section.
(l) INDEMNIFICATION BY BANKS. The Banks shall, ratably in proportion
to their Commitment Percentages, indemnify each LC Issuing Bank (to the extent
not reimbursed by the Borrower) against any claims, damages, losses,
liabilities, reasonable costs and reasonable expenses (including, without
limitation, reasonable fees and disbursements of counsel) that any such
Indemnitee may suffer or incur in connection with this Section or any action
taken or omitted by such indemnitee under this Section; PROVIDED that the Banks
shall not be required to indemnify any LC Issuing Bank for any such claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (i) its own gross negligence or willful misconduct, (ii) its
failure to pay under any Letter of Credit issued by it after the presentation to
it of a request strictly complying with the terms and conditions of such Letter
of Credit, (iii) its failure to comply with subsection (e) of this Section, (iv)
its liabilities under any Letter of Credit issued by it in contravention of
clause (iii) (to the extent that the limitations referred to therein were in
fact exceeded) or clause (iv) of subsection (c) of this Section or (v) its
liabilities under any Letter of Credit extended (or allowed to be automatically
extended) by it in contravention of clause (ii) of subsection (f) of this
Section.
(m) LIABILITY FOR DAMAGES. Nothing in this Section shall preclude the
Borrower or any Bank from asserting against any LC Issuing Bank any claim for
damages suffered by the Borrower or such Bank to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of such LC
Issuing Bank or (ii) such LC Issuing Bank's failure to pay under any Letter of
Credit issued by it after the presentation to it of a request strictly complying
with the terms and conditions thereof.
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(n) DUAL CAPACITIES. In its capacity as a Bank, each LC Issuing Bank
shall have the same rights and obligations under this Section as any other Bank.
(o) INFORMATION TO BE PROVIDED TO ADMINISTRATIVE AGENT. Each LC
Issuing Bank shall furnish to the Administrative Agent upon request such
information as the Administrative Agent shall reasonably request in order to
calculate (i) the Aggregate LC Exposure existing from time to time and (ii) the
amount of any fee payable for the account of the Banks under Section 2.06(b).
ARTICLE 3
CONDITIONS
SECTION 3.01. CLOSING. The closing hereunder shall occur when all the
following conditions have been satisfied:
(a) receipt by the Administrative Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the Administrative
Agent in form satisfactory to it of facsimile, telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party) and the Schedules hereto;
(b) receipt by the Administrative Agent of a duly executed Note for
the account of each Bank dated on or before the Closing Date and complying with
the provisions of Section 2.13;
(c) receipt by the Administrative Agent of an opinion of Butler &
Binion, L.L.P., counsel for the Obligors, substantially in the form of Exhibit B
hereto, dated the Closing Date and covering such additional matters relating to
the transactions contemplated hereby as the Administrative Agent may reasonably
request;
(d) receipt by the Administrative Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Administrative Agent, substantially in the
form of Exhibit C hereto, dated the Closing Date and covering such additional
matters relating to the transactions contemplated hereby as the Administrative
Agent may reasonably request;
(e) receipt by the Administrative Agent of payment instructions with
respect to each wire transfer to be made by the Administrative Agent or the
Borrower on the Closing Date setting forth the amount of such transfer, the name
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and number of the account to which such transfer is to be made, the name and ABA
number of the bank or other financial institution where such account is located
and the name and telephone number of an individual that can be contacted to
confirm receipt of such transfer;
(f) receipt by the Administrative Agent of evidence satisfactory to it
in its sole good faith discretion that all outstanding obligations of the
Borrower under, or with respect to, the Existing Credit Facility have been paid
in full, all commitments thereunder have been terminated and all Guarantees
thereof have been released;
(g) the Administrative Agent shall have received evidence of the prior
closing of the Long Term Junior Financing, in form and substance satisfactory to
it;
(h) the Administrative Agent shall not have received notice from Banks
holding at least 331/3% of the Commitments (which notices so received shall not
have been rescinded) to the effect that such Banks have not completed, or are
not satisfied in their sole good faith discretion with the scope and results of,
their due diligence review of financial, legal, tax, litigation, insurance,
ERISA, Environmental Liabilities, other contingent liabilities and other matters
concerning the Borrower and its Subsidiaries;
(i) receipt by the Administrative Agent of a certificate of an
executive officer of the Borrower, certifying that the Borrower has received (or
made) all authorizations, consents, approvals, waivers, orders, licenses,
permits, notices, filings and declarations (including those of or issued by (or
to be made or provided to) any governmental authority), except for those the
failure of which to receive (make or provide) would not have a Material Adverse
Effect at or after the Closing Date); and
(j) receipt by the Administrative Agent of all documents the
Administrative Agent may reasonably request relating to the existence of the
Obligors, the corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto and thereto, all in form and
substance satisfactory to the Administrative Agent.
Promptly after the Closing Date occurs, the Administrative Agent shall notify
the Borrower and the Banks thereof, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.02. BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT. The
obligation of any Bank to make a Loan on the occasion of any Borrowing, and the
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obligation of any LC Issuing Bank to issue (or extend or allow an extension of
the expiry date of) any Letter of Credit (any such event, a "CREDIT EVENT"), is
subject to the satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02, or receipt by the relevant LC Issuing Bank of a notice
of proposed issuance or extension as required by Section 2.16(b) or 2.16(f), as
the case may be;
(b) the fact that, immediately before and after such Credit Event, no
Default shall have occurred and be continuing;
(c) the fact that, immediately after such Credit Event, the Total
Outstanding Amount will not exceed the Borrowing Base at such time; and
(d) the fact that the representations and warranties of the Obligors
contained in the Financing Documents shall be true on and as of the date of such
Credit Event (except Sections 4.04(a), 4.04(b), 4.11 and 4.14, which
representations relate solely to an earlier date and were true and correct in
all
material respects on such earlier date).
Each Credit Event Borrowing and each issuance or extension of a Letter of Credit
hereunder shall be deemed to be a representation and warranty by the Borrower on
the date of such Credit Event as to the facts specified in clauses (c) and (d)
of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and, as to the matters set forth
in Section 4.12, each Guarantor represents and warrants, with respect to itself
only, that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all governmental licenses, consents, authorizations and approvals required to
carry on its business as now conducted (other than such governmental licenses,
consents, authorizations and approvals the failure of which to obtain would not
reasonably be expected to have a Material Adverse Effect).
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SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Borrower of the
Financing Documents are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the Borrower's certificate of incorporation or by-laws or of
any agreement or other instrument evidencing Debt for borrowed money or of any
other material agreement, judgment, injunction, order, decree or other material
instrument binding upon the Borrower or any Subsidiary or result in the creation
or imposition of any Lien on any asset of the Borrower or any Subsidiary.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of June 30, 1996 and the
related consolidated statements of income, cash flows and changes in
stockholders' equity for the Fiscal Year then ended, reported on by Deloitte &
Touche LLP and set forth in the Borrower's 1996 Form 10-K, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with GAAP,
the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1996 and the related unaudited
consolidated statements of income, cash flows and changes in stockholders'
equity for the six months then ended, set forth in the Borrower's Latest Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such six-month period (subject to normal year-end
adjustments).
(c) Since June 30, 1996, there has been no material adverse change in
the business, financial position or results of operations of the Borrower, its
Consolidated Subsidiaries, and the Torch Acquired Properties, considered as a
whole.
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SECTION 4.05. LITIGATION. Except as disclosed on Schedule 4.05, there
is no action, suit or proceeding pending against, or to the Borrower's knowledge
threatened against or affecting, the Borrower or any Subsidiary before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could have a Material
Adverse Effect.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations in all material respects under the minimum funding
standards of ERISA and the Internal Revenue Code with respect to each Plan and
is in compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code in respect of any Plan
for an amount which, if not granted, would have subjected the ERISA Group (or
any member thereof) to a liability in excess of $5,000,000, (ii) failed to make
any contribution or payment of a material amount to any Plan or Multiemployer
Plan, or made any amendment to any Plan, which has resulted or could result in
the imposition of a Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code (other than Liens permitted under Section 5.10) or
(iii) incurred any material liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. ENVIRONMENTAL COMPLIANCE. (a) Except (x) as disclosed on
Schedule 4.07 or (z) to the extent that the Environmental Liabilities of the
Borrower and its Subsidiaries, taken as a whole, that relate to or could result
from the matters referred to in clauses (i) through (vi), inclusive, would not
exceed $1,000,000 for any one occurrence or $5,000,000 in the aggregate:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review
is pending, or to the Borrower's knowledge, threatened by any
governmental or other entity with respect to any (A) alleged violation
by the Borrower or any Subsidiary of any Environmental Law, (B) alleged
failure by the Borrower or any Subsidiary to have any environmental
permit, certificate, license, approval, registration or authorization
required in connection with the conduct of its business, (C) alleged
violation of or liability under any Environmental Law with respect to
any Regulated Activity or (D) alleged violation of or liability under
any Environmental Law with respect to any Release of Hazardous
Substances;
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(ii) other than generation in material compliance with all applicable
Environmental Laws, (A) neither the Borrower nor any Subsidiary has
engaged in any Regulated Activity and (B) no Regulated Activity
conducted by the Borrower (and, to the Borrower's knowledge, no
Regulated Activity conducted by other Persons) has occurred at or on
any property now or previously owned, leased or operated by the
Borrower or any Subsidiary;
(iii) other than in material compliance with all applicable
Environmental Laws and in a manner which would not reasonably be
expected to result in any Environmental Liabilities, no polychlorinated
biphenyls, radioactive material, urea formaldehyde, lead, asbestos,
asbestos-containing material or underground storage tank (active or
abandoned) is or has been present at any property now or previously
owned, leased or operated by the Borrower or any Subsidiary;
(iv) no Hazardous Substance has been Released (and no written
notification of such Release has been received by the Borrower) at, on
or under any property now or previously owned, leased or operated by
the Borrower or any Subsidiary;
(v) no property now or previously owned, leased or operated by the
Borrower or any Subsidiary or any property to which the Borrower or any
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances, is listed or, to the
Borrower's knowledge, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA)
or on any similar federal, state or foreign list of sites requiring
investigation or clean-up; and
(vi) other than Liens permitted under Section 5.10, there are no liens
under Environmental Laws on any of the real property owned or leased by
the Borrower or any Subsidiary, to the Borrower's knowledge, no
government actions have been taken or are in process which could
subject any of such properties or assets to such liens and neither the
Borrower nor any Subsidiary would be required to place any notice or
restriction relating to Hazardous Substances at any property owned by
it in any deed to such property.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Borrower has knowledge in
relation to the current or prior business of the Borrower or any property or
facility now or previously owned, leased or operated by the Borrower or any
Subsidiary,
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which has not been made available for review to the Administrative Agent at
least five days prior to the Effective Date.
(c) For purposes of this Section, the terms "Borrower" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is a predecessor, in whole or in part, of the Borrower or any
Subsidiary.
SECTION 4.08. TAXES. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary except those which are diligently contested in good faith by
appropriate proceedings. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the Borrower's opinion, adequate.
SECTION 4.09. SUBSIDIARIES. Part I of 4.09 lists all of the
Subsidiaries on the Effective Date and Part II of Schedule 4.09 lists all
Material Subsidiaries on the Effective Date. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except such
governmental licenses, authorizations, consents and approvals the failure of
which to obtain would not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.10. NO REGULATORY RESTRICTIONS ON BORROWING. The Borrower is
not (i) an "investment company" within the meaning of the Investment Company Act
of 1940, as amended or (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 4.11. FULL DISCLOSURE. All information, including, without
limitation, the Information Memorandum, other than the Projections (as defined
below), which has been or is hereafter prepared or made available by the
Borrower or by any of the Borrower's respective representatives (including
Torch) to any Bank or the Administrative Agent, in connection with this
Agreement and the transactions contemplated hereby (including without limitation
all information given at information meetings for potential syndicate members
and supplied or approved by the Borrower) (such information collectively, the
"INFORMATION") is, or in the case of Information made available after the date
hereof will be, true, complete and correct in all material respects, and does
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to
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make the statements contained therein, in the light of the circumstances under
which such statements were or are made, not misleading. It is understood and
agreed, however, that (i) each Reserve Report is necessarily based upon economic
assumptions and professional opinions, estimates and projections, (ii) any
financial projections (the "PROJECTIONS") which the Borrower or any of the
Borrower's representatives (including Torch) has provided or may provide in
connection with the transactions contemplated hereby (including the Reserve
Reports) and the Information Memorandum are similarly based on economic
assumptions, opinions and estimates, (iii) the Borrower is not making any
representation or warranty that such assumptions, opinions, estimates and
Projections will ultimately prove to have been accurate, (iv) the Borrower is
not making any representation or warranty with respect to any price or cost
Projections furnished by the Administrative Agent or any Bank for use in
preparing any Reserve Report, and (v) the Borrower's only representation or
warranty with respect to any Projections that have been or will be provided by
the Borrower or any of its representatives or Subsidiaries is that such
Projections have been or will be, as the case may be, prepared in good faith
based upon assumptions that Borrower's management reasonably believed or
believes, as the case may be, to be reasonable at the time such Projections were
or are prepared. The Borrower has disclosed to the Banks in writing any and all
facts which may have a Material Adverse Effect.
SECTION 4.12. REPRESENTATIONS OF GUARANTORS. Each Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all corporate powers and
all governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except such governmental licenses,
authorizations, consents and approvals the failure of which to obtain would not
reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance by each Guarantor of each Financing Document to which
such Guarantor is a party are within such Guarantor's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of such
Guarantor or of any agreement or instrument evidencing Debt for borrowed money
or of any other material agreement, judgment, injunction, order, decree or other
instrument binding upon such Guarantor or result in the creation or imposition
of any Lien on any asset of such Guarantor. This Agreement constitutes a valid
and binding agreement of each Guarantor, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
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SECTION 4.13. OWNERSHIP OF PROPERTY, LIENS. Except to an extent which
could not reasonably be expected to have a Material Adverse Effect: the Borrower
and its Subsidiaries have good and marketable title to and are in lawful
possession of, or have valid leasehold interests in, all material Properties
purported to be owned by the Borrower and its Subsidiaries or to be leased by
the Borrower and its Subsidiaries (as the case may be), and none of such
material Properties is subject to any Liens, except Liens permitted under
Section 5.10, all of such material Properties are in good working order and
condition, ordinary wear and tear excepted, and the Borrower and its
Subsidiaries have received all deeds, assignments, bills of sale and other
documents and duly effected all recordings, filings and other actions necessary
or appropriate to establish, protect and perfect its right, title and interest
in and to all such material Properties.
SECTION 4.14. REPRESENTATIONS IN PURCHASE AND SALE AGREEMENT TRUE AND
CORRECT. Each of the representations and warranties of the Borrower contained in
the Purchase and Sale Agreement was true and correct in all material respects on
the date when made. The Purchase and Sale Agreement has not been modified or
amended in any respect and no provision or condition contained therein has been
waived, except as permitted by Section 5.20.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Credit Exposure
hereunder or any interest or fees accrued hereunder remain unpaid:
SECTION 5.01. INFORMATION. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all reported on in a manner acceptable to
the SEC by Deloitte & Touche LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end
of each of the first three Fiscal Quarters of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such
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Fiscal Quarter, the related consolidated statement of income, cash flows and
changes in stockholders' equity for such Fiscal Quarter and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, setting forth in the case of each such statement of income, cash flows
and changes in stockholders' equity in comparative form the figures for the
corresponding period in the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation and consistency with
GAAP by the Borrower's chief financial officer or chief accounting officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
Borrower's chief financial officer or chief accounting officer (i) setting forth
in reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.10 to 5.16, on the date of
such financial statements and (ii) stating whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) stating
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) within five Domestic Business Days after any Responsible Officer
of the Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of a Responsible Officer of the Borrower setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto;
(f) promptly after the mailing thereof to the Borrower's shareholders
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) filed by the Borrower with the SEC;
(h) promptly after any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
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Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC (unless, in each instance, the 30-day notice
requirement under Section 4043(a) of the Internal Revenue Code has been waived);
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the Borrower's
chief financial officer or chief accounting officer setting forth details as to
such occurrence and the action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(i) promptly, upon receipt of any complaint, order, citation, notice
or other written communication from any Person with respect to, or upon the
Borrower's obtaining knowledge of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or any Environmental Liability in
connection with any property now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries, (ii) any Release on such property or any
part thereof in a quantity that is reportable under any applicable Environmental
Law, and (iii) any pending or threatened proceeding for the termination,
suspension or non-renewal of any permit required under any applicable
Environmental Law, in each case, with respect to clauses (i), (ii) and (iii)
above, (x) which could result in liability or expenses in excess of $1,000,000
or (y) which individually or in the aggregate could have a Material Adverse
Effect, notice thereof; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. RESERVE REPORTS. (a) Not later than September 1 of each
year, the Borrower will furnish to the Banks reports in form and substance
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satisfactory to the Administrative Agent, each prepared by an Approved Petroleum
Engineer, which reports shall evaluate the Borrowing Base Properties of the
Borrower and the Subsidiaries as of the immediately preceding June 30 and which
shall, together with any other information reasonably requested by the Banks,
set forth the Proved Reserves attributable to such Property, together with a
projection of the rate of production and future net income with respect thereto
as of such date.
(b) From time to time, the Borrower (x) may, at its election, or, (y)
will, if so requested in writing by the Required Banks, (but not more frequently
than once each year, in the case of either (x) or (y)), furnish to the Banks
within 45 days of such election or request reports in form and substance
satisfactory to the Administrative Agent, each of which shall be prepared by an
Approved Petroleum Engineer, which shall further evaluate the Borrowing Base
Properties evaluated in the immediately preceding Reserve Report, and which
shall, together with any other information reasonably requested by the Banks,
set forth the Proved Reserves attributable to such Property as of the date of
such election or request, together with a projection of the rate of production
and net income with respect thereto as of such date.
(c) Each of the reports to be furnished by the Borrower to the Banks
pursuant to this Section 5.02 shall be prepared on the basis of price and other
economic assumptions specified by the Administrative Agent to the Borrower in
accordance with the standards set forth in Section 2.15(c). Each report prepared
pursuant to Section 5.02(a) or Section 5.02(b) shall separately cover Proved
Developed Reserves which are currently producing to market, other Proved
Developed Reserves and Proved Undeveloped Reserves, and shall identify any
material gas imbalances and any Liens (other than Liens permitted pursuant to
Sections 5.10(h), (i), (k) through (m) and (o) through (q)) on, and Production
Payments and Reserve Sales with respect to, any Oil and Gas Properties
(including the amount secured thereby).
(d) Not later than September 1 of each year (and concurrently with the
reports, if any, furnished pursuant to clause (b) above), the Borrower will
furnish to the Banks cash flow information with respect to the Related Assets
and such other information which the Administrative Agent may from time to time
reasonably request concerning the Related Assets.
SECTION 5.03. PAYMENT OF OBLIGATIONS. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities (including,
without limitation, tax liabilities and claims of materialmen, warehousemen and
the like which if unpaid might by law give rise to a Lien other than a Lien
permitted under
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Section 5.10), except where the same are contested in good faith by appropriate
proceedings, and will maintain, and will cause each Subsidiary to maintain, in
accordance with GAAP, appropriate reserves for the accrual thereof.
SECTION 5.04. MAINTENANCE OF PROPERTY AND INSURANCE. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all Property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Borrower will maintain, and will cause each of its
Subsidiaries to maintain, insurance in responsible companies in such amounts and
against such risks as is usually carried by owners of similar businesses and
properties in the same general areas in which the Borrower and its Subsidiaries
operate, PROVIDED that in any event the Borrower will maintain, and will cause
each of its Subsidiaries to maintain, (i) property and casualty insurance on all
real and personal property on an all risks basis (including the perils of flood
and quake), covering the repair and replacement cost of all such property, for
such amounts not less than those, and with deductible amounts not greater than
those, set forth in Part I of Schedule 5.04, (ii) public liability insurance
(including products liability coverage) covering such risks, for such amounts
not less than those, and with deductible amounts not greater than those, set
forth in Part II of Schedule 5.04 and (iii) such other insurance coverage in
such amounts and with respect to such risks as the Required Banks may reasonably
request. At least 95% of all such insurance shall be provided by (A) insurers
that are rated B+, Class VII or better by A.M. Best Company, Inc. (or accorded a
similar rating by another nationally or internationally recognized insurance
rating agency of similar standing, as determined in good faith by the Borrower),
PROVIDED that, if the Borrower or any of its Subsidiaries have insurance with
any insurer that (1) is not rated by A.M. Best Company, Inc. and (2) is a
Lloyd's syndicate, such syndicate must have had, as of the last day of its most
recently completed fiscal year, capital and surplus of at least $250,000,000 and
a ratio of liabilities (including all potential claims under insurance policies
written by them, regardless of the amount of the reserves therefor) to capital
and surplus of no greater than 6:1, or (B) such other insurers as the Required
Banks may approve in writing. The Borrower will deliver to the Banks (i) upon
request of any Bank through the Administrative Agent from time to time full
information as to the insurance carried, (ii) within five days of receipt of
notice from any insurer a copy of any notice of cancellation, nonrenewal or
material change in coverage from that existing on the date of this Agreement and
(iii) forthwith, notice of any cancellation or nonrenewal of coverage by the
Borrower or any Subsidiary.
SECTION 5.05. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower and its Subsidiaries will continue to engage in business of the
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acquisition, exploration for, development, production, transportation,
gathering, storing, processing and/or marketing of Hydrocarbons and/or
accompanying elements, and will preserve, renew and keep in full force and
effect their respective corporate existences and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business, other than those the failure of which to maintain would not reasonably
be expected to have a Material Adverse Effect; PROVIDED that nothing in this
Section shall prohibit:
(i) mergers permitted under Section 5.08; or
(ii) the termination of the corporate existence of a Subsidiary if the
Borrower in good faith determines that such termination is in the best
interest of the Borrower and is not disadvantageous to the Banks.
SECTION 5.06. COMPLIANCE WITH LAWS. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or the failure
to so comply would not reasonably be expected to have a Material Adverse Effect.
SECTION 5.07. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times
during normal business hours and as often as may reasonably be requested.
SECTION 5.08. MERGERS AND SALES OF ASSETS. The Borrower will not, and
will not permit any Guarantor to, consolidate or merge with or into any other
Person; PROVIDED that (x) any Guarantor may merge with the Borrower, any other
Guarantor or with any other Person if the Guarantor is the corporation surviving
such merger with any other Person (other than the Borrower or another
Guarantor), and (y) the Borrower may merge with or into another Person if the
Borrower is the corporation surviving such merger, if after giving effect to any
such merger, no Default shall have occurred and be continuing. The Borrower and
its Subsidiaries will not sell, lease or otherwise transfer, directly or
indirectly, all or
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any substantial part of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person.
SECTION 5.09. USE OF PROCEEDS. The proceeds of the Loans will be used
by the Borrower (i) to refinance Debt of the Borrower under the Existing Credit
Facility and (ii) for general corporate purposes. The Letters of Credit will be
used by the Borrower for general corporate purposes. Neither any proceeds of the
Loans nor any Letter of Credit will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
SECTION 5.10. NEGATIVE PLEDGE. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $500,000;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
PROVIDED that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary and
not created in contemplation of such event;
(e) any Lien existing on any asset as of the acquisition thereof by
the Borrower or a Subsidiary;
(f) Liens on cash and Temporary Cash Equivalents securing Derivatives
Obligations, PROVIDED that the aggregate amount of cash and Temporary Cash
Investments subject to such Liens may at no time exceed $7,500,000;
(g) any Lien arising under the Acquisition Documents with respect to
Property in the Escrow Account;
(h) Liens which (i) do not secure Debt, (ii) arise in the ordinary
course of business under operating agreements, joint venture agreements, oil and
gas
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partnership agreements, oil and gas leases, farm-out agreements, division
orders, contracts for the sale, transportation or exchange of oil and natural
gas, unitization and pooling declarations and agreements, area of mutual
interest agreements, overriding royalty agreements, marketing agreements,
processing agreements, net profits agreements, production payment agreements,
royalty trust agreements, development agreements, production sales contracts,
gas balancing or deferred production agreements, injection, repressuring and
recycling agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements, and other agreements which are customary in
the oil and gas business, and (iii) are for claims which are either not
delinquent or are being contested in good faith by appropriate proceedings and
as to which the Borrower or its applicable Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(i) Liens not securing Debt reserved in oil and gas mineral leases, or
created by statute, to secure royalty, net profits interests, bonus payments,
rental payments or other payments out of or with respect to the production,
transportation or processing of Hydrocarbons, and compliance with the terms of
such leases;
(j) Production Payments and Reserve Sales, and Liens on properties
subject thereto to secure performance obligations in connection therewith;
(k) Liens for taxes, assessments and governmental charges or claims
which are either not delinquent or are being contested in good faith by
appropriate proceedings and as to which the Borrower or the applicable
Subsidiary shall have set aside on its books such reserve as may be required
pursuant to GAAP;
(l) Statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for claims which are either not
delinquent or are being contested in good faith by appropriate proceedings and
as to which the Borrower or its applicable Subsidiary shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(m) Liens on any assets, in each case created or made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the payment or
performance of tenders, statutory or regulatory obligations, surety bonds, bids,
government contracts and leases, trade contracts (other than for Debt),
performance and return of money bonds and other similar obligations (exclusive
of obligations for the payment of Debt), including lessee or operator
obligations under statutes, governmental regulations or instruments related to
the ownership,
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exploration and production of oil, gas and minerals on private, state, federal
or foreign lands or waters);
(n) (i) Judgment Liens in an aggregate amount not to exceed
$20,000,000 and (ii) Liens on any assets in an aggregate amount not to exceed
$20,000,000 which secure the payment or performance of appeal bonds with respect
to the appeal of any such judgment, in each case, so long as (i) any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired and (ii) the Borrower shall
have either (A) posted a bond in an amount and manner sufficient that such Lien
cannot be executed or (B) obtained a stay of such judgment for the period of the
review of such judgment;
(o) Liens not securing Debt that arise solely by virtue of any
statutory or common law provision relating to banker's liens, rights of set-off
or similar rights and remedies and burdening only deposit accounts or other
funds maintained with a creditor depository institution, PROVIDED that (i) no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board of Governors of the Federal Reserve System,
and (ii) no such deposit account is intended by Borrower or any of its
Subsidiaries to provide collateral to the depository institution;
(p) 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 purpose for which it is or may reasonably be expected to be held;
(q) 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;
(r) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that any such Debt is not increased beyond the
amount thereof outstanding on the Closing Date or on the date of incurrence of
such Lien in accordance with this Section 5.10 (PLUS the reasonable costs of
renewals and extensions) and is not secured by any additional assets; and
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(s) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount not at any time
exceeding $5,000,000.
SECTION 5.11. LIMITATION ON DEBT. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(i) Debt under the Financing Documents;
(ii) Debt outstanding on the date hereof identified on Schedule 5.11
and refinancings thereof; PROVIDED that the principal amount thereof is
not increased beyond the amount outstanding thereunder on the date
hereof (PLUS reasonable costs and expenses associated with such
refinancings);
(iii) Debt secured by Liens permitted by Section 5.10;
(iv) Permitted Subordinated Debt of the Borrower and its
Subsidiaries;
(v) Debt owed by the Borrower to any of its Subsidiaries or by
any Subsidiary to the Borrower or any other Subsidiary;
(vi) endorsements of negotiable instruments for collection in the
ordinary course of business; and
(vii) Additional Debt not permitted by clauses (i) through (vi) above,
PROVIDED, HOWEVER, that the aggregate amount of all Debt incurred by
the Borrower and its Subsidiaries pursuant to this clause (vii) shall
not exceed $3,000,000 at any one time outstanding.
SECTION 5.12. DEBT OF SUBSIDIARIES. Total Debt of all Subsidiaries
(excluding Debt of a Subsidiary to the Borrower or to a Guarantor) will at no
time exceed 10.00% of Consolidated Tangible Net Worth.
SECTION 5.13. CASH INTEREST COVERAGE RATIO. As of the last day of each
Fiscal Quarter, the Cash Interest Coverage Ratio will not be less than 3.0 to 1.
SECTION 5.14. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated
Tangible Net Worth will at no time during any Fiscal Quarter set forth below be
less than an amount equal to the sum of (i) $40,000,000 PLUS (ii) an amount
equal to 50% of Consolidated Net Income for each Fiscal Quarter ending after
December 31, 1996, in each case, for which Consolidated Net Income is positive
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(but with no deduction on account of negative Consolidated Net Income for any
Fiscal Quarter) PLUS (iii) upon the consummation of any issuance of Non-
Redeemable Stock after September 30, 1996, 100% of the first $30,000,000, and
75% of all amounts in excess thereof, of the amount of Net Cash Proceeds
received by the Borrower from all such issuances.
SECTION 5.15. RESTRICTED PAYMENTS AND INVESTMENTS. Neither the Borrower
nor any Subsidiary will declare or make any Restricted Payment or any Restricted
Investment other than Restricted Payments of the type referred to in clauses (i)
and (ii) of the definition thereof and Restricted Investments, but only if (x)
both before and after giving effect thereto, no Default shall have occurred and
be continuing and (y) the aggregate amount of all such Restricted Payments and
Restricted Investments declared or made since the Closing Date and ending on the
date such Restricted Payment or Restricted Investment is declared or made does
not exceed (i) $5,000,000 PLUS (ii) 25% of Consolidated Net Income (or MINUS
100% of consolidated net loss) for such period PLUS (iii) the aggregate amount
of any Net Cash Proceeds received by the Borrower in any sale(s) by the Borrower
of Non-Redeemable Stock during any such period.
SECTION 5.16. INVESTMENTS. Neither the Borrower nor any Subsidiary will
hold, make or acquire any Investment in any Person other than:
(a) Investments in any Guarantor or the Borrower;
(b) Temporary Cash Investments;
(c) Investments existing on the date hereof and disclosed on
Schedule 5.16;
(d) Accounts receivable from customers in the ordinary course of
business;
(e) Investments pursuant 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 the Borrower's
or any Subsidiary's obligations thereunder in accordance with prudent operating
standards and in the ordinary course of business;
(f) Investments in any Person which is a Subsidiary or which thereby
becomes a Subsidiary, PROVIDED that no Event of Default exists immediately after
such Investment is made and, PROVIDED FURTHER that the sum of all Investments in
Subsidiaries that are not Guarantors shall not exceed $1,000,000 (in each case,
the amount thereof determined at the time such Investment is made);
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(g) Investments in stock, obligations or securities received in
settlement of debts owing to the Borrower or any Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Borrower or any Subsidiary;
(h) Investments in securities of a Person for which there is an
established public trading market, 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 $5,000,000;
(i) Production Payments and Reserve Sales;
(j) any Investment not otherwise permitted by the foregoing clauses of
this Section if, immediately after such Investment is made or acquired, the
aggregate net book value of all Investments permitted by this clause (j) does
not exceed $10,000,000; and
(k) any Restricted Investment to the extent permitted under Section
5.15.
SECTION 5.17. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any Investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary as could have been obtained from a third party
that was not an Affiliate; PROVIDED that the foregoing provisions of this
Section shall not prohibit any such Person from declaring or paying any lawful
dividend or other payment ratably in respect of all its capital stock of the
relevant class so long as, after giving effect thereto, no Default shall have
occurred and be continuing.
SECTION 5.18. ADDITIONAL GUARANTORS. At any time after the Closing
Date, if any Person that is not listed on Part II of Schedule 4.09 hereto
becomes a Material Subsidiary, then the Borrower will cause each such new
Material Subsidiary to become a party hereto as Guarantor by executing a
supplement hereto in form and substance satisfactory to the Administrative
Agent, such supplement to be executed within 20 Domestic Business Days of the
creation of such Material Subsidiary; PROVIDED, HOWEVER, that, so long as either
the NGL- Torch Gas Plant Venture or the Snyder Gas Plant Venture is
contractually
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prohibited from doing so, such Subsidiary will not be required to become a
Guarantor hereunder.
SECTION 5.19. PRICE HEDGE. On April 9, 1997, pursuant to the Purchase
and Sale Agreement, the Borrower placed $9,011,853 into escrow to secure payment
of the portion of the consideration to be paid, pursuant to the Purchase and
Sale Agreement, by the Borrower to the Sellers for the Torch Acquired
Properties, the payment of which will be based upon a fixed volume of gas and a
formula, as set forth in the Purchase and Sale Agreement.
SECTION 5.20. AMENDMENTS OF THE ACQUISITION DOCUMENTS. The Company will
not amend, modify or terminate (or consent to amend, modify or terminate), or
permit any of its Subsidiaries to amend, modify, or terminate (or consent to
amend, modify or terminate), any of the Acquisition Documents in any manner
which would have a Material Adverse Effect.
SECTION 5.21. EXTRAORDINARY BORROWING BASE REDETERMINATIONS. (a) TITLE
INFORMATION.
(i) If applicable, as soon as practicable after the provision of any
Reserve Report to the Banks pursuant to Section 5.02, the Borrower will
deliver acquisition summaries, title opinions and due diligence reports
(if any), in respect of any new Borrowing Base Properties being added
to the Borrowing Base for any period, prepared in connection with the
acquisition and the financing of the acquisition of such Property
prepared for the Borrower or the Person financing such acquisition and
such additional title information in form and substance reasonably
acceptable to the Administrative Agent as is requested so that the
Administrative Agent shall have received, together with the title
information previously received by it, satisfactory title information
covering Oil and Gas Property representing 80% of the value of the new
Borrowing Base Properties as set forth in such Reserve Report, as such
value is set forth therein.
(ii) The Borrower shall commence to cure any material title defects or
exceptions, which are not Liens permitted by Section 5.10, raised by
any title information, within 90 days after a reasonable request by the
Administrative Agent to cure such material defects or exceptions.
(iii) If the Borrower is unable to cure any material title defects
reasonably requested by the Administrative Agent to be cured within
such 90-day period or the Borrower does not comply with the
requirements to provide acceptable title information covering 80% of
the value of such new Borrowing Base Properties evaluated in the most
recent Reserve Report,
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such default shall not be a Default, but instead the Required Banks
shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this
remedy at any time is not a waiver as to future exercise of the remedy
by the Banks. To the extent that the Banks are not satisfied with a
title to any Property after the time period in Section 5.21(a)(ii) has
elapsed, the Administrative Agent shall, if so requested by the
Required Banks, send a Borrowing Base Notice to the Company that the
then outstanding Borrowing Base shall be reduced by an amount equal to
the loan value attributed to such unacceptable Property by the Banks in
the latest Borrowing Base. This new Borrowing Base shall become
effective upon receipt of such notice.
(b) BORROWING BASE PROPERTY SALES. Whenever the Borrower or any of its
Subsidiaries, in one or more transactions after the Determination Date
immediately preceding the time in question (or, prior to the first Determination
Date, after the date hereof) sells, transfers or otherwise disposes of Borrowing
Base Properties of $5,000,000 or more in the aggregate, the Borrower will
promptly give notice of such event to the Administrative Agent and each Bank
and, upon receipt of such notice, the Administrative Agent may, with the consent
of the Required Banks, either (i) request a Reserve Report as contemplated in
Section 5.02(b) and the Required Banks may make the determinations, contemplated
in Section 2.15(b), or (ii) request any supplemental information which the
Required Banks reasonably desire from the Borrower without requiring all such
reports and other information, and then designate a new Borrowing Base as the
Required Banks deem appropriate in light of such event and such supplemental
information. The determination of any new Borrowing Base pursuant to this
Section 5.21(b) shall take effect as provided in Section 2.15(d).
(c) SUBORDINATED DEBT SALES; APPROVAL OF SUBORDINATED DEBT. Not less
than 30 days prior to any proposed issuance and sale by the Borrower of any
subordinated debt securities of the Borrower, the Borrower will deliver to the
Banks notice of such proposed transaction containing (A) the type and amount of
the subordinated debt securities to be sold, (B) the principal amount of the
subordinated debt securities that the Borrower expects to issue and sell in such
proposed transaction and (C) the material terms and conditions of the proposed
subordinated debt securities. Within 15 days after the receipt of such notice,
the Administrative Agent will notify the Banks (1) whether it approves of the
terms and conditions of the proposed subordinated debt securities and (2) of a
proposed new Borrowing Base (such notice, the "SECTION 5.21(C) NOTICE"). Within
15 days after the provision of the Section 5.21(c) Notice, if any Bank
disapproves of (i) the terms and conditions of the proposed subordinated debt
securities, and/or (ii) the proposed new Borrowing Base, such Bank shall submit
to the Administrative Agent in writing such disapproval, which disapproval
shall, as applicable, state (A)
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the reasons and basis for its disapproval of the terms and conditions of the
proposed subordinated debt securities and/or (B) the maximum Borrowing Base
acceptable to such Bank (taking into account the effect of the issuance of such
proposed subordinated debt securities). On the close of business on the
fifteenth day after the provisions of the Section 5.21(c) Notice (or the next
succeeding Domestic Business Day if such day is not a Domestic Business Day),
(i) the terms and conditions of the proposed subordinated debt securities shall
be deemed to have been approved by the Required Banks (and the Administrative
Agent shall notify the Borrower of such approval) unless, on or prior to such
fifteenth day (or such next succeeding Domestic Business Day, as applicable),
Banks having more than 331/3 of the Credit Exposure at such time shall have
expressed their disapproval of such terms and conditions in the manner set forth
in the previous sentence, in which case the Borrower will not issue any
subordinated debt securities until it repeats the foregoing procedures of this
Section 5.21(c) and (ii) such proposed Borrowing Base shall become the basis for
determining the new Borrowing Base, pursuant to the final sentence of this
Section 5.21(c), unless on or prior to such fifteenth day, (A) the
Administrative Agent shall have received the written consent of the Required
Banks to such proposed Borrowing Base, or (B) Banks having more than 331/3 of
the Credit Exposure at such time shall have expressed their disapproval to the
Administrative Agent in the manner set forth in the previous sentence, in which
case the Administrative Agent shall notify the Borrower of the lowest
determination agreed to by the Required Banks. Upon the consummation of the sale
of any subordinated debt securities, (i) the Borrower shall notify the
Administrative Agent of the principal amount of the subordinated debt securities
sold in such transaction and (ii) the Borrowing Base will on and as of such date
be redetermined in an amount equal to (A) the maximum Borrowing Base agreed to
by the Required Banks PLUS (B) the difference of (1) the principal amount of the
subordinated debt securities sold in such transaction MINUS (2) the principal
amount that the Borrower had expected to issue in the proposed subordinated debt
securities sale, as specified in its notice to the Banks pursuant to the first
sentence of this Section 5.21(c).
ARTICLE 6
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) any principal of any Loan or
any LC Reimbursement Obligation payable by it hereunder when due or (ii) any
interest,
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fee or other amount payable by it hereunder within 3 days of the date due
hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.10 through 5.21 hereof, inclusive;
(c) any Obligor shall fail to observe or perform any covenant or
agreement (other than those covered by clause (a) or (b) above) contained in
this Agreement or any amendment hereof for 30 days after the Administrative
Agent gives notice thereof to the Borrower at the request of any Bank;
(d) any representation, warranty, certification or statement made by
any Obligor in this Agreement or any amendment hereof or in any certificate,
financial statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make one or more
payments in respect of Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such Debt
or any Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Material Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be
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entered against the Borrower or any Material Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $5,000,000 which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer, any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000;
(j) judgments or orders for the payment of money exceeding $5,000,000
in aggregate amount shall be rendered against the Borrower or any Subsidiary and
such judgments or orders shall continue unsatisfied and unstayed for a period of
10 days;
(k) the Borrower and/or any Subsidiary of the Borrower has incurred or
incurs final, non-appealable Environmental Liabilities in excess of $5,000,000
in the aggregate, which Environmental Liabilities would, under GAAP, be
reflected in the financial statements (or the footnotes thereto) of the
Borrower;
(l) any person or group of persons (within the meaning of Section 13
or 14 of the Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40.00% or more
of the outstanding shares of common stock of the Borrower; or, during any period
of 12 consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period shall cease to constitute a majority of
the Borrower's board of directors; or, any "Change of Control" (as defined in
the indenture with respect to subordinated debt included in a Long Term Junior
Financing) shall have occurred; or
(m) at any time, any Guarantee hereunder by any Guarantor shall fail
to constitute a valid and binding obligation of such Guarantor, enforceable in
accordance with its terms;
then, and in every such event, the Administrative Agent shall:
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(i) if requested by Banks having more than 662/3% in aggregate amount
of the Commitments, by notice to the Borrower terminate the Commitments
and they shall thereupon terminate;
(ii) if requested by Banks having more than 662/3% of the Aggregate LC
Exposure, by notice to each LC Issuing Bank instruct such LC Issuing
Bank not to extend the expiry date of any outstanding Letter of Credit,
whereupon such LC Issuing Bank shall deliver notice to that effect
promptly to the beneficiary of each such Letter of Credit and the
Borrower; and
(iii) if requested by Banks holding Notes evidencing more than 662/3% in
aggregate outstanding principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest thereon) to
be, and the Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower;
PROVIDED that, if any Event of Default specified in Section 6.01(g) or 6.01(h)
occurs with respect to the Borrower, then without any notice to the Borrower or
any other act by the Administrative Agent or the Banks, the Commitments shall
thereupon terminate and the Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. CASH COVER. The Borrower agrees that, if an Event of
Default shall have occurred and be continuing and Banks having more than 662/3%
of the Aggregate LC Exposure instruct the Administrative Agent to request cash
collateral pursuant to this Section, the Borrower will, promptly after it
receives such request from the Administrative Agent, pay to the Administrative
Agent an amount in immediately available funds equal to the then aggregate
amount available for subsequent drawings under all outstanding Letters of
Credit, to be held by the Administrative Agent, under arrangements satisfactory
to it, to secure the payment of all LC Reimbursement Obligations arising from
subsequent drawings under such Letters of Credit (which collateral shall be
released by the Administrative Agent to the Borrower upon the cure of any such
Event of Default); PROVIDED that, if any Event of Default specified in Section
6.01(g) or 6.01(h) occurs with respect to the Borrower, the Borrower shall pay
such amount
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to the Administrative Agent forthwith without any notice or demand or any other
act by the Administrative Agent or the Banks.
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. ADMINISTRATIVE AGENTS AND AFFILIATES. Morgan Guaranty
Trust Company of New York shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from exercising the same
as though it were not the Administrative Agent, and Morgan Guaranty Trust
Company of New York and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or any Subsidiary
or affiliate of the Borrower as if it were not the Administrative Agent.
SECTION 7.03. ACTION BY ADMINISTRATIVE AGENT. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Administrative Agent may
consult with legal counsel (who may be counsel for 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 by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF ADMINISTRATIVE AGENT. None of the
Administrative Agent or any of its affiliates or any of their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the request of
the Required Banks (or such different number of Banks as any provision hereof
expressly requires for such consent or request) or (ii) in the absence of its
own gross negligence or willful misconduct. Neither the Administrative Agent nor
any of its affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty
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or representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the
Administrative Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in connection
herewith. The Administrative Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, telex, facsimile or similar writing) believed by it
to be genuine or to be signed by the proper party or parties. Without limiting
the generality of the foregoing, the use of the term "agent" in this Agreement
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.
SECTION 7.06. INDEMNIFICATION. The Banks shall, ratably in proportion
to their Credit Exposures, indemnify the Administrative Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except such
as result from such indemnitees' gross negligence or willful misconduct) that
such indemnitees may suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitees hereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance on the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking any action under this Agreement.
SECTION 7.08. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may resign at any time by giving notice thereof to the Banks and the Borrower.
Upon any such resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent with the consent of the Borrower (which shall not
be unreasonably withheld). If no successor Administrative Agent shall have been
so appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent gives notice of
resignation, then the retiring Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent, which shall be a commercial bank
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organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $100,000,000. Upon
the acceptance of its appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent resigns as Administrative Agent hereunder, the provisions
of this Article 7 shall inure to its benefit as to actions taken or omitted to
be taken by it while it was Administrative Agent.
SECTION 7.09. ADMINISTRATIVE AGENT'S FEE. The Borrower shall pay to the
Administrative Agent for its own account fees in the amounts and at the times
previously agreed upon by the Borrower and the Administrative Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or before the first day of any Interest Period for any Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the London interbank market for such Interest Period, or
(b) Banks holding 50% or more of the aggregate principal amount of the
affected Loans advise the Administrative Agent that the London Interbank Offered
Rate as determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding their Euro-Dollar Loans for such
Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or to continue or convert
outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each
outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the
last day of the then current Interest Period applicable thereto. Unless the
Borrower notifies the Administrative Agent at least two Domestic Business Days
before the date of any affected Borrowing for which a Notice of Borrowing has
previously been given
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that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the adoption
of any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Administrative Agent, the Administrative Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into
Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Administrative Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice
is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted
to a Base Rate Loan either (a) on the last day of the then current Interest
Period applicable to such Euro- Dollar Loan if such Bank may lawfully continue
to maintain and fund such Loan as a Euro-Dollar Loan to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue to
maintain and fund such Loan as a Euro-Dollar Loan to such day.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) or any LC
Issuing Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency, shall impose,
modify or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding any such requirement with respect to which such Bank is entitled to
compensation during the relevant Interest Period under Section 2.13), special
deposit, insurance assessment or similar requirement against assets of, deposits
with or for the account of, or credit (including letters of credit and
participations therein) extended by, any Bank (or its
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Applicable Lending Office) or any LC Issuing Bank or shall impose on any Bank
(or its Applicable Lending Office) or any LC Issuing Bank or the London
interbank market any other condition affecting its Euro-Dollar Loans, its Notes
or its obligation to make Euro-Dollar Loans or its obligations hereunder in
respect of Letters of Credit and the result of any of the foregoing is to
increase the cost to such Bank (or its Applicable Lending Office) or such LC
Issuing Bank of making or maintaining any Euro-Dollar Loan or issuing or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by such Bank (or its Applicable Lending Office) or such
LC Issuing Bank under this Agreement or under its Note with respect thereto, by
an amount deemed by such Bank or LC Issuing Bank to be material, then, within 15
days after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank or LC Issuing Bank such additional amount or
amounts as will compensate such Bank or LC Issuing Bank for such increased cost
or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction.
(c) Each Bank and LC Issuing Bank will promptly notify the Borrower
and the Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank or LC Issuing Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank or LC Issuing
Bank, be otherwise disadvantageous to it. A certificate of any Bank or LC
Issuing Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank or LC
Issuing Bank may use any reasonable averaging and attribution methods.
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SECTION 8.04. TAXES. (a) For the purposes of this Section, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings of any nature with respect to any
payment by the Borrower or any Guarantor, as the case may be, pursuant to this
Agreement or under any Note, and all liabilities with respect thereto, EXCLUDING
(i) in the case of each Bank Party, income taxes, franchise taxes and other
similar taxes imposed on or measured by its net income (or, in lieu of net
income, total assets, net worth or shareholders' capital), by a jurisdiction
under the laws of which it is organized or in which its principal executive
office is located or, in the case of each Bank, in which its Applicable Lending
Office is located and (ii) in the case of each Bank, any United States
withholding tax imposed on such payment, but not excluding any portion of such
tax that exceeds the United States withholding tax which would have been imposed
on such a payment to such Bank under the laws and treaties in effect when such
Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution, delivery, registration or enforcement of, or otherwise with
respect to, this Agreement or any Note.
(b) All payments by the Borrower or any Guarantor to or for the
account of any Bank Party hereunder or under any Note shall be made without
deduction for any Taxes or Other Taxes; PROVIDED that, if the Borrower or any
Guarantor shall be required by law to deduct any Taxes or Other Taxes from any
such payment, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) such Bank Party receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
or any Guarantor, as the case may be, shall make such deductions, (iii) the
Borrower or such Guarantor, as the case may be, shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and (iv) the Borrower shall promptly furnish to the
Administrative Agent, at its address specified in or pursuant to Section 10.01,
the original or a certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank Party for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section), whether or not correctly or legally imposed, paid by such Bank
Party and
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any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be paid within 15 days after
such Bank Party makes demand therefor.
(d) Each Bank Party organized under the laws of a jurisdiction outside
the United States, on or before it signs and delivers this Agreement in the case
of each Bank listed on the signature pages hereof and on or before it becomes a
Bank in the case of each other Bank, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Bank remains
lawfully able to do so), shall provide each of the Borrower and the
Administrative Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts such Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or certifying that the income receivable by it
pursuant to this Agreement is effectively connected with the conduct of its
trade or business in the United States.
(e) For any period with respect to which a Bank has failed to provide
the Borrower or the Administrative Agent with the appropriate form referred to
in Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring after the date on which such form originally was required
to be provided), such Bank shall not be entitled to indemnification under
Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United States;
PROVIDED that if a Bank, that is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower or any Guarantor is required to pay additional
amounts to or for the account of any Bank pursuant to this Section as a result
of a change in law or treaty occurring after such Bank first became a party to
this Agreement, then such Bank will, at the Borrower's request, change the
jurisdiction of its Applicable Lending Office if, in the sole judgment of such
Bank, such change (i) will eliminate or reduce any such additional payment which
may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR
LOANS. If (i) the obligation of any Bank to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans, and in any such case the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
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through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, all Loans which would otherwise be made by such
Bank as (or continued as or converted to) Euro-Dollar Loans shall instead be
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks). If
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist, the principal amount of
each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first
day of the next succeeding Interest Period applicable to the related Euro-Dollar
Loans of the other Banks.
SECTION 8.06. SUBSTITUTION OF BANK; NOTICE OF COSTS OR EXPENSES. (a) If
(i) the obligation of any Bank to make, or to continue or convert Loans as or
to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04, the Borrower shall
have the right (a) with the assistance of the Administrative Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Note and assume the rights and obligations of such Bank
hereunder, or (b) to elect to terminate this Agreement as to such Bank, and in
connection therewith not to borrow or convert to any Base Rate Loan provided for
in Section 8.02 or to prepay any Base Rate Loan made pursuant to Section 8.02 or
8.05, PROVIDED that the Borrower (x) notifies such Bank through the
Administrative Agent of such election at least three Euro-Dollar Business Days
before any date fixed for such a borrowing, prepayment or conversion, as the
case may be, and (y) prepays all of such Bank's outstanding Loans at the end of
the respective Interest Periods applicable thereto or, if required by clause (b)
of the last sentence of Section 8.02, immediately. Upon receipt by the
Administrative Agent of such notice the Commitment of such Lender, if
outstanding, shall terminate.
(b) Notwithstanding anything to the contrary contained in Section 8.02
through 8.04, the Borrower shall not be obligated to pay any costs or expenses
of any Bank arising pursuant to such sections that are attributable to the
Excluded Period with respect to such additional costs or expenses; PROVIDED,
that if an applicable law, rule, regulation, guideline or request that gives
rise to such costs or expenses shall be adopted or made on any date after the
Closing Date and shall be applicable to the period (a "RETROACTIVE PERIOD")
prior to the date on which such law, rule, regulation, guideline or request is
adopted or made, the limitation on the Borrower's obligations to pay such
additional costs or expenses under this Section 8.06(b) shall not apply to the
additional costs or expenses of any Bank payable in respect of such Retroactive
Period.
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ARTICLE 9
GUARANTY
SECTION 9.01. THE GUARANTY. Each Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment of
all other amounts payable by the Borrower under this Agreement. Upon failure by
the Borrower to pay punctually any such amount, each Guarantor shall forthwith
on demand pay the amount not so paid at the place and in the manner specified in
this Agreement.
SECTION 9.02. GUARANTY UNCONDITIONAL. The obligations of each Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower or any other Guarantor
under this Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower or any
other Guarantor under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of
the Borrower or any other Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
other Guarantor or their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other Guarantor
contained in this Agreement or any Note;
(v) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, any other
Guarantor, the Administrative Agent, any Bank or any other Person,
whether in connection herewith or any unrelated transactions, PROVIDED
that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
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(vi) any invalidity or unenforceability relating to or against the
Borrower or any other Guarantor for any reason of this Agreement or any
Note, or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower or any other Guarantor of the
principal of or interest on any Note or any other amount payable by the
Borrower or any other Guarantor under this Agreement; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor, the Administrative Agent, any Bank or
any other Person or any other circumstance whatsoever which might, but
for the provisions of this paragraph, constitute a legal or equitable
discharge of the Guarantor's obligations hereunder.
SECTION 9.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Each Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement shall have been paid in full. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by the Borrower under this Agreement is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
any other Guarantor or otherwise, each Guarantor's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
SECTION 9.04. WAIVER BY EACH GUARANTOR. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Borrower or any other Guarantor or any other
Person.
SECTION 9.05. SUBROGATION AND CONTRIBUTION. Upon making any payment
with respect to any Borrower hereunder, the relevant Guarantor shall be
subrogated to the rights of the payee against the Borrower with respect to such
payment; PROVIDED that no Guarantor shall enforce any payment by way of
subrogation or contribution against any other Obligor until all amounts of
principal of and interest on the Notes and all other amounts payable by the
Borrower under this Agreement have been paid in full.
SECTION 9.06. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower under this Agreement or any Note
is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by each Guarantor hereunder forthwith on demand by
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the Administrative Agent made at the request of the requisite proportion of the
Banks specified in Article 6 of the Agreement.
SECTION 9.07. LIMIT OF LIABILITY. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
SECTION 9.08. RELEASE OF GUARANTOR. (a) Upon any sale by the Borrower
of a Subsidiary permitted by and in compliance with this Agreement, such
Subsidiary shall automatically and without further action by any Bank or the
Administrative Agent be released from its obligations, if any, as a Guarantor
hereunder.
(b) If at any time a Subsidiary that is a Guarantor at such time
hereunder shall no longer qualify as a Material Subsidiary, then, PROVIDED that
a Default shall not have occurred and be continuing, upon the request of the
Borrower to the Administrative Agent and the receipt of the consent of the
Required Banks (which consent shall not be unreasonably withheld), such
Subsidiary shall be released from its obligations as a Guarantor hereunder.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile or similar writing) and shall be given to such party (a) in the case
of the Borrower or the Administrative Agent, at its address, facsimile number or
telex number set forth on the signature pages hereof, (b) in the case of any
Guarantor, in care of the Borrower (c) in the case of any Bank, at its address,
facsimile number or telex number set forth in its Administrative Questionnaire
or (d) in the case of any party, at such other address, facsimile number or
telex number as such party may hereafter specify for the purpose by notice to
the Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when transmitted to the
telex number referred to in this Section and the appropriate answerback is
received, (ii) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, (iii) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address referred to in this
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Section; PROVIDED that notices to the Administrative Agent or any LC Issuing
Bank under Article 2 or Article 8 shall not be effective until received.
SECTION 10.02. NO WAIVERS. No failure or delay by any Bank Party
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Administrative Agent, including
reasonable fees and disbursements of special counsel for the Administrative
Agent, in connection with the preparation and administration of this Agreement,
any waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by each Bank Party, including (without
duplication) the reasonable fees and disbursements of outside counsel and the
allocated cost of inside counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) The Borrower agrees to indemnify each Bank Party, their respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of any Letter
of Credit or any proceeds of Loans hereunder; PROVIDED that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
(c) The Borrower hereby indemnifies each Indemnitee from and against
and agrees to hold each of them harmless from any and all liabilities, losses,
damages, costs and expenses of any kind (including without limitation reasonable
expenses of investigation by engineers, environmental consultants and similar
technical personnel and reasonable fees and disbursements of counsel) of such
Indemnitee arising out of, in respect of or in connection with any and all
Environmental Liabilities. Without limiting the generality of the foregoing
(except as provided in the proviso at the end of this sentence), the Borrower
hereby waives
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all rights for contribution or any other rights of recovery with respect to
liabilities, losses, damages, costs and expenses arising under or related to
Environmental Laws that it might have by statute or otherwise against each
Indemnitee; PROVIDED that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 10.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest then due with
respect to the Loans and participations in LC Reimbursement Obligations held by
it which is greater than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest then due with respect to the
Loans and participations in LC Reimbursement Obligations held by such other
Bank, the Bank receiving such proportionately greater payment shall purchase
such participations in the Loans and participations in LC Reimbursement
Obligations held by the other Banks, and such other adjustments shall be made,
as may be required so that all such payments of principal and interest with
respect to the Loans and participations in LC Reimbursement Obligations held by
the Banks shall be shared by the Banks pro rata; PROVIDED that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of any Obligor other than its indebtedness in respect of
the Loans and LC Reimbursement Obligations. Each Obligor agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Loan or LC Reimbursement Obligation, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of such Obligor in the
amount of such participation.
SECTION 10.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Administrative Agent or any LC Issuing Bank are affected
thereby, by the Administrative Agent or such LC Issuing Banks, as the case may
be); PROVIDED that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or the
amount of any LC Reimbursement Obligation or any interest thereon or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or of any LC Reimbursement Obligation or any interest
thereon or any fees hereunder or for the termination of any Commitment
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or (except as expressly provided in Section 2.14) extend the expiry date of any
Letter of Credit, (iv) change the aggregate amount by which or to which the
Commitments are required to be reduced on or prior to any Commitment Reduction
Date, (v) release any Guarantor from its obligations hereunder (except pursuant
to Section 9.08) or (vi) change the percentage of the Commitments or of the
Aggregate LC Exposure or of the aggregate unpaid principal amount of the Loans,
or the number of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement.
SECTION 10.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the Bank Parties.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans and participations in Letters of Credit. If a Bank
grants any such participating interest to a Participant, whether or not upon
notice to the Borrower and the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower,
the LC Issuing Banks and the Administrative Agent shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank may
grant such a participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of the Borrower and
the LC Issuing Banks hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement; PROVIDED that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iii) or (iv) of Section 10.05 without the
consent of the Participant. The Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the benefits
of Section 2.13 and Article 8 with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection.
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of its
rights and obligations under this Agreement and its Note, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit D hereto signed by
such Assignee
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and such transferor Bank, with (and subject to) the subscribed consent of the
Borrower (which shall not be unreasonably withheld; PROVIDED that the
withholding of any consent by the Borrower with respect to any assignment to an
Assignee that is not a commercial bank shall not be deemed to be unreasonable),
the Administrative Agent and the LC Issuing Banks; PROVIDED that if an Assignee
is an affiliate of such transferor Bank or was a Bank immediately before such
assignment, or, if at the time of such assignment, an Event of Default pursuant
to Section 6.01(a), (g) or (h) shall have occurred and be continuing, no such
consent of the Borrower shall be required. Each such assignment shall be in such
an amount that, after such assignment is made, each of the assignor Bank and the
Assignee will have an Outstanding Amount, together with their respective unused
Commitments, of at least $10,000,000. When such instrument has been signed and
delivered by the parties thereto and such Assignee has paid to such transferor
Bank the purchase price agreed between them, such Assignee shall be a Bank party
to this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection, the transferor Bank,
the Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to the Assignee. In connection with any
such assignment, the transferor Bank shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States or a
political subdivision thereof, it shall deliver to the Borrower and the
Administrative Agent certification as to its exemption from deduction or
withholding of, or its entitlement to a reduced withholding rate for, United
States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 10.07. NO RELIANCE ON MARGIN STOCK. Each of the Banks
represents to the Administrative Agent and each of the other Banks that it in
good
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faith is not relying upon any "margin stock" (as defined in Regulation U) as
collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 10.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 10.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective when the Administrative Agent has received from
each of the parties hereto a counterpart hereof signed by such party or
facsimile or other written confirmation satisfactory to the Administrative Agent
confirming that such party has signed a counterpart hereof.
SECTION 10.10. WAIVER OF JURY TRIAL. THE BORROWER AND EACH BANK PARTY
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 10.11. APPOINTMENT OF AGENT FOR SERVICES OF PROCESS. (a) Each
Obligor hereby irrevocably designates, appoints, authorizes and empowers as its
agent for service of process, CT Corporation System at its offices currently
located at 1633 Broadway, New York, New York 10019 to accept and acknowledge for
and on behalf of each Obligor service of any and all process, notices or other
documents that may be served in any suit, action or proceeding relating hereto
in any New York State or Federal court sitting in The State of New York.
(b) In lieu of service upon its agent, each Obligor consents to
process being served in any suit, action or proceeding relating hereto by
mailing a copy
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thereof by registered or certified air mail, postage prepaid, return receipt
requested, to its address designated pursuant to Section 10.01. Each Obligor
agrees that such service (1) shall be deemed in every respect effective service
of process upon it in any such suit, action or proceeding and (2) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to it.
(c) Nothing in this Section shall affect the right of any party hereto
to serve process in any manner permitted by law, or limit any right that any
party hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
SECTION 10.12. JUDGMENT CURRENCY. If for the purposes of enforcing the
obligations of the Borrower any hereunder it is necessary to convert a sum due
from such Person in U.S. dollars ("DOLLARS") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent and the Banks could purchase dollars with
such currency at or about 11:00 A.M. (New York City time) on the Domestic
Business Day preceding that on which final judgment is given. The obligations in
respect of any sum due to the Administrative Agent and the Banks hereunder
shall, notwithstanding any adjudication expressed in a currency other than
dollars, be discharged only to the extent that on the Domestic Business Day
following receipt by the Administrative Agent and the Banks of any sum adjudged
to be so due in such other currency the Administrative Agent and the Banks may
in accordance with normal banking procedures purchase dollars with such other
currency; if the amount of dollars so purchased is less than the sum originally
due to the Administrative Agent and the Banks in dollars, the Borrower and each
Guarantor agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such adjudication, to indemnify the
Administrative Agent and the Banks against such loss, and if the amount of
dollars so purchased exceeds the sum originally due to the Administrative Agent
and the Banks, it shall remit such excess to the Borrower.
SECTION 10.13. MAXIMUM INTEREST RATE. (a) Nothing contained in this
Agreement or the Notes shall require the Borrower to pay interest at a rate
exceeding the maximum rate permitted by applicable law.
(b) If the amount of interest payable for the account of any Bank on
any interest payment date in respect of the immediately preceding interest
computation period, computed pursuant to this Agreement, would exceed the
maximum amount permitted by applicable law to be charged by such Bank, the
amount of interest
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payable for its account on such interest payment date shall be automatically
reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of any Bank in
respect of any interest computation period is reduced pursuant to clause (b) of
this Section and the amount of interest payable for its account in respect of
any subsequent interest computation period, computed pursuant to this Agreement,
would be less than the maximum amount permitted by applicable law to be charged
by such Bank, then the amount of interest payable for its account in respect of
such subsequent interest computation period shall be automatically increased to
such maximum permissible amount; PROVIDED that at no time shall the aggregate
amount by which interest paid for the account of any Bank has been increased
pursuant to this clause (c) exceed the aggregate amount by which interest paid
for its account has theretofore been reduced pursuant to clause (b) of this
Section.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BELLWETHER EXPLORATION
COMPANY
By:______________________________
Name:
Title:
Address: 1331 Lamar, Suite 1455
Houston, Texas 77010
Facsimile: (713) 652-2916
ODYSSEY PETROLEUM COMPANY, as
Guarantor
By:______________________________
Name:
Title:
BLACKHAWK OIL COMPANY, as
Guarantor
By:______________________________
Name:
Title:
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1989-I TEAI LIMITED PARTNERSHIP, as
Guarantor
By: Blackhawk Oil Company, as the
General Partner
By:______________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By:______________________________
Name:
Title:
Address: 60 Wall Street
New York, NY 10260
Facsimile: (212) 648-5014
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Bank
By:______________________________
Name:
Title:
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BANQUE PARIBAS, as Bank
By______________________________
Name:
Title:
By______________________________
Name:
Title:
THE CHASE MANATTAN BANK,
as Bank
By______________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.,
as Bank
By______________________________
Name:
Title:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as Bank
By______________________________
Name:
Title:
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MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as LC
Issuing Bank
By______________________________
Name:
Title:
88
<PAGE>
COMMITMENT SCHEDULE
Morgan Guaranty Trust Company of New York $ 20,000,000
Banque Paribas $ 17,500,000
The Chase Manhattan Bank $ 17,500,000
NationsBank of Texas, N.A. $ 17,500,000
Wells Fargo Bank (Texas), National Association $ 17,500,000
TOTAL $ 90,000,000
89
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EXHIBIT A - NOTE
NOTE
New York, New York
For value received, Bellwether Exploration Company, a Delaware
corporation (the "BORROWER"), promises to pay to the order of
______________________ (the "BANK"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the maturity date
provided for in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; PROVIDED that the failure of the Bank to make any such recordation or
endorsement shall not affect the Borrower's obligations hereunder or under the
Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of April 21, 1997 among Bellwether Exploration Company, the Guarantors, the
Banks and the LC Issuing Banks party thereto and Morgan Guaranty Trust Company
of New York, as Administrative Agent (as the same may be amended from time to
time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for,
INTER ALIA, provisions for the prepayment hereof, the acceleration of the
maturity hereof and to the effect that no provision of the Credit Agreement or
this note shall require the payment or permit the charging or collection of
interest in an amount in excess of the highest amount permitted by applicable
law.
90
<PAGE>
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by certain Guarantors.
Bellwether Exploration Company
By___________________________
Name:
Title:
91
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LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Notation Made
Date Loan Type of Loan Principal Repaid By
92
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EXHIBIT B - OPINION OF COUNSEL FOR THE BORROWER
OPINION OF
COUNSEL FOR THE OBLIGORS
April 21, 1997
To: Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
And the Banks listed on Schedule I Attached Hereto
Ladies and Gentlemen:
We have acted as counsel for Bellwether Exploration Company (the
"BORROWER"), Odyssey Petroleum Corporation ("ODYSSEY"), Black Hawk Oil Company
("BLACK HAWK" and together with Odyssey collectively, the "CORPORATE
GUARANTORS") and 1989-I TEAI Limited Partnership (the "LP GUARANTOR" and
together with the Corporate Guarantors, collectively, the "GUARANTORS") in
connection with the Senior Reducing Revolving Credit Agreement dated as of April
21, 1997 (the "CREDIT AGREEMENT") among the Borrower, the Guarantors Party
Thereto, the Banks Party Thereto and LC Issuing Banks Referred to Therein and
Morgan Guaranty Trust Company of New York ("MORGAN GUARANTY"), as Administrative
Agent (the "ADMINISTRATIVE AGENT"). Terms defined in the Credit Agreement are
used herein as therein defined. This opinion is being rendered to you at the
request of our clients pursuant to Section 3.01(c) of the Credit Agreement.
In preparing this opinion letter, we have examined executed
counterparts of (i) the Credit Agreement and (ii) those certain promissory notes
(the "NOTES"), dated April 21, 1997, executed by the Borrower and payable to the
order of each of the Banks listed on Schedule I, respectively, delivered
pursuant to the Credit Agreement. In addition, we have also examined originals
or copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments and have conducted such other
B-1
<PAGE>
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
In making this examination, we have assumed, with respect to all
documents which we have examined: the genuineness of all signatures thereon, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all documents submitted to us as copies, the authenticity of
the originals of such copies, and the completeness of all such documents and
copies. As to certain questions of fact material to such opinions, we have,
where such facts were not otherwise verified or established, relied upon the
factual representations contained in the Agreement, the certificates and other
documents delivered pursuant thereto and other certifications of officers of the
Borrower and the Guarantors. For purposes of this opinion letter, we also have
assumed the due authorization, execution and delivery of, and the validity and
binding effect of, the Credit Agreement with regard to all parties thereto other
than the Borrower and the Guarantors.
Upon the basis of the foregoing, and subject to the qualifications,
limitations and exceptions hereinafter set forth, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes (a) are within the Borrower's corporate powers,
(b) have been duly authorized by all necessary corporate action on the part of
the Borrower, (c) require no action by or in respect of, or filing with, any
governmental body, agency or official (other than actions or filings required in
the ordinary course of business) and (d) do not contravene, or constitute a
default, or result in the creation or imposition of any Lien (other than Liens
that arise in the ordinary course of business) on any asset of the Borrower or
any Subsidiary, under, any provision (i) of applicable statutory law or
regulation or (ii) of the Borrower's certificate of incorporation or by-laws or
(iii) of any existing obligation of the Borrower under any material agreement
filed by the Borrower with the SEC or any agreement or instrument evidencing
Debt for borrowed money known to us or (iv) of any material judgment,
injunction, order, decree or other instrument binding upon the Borrower or any
Subsidiary and known to us.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes issued thereunder today constitute valid and binding
obligations of the Borrower, in each case enforceable against the Borrower in
accordance with its terms, subject to (x) applicable bankruptcy, insolvency,
fraudulent transfer or conveyance, reorganization, moratorium, receivership or
<PAGE>
similar laws affecting creditors' rights generally and (y) general principles of
equity, whether considered by a court of law or equity.
4. Each of the Borrower's corporate Subsidiaries identified on
SCHEDULE II attached hereto is a corporation validly existing and in good
standing under the laws of its jurisdiction of incorporation.
5. Each of the Corporate Guarantors is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The LP Guarantor is a limited partnership duly formed and validly
existing under the laws of the State of Texas.
6. The execution, delivery and performance by each of the Guarantors
of the Credit Agreement (a) are within such Guarantor's corporate or partnership
powers, as applicable, (b) have been duly authorized by all necessary corporate
or partnership action, as applicable, on the part of such Guarantor, (c) require
no action by or in respect of, or filing with, any governmental body, agency or
official (other than actions or filings required in the ordinary course of
business) and (d) do not contravene, or constitute a default or result in the
creation or imposition of any Lien (other than Liens that arise in the ordinary
course of business) on any asset of such Guarantor, under, any provision (i) of
applicable statutory law or regulation or (ii) of the certificate of
incorporation or by-laws or limited partnership agreement, as applicable, of
such Guarantor or (iii) of any existing obligation of such Guarantor under any
material agreement filed by the Borrower or such Guarantor with the SEC or any
agreement or instrument evidencing Debt for borrowed money known to us, or (iv)
of any material judgment, injunction, order, decree or other instrument binding
upon such Guarantor and known to us.
7. The Credit Agreement constitutes a valid and binding agreement of
each of the Guarantors, enforceable against each Guarantor in accordance with
its terms, subject to (x) applicable bankruptcy, insolvency, fraudulent transfer
or conveyance, reorganization, moratorium, receivership or similar laws relating
to or affecting creditors' rights generally and (y) general principles of
equity, whether considered by a court of law or equity.
We hereby confirm to you that, to the best of our knowledge, there is
no action, suit or proceeding pending or overtly threatened in writing against
the Borrower or any Subsidiary before any court or arbitrator or any
governmental body, agency or official not otherwise disclosed in the Credit
Agreement or in any certificate or document delivered pursuant thereto, which
could reasonably be expected to materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated
<PAGE>
Subsidiaries, considered as a whole, or which seeks to affect the validity of
the Credit Agreement or the Notes.
The foregoing opinions are limited in all respects to the substantive
law of the State of New York, the General Corporation law of the State of
Delaware and the federal law of the United States, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction. In addition, we express no opinion as to any
applicable state securities, blue sky, tax or legal investment laws, and we
express no opinion as to the enforceability of any indemnification provisions of
documents to the extent that any such indemnification would be contrary to
public policy.
Our opinion in paragraph 4 above, regarding the due incorporation,
valid existence and good standing of persons other than the Borrower or the
Guarantors, is based solely upon review and reliance upon certificates of public
officials.
The qualification of any opinion or statement herein by the use of the
words "to our knowledge" or "known to us" means that during the course of
representation as described in this opinion letter, no information has come to
the attention of the attorneys in this firm involved in the transactions
described which would give such attorneys current actual knowledge of the
existence of the facts so qualified. Except as set forth herein, we have not
undertaken any investigation to determine the existence of such facts, and no
inference as to our knowledge thereof shall be drawn from the fact of our
representation of any party or otherwise.
This opinion letter (i) has been furnished to you at your request and
may not be furnished, reproduced, distributed or disclosed to anyone without our
prior written consent, (ii) is rendered solely for your information in
connection with the referenced transaction and may not be relied upon by any
other person or for any other purpose without our prior written consent, (iii)
is rendered as of the date hereof, and we undertake no, and hereby disclaim any,
obligation to advise you of any changes or any new developments which might
affect any matters or opinions set forth herein, and (iv) is limited to the
matters expressly stated herein and no opinions may be inferred or implied
beyond the matters expressly stated herein.
Very truly yours,
BUTLER & BINION, L.L.P.
<PAGE>
SCHEDULE I
BANKS
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
Banque Paribas
1200 Smith Street
Suite 3100
Houston, TX 77002
The Chase Manhattan Bank
707 Travis, 5th Floor
Houston, TX 77002
NationsBank of Texas, N.A.
700 Louisiana Street
8th Floor
Houston, TX 77002
Wells Fargo Bank (Texas), National Association
1000 Louisiana Street
3d Floor/Energy Department
Houston, TX 77002
<PAGE>
SCHEDULE II
REFERENCED CORPORATE SUBSIDIARIES
Odyssey Petroleum Company, a Delaware corporation
West Monroe Gas Gathering Corporation, a Louisiana corporation
Black Hawk Oil Company, a Delaware corporation
TEAI Oil & Gas Company, a Delaware corporation
<PAGE>
EXHIBIT C - OPINION OF SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE ADMINISTRATIVE AGENT
April 21, 1997
To the Banks and the Administrative Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement dated
as of April 21, 1997 (the "CREDIT AGREEMENT") among Bellwether Exploration
Company, a Delaware corporation (the "BORROWER"), the Guarantors, the Banks and
LC Issuing Banks party thereto and Morgan Guaranty Trust Company of New York, as
Administrative Agent, and have acted as special counsel for the Administrative
Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
32. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes issued thereunder today constitute valid and binding
C-1
<PAGE>
obligations of the Borrower, in each case enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other Person without our prior written consent.
Very truly yours,
C-2
<PAGE>
EXHIBIT D - ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [NAME OF ASSIGNOR] (the
"ASSIGNOR") and [NAME OF ASSIGNEE] (the "ASSIGNEE").
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Credit Agreement dated as of April 21, 1997 among the Borrower,
the Guarantors party thereto, the Assignor and the other Banks party thereto,
the LC Issuing Banks party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Administrative Agent (the "ADMINISTRATIVE AGENT") (as amended from time
to time, the "CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of Credit in
an aggregate principal amount at any time outstanding not to exceed
$------------;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof;
WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "ASSIGNED AMOUNT"),
together with a corresponding portion of each of its outstanding Loans and its
LC Exposure, and the Assignee proposes to accept such assignment and assume the
corresponding obligations of the Assignor under the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
<PAGE>
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount and a corresponding portion of each of its
outstanding Loans, and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount and the corresponding portion of
each component of its LC Exposure. Upon the execution and delivery hereof by the
Assignor and the Assignee [and the execution of the consent attached hereto by
the Borrower and the Administrative Agent]1 and the LC Issuing Banks and the
payment of the amounts specified in Section 3 required to be paid on the date
hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the Credit Agreement and
the Financing Documents with a Commitment in an amount equal to the Assigned
Amount and acquire the rights of the Assignor with respect to a corresponding
portion of each of its outstanding Loans and (ii) the Commitment of the Assignor
shall, as of the date hereof, be reduced by the Assigned Amount, and the
Assignor shall be released from its obligations under the Credit Agreement to
the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.2
Commitment and/or facility fees accrued before the date hereof are for the
account of the Assignor and such fees accruing on and after the date hereof with
respect to the Assigned Amount are for the account of the Assignee. Each of the
Assignor and the Assignee agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other party's
interest therein and promptly pay the same to such other party.
[SECTION 4. CONSENT OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
LC ISSUING BANKS. This Agreement is conditioned upon the consent of the
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1 Delete if consent is not required.
2 Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any up-front fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
<PAGE>
Borrower, the Administrative Agent and the LC Issuing Banks pursuant to Section
10.06(c) of the Credit Agreement.3]
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of any Obligor,
or the validity and enforceability of the any Obligor's obligations under the
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Obligors.
SECTION 6. ASSIGNEE. The Assignee (a) confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
most recently delivered thereunder and such other Financing Documents and other
documents and information as it has deemed appropriate to make its own analysis
of Borrower and the transactions contemplated by the Credit Agreement and its
own independent decision to enter into this Assignment and Assumption Agreement
and (b) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank (including the obligation to make future Loans).
SECTION 7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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3 Delete if consent is not required.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By__________________________
Name:
Title:
[NAME OF ASSIGNEE]
By__________________________
Name:
Title:
The undersigned consent to the foregoing assignment:
[BELLWETHER EXPLORATION COMPANY]
By__________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By__________________________
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as LC
Issuing Bank
By__________________________
Name:
Title:
