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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-8094
Seagull Energy Corporation
(Exact name of registrant as specified in its charter)
Texas 74-1764876
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Fannin, Suite 1700, Houston, Texas 77002-6714
(Address of principal executive offices) (Zip code)
(713) 951-4700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
As of August 1, 1997, 63,175,401 shares of Common Stock, par value
$0.10 per share, were outstanding.
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
INDEX
PAGE
Part I. Financial Information NUMBER
Item 1. Unaudited Consolidated Financial Statements
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1997 and 1996........................... 3
Consolidated Balance Sheets - June 30, 1997
and December 31, 1996............................................. 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996...................................... 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders ............. 16
Item 6. Exhibits and Reports on Form 8-K ................................ 18
Signatures................................................................... 19
-2-
<PAGE>
Item 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
Restated Restated
<S> <C> <C> <C> <C>
Revenues:
Oil and gas operations................... $ 105,406 96,586 $ 230,410 $ 197,731
Alaska transmission and distribution..... 16,774 15,703 51,343 51,133
------------ ------------ ------------- -------------
122,180 112,289 281,753 248,864
Costs of Operations:
Operations and maintenance............... 41,005 35,727 83,876 70,062
Alaska transmission and distribution
cost of gas sold....................... 7,244 6,257 23,966 22,457
Exploration charges...................... 7,346 13,732 16,299 20,462
Depreciation, depletion and amortization. 45,661 38,323 87,772 76,529
General and administrative............... 3,113 4,634 5,423 8,363
------------ ------------ ------------- -------------
104,369 98,673 217,336 197,873
------------ ------------ ------------- -------------
Operating Profit........................... 17,811 13,616 64,417 50,991
Other (Income) Expense:
Interest expense......................... 9,585 11,237 19,995 22,683
Interest income and other................ (215) (764) (913) (1,919)
------------ ------------ ------------- -------------
9,370 10,473 19,082 20,764
------------ ------------ ------------- -------------
Income Before Income Taxes................. 8,441 3,143 45,335 30,227
Income Tax Expense......................... 5,820 6,077 25,460 14,849
------------ ------------ ------------- -------------
Net Income (Loss).......................... $ 2,621 $ (2,934) $ 19,875 $ 15,378
============ ============ ============= =============
Earnings (Loss) Per Share.................. $ 0.04 $ (0.05) $ 0.31 $ 0.24
============ ============ ============= =============
Weighted Average Number of Common
Shares Outstanding....................... 63,961 62,592 64,028 63,160
============ ============ ============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 29,465 $ 15,284
Accounts receivable, net................................ 149,346 193,659
Inventories............................................. 13,638 12,285
Prepaid expenses and other.............................. 15,271 6,389
-------------- -------------
Total Current Assets.................................. 207,720 227,617
Property, Plant and Equipment - at cost................... 2,177,335 2,049,356
Accumulated Depreciation, Depletion and Amortization...... 890,298 804,715
-------------- -------------
1,287,037 1,244,641
Other Assets.............................................. 43,011 42,805
-------------- -------------
Total Assets.............................................. $ 1,537,768 $ 1,515,063
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and note payable............................... $ 158,140 $ 166,775
Accrued expenses........................................ 45,028 57,368
Current maturities of long-term debt.................... 7,247 7,227
-------------- -------------
Total Current Liabilities............................. 210,415 231,370
Long-Term Debt............................................ 588,752 573,455
Other Noncurrent Liabilities.............................. 60,348 65,428
Deferred Income Taxes..................................... 42,154 31,021
Redeemable Bearer Shares.................................. 15,837 16,059
Commitments and Contingencies............................. - -
Shareholders' Equity:
Common Stock, $.10 par value; authorized
100,000,000 shares; issued 63,428,219 shares (1997)
and 63,073,287 shares (1996)........................... 6,343 6,307
Additional paid-in capital.............................. 486,594 483,118
Retained earnings....................................... 135,680 115,805
Foreign currency translation adjustment................. (804) 51
Less - note receivable from employee stock
ownership plan......................................... (4,284) (4,284)
Less - 361,314 shares of Common Stock
held in Treasury, at cost.............................. (3,267) (3,267)
-------------- -------------
Total Shareholders' Equity............................ 620,262 597,730
-------------- -------------
Total Liabilities and Shareholders' Equity................ $ 1,537,768 $ 1,515,063
============== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1997 1996
--------- ----------
<S> <C> <C>
Operating Activities:
Net income................................................... $ 19,875 $ 15,378
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization................... 87,772 76,529
Amortization of deferred financing costs................... 1,215 1,755
Deferred income taxes...................................... 11,336 5,683
Dry hole expense........................................... 3,401 9,308
Other...................................................... 350 94
---------- --------
123,949 108,747
Changes in operating assets and
liabilities, net of acquisitions:
Decrease in short-term investments....................... - 5,011
Decrease in accounts receivable.......................... 44,096 10,765
Decrease (Increase) in inventories, prepaid
expenses and other...................................... (9,685) 5,779
Decrease in accounts and note payable.................... (16,688) (4,011)
Decrease in accrued expenses and other................... (15,678) (904)
---------- ---------
Net Cash Provided By Operating Activities............. 125,994 125,387
Investing Activities:
Capital expenditures......................................... (137,348) (75,268)
Acquisitions, net of cash acquired........................... (821) (25,669)
Proceeds from sales of property, plant and equipment......... 1,156 1,082
---------- ---------
Net Cash Used In Investing Activities................. (137,013) (99,855)
Financing Activities:
Proceeds from debt........................................... 368,003 135,560
Principal Payments on debt................................... (344,007) (153,132)
Proceeds from sales of common stock.......................... 2,798 3,848
Other........................................................ (1,530) (2,218)
---------- ---------
Net Cash Provided By (Used In) Financing Activities... 25,264 (15,942)
Effect of exchange rate changes on Cash........................ (64) 138
---------- ---------
Increase In Cash And Cash Equivalents................. 14,181 9,728
Cash And Cash Equivalents At Beginning Of Period............... 15,284 21,477
---------- ---------
Cash And Cash Equivalents At End Of Period................... $ 29,465 $ 31,205
=========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
Note 1. Presentation of Financial Information
Merger with Global Natural Resources Inc. -- On October 3, 1996, the
shareholders of Seagull Energy Corporation and Subsidiaries (the "Company" or
"Seagull") and Global Natural Resources Inc. ("Global") approved a merger of a
wholly owned subsidiary of Seagull into Global (the "Global Merger"). Pursuant
to the Global Merger, each share of Global common stock was converted into 0.88
shares of Seagull common stock with approximately 26.3 million shares issued to
the shareholders of Global. The Global Merger was accounted for as a pooling of
interests. Accordingly, the financial statements for 1996 have been restated to
combine the results of Seagull and Global.
In the opinion of management, the unaudited consolidated financial
statements presented herein contain all adjustments necessary to present fairly
the financial position of Seagull as of June 30, 1997, and the results of its
operations and cash flows for the three and six months ended June 30, 1997 and
1996. All adjustments made are of a normal, recurring nature. The results of
operations for the three and six months ended June 30, 1997 and 1996 are not
necessarily indicative of the results to be expected for the full year.
The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 financial
information to conform to the presentation used in 1997.
Derivative Financial Instruments -- The Company enters into a variety
of commodity derivative financial instruments (futures contracts, price swaps
and options) only for non-trading purposes as a hedging strategy to manage
commodity prices associated with oil and gas sales and to reduce the impact of
price fluctuations. To qualify as a hedge, these instruments must correlate to
anticipated future production such that the Company's exposure to the effects of
price changes is reduced. The Company uses the hedge or deferral method of
accounting for these instruments and, as a result, gains and losses on commodity
derivative financial instruments are generally offset by similar changes in the
realized prices of the commodities. Income and costs related to these hedging
activities are recognized in oil and gas revenues when the commodities are
produced. Any realized income and costs that are deferred at the balance sheet
date and any margin accounts for futures contracts are included as net current
assets. While commodity derivative financial instruments are intended to reduce
the Company's exposure to declines in the market price of oil and natural gas,
the commodity derivative financial instruments may limit the Company's gain from
increases in those market prices.
The Company recorded as a reduction of revenues $7.7 million and $7.3
million related to commodity hedging activities for the six months ended June
30, 1997 and 1996, respectively, and as a reduction of revenues $0.2 million and
$3.8 million for the second quarter of 1997 and 1996, respectively. While
substantially all commodity hedges for equity production were settled by
-6-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
March 31, 1997, the Company has commodity hedges in place as required by the
monetary production payment (related to the 1995 sale of the Company's
Section 29 tax credit-bearing properties) for approximately 12 MMcf per day
through December 1998.
From time to time, the Company has entered into interest rate swap
agreements to manage the impact of changes in interest rates. The differential
interest to be paid or received is accrued as interest rates change and is
recognized over the life of the agreements as a component of interest expense.
Currently, Seagull has no open interest rate swap agreements.
Accounting Pronouncements -- In February 1997, the Financial Accounting
Standards Board (the "FASB")issued Statement of Financial Accounting Standards
("SFAS") No. 128, Earnings per Share. This statement establishes standards for
computing and presenting earnings per share and requires, among other things,
dual presentation of basic and diluted earnings per share on the face of the
statement of operations. The statement is effective for financial statements for
periods ending after December 15, 1997. The Company will adopt SFAS No. 128 by
December 31, 1997 and does not expect the adoption to have a material impact on
its calculation of earnings per share.
The following represents the pro forma effect on earnings per share as
though SFAS No. 128 were adopted effective January 1, 1997:
EARNINGS PER SHARE (UNAUDITED)
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1997 1996 1997 1996
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Restated Restated
Net income (loss)................................ $ 2,621 $(2,934) $19,875 $15,378
As Reported:
Earnings (loss) per share ..................... $ 0.04 $ (0.05) $ 0.31 $ 0.24
Weighted average number of common
shares outstanding........................... 63,961 62,592 64,028 63,160
Pro Forma:
Earnings (loss) per share:
Basic...................................... $ 0.04 $ (0.05) $ 0.32 $ 0.25
Diluted.................................... $ 0.04 $ (0.05) $ 0.31 $ 0.24
Weighted average number of common
shares outstanding:
Basic...................................... 63,007 62,627 62,897 62,488
Diluted.................................... 64,295 62,627 64,423 64,602
</TABLE>
-7-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of financial statements.
Comprehensive income includes all changes in a company's equity, including,
among other things, foreign currency translation adjustments, notes receivable
from employee stock ownership plans and deferred gains (losses) on hedging
activities. In June 1997, the FASB also issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This statement establishes
standards for reporting information about operating segments in annual financial
statements and requires that enterprises report selected information about
operating segments in interim reports issued to shareholders. Both of these
statements are effective for financial statements for periods beginning after
December 15, 1997. As both SFAS No. 130 and 131 establish standards for
reporting and display, the Company does not expect the adoption of these
statements to have a material impact on its financial condition or results of
operations.
Note 2. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------- ---- ----------------------
(Amounts in Thousands) 1997 1996
----------------------- ----------------------
<S> <C> <C>
Cash paid during the period for: Restated
Interest, net of amount capitalized................................. $20,913 $21,528
Income taxes........................................................ $13,377 $ 9,481
</TABLE>
Note 3. Long-Term Debt
On June 17, 1997, the Company amended and restated its U.S. and
Canadian revolving credit facilities (the "Credit Facilities") to increase the
"Borrowing Base" from $550 million to $650 million, extend the maturity date
from December 31, 2002 to May 31, 2004 and reduce stated interest rate margins.
At June 30, 1997, the maximum commitment under the Credit Facilities was $550
million with immediately available unused commitments of approximately $250
million. The Credit Facilities bear interest, at Seagull's option, at various
market-sensitive rates plus an applicable margin or a competitive bid rate. The
amount of senior indebtedness the Company is permitted to incur under the
provisions of the Credit Facilities is subject to a "Borrowing Base" based on
the proved reserves of the Company's Oil and Gas Operations segment and the
financial performance of the Company's other business segments.
-8-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
Note 4. Canadian Properties
In June 1997, the Company announced that it had retained an investment
banking firm to assist the Company in exploring strategic alternatives regarding
its Canadian operating subsidiary, Seagull Energy Canada Ltd. The Company's
Canadian operations contributed $18.4 million and $15.9 million in revenue and
$2.3 million and $(2.3) million in income (loss) before taxes for the six months
ended June 30, 1997 and 1996, respectively. At June 30, 1997, the Company's
Canadian operations had assets less associated liabilities of $104 million.
Note 5. Commitments and Contingencies
Royalty Litigation -- Increasingly, royalty owners under oil and gas
leases are challenging valuation methodology and post-production deductions used
by producers. These cases have arisen because of the manner in which oil and gas
producers such as Seagull have begun to provide services that had previously
been provided by the interstate gas pipelines prior to the "unbundling" of gas
services. For example, in 1996, Seagull was sued in Anne K. Barnaby, et al. v.
Seagull Mid-South, Inc. This case is pending in state court of Latimer County,
Oklahoma. In this case, the plaintiffs seek additional royalties based upon the
deduction by Seagull of post-production costs, such as those related to
gathering, compression, dehydration and treating. In addition, the plaintiffs
have questioned the sales price used by Seagull as a basis for calculating
royalty to the extent that sales were made to Seagull's gas marketing
subsidiary. While Seagull intends to vigorously defend this case, the Company
cannot predict the outcome of these matters.
NorAm Litigation -- Seagull also was sued in NorAm Gas Transmission
Co., et al. v. Seagull Mid-South, Inc. The case relates to Seagull's termination
of a 1956 gas contract which provided for the sale of gas by Seagull from
certain wells in the Aetna Field in Arkansas for approximately $0.16 per Mcf.
NorAm Gas Transmission ("NorAm") has sought a declaratory judgment that the gas
contract remains in effect with respect to these wells or, in the alternative,
money damages. Since the termination by Seagull of the gas contract, Seagull has
been selling the gas in question on the spot market. Seagull believes that it
had reasonable grounds for terminating the gas contract. NorAm has also sought a
declaratory judgment to the effect that certain additional wells in the Aetna
Field (including any new wells) would be subject to the $0.16 per Mcf price (the
"Additional Well Claim"). If NorAm were successful with the Additional Well
Claim, Seagull's operations in the Aetna Field would be materially affected in
an adverse manner. The current estimate of potential loss in these matters
ranges from zero to $91 million plus attorneys' fees. The NorAm case is
currently scheduled for trial in late 1997 in District Court in Harris County,
Texas. While Seagull intends to vigorously defend this case, the Company cannot
determine the outcome of this case.
Gulf Coast Vacuum Site -- In 1993, the Environmental Protection Agency
("EPA") notified the Company that a subsidiary was a potentially responsible
party ("PRP") at the Gulf Coast Vacuum Services Superfund Site the "GCV Site")
in Vermilion Parish, Louisiana. Based upon the Company's investigation of this
-9-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
(Unaudited)
claim, the Company believes that the basis for its alleged liability is a series
of transactions between the Company's subsidiary and the operator of the GCV
Site that occurred during 1979 and 1980. While the EPA's cleanup cost
estimate of the GCV Site is in the range of $17 million, the Company believes
that its liability is unlikely to be material to its financial condition,
results of operations or cash flows because of the large number of PRPs at the
GCV Site and the relative amount of contamination, if any, that may have been
caused at the GCV Site by the disposal of wastes by the Company during 1979 and
1980.
Caddo Natural Gas Company Site -- The Company was notified by the
Louisiana Department of Environmental Quality on March 20, 1996, that one of the
Company's wholly owned subsidiaries is a PRP in a state Superfund site known as
the Caddo Natural Gas Company Site. This site is reported to be contaminated
with low levels of PCB, an additive used in lubricating oils prior to the 1980s.
During the first quarter of 1997, the Company signed a settlement agreement
whereby Seagull would pay a portion of the cleanup costs for the Caddo Natural
Gas Company Site. Seagull's share of the cleanup costs is expected to be
approximately $150,000.
Comstock Mill Site -- On February 21, 1996, the United States
Department of Interior Bureau of Land Management ("BLM") sent a letter to
Houston Oil & Minerals Corporation ("HO&M"), a wholly owned subsidiary of
Seagull, requesting HO&M to prepare and submit a plan for sampling and analyzing
groundwater at a former mining operation located near Virginia City, Nevada (the
"Comstock Mill Site"). The basis for the BLM's request was the alleged operation
of the Comstock Mill Site by HO&M between 1978 and 1982. Pursuant to an
indemnity provision in the stock purchase agreement by which Seagull acquired
HO&M in 1988 (the "HO&M Purchase Agreement"), Seagull tendered the BLM's letter
to Tenneco Inc. ("Tenneco") with a demand for indemnity and notified the BLM
that Tenneco would respond to the BLM letter on behalf of HO&M. The BLM has also
indicated that Tenneco and HO&M might be required to address cyanide
contamination of groundwater at the Comstock Mill Site by separate action of the
Nevada Division of Environmental Protection. Seagull believes that any liability
associated with the Comstock Mill Site is the responsibility of Tenneco or its
successors in liability pursuant to the HO&M Purchase Agreement.
Other -- The Company is a party to other ongoing litigation in the
normal course of business. Management regularly analyzes current information
and, as necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. While the outcome of lawsuits or other proceedings
against the Company cannot be predicted with certainty, management believes that
the effect on its financial condition, results of operations and cash flows, if
any, will not be material.
-10-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion is intended to assist in an understanding of
the Company's financial position and results of operations for each of the
periods indicated. The Company's accompanying unaudited financial statements and
the notes thereto and the consolidated financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1996
contain detailed information that should be referred to in conjunction with the
following discussion.
RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues: Restated Restated
Oil and gas operations......................... $105,406 $ 96,586 $230,410 $197,731
Alaska transmission and distribution........... 16,774 15,703 51,343 51,133
-------------- ------------- ------------- --------------
$122,180 $112,289 $281,753 $248,864
============== ============= ============= ==============
Operating Profit:
Oil and gas operations......................... $ 19,681 $ 16,721 $ 58,760 $ 46,599
Alaska transmission and distribution........... 1,971 2,023 12,437 13,767
Corporate...................................... (3,841) (5,128) (6,780) (9,375)
-------------- ------------- ------------- --------------
$ 17,811 $ 13,616 $ 64,417 $ 50,991
============== ============= ============= ==============
Net income (loss)................................ $ 2,621 $ (2,934) $ 19,875 $ 15,378
Earnings (loss) per share........................ $ 0.04 $ (0.05) $ 0.31 $ 0.24
Weighted average number of common
shares outstanding............................. 63,961 62,592 64,028 63,160
Net cash provided by operating
activities before changes in
operating assets and liabilities............... $ 50,836 $ 46,209 $123,949 $108,747
Net cash provided by operating
activities..................................... $ 52,479 $ 73,254 $125,994 $125,387
</TABLE>
Net income increased $5.6 million and $4.5 million, respectively for
the three and six months ended June 30, 1997 versus the prior year. These
increases were primarily due to the increase in operating profit and decrease in
interest expense, which were partially offset by an increase in income taxes.
The increase in operating profit was primarily due to significant increases in
international oil production and decreases in dry hole expense and general and
administrative expense. The six months ended June 30, 1997 also benefits from
increases in domestic and Canadian natural gas prices.
-11-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
OIL AND GAS OPERATIONS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues: Restated Restated
Natural gas............................. $ 68,219 $73,158 $153,719 $145,826
Oil and NGL............................. 32,411 17,559 63,234 34,444
Pipeline and marketing.................. 4,776 5,869 13,457 17,461
--------------- --------------- --------------- ---------------
105,406 96,586 230,410 197,731
--------------- --------------- --------------- ---------------
E&P operating expenses.................... 29,241 24,529 59,124 47,984
Pipeline and marketing
expenses................................ 6,289 5,813 13,980 11,251
Exploration charges....................... 7,346 13,732 16,299 20,462
Depreciation, depletion and
amortization............................ 42,849 35,791 82,247 71,435
--------------- -------------- --------------- ---------------
Operating profit........................ $ 19,681 $16,721 $ 58,760 $ 46,599
=============== =============== =============== ===============
</TABLE>
With the purchase of two Egyptian concessions from units of Exxon
Corporation (the "Esso Suez Acquisition") in September 1996, and the October
1996 merger with Global Natural Resources Inc., Seagull's operations gained both
a significant international component and an increase in oil production as a
percentage of the total production. The $3 million and $12 million increases in
the operating profit of the Oil and Gas Operations ("O&G") segment for the
second quarter and the first half of 1997, respectively, were principally due to
the resulting five-fold increase in oil production in Egypt. Increases in
Egyptian oil production accounted for just over $13 million and $23 million of
the total increase in revenue for the second quarter and the six months of 1997,
respectively, as Seagull realized contributions from the East Zeit concession,
one of two concessions purchased in the Esso Suez Acquisition, and as additional
production facilities became operational at the Company's Qarun concession. The
six months ended June 30, 1997 also benefited from a 12% increase in domestic
natural gas prices.
The domestic natural gas price increase from $2.07 per Mcf for the six
months ended June 30, 1996 to $2.32 per Mcf for the first half of 1997 accounted
for approximately $16 million of the overall increase in natural gas revenue.
Additionally, the $0.44 per Mcf increase in Canadian natural gas prices over the
same period accounted for approximately $4 million of the overall increase in
revenue. Ultimately, U.S. and Canadian natural gas revenues increased only $7
million for the first half of 1997 as the increase related to higher prices was
partially offset by lower production and Canadian royalties increasing in
tandem with prices. This lower production was principally the result of normal
production declines from developed properties combined with the impact of
substantially lower development expenditures in late 1994 and all of 1995.
Natural gas revenues decreased $5 million from the second quarter of 1996 to
1997 primarily as a result of lower domestic gas prices and lower production due
to the reasons discussed above.
-12-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
The Company recorded as a reduction of revenues $7.7 million and $7.3
million related to commodity hedging activities for the six months ended June
30, 1997 and 1996, respectively, and as a reduction of revenues $0.2 million and
$3.8 million for the second quarter of 1997 and 1996, respectively. While
substantially all commodity hedges for equity production were settled by March
31, 1997, the Company has commodity hedges in place as required by the monetary
production payment (related to the 1995 sale of the Company's Section 29 tax
credit-bearing properties) for approximately 12 MMcf per day through December
1998.
EXPLORATION AND PRODUCTION OPERATING DATA
(Amounts in thousands except per unit data)
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------------------------------------
Revenues Net Daily Production Unit Price
1997 1996 1997 1996 1997 1996
------------ ------------- ------------ ------------- ------------ -------------
Restated Restated Restated
<S> <C> <C> <C> <C> <C> <C>
Gas Sales (1):
Domestic............ $57,696 $63,339 310.7 327.8 2.04 2.12
Canada ............. 6,217 5,818 51.1 53.1 1.34 1.20
Cote d'Ivoire....... 922 720 5.7 4.6 1.78 1.70
Indonesia........... 3,365 3,281 10.3 10.8 3.58 3.33
Other ............. 19 - 0.2 - 0.99 -
------------ ------------- ------------ ------------- ------------ ------------
$68,219 $73,158 378.0 396.3 1.98 2.03
============ ============= ============ ============= ============ ============
Oil and NGL Sales(2):
Domestic............ $ 8,181 $ 7,029 5,085 4,180 17.68 18.48
Canada ............. 1,134 1,297 857 975 14.54 14.62
Egypt............... 14,610 2,869 9,241 1,634 17.37 19.30
Cote d'Ivoire....... 2,084 2,248 1,264 1,376 18.12 17.95
Tatarstan........... 6,081 3,861 5,139 2,884 13.00 14.71
Indonesia........... 298 249 149 145 22.00 18.90
Other ............. 23 6 16 5 16.02 11.74
------------ ------------- ------------ ------------- ----------- -------------
$32,411 $17,559 21,751 11,199 16.37 17.23
============ ============= ============ ============= =========== =============
</TABLE>
(1) Net Daily Production in MMcf per day; Unit Price in $ per Mcf.
(2) Net Daily Production in Bbl per day; Unit Price in $ per Bbl.
-13-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
EXPLORATION AND PRODUCTION OPERATING DATA
(Amounts in thousands except per unit data)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------------------------------
Revenues Net Daily Production Unit Price
1997 1996 1997 1996 1997 1996
------------- --------------- ----------- ------------- ---------- -------------
Restated Restated Restated
<S> <C> <C> <C> <C> <C> <C>
Gas Sales (1):
Domestic............ $128,569 $123,924 306.7 328.7 2.32 2.07
Canada ............. 15,707 13,188 49.6 55.4 1.75 1.31
Cote d'Ivoire....... 1,745 1,415 5.3 4.5 1.83 1.71
Indonesia........... 7,659 7,299 12.0 12.1 3.53 3.30
Other ............. 39 - 0.2 - 1.00 -
------------- --------------- ----------- ------------- ---------- -------------
$153,719 $145,826 373.8 400.7 2.28 2.00
============= =============== =========== ============= ========== =============
Oil and NGL Sales(2):
Domestic............ $ 15,043 $ 14,215 4,383 4,447 18.96 17.57
Canada ............. 2,677 2,670 867 979 17.06 14.98
Egypt............... 28,588 4,957 8,555 1,432 18.46 19.01
Cote d'Ivoire....... 4,847 5,060 1,356 1,504 19.75 18.49
Tatarstan........... 11,264 7,066 4,281 2,795 14.54 13.89
Indonesia........... 764 461 203 134 20.75 18.83
Other ............. 51 15 16 7 17.71 12.77
------------- --------------- ----------- ------------- ---------- -------------
$ 63,234 $ 34,444 19,661 11,298 17.77 16.75
============= =============== =========== ============= ========== =============
</TABLE>
(1) Net Daily Production in MMcf per day; Unit Price in $ per Mcf.
(2) Net Daily Production in Bbl per day; Unit Price in $ per Bbl.
E&P operating expenses per BOE increased for the second quarter from
$3.49 in 1996 to $3.79 in 1997 and from $3.38 for the six months ended June 30,
1996 to $3.99 in 1997 as a result of (i) increased domestic production taxes as
natural gas prices increased, (ii) increased domestic workover expenses, and
(iii) higher average operating costs per BOE at the East Zeit concession as
compared to the Company's other operations.
Exploration charges decreased 47% and 20% for the quarter and the six
months ended June 30, 1997, respectively, principally due to decreases in dry
hole costs of approximately $5.4 million and $5.9 million, respectively.
The increase in E&P depreciation, depletion and amortization ("DD&A")
expense of $0.53 per BOE for the first half of 1997 combined with the increase
in Egyptian production to produce 20% and 16% increases in DD&A expense for the
O&G segment for the three and six months ended June 30, 1997, respectively. A
change in the mix of the properties being produced domestically and a higher
DD&A rate for the East Zeit concession as compared to the Company's other
operations were the primary factors involved in the increase in the DD&A rate
per equivalent unit of production.
-14-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
ALASKA TRANSMISSION AND DISTRIBUTION
(Amounts in Thousand Except Per Unit Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues.......................................... $16,774 $15,703 $51,343 $51,133
Cost of gas sold.................................. 7,244 6,257 23,966 22,457
------------ ------------- ------------ -------------
Gross margin.................................... 9,530 9,446 27,377 28,676
Operations and maintenance expense................ 5,475 5,385 10,772 10,827
Depreciation, depletion and amortization.......... 2,084 2,038 4,168 4,082
------------ ------------- ------------ -------------
Operating profit................................ $1,971 $ 2,023 $12,437 $13,767
============ ============= ============ =============
OPERATING DATA:
Degree days (1)................................. 1,571 1,470 5,291 5,823
Volumes (Bcf):
Gas sold...................................... 3.8 4.0 12.6 14.4
Gas transported............................... 4.9 4.6 11.2 9.9
------------ ------------- ------------ -------------
Combined...................................... 8.7 8.6 23.8 24.3
============ ============= ============ =============
Margins ($ per Mcf):
Gas sold...................................... 1.86 1.84 1.71 1.68
Gas transported............................... 0.50 0.45 0.51 0.47
Combined...................................... 1.09 1.10 1.15 1.18
</TABLE>
(1) A measure of weather severity calculated by subtracting the mean
temperature for each day from 650 degrees fahrenheit. More degree days equate to
colder weather.
Operating profit of the Alaska transmission and distribution segment
(ENSTAR Natural Gas Company, a division of the Company, and Alaska Pipeline
Company, a wholly owned subsidiary, (collectively referred to herein as "ENSTAR
Alaska")) for the six months ended June 30, 1997 decreased slightly from the
1996 period primarily as a result of lower volumes due to warmer weather in the
utility's service area and a slight decrease in ENSTAR Alaska's combined margin.
This segment's business is seasonal with approximately 65% of its
revenues earned in the first and fourth quarters of each year.
OTHER
General and administrative expenses decreased for both the three and
six months ended June 30, 1997 in comparison to 1996 primarily due to
efficiencies being realized from the Global Merger and decreased expenses
associated with compensation plans that are tied directly to the closing price
of Seagull's common stock. The Company's effective tax rate increased from
-15-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
49.1% for the first half of 1996 to 56.2% for the first half of 1997 primarily
due to the higher effective tax rates associated with the Company's
expanding international operations.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ---------------------------------
1997 1996 1997 1996
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Restated Restated
Exploration and production:
Leasehold.............................. $12,482 $ 3,384 $ 13,315 $ 5,347
Exploration............................ 23,740 21,589 45,577 30,255
Development............................ 40,979 21,479 70,750 35,019
--------------- --------------- -------------- --------------
77,201 46,452 129,642 70,621
Pipeline and marketing................... 8 - 45 -
--------------- --------------- -------------- --------------
Oil and gas operations................. 77,209 46,452 129,687 70,621
Alaska transmission and distribution.....
2,046 2,169 3,451 3,347
Corporate................................ 2,666 731 4,210 1,300
--------------- --------------- -------------- --------------
$81,921 $49,352 $137,348 $75,268
=============== =============== ============== ==============
</TABLE>
Seagull's capital expenditure program was designed to be consistent
with the Company's strategic objectives to achieve a greater balance between
additions from exploration, development and acquisitions than in preceding years
and grow oil and gas deliverability in 1998. To further meet those objectives,
in July 1997, Seagul's Board of Directors approved an increase in the capital
expenditures budget of $36 million to a total of $287 million, including just
over $270 million in E&P. More than 43% of this spending is targeted outside the
United States. As drilling activities increased substantially to meet these
objectives for 1997, E&P capital expenditures increased primarily in the
Company's domestic, Egyptian and Ivorian areas of operations.
On June 17, 1997, the Company amended and restated the Credit
Facilities to increase the "Borrowing Base" from $550 million to $650 million,
extend the maturity date from December 31, 2002 to May 31, 2004 and reduce
stated interest rate margins. At June 30, 1997, the maximum commitment under the
Credit Facilities was $550 million with immediately available unused commitments
of approximately $250 million. The Credit Facilities bear interest, at Seagull's
option, at various market-sensitive rates plus an applicable margin or a
competitive bid rate. The amount of senior indebtedness the Company is permitted
to incur under the provisions of the Credit Facilities is subject to a
"Borrowing Base" based on the proved reserves of the
-16-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
Item 2. Managements Discssion and Analysis of Financial Condition and
Results of Operations
Company's O&G segment and the financial performance of the Company's other
business segments.
Management believes that the Company's internally generated funds and
bank borrowing capabilities will be sufficient to finance current and forecasted
operations.
In June 1997, the Company announced that it had retained an investment
banking firm to assist the Company in exploring strategic alternatives regarding
its Canadian operating subsidiary, Seagull Energy Canada Ltd.
Defined Terms
Natural gas is stated herein in billion cubic feet ("Bcf"), million
cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural
gas liquids ("NGL") are stated in barrels ("Bbl") or thousand barrels ("MBbl").
MMcfe and Mcfe represent the equivalent of one million and one thousand cubic
feet of natural gas, respectively. Oil, condensate and NGL are converted to gas
at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy
content. MBOE and BOE represent one thousand barrels of oil equivalent and one
barrel of oil equivalent, respectively, with six Mcf of gas converted to one
barrel of liquid.
Forward Looking Statements
Item 2 of this document 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, as amended. Although Seagull
believes that its expectations are based upon reasonable assumptions, it can
give no assurance that its goals will be achieved. Important factors that could
cause actual results to differ materially from those in the forward looking
statements include the resolution of various litigation matters discussed
earlier, the result of the Company's search for strategic alternatives for its
Canadian properties, political developments in foreign countries, federal and
state regulatory developments, the timing and extent of changes in commodity
prices, the timing and extent of success in discovering, developing and
producing or acquiring oil and gas reserves and conditions of the capital and
equity markets during the periods covered by the forward looking statements.
-17-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on May 13,
1997, the shareholders voted to elect one director (Milton Carroll) to serve
until the 1999 Annual Meeting of Shareholders and five directors to serve until
the 2000 Annual Meeting of Shareholders, adopt an amendment to the Seagull
Energy Corporation Bylaws to increase the permitted number of directors and
amend the classified Board provisions and ratify the selection of KPMG Peat
Marwick LLP as independent auditors of the Company for the fiscal year ended
December 31, 1997. Votes cast were as follows:
<TABLE>
<CAPTION>
Broker
For Against Non-Votes Abstained
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Election as a Director of the Company of:
Milton Carroll.....................................52,483,683 - - 5,847,677
J. Evans Attwell...................................52,499,723 - - 5,831,637
Richard J. Burgess.................................52,486,375 - - 5,844,985
Barry J. Galt......................................52,495,608 - - 5,835,752
Dee S. Osborne.....................................52,499,439 - - 5,831,921
Sidney R. Petersen.................................52,488,143 - - 5,843,217
Adoption of the Amendment to the Bylaws..............48,675,515 9,589,023 - 66,822
Ratification of Selection of KPMG Peat
Marwick LLP as Independent Auditors for
1997................................................58,023,971 269,676 - 37,713
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
*4.1 Credit Agreement, U.S. $450 million Revolving Credit and Competitive
Bid Facility, dated June 17, 1997, among Seagull Energy Corporation,
The Chase Manhattan Bank, Individually and as Agent, and the other
Banks signatory hereto.
*4.2 Credit Agreement, U.S. $100 million Revolving Credit Facility, dated
June 17, 1997, among Seagull Energy Canada Ltd. and The Chase
Manhattan Bank of Canada, Individually and as Arranger and
Administrative Agent, The Bank of Nova Scotia, Individually and as
Paying Agent and Co-Agent, Canadian Imperial Bank of Commerce,
Individually and as Co-Agent, and the other Banks signatory hereto.
*#10.1 1997 Executive Incentive Plan.
*27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
- ---------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
-18-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: August 8, 1997
By: /s/ Gordon L.McConnell, Vice President and
Controller (Principal Accounting Officer)
Date: August 8, 1997
-19-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ---------------- ------------------------------------------------------------------------------ --------------
<S> <C> <C>
*4.1 Credit Agreement, U.S. $450 million Revolving Credit and
Competitive Bid Facility, dated June 17, 1997, among
Seagull Energy Corporation, The Chase Manhattan Bank,
Individually and as Agent, and the other Banks signatory
hereto.
*4.2 Credit Agreement, U.S. $100 million Revolving Credit
Facility, dated June 17, 1997, among Seagull Energy Canada
Ltd. and The Chase Manhattan Bank of Canada, Individually
and as Arranger and Administrative Agent, The Bank of Nova
Scotia, Individually and as Paying Agent and Co-Agent,
Canadian Imperial Bank of Commerce, Individually and as
Co-Agent, and the other Banks signatory hereto.
*#10.1 1997 Executive Incentive Plan.
*27.1 Financial Data Schedule.
</TABLE>
- ----------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
CREDIT AGREEMENT
$450,000,000 REVOLVING CREDIT
AND COMPETITIVE BID FACILITY
AMONG
SEAGULL ENERGY CORPORATION,
THE CHASE MANHATTAN BANK,
Individually and as Agent,
AND
THE OTHER BANKS SIGNATORY HERETO
June 17, 1997
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters..........................1
1.1 Certain Defined Terms.......................................1
1.2 Accounting Terms and Determinations........................24
1.3 Types of Loans.............................................25
1.4 Miscellaneous..............................................25
Section 2. Commitments; Borrowing Base Determinations;
Competitive Bid Facility...................................25
2.1 Committed Loans............................................25
2.2 Letters of Credit..........................................25
2.3 Reductions and Changes of Commitments......................28
2.4 Fees.......................................................28
2.5 Affiliates; Lending Offices................................29
2.6 Several Obligations........................................29
2.7 Notes......................................................29
2.8 Use of Proceeds............................................30
2.9 Borrowing Base Determinations..............................30
2.10 Competitive Bid Procedure..................................30
Section 3. Borrowings, Prepayments and Selection of Interest Rates....32
3.1 Borrowings.................................................32
3.2 Prepayments................................................33
3.3 Selection of Interest Rates................................34
Section 4. Payments of Principal and Interest.........................34
4.1 Repayment of Loans and Reimbursement Obligations...........34
4.2 Interest...................................................34
Section 5. Payments; Pro Rata Treatment; Computations, Etc............35
5.1 Payments...................................................35
5.2 Pro Rata Treatment.........................................36
5.3 Computations...............................................36
5.4 Minimum and Maximum Amounts................................36
5.5 Certain Actions, Notices, Etc..............................37
5.6 Non-Receipt of Funds by Agent..............................38
5.7 Sharing of Payments, Etc...................................38
Section 6. Yield Protection and Illegality............................39
6.1 Additional Costs...........................................39
(1)
<PAGE>
6.2 Limitation on Types of Loans...............................40
6.3 Illegality.................................................41
6.4 Substitute Alternate Base Rate Loans.......................41
6.5 Compensation...............................................42
6.6 Additional Costs in Respect of Letters of Credit...........42
6.7 Capital Adequacy...........................................43
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination.........................................43
Section 7. Conditions Precedent.......................................44
7.1 Initial Loans..............................................44
7.2 Initial and Subsequent Loans...............................46
Section 8. Representations and Warranties.............................47
8.1 Corporate Existence........................................47
8.2 Corporate Power and Authorization..........................47
8.3 Binding Obligations........................................47
8.4 No Legal Bar or Resultant Lien.............................47
8.5 No Consent.................................................48
8.6 Financial Condition........................................48
8.7 Investments and Guaranties.................................48
8.8 Liabilities and Litigation.................................48
8.9 Taxes and Governmental Charges.............................49
8.10 Title to Properties........................................49
8.11 Defaults...................................................49
8.12 Location of Businesses and Offices.........................49
8.13 Compliance with Law........................................49
8.14 Margin Stock...............................................50
8.15 Subsidiaries...............................................50
8.16 ERISA......................................................50
8.17 Investment Company Act.....................................50
8.18 Public Utility Holding Company Act.........................51
8.19 Environmental Matters......................................51
8.20 Claims and Liabilities.....................................52
8.21 Solvency...................................................52
Section 9. Affirmative Covenants......................................52
9.1 Financial Statements and Reports...........................52
9.2 Officers' Certificates.....................................54
9.3 Taxes and Other Liens......................................55
9.4 Maintenance................................................55
9.5 Further Assurances.........................................56
(2)
9.6 Performance of Obligations.................................56
9.7 Reimbursement of Expenses..................................56
9.8 Insurance..................................................57
9.9 Accounts and Records.......................................57
9.10 Rights of Inspection.......................................58
9.11 Notice of Certain Events...................................58
9.12 ERISA Information and Compliance...........................59
Section 10. Negative Covenants.........................................60
10.1 Debts, Guaranties and Other Obligations....................60
10.2 Liens......................................................63
10.3 Investments, Loans and Advances............................66
10.4 Dividend Payment Restrictions..............................68
10.5 Mergers and Sales of Assets................................68
10.6 Proceeds of Notes..........................................69
10.7 ERISA Compliance...........................................69
10.8 Amendment of Certain Documents.............................69
10.9 Tangible Net Worth.........................................69
10.10 Company Debt/Capitalization Ratio..........................70
10.11 EBITDAX/Interest Ratio.....................................70
10.12 Nature of Business.........................................70
10.13 Futures Contracts..........................................70
10.14 Covenants in Other Agreements..............................70
Section 11. Defaults...................................................71
11.1 Events of Default..........................................71
11.2 Collateral Account.........................................74
11.3 Preservation of Security for Unmatured Reimbursement
Obligations................................................74
11.4 Right of Setoff............................................74
Section 12. Agent......................................................75
12.1 Appointment, Powers and Immunities.........................75
12.2 Reliance by Agent..........................................76
12.3 Defaults...................................................76
12.4 Rights as a Bank...........................................77
12.5 Indemnification............................................77
12.6 Non-Reliance on Agent and Other Banks......................77
12.7 Failure to Act.............................................78
12.8 Resignation or Removal of Agent............................78
(3)
<PAGE>
Section 13. Miscellaneous..............................................78
13.1 Waiver.....................................................78
13.2 Notices....................................................79
13.3 Indemnification............................................79
13.4 Amendments, Etc............................................80
13.5 Successors and Assigns.....................................80
13.6 Limitation of Interest.....................................83
13.7 Survival...................................................85
13.8 Captions...................................................85
13.9 Counterparts...............................................85
13.10 Governing Law..............................................85
13.11 Severability...............................................86
13.12 Chapter 15 Not Applicable..................................86
13.13 Confidential Information...................................86
13.14 Tax Forms..................................................87
13.15 Amendment and Restatement..................................87
13.16 Intercreditor Agreement....................................87
EXHIBITS:
Exhibit A Oil and Gas Subsidiaries
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Request for Extension of Credit
Exhibit D Existing Competitive Loans
Exhibit E Form of Committed Note
Exhibit F Subsidiaries (with Addresses)
Exhibit G Form of Compliance Certificate
Exhibit H Assignment and Acceptance
Exhibit I Form of Engineering Report Certificate
Exhibit J Parameters Interest Rate Protection and Commodities Futures
Programs
Exhibit K Form of Competitive Bid Request
Exhibit L Form of Notice to Banks of Competitive Bid Request
Exhibit M Form of Competitive Bid
Exhibit N Form of Competitive Bid Administrative Questionnaire
Exhibit O Form of Competitive Note
(4)
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of June 17, 1997 (the "Effective
Date"), is by and among SEAGULL ENERGY CORPORATION (the "Company"), a
corporation duly organized and validly existing under the laws of the State of
Texas; each of the banks which is or which may from time to time become a
signatory hereto (individually, a "Bank" and, collectively, the "Banks"); THE
CHASE MANHATTAN BANK ("Chase"), as agent for the Banks (in such capacity,
together with its successors in such capacity, "Agent").
The parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.1 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Additional Costs" shall have the meaning ascribed to such term in
Section 6.1 hereof.
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
stepchildren, grandchildren, nephews and nieces) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"Agreement" shall mean this Credit Agreement, as the same may be
amended, modified, restated or supplemented from time to time.
"Alaskan Gas Component Value" shall mean (A) prior to the initial
Borrowing Base Determination, $75,000,000 and (B) thereafter, the amount by
which (i) the product of 5-1/2 times an amount equal to (I) the average annual
EBITDA of ENSTAR Alaska on a consolidated basis for the three year period ended
on the most recent December 31st plus (II) 70% of the average annual management
fees paid to the Company by ENSTAR Alaska during such three year period minus
(III) average annual Capital Expenditures attributable to ENSTAR Alaska in
accordance with GAAP and on a consolidated basis during such three year period
exceeds (ii) the Alaskan Gas Debt determined as of (x) the preceding January 1
(in the case of a Scheduled Redetermination)
1
<PAGE>
or (y) the last day of the second month prior to the month in which the
effective date of the Borrowing Base Determination occurs (in the case of a
Requested Redetermination).
"Alaskan Gas Debt" shall mean the sum of (i) Funded Indebtedness of
ENSTAR Alaska plus (ii) Current Maturities of ENSTAR Alaska plus (iii)
Redemption Obligations of ENSTAR Alaska plus (iv) the highest amount of Short
Term Borrowings outstanding during the Short Term Borrowings Measuring Period.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
to the higher of (a) the Prime Rate in effect on such day or (b) 1/2 of 1% plus
the Federal Funds Rate in effect for such day (rounded upwards, if necessary, to
the nearest 1/16th of 1%). For purposes hereof, "Federal Funds Rate" shall mean,
for any period, a fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three Federal funds brokers of recognized standing selected by it. For
purposes of this Agreement, any change in the Alternate Base Rate due to a
change in the Federal Funds Rate shall be effective on the effective date of
such change in the Federal Funds Rate. If for any reason Agent shall have
determined (which determination shall be conclusive and binding, absent manifest
error) that it is unable to ascertain the Federal Funds Rate for any reason,
including, without limitation, the inability or failure of Agent to obtain
sufficient bids or publications in accordance with the terms hereof, the
Alternate Base Rate shall be the Prime Rate until the circumstances giving rise
to such inability no longer exist. For the purposes hereof, "Prime Rate" shall
mean the prime rate as announced from time to time by Agent, and thereafter
entered in the minutes of Agent's Loan and Discount Committee. Without notice to
the Company or any other Person, the Prime Rate shall change automatically from
time to time as and in the amount by which said prime rate shall fluctuate. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. Agent may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate. For purposes
of this Agreement any change in the Alternate Base Rate due to a change in the
Prime Rate shall be effective on the date such change in the Prime Rate is
announced.
"Alternate Base Rate Loans" shall mean Loans which bear interest at a
rate based upon the Alternate Base Rate.
"APC" shall mean Alaska Pipeline Company, an Alaska corporation, a
Subsidiary of the Company.
"APC Long Term Financing Documents" shall mean that certain Inducement
Agreement and that certain Note Agreement (together with the Notes, as defined
therein), each dated as of
2
<PAGE>
May 14, 1992, by and among the Company, Aid Association for Lutherans, The
Equitable Life Assurance Society of the United States, Equitable Variable Life
Insurance Company, Provident Life and Accident Insurance Company and Teachers
Insurance & Annuity Association of America, any documentation executed in
connection with any renewal, extension or rearrangement of the Indebtedness that
is the subject of the foregoing documents, the Gas Sales Contract, the
Intercompany Mortgage, as defined in the above-mentioned Note Agreement, and any
documents executed in replacement of any of the foregoing documents, if any, and
only if Agent has received notice thereof pursuant to Section 10.8.
"Applicable Lending Office" shall mean, for each Bank and for each Type
of Loan, such office of such Bank (or of an affiliate of such Bank) as such Bank
may from time to time specify to Agent and the Company as the office by which
its Loans of such Type are to be made and/or issued and maintained.
"Applicable Margin" shall mean, on any day, (i) zero percent (0%) with
respect to any Alternate Base Rate Loan and (ii) with respect to any Eurodollar
Loan, the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the Rating as of the close of
business on the preceding Business Day:
<TABLE>
<CAPTION>
Eurodollar
Loan
Applicable
Rating Margin
<S> <C>
Baa2 and higher 0.20
BBB-/Baa3 0.275
BB+/Ba1 0.40
BB/Ba2 and lower 0.45
</TABLE>
Notwithstanding the foregoing, at all times that a Borrowing Base Deficiency
shall exist and is continuing for more than 30 days, the Applicable Margins
provided for in this definition shall each be increased by adding 1.00%.
"Applications" shall mean all applications and agreements for Letters
of Credit, or similar instruments or agreements, now or hereafter executed by
any Person in connection with any Letter of Credit now or hereafter issued or to
be issued.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as
amended, and any successor statute.
3
<PAGE>
"Beluga Financing Documents" shall mean that certain Inducement
Agreement and that certain Note Agreement (together with the Notes, as defined
therein), each dated June 17, 1985, and amended as of June 15, 1990, by and
among the Company and The Equitable Life Assurance Society of the United States
and the Travelers Insurance Company, any documentation executed in connection
with any renewal, extension or rearrangement of the Indebtedness that is the
subject of the foregoing documents, the Gas Sales Contract, the Intercompany
Mortgage, as defined in the above-mentioned Note Agreement, and any documents
executed in replacement of any of the foregoing documents, if and only if Agent
has received notice thereof pursuant to Section 10.8.
"Borrowing Base" shall mean, as at any date, the sum of
(i) the Oil and Gas Reserves Component Value plus
(ii) the Alaskan Gas Component Value.
If the Company fails to provide a current Borrowing Base Certificate as required
by Section 9.2(c), two (2) Business Days after notice to the Company the
Majority Banks may determine the Alaskan Gas Component Value comprising the
Borrowing Base from time to time in their reasonable discretion, taking into
account all information reasonably available to them, and the Alaskan Gas
Component Value from time to time so determined shall be the Alaskan Gas
Component Value for all purposes of this Agreement until a current Borrowing
Base Certificate is furnished.
"Borrowing Base Certificate" shall mean a certificate with respect to
the Alaskan Gas Component Value, duly executed by the chief executive officer,
chief financial officer, treasurer or controller of the Company, appropriately
completed and in substantially the form of Exhibit B hereto.
"Borrowing Base Debt" shall mean, without duplication, the sum of (i)
borrowed money Indebtedness (including without limitation contingent obligations
in respect of borrowed money Indebtedness under any Guarantee or letter of
credit) plus (ii) the "Maximum Outstanding Amount" in effect from time to time
under the Canadian Facility plus (iii) Redemption Obligations payable within
five (5) years after any applicable determination date, together with
obligations (excluding volumetric obligations with respect to pre-sales of
Hydrocarbon production which have already been accounted for in the calculation
of the Borrowing Base) payable out of Hydrocarbon production (except
Indebtedness permitted by Sections 10.1(l) and (s) hereof) but only to the
extent the reserves from which the aforementioned Hydrocarbon production
payments are made are Included Reserves; provided, however, that Borrowing Base
Debt shall not include the Loans, the Letter of Credit Liabilities or any
Subordinated Debt and shall not include any borrowed money Indebtedness (or
contingent liabilities in respect thereto) incurred after the date hereof with
an original bullet maturity of twenty (20) years or more.
4
<PAGE>
"Borrowing Base Deficiency" shall mean the amount by which (a) the sum
of (i) the aggregate outstanding amount of all Revolving Credit Obligations plus
(ii) the aggregate outstanding amount of all Borrowing Base Debt of the Company
and its Subsidiaries (other than ENSTAR Alaska) exceeds (b) the then current
Borrowing Base.
"Borrowing Base Deficiency Notification Date" shall mean the date on
which any notice of a Borrowing Base Deficiency is received by the Company.
"Borrowing Base Determination" shall mean a Scheduled Redetermination
or a Requested Redetermination.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas or New York, New
York, and where such term is used in the definition of "Quarterly Date" in this
Section 1.1 or if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.
"Canadian Facility" shall mean that certain Credit Agreement dated
concurrently herewith executed by and among Seagull Energy Canada Ltd., The
Chase Manhattan Bank of Canada, as Arranger and as Agent, The Bank of Nova
Scotia, as Paying Agent and as Co-Agent, Canadian Imperial Bank of Commerce, as
Co-Agent, and certain banks therein named, as amended by the Intercreditor
Agreement, and as the same may be further amended or modified from time to time.
"Capital Expenditures" shall mean expenditures in respect of fixed or
capital assets (calculated in accordance with GAAP) excluding expenditures for
the restoration, repair or replacement of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent financed by the
proceeds of an insurance policy. Expenditures in respect of replacements and
maintenance consistent with the business practices of the Company and its
Subsidiaries in respect of plant facilities, machinery, fixtures and other like
capital assets utilized in the ordinary course of business are not Capital
Expenditures to the extent such expenditures are not capitalized in preparing a
balance sheet of the Company in accordance with GAAP.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
5
<PAGE>
"Capitalization" shall mean an amount equal to the sum of (a) Funded
Indebtedness of the Company and its Subsidiaries on a consolidated basis plus
(b) Current Maturities of the Company and its Subsidiaries on a consolidated
basis plus (c) borrowed money Indebtedness of the Company and its Subsidiaries
on a consolidated basis that is not Funded Indebtedness plus (d) Indebtedness of
the Company and its Subsidiaries on a consolidated basis constituting
obligations payable out of Hydrocarbons (except such obligations payable solely
by recourse to properties not included in the Borrowing Base) plus (e) the
Tangible Net Worth of the Company and its Subsidiaries on a consolidated basis.
"Change of Control" shall mean a change resulting when any Unrelated
Person or any Unrelated Persons acting together which would constitute a Group
together with any Affiliates or Related Persons thereof (in each case also
constituting Unrelated Persons) shall at any time either (i) Beneficially Own
more than 50% of the aggregate voting power of all classes of Voting Stock of
the Company or (ii) succeed in having sufficient of its or their nominees
elected to the Board of Directors of the Company such that such nominees, when
added to any existing director remaining on the Board of Directors of the
Company after such election who is an Affiliate or Related Person of such
Unrelated Person or Group, shall constitute a majority of the Board of Directors
of the Company. As used herein (a) "Beneficially Own" means "beneficially own"
as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or
any successor provision thereto; provided, however, that, for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates until such tendered securities are accepted for
purchase or exchange; (b) "Group" means a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended; (c) "Unrelated Person" means
at any time any Person other than the Company or any Subsidiary and other than
any trust for any employee benefit plan of the Company or any Subsidiary of the
Company; (d) "Related Person" of any Person shall mean any other Person owning
(1) 5% or more of the outstanding common stock of such Person or (2) 5% or more
of the Voting Stock of such Person; and (e) "Voting Stock" of any Person shall
mean capital stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
"Chapter One" shall mean Chapter One of the Texas Credit Code, as in
effect on the date the document using such term was executed.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
"Commitment Percentage" shall mean, as to any Bank, the percentage
equivalent of a fraction the numerator of which is the amount of such Bank's
Commitment and the denominator of which is the aggregate amount of the
Commitments of all Banks.
6
<PAGE>
"Commitment" shall mean, as to any Bank, the obligation, if any, of
such Bank to make Committed Loans and incur Letter of Credit Liabilities in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount, if any, set forth opposite such Bank's name on the signature pages
hereof under the caption "Commitment" (as the same may be reduced from time to
time pursuant to Section 2.3).
"Committed Loans" shall mean the loans provided for in Section 2.1
hereof.
"Committed Notes" shall mean the promissory notes of the Company
evidencing the Committed Loans, in the form of Exhibit E hereto, together with
all renewals, extensions, modifications and replacements thereof and
substitutions therefor.
"Company Report" shall mean one or more reports, in form satisfactory
to Agent and the Majority Banks, prepared by petroleum engineers employed by the
Company or its Subsidiaries, which shall evaluate at least 85% of the present
value of the Included Reserves effective as of the immediately preceding July 1.
Each Company Report shall set forth production, drilling and acquisition
information and other information requested by Agent and shall be based upon
updated economic assumptions acceptable to Agent and approved by the Majority
Banks at the beginning of the applicable year.
"Competitive Bid" shall mean an offer by a Bank to make a Competitive
Loan pursuant to Section 2.10 hereof.
"Competitive Bid Administrative Questionnaire" shall mean a
questionnaire substantially in the form of Exhibit N hereto.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a
Bank pursuant to Section 2.10 hereof, the fixed rate of interest, in each case,
offered by the Bank making such Competitive Bid.
"Competitive Bid Request" shall have the meaning ascribed to such term
in Section 2.10 hereof.
"Competitive Loans" shall mean the Existing Competitive Loans and loans
provided for in Section 2.10 hereof.
"Competitive Notes" shall mean the promissory notes of the Company
evidencing the Competitive Loans, in the form of Exhibit O hereto, together with
all renewals, extensions, modifications and replacements thereof and
substitutions therefor.
"Cover" for Letter of Credit Liabilities shall be effected by paying to
Agent immediately available funds, to be held by Agent in a collateral account
maintained by Agent at its Principal
7
<PAGE>
Office and collaterally assigned as security for the financial accommodations
extended pursuant to this Agreement using documentation satisfactory to Agent,
in an amount equal to any required prepayment. Such amount shall be retained by
Agent in such collateral account until such time as (x) in the case of Cover
being provided pursuant to Section 2.2(a), the applicable Letter of Credit shall
have expired and Reimbursement Obligations, if any, with respect thereto shall
have been fully satisfied or (y) in the case of Cover being provided pursuant to
Section 3.2(b)(1), the outstanding principal amount of all Revolving Credit
Obligations is not greater than the aggregate amount of the Commitments.
"Current Maturities" shall mean, on any day on which Current Maturities
are calculated, the sum of (a) scheduled principal payments on Funded
Indebtedness which are payable within one (1) year after such day plus (b) the
principal component of payments required to be made with respect to Capital
Lease Obligations within one (1) year of said date plus (c), to the extent not
included above, all items which in accordance with GAAP would be classified as
current maturities of long term debt.
"Debt/Capitalization Ratio" shall mean the ratio of (a) the sum of
Funded Indebtedness of the Company and its Subsidiaries on a consolidated basis
plus Current Maturities of the Company and its Subsidiaries on a consolidated
basis plus borrowed money Indebtedness of the Company and its Subsidiaries on a
consolidated basis that is not Funded Indebtedness plus Indebtedness of the
Company and its Subsidiaries on a consolidated basis constituting obligations
payable out of Hydrocarbons (except such obligations payable solely by recourse
to properties not included in the Borrowing Base) to (b) Capitalization.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
"Disclosure Statement" shall mean the Disclosure Statement dated
December 31, 1992 delivered to Agent by the Company.
"Dividend Payment" shall mean, with respect to any Person, dividends
(in cash, property or obligations) on, or other payments or distributions on
account of, or the redemption of, or the setting apart of money for a sinking or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, any shares of any class of capital stock of such Person, or the
exchange or conversion of any shares of any class of capital stock of such
Person for or into any obligations of or shares of any other class of capital
stock of such Person or any other property, but excluding dividends to the
extent payable in, or exchanges or conversions for or into, shares of common
stock of the Company or options or warrants to purchase common stock of the
Company.
"Dollars" and "$" shall mean lawful money of the United States of
America.
8
<PAGE>
"EBITDA" shall mean net earnings (excluding gains and losses on sales
and retirement of assets, non-cash write downs, charges resulting from
accounting convention changes) before deduction for federal and state taxes,
interest expense (including capitalized interest), operating lease rentals or
depreciation, depletion and amortization expense, all determined in accordance
with GAAP.
"EBITDAX" shall mean net earnings (excluding gains and losses on sales
and retirement of assets, non-cash write downs, charges resulting from
accounting convention changes and deductions for dry hole expenses) before
deduction for federal and state taxes, interest expense (including capitalized
interest), operating lease rentals or depreciation, depletion and amortization
expense, all determined in accordance with GAAP.
"EBITDAX/Interest Ratio" shall mean the ratio of (a) EBITDAX of the
Company and its Subsidiaries on a consolidated basis to (b) operating lease
rentals and interest expense (including capitalized interest but excluding
non-cash amortization of deferred financing costs) on all Indebtedness of the
Company and its Subsidiaries on a consolidated basis for any twelve-month period
ending on the last day of every calendar quarter during the period with respect
to which the EBITDAX/Interest Ratio is to be calculated.
"Engineering Report" shall mean one or more reports, in form
satisfactory to Agent and the Majority Banks, prepared by one or more
independent consulting firms acceptable to Agent and the Majority Banks in their
reasonable business judgment, which shall evaluate at least 85% of the present
value of the Included Reserves as of the immediately preceding January 1. Each
Engineering Report shall set forth a projection of the future rate of
production, Net Proceeds of Production and present value of the Net Proceeds of
Production, in each case based upon economic assumptions acceptable to Agent and
approved by the Majority Banks.
"ENSTAR Alaska" shall collectively mean (i) the gas distribution system
in south-central Alaska known as ENSTAR Natural Gas Company, a division of the
Company, and (ii) APC.
"Environmental Claim" means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
9
<PAGE>
"Environmental Liabilities" includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
"Environmental Permit" means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into 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 or Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations and interpretations by
the Internal Revenue Service or the Department of Labor thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is a member of a group of which the Company is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurodollar Base Rate" shall mean, with respect to any Interest Period
for any Eurodollar Loan, the lesser of (A) the rate per annum (rounded upwards,
if necessary, to the nearest 1/16th of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall not
be available, any successor or similar service as may be selected by Agent and
the Company) as of 11:00 a.m., Houston, Texas time (or as soon thereafter as
practicable) on the day two Business Days prior to the first day of such
Interest Period for Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the Eurodollar
Loan to which such Interest Period relates or (B) the Highest Lawful Rate. If
none of such Telerate Page 3750 nor any successor or similar service is
available, then the "Eurodollar Base Rate" shall mean, with respect to any
Interest Period for any applicable Eurodollar Loan, the lesser of (A) the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%)
determined by Agent to be the average of the rates quoted by the Reference Banks
at approximately 11:00 a.m., Houston, Texas time (or as soon thereafter as
practicable) on the day two Business Days prior to the first day of such
Interest Period for the offering by such Reference Banks to leading banks in the
London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
Eurodollar Loan to which such Interest Period relates or (B) the Highest Lawful
Rate. If any
10
<PAGE>
Reference Bank does not furnish a timely quotation, Agent shall determine the
relevant interest rate on the basis of the quotation or quotations furnished by
the remaining Reference Bank or Banks; if none of such quotations is available
on a timely basis, the provisions of Section 6.2 shall apply. Each determination
of the Eurodollar Base Rate shall be conclusive and binding, absent manifest
error, and may be computed using any reasonable averaging and attribution
method.
"Eurodollar Loans" shall mean Loans the interest on which is determined
on the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.1.
"Eurodollar Rate" shall mean, for any Interest Period for any
Eurodollar Loan, a rate per annum determined by Agent to be equal to the
Eurodollar Base Rate for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 11 hereof.
"Existing Competitive Loans" shall mean the Competitive Loans described
on Exhibit D hereto.
"Facility Fee Percentage" shall mean, on any date, the applicable per
annum percentage set forth at the appropriate intersection in the table shown
below, based on the Rating as of the close of business on the preceding Business
Day:
<TABLE>
<CAPTION>
Facility
Fee
Rating Percentage
<S> <C>
BBB/Baa2 and higher 0.125
BBB-/Baa3 0.150
BB+/Ba1 0.20
BB/Ba2 and lower 0.30
</TABLE>
"Financial Statements" shall mean the financial statement or
statements, together with the notes and schedules thereto, described or referred
to in Sections 8.6 and 9.1.
"Funded Indebtedness" shall mean all Indebtedness which by its terms
matures more than one (1) year from the date as of which any calculation of
Funded Indebtedness is made, and any Indebtedness maturing within one (1) year
from such date which is renewable at the option of the obligor to a date beyond
one (1) year from such date (if Indebtedness provides for amortization, only the
amount of the principal payment required to be made within one (1) year from the
date
11
<PAGE>
as of which any calculation of Funded Indebtedness is made shall be excluded
from "Funded Indebtedness").
"GAAP" shall mean as to a particular Person, such accounting practice
as, in the opinion of KPMG Peat Marwick or other independent accountants of
recognized national standing retained by such Person and acceptable to the
Majority Banks, conforms at the time to generally accepted accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
relevant Person furnished to the Banks, except only for such changes in
principles and practices with which the applicable independent public
accountants concur and which are disclosed to the Banks in writing, and (c)
which are consistently applied for all periods after the date hereof so as to
reflect properly the financial condition and results of operations of such
Person.
"Gas and Liquids Pipeline Subsidiaries" shall mean each company (which
may include the Company) engaged in the Pipeline Operations.
"Gas Sale Contract" shall mean that certain Gas Sale Contract dated
January 1, 1984, between APC, as Seller, and ENSTAR Natural Gas Company, as
Purchaser, as amended on June 17, 1985, and from time to time thereafter, if and
only if Agent has received notice thereof pursuant to Section 10.8.
"Governmental Authority" shall mean any sovereign governmental
authority, the United States of America, any State of the United States and any
political subdivision of any of the foregoing, and any central bank, agency,
instrumentality, department, commission, board, bureau, authority, court or
other tribunal or quasi-governmental authority in each case whether executive,
legislative, judicial, regulatory or administrative, having jurisdiction over
the Company, any of its Subsidiaries, any of their respective property, Agent or
any Bank.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of any such Person directly or indirectly guaranteeing any
Indebtedness 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 Indebtedness (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, other than agreements to purchase assets, goods, securities or
services at an arm's length price in the ordinary course of business) or (ii)
entered into for the purpose of assuring in any other manner the holder of such
Indebtedness of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the
12
<PAGE>
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substance" shall mean petroleum products, and any hazardous
or toxic waste or substance defined or regulated as such from time to time by
any law, rule, regulation or order described in the definition of "Requirements
of Environmental Law".
"Highest Lawful Rate" shall mean, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable federal or
Texas law permits the higher interest rate, stated as a rate per annum. On each
day, if any, that Chapter One establishes the Highest Lawful Rate, the Highest
Lawful Rate shall be the "indicated rate ceiling" (as defined in Chapter One)
for that day.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate and all other liquid or gaseous hydrocarbons and
related minerals, in each case whether in a natural or a processed state.
"Included Reserves" shall mean those producing and non-producing proved
oil and gas reserves of the Company and its Oil and Gas Subsidiaries which are
to be taken into account in the determination of the Oil and Gas Reserves
Component Value from time to time in effect, as designated by the Company.
"Indebtedness" shall mean, as to any Person: (i) indebtedness of such
Person for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase or acquisition price of property or
services, including, without limitation, obligations (excluding volumetric
obligations with respect to pre-sales of Hydrocarbon production which have
already been accounted for in the calculation of the Borrowing Base) payable out
of Hydrocarbon production; (ii) obligations, whether fixed or contingent, of
such Person in respect of letters of credit, acceptances or similar instruments
issued or accepted by banks and other financial institutions for the account of
such Person or any other Person; (iii) Capital Lease Obligations of such Person;
(iv) Redemption Obligations of such Person and other obligations of such Person
to redeem or otherwise retire shares of capital stock of such Person or any
other Person, in each case to the extent that the redemption obligations will
arise prior to the stated maturity of the Obligations; (v) indebtedness of
others of the type described in clause (i), (ii), (iii) or (iv) above secured by
a Lien on the property of such Person, whether or not the respective obligation
so secured has been assumed by such Person; and (vii) indebtedness of others of
the type described in clause (i), (ii), (iii) or (iv) above Guaranteed by such
Person.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated December 30, 1993 executed by and among the Company, Seagull
Energy Canada Ltd., Agent and the "Administrative Agent" under the Canadian
Facility, as amended by that certain First Amendment to Intercreditor Agreement
dated May 24, 1994 and by that certain Second Amendment to
13
<PAGE>
Intercreditor Agreement dated December 23, 1996, and as the same may be further
amended or modified from time to time.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Loan, the period commencing on (i)
the date such Loan is made or converted into or continued as a Eurodollar Loan
or (ii) in the case of a roll-over to a successive Interest Period, the last day
of the immediately preceding Interest Period and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 3.3 hereof, except
that each such Interest Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month shall
end on the last Business Day of the appropriate subsequent calendar month.
(b) With respect to any Alternate Base Rate Loan, the period commencing
on the date such Loan is made and ending on the next succeeding Quarterly Date.
(c) With respect to any Existing Competitive Loan, the applicable
interest period specified on Exhibit D hereto, and with respect to any other
Competitive Loan, the period commencing on the date such Loan is made and ending
on the date specified in the Competitive Bid in which the offer to make the
Competitive Loan was extended; provided, however, that each such period shall
have a duration of not less than seven calendar days or more than 180 calendar
days.
Notwithstanding the foregoing: (i) no Interest Period applicable to any
Eurodollar Loan or any Competitive Loan may commence before and end after the
date of any scheduled reduction in the Commitments if, after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans or Competitive
Loans which have Interest Periods which end after such reduction date shall be
greater than the aggregate principal amount of the Commitments scheduled to be
in effect after such reduction date; (ii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (iii) no Interest Period
applicable to any Eurodollar Loan or any Competitive Loan shall extend beyond
the end of the scheduled Revolving Credit Availability Period, and (iv) no
Interest Period for any Eurodollar Loans shall have a duration of less than one
month and, if the Interest Period therefor would otherwise be a shorter period,
such Loans shall not be available hereunder.
"Investments" shall have the meaning assigned to such term in Section
10.3 hereof.
"Investments Tests" shall mean compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Investments):
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(i) there shall exist no Borrowing Base Deficiency;
(ii) no Default or Event of Default shall have occurred
and be continuing; and
(iii) the applicable Investment, when aggregated with any
prior permitted Investments (exclusive of Investments
permitted under Sections 10.3(a) through (o) hereof),
shall not exceed 10% of Tangible Net Worth of the
Company and its Subsidiaries on a consolidated basis.
"Issuer" shall mean each Bank issuing a Letter of Credit hereunder.
"Legal Requirement" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, now or hereafter in effect.
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.2 hereof.
"Letter of Credit Fee" shall mean a per annum rate equal to the
Applicable Margin for Eurodollar Loans in effect from time to time.
"Letter of Credit Liabilities" shall mean, at any time and in respect
of any Letter of Credit, the sum of (i) the amount available for drawings under
such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, collateral assignment, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Liquid Investments" shall mean:
(I) in the case of investments of U.S. Dollars
(i) securities issued or directly, fully and unconditionally
guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is
pledged in support thereof) having maturities of not more
than one year from the date of issue;
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(ii) U.S. Dollar time deposits and certificates of deposit (A)
of any Bank having capital and surplus in excess of U.S.
$300,000,000, or (B) of any commercial bank incorporated
in the United States, of recognized standing, having
capital and surplus in excess of U.S. $500,000,000 and
which has (or which is a Subsidiary of a holding company
which has) publicly traded debt securities rated, at the
time of issuance of such time deposits, AA or higher by
Standard & Poor's Ratings Group or Aa-2 or higher by
Moody's Investors Service, Inc. with maturities of not
more than one year from the date of issue;
(iii) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in
clause (I)(i) above entered into with any bank meeting the
qualifications specified in clause (I)(ii) above, provided
that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Institution
Examination Counsel Supervisory Policy -- Repurchase
Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985;
(iv) commercial paper or other U.S. Dollar obligations issued
by the parent corporation (A) of any Bank having capital
and surplus in excess of U.S. $300,000,000, or (B) of any
commercial bank (provided that the parent corporation and
the bank are both incorporated in the United States) of
recognized standing having capital and surplus in excess
of U.S. $500,000,000 and commercial paper or other U.S.
Dollar obligations issued by any Person incorporated in
the United States, which commercial paper is rated at
least A-2 or the equivalent thereof by Standard & Poor's
Ratings Group or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing
not more than six months after the date of issue;
(v) obligations of any state or political subdivision thereof
rated at least F-1 by Fitch Investors ervice, Inc.
or AA by Standard & Poor's Ratings Group with an original
maturity of 180 days or less; and
(vi) investments in money market funds substantially all the
assets of which are comprised of securities of the types
described in clauses (I)(i) through (v) above; and
(II) in the case of investments of Canadian dollars
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(i) bonds or other evidences of indebtedness of, or the
principal and interest of which is fully guaranteed
by, the Government of Canada or any province of
Canada, payable in Canadian dollars and (in the case
of any provincial obligations and any Government of
Canada obligations that are rated) rated AAA or AA
(or the then equivalent grade) by Dominion Bond
Rating Service Limited, or any other nationally
recognized bond rating service, having a maturity not
in excess of one year,
(ii) certificates of deposit issued or guaranteed by a
bank or trust company organized under the laws of
Canada or any province thereof, provided such bank or
trust company has capital and retained earnings in
the aggregate in excess of Canadian $500,000,000 on
its most recent balance sheet (whether audited or
unaudited), having a maturity not in excess of one
year,
(iii) bankers' acceptances of any bank or trust company the
certificates of deposit of which would constitute
Liquid Investments as provided in clause (II)(ii)
above, if outstanding unsecured debt of such bank or
trust company is rated no less than AA (or the then
equivalent grade) by Dominion Bond Rating Service
Limited, or any other nationally recognized bond
rating service; and
(iv) commercial paper rated no less than R-1 (or the then
equivalent grade) by Dominion Bond Rating Service
Limited or A-1 (or the then equivalent grade) by CBRS
Inc., having a maturity not in excess of one year;
excluding any bonds or other evidences of
indebtedness, certificates of deposit or commercial
paper which a Canadian chartered bank may not hold as
security under the Bank Act (Canada).
"Loan Documents" shall mean this Agreement, the Notes, the
Intercreditor Agreement, all Applications, all instruments, certificates and
agreements now or hereafter executed or delivered to Agent or any Bank pursuant
to any of the foregoing, and all amendments, modifications, renewals,
extensions, increases and rearrangements of, and substitutions for, any of the
foregoing.
"Loans" shall mean Committed Loans and Competitive Loans.
"Majority Banks" shall mean (a) prior to the termination of the
Commitments, Banks having greater than 66-2/3% of the aggregate amount of the
Commitments and (b) after the termination of the Commitments, Banks having
greater than 66-2/3% of the aggregate principal amount of the Loans and the
Letter of Credit Liabilities.
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"Material Adverse Effect" shall mean a material adverse effect on the
business, condition (financial or otherwise), operations or properties
(including proven oil and gas reserves) of the Company and its Subsidiaries,
taken as a whole, or on the ability of the Company to perform its material
obligations under any Loan Document to which it is a party.
"Maximum Revolving Credit Available Amount" shall mean, at any date, an
amount equal to the lesser of (i) the aggregate of the Commitments or (ii) the
amount by which (a) the Borrowing Base exceeds (b) the aggregate outstanding
amount of all Borrowing Base Debt of the Company and its Subsidiaries (other
than ENSTAR Alaska).
"Mesa Contract" shall mean that certain Purchase and Sale Agreement
dated Febru ary 6, 1991 executed by and among Mesa Limited Partnership, a
Delaware limited partnership, Mesa Operating Limited Partnership, a Delaware
limited partnership, and Mesa Midcontinent Limited Partnership, a Delaware
limited partnership, as Sellers, and the Company, as Buyer, as amended by that
certain First Amendment to Purchase and Sale Agreement dated February 22, 1991
and as further amended by that certain Second Amendment to Purchase and Sale
Agreement dated March 8, 1991.
"Net Proceeds of Production" shall mean, with respect to any Person,
all revenue received by or credited to the account of such Person from the sale
of Hydrocarbons and other minerals in, under or produced from their respective
oil, gas and mineral properties after deducting royalties, overriding royalties,
volumetric production payments with respect to pre-sales of Hydrocarbon
production, production payments pledged to secure non-recourse financing payable
solely out of such production payments, net profits interests and other burdens
payable out of production, normal and reasonable operating expenses and
severance, ad valorem, excise and windfall profit taxes.
"Notes" shall mean the Committed Notes and the Competitive Notes.
"Obligations" shall mean, as at any date of determination thereof, the
sum of the following: (i) the aggregate principal amount of Loans outstanding
hereunder plus (ii) the aggregate amount of the Letter of Credit Liabilities
hereunder plus (iii) all other liabilities, obligations and indebtedness of the
Company or any Subsidiary of the Company under any Loan Document.
"Oil and Gas Reserves Component Value" shall mean (A) prior to the
initial Borrowing Base Determination, $575,000,000 and (B) thereafter, that
amount of Indebtedness that the Super Majority Banks shall agree can be
supported by the Included Reserves, after an engineering and economic review of
the Included Reserves conducted by the Banks using such Banks' customary
standards for oil and gas lending.
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"Oil and Gas Subsidiaries" shall mean any Subsidiary of the Company
whose assets consist primarily of oil and gas properties. As of the date hereof,
the Oil and Gas Subsidiaries are listed as such on Exhibit A hereto.
"Organizational Documents" shall mean, with respect to a corporation,
the certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a bank, a
voluntary association, a partnership, a trust, an unincorporated organization,
any Governmental Authority or any other entity.
"Pipeline Operations" shall mean the natural gas gathering and
transmission, gas liquids plant, gas marketing, engineering and construction and
liquids pipeline operations of the Company and its Subsidiaries, excluding any
portion of such operations attributable to ENSTAR Alaska.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Company or any ERISA Affiliate
for employees of the Company or any ERISA Affiliate or (b) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which the Company or any ERISA
Affiliate is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan, any Reimburse ment Obligation or any other amount payable by the Company
under this Agreement or any other Loan Document which is not paid when due
(whether at stated maturity, by acceleration, or otherwise), a rate per annum
during the period commencing on the due date until such amount is paid in full
equal to the lesser of (a) the sum of (x) with respect to Eurodollar Loans, 2%
per annum plus the applicable Eurodollar Rate then in effect plus the Applicable
Margin for Eurodollar Loans until the expiration of the applicable Interest
Period, (y) with respect to Competitive Loans, 2% per annum plus the applicable
fixed rate offered by the applicable Bank and accepted by the Company in
accordance with Section 2.10 hereof (or, in the case of the Existing Competitive
Loans, the applicable fixed rate specified on Exhibit D hereto), and (z) with
respect to Alternate Base Rate Loans and with respect to Eurodollar Loans after
the expiration of the applicable Interest Period (and also with respect to
indebtedness other than Loans), 2% plus
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the Alternate Base Rate as in effect from time to time plus the Applicable
Margin for Alternate Base Rate Loans or (b) the Highest Lawful Rate.
"Principal Office" shall mean the principal office of Agent, presently
located at 1 Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention: Agent Services.
"Quarterly Dates" shall mean the last day of each March, June,
September and December, provided that, if any such date is not a Business Day,
then the relevant Quarterly Date shall be the next succeeding Business Day.
"Rating" shall mean the senior debt rating for the Company publicly
announced by Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
In the event the ratings are not equivalent, the higher rating shall be treated
as the "Rating" hereunder; provided, that if such ratings differ by more than
one (1) level, the Rating shall be the average, rounded upwards, of the two
ratings.
"Redemption Obligations" shall mean with respect to any Person all
mandatory redemption obligations of such Person with respect to preferred stock
or other equity securities issued by such Person or put rights in favor of the
holder of such preferred stock or other equity securities, to the extent that
the redemption obligations will arise prior to the stated maturity of the
Obligations.
"Reference Banks" shall mean Chase and such other Banks (up to a
maximum of two (2) additional Banks) as the Company, with the approval of Agent
(which approval shall not be unreasonably withheld), may from time to time
designate.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time and any successor or other regulation relating to reserve requirements.
"Regulatory Change" shall mean, with respect to any Bank, any change on
or after the date of this Agreement in Legal Requirements (including Regulation
D) or the adoption or making on or after such date of any interpretation,
directive or request applying to a class of banks including such Bank under any
Legal Requirements (whether or not having the force of law) by any Governmental
Authority.
"Reimbursement Obligations" shall mean, as at any date, the obligations
of the Company then outstanding in respect of Letters of Credit under this
Agreement, to reimburse Agent for the account of the applicable Issuer for the
amount paid by the applicable Issuer in respect of any drawing under such Letter
of Credit.
"Relevant Party" shall mean the Company and each other party to any of
the Loan Documents other than (a) the Banks and (b) Agent.
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"Request for Extension of Credit" shall mean a request for extension of
credit duly executed by any Responsible Officer of the Company, appropriately
completed and substantially in the form of Exhibit C attached hereto.
"Requested Redetermination" shall have the meaning assigned to such
term in Section 2.9 hereof.
"Requesting Banks" shall mean (a) prior to the termination of the
Commitments, Banks having greater than 50% of the aggregate amount of the
Commitments and (b) after the termination of the Commitments, Banks having
greater than 50% of the aggregate principal amount of the Loans and the Letter
of Credit Liabilities.
"Requirements of Environmental Law" means all requirements imposed by
any law (including for example and without limitation The Resource Conservation
and Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.
"Reserve Requirement" shall mean, for any Eurodollar Loan for any
Interest Period therefor, the stated maximum rate for all reserves (including
any marginal, supplemental or emergency reserves) required to be maintained
during such Interest Period under Regulation D by any member bank of the Federal
Reserve System or any Bank against "Eurocurrency liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect and include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change against (i)
any category of liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined as provided in the definition of "Eurodollar
Base Rate" in this Section 1.1 or (ii) any category of extensions of credit or
other assets which include Eurodollar Loans. Any determination by Agent of the
Reserve Requirement shall be conclusive and binding, absent manifest error, and
may be made using any reasonable averaging and attribution method.
"Responsible Officer" shall mean the chairman of the board, the
president, any executive vice president, the vice president of finance and
administration, the chief executive officer or the chief operating officer or
any equivalent officer (regardless of title) and in the case of the Company, any
other vice president, and in respect of financial or accounting matters, shall
also include the chief financial officer, the treasurer and the controller or
any equivalent officer (regardless of title).
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"Revolving Credit Availability Period" shall mean the period from and
including the date hereof to but not including May 31, 2004 or the date the
Commitments are terminated pursuant to Section 11.1, whichever is first to
occur.
"Revolving Credit Obligations" shall mean, as at any date of
determination thereof, the sum of the following (determined without
duplication): (i) the aggregate principal amount of Loans outstanding hereunder
plus (ii) the aggregate amount of the Letter of Credit Liabilities hereunder.
"Scheduled Redetermination" shall having the meaning assigned to such
term in Section 2.9 hereof.
"Senior Debt" shall mean Indebtedness having a weighted average
maturity at least seven (7) years from the date of issuance and having no
conditions precedent or covenants materially more onerous to the Company than
the conditions precedent and covenants contained herein and in the other Loan
Documents with respect to the Loans. The documents evidencing any Senior Debt
shall contain a provision substantially identical to Section 10.2(y) hereof
permitting Liens securing the Notes and the other Obligations on a pari passu
basis with such Senior Debt.
"Short Term Borrowings" shall mean, as of any date, the aggregate
outstanding principal amount of ENSTAR Alaska's borrowed money Indebtedness
(other than borrowed money Indebtedness owed by ENSTAR Natural Gas Company to
APC or by APC to ENSTAR Natural Gas Company) which is not Funded Indebtedness.
"Short Term Borrowings Measuring Period" shall mean that period of
ninety (90) consecutive days during the twelve-month period ending on the
applicable date that average Short Term Borrowings were lower than any other
period of ninety (90) consecutive days during such twelve-month period.
"Subordinated Debt" shall mean Indebtedness of the Company having a
weighted average maturity at least seven (7) years from the date of issuance and
having no conditions precedent or covenants materially more onerous to the
Company than the conditions precedent and covenants contained herein and in the
other Loan Documents with respect to the Loans and which is expressly made
subordinate and junior in right of payment to the Obligations and in respect of
any collateral or security by the express terms of the instruments evidencing
the Subordinated Debt or the indenture or other similar instrument under which
the Subordinated Debt is issued (which indenture or other instrument will be
binding on all holders of such Subordinated Debt), by provisions not more
favorable to the holders of the Subordinated Debt than the following:
(a) in the event a Default exists and is continuing, no payment of
principal or interest will be made on account of Subordinated Debt and no remedy
for default shall be exercised until (i) such Default will have been cured or
waived or until the Obligations will have been paid in full
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(or provisions made therefor reasonably satisfactory to the Banks) or (ii) 179
days after the occurrence of such Default (as to which the Banks have knowledge
as a result of having received notice from the Company pursuant to this
Agreement or otherwise) and no action being taken by the Banks with respect to
such Default, whichever occurs earlier;
(b) upon the occurrence of any of the events or proceedings specified
in Subsec tions 11.1(f) or (g) hereof (or, as to any Subsidiary of the Company,
Subsection 11.1(j) to the extent that it refers to Subsections 11.1(f) or (g)),
the holders of any Obligations will be entitled to receive payment in full of
all principal or interest on all Obligations before the holders of the
Subordinated Debt are entitled to receive any payment on account of principal or
interest on the Subordinated Debt, and to that end (but subject to the power of
a court of competent jurisdiction to make other provision) the holders of the
Obligations will be entitled to receive distributions of any kind or character,
whether in cash or property or securities (other than equity securities and
other securities establishing rights in the holders thereof which are
subordinate to the rights of the holders of the Obligations in accordance with
this definition of Subordinated Debt), which may be or would otherwise be
payable or deliverable in any such proceedings in respect of the Subordinated
Debt (provided that, the Subordinated Debt may provide that if the Obligations
have been paid in full or provision therefor reasonably satisfactory to the
Banks has been made, the holders of the Subordinated Debt will be subrogated to
the rights of the holders of the Obligations);
(c) in the event that any Subordinated Debt is declared due and payable
before its expressed maturity because of the occurrence of an event of default
thereunder (under circumstances when the provisions of the foregoing clauses (a)
and (b) will not be applicable), the holders of the Obligations at the time such
Subordinated Debt becomes due and payable because of such an event of default
will be entitled to receive payment in full of all Obligations (or have
provision therefor satisfactory to the Banks made) before the holders of the
Subordinated Debt are entitled to receive any payment on account of the
principal or interest on the Subordinated Debt; and
(d) no holder of the Obligations will be prejudiced in its right to
enforce subordination of the Subordinated Debt by any act or failure to act on
the part of the Company or the part of the holders of the Obligations;
provided that, the Subordinated Debt may provide that the foregoing provisions
are solely for the purpose of defining the relative rights of the holders of the
Obligations on the one hand, and the holders of the Subordinated Debt on the
other hand, and that nothing therein will impair, as between the Company and the
holders of the Subordinated Debt, the obligation of the Company, which may be
unconditional and absolute, to pay to the holders of the Subordinated Debt the
principal and interest thereon in accordance with its terms, nor will anything
herein prevent the holders of the Subordinated Debt from exercising all remedies
otherwise permitted by applicable law or thereunder upon default thereunder,
subject to the rights under clauses (a), (b) and (c)
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above of the holders of the Obligations to receive cash, property or securities
otherwise payable or deliverable to the holders of the Subordinated Debt.
"Subsidiary" shall mean, with respect to any Person (the "parent"), (a)
any corporation of which at least a majority of the outstanding shares of stock
having by the terms thereof ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by the parent or one or more of the
Subsidiaries of the parent or by the parent and one or more of the Subsidiaries
of the parent, and (b) any partnership, limited partnership, joint venture or
other form of entity, the majority of the legal or beneficial ownership of which
is at the time directly or indirectly owned or controlled by the parent or one
or more of the Subsidiaries of the parent or by the parent and one or more of
the Subsidiaries of the parent.
"Super Majority Banks" shall mean (a) prior to the termination of the
Commitments, Banks having 75% or more of the aggregate amount of the Commitments
and (b) after the termination of the Commitments, Banks having 75% or more of
the aggregate principal amount of the Loans and the Letter of Credit
Liabilities.
"Tangible Net Worth" shall mean the sum of the redemption price of
preferred stock, par value of common stock, capital in excess of par value of
common stock (additional paid-in capital) and retained earnings, less treasury
stock, goodwill, deferred development costs, franchises, licenses, patents,
trademarks and copyrights and all other assets which are properly classified as
intangible assets in accordance with GAAP less any Redemption Obligations.
"Type" shall have the meaning assigned to such term in Section 1.3
hereof.
"Unfunded Liabilities" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.
1.2 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP.
To enable the ready determination of compliance with the provisions hereof, the
Company will not change from December 31 in each year the date on which its
fiscal year ends, nor from March 31, June 30 and September 30 the dates on which
the first three fiscal quarters in each fiscal year end.
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1.3 Types of Loans. Loans hereunder are distinguished by "Type". The
"Type" of a Loan refers to the determination whether such Loan is a Eurodollar
Loan, a Competitive Loan or an Alternate Base Rate Loan.
1.4 Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. Any
reference to Sections shall refer to Sections of this Agreement.
Section 2. Commitments; Borrowing Base Determinations; Competitive Bid
Facility.
2.1 Committed Loans. From time to time on or after the date hereof and
during the Revolving Credit Availability Period, each Bank shall make Committed
Loans under this Section 2.1 to the Company in an aggregate principal amount at
any one time outstanding (including its Commitment Percentage of all Letter of
Credit Liabilities at such time) up to but not exceeding such Bank's Commitment
Percentage of the amount by which the Maximum Revolving Credit Available Amount
exceeds the aggregate unpaid principal balance of all Competitive Loans and
Letter of Credit Liabilities from time to time outstanding. Subject to the
conditions herein, any such Committed Loan repaid prior to the end of the
Revolving Credit Availability Period may be reborrowed pursuant to the terms of
this Agreement; provided, that any and all such Committed Loans shall be due and
payable in full at the end of the Revolving Credit Availability Period.
2.2 Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions hereof, and
on the condition that aggregate Letter of Credit Liabilities shall never exceed
$100,000,000, the Company shall have the right, in addition to Committed Loans
provided for in Section 2.1 hereof, to utilize the Commitments from time to time
from and after the Effective Date through the expiration of the Revolving Credit
Availability Period by obtaining the issuance of letters of credit for the
account of the Company and on behalf of the Company by the applicable Issuer if
the Company shall so request in the notice referred to in Section 2.2(b)(i)
(such letters of credit being collectively referred to as the "Letters of
Credit"). Upon the date of the issuance of a Letter of Credit, the applicable
Issuer 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 the applicable Issuer, a participation, to the
extent of such Bank's Commitment Percentage, in such Letter of Credit and the
related Letter of Credit Liabilities. Any Letter of Credit having an expiry date
after the end of the Revolving Credit Availability Period shall have been fully
Covered or shall be backed by a letter of credit in form and substance, and
issued by an issuer, acceptable to Agent in its reasonably exercised discretion.
Subject to the terms and conditions hereof, upon the request of the Company, if
Chase is the designated Issuer, Chase shall
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issue the applicable Letter of Credit and if any other Bank is the designated
Issuer, such Bank may, but shall not be obligated to, issue such Letter of
Credit.
(b) Additional Provisions. The following additional provisions
shall apply to each Letter of Credit:
(i) The Company shall give Agent at least three (3) Business
Days' prior notice (effective upon receipt) specifying the proposed Issuer and
the date such Letter of Credit is to be issued and describing the proposed terms
of such Letter of Credit and the nature of the transaction proposed to be
supported thereby, and shall furnish such additional information regarding such
transaction as Agent or the applicable Issuer may reasonably request. Upon
receipt of such notice Agent shall promptly notify each Bank of the contents
thereof and of such Bank's Commitment Percentage of the amount of such proposed
Letter of Credit.
(ii) No Letter of Credit may be issued if after giving
effect thereto the Revolving Credit Obligations would exceed the Maximum
Revolving Credit Available Amount. On each day during the period commencing with
the issuance of any Letter of Credit and until such Letter of Credit shall have
expired or been terminated, the Commitment of each Bank shall be deemed to be
utilized for all purposes hereof in an amount equal to such Bank's Commitment
Percentage of the amount then available for drawings under such Letter of
Credit.
(iii) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment thereunder, the applicable Issuer shall
promptly notify the Company and each Bank as to the amount to be paid as a
result of such demand and the payment date. If at any time the applicable Issuer
shall have made a payment to a beneficiary of a Letter of Credit in respect of a
drawing under such Letter of Credit, each Bank will pay to the applicable Issuer
immediately upon demand by the applicable Issuer at any time during the period
commencing after such payment until reimbursement thereof in full by the
Company, an amount equal to such Bank's Commitment Percentage of such payment,
together with interest on such amount for each day from the date of demand for
such payment (or, if such demand is made after 11:00 a.m. Houston, Texas time on
such date, from the next succeeding Business Day) to the date of payment by such
Bank of such amount at a rate of interest per annum equal to the Federal Funds
Rate for such period.
(iv) The Company shall be irrevocably and unconditionally
obligated forthwith to reimburse the applicable Issuer for any amount paid by
the applicable Issuer upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind. Such
reimbursement may, subject to satisfaction of any other applicable conditions
set forth in this Agreement, including the existence of the Maximum Revolving
Credit Available Amount (after adjustment in the same to reflect the elimination
of the corresponding Letter of Credit Liability) be made by borrowing of Loans.
In the event any such reimbursement is not made by borrowing of Loans, the
Company shall make such reimbursement in immediately available funds within five
(5) days after demand therefor by the applicable Issuer. The applicable Issuer
will pay to each
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<PAGE>
Bank such Bank's Commitment Percentage of all amounts received from the Company
for application in payment, in whole or in part, of the Reimbursement Obligation
in respect of any Letter of Credit, but only to the extent such Bank has made
payment to the applicable Issuer in respect of such Letter of Credit pursuant to
clause (iii) above.
(v) The Company will pay to Agent at the Principal Office
for the account of each Bank a fee on such Bank's Commitment Percentage of the
daily average amount available for drawings under each Letter of Credit, in each
case for the period from and including the date of issuance of such Letter of
Credit to and including the date of expiration or termination thereof at a rate
per annum equal to the Letter of Credit Fee in effect from time to time, such
fee to be paid in arrears on the Quarterly Dates and on the date of the
expiration or termination thereof. Agent will pay to each Bank, promptly after
receiving any payment in respect of letter of credit fees referred to in the
preceding sentence of this clause (v), an amount equal to such Bank's Commitment
Percentage of such fees. The Company shall pay to the applicable Issuer an
administration and issuance fee in an amount equal to 1/8 of 1% per annum of the
daily average amount available for drawings under such Letter of Credit, in each
case for the period from and including the date of issuance of such Letter of
Credit to and including the date of expiration or termination thereof, such fee
to be paid in arrears on the Quarterly Dates and on the date of the expiration
or termination thereof. Such administration and issuance fee shall be retained
by the applicable Issuer.
(vi) The issuance by the applicable Issuer of each Letter of
Credit shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that such Letter of Credit shall
be in such form and contain such terms as shall be reasonably satisfactory to
the applicable Issuer and that the Company shall have executed and delivered
such other instruments and agreements relating to such Letter of Credit as the
applicable Issuer shall have reasonably requested and are not inconsistent with
the terms of this Agreement including an Application therefor. In the event of a
conflict between the terms of this Agreement and the terms of any Application,
the terms of this Agreement shall control. Without limiting the generality of
the foregoing sentence, in the event any such Application shall include
requirements for Cover, it is agreed that there shall be no requirements for the
Company to provide Cover except as expressly required in this Agreement.
(c) Indemnification. The Company hereby indemnifies and holds harmless
Agent, the applicable Issuer and each Bank from and against any and all claims
and damages, losses, liabilities, costs or expenses which such Bank, the
applicable Issuer or Agent may incur (or which may be claimed against such Bank,
the applicable Issuer or Agent by any Person whatsoever) in connection with the
execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit, including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which Agent, the applicable Issuer or such Bank,
as the case may be, may incur (whether incurred as a result of its own
negligence or otherwise) by reason of or in connection with the failure of any
other Bank (whether as a result of its own negligence or otherwise) to fulfill
27
<PAGE>
or comply with its obligations to Agent, the applicable Issuer or such Bank, as
the case may be, hereunder (but nothing herein contained shall affect any rights
the Company may have against such defaulting Bank); provided that, the Company
shall not be required to indemnify any Bank, the applicable Issuer or Agent for
any claims, damages, losses, liabilities, costs or expenses to the extent, but
only to the extent, caused by (i) the willful misconduct or gross negligence of
the party seeking indemnification, or (ii) by such Bank's, the applicable
Issuer's or Agent's, as the case may be, failure to pay under any Letter of
Credit after the presentation to it of a request required to be paid under
applicable law. Nothing in this Section 2.2(c) is intended to limit the
obligations of the Company under any other provision of this Agreement.
(d) Co-issuance or Separate Issuance of Letters of Credit. The Company
may, at its option, request that any requested Letter of Credit which exceeds
$1,000,000 be issued severally, but not jointly, by any two or more of the Banks
or issued through separate Letters of Credit issued by any two or more of the
Banks, respectively, each in an amount equal to a portion of the amount of the
applicable Letter of Credit requested by the Company. In either such event, the
Banks issuing such Letters of Credit shall each constitute an "Issuer" and the
Letters of Credit so issued shall each constitute a "Letter of Credit" for all
purposes hereunder and under the Loan Documents. Notwithstanding the foregoing,
no Bank other than Chase shall have any obligation to issue any Letter of
Credit, but may do so at its option.
2.3 Reductions and Changes of Commitments.
(a) Mandatory. On May 31, 2004, all Commitments shall be terminated
in their entirety unless terminated at an earlier date pursuant to Section 11.1.
(b) Optional. The Company shall have the right to terminate or reduce
the unused portion of the Commitments at any time or from time to time, provided
that: (i) the Company shall give notice of each such termination or reduction to
Agent as provided in Section 5.5 hereof and (ii) each such partial reduction
shall be permanent and in an aggregate amount at least equal to $5,000,000.
(c) No Reinstatement. Any reduction in or termination of the
Commitments may not be reinstated without the approval of Agent and any Bank
whose Commitment (or the applicable part thereof) is to be so reinstated.
2.4 Fees.
(a) The Company shall pay to Agent for the account of each Bank a
facility fee accruing from the Effective Date, computed for each day at a rate
per annum equal to the Facility Fee Percentage times such Bank's pro rata share
(based on its respective Commitment) of the Maximum Revolving Credit Available
Amount on such day. Such facility fees shall be payable
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<PAGE>
on the Quarterly Dates and on the earlier of the date the Commitments are
terminated in their entirety or the last day of the Revolving Credit
Availability Period.
(b) The Company agrees to pay to Agent fees as provided in the separate
letter agreements executed by and between Agent and the Company.
2.5 Affiliates; Lending Offices.
(a) Any Bank may, if it so elects, fulfill any obligation to make a
Eurodollar Loan or Competitive Loan by causing a branch, foreign or otherwise,
or Affiliate of such Bank to make such Loan and may transfer and carry such Loan
at, to or for the account of any branch office or Affiliate of such Bank;
provided that, in such event for the purposes of this Agreement such Loan shall
be deemed to have been made by such Bank and the obligation of the Company to
repay such Loan shall nevertheless be to such Bank and shall be deemed to be
held by such Bank and, to the extent of such Loan, to have been made for the
account of such branch or Affiliate.
(b) Notwithstanding any provision of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of all or any part
of its Loans hereunder in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement all determinations hereunder shall be
made as if such Bank had actually funded and maintained each Eurodollar Loan
during each Interest Period through the purchase of deposits having a maturity
corresponding to such Interest Period and bearing an interest rate equal to the
Eurodollar Rate for such Interest Period.
2.6 Several Obligations. The failure of any Bank to make any Loan to be
made by it on the date specified therefor shall not relieve any other Bank of
its obligation to make its Loan on such date, but neither Agent nor any Bank
shall be responsible for the failure of any other Bank to make a Loan to be made
by such other Bank.
2.7 Notes. The Committed Loans made by each Bank shall be evidenced by
a single Committed Note of the Company in substantially the form of Exhibit E
hereto payable to the order of such Bank in a principal amount equal to the
Commitment of such Bank, and otherwise duly completed. The Competitive Loans
made by each Bank shall be evidenced by a single Competitive Note of the Company
in substantially the form of Exhibit O hereto payable to the order of such Bank
and otherwise duly completed. Each Bank is hereby authorized by the Company to
endorse on the schedules (or a continuations thereof) attached to the Notes of
such Bank, to the extent applicable, the date, amount and Type of and the
Interest Period for each Loan made by such Bank to the Company hereunder, and
the amount of each payment or prepayment of principal of such Loan received by
such Bank, provided, that any failure by such Bank to make any such endorsement
shall not affect the obligations of the Company under such Note or hereunder in
respect of such Loan.
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<PAGE>
2.8 Use of Proceeds. The proceeds of the Loans shall be used for
general corporate purposes.
2.9 Borrowing Base Determinations.
(a) Within 45 days after receipt of the Engineering Report required to
be delivered each year, commencing with the Engineering Report required to be
delivered in 1998, Agent shall notify the Company, in writing, of the Oil and
Gas Reserves Component Value determined on the basis of such Engineering Report
and the Borrowing Base determined on the basis of such Oil and Gas Reserves
Component Value, together with the determination of the Alaskan Gas Component
Value. Each such determination is herein called a "Scheduled Redetermination".
Each Scheduled Redetermination shall be effective when the Company is notified
of the amount of the redetermined Borrowing Base by Agent.
(b) The Requesting Banks or the Company may, from time to time (but not
more frequently than one time during any calendar year by the Requesting Banks
and one time during any calendar year by the Company), request a redetermination
of the Oil and Gas Reserves Component Value based upon the most recently
received Engineering Report or Company Report, as the case may be, and of the
Borrowing Base based upon such redetermination of the Oil and Gas Reserves
Component Value, together with the determination of the Alaskan Gas Component
Value. Each such requested redetermination is herein called a "Requested
Redetermination." Each Requested Redetermination shall be effective when the
Company is notified, in writing, of the amount of the redetermined Borrowing
Base by Agent.
2.10 Competitive Bid Procedure.
(a) In order to request Competitive Bids, the Company shall hand
deliver, telex or telecopy to Agent a duly completed request substantially in
the form of Exhibit K, with the blanks appropriately completed (a "Competitive
Bid Request"), to be received by Agent not later than 11:00 a.m., Houston, Texas
time, five Business Days before the date specified for a proposed Competitive
Loan. No Alternate Base Rate Loan shall be requested in, or, except pursuant to
Section 6, made pursuant to, a Competitive Bid Request. A Competitive Bid
Request that does not conform substantially to the format of Exhibit K may be
rejected at Agent's sole discretion, and Agent shall promptly notify the Company
of such rejection by telecopier. Each Competitive Bid Request shall in each case
refer to this Agreement and specify (x) the date of such Competitive Loans
(which shall be a Business Day) and the aggregate principal amount thereof
(which shall not be less than $25,000,000 or greater than the unused portion of
the Maximum Revolving Credit Available Amount on such date and shall be an
integral multiple of $5,000,000) and (y) the Interest Period with respect
thereto (which may not end after the termination of the Revolving Credit
Availability Period). Promptly after its receipt of a Competitive Bid Request
that is not rejected as aforesaid, Agent shall invite by telecopier (in
substantially the form set forth in Exhibit L hereto) the Banks to bid, on the
terms and conditions of this Agreement, to make Competitive
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<PAGE>
Loans pursuant to such Competitive Bid Request. Notwithstanding the foregoing,
Agent shall have no obligation to invite any Bank to make a Competitive Bid
pursuant to this Section 2.10(a) until such Bank has delivered a properly
completed Competitive Bid Administrative Questionnaire to Agent.
(b) Each Bank may, in its sole discretion, make one or more Competitive
Bids to the Company responsive to each Competitive Bid Request. Each Competitive
Bid by a Bank must be received by Agent via telecopier, in the form of Exhibit M
hereto, not later than 11:00 a.m., Houston, Texas time, four Business Days
before the date specified for a proposed Competitive Loan. Competitive Bids that
do not conform substantially to the format of Exhibit M may be rejected by Agent
after conferring with, and upon the instruction of, the Company, and Agent shall
notify the Bank of such rejection as soon as practicable. Each Competitive Bid
shall refer to this Agreement and (x) specify the principal amount (which shall
be in a minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000 and which may equal the entire aggregate principal amount of the
Competitive Loan requested by the Company) of the Competitive Loan that the Bank
is willing to make to the Company, (y) specify the Competitive Bid Rate at which
the Bank is prepared to make the Competitive Loan and (z) confirm the Interest
Period with respect thereto specified by the Company in its Competitive Bid
Request. A Competitive Bid submitted by a Bank pursuant to this paragraph (b)
shall be irrevocable.
(c) Agent shall, by 2:00 p.m. four Business Days before the date
specified for a proposed Competitive Loan, notify the Company by telecopier of
all the Competitive Bids made, the Competitive Bid Rate and the maximum
principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Bank that made each bid. Agent shall send a
copy of all Competitive Bids to the Company for its records as soon as
practicable after completion of the bidding process set forth in this Section
2.10.
(d) The Company may in its sole and absolute discretion, subject only
to the provisions of this Section 2.10(d), accept or reject any Competitive Bid
referred to in Section 2.10(c); provided, however, that the aggregate amount of
the Competitive Bids so accepted by the Company may not exceed the principal
amount of the Competitive Loan requested by the Company. The Company shall
notify Agent by telecopier whether and to what extent it has decided to accept
or reject any or all of the bids referred to in Section 2.10(c), not later than
11:00 a.m., Houston, Texas time, three Business Days before the date specified
for a proposed Competitive Loan; provided, however, that (w) the failure by the
Company to give such notice shall be deemed to be a rejection of all the bids
referred to in Section 2.10(c) and (x) no bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a minimum principal amount
of $5,000,000 and an integral multiple of $1,000,000. Notwithstanding the
foregoing, if the Company accepts more than one bid made in response to a
Competitive Bid Request and the available principal amount of Competitive Loans
to be allocated among the Banks is not sufficient to enable Competitive Loans to
be allocated to each Bank in a minimum principal amount of $5,000,000 and in
integral multiples of $1,000,000, then the Company shall select the Banks to
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<PAGE>
be allocated such Competitive Loans and shall round allocations up or down to
the next higher or lower multiple of $1,000,000 as it shall deem appropriate. In
addition, the Company shall be permitted under the foregoing procedures to
accept a bid or bids in a principal amount of less than $5,000,000 (i) in order
to enable the Company to accept bids equal to (but not in excess of) the
principal amount of the Competitive Loan requested by the Company or (ii) in
order to enable the Company to accept all remaining bids, or all remaining bids
at a particular Competitive Bid Rate. A notice given by Company pursuant to this
paragraph (d) shall be irrevocable.
(e) Agent shall promptly notify each bidding Bank whether or not its
Competitive Bid has been accepted (and if so, in what amount and at what
Competitive Bid Rate) by telex or telecopier sent by Agent, and each successful
bidder will thereupon become bound, subject to the other applicable conditions
hereof, to make the Competitive Loan in respect of which its bid has been
accepted. After completing the notifications referred to in the immediately
preceding sentence, Agent shall (i) notify Agent of each Competitive Bid that
has been accepted, the amount thereof and the Competitive Bid Rate therefor and
(ii) notify each Bank of the aggregate principal amount of all Competitive Bids
accepted.
(f) No Competitive Loan shall be made within five Business Days of the
date of any other Competitive Loan, unless the Company and Agent shall mutually
agree otherwise.
(g) If Agent shall at any time have a Commitment hereunder and shall
elect to submit a Competitive Bid in its capacity as a Bank, it shall submit
such bid directly to the Company one quarter of an hour earlier than the latest
time at which the other Banks are required to submit their bids to Agent
pursuant to paragraph (b) above.
(h) All notices required by this Section 2.10 shall be made in
accordance with Section 13.2 and the Competitive Bid Administrative
Questionnaire most recently placed on file by each Bank with Agent.
Section 3. Borrowings, Prepayments and Selection of Interest Rates.
3.1 Borrowings. The Company shall give Agent notice of each borrowing
to be made hereunder as provided in Sections 2.10 and 5.5 hereof. Not later than
2:00 p.m. Houston, Texas time on the date specified for each such borrowing
hereunder, each Bank shall make available the amount of the Loan, if any, to be
made by it on such date to Agent, at its Principal Office, in immediately
available funds, for the account of the Company. The amount so received by Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Company by depositing the same, in immediately available funds, in an
account designated by the Company maintained with Agent at the Principal Office.
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<PAGE>
3.2 Prepayments.
(a) Optional Prepayments. Subject to the provisions of Sections 4, 5
and 6, the Company shall have the right to prepay, on any Business Day, in whole
or in part, without the payment of any penalty or fee, Loans at any time or from
time to time, provided that, the Company shall give Agent notice of each such
prepayment as provided in Section 5.5 hereof. Eurodollar Loans and Competitive
Loans may be prepaid on the last day of an Interest Period applicable thereto.
Neither Eurodollar Loans nor Competitive Loans may be otherwise prepaid unless
prepayment is accompanied by payment of all compensation required by Section 6.
(b) Mandatory Prepayments and Cover; Borrowing Base Deficiency.
(1) Reduction of Commitments. The Company shall from time to time on
demand by Agent prepay the Loans (or provide Cover for Letter of Credit
Liabilities) in such amounts as shall be necessary so that at all times the
aggregate outstanding principal amount of all Revolving Credit Obligations shall
not be in excess of the aggregate amount of the Commitments, as reduced from
time to time pursuant to Section 2.3 hereof plus any Cover provided under this
Section 3.2(b)(1).
(2) Borrowing Base Deficiency. Should a Borrowing Base Deficiency
occur, Agent may (and, at the direction of the Majority Banks, shall) notify the
Company in writing of such Borrowing Base Deficiency. Within 30 days from and
after the Borrowing Base Deficiency Notification Date, the Company shall make a
payment on the Loans or Borrowing Base Debt of the Company or its Subsidiaries,
as the Company may elect, in an amount sufficient to eliminate such Borrowing
Base Deficiency, and deliver to Agent evidence satisfactory to Agent of any such
payment of Borrowing Base Debt of the Company or its Subsidiaries. If the
Company fails to take the action described above within such 30-day period, then
without any necessity for notice to the Company or any other person, the Company
shall become obligated to pay on the Loans three (3) installments, each in an
amount equal to one-third (1/3rd) of the applicable Borrowing Base Deficiency,
such installments to be due and payable on or before three (3), six (6) and nine
(9) calendar months after the Borrowing Base Deficiency Notification Date,
respectively. Payments of principal otherwise required hereunder shall be
credited against such installments.
(3) Asset Dispositions. If the Company or any Subsidiary sells,
transfers or otherwise disposes of assets that have been given value in the most
recent determination of the Borrowing Base and having a fair market value in the
aggregate for the Company and such Subsidiaries in excess of $50,000,000 during
the period from the effective date of any Borrowing Base Determination until the
effective date of the next Borrowing Base Determination, the Borrowing Base
shall be immediately reduced, until the effective date of the next Borrowing
Base Determination, by an amount equal to, the value of such assets reflected in
the most recent Borrowing Base, or if the value of the applicable asset
reflected in the most recent Borrowing Base cannot be readily determined, the
net sales proceeds realized from the sale, transfer or other
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<PAGE>
disposition of such assets. If such reduction shall result in a Borrowing Base
Deficiency, then in lieu of the provisions of Section 3.2(b)(2) hereof, the
Company shall immediately make a payment on the Loans in an amount equal to such
Borrowing Base Deficiency. In addition to and cumulative of the foregoing, if a
Borrowing Base Deficiency exists prior to such sale, transfer or other
disposition of assets, then in lieu of the provisions of Section 3.2(b)(2)
hereof, the Company shall immediately make a payment on the Loans in an amount
equal to the lesser of the amount of the Borrowing Base Deficiency (after giving
effect to the applicable sale, transfer or other disposition) or 100% of the net
sales proceeds realized from the applicable sale, transfer or other disposition.
3.3 Selection of Interest Rates. Subject to the terms and provisions of
this Agreement, the Company shall have the right either to convert any Loan (in
whole or in part) into a Loan of another Type (provided that no such conversion
of Eurodollar Loans or Competitive Loans shall be permitted other than on the
last day of an Interest Period applicable thereto) or to continue such Loan (in
whole or in part) as a Loan of the same Type. In the event the Company fails to
so give such notice prior to the end of the applicable Interest Period with
respect to any Eurodollar Loan or Competitive Loan, such Loan shall become an
Alternate Base Rate Loan on the last day of such Interest Period.
Section 4. Payments of Principal and Interest.
4.1 Repayment of Loans and Reimbursement Obligations. The Company will
pay to Agent for the account of each Bank (a) the principal of each Loan made by
such Bank on the dates provided in the respective Notes and as provided
hereunder and (b) the amount of each Reimbursement Obligation promptly upon its
occurrence. The amount of any Reimbursement Obligation may, if the applicable
conditions precedent specified in Section 7 hereof have been satisfied, be paid
with the proceeds of Loans.
4.2 Interest.
(a) Subject to Section 13.6 hereof, the Company will pay to Agent for
the account of each Bank interest on the unpaid principal amount of each Loan
made by such Bank for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the lesser of (I) the
following rates per annum:
(i) if such Loan is an Alternate Base Rate Loan, the Alternate
Base Rate plus the Applicable Margin,
(ii) if such Loan is a Eurodollar Loan, the applicable
Eurodollar Rate plus the Applicable Margin, and
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<PAGE>
(iii) if such Loan is a Competitive Loan, the applicable fixed
rate offered by the applicable Bank and accepted by the Company in accordance
with Section 2.10 hereof (or, in the case of Existing Competitive Loans,
the applicable fixed rate specified on Exhibit D hereto), or (II) the Highest
Lawful Rate.
(b) Notwithstanding any of the foregoing but subject to Section 13.6
hereof, the Company will pay to Agent for the account of each Bank interest at
the applicable Post-Default Rate on any principal of any Loan made by such Bank,
on any Reimbursement Obligation and on any other amount payable by the Company
hereunder to or for the account of such Bank (but, if such amount is interest,
only to the extent legally allowed), which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise), for the period
commencing on the due date thereof until the same is paid in full.
(c) Accrued interest on each Loan shall be payable on the last day of
each Interest Period for such Loan (and, if such Interest Period exceeds three
months' duration, quarterly, commencing on the first quarterly anniversary of
the first day of such Interest Period), except that (i) accrued interest payable
at the Post-Default Rate shall be due and payable from time to time on demand of
Agent or the Majority Banks (through Agent) and (ii) accrued interest on any
amount prepaid or converted pursuant to Section 6 hereof shall be paid on the
amount so prepaid or converted.
Section 5. Payments; Pro Rata Treatment; Computations, Etc.
5.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company hereunder and under the Notes shall be made in Dollars, in
immediately available funds, to Agent at the Principal Office (or in the case of
a successor Agent, at the principal office of such successor Agent in the United
States), not later than 11:00 a.m. Houston, Texas time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment hereunder or
under any Note, specify to Agent the Loans or other amounts payable by the
Company hereunder or thereunder to which such payment is to be applied. Each
payment received by Agent hereunder or under any Note or any other Loan Document
for the account of a Bank shall be paid promptly to such Bank, in immediately
available funds for the account of such Bank's Applicable Lending Office.
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<PAGE>
(c) If the due date of any payment hereunder or under any Note or any
other Loan Document falls on a day which is not a Business Day, the due date for
such payment (subject to the definition of Interest Period) shall be extended to
the next succeeding Business Day and interest shall be payable for any principal
so extended for the period of such extension.
5.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof shall be made ratably
from the Banks on the basis of their respective Commitments and each payment of
commitment or facility fees shall be made for the account of the Banks, and each
termination or reduction of the Commitments of the Banks under Section 2.3
hereof shall be applied, pro rata, according to the Banks' respective
Commitments; (b) each payment by the Company of principal of or interest on
Loans of a particular Type shall be made to Agent for the account of the Banks
pro rata in accordance with the respective unpaid principal amounts of such
Loans held by the Banks; and (c) the Banks (other than the applicable Issuer)
shall purchase from the applicable Issuer participations in the Letters of
Credit to the extent of their respective Commitment Percentages.
5.3 Computations. Interest on Competitive Loans and interest based on
the Eurodollar Base Rate or the Federal Funds Rate will be computed on the basis
of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable, unless the
effect of so computing shall be to cause the rate of interest to exceed the
Highest Lawful Rate, in which case interest shall be calculated on the basis of
the actual number of days elapsed in a year composed of 365 or 366 days, as the
case may be. All other interest and fees shall be computed on the basis of a
year of 365 (or 366) days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
5.4 Minimum and Maximum Amounts. Except for prepayments made pursuant
to Section 3.2(b) hereof, and subject to the provisions of Section 2.10 hereof
with respect to Competitive Loans, each borrowing and repayment of principal of
Loans, each termination or reduction of Commitments, each optional prepayment
and each conversion of Type shall be in an aggregate principal amount at least
equal to (a) in the case of Eurodollar Loans and Competitive Loans, $5,000,000,
and (b) in the case of Alternate Base Rate Loans, $1,000,000 (borrowings or
prepayments of Loans of different Types or, in the case of Eurodollar Loans and
Competitive Loans, having different Interest Periods at the same time hereunder
to be deemed separate borrowings and prepayments for purposes of the foregoing,
one for each Type or Interest Period). Upon any mandatory prepayment that would
reduce Eurodollar Loans or Competitive Loans, respectively, having the same
Interest Period to less than $5,000,000 such Loans shall automatically be
converted into Alternate Base Rate Loans on the last day of the applicable
Interest Period. Notwithstanding anything to the contrary contained in this
Agreement, there shall not be, at any one time, more than eight (8) Interest
Periods in effect with respect to Eurodollar Loans or Competitive Loans, in the
aggregate.
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<PAGE>
5.5 Certain Actions, Notices, Etc. Notices to Agent of any termination
or reduction of Commitments, of borrowings and prepayments, conversions and
continuations of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by Agent not later than
11:00 a.m. Houston, Texas time on the number of Business Days prior to the date
of the relevant termination, reduction, borrowing and/or repayment, conversion
or continuance specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
<S> <C>
Termination or
Reduction of Commitments 2
Borrowing or prepayment
of or conversion into or
continuance of Alternate Base
Rate Loans same day
Borrowing or
prepayment of or conversion
into or continuance of
Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
prepayment shall specify the amount and Type of the Loans to be borrowed or
prepaid (subject to Sections 3.2(a) and 5.4 hereof), the date of borrowing or
prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the Interest Period therefor (subject to the definition of
"Interest Period"). Each such notice of conversion of a Loan into a Loan of
another Type shall identify such Loan (or portion thereof) being converted and
specify the Type of Loan into which such Loan is being converted (subject to
Section 5.4 hereof) and the date for conversion (which shall be a Business Day)
and, unless such Loan is being converted into an Alternate Base Rate Loan, the
duration (subject to the definition of "Interest Period") of the Interest Period
therefor which is to commence as of the last day of the then current Interest
Period therefor (or the date of conversion, if such Loan is being converted from
an Alternate Base Rate Loan). Each such notice of continuation of a Loan (or
portion thereof) as the same Type of Loan shall identify such Loan (or portion
thereof) being continued (subject to Section 5.4 hereof) and, unless such Loan
is an Alternate Base Rate Loan, the duration (subject to the definition of
"Interest Period") of the Interest Period therefor which is to commence as of
the last day of the then current Interest Period therefor. Agent shall promptly
notify the affected Banks of the contents of each such notice. Notice of any
prepayment having been given, the principal amount specified in such notice,
together with interest thereon
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to the date of prepayment, shall be due and payable on such prepayment date.
Section 2.10 hereof shall control the time periods applicable to Competitive
Loans.
5.6 Non-Receipt of Funds by Agent. Unless Agent shall have been
notified by a Bank or the Company (the "Payor") prior to the date on which such
Bank is to make payment to Agent of the proceeds of a Loan to be made by it
hereunder (or the payment of any amount by such Bank to reimburse the applicable
Issuer for a drawing under any Letter of Credit) or the Company is to make a
payment to Agent for the account of one or more of the Banks, as the case may be
(such payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to Agent, Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to Agent on or before such date,
the recipient of such payment (or, if such recipient is the beneficiary of a
Letter of Credit, the Company and, if the Company fails to pay the amount
thereof to Agent forthwith upon demand, the Banks ratably in proportion to their
respective Commitment Percentages) shall, on demand, pay to Agent the amount
made available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by Agent until the date
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such period.
5.7 Sharing of Payments, Etc. If a Bank shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, or on any
Reimbursement Obligation or other obligation then due to such Bank hereunder,
through the exercise of any right of set-off, banker's lien, counterclaim or
similar right, or otherwise, it shall promptly purchase from the other Banks
participations in the Loans made, or Reimbursement Obligations or other
obligations held, by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share the benefit of such payment (net of any expenses which may be
incurred by such Bank in obtaining or preserving such benefit) pro rata in
accordance with the unpaid principal and interest on the Obligations then due to
each of them (provided, however, that the foregoing shall not apply to payments
of Competitive Loans made prior to the termination of the Commitments following
the occurrence of an Event of Default). To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. The
Company agrees, to the fullest extent it may effectively do so under applicable
law, that any Bank so purchasing a participation in the Loans made, or
Reimbursement Obligations or other obligations held, by other Banks may exercise
all rights of set-off, bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such Bank were a direct holder of
Loans and Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of the Company.
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Section 6. Yield Protection and Illegality.
6.1 Additional Costs.
(a) Subject to Section 13.6, the Company shall pay to Agent, on demand
for the account of each Bank from time to time such amounts as such Bank may
determine to be necessary to compensate it for any costs incurred by such Bank
which such Bank determines are attributable to its making or maintaining of any
Eurodollar Loan or any Competitive Loan hereunder or its obligation to make any
such Loan hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), in each case resulting from any Regulatory Change which:
(i) subjects such Bank (or makes it apparent that such Bank
is subject) to any tax (including without limitation any United States interest
equalization tax), levy, impost, duty, charge or fee (collectively, "Taxes"), or
any deduction or withholding for any Taxes on or from the payment due under any
Eurodollar Loan or any Competitive Loan or other amounts due hereunder, other
than income and franchise taxes of each jurisdiction (or any subdivision
thereof) in which such Bank has an office or its Applicable Lending Office; or
(ii) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or its Notes in respect of any of such Loans
(other than changes which affect taxes measured by or imposed on the overall net
income or franchise taxes of such Bank or of its Applicable Lending Office for
any of such Loans by each jurisdiction (or any subdivision thereof) in which
such Bank has an office or such Applicable Lending Office); or
(iii) imposes or modifies or increases or deems applicable
any reserve, special deposit or similar requirements (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System) relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, such Bank or loans made by such
Bank, or against any other funds, obligations or other property owned or held by
such Bank (including any of such Loans or any deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.1 hereof) and such Bank
actually incurs such additional costs.
Each Bank (if so requested by the Company through Agent) will designate a
different available Applicable Lending Office for the Eurodollar Loans or the
Competitive Loans of such Bank or take such other action as the Company may
request if such designation or action will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole opinion of such Bank
exercised in good faith, be disadvantageous to such Bank (provided that such
Bank shall have no obligation so to designate an Applicable Lending Office for
Eurodollar Loans located in the United States of America). Each Bank will
furnish the Company with a statement setting forth the
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basis and amount of each request by such Bank for compensation under this
Section 6.1(a); subject to Section 6.8, such certificate shall be conclusive,
absent manifest error, and may be prepared using any reasonable averaging and
attribution methods.
(b) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any Bank
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes Eurodollar
Loans or Competitive Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if such
Bank so elects by notice to the Company (with a copy to Agent), the obligation
of such Bank to make Eurodollar Loans or Competitive Loans, as the case may be,
hereunder shall be suspended until the date such Regulatory Change ceases to be
in effect (in which case the provisions of Section 6.4 hereof shall be
applicable).
(c) Good faith determinations and allocations by any Bank for purposes
of this Section 6.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Loans or of making or maintaining Loans or
on amounts receivable by it in respect of Loans, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs, shall be
conclusive, absent manifest error.
(d) The Company's obligation to pay Additional Costs and compensation
with regard to each Eurodollar Loan and each Competitive Loan shall survive
termination of this Agreement.
6.2 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, with respect to any Eurodollar Loans:
(a) Agent determines in good faith (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof are not
being provided by the Reference Banks in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or
(b) the Majority Banks determine in good faith (which determination
shall be conclusive) and notify Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof
upon the basis of which the rates of interest for such Loans are to be
determined do not accurately reflect the cost to such Banks of making or
maintaining such Loans for Interest Periods therefor; or
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(c) Agent determines in good faith (which determination shall be
conclusive) that by reason of circumstances affecting the interbank Dollar
market generally, deposits in United States dollars in the relevant interbank
Dollar market are not being offered for the applicable Interest Period and in an
amount equal to the amount of the Eurodollar Loan requested by the Company; then
Agent shall promptly notify the Company and each Bank thereof, and, so long as
such condition remains in effect, the Banks shall be under no obligation to
make Eurodollar Loans (but shall maintain until the end of the Interest Period
then in effect the Eurodollar Loans then outstanding).
6.3 Illegality. Notwithstanding any other provision of this Agreement
to the contrary, if (x) by reason of the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Bank with any request or directive (whether or not having the
force of law) of any central bank or other Governmental Authority or (y)
circumstances affecting the relevant interbank Dollar market or the position of
a Bank therein shall at any time make it unlawful or impracticable in the sole
discretion of a Bank exercised in good faith for such Bank or its Applicable
Lending Office to (a) honor its obligation to make Eurodollar Loans or
Competitive Loans hereunder, or (b) maintain Eurodollar Loans or Competitive
Loans hereunder, then such Bank shall promptly notify the Company thereof
through Agent and such Bank's obligation to make or maintain Eurodollar Loans or
Competitive Loans, as the case may be, hereunder shall be suspended until such
time as such Bank may again make and maintain Eurodollar Loans or Competitive
Loans, as the case may be (in which case the provisions of Section 6.4 hereof
shall be applicable). Before giving such notice pursuant to this Section 6.3,
such Bank will designate a different available Applicable Lending Office for the
Eurodollar Loans or the Competitive Loans, as the case may be, of such Bank or
take such other action as the Company may request if such designation or action
will avoid the need to suspend such Bank's obligation to make Eurodollar Loans
or Competitive Loans, as the case may be, hereunder and will not, in the sole
opinion of such Bank exercised in good faith, be disadvantageous to such Bank
(provided, that such Bank shall have no obligation so to designate an Applicable
Lending Office for Eurodollar Loans located in the United States of America).
6.4 Substitute Alternate Base Rate Loans. If the obligation of any Bank
to make or maintain Eurodollar Loans or Competitive Loans, as the case may be,
shall be suspended pursuant to Section 6.1, 6.2 or 6.3 hereof, all Loans which
would otherwise be made by such Bank as Eurodollar Loans or Competitive Loans,
as the case may be, shall be made instead as Alternate Base Rate Loans (and, if
an event referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank
so requests by notice to the Company with a copy to Agent, each Eurodollar Loan
or each Competitive Loan, as the case may be, of such Bank then outstanding
shall be automatically converted into an Alternate Base Rate Loan on the date
specified by such Bank in such notice) and, to the extent that Eurodollar Loans
or Competitive Loans, as the case may be, are so made as (or
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converted into) Alternate Base Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans or such Competitive Loans, as the
case may be, shall be applied instead to such Alternate Base Rate Loans.
6.5 Compensation. Subject to Section 13.6 hereof, the Company shall pay
to Agent for the account of each Bank, within four (4) Business Days after
demand therefor by such Bank through Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Bank) to compensate it for any
loss, cost or expense actually incurred by it (exclusive of any lost profits or
opportunity costs) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan or a
Competitive Loan made by such Bank on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Company to borrow a Eurodollar Loan or a
Competitive Loan to be made by such Bank on the date for such borrowing
specified in the relevant notice of borrowing under Section 5.5 or Section 2.10
hereof; such compensation to include, without limitation, any loss or expense
actually incurred (exclusive of any lost profits or opportunity costs) by reason
of the liquidation or reemployment of deposits or other funds acquired by the
applicable Bank to fund or maintain its share of any Loan. Subject to Section
6.8, each determination of the amount of such compensation by a Bank shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method. No costs shall be payable under
this Section solely by reason of the conversion of loans designated as
"Eurodollar Loans" under that certain Amended and Restated Credit Agreement
referred to in Section 13.15 hereof into the Existing Competitive Loans.
6.6 Additional Costs in Respect of Letters of Credit. If as a result of
any Regulatory Change there shall be imposed, modified or deemed applicable any
tax, reserve, special deposit or similar requirement against or with respect to
or measured by reference to Letters of Credit issued or to be issued hereunder
or participations in such Letters of Credit, and the result shall be to increase
the cost to any Bank of issuing or maintaining any Letter of Credit or any
participation therein, or reduce any amount receivable by any Bank hereunder in
respect of any Letter of Credit or any participation therein (which increase in
cost, or reduction in amount receivable, shall be the result of such Bank's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event), then such Bank shall notify the Company through Agent, and
upon demand therefor by such Bank through Agent, the Company (subject to Section
13.6 hereof) shall pay to such Bank, from time to time as specified by such
Bank, such additional amounts as shall be sufficient to compensate such Bank for
such increased costs or reductions in amount. Before making such demand pursuant
to this Section 6.6, such Bank will designate a different available Applicable
Lending Office for the Letter of Credit of such Bank or take such other action
as the
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Company may request, if such designation or action will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Bank exercised in good faith, be disadvantageous to such Bank. A statement
as to such increased costs or reductions in amount incurred by such Bank,
submitted by such Bank to the Company, shall be conclusive as to the amount
thereof, absent manifest error.
6.7 Capital Adequacy. If any Bank shall have determined that a
Regulatory Change resulting in the adoption after the date hereof or
effectiveness after the date hereof (whether or not previously announced) of any
applicable law, rule, regulation or treaty regarding capital adequacy, or any
change therein after the date hereof, or any change in the interpretation or
administration thereof after the date hereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by any
Bank (or its Applicable Lending Office) with any request or directive after the
date hereof regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of such Bank's
obligations hereunder, under the Loans made by it, under the Letters of Credit
and under the Notes held by it to a level below that which such Bank could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, upon satisfaction of the
conditions precedent set forth in this Section 6.7, upon demand by such Bank
(with a copy to Agent), the Company (subject to Section 13.6 hereof) shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such reduction. A certificate as to such amounts, submitted to the Company and
Agent by such Bank, setting forth the basis for such Bank's determination of
such amounts, shall constitute a demand therefor and shall be conclusive and
binding for all purposes, absent manifest error. The Company shall pay the
amount shown as due on any such certificate within four (4) Business Days after
delivery of such certificate. Subject to Section 6.8, in preparing such
certificate, a Bank may employ such assumptions and allocations of costs and
expenses as it shall in good faith deem reasonable and may use any reasonable
averaging and attribution method.
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination. Anything in this Section 6 notwithstanding:
(a) the Company shall not be required to pay to any Bank reimbursement
with regard to any costs or expenses, unless such Bank notifies the Company of
such costs or expenses within 90 days after the date paid or incurred;
(b) none of the Banks shall be permitted to pass through to the Company
charges and costs under this Section 6 on a discriminatory basis (i.e., which
are not also passed through by such Bank to other customers of such Bank
similarly situated where such customer is subject to documents providing for
such pass through); and
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(c) if any Bank elects to pass through to the Company any material
charge or cost under this Section 6 or elects to terminate the availability of
Eurodollar Loans for any material period of time, the Company may, within 60
days after the date of such event and so long as no Default shall have occurred
and be continuing, elect to terminate such Bank as a party to this Agreement;
provided that, concurrently with such termination the Company shall (i) if Agent
and each of the other Banks shall consent, pay that Bank all principal, interest
and fees and other amounts owed to such Bank through such date of termination or
(ii) have arranged for another financial institution approved by Agent (such
approval not to be unreasonably withheld) as of such date, to become a
substitute Bank for all purposes under this Agreement in the manner provided in
Section 13.5; provided further that, prior to substitution for any Bank, the
Company shall have given written notice to Agent of such intention and the Banks
shall have the option, but no obligation, for a period of 60 days after receipt
of such notice, to increase their Commitments in order to replace the affected
Bank in lieu of such substitution.
Section 7. Conditions Precedent.
7.1 Initial Loans. The obligation of each Bank or any applicable Issuer
to make its initial Loans after the date hereof or issue or participate in a
Letter of Credit after the date hereof (if such Letter of Credit is issued prior
to the funding of the initial Loans after the date hereof) hereunder is subject
to the following conditions precedent, each of which shall have been fulfilled
or waived to the satisfaction of the Majority Banks:
(a) Corporate Action and Status. Agent shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than bylaws) of the Company and each of its Subsidiaries, and
evidence satisfactory to Agent of all corporate action taken by the Company or
any of its Subsidiaries authorizing the execution, delivery and performance of
the Loan Documents and all other documents related to this Agreement to which it
is a party (including, without limitation, a certificate of the secretary of
each such party setting forth the resolutions of its Board of Directors
authorizing the transactions contemplated thereby and attaching a copy of its
bylaws), together with such certificates as may be appropriate to demonstrate
the qualification and good standing of and payment of taxes by the Company and
each of its Subsidiaries in each state in which such qualification is necessary.
(b) Incumbency. The Company and each Relevant Party shall have
delivered to Agent a certificate in respect of the name and signature of each of
the officers (i) who is authorized to sign on its behalf the applicable Loan
Documents related to any Loan or the issuance of any Letter of Credit and (ii)
who will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and
giving notices and other communications in connection with any Loan or the
issuance of any Letter of Credit. Agent and each Bank may conclusively rely on
such certificates until they receive notice in writing from the Company or the
appropriate Relevant Party to the contrary.
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(c) Notes. Agent shall have received the appropriate Notes of the
Company for each Bank, duly completed and executed.
(d) Loan Documents. The Company and each other Relevant Party shall
have duly executed and delivered the other Loan Documents to which it is a party
(in such number of copies as Agent shall have requested) and each such Loan
Document shall be in form satisfactory to Agent. Each such Loan Document shall
be in substantially the form furnished to the Banks prior to their execution of
this Agreement, together with such changes therein as Agent may approve.
(e) Fees and Expenses. The Company shall have paid to Agent for the
account of each Bank all accrued and unpaid commitment fees and other fees in
the amounts previously agreed upon in writing among the Company and Agent; and
shall have in addition paid to Agent all amounts payable under the letter
agreements referred to Section 2.4(c) hereof and under Section 9.7 hereof on or
before the date of this Agreement.
(f) Opinions of Counsel. Agent shall have received (1) an opinion of
Vinson & Elkins L.L.P., counsel to the Company, in form and substance reasonably
satisfactory to Agent and (2) such opinions of counsel to the Company and other
Relevant Parties and special local counsel of Agent as Agent shall reasonably
request with respect to the Company and the Loan Documents.
(g) Execution by Banks. Agent shall have received counterparts of this
Agreement executed and delivered by or on behalf of each of the Banks or Agent
shall have received evidence satisfactory to it of the execution and delivery by
each of the Banks of a counterpart hereof.
(h) Consents. Agent shall have received evidence satisfactory to it
that, except as disclosed in the Disclosure Statement, all material consents of
each Governmental Authority and of each other Person, if any, reasonably
required in connection with (a) the Loans and the Letters of Credit and (b) the
execution, delivery and performance of this Agreement and the other Loan
Documents have been satisfactorily obtained.
(i) Amendment to Intercreditor Agreement. Agent shall have received
counterparts of the Second Amendment to Intercreditor Agreement referred to in
the definition of "Intercreditor Agreement" in Section 1.1 hereof executed and
delivered by or on behalf of each of the Company and by the "Administrative
Agent" under the Canadian Facility or Agent shall have received evidence
satisfactory to it of the execution and delivery by each such Person of a
counterpart of such Second Amendment to Intercreditor Agreement.
(j) Canadian Facility. Agent shall have received counterparts of the
Credit Agreement referred to in the definition of "Canadian Facility" in Section
1.1 hereof executed and delivered by or on behalf of each of Seagull Energy
Canada Ltd., The Chase Manhattan Bank of
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Canada, as Arranger and as Agent, The Bank of Nova Scotia, as Paying Agent and
as Co-Agent, Canadian Imperial Bank of Commerce, as Co-Agent, and certain banks
parties thereto or Agent shall have received evidence satisfactory to it of the
execution and delivery by each such Person of a counterpart of such Credit
Agreement.
(k) Other Documents. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request.
All provisions and payments required by this Section 7.1 are subject to
the provisions of Section 13.6.
7.2 Initial and Subsequent Loans. The obligation of each Bank or any
applicable Issuer to make any Loan (including, without limitation, its initial
Loan) to be made by it hereunder or to issue or participate in any Letter of
Credit is subject to the additional conditions precedent that (i) Agent shall
have received a Request for Extension of Credit and such other certifications as
Agent may reasonably require, (ii) in the case of Competitive Loans, the Company
shall have complied with the provisions of Section 2.10 hereof and (iii) as of
the date of such Loan or such issuance, and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except for facts timely disclosed to Agent from time to time in
writing, which facts (i) are not materially more adverse to the Company and its
Subsidiaries, (ii) do not materially decrease the ability of the Banks to
collect the Obligations as and when due and payable and (iii) do not materially
increase the liability of Agent or any of the Banks, in each case compared to
those facts existing on the date hereof and the material details of which have
been set forth in the Financial Statements delivered to Agent prior to the date
hereof or in the Disclosure Statement, and except for the representations set
forth in the Loan Documents which, by their terms, are expressly (or by means of
similar phrasing) made as of the Effective Date or as of the date hereof, as the
case may be, only, the representations and warranties made in each Loan Document
shall be true and correct in all material respects on and as of the date of the
making of such Loan or such issuance, with the same force and effect as if made
on and as of such date;
(c) the making of such Loan or the issuance of such Letter of Credit
shall not violate any Legal Requirement applicable to any Bank.
Each Request for Extension of Credit by the Company hereunder or
request for issuance of a Letter of Credit shall include a representation and
warranty by the Company to the effect set forth in Subsections 7.2(a) and (b)
(both as of the date of such notice and, unless the Company
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otherwise notifies Agent prior to the date of such borrowing or issuance, as of
the date of such borrowing or issuance).
Section 8. Representations and Warranties. To induce the Banks to enter
into this Agreement and to make the Loans and issue or participate in the
Letters of Credit, the Company represents and warrants (such representations and
warranties to survive any investigation and the making of the Loans and the
issuance of the Letters of Credit) to the Banks and Agent as follows:
8.1 Corporate Existence. The Company and each Subsidiary of the Company
are corporations duly incorporated and organized, legally existing and in good
standing under the laws of the respective jurisdictions in which they are
incorporated, and are duly qualified as foreign corporations in all
jurisdictions wherein the property owned or the business transacted by them
makes such qualification necessary and the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect.
8.2 Corporate Power and Authorization. The Company is duly authorized
and empowered to create and issue the Notes; each of the Company and each
Subsidiary of the Company is duly authorized and empowered to execute, deliver,
and perform this Agreement and the other Loan Documents to which it is a party;
and all corporate action on the Company's part requisite for the due creation
and issuance of the Notes and on the Company's part and on the part of each
Subsidiary of the Company for the due execution, delivery, and performance of
this Agreement and the other Loan Documents to which each of the Company and
each such Subsidiary is a party has been duly and effectively taken.
8.3 Binding Obligations. This Agreement, the Notes and the other Loan
Documents constitute legal, valid and binding obligations of the Company and its
Subsidiaries, to the extent each is a party thereto, enforceable against the
Company and its Subsidiaries, to the extent each is a party thereto, in
accordance with their respective terms, except as may be limited by any
bankruptcy, insolvency, moratorium or other similar laws or judicial decisions
affecting creditors' rights generally and general principles of equity whether
considered at law or in equity.
8.4 No Legal Bar or Resultant Lien. The Company's and each of its
Subsidiaries' creation, issuance, execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents, to the extent they are
parties thereto, do not and will not violate any provisions of the
Organizational Documents of the Company or any Subsidiary of the Company or any
Legal Requirement to which the Company or any Subsidiary of the Company is
subject or by which its property may be presently bound or encumbered, or result
in the creation or imposition of any Lien upon any properties of the Company or
any Subsidiary of the Company, other than those permitted by this Agreement.
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8.5 No Consent. Except as set forth in the Disclosure Statement, the
Company's creation and issuance of the Notes and the Company's and each of its
Subsidiaries' execution, delivery, and performance of this Agreement, the Notes
and the other Loan Documents to which they are parties do not and will not
require the consent or approval of any Person other than such consents and/or
approvals obtained by the Company contemporaneously with or prior to the
execution of this Agreement, including, without limitation, any Governmental
Authorities, other than those consents the failure to obtain which could not be
reasonably expected to have a Material Adverse Effect.
8.6 Financial Condition. The audited consolidated annual financial
statements of the Company and its Subsidiaries for the year ended December 31,
1996 and the unaudited consolidated interim financial statements of the Company
and its Subsidiaries for the quarter and three-month period ended March 31,
1997, which have been delivered to the Banks, have been prepared in accordance
with GAAP, and present fairly the financial condition and results of the
operations of the Company and its Subsidiaries for the period or periods stated
(subject only to normal year-end audit adjustments with respect to the unaudited
interim statements). No material adverse change, either in any case or in the
aggregate, has occurred since March 31, 1997 in the assets, liabilities,
financial condition, business, operations, affairs or circumstances of the
Company and its Subsidiaries taken as a whole, except as disclosed to the Banks
in the Disclosure Statement. Each Engineering Report and Company Report fairly
presents the values and prospective performances of the property described
therein and there are no statements or conclusions therein which were based upon
or included materially misleading information or fail to take into account
material information.
8.7 Investments and Guaranties. As of the Effective Date, neither the
Company nor any Subsidiary of the Company had made Investments in, advances to,
or Guarantees of, the obligations of any Person, except as (a) disclosed to the
Banks in the Disclosure Statement or (b) not prohibited by applicable provisions
of Section 10.
8.8 Liabilities and Litigation. Neither the Company nor any Subsidiary
of the Company has any material (individually or in the aggregate) liabilities,
direct or contingent, except as (a) disclosed or referred to in the Financial
Statements, (b) disclosed to the Banks in the Disclosure Statement, (c)
disclosed in a notice to Agent pursuant to Section 9.11 with respect to such as
could reasonably be expected to have a Material Adverse Effect or (d) not
prohibited by applicable provisions of Section 10. Except as (a) described in
the Financial Statements, (b) otherwise disclosed to the Banks in the Disclosure
Statement, (c) disclosed in a notice to Agent pursuant to Section 9.11 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (d) not prohibited by applicable provisions of Section 10, no
litigation, legal, administrative or arbitral proceeding, investigation, or
other action of any nature exists or (to the knowledge of the Company) is
threatened against or affecting the Company or any Subsidiary of the Company
which could reasonably be expected to result in any judgment which could
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reasonably be expected to have a Material Adverse Effect, or which in any manner
challenges or may challenge or draw into question the validity of this
Agreement, the Notes or any other Loan Document, or enjoins or threatens to
enjoin or otherwise restrain any of the transactions contemplated by any of
them.
8.9 Taxes and Governmental Charges. The Company and its Subsidiaries
have filed, or obtained extensions with respect to the filing of, all material
tax returns and reports required to be filed and have paid all material taxes,
assessments, fees and other governmental charges levied upon any of them or upon
any of their respective properties or income which are due and payable,
including interest and penalties, or have provided adequate reserves for the
payment thereof.
8.10 Title to Properties. The Company and its Subsidiaries have good
and defensible title to their respective properties included in the Borrowing
Base (including, without limitation, all fee and leasehold interests), free and
clear of all Liens except (a) those referred to in the Financial Statements, (b)
as disclosed to the Banks in the Disclosure Statement or (c) as permitted by
Section 10.2.
8.11 Defaults. Neither the Company nor any Subsidiary of the Company is
in default, which default could reasonably be expected to have a Material
Adverse Effect, under any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company or any Subsidiary of the Company is a party or
by which the Company or any Subsidiary of the Company or the property of the
Company or any Subsidiary of the Company is bound, except as (a) disclosed to
the Banks in the Disclosure Statement, (b) disclosed in a notice to Agent
pursuant to Section 9.11 with respect to such as could reasonably be expected to
have a Material Adverse Effect or (c) specifically permitted by applicable
provisions of Section 10. No Default under this Agreement, the Notes or any
other Loan Document has occurred and is continuing.
8.12 Location of Businesses and Offices. Except to the extent that
Agent has been furnished written notice to the contrary or of additional
locations, pursuant to Section 9.11, the Company's principal place of business
and chief executive offices are located at the address stated on the signature
page hereof and the principal places of business and chief executive offices of
each Subsidiary are described on Exhibit F hereto.
8.13 Compliance with Law. Neither the Company nor any Subsidiary of the
Company (except as (a) disclosed to the Banks in the Disclosure Statement, (b)
disclosed in a notice to Agent pursuant to Section 9.11 with respect to such as
could reasonably be expected to have a Material Adverse Effect or (c) not
prohibited by applicable provisions of Section 10):
(a) is in violation of any Legal Requirement; or
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(b) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of their respective
properties or the conduct of their respective business;
which violation or failure could reasonably be expected to have a Material
Adverse Effect.
8.14 Margin Stock. None of the proceeds of the Notes will be used for
the purpose of, and neither the Company nor any Subsidiary of the Company is
engaged in the business of extending credit for the purpose of (a) purchasing or
carrying any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 221) or (b) reducing or retiring
any indebtedness which was originally incurred to purchase or carry margin
stock, if such purpose under either (a) or (b) above would constitute this
transaction a "purpose credit" within the meaning of said Regulation U, or for
any other purpose which would constitute this transaction a "purpose credit".
Neither the Company nor any Subsidiary of the Company is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stocks. Neither the Company nor any
Subsidiary of the Company nor any Person acting on behalf of the Company or any
Subsidiary of the Company has taken or will take any action which might cause
the Notes or any of the Loan Documents, including this Agreement, to violate
Regulation U or any other regulation of the Board of Governors of the Federal
Reserve System, or to violate any similar provision of the Securities Exchange
Act of 1934 or any rule or regulation under any such provision thereof.
8.15 Subsidiaries. The Company has no Subsidiaries as of the date of
this Agreement except those shown in Exhibit F hereto.
8.16 ERISA. With respect to each Plan, the Company and each ERISA
Affiliate have fulfilled their obligations, including obligations under the
minimum funding standards of ERISA and the Code, and are in compliance in all
material respects with the provisions of ERISA and the Code. The Company has no
knowledge of any event which could result in a liability of the Company or any
ERISA Affiliate to the PBGC or a Plan (other than to make contributions in the
ordinary course). Since the effective date of Title IV of ERISA, there have not
been any nor are there now existing any events or conditions that would cause
the Lien provided under Section 4068 of ERISA to attach to any property of the
Company or any ERISA Affiliate. There are no Unfunded Liabilities with respect
to any Plan other than those specifically described in the certificate delivered
in accordance with Section 7.1(i). No "prohibited transaction" has occurred with
respect to any Plan.
8.17 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
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8.18 Public Utility Holding Company Act. Neither the Company nor any of
its Subsidiaries (i) is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended (the "PUHC Act"), except as to Section 9(a)(2)
thereof (15 U.S.C.A. ss.79(i)(a)(2)), or (ii) is in violation of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of the transactions contemplated under this Agreement, including without
limitation, the making of the Loans and the issuance of the Letters of Credit,
shall cause or constitute a violation of any of the provisions, rules,
regulations or orders of or under the PUHC Act and the PUHC Act does not in any
manner impair the legality, validity or enforceability of the Notes. The Company
has duly filed with the Securities and Exchange Commission good faith
applications (each an "Application") under Section 2(a)(8) of the PUHC Act (15
U.S.C.A. ss.79(b)(a)(8)) for a declaration of non-subsidiary status pursuant to
such Section 2(a)(8) with respect to each Person (each a "Specified
Shareholder") which owns, controls or holds with power to vote, directly or
indirectly, a sufficient quantity of the voting securities of the Company to be
construed as a "holding company", as such term is defined in the PUHC Act, in
respect of the Company. All of the information contained in such Applications,
as amended, was true as of the most recent filing date with respect thereto
(provided that the Company may, unless it has actual current knowledge to the
contrary, rely solely upon written information furnished by any Specified
Shareholder with respect to background information about the Specified
Shareholder and the nature of the ownership by such Specified Shareholder or its
Affiliates of the voting securities of the Company), and the Company knows of no
reason why each such Application, if acted upon by the Securities and Exchange
Commission, would not be approved. True and correct copies of each such
Application and any amendments thereto, as filed, have been furnished to Agent.
The Company has not received any written notice from the Securities and Exchange
Commission with respect to any such Application other than as disclosed in
writing to Agent.
8.19 Environmental Matters. Except as disclosed in the Disclosure
Statement, (i) the Company and it Subsidiaries have obtained and maintained in
effect all Environmental Permits (or has initiated the necessary steps to
transfer the Environmental Permits into its name), the failure to obtain which
could reasonably be expected to have a Material Adverse Effect, (ii) the Company
and its Subsidiaries and their properties, assets, business and operations have
been and are in compliance with all applicable Requirements of Environmental Law
and Environmental Permits failure to comply with which could reasonably be
expected to have a Material Adverse Effect, (iii) the Company and its
Subsidiaries and their properties, assets, business and operations are not
subject to any (A) Environmental Claims or (B) Environmental Liabilities, in
either case direct or contingent, and whether known or unknown, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which could reasonably be expected to
have a Material Adverse Effect, and (iv) no Responsible Officer of the Company
or any of its Subsidiaries has received any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with its assets, properties, business or
operations which could reasonably be expected to have a Material Adverse Effect.
The liability (including without limitation any
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Environmental Liability and any other damage to persons or property), if any, of
the Company and its Subsidiaries and with respect to their properties, assets,
business and operations which is reasonably expected to arise in connection with
Requirements of Environmental Laws currently in effect and other environmental
matters presently known by a Responsible Officer of the Company will not have a
Material Adverse Effect. No Responsible Officer of the Company knows of any
event or condition with respect to Environmental Matters with respect to any of
its properties or the properties of any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect. For purposes of this
Section 8.19, "Environmental Matters" shall mean matters relating to pollution
or protection of the environment, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, ambient air, surface water or ground
water, or land surface or subsurface), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
8.20 Claims and Liabilities. Except as disclosed to the Banks in
writing, neither the Company nor any of its Subsidiaries has accrued any
liabilities under gas purchase contracts for gas not taken, but for which it is
liable to pay if not made up and which, if not paid, would have a Material
Adverse Effect. Except as disclosed to the Banks in writing, no claims exist
against the Company or its Subsidiaries for gas imbalances which claims if
adversely determined would have a Material Adverse Effect. No purchaser of
product supplied by the Company or any of its Subsidiaries has any claim against
the Company or any of its Subsidiaries for product paid for, but for which
delivery was not taken as and when paid for, which claim if adversely determined
would have a Material Adverse Effect.
8.21 Solvency. Neither the Company nor the Company and its
Subsidiaries, on a consolidated basis, is "insolvent", as such term is used and
defined in (i) the Bankruptcy Code and (ii) the Texas Uniform Fraudulent
Transfer Act, Tex. Bus. & Com. Code Ann. ss.24.001 et seq.
Section 9. Affirmative Covenants. A deviation from the provisions of
this Section 9 will not constitute a Default under this Agreement if such
deviation is consented to in writing by the Majority Banks. Without the prior
written consent of the Majority Banks, the Company agrees with the Banks and
Agent that, so long as any of the Commitments is in effect and until payment in
full of all Loans hereunder, the termination or expiry of all Letters of Credit
and payment in full of Letter of Credit Liabilities, all interest thereon and
all other amounts payable by the Company hereunder:
9.1 Financial Statements and Reports. The Company will promptly furnish
to any Bank from time to time upon request such information regarding the
business and affairs and financial condition of the Company and its Subsidiaries
as such Bank may reasonably request, and will furnish to Agent and each of the
Banks:
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(a) Annual Reports - promptly after becoming available and in any event
within 100 days after the close of each fiscal year of the Company:
(i) the audited consolidated balance sheet of the Company
and its Subsidiaries as of the end of such year;
(ii) the audited consolidated statement of earnings of the
Company and its Subsidiaries for such year;
(iii) the audited consolidated statement of cash flows of
the Company and its Subsidiaries for such year;
(iv) a report prepared by a petroleum engineer, who may be
an employee of the Company or its Subsidiaries,
setting forth the historical monthly production data
for Hydrocarbons produced and sold by the Company and
its Subsidiaries for such year;
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, in the case of the audited Financial Statements,
audited and accompanied by the related opinion of KPMG Peat Marwick or other
independent certified public accountants of recognized national standing
acceptable to the Majority Banks, which opinion shall state that such audited
balance sheets and statements have been prepared in accordance with GAAP
consistently followed throughout the period indicated and fairly present the
consolidated financial condition and results of operations of the applicable
Persons as at the end of, and for, such fiscal year; and
(b) Quarterly Reports - as soon as available and in any event within 50
days after the end of each of the first three quarterly periods in each fiscal
year of the Company:
(i) the unaudited consolidated balance sheet of the
Company and its Subsidiaries as of the end of such
quarter;
(ii) the unaudited consolidated statement of earnings of
the Company and its Subsidiaries for such quarter and
for the period from the beginning of the fiscal year
to the close of such quarter;
(iii) the unaudited consolidated statement of cash flows of
the Company and its Subsidiaries for such quarter and
for the period from the beginning of the fiscal year
to the close of such quarter;
(iv) a report prepared by a petroleum engineer, who may be
an employee of the Company or its Subsidiaries,
setting forth the historical monthly production
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data for Hydrocarbons produced and sold by the
Company and its Subsidiaries for such quarter; all of
items (i) through (iv) above prepared on
substantially the same accounting basis as the annual
reports described in Subsection 9.1(a), subject to
normal changes resulting from year-end adjustments;
and
(c) Company Report - promptly after becoming available and in any event
on or before September 1 of each year, a Company Report; and
(d) Other Bank Requirements - at such time as the same are required to
be furnished to other lenders under other financing arrangements to which the
Company or any of its Subsidiaries may be a party or be bound from time to time,
a copy of any report, certificate, affidavit or other information required to be
furnished to any such lender; and
(e) SEC and Other Reports - promptly upon their becoming publicly
available, one copy of each financial statement, report, notice or definitive
proxy statement sent by the Company or any Subsidiary to shareholders generally,
and of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in respect
thereof filed by the Company or any of its Subsidiaries with, or received by the
Company or any of its Subsidiaries in connection therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency; and
(f) Engineering Report and other Component Values - promptly after
becoming available and in any event on or before March 15 of each year,
commencing with March 15, 1998, an Engineering Report.
All of the balance sheets and other financial statements referred to in
this Section 9.1 will be in such detail as any Bank may reasonably request and
will conform to GAAP applied on a basis consistent with those of the Financial
Statements as of December 31, 1996. In addition, if GAAP shall change with
respect to any matter relative to determination of compliance with this
Agreement, the Company will also provide financial information necessary for the
Banks to determine compliance with this Agreement.
9.2 Officers' Certificates.
(a) Concurrently with the furnishing of the annual financial statements
pursuant to Subsection 9.1(a), commencing with the annual financial statements
required to be delivered in 1998, the Company will furnish or cause to be
furnished to Agent certificates of compliance, as follows:
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(i) a certificate signed by the principal financial
officer of the Company in the form of Exhibit G; and
(ii) a certificate from the independent public accountants
stating that their audit has not disclosed the
existence of any condition which constitutes a
Default, or if their audit has disclosed the
existence of any such condition, specifying the
nature and period of existence.
(b) Concurrently with the furnishing of the quarterly financial
statements pursuant to Subsection 9.1(b), the Company will furnish to Agent a
principal financial officer's certificate in the form of Exhibit G.
(c) Not later than concurrently with the furnishing of any annual
reports pursuant to Section 9.1(a) or concurrently with any request by the
Company for a Requested Redetermination (using then available Financial
Statements) and within ten (10) Business Days after any request by the
Requesting Banks for a Requested Redetermination (using then available Financial
Statements), the Company will furnish to Agent a Borrowing Base Certificate.
(d) Concurrently with the furnishing of any Engineering Report or
Company Report, the Company will furnish to Agent a certificate signed by an
appropriate officer of the Company and the applicable Relevant Party in the form
of Exhibit I.
9.3 Taxes and Other Liens. The Company will and will cause each
Subsidiary of the Company to pay and discharge promptly all taxes, assessments
and governmental charges or levies imposed upon the Company or such Subsidiary,
or upon the income or any property of the Company or such Subsidiary, as well as
all claims of any kind (including claims for labor, materials, supplies, rent
and payment of proceeds attributable to Hydrocarbon production) which, if
unpaid, might result in or become a Lien upon any or all of the property of the
Company or such Subsidiary; provided, however, that neither the Company nor such
Subsidiary will be required to pay any such tax, assessment, charge, levy or
claims if the amount, applicability or validity thereof will currently be
contested in good faith by appropriate proceedings diligently conducted and if
the Company or such Subsidiary will have set up reserves therefor adequate under
GAAP.
9.4 Maintenance. Except as referred to in Sections 8.1 and 8.13 and
except as permitted under Section 10.5 the Company will and will cause each
Subsidiary of the Company to: (i) maintain its corporate existence; (ii)
maintain its rights and franchises, except for any mergers or consolidations
otherwise permitted by this Agreement and except to the extent failure to so
maintain the same would not have a Material Adverse Effect; (iii) observe and
comply (to the extent that any failure would have a Material Adverse Effect)
with all valid Legal Requirements (including without limitation Requirements of
Environmental Law); and (iv)
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maintain (except to the extent failure to so maintain the same would not have a
Material Adverse Effect) its properties (and any properties leased by or
consigned to it or held under title retention or conditional sales contracts)
consistent with the standards of a reasonably prudent operator at all times and
make all repairs, replacements, additions, betterments and improvements to its
properties consistent with the standards of a reasonably prudent operator.
9.5 Further Assurances. The Company will and will cause each Subsidiary
of the Company to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Loan Documents, including this
Agreement. The Company at its expense will promptly execute and deliver to Agent
upon request all such other and further documents, agreements and instruments
(or cause any of its Subsidiaries to take such action) in compliance with or
accomplishment of the covenants and agreements of the Company or any of its
Subsidiaries in the Loan Documents, including this Agreement, or to correct any
omissions in the Loan Documents, or to make any recordings, to file any notices,
or obtain any consents, all as may be necessary or appropriate in connection
therewith.
9.6 Performance of Obligations. The Company will pay the Notes
according to the reading, tenor and effect thereof; and the Company will do and
perform every act and discharge all of the obligations provided to be performed
and discharged by the Company under this Agreement and the other Loan Documents
at the time or times and in the manner specified, and cause each of its
Subsidiaries to take such action with respect to their obligations to be
performed and discharged under the Loan Documents to which they respectively are
parties.
9.7 Reimbursement of Expenses. Whether or not any Loan is ever made or
any Letter of Credit is ever issued, the Company agrees to pay or reimburse
Agent for paying the reasonable fees and expenses of Liddell, Sapp, Zivley, Hill
& LaBoon, L.L.P., special counsel to Agent, together with the reasonable fees
and expenses of local counsel engaged by Agent, in connection with the
negotiation of the terms and structure of the Obligations, the preparation,
execution and delivery of this Agreement and the other Loan Documents and the
making of the Loans and the issuance of Letters of Credit hereunder, as well as
any modification, supplement or waiver of any of the terms of this Agreement and
the other Loan Documents. The Company will promptly upon request and in any
event within 30 days from the date of receipt by the Company of a copy of a bill
for such amounts, reimburse any Bank or Agent for all amounts reasonably
expended, advanced or incurred by such Bank or Agent to satisfy any obligation
of the Company under this Agreement or any other Loan Document, to protect the
properties or business of the Company or any Subsidiary of the Company, to
collect the Obligations, or to enforce the rights of such Bank or Agent under
this Agreement or any other Loan Document, which amounts will include without
limitation all court costs, attorneys' fees (but not including allocated costs
of in-house counsel), any engineering fees and expenses, fees of auditors,
accountants and appraisers, investigation expenses, all transfer, stamp,
documentary or similar taxes, assessments or charges levied by any governmental
or revenue authority in respect of any of the Loan Documents or any other
document
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referred to therein, all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection of
any lien contemplated by any of the Loan Documents or any document referred to
therein, fees and expenses incurred in connection with such Bank's participation
as a member of a creditors' committee in a case commenced under the Bankruptcy
Code or other similar law of the United States or any state thereof, fees and
expenses incurred in connection with lifting the automatic stay prescribed in
ss.362 Title 11 of the United States Code, and fees and expenses incurred in
connection with any action pursuant to ss.1129 Title 11 of the United States
Code and all other customary out-of-pocket expenses incurred by such Bank or
Agent in connection with such matters, together with interest after the
expiration of the 30-day period stated above in this Section if no Event of
Default has occurred and is continuing, or from the date of the request to the
Company if an Event of Default has occurred and is continuing, at either (i) the
Post-Default Rate on each such amount until the date of reimbursement to such
Bank or Agent, or (ii) if no Event of Default will have occurred and be
continuing, the Alternate Base Rate plus the highest Applicable Margin for
Alternate Base Rate Loans (not to exceed the Highest Lawful Rate) on each such
amount until the date of the Company's receipt of written demand or request by
such Bank or Agent for the reimbursement of same, and thereafter at the
applicable Post-Default Rate until the date of reimbursement to such Bank or
Agent. The obligations of the Company under this Section are compensatory in
nature, shall be deemed liquidated as to amount upon receipt by the Company of a
copy of any invoice therefor, and will survive the non-assumption of this
Agreement in a case commenced under the Bankruptcy Code or other similar law of
the United States or any state thereof, and will remain binding on the Company
and any trustee, receiver, or liquidator of the Company appointed in any such
case.
9.8 Insurance. The Company and its Subsidiaries will maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and business against such liabilities, casualties, risks
and contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated.
Upon the request of Agent acting at the instruction of the Majority Banks, the
Company will furnish or cause to be furnished to Agent from time to time a
summary of the insurance coverage of the Company and its Subsidiaries in form
and substance satisfactory to the Majority Banks in their reasonable judgment,
and if requested will furnish Agent copies of the applicable policies. Subject
to the terms of Section 3 hereof, in the case of any fire, accident or other
casualty causing loss or damage to any properties of the Company or any of its
Subsidiaries, the proceeds of such policies will be used (i) to repair or
replace the damaged property or (ii) to prepay the Obligations, at the election
of the Company.
9.9 Accounts and Records. The Company will keep and will cause each
Subsidiary of the Company to keep books of record and account which fairly
reflect all dealings or transactions in relation to their respective businesses
and activities, in accordance with GAAP, which books of record and account will
be maintained, to the extent necessary to enable
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compliance with all provisions of this Agreement, separately for each such
Subsidiary, the Company and any division of the Company.
9.10 Rights of Inspection. The Company will permit and will cause each
of its Subsidiaries to permit any officer, employee, or agent of Agent or any
Bank to meet with the consultants who prepared any applicable Engineering Report
and to review such Engineering Report with such consultants and to visit and
inspect any of the properties of the Company or such Subsidiary, examine the
Company's or such Subsidiary's books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of the Bank
or such Subsidiary with the Company's or such Subsidiary's officers, accountants
and auditors, all at such reasonable times during normal business hours and as
often as Agent or such Bank may reasonably desire, and will assist in all such
matters.
9.11 Notice of Certain Events. The Company will promptly notify Agent
(and Agent will then notify all of the Banks) if a Responsible Officer of the
Company learns of the occurrence of, or if the Company causes or intends to
cause, as the case may be:
(i) any event which constitutes a Default, together with a
detailed statement by a Responsible Officer of the Company of the steps being
taken to cure the effect of such Default; or
(ii) the receipt of any notice from, or the taking of any
other action by, the holder of any promissory note, debenture or other evidence
of indebtedness of the Company or any Subsidiary of the Company or of any
security (as defined in the Securities Act of 1933, as amended) of the Company
or any Subsidiary of the Company with respect to a claimed default, together
with a detailed statement by a Responsible Officer of the Company specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action the Company or such Subsidiary is taking or proposes to
take with respect thereto; or
(iii) any legal, judicial or regulatory proceedings
affecting the Company or any Subsidiary of the Company or any of the properties
of the Company or any Subsidiary of the Company in which the amount involved is
materially adverse to the Company and its Subsidiaries taken as a whole, and is
not covered by insurance or which, if adversely determined, would have a
Material Adverse Effect; or
(iv) any dispute between the Company or any Subsidiary of
the Company and any Governmental Authority or any other Person which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect; or
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(v) the occurrence of a default or event of default by the
Company or any Subsidiary of the Company under any other agreement to which it
is a party, which default or event of default could reasonably be expected to
have a Material Adverse Effect; or
(vi) any change in the accuracy of the representations and
warranties of the Company or any Subsidiary contained in this Agreement or
any other Loan Document; or
(vii) any material violation or alleged material violation
of any Requirements of Environmental Law or Environmental Permit or any
Environmental Claim or any Environmental Liability; or
(viii) any tariff and rate cases and other material reports
filed by the Company or any of its Subsidiaries with any Governmental Authority
and any notice to the Company or any of its Subsidiaries from any Governmental
Authority concerning noncompliance with any applicable Legal Requirement; or
(ix) the existence of any Borrowing Base Deficiency; or
(x) within 10 days after the date on which a Responsible
Officer of the Company has actual knowledge thereof, the receipt of any notice
by the Company or any of its Subsidiaries of any claim of nonpayment of, or any
attempt to collect or enforce, accounts payable of the Company or any of its
Subsidiaries exceeding, in the case of any one account payable at one time
outstanding, $1,000,000 and in the case of all accounts payable in the aggregate
at any one time outstanding, $3,000,000; or
(xi) any requirement for the payment of all or any portion
of any Indebtedness of the Company or any of its Subsidiaries prior to the
stated maturity thereof (whether by acceleration or otherwise) or as the result
of any failure to maintain or the reaching of any threshold amount provided in
any promissory note, bond, debenture, or other evidence of Indebtedness or under
any credit agreement, loan agreement, indenture or similar agreement executed in
connection with any of the foregoing; or
(xii) any notice from the Securities and Exchange Commission
with respect to any Application (as defined in Section 8.18 hereof).
9.12 ERISA Information and Compliance. The Company will promptly
furnish to Agent (i) immediately upon receipt, a copy of any notice of complete
or partial withdrawal liability under Title IV of ERISA and any notice from the
PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, (ii) if requested by Agent, acting on the instruction of
the Majority Banks, promptly after the filing thereof with the United States
Secretary of Labor or the PBGC or the Internal Revenue Service, copies of each
annual and other report
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with respect to each Plan or any trust created thereunder, (iii) immediately
upon becoming aware of the occurrence of any "reportable event", as such term is
defined in Section 4043 of ERISA, for which the disclosure requirements of
Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of
any "prohibited transaction", as such term is defined in Section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by the President or the principal financial officer of the Company
or the applicable ERISA Affiliate specifying the nature thereof, what action the
Company or the applicable ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken by the PBGC, the Internal
Revenue Service or the Department of Labor with respect thereto, (iv) promptly
after the filing or receiving thereof by the Company or any ERISA Affiliate of
any notice of the institution of any proceedings or other actions which may
result in the termination of any Plan, and (v) each request for waiver of the
funding standards or extension of the amortization periods required by Sections
303 and 304 of ERISA or Section 412 of the Code promptly after the request is
submitted by the Company or any ERISA Affiliate to the Secretary of the
Treasury, the Department of Labor or the Internal Revenue Service, as the case
may be. To the extent required under applicable statutory funding requirements,
the Company will fund, or will cause each ERISA Affiliate to fund, all current
service pension liabilities as they are incurred under the provisions of all
Plans from time to time in effect, and comply with all applicable provisions of
ERISA, except to the extent that any such failure to comply could not reasonably
be expected to have a Material Adverse Effect. The Company covenants that it
shall and shall cause each ERISA Affiliate to (1) make contributions to each
Plan in a timely manner and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in a timely manner all notices and
reports required under the terms of ERISA including but not limited to annual
reports; and (3) pay in a timely manner all required PBGC premiums, in each
case, to the extent failure to do so would have a Material Adverse Effect.
Section 10. Negative Covenants. A deviation from the provisions of this
Section 10 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. The Company agrees with the
Banks and Agent that, so long as any of the Commitments is in effect and until
payment in full of all Loans hereunder, the termination or expiry of all Letters
of Credit and payment in full of Letter of Credit Liabilities, all interest
thereon and all amounts payable by the Company hereunder:
10.1 Debts, Guaranties and Other Obligations. The Company will not and
will not permit any of its Subsidiaries (other than APC) to incur, create,
assume or in any manner become or be liable in respect of any Indebtedness
(including obligations for the payment of rentals); and the Company will not and
will not permit any of its Subsidiaries (other than APC) to Guarantee or
otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the Indebtedness of any other Person or
agreement for the furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by
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way of stock purchase, capital contribution, advance or loan) for the purpose of
paying or discharging the Indebtedness of any other Person, or otherwise, except
that the foregoing restrictions will not apply to:
(a) the Notes or other Indebtedness under the Loan Documents;
(b) liabilities, direct or contingent, of the Company or any Subsidiary
of the Company existing on the date of this Agreement which are reflected in the
Financial Statements or the Disclosure Statement and all renewals, extensions,
refinancings and rearrangements, but not increases, thereof;
(c) endorsements of negotiable or similar instruments for collection or
deposit in the ordinary course of business;
(d) trade payables, lease acquisition and lease maintenance
obligations, extensions of credit from suppliers or contractors, liabilities
incurred in exploration, development and operation of the Company's or any
Subsidiary's oil and gas properties or similar obligations from time to time
incurred in the ordinary course of business, other than for borrowed money,
which are paid within 90 days after the invoice date (inclusive of applicable
grace periods) or (i) are being contested in good faith, if such reserve as
required by GAAP has been made therefor or (ii) trade accounts payable of the
Company and its Subsidiaries (with respect to which no legal proceeding to
enforce collection has been commenced or, to the knowledge of any Responsible
Officer of the Company, threatened) not exceeding, in the aggregate at any time
outstanding, $25,000,000;
(e) taxes, assessments or other government charges which are not yet
due or are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as will be required by GAAP
will have been made therefor;
(f) Borrowing Base Debt of the Company; provided that the aggregate of
all Indebtedness permitted under this Subsection 10.1(f) shall not exceed the
amount by which the then current Borrowing Base exceeds the then current
Revolving Credit Obligations;
(g) to the extent, if any, not covered by Subsection (b) hereinabove,
the Indebtedness of the Company to APC evidenced solely by the Intercompany
Notes, as defined in the Beluga Financing Documents and the APC Long Term
Financing Documents, together with any renewals, extensions, amendments,
refinancings, rearrangements, modifications, restatements or supplements, but
not increases (other than increases which are permitted under the present terms
of the Beluga Financing Documents and the APC Long Term Financing Documents)
thereof from time to time;
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(h) intercompany Indebtedness owed to the Company by any Subsidiary of
the Company and intercompany Indebtedness owed to any Subsidiary of the Company
by the Company or any other Subsidiary of the Company which is fully
subordinated to the Obligations;
(i) loans, advances or extensions of credit to the Company for the
purpose of financing no more than 75% of the purchase price of any fixed assets
which are not included in the property taken into account in determining the
Borrowing Base and which are considered in the categories of property, plant or
equipment according to GAAP applied on a consistent basis;
(j) obligations of the Company under the Gas Sales Contract, together
with any renewals, extensions, amendments, refinancings, rearrangements,
modifications, restatements or supplements, but not increases, thereof from time
to time;
(k) the Guarantee by the Company or any Subsidiary of the Company of
payment or performance by any Subsidiary of the Company under any agreement so
long as the obligation guaranteed does not constitute Indebtedness for borrowed
money;
(l) obligations of the Company or any of its Subsidiaries under gas
purchase contracts for gas not taken, as to which the Company or its respective
Subsidiary is liable to pay if not made up;
(m) obligations of the Company or any of its Subsidiaries under any
contract for sale for future delivery of oil or gas (whether or not the subject
oil or gas is to be delivered), hedging contract, forward contract, swap
agreement, futures contract or other similar agreement;
(n) obligations of the Company or any of its Subsidiaries under any
interest rate swap agreement, or any contract implementing any interest rate
cap, collar or floor, or any similar interest hedging contract;
(o) obligations in connection with gas imbalances arising in the
ordinary course of business;
(p) Indebtedness not exceeding $1,000,000 in the aggregate borrowed
from the Amarillo Economic Development Commission and related Guarantees and
related obligations of the Company and its Subsidiaries;
(q) liabilities under leases and lease agreements which do not cover
oil and gas properties to the extent the incurrence and existence of such
liabilities will still enable the Company and each Subsidiary to comply with all
other requirements of this Agreement and the other Loan Documents to which they
respectively are parties;
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(r) Subordinated Debt;
(s) Indebtedness of any Oil and Gas Subsidiary for borrowed money
payable solely by recourse to properties not included in the Borrowing Base and
Indebtedness incurred by any Gas and Liquids Pipeline Subsidiary in connection
with the construction or acquisition of new assets in connection with the
Pipeline Operations which is payable solely by recourse to the assets so
constructed or acquired, each to the extent not otherwise expressly permitted by
this Section 10.1;
(t) the Canadian Facility (and the "Bankers' Acceptances" provided for
therein) and the guaranty by the Company of the Canadian Facility; and
(u) Indebtedness of Seagull Energy Canada Ltd. having a maturity of 364
days or less from the date of its incurrence in an aggregate principal amount
not exceeding Canadian $10,000,000 at any one time outstanding.
10.2 Liens. The Company will not and will not permit any of its
Subsidiaries to create, incur, assume or permit to exist any Lien on any of its
or their properties (now owned or hereafter acquired), except:
(a) Liens securing the Indebtedness described in Subsection 10.1(a);
(b) Liens for taxes, assessments or other governmental charges or
levies not yet due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserve as will be
required by GAAP will have been made therefor;
(c) Liens of landlords, vendors, contractors, subcontractors, carriers,
warehousemen, mechanics, laborers or materialmen or other like Liens arising by
law in the ordinary course of business for sums not yet due or being contested
in good faith by appropriate action promptly initiated and diligently conducted,
if such reserve as will be required by GAAP will have been made therefor;
(d) Liens existing on property owned by the Company or any of its
Subsidiaries on the date of this Agreement which have been disclosed to the
Banks in the Disclosure Statement, together with any renewals, extensions,
amendments, refinancings, rearrangements, modifications, restatements or
supplements, but not increases, thereof from time to time;
(e) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, social security
and other like laws;
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(f) inchoate liens arising under ERISA to secure the contingent
liability of the Company permitted by Section 9.12;
(g) Liens in the ordinary course of business, not to exceed in the
aggregate $10,000,000 as to the Company and its Subsidiaries at any time in
effect, regarding (i) the performance of bids, tenders, contracts (other than
for the repayment of borrowed money or the deferred purchase price of property
or services) or leases, (ii) statutory obligations, (iii) surety appeal bonds or
(iv) Liens to secure progress or partial payments made to the Company or any of
its Subsidiaries and other Liens of like nature;
(h) covenants, restrictions, easements, servitudes, permits,
conditions, exceptions, reservations, minor rights, minor encumbrances, minor
irregularities in title or conventional rights of reassignment prior to
abandonment which do not materially interfere with the occupation, use and
enjoyment by the Company or any Subsidiary of the Company of its respective
assets in the normal course of business as presently conducted, or materially
impair the value thereof for the purpose of such business;
(i) Liens of operators under joint operating agreements or similar
contractual arrangements with respect to the relevant entity's proportionate
share of the expense of exploration, development and operation of oil, gas and
mineral leasehold or fee interests owned jointly with others, to the extent that
same relate to sums not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if such reserve
as will be required by GAAP will have been made therefor;
(j) Liens created pursuant to the creation of trusts or other
arrangements funded solely with cash, cash equivalents or other marketable
investments or securities of the type customarily subject to such arrangements
in customary financial practice with respect to long-term or medium-term
indebtedness for borrowed money, the sole purpose of which is to make provision
for the retirement or defeasance, without prepayment, of Indebtedness permitted
under Section 10.1;
(k) Liens on the assets or properties of ENSTAR Alaska;
(l) the Vendor Financing Arrangements (as defined in the Mesa
Contract), to the extent that the same shall have been deducted in calculating
the Borrowing Base;
(m) purchase money Liens for the acquisition of fixed assets pursuant
to Subsec tion 10.1(i), so long as such Liens exist solely against the relevant
fixed asset acquired and secure only the purchase money debt; provided, that the
aggregate amount of Indebtedness which is secured by Liens described in this
subsection (other than Indebtedness which is payable solely by recourse to the
applicable property) shall not exceed $10,000,000 at any one time outstanding;
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(n) any Lien existing on any real or personal property of any
corporation or partnership at the time it becomes a Subsidiary of the Company or
of any other Subsidiary of the Company, or existing prior to the time of
acquisition upon any real or personal property acquired by the Company or any of
its Subsidiaries; provided, that such Liens may at all times be deducted in
calculating the Borrowing Base from time to time in effect;
(o) legal or equitable encumbrances deemed to exist by reason of the
existence of any litigation or other legal proceeding or arising out of a
judgment or award with respect to which an appeal is being prosecuted in good
faith by appropriate action promptly initiated and diligently conducted, if such
reserve as will be required by GAAP will have been made therefor;
(p) any Liens securing Indebtedness neither assumed nor guaranteed by
the Company or any of its Subsidiaries nor on which it customarily pays
interest, existing upon real estate or rights in or relating to real estate
acquired by the Company or any of its Subsidiaries for substation, metering
station, pump station, storage, gathering line, transmission line,
transportation line, distribution line or right-of-way purposes, and any Liens
reserved in leases for rent and full compliance with the terms of the leases in
the case of leasehold estates, to the extent that any such Lien referred to in
this clause arises in the normal course of business as presently conducted and
does not materially impair the use of the property covered by such Lien for the
purposes for which such property is held by the Company or its applicable
Subsidiary;
(q) rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate such right,
power, franchise, grant, license or permit or to purchase, condemn, expropriate
or recapture or to designate a purchaser of any of the property of the Company
or any of its Subsidiaries;
(r) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any property of the Company
or any of its Subsidiaries, or to use such property in a manner which does not
materially impair the use of such property for the purposes for which it is held
by the Company or its applicable Subsidiary;
(s) any obligations or duties affecting the property of the Company or
any of its Subsidiaries to any municipality, governmental, statutory or public
authority with respect to any franchise, grant, license or permit;
(t) rights of a common owner of any interest in real estate,
rights-of-way or easements held by the Company or any of its Subsidiaries and
such common owner as tenants in common or through other common ownership;
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(u) any Liens arising from the matters described in Schedule 3.19 of
the Mesa Contract;
(v) Liens securing Indebtedness permitted under Section 10.1(s) hereof
(to the extent such Liens are permitted under such Section 10.1(s));
(w) as to assets located in Canada, reservations, limitations, provisos
and conditions in any original grant from the Crown or freehold lessor of any of
the properties of the Company or its Subsidiaries;
(x) other Liens securing Indebtedness not exceeding, in the aggregate,
$10,000,000 at any one time outstanding;
(y) other Liens securing Senior Debt, but only so long as such Liens
shall also secure the Obligations on a pari passu basis, in a manner and
pursuant to documentation acceptable to the Majority Banks;
(z) Liens (i) granted to or existing in favor of third parties on
margin accounts of the Company or any of its Subsidiaries relating to exchange
traded contracts for the delivery of natural gas pursuant to which the Company
or any such Subsidiary intends to take actual delivery of such natural gas
within forty (40) days from the then current date in the ordinary course of
business and not for speculative purposes, and (ii) on margin accounts of the
Company or any of its Subsidiaries relating to exchange traded contracts for the
delivery of natural gas, provided, however, the aggregate balance of the margin
accounts subject to the Liens permitted by this clause (ii) shall not exceed
from time to time $10,000,000.
10.3 Investments, Loans and Advances. The Company will not and will not
permit its Subsidiaries to make or permit to remain outstanding any advances,
loans or other extensions of credit or capital contributions (other than prepaid
expenses in the ordinary course of business) to (by means of transfers of
property or assets or otherwise), or purchase or own any stocks, bonds, notes,
debentures or other securities of, or incur contingent liability with respect to
(except for the endorsement of checks in the ordinary course of business and
except for the Indebtedness and Liens permitted under this Agreement) any Person
(all such transactions being herein called "Investments"), except that the
foregoing restriction will not apply to:
(a) Investments (all prior to the date hereof) the material details of
which have been set forth in the Financial Statements delivered to Agent prior
to the date hereof or the Disclosure Statement;
(b) Liquid Investments;
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(c) advances or extensions of credit in the form of accounts receivable
incurred in the ordinary course of business;
(d) the acquisition of all of the capital stock of wholly owned
Subsidiaries incorporated or acquired subsequent to the date of this Agreement;
(e) investments where the consideration paid is capital stock of the
Company, plus cash paid in lieu of issuing fractional shares and cash paid in
settlement of claims of dissenters, such cash not to exceed 10% of the aggregate
purchase price in any such transaction;
(f) Investments in any Person which after giving effect thereto will be
a Subsidiary of the Company, so long as the Investment in such Person, when
consummated, would not result in a breach of the covenants set forth in Section
10.1;
(g) intercompany loans, advances or investments by the Company to or in
any Subsidiary of the Company (other than a Subsidiary that is obligated to pay
Funded Indebtedness for borrowed money payable solely by recourse to properties
not included in the Borrowing Base) or, to the extent permitted under Section
10.1(h) hereof, by any Subsidiary of the Company to or in the Company or to or
in any other Subsidiary of the Company, provided, however, that APC may not make
any intercompany loans, advances or investments in any Subsidiary of the Company
pursuant to this clause (g);
(h) intercompany loans, advances or investments by the Company, solely
from income or cash flow of the Company subject to the Beluga Financing
Documents, to APC as required under the Beluga Financing Documents and the APC
Long Term Financing Documents;
(i) to the extent, if any, not covered by Subsection (a) hereinabove,
the Indebtedness of the Company to APC evidenced solely by the Intercompany
Notes, as defined in the Beluga Financing Documents and the APC Long Term
Financing Documents, together with any renewals, extensions, amendments,
refinancings, rearrangements, modifications, restatements or supplements, but
not increases (other than increases which are permitted under the present terms
of the Beluga Financing Documents and the APC Long Term Financing Documents)
thereof from time to time;
(j) loans or advances to employees made in the ordinary course of
business, up to the aggregate principal amount at any one time outstanding of
$5,000,000;
(k) Investments in reasonable amounts of securities for purposes of
funding employee benefit plans maintained by the Company;
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(l) advances or extensions of credit made in the ordinary course of
business to third parties under applicable contracts and agreements in
connection with (i) oil, gas or other mineral exploration, development and
production activities or (ii) Hydrocarbon or chemical pipeline gathering or
transportation activities;
(m) Investments where the consideration paid is assets of the Company
or its Subsidiaries other than capital stock, cash or oil and gas reserves;
(n) Investments in EBOC Energy Ltd. made in connection with and
pursuant to that certain Sale Agreement dated November 19, 1993 executed by and
between Novacor Petrochemicals Ltd., as Vendor, and the Company, as Purchaser;
(o) any payment, prepayment, purchase or retirement of Indebtedness of
the Company (other than payments, prepayments, purchases or retirement of
Subordinated Debt prohibited under the definition of "Subordinated Debt"); and
(p) any other Investments which in the aggregate do not cause the
Company to be in violation of the Investments Tests.
10.4 Dividend Payment Restrictions. The Company will not declare or
make any Dividend Payment if any Default or Event of Default has occurred and is
continuing or if there exists any Borrowing Base Deficiency.
10.5 Mergers and Sales of Assets. The Company will not (a) merge or
consolidate with, or sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of transactions, more than ten percent (10%) in the
aggregate of the Company's and its Subsidiaries' consolidated total assets
(whether now owned or hereafter acquired) to any Person or Persons during the
period since the most recent Borrowing Base Determination, or permit any
Subsidiary of the Company to do so (other than to the Company or another
Subsidiary of the Company or the issuance by any Subsidiary of the Company of
any stock to the Company or another Subsidiary of the Company), or (b) sell,
assign, lease or otherwise dispose of, whether in one transaction or in a series
of transactions, any other properties if receiving therefor consideration other
than cash or other consideration readily convertible to cash or which is less
than the fair market value of the relevant properties, or permit any Subsidiary
of the Company to do so; provided that the Company or any Subsidiary of the
Company may merge or consolidate with any other Person and any Subsidiary of the
Company may transfer properties to any other Subsidiary of the Company or to the
Company so long as, in each case, (i) immediately thereafter and giving effect
thereto, no event will occur and be continuing which constitutes a Default, (ii)
in the case of any such merger or consolidation to which the Company is a party,
the Company is the surviving Person, (iii) in the case of any such merger or
consolidation to which any Subsidiary of the Company is a party (but not the
Company), after giving effect to all transactions closing concurrently relating
to such
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merger or consolidation, the surviving Person is a Subsidiary of the Company and
(iv) the surviving Person ratifies each applicable Loan Document and provided
further that any Subsidiary of the Company may merge or consolidate with any
other Subsidiary of the Company so long as, in each case (i) immediately
thereafter and giving effect thereto, no event will occur and be continuing
which constitutes a Default and (ii) the surviving Person ratifies each
applicable Loan Document.
10.6 Proceeds of Notes. The Company will not permit the proceeds of the
Notes to be used for any purpose other than those permitted by this Agreement.
10.7 ERISA Compliance. The Company will not at any time permit any Plan
maintained by it or any Subsidiary of the Company to:
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code;
(b) incur any "accumulated funding deficiency" as such term is defined
in Section 302 of ERISA; or
(c) terminate or be terminated in a manner which could result in the
imposition of a Lien on the property of the Company or any Subsidiary of the
Company pursuant to Section 4068 of ERISA, in each case, to the extent that
permitting the Plan to do so would have a Material Adverse Effect.
10.8 Amendment of Certain Documents. The Company will not amend, modify
or obtain or grant a waiver of (except for waivers only of cross-defaults
created by a Default under this Agreement), or allow APC to enter into any
amendment or modification or obtain or grant any waiver of (except for waivers
only of cross-defaults created by a Default under this Agreement), any provision
of those documents relating to or constituting the Beluga Financing Documents or
the APC Long Term Financing Documents, without prior written notification to
Agent.
10.9 Tangible Net Worth. The Company will not permit the Tangible Net
Worth of the Company and its Subsidiaries, on a consolidated basis, at any time
to be less than $465,000,000 plus 50% of net income of the Company and its
Subsidiaries on a consolidated basis, if positive, beginning with the fiscal
year ended December 31, 1997 and calculated annually thereafter based upon
positive net income of the Company and its Subsidiaries for each applicable
fiscal year taken cumulatively.
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10.10 Company Debt/Capitalization Ratio. The Company will not permit
the Debt/Capitalization Ratio to be, at any time, more than 65%.
10.11 EBITDAX/Interest Ratio. The Company will not permit the
EBITDAX/Interest Ratio to be, at any time, less than 3.50:1.00 for any twelve
month period ending on the last day of any calendar quarter.
10.12 Nature of Business. The Company will not engage in, and will not
permit any Subsidiary of the Company to engage in, businesses other than oil and
gas exploration and production, gas processing, transmission, distribution,
marketing and storage and gas and liquids pipeline operations and activities
related or ancillary thereto; provided, that if the Company acquires one or more
Subsidiaries in transactions otherwise permitted by the terms hereof, any such
Subsidiary may be engaged in businesses other than those listed in this Section
so long as the assets of such Subsidiaries which are used in the conduct of such
other businesses do not constitute more than five percent (5%) of the
consolidated total assets of the Company (inclusive of the assets of the
Subsidiary so acquired).
10.13 Futures Contracts. The Company will not, and will not permit any
Subsidiary of the Company to, enter into or be obligated under any contract for
sale for future delivery of oil or gas (whether or not the subject oil or gas is
to be delivered), hedging contract, forward contract, swap agreement, futures
contract or other similar agreement except for (i) such contracts (x) which fall
within the parameters set forth on Exhibit J hereto or are otherwise approved in
writing by the Majority Banks and (y) which in the aggregate do not cover at any
time a volume of oil and/or gas equal to or greater than 50% of the proved
producing reserves attributable to the oil and gas properties of the Company and
its Subsidiaries, taken as a whole, as evidenced by the most current Engineering
and Company Reports and (ii) production sales contracts entered into in the
ordinary course of the Company's or the applicable Subsidiary's business.
10.14 Covenants in Other Agreements. The Company will not and will not
permit any of its Subsidiaries to become a party to or to agree that it or any
of its property is bound by any agreement, indenture, mortgage, deed of trust or
any other instrument directly or indirectly
(i) restricting any loans, advances or any other Investments
to or in the Company by any of its Subsidiaries;
(ii) restricting the ability of any Subsidiary of the Company
to make tax payments or management fee payments;
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(iii) restricting the capitalization structure of any
Subsidiary of the Company; or
(iv) restricting the ability or capacity of any Subsidiary of
the Company to make Dividend Payments; provided, however, nothing in this
Section 10.14 shall restrict the existence of negative covenants otherwise
prohibited by this Section in documentation evidencing or related to
Indebtedness permitted by Subsection 10.1(t) and, to the extent that the
applicable Subsidiary does not own any property included in the Borrowing Base,
Subsections 10.1(m), (n) and (s). Notwithstanding the foregoing, either of
ENSTAR Alaska or APC may become a party to, or grant a Lien in any of its
property by way of, or agree that it will be bound by, any indenture, mortgage,
deed of trust or other instrument containing provisions of the types described
above in this Section 10.14 so long as the terms and provisions thereof are
not materially more restrictive than the terms or provisions which are legally
binding on ENSTAR Alaska or APC on the Effective Date.
Section 11. Defaults.
11.1 Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) Payments - (i) the Company or any other Relevant Party fails to
make any payment or prepayment of any installment of principal on the Loans or
any Reimbursement Obligation payable under the Notes, this Agreement or the
other Loan Documents when due or (ii) the Company or any other Relevant Party
fails to make any payment or prepayment of interest with respect to the Loans,
any Reimbursement Obligation or any other fee or amount under the Notes, this
Agreement or the other Loan Documents and such failure to pay continues
unremedied for a period of five (5) Business Days; or
(b) Representations and Warranties - any representation or warranty
made by the Company or any other Relevant Party in this Agreement or in any
other Loan Document or in any instrument executed in connection herewith or
therewith proves to have been incorrect in any material respect as of the date
thereof; or any representation, statement (including Financial Statements),
certificate or data furnished or made by the Company or any other Relevant Party
(or any officer of the Company or any other Relevant Party) under or in
connection with this Agreement or any other Loan Document, including without
limitation in the Disclosure Statement, proves to have been untrue in any
material respect, as of the date as of which the facts therein set forth were
stated or certified; or
(c) Affirmative Covenants - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained in
Sections 9.11 (or in Section 9.6
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to the extent such default is considered an Event of Default under the other
Subsections of this Sec tion 11.1) or (ii) default is made in the due observance
or performance of any of the other covenants or agreements contained in Section
9 of this Agreement or any other affirmative covenant of the Company or any
other Relevant Party contained in this Agreement or any other Loan Document and
such default continues unremedied for a period of 30 days after (x) notice
thereof is given by Agent to the Company or (y) such default otherwise becomes
known to the Company, whichever is earlier; or
(d) Negative Covenants - (i) default shall be made in the observance or
performance of any of the covenants or agreements contained in Section 10.8 and
such default continues unremedied for a period of five (5) Business Days after
(x) notice thereof is given by Agent to the Company or (y) such default
otherwise becomes known to the Company, whichever is earlier, or (ii) default is
made in the due observance or performance by the Company of any of the other
covenants or agreements contained in Section 10 of this Agreement or of any
other negative covenant of the Company or any other Relevant Party contained in
this Agreement or any other Loan Document; or
(e) Other Obligations - default is made in the due observance or
performance by the Company or any of its Subsidiaries (as principal or guarantor
or other surety) of any of the covenants or agreements contained in any bond,
debenture, note or other evidence of Indebtedness in excess of $25,000,000
(singly or aggregating several such bonds, debentures, notes or other evidence
of Indebtedness) which default gives the holder the right to accelerate the
maturity of such Indebtedness, other than the Loan Documents, or under any
credit agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing, to
which it (respectively) is a party and such default is unwaived or continues
unremedied beyond the expiration of any applicable grace period which may be
expressly allowed under such instrument or agreement; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a receiver,
conservator, liquidator or trustee of the Company or of any of its property is
appointed by the order or decree of any court or agency or supervisory authority
having jurisdiction, and such decree or order remains in effect for more than 60
days; or the Company is adjudicated bankrupt or insolvent; or any of its
property is sequestered by court order and such order remains in effect for more
than 60 days; or a petition is filed against the Company under any state or
federal bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 60 days after such
filing; or
(g) Voluntary Petitions or Consents - the Company commences a voluntary
case or other proceeding seeking liquidation, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or other relief with
respect to itself or its debt or other liabilities
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under any bankruptcy, insolvency or other similar law nor 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
consents 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 fails generally to, or cannot, pay its debts generally as they become due or
takes any corporate action to authorize or effect any of the foregoing; or
(h) Assignments for Benefit of Creditors or Admissions of Insolvency -
the Company makes an assignment for the benefit of its creditors, or admits in
writing its inability to pay its debts generally as they become due, or consents
to the appointment of a receiver, trustee, or liquidator of the Company or of
all or any part of its property; or
(i) Undischarged Judgments - judgments (individually or in the
aggregate) for the payment of money in excess of $10,000,000 is rendered by any
court or other governmental body against the Company or any of its Subsidiaries
and the Company or such Subsidiary does not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within 60 days from the date of entry thereof, and within said period of
60 days from the date of entry thereof or such longer period during which
execution of such judgment will have been stayed, the Company or such Subsidiary
fails to appeal therefrom and cause the execution thereof to be stayed during
such appeal while providing such reserves therefor as may be required under
GAAP; or
(j) Subsidiary Defaults -any Subsidiary of the Company takes, suffers,
or permits to exist any of the events or conditions referred to in Subsections
11.1(f), (g) or (h); or
(k) Change in Control - there should occur any Change of Control.
THEREUPON: Agent may (and, if directed by the Majority Banks, shall) (a) declare
the Commitments terminated (whereupon the Commitments shall be terminated)
and/or (b) terminate any Letter of Credit providing for such termination by
sending a notice of termination as provided therein and/or (c) declare the
principal amount then outstanding of and the accrued interest on the Loans and
Reimbursement Obligations and all fees and all other amounts payable hereunder
and under the Notes to be forthwith due and payable, whereupon such amounts
shall be and become immediately due and payable, without notice (including
without limitation notice of acceleration and notice of intent to accelerate),
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Company; provided that in the case of the
occurrence of an Event of Default with respect to the Company referred to in
clause (f) or (g) of this Section 11.1 or in clause (j) of this Section 11.1 to
the extent it refers to clauses (f) or (g), the Commitments shall be
automatically terminated and the principal amount then outstanding of and the
accrued interest on the Loans and Reimbursement Obligations and all fees and all
other amounts payable hereunder and under the Notes shall be and become
automatically and
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immediately due and payable, without notice (including but not limited to notice
of intent to accelerate and notice of acceleration) and without presentment,
demand, protest or other for malities of any kind, all of which are hereby
expressly waived by the Company and/or (d) exercise any and all other rights
available to it under the Loan Documents, at law or in equity.
11.2 Collateral Account. The Company hereby agrees, in addition to the
provisions of Section 11.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Agent or the
Majority Banks (through Agent), pay to Agent an amount in immediately available
funds equal to the then aggregate amount available for drawings under all
Letters of Credit issued for the account of the Company, which funds shall be
held by Agent as Cover.
11.3 Preservation of Security for Unmatured Reimbursement Obligations.
In the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to Agent under the Loan Documents, and (ii)
payment in full of the principal amount then outstanding of and the accrued
interest on the Loans and Reimbursement Obligations and fees and all other
amounts payable hereunder and under the Notes, any Letters of Credit shall
remain outstanding and undrawn upon, Agent shall be entitled to hold (and the
Company hereby grants and conveys to Agent a security interest in and to) all
cash or other property ("Proceeds of Remedies") realized or arising out of the
exercise by Agent of any rights available to it under the Loan Documents, at law
or in equity, including, without limitation, the proceeds of any foreclosure, as
collateral for the payment of any amounts due or to become due under or in
respect of such Letters of Credit. Such Proceeds of Remedies shall be held for
the ratable benefit of the applicable Issuers. The rights, titles, benefits,
privileges, duties and obligations of Agent with respect thereto shall be
governed by the terms and provisions of this Agreement. Agent may, but shall
have no obligation to, invest any such Proceeds of Remedies in such manner as
Agent, in the exercise of its sole discretion, deems appropriate. Such Proceeds
of Remedies shall be applied to Reimbursement Obligations arising in respect of
any such Letters of Credit and/or the payment of any Issuer's obligations under
any such Letter of Credit when such Letter of Credit is drawn upon. The Company
hereby agrees to execute and deliver to Agent and the Banks such security
agreements, pledges or other documents as Agent or any of the Banks may, from
time to time, require to perfect the pledge, lien and security interest in and
to any such Proceeds of Remedies provided for in this Section 11.3.
11.4 Right of Setoff. Upon (i) the occurrence and during the
continuance of any Event of Default referred to in clauses (f), (g) or (h) of
Section 11.1, or in clause (j) of Section 11.1 to the extent it refers to
clauses (f), (g) or (h), or upon (ii) the occurrence and continuance of any
other Event of Default and upon the making of the notice specified in Section
11.1 to authorize Agent to declare the Notes due and payable pursuant to the
provisions thereof, or if (iii) the Company or any of its Subsidiaries becomes
insolvent, however evidenced, the Banks are hereby authorized at any time and
from time to time, without notice to the Company or any of its
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Subsidiaries (any such notice being expressly waived by the Company and its
Subsidiaries), to setoff and apply any and all deposits (general or special,
time or demand, provisional or final, whether or not such setoff results in any
loss of interest or other penalty, and including without limitation all
certificates of deposit) at any time held, and any other funds or property at
any time held, and other Indebtedness at any time owing by any Bank to or for
the credit or the account of the Company against any and all of the Obligations
irrespective of whether or not such Bank will have made any demand under this
Agreement or the Notes and although such obligations may be unmatured. Should
the right of any Bank to realize funds in any manner set forth hereinabove be
challenged and any application of such funds be reversed, whether by court order
or otherwise, the Banks shall make restitution or refund to the Company pro rata
in accordance with their Commitments. The Banks agree promptly to notify the
Company and Agent after any such setoff and application, provided that the
failure to give such notice will not affect the validity of such setoff and
application. The rights of Agent and the Banks under this Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which Agent or the Banks may have.
Section 12. Agent.
12.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder and under the
Letters of Credit and the other Loan Documents with such powers as are
specifically delegated to Agent by the terms hereof and thereof, together with
such other powers as are reasonably incidental thereto. Agent (which term as
used in this Section 12 shall include reference to its affiliates and its own
and their affiliates' officers, directors, employees and agents) shall not (a)
have any duties or responsibilities except those expressly set forth in this
Agreement, the Letters of Credit, and the other Loan Documents, or shall by
reason of this Agreement or any other Loan Document be a trustee or fiduciary
for any Bank; (b) be responsible to any Bank for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Letters of Credit, or any other Loan Document or any other document referred to
or provided for herein or therein or any property covered thereby or for any
failure by any Relevant Party or any other Person to perform any of its
obligations hereunder or thereunder; (c) be required to initiate or conduct any
litigation or collection proceedings hereunder or under the Letters of Credit or
any other Loan Document except to the extent Agent is so requested by the
Majority Banks, or (d) be responsible for any action taken or omitted to be
taken by it hereunder or under the Letters or Credit or any other Loan Document
or any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, including, without limitation,
pursuant to their own negligence, except for its own gross negligence or willful
misconduct. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any
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such agents or attorneys-in-fact selected by it with reasonable care. Without in
any way limiting any of the foregoing, each Bank acknowledges that neither Agent
nor any Issuer shall have any greater responsibility in the operation of the
Letters of Credit than is specified in the Uniform Customs and Practice for
Documentary Credits (1993 Revision, International Chamber of Commerce
Publication No. 500). In any foreclosure proceeding concerning any collateral
for the Notes, each holder of a Note if bidding for its own account or for its
own account and the accounts of other Banks is prohibited from including in the
amount of its bid an amount to be applied as a credit against its Note or Notes
or the Notes of the other Banks; instead, such holder must bid in cash only;
provided that this provision is for the sole benefit of Agent and the Banks and
shall not inure to the benefit of the Company or any of its Subsidiaries.
However, in any such foreclosure proceeding, Agent may (but shall not be
obligated to) submit a bid for all Banks (including itself) in the form of a
credit against the Notes of all of the Banks, and Agent or its designee may (but
shall not be obligated to) accept title to such collateral for and on behalf of
all Banks.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel (which may be counsel for the
Company), independent accountants and other experts selected by Agent. As to any
matters not expressly provided for by this Agreement, the Letters of Credit, or
any other Loan Document, Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder and thereunder in accordance with
instructions of the Majority Banks (or, where unanimous consent is required by
the terms hereof or of the other Loan Documents, all of the Banks), and any
action taken or failure to act pursuant thereto shall be binding on all of the
Banks. Pursuant to instructions of the Majority Banks (except as otherwise
provided in Section 13.4 hereof), Agent shall have the authority to execute
releases of security documents on behalf of the Banks without the joinder of any
Bank.
12.3 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans or Reimbursement Obligations) unless it has received notice from a Bank
or the Company specifying such Default and stating that such notice is a "Notice
of Default". In the event that Agent receives such a notice of the occurrence of
a Default, Agent shall give prompt notice thereof to the Banks (and shall give
each Bank prompt notice of each such non-payment). Agent shall (subject to
Section 12.7 hereof) take such action with respect to such Default as shall be
directed by the Majority Banks and within its rights under the Loan Documents
and at law or in equity, provided that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, permitted hereby with respect to
such Default as it shall deem advisable in the best interests of the Banks and
within its rights under the Loan Documents, at law or in equity.
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12.4 Rights as a Bank. With respect to its Commitments and the Loans
made and Letter of Credit Liabilities, Chase in its capacity as a Bank hereunder
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not acting as Agent and the term "Bank" or
"Banks" shall, unless the context otherwise indicates, include the Chase in its
individual capacity. Agent may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of banking,
trust, letter of credit, agency or other business with the Company (and any of
its Affiliates) as if it were not acting as Agent, and Agent may accept fees and
other consideration from the Company and its Affiliates (in addition to the fees
heretofore agreed to between the Company and Agent) for services in connection
with this Agreement or otherwise without having to account for the same to the
Banks.
12.5 Indemnification. The Banks agree to indemnify Agent (to the extent
not reimbursed under Section 2.2(c), Section 9.7 or Section 13.3 hereof, but
without limiting the obligations of the Company under said Sections 2.2(c), 9.7
and 13.3), ratably in accordance with their respective Commitments, for any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever
(including but not limited to, the consequences of the negligence of Agent)
which may be imposed on, incurred by or asserted against Agent in any way
relating to or arising out of this Agreement, the Letters of Credit or any other
Loan Document or any other documents contemplat ed by or referred to herein or
therein or the transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses which the Company is obligated to pay under
Sections 2.2(c), 9.8 and 13.3 hereof but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of their respective agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
The obligations of the Banks under this Section 12.5 shall survive the
termination of this Agreement and the repayment of the Obligations.
12.6 Non-Reliance on Agent and Other Banks. Each Bank agrees that it
has received current financial information with respect to the Company and that
it has, independently and without reliance on Agent or any other Bank and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Company and decision to enter into this Agreement and
that it will, independently and without reliance upon Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Loan Documents. Agent shall not
be required to keep itself informed as to the performance or observance by any
Relevant Party of this Agreement, the Letters of Credit or any of the other Loan
Documents or any other document referred to or provided for herein or therein or
to inspect the properties or books of the Company or any Relevant Party. Except
for notices,
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reports and other documents and information expressly required to be furnished
to the Banks by Agent hereunder, under the Letters of Credit or the other Loan
Documents, Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the affairs, financial condition
or business of the Company or any other Relevant Party (or any of their
affiliates) which may come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder, under the Letters of Credit and under the other Loan Documents, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Banks of their indemnification obligations under Section 12.5 hereof against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
12.8 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Banks and the Company, and Agent may be removed
at any time with or without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent, provided deposits with a successor Agent shall be insured by
the Federal Deposit Insurance Corporation or its successor. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent. Any
successor Agent shall be a bank which has an office in the United States and a
combined capital and surplus of at least $250,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. A successor Agent shall
promptly specify by notice to the Company and the Banks its Principal Office
referred to in Sections 3.1 and 5.1. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 12 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as an Agent.
Section 13. Miscellaneous.
13.1 Waiver. No waiver of any Default shall be a waiver of any other
Default. No failure on the part of any Agent or any Bank to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.
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13.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable, mail or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a notice to the Company, Agent given in accordance with this Section 13.2.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly received when transmitted by telex or telecopier during
regular business hours, delivered to the telegraph or cable office or personally
delivered or, in the case of a mailed notice, three (3) days after deposit in
the United States mails, postage prepaid, certified mail with return receipt
requested (or upon actual receipt, if earlier), in each case given or addressed
as aforesaid.
13.3 Indemnification. The Company shall indemnify Agent, the Banks, and
each Affiliate thereof and their respective directors, officers, employees and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject
(regardless of whether caused in whole or in part by the simple (but not gross)
negligence of the Person indemnified), insofar as such losses, liabilities,
claims or damages arise out of or result from any (i) actual or proposed use by
the Company of the proceeds of any extension of credit (whether a Loan or a
Letter of Credit) by any Bank hereunder, (ii) breach by the Company of this
Agreement or any other Loan Document, (iii) violation by the Company or any of
its Subsidiaries of any Legal Requirement, including but not limited to those
relating to Hazardous Substances, (iv) Liens or security interests previously or
hereafter granted on any real or personal property, to the extent resulting from
any Hazardous Substance located in, on or under any such property, (v) ownership
by the Banks or Agent of any real or personal property following foreclosure, to
the extent such losses, liabilities, claims or damages arise out of or result
from any Hazardous Substance located in, on or under such property, including,
without limitation, losses, liabilities, claims or damages which are imposed
upon Persons under laws relating to or regulating Hazardous Substances solely by
virtue of ownership, (vi) Bank's or Agent's being deemed an operator of any such
real or personal property by a court or other regulatory or administrative
agency or tribunal in circumstances in which neither Agent nor any of the Banks
is generally operating or generally exercising control over such property, to
the extent such losses, liabilities, claims or damages arise out of or result
from any Hazardous Substance located in, on or under such property, (vii)
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to any of the foregoing, and the Company
shall reimburse Agent, each Bank, and each Affiliate thereof and their
respective directors, officers, employees and agents, upon demand, for any
expenses (including legal fees) incurred in connection with any such
investigation or proceeding or (viii) taxes (excluding income taxes and
franchise taxes) payable or ruled payable by any Governmental Authority in
respect of the Notes or any other Loan Document, together with interest and
penalties, if any; provided, however, that the Company shall not have any
obligations pursuant to this Section 13.3 with
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respect to any losses, liabilities, claims, damages or expenses (a) arising from
or relating solely to events, conditions or circumstances which, as to clauses
(iv), (v) or (vi) above, first came into existence or which first occurred after
the date on which the Company or any of its Subsidiaries conveyed to an
unrelated third party all of the Company's or the applicable Subsidiary's
rights, titles and interests to the applicable real or personal property
(whether by deed, deed-in-lieu, foreclosure or otherwise) other than a
conveyance made in violation of any Loan Document or (b) incurred by the Person
seeking indemnification by reason of the gross negligence or willful misconduct
of such Person. If the Company ever disputes a good faith claim for
indemnification under this Section 13.3 on the basis of the proviso set forth in
the preceding sentence, the full amount of indemnification provided for shall
nonetheless be paid, subject to later adjustment or reimbursement at such time
(if any) as a court of competent jurisdiction enters a final judgment as to the
applicability of any such exceptions.
13.4 Amendments, Etc. No amendment or waiver of any provision of this
Agreement, the Notes or any other Loan Document, nor any consent to any
departure by the Company therefrom, shall in any event be effective unless the
same shall be agreed or consented to by the Majority Banks and the Company, and
each such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, that no amendment, waiver or
consent shall, unless in writing and signed by each Bank affected thereby, do
any of the following: (a) increase the Commitment of such Bank (it being
understood that the waiver of any reduction in the Commitments or any mandatory
repayment other than (x) the repayment of all Loans at the end of the Revolving
Credit Availability Period and (y) the mandatory reductions of the Commitments
provided for in Section 2.3(a) and (z) the mandatory prepayments required by the
terms of Section 3.2(b), shall not be deemed to be an increase in any
Commitment) or subject the Banks to any additional obligation; (b) reduce the
principal of, or interest on, any Loan, Reimbursement Obligation or fee
hereunder; (c) postpone any scheduled date fixed for any payment or mandatory
prepayment of principal of, or interest on, any Loan, Reimbursement Obligation,
fee or other sum to be paid hereunder; (d) change the percentage of any of the
Commitments or of the aggregate unpaid principal amount of any of the Loans and
Letter of Credit Liabilities, or the number of Banks, which shall be required
for the Banks or any of them to take any action under this Agreement; (e) change
any provision contained in Sections 2.2(c), 9.7 or 13.3 hereof or this Section
13.4 or Section 6.7 hereof, or (f) release all or substantially all of any
security for the obligations of the Company under this Agreement or any Note or
all or substantially all of the personal liability of any obligor created under
any of the Loan Documents. Anything in this Section 13.4 to the contrary, no
amendment, waiver or consent shall be made with respect to Section 12 without
the consent of Agent. The consent of the Super Majority Banks shall be required
to any amendment of any requirement under this Agreement or the other the Loan
Documents that the consent of the Super Majority Banks be obtained.
13.5 Successors and Assigns.
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(a) This Agreement shall be binding upon and inure to the benefit of
the Company, Agent and the Banks and their respective successors and assigns.
The Company may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of all of the Banks. Each Bank may
sell participations to any Person in all or part of any Loan or Letter of
Credit, or all or part of its Notes or Commitments, in which event, without
limiting the foregoing, the provisions of Section 6 shall inure to the benefit
of each purchaser of a participation and the pro rata treatment of payments, as
described in Section 5.2, shall be determined as if such Bank had not sold such
participation. In the event any Bank shall sell any participation, such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Company relating to the Loans or Letters of Credit, including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or waivers with
respect to (i) any fees payable hereunder to the Banks and (ii) the amount of
principal or the rate of interest payable on, or the dates fixed for the
scheduled repayment of principal of, the Loans.
(b) Each Bank may assign to one or more Banks or any other Person all
or a portion of its interests, rights and obligations under this Agreement,
provided, however, that (i) other than in the case of an assignment to another
Bank that is, at the time of such assignment, a party hereto or an Affiliate of
such Bank, the Company must give its prior written consent, which consent will
not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or
Loans or Letters of Credit of the assigning Bank subject to each such assignment
(determined as of the date the Assignment and Acceptance (as defined below) with
respect to such assignment is delivered to Agent) shall in no event be less than
$10,000,000 (or $5,000,000 in the case of an assignment to an Affiliate of a
Bank or between Banks), (iii) no assignment shall have the effect of reducing
the pro rata share of the Loans or Letters of Credit and the Commitments held by
the assignor and its Affiliates below $10,000,000, (iv) notwithstanding any
other term or provision of this Agreement, unless the Company shall have
otherwise consented in writing (such consent not to be unreasonably withheld),
each such assignment shall be pro rata with respect to the Loans, the Letters of
Credit and the Commitment of the assignor, and (v) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording
in the Register (as defined below), an Assignment and Acceptance in the form of
Exhibit H hereto (each an "Assignment and Acceptance") with blanks appropriately
completed, together with any Note or Notes subject to such assignment and a
processing and recordation fee of $2,500 paid by the assignee (for which the
Company shall have no liability). Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days after the
execution thereof, (A) the assignee thereunder shall be a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (B) the Bank thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement. Notwithstanding anything contained in this Agreement to
the contrary, any Bank may at any time assign all or any portion of its rights
under this Agreement and the Notes issued to it
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as collateral to a Federal Reserve Bank; provided, that no such assignment shall
release the assigning Bank from any of its obligations hereunder.
(c) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Bank assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Bank assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Company or the performance or observance by the Company of any of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 8.6 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon any Agent, such Bank assignor 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 action under this Agreement and the other Loan Documents; (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this Agreement and the other Loan Documents are required to be performed by
it as a Bank.
(d) Agent shall maintain at its office a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Banks and the Commitments of, and principal amount of the Loans
owing to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and the Company,
Agent and the Banks may treat each person the name of which is recorded in the
Register as a Bank hereunder for all purposes of this Agreement and the other
Loan Documents. The Register shall be available for inspection by the Company or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and the assignee thereunder together with any Note or Notes
subject to such assignment, the written consent to such assignment executed by
the Company and the fee payable in respect
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thereto, Agent shall, if such Assignment and Acceptance has been completed with
blanks appropriately filled, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Company. Within five Business Days after receipt of
notice, the Company, at its own expense, shall execute and deliver to Agent in
exchange for the surrendered Notes new Notes to the order of such assignee in an
amount equal to the Commitments and/or Loans or Letters of Credit assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained Commitments and/or Loans hereunder, new Notes to the order of the
assigning Bank in an amount equal to the Commitment and/or Loans retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the respective Note. Thereafter, such surrendered
Notes shall be marked renewed and substituted and the originals delivered to the
Company (with copies, certified by the Company as true, correct and complete, to
be retained by Agent).
(f) Any Bank may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 13.5, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Company furnished to such Bank by or on behalf of the Company;
provided, however, that, prior to any such disclosure, the Company shall have
consented thereto, which consent shall not be unreasonably withheld, and each
such assignee or participant, or proposed assignee or participant, shall execute
an agreement whereby such assignee or participant shall agree to preserve the
confidentiality of any Confidential Information (defined in Section 13.13) on
terms substantially the same as those provided in Section 13.13.
(g) The Company will have the right to consent to any material
intercreditor arrangements in connection with an assignment by any Bank of any
interest, right or obligation under this Agreement which is not pro rata with
respect to the Loans, the Letters of Credit and the Commitment of the assignor
and the Company may deny its consent to any such arrangements which, in the
reasonable judgement of the Company, would adversely affect the Company in a
material respect.
(h) The provisions of this Section shall not apply to the assignment
and pledge of a Bank's rights hereunder or under any Note to any Federal Reserve
Bank for collateral purposes pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank; provided that such assignment and pledge shall not relieve such
Bank of any of its obligations hereunder.
13.6 Limitation of Interest. The Company and the Banks intend to
strictly comply with all applicable laws, including applicable usury laws.
Accordingly, the provisions of this Section 13.6 shall govern and control over
every other provision of this Agreement or any other Loan
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Document which conflicts or is inconsistent with this Section, even if such
provision declares that it controls. As used in this Section, the term
"interest" includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to
the maximum extent permitted by applicable law, (a) any non-principal payment
shall be character ized as an expense or as compensation for something other
than the use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations. In no event shall the Company or any other Person be
obligated to pay, or any Bank have any right or privilege to reserve, receive or
retain, (a) any interest in excess of the maximum amount of nonusurious interest
permitted under the laws of the State of Texas or the applicable laws (if any)
of the United States or of any other applicable state, or (b) total interest in
excess of the amount which such Bank could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated for the
full term of the Obligations at the Highest Lawful Rate. On each day, if any,
that the interest rate (the "Stated Rate") called for under this Agreement or
any other Loan Document exceeds the Highest Lawful Rate, the rate at which
interest shall accrue shall automatically be fixed by operation of this sentence
at the Highest Lawful Rate for that day, and shall remain fixed at the Highest
Lawful Rate for each day thereafter until the total amount of interest accrued
equals the total amount of interest which would have accrued if there were no
such ceiling rate as is imposed by this sentence. Thereafter, interest shall
accrue at the Stated Rate unless and until the Stated Rate again exceeds the
Highest Lawful Rate when the provisions of the immediately preceding sentence
shall again automatically operate to limit the interest accrual rate. The daily
interest rates to be used in calculating interest at the Highest Lawful Rate
shall be determined by dividing the applicable Highest Lawful Rate per annum by
the number of days in the calendar year for which such calculation is being
made. None of the terms and provisions contained in this Agreement or in any
other Loan Document which directly or indirectly relate to interest shall ever
be construed without reference to this Section 13.6, or be construed to create a
contract to pay for the use, forbearance or detention of money at an interest
rate in excess of the Highest Lawful Rate. If the term of any Obligation is
shortened by reason of acceleration of maturity as a result of any Default or by
any other cause, or by reason of any required or permitted prepayment, and if
for that (or any other) reason any Bank at any time, including but not limited
to, the stated maturity, is owed or receives (and/or has received) interest in
excess of interest calculated at the Highest Lawful Rate, then and in any such
event all of any such excess interest shall be canceled automatically as of the
date of such acceleration, prepayment or other event which produces the excess,
and, if such excess interest has been paid to such Bank, it shall be credited
pro tanto against the then-outstanding principal balance of the Company's
obligations to such Bank, effective as of the date or dates when the event
occurs which causes it to be excess interest, until such excess is exhausted or
all of such principal has been fully paid and satisfied, whichever occurs first,
and any remaining balance of such excess shall be promptly refunded to its
payor.
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13.7 Survival. The obligations of the Company under Sections 2.2(c), 6,
9.7 and 13.3 hereof and the obligations of the Banks under Section 13.6 hereof
shall survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and the Letters of Credit.
13.8 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
13.10 Governing Law. This Agreement and the Notes and (except as
therein provided) the other Loan Documents are performable in Harris County,
Texas, which shall be a proper place of venue for suit on or in respect thereof.
The Company irrevocably agrees that any legal proceeding in respect of this
Agreement or the other Loan Documents shall be brought in the district courts of
Harris County, Texas or the United States District Court for the Southern
District of Texas, Houston Division (collectively, the "Specified Courts"). The
Company hereby irrevocably submits to the nonexclusive jurisdiction of the state
and federal courts of the State of Texas. The Company hereby irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to any Loan Document brought in any Specified Court, and
hereby further irrevocably waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
The Company further (1) agrees to designate and maintain an agent for service of
process in the City of Houston in connection with any such suit, action or
proceeding and to deliver to Agent evidence thereof and (2) irrevocably consents
to the service of process out of any of the aforementioned courts in any such
suit, action or proceeding by the mailing of copies thereof by certified mail,
return receipt requested, postage prepaid, to the Company at its address as
provided in this Agreement or as otherwise provided by Texas law. Nothing herein
shall affect the right of any Agent or any Bank to commence legal proceedings or
otherwise proceed against the Company in any jurisdiction or to serve process in
any manner permitted by applicable law. The Company agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER
THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED STATES OF
AMERICA FROM TIME TO TIME IN EFFECT.
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13.11 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
13.12 Chapter 15 Not Applicable. Chapter 15, Subtitle 3, Title 79,
Revised Civil Statutes of Texas, 1925, as amended, shall not apply to this
Agreement or to any Loan or Letter of Credit, nor shall this Agreement or any
Loan or Letter of Credit be governed by or be subject to the provisions of such
Chapter 15 in any manner whatsoever.
13.13 Confidential Information. Agent and each Bank separately agrees
that:
(a) As used herein, the term "Confidential Information" means written
information about the Company or the transactions contemplated herein furnished
by the Company to Agent and/or the Banks which is specifically designated as
confidential by the Company; Confidential Information, however, shall not
include information which (i) was publicly known or available, or otherwise
available on a non-confidential basis to any Bank, at the time of disclosure
from a source other than the Company, (ii) subsequently becomes publicly known
through no act or omission by such Bank, (iii) otherwise becomes available on a
non-confidential basis to any Bank other than through disclosure by the Company
or (iv) has been in the possession of any Bank for a period of more than two
years from the date on which such information originally was furnished to such
Bank by the Company, unless the Company shall have requested Agent and the Banks
in writing, at least 30 days prior to the end of such two-year period, to
maintain the confidentiality of such information for another two (2) year period
(or for successive two (2) year periods); provided that the Company shall not
unreasonably withhold its consent to a request made after the initial two (2)
year period to eliminate information from "Confidential Information".
(b) Agent and each Bank agrees that it will take normal and reasonable
precautions to maintain the confidentiality of any Confidential Information
furnished to such Person; provided, however, that such Person may disclose
Confidential Information (i) upon the Company's consent; (ii) to its auditors;
(iii) when required by any Legal Requirement; (iv) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over it; (v) to such Person's
and its Subsidiaries' or Affiliates' officers, directors, employees, agents,
representatives and professional consultants in connection with this Agreement
or administration of the Loans and Letters of Credit; (vi) as may be required or
appropriate, should such Bank elect to assign or grant participations in any of
the Obligations in connection with (1) the enforcement of the Obligations to any
such Person under any of the Loan Documents or related agreements, or (2) any
potential transfer pursuant to this Agreement of any Obligation owned by any
Bank (provided any potential transferee has been approved by the Company if
required by this Agreement, which approval shall not be unreasonably withheld,
and
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has agreed in writing to be bound by substantially the same provisions regarding
Confidential Information contained in this Section); (vii) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation or administrative proceeding; (viii) to any other Bank; (ix) to the
extent reasonably required in connection with the exercise of any remedy
hereunder or under the other Loan Documents; or (x) to correct any false or
misleading information which may become public concerning such Person's
relationship to the Company.
13.14 Tax Forms. With respect to each Bank which is organized under the
laws of a jurisdiction outside the United States, on the day of the initial
borrowing hereunder and from time to time thereafter if requested by the Company
or Agent, such Bank shall provide Agent and the Company with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such Bank's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Bank hereunder
or other documents satisfactory to the Bank and Agent indicating that all
payments to be made to such Bank hereunder are subject to such tax at a rate
reduced by an applicable tax treaty. Unless the Company and Agent shall have
received such forms or such documents indicating that payments hereunder are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Company or Agent shall withhold taxes
from such payments at the applicable statutory rate in the case of payments to
or for any Bank organized under the laws of a jurisdiction outside the United
States.
13.15 Amendment and Restatement. This Agreement amends and restates in
its entirety that certain Credit Agreement dated as of December 23, 1996
executed by and among the Company, the Banks and Agent, as amended.
13.16 Intercreditor Agreement. Reference is hereby made to the
Intercreditor Agreement, which provides for certain matters relating to both the
Loans and the Canadian Facility. To the extent of any conflict between the terms
hereof and the terms of the Intercreditor Agreement, the Intercreditor Agreement
shall control. The execution and delivery by Agent of the Intercreditor
Agreement on behalf of the Banks is hereby ratified and confirmed by each of the
Banks. Any Bank that becomes a party to this Agreement after the Effective Date
agrees to be bound by the terms and provisions of the Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SEAGULL ENERGY CORPORATION,
a Texas corporation
By: /s/ William L. Transier
Name: William L. Transier
Title: Senior Vice President and
Chief Financial Officer
Address for Notices:
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Steve Thorington
88
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THE CHASE MANHATTAN BANK,
as Agent
By: /s/ Peter M. Ling
Name: Peter M. Ling
Title: Vice President
Commitment:
Address for Notices:
$40,000,000
1 Chase Manhattan Plaza,
8th Floor
New York, New York 10081
Attention: Agent Services
with a copy to:
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Division
89
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MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ John Kowalczuk
Commitment: Name: John Kowalczuk
Title: Vice President
$40,000,000
Address for Notices:
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
90
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NATIONSBANK OF TEXAS, N.A.
By: /s/ Paul A. Squires
Commitment: Name: Paul A. Squires
Title: Sr. Vice President
$40,000,000
Address for Notices:
700 Louisiana, 8th Floor
Houston, Texas 77002
Attention: Jo A. Tamalis
91
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BANKBOSTON, N.A.
By: /s/ George W. Passela
Commitment: Name: George W. Passela
Title: Managing Director
$25,000,000
Address for Notices:
100 Federal Street
Energy & Utilities 01-08-04
Boston, Massachusetts 02110
Attention: George W. Passela
92
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ABN AMRO BANK N.V., HOUSTON AGENCY
By: /s/ Cheryl L. Lipshutz
Commitment: Name: Cheryl L. Lipshutz
Title: Group Vice President
$15,000,000
By: /s/ Charles W. Randall
Name: Charles W. Randall
Title: Sr. Vice President
Address for Notices:
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Ms. Cheryl Lipshutz
93
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THE BANK OF NEW YORK
By: /s/ Renee Bijlani
Commitment: Name: Renee Bijlani
Title:
$15,000,000
Address for Notices:
One Wall Street, 19th Floor
New York, New York 10286
Attention: Ms. Renee Bijlani
94
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BANQUE PARIBAS HOUSTON AGENCY
By: /s/ Marian Livingston
Commitment: Name: Marian Livingston
Title: Vice President
$25,000,000
By: /s/ Barton D. Schouest
Name: Barton D. Schouest
Title: Group Vice President
Address for Notices:
1200 Smith, Suite 3100
Houston, Texas 77002
Attention: Marian Livingston
95
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CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
Commitment: Name: Pascal Poupelle
Title: Executive Vice President
$25,000,000
Address for Notices:
1000 Louisiana, Suite #5360
Houston, Texas 77002
Attention: Mr. A. David Dodd
96
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THE FUJI BANK, LIMITED
HOUSTON AGENCY
By: /s/ Yoshiaki Inoue
Commitment: Name: Yoshiaki Inoue
Title: Vice President & Manager
$15,000,000
Address for Notices:
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attention: Mr. Tommy Watts
97
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THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Dixon P. Schultz
Commitment: Name: Dixon P. Schultz
Title: Vice President
$25,000,000
Address for Notices:
One First National Plaza
10th Floor, Mail Suite 0634
Chicago, Illinois 60670
Attention: Mr. John Beirne
with a copy to:
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention: Ms. Dixon Schultz
98
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SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Richard A. Erbert
Commitment: Name: Richard A. Erbert
Title: Vice President
$25,000,000
Address for Notices:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attention: Ms. Angela Aldridge
with a copy to:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Mr. Richard Erbert
99
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THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ M. G. Meiss
Commitment: Name: M. G. Meiss
Title: Vice President
$15,000,000
Address for Notices:
1100 Louisiana, Suite 2800
Houston, Texas 770002-5216
Attention: Mr. John M. McIntyre
100
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
Commitment: Name: Annie Chin Tat
Title: Vice President
$15,000,000
Address for Notices:
565 Fifth Avenue
New York, New York 10017
Attention: Ms. Catherine Onifrey
101
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CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Dean Bulice
Commitment: Name: Dean Bulice
Title: Sr. Vice President
$15,000,000
Address for Notices:
600 Travis, Suite 2340
Houston, Texas 77002
Attention: Mr. Brian Knezeak
102
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CHRISTIANIA BANK OG KREDITKASSE
By: /s/ Peter M. Dodge
Commitment: Name: Peter M. Dodge
Title: First Vice President
$15,000,000
By: /s/ Carl Petter Svendsen
Name: Carl Petter Svendsen
Title: First Vice President
Address for Notices:
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Mr. Peter Dodge
103
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DEN NORSKE BANK AS
By: /s/ Byron L. Cooley
Commitment: Name: Byron L. Cooley
Title: Sr. Vice President
$15,000,000
By: /s/ J. Morten Kreutz
Name: J. Morten Kreutz
Title: Vice President
Address for Notices:
333 Clay
Suite 4890
Houston, Texas 77002
Attention: Mr. Byron L. Cooley
104
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WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By: /s/ J. Alan Alexander, Jr.
Commitment: Name: J. Alan Alexander, Jr.
Title: Vice President
$25,000,000
Address for Notices:
1000 Louisiana Street
3rd Floor/MAC 5002-031
Houston, Texas 77002
Attention: Mr. Alan Alexander
105
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THE BANK OF NOVA SCOTIA
By: /s/ A. S. Norsworthy
Commitment: Name: A. S. Norsworthy
Title: Sr. Team Leader -
Loan Operations
$10,000,000
Address for Notices:
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Attention: Mr. Cleve Bushey
106
<PAGE>
CIBC INC.
By: /s/ Aleksandra K. Dymanus
Commitment: Name: Aleksandra K. Dymanus
Title:
$10,000,000
Address for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Loan Operations
with a copy to:
Canadian Imperial Bank of Commerce
Two Houston Center
909 Fannin Street
Houston, Texas 77010
Attention: Mr. Brian Myers
107
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MELLON BANK
By: /s/ E. Marc Cuenod, Jr.
Commitment: Name: E. Marc Cuenod, Jr.
Title: First Vice President
$15,000,000
Address for Notices:
Mellon Bank
One Mellon Bank Center
Room 151-4425
Pittsburgh, Pennsylvania 15258-0001
Attention: Manager, Energy and Utilities Group
with a copy to:
Mellon Financial Services
1100 Louisiana, 36th Floor
Houston, Texas 77002-5210
Attention: Ms. Melissa Bauman
108
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FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ Michael J. Kolosowsky
Commitment: Name: Michael J. Kolosowsky
Title: Vice President
$15,000,000
Address for Notices:
First Union National Bank of North Carolina
1001 Fannin, Suite 2255
Houston, Texas 77002
Attention: Mr. Jay M. Chernosky
109
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BANK OF MONTREAL
By: /s/Robert L. Roberts
Commitment: Name: Robert L. Roberts
Title: Director, U. S. Corporate Banking
$10,000,000
Address for Notices:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Mr. Brian Otis
110
CREDIT AGREEMENT
U.S. $100,000,000 REVOLVING CREDIT FACILITY
AMONG
SEAGULL ENERGY CANADA LTD.
AND
THE CHASE MANHATTAN BANK OF CANADA,
Individually and as Arranger and Administrative Agent,
THE BANK OF NOVA SCOTIA,
Individually and as Paying Agent and Co-Agent,
CANADIAN IMPERIAL BANK OF COMMERCE,
Individually and as Co-Agent,
AND
THE OTHER BANKS SIGNATORY HERETO
June 17, 1997
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters............................1
1.1 Certain Defined Terms.........................................1
1.2 Accounting Terms and Determinations..........................24
1.3 Types of Loans...............................................25
1.4 Miscellaneous................................................25
Section 2. Commitments; Designation of Maximum Outstanding Amount.......25
2.1 Loans and Bankers' Acceptances...............................25
2.2 Letters of Credit............................................26
2.3 Reductions and Changes of Commitments........................29
2.4 Fees.........................................................29
2.5 Affiliates; Lending Offices..................................29
2.6 Several Obligations..........................................30
2.7 Notes........................................................30
2.8 Use of Proceeds..............................................30
Section 3. Borrowings, Prepayments and Selection of Interest Rates......31
3.1 Borrowings...................................................31
3.2 Prepayments..................................................31
3.3 Selection of Interest Rates..................................32
3.4 Conditions Applicable to Bankers' Acceptances................32
3.5 Paying Agent's Duties Re Bankers' Acceptances................34
3.6 Certain Provisions Relating to Bankers' Acceptances Forms....35
Section 4. Payments of Principal and Interest...........................36
4.1 Repayment of Loans and Reimbursement Obligations.............36
4.2 Interest.....................................................36
4.3 Acceptance Fees..............................................37
Section 5. Payments; Pro Rata Treatment; Computations, Etc.............37
5.1 Payments....................................................37
5.2 Pro Rata Treatment..........................................38
5.3 Computations................................................38
5.4 Minimum and Maximum Amounts.................................38
5.5 Certain Actions, Notices, Etc...............................39
5.6 Non-Receipt of Funds by the Paying Agent....................41
5.7 Sharing of Payments, Etc....................................41
(1)
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Section 6. Yield Protection and Illegality..............................42
6.1 Additional Costs.............................................42
6.2 Limitations..................................................44
6.3 Illegality...................................................45
6.4 Substitute Alternate Base Rate Loans or Canadian Prime Rate
Loans........................................................45
6.5 Compensation.................................................46
6.6 Additional Costs in Respect of Letters of Credit.............46
6.7 Capital Adequacy.............................................47
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination...........................................47
Section 7. Conditions Precedent.........................................48
7.1 Initial Loans and Acceptance and Purchase of Bankers'
Acceptances..................................................48
7.2 Initial and Subsequent Loans.................................50
Section 8. Representations and Warranties...............................51
8.1 Corporate Existence..........................................51
8.2 Corporate Power and Authorization............................51
8.3 Binding Obligations..........................................52
8.4 No Legal Bar or Resultant Lien...............................52
8.5 No Consent...................................................52
8.6 Financial Condition..........................................52
8.7 Investments and Guaranties...................................53
8.8 Liabilities and Litigation...................................53
8.9 Taxes and Governmental Charges...............................53
8.10 Title to Properties..........................................53
8.11 Defaults.....................................................53
8.12 Location of Businesses and Offices...........................54
8.13 Compliance with Law...........................................54
8.14 Margin Stock..................................................54
8.15 Subsidiaries..................................................55
8.16 ERISA.........................................................55
8.17 Investment Company Act........................................55
8.18 Public Utility Holding Company Act............................55
8.19 Environmental Matters.........................................56
8.20 Claims and Liabilities........................................57
8.21 Solvency......................................................57
Section 9. Affirmative Covenants........................................57
9.1 Financial Statements and Reports.............................57
9.2 Officers' Certificates.......................................59
(2)
9.3 Taxes and Other Liens........................................60
9.4 Maintenance..................................................60
9.5 Further Assurances...........................................61
9.6 Performance of Obligations...................................61
9.7 Reimbursement of Expenses....................................61
9.8 Insurance....................................................62
9.9 Accounts and Records.........................................63
9.10 Rights of Inspection.........................................63
9.11 Notice of Certain Events.....................................63
9.12 ERISA Information and Compliance.............................65
Section 10. Negative Covenants..........................................65
10.1 Debts, Guarantees and Other Obligations......................66
10.2 Liens........................................................68
10.3 Investments, Loans and Advances..............................72
10.4 Dividend Payment Restrictions................................74
10.5 Mergers, Amalgamations and Sales of Assets...................74
10.6 Use of Proceeds..............................................74
10.7 ERISA Compliance.............................................74
10.8 Amendment of Certain Documents...............................75
10.9 Tangible Net Worth...........................................75
10.10 Parent Debt/Capitalization Ratio.............................75
10.11 EBITDAX/Interest Ratio.......................................75
10.12 Nature of Business...........................................75
10.13 Futures Contracts............................................76
10.14 Covenants in Other Agreements................................76
Section 11. Defaults.....................................................77
11.1 Events of Default............................................77
11.2 Collateral Account...........................................79
11.3 Preservation of Security for Unmatured Reimbursement
Obligations..................................................80
11.4 Right of Setoff..............................................80
Section 12. The Agents...................................................81
12.1 Appointment, Powers and Immunities...........................81
12.2 Reliance by Agents...........................................82
12.3 Defaults.....................................................82
12.4 Rights as a Bank.............................................83
12.5 Indemnification..............................................83
12.6 Non-Reliance on Agents and Other Banks.......................84
(3)
<PAGE>
12.7 Failure to Act...............................................84
12.8 Resignation or Removal of Agents.............................84
Section 13. Miscellaneous................................................85
13.1 Waiver.......................................................85
13.2 Notices......................................................85
13.3 Indemnification..............................................85
13.4 Amendments, Etc..............................................86
13.5 Successors and Assigns.......................................87
13.6 Limitation of Interest.......................................90
13.7 Interest Act (Canada); Interest Generally....................91
13.8 Certain Saskatchewan Legislation.............................92
13.9 Survival.....................................................92
13.10 Captions.....................................................92
13.11 Counterparts.................................................92
13.12 Governing Law................................................92
13.13 Severability.................................................93
13.14 Confidential Information.....................................93
13.15 Amendment and Restatement....................................94
13.16 Intercreditor Agreement......................................94
13.17 Judgement Currency...........................................94
13.18 Withholding Tax Remittances..................................95
Exhibit A Oil and Gas Subsidiaries
Exhibit B Form of Request for Extension of Credit
Exhibit C-1 Form of Revolving Credit Loan Note (U.S. Dollars)
Exhibit C-2 Form of Revolving Credit Loan Note (Canadian Dollars)
Exhibit D Subsidiaries (with Addresses)
Exhibit E Form of Compliance Certificate
Exhibit F Assignment and Acceptance
Exhibit G Form of Engineering Report Certificate
Exhibit H Parameters Interest Rate Protection and Commodities Futures
Programs
Exhibit I Form of Bankers' Acceptance
(4)
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of June 17, 1997, is by and among
SEAGULL ENERGY CANADA LTD. (the "Company"), a corporation duly organized and
validly existing under the laws of the Province of Alberta, Canada; each of the
banks which is or which may from time to time become a signatory hereto
(individually, a "Bank" and, collectively, the "Banks"); THE CHASE MANHATTAN
BANK OF CANADA ("Chase"), as arranger and administrative agent for the Banks (in
such capacity, together with its successors in such capacity, the
"Administrative Agent"); THE BANK OF NOVA SCOTIA ("BNS"), as paying agent and
coagent for the Banks (in such capacity, together with its successors in such
capacity, the "Paying Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"),
as co-agent for the Banks (in such capacity, together with its successors in
such capacity, the "Co-Agent").
The parties hereto agree as follows:
Section 1. Definitions and Accounting Matters
1.1 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Additional Costs" shall have the meaning ascribed to such term in
Section 6.1 hereof.
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
stepchildren, grandchildren, nephews and nieces) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"Agents" shall mean the Administrative Agent, the Paying Agent and the
Co-Agent, collectively.
"Agreement" shall mean this Credit Agreement, as the same may be
amended, modified, restated or supplemented from time to time.
1
<PAGE>
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
to the higher of (a) the U.S. Prime Rate in effect on such day or (b) 1/2 of 1%
plus the Federal Funds Rate in effect for such day (rounded upwards, if
necessary, to the nearest 1/16th of 1%). For purposes hereof, "Federal Funds
Rate" shall mean, for any period, a fluctuating interest rate per annum equal
for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Paying Agent from three Federal funds brokers of recognized
standing selected by it. For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Federal Funds Rate shall be effective
on the effective date of such change in the Federal Funds Rate. If for any
reason the Paying Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Rate for any reason, including, without limitation, the
inability or failure of the Paying Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Alternate Base Rate shall
be the U.S. Prime Rate until the circumstances giving rise to such inability no
longer exist. For the purposes hereof, "U.S. Prime Rate" shall mean the annual
rate of interest announced from time to time by the Paying Agent in Canada as
its U.S. Base Rate for U.S. Dollar loans made by the Paying Agent in Canada.
Without notice to the Company or any other Person, the U.S. Prime Rate shall
change automatically from time to time as and in the amount by which said annual
rate of interest shall fluctuate. The U.S. Prime Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to any
customer. The Chase Manhattan Bank, any Agent or any Bank may make commercial
loans or other loans at rates of interest at, above or below the U.S. Prime
Rate. For purposes of this Agreement any change in the Alternate Base Rate due
to a change in the U.S. Prime Rate shall be effective on the date such change in
the U.S. Prime Rate is announced.
"Alternate Base Rate Loans" shall mean Loans which bear interest at a
rate based upon the Alternate Base Rate.
"APC" shall mean Alaska Pipeline Company, an Alaska corporation, a
Subsidiary of the Parent.
"APC Long Term Financing Documents" shall mean that certain Inducement
Agreement and that certain Note Agreement (together with the Notes, as defined
therein), each dated as of May 14, 1992, by and among the Parent, Aid
Association for Lutherans, The Equitable Life Assurance Society of the United
States, Equitable Variable Life Insurance Company, Provident Life and Accident
Insurance Company and Teachers Insurance & Annuity Association of America, any
documentation executed in connection with any renewal, extension or
rearrangement of the Indebtedness that is the subject of the foregoing
documents, the Gas Sales Contract, the Intercompany Mortgage, as defined in the
above-mentioned Note Agreement, and any documents
2
<PAGE>
executed in replacement of any of the foregoing documents, if any, and only if
the Administrative Agent has received notice thereof pursuant to Section 10.8.
"Applicable Lending Office" shall mean, for each Bank and for each Type
of Loan and for each Bankers' Acceptance, such office of such Bank (or of an
affiliate of such Bank) as such Bank may from time to time specify to the Paying
Agent and the Company as the office by which its Loans of such Type are to be
made and/or issued and maintained and at which Bankers' Acceptances are to be
accepted and purchased; provided, however, that each such office shall be
located in Canada.
"Applicable Margin" shall mean, on any day, (i) zero percent (0%) with
respect to any Alternate Base Rate Loan and Canadian Prime Rate Loan and (ii)
with respect to any Eurodollar Loan, the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Rating as of the close of business on the preceding Business Day:
<TABLE>
<CAPTION>
Eurodollar
Loan
Applicable
Rating Margin
<S> <C>
BBB/Baa2 and higher 0.20
BBB-/Baa3 0.275
BB+/Ba1 0.40
BB/Ba2 and lower 0.45
</TABLE>
Notwithstanding the foregoing, at all times that a Borrowing Base Deficiency
shall exist and is continuing for more than 30 days, the Applicable Margins
provided for in this definition shall each be increased by adding 1.00%.
"Applications" shall mean all applications and agreements for Letters
of Credit, or similar instruments or agreements, now or hereafter executed by
any Person in connection with any Letter of Credit now or hereafter issued or to
be issued.
"Bank Guarantee" shall mean that certain Guarantee dated concurrently
herewith executed by the Parent in favour of the Administrative Agent.
"Bankers' Acceptances" means bankers' acceptances issued by the Company
and denominated in Canadian Dollars, which are accepted and purchased by the
Banks at the request of the Company pursuant to Section 2.1.
3
<PAGE>
"B.A. Reference Banks" shall mean the Paying Agent and one (1) other
Bank selected by the Paying Agent (after consultation with the Company) which is
a "Schedule 1" accepting bank.
"B/A Stamping Rate" means, with respect to Bankers' Acceptances
accepted by a Bank, the Applicable Margin for Eurodollar Loans in effect on the
date of acceptance of the Bankers' Acceptance.
"Bankruptcy Code" shall mean (i) the United States Bankruptcy Code, as
amended, and any successor statute and (ii) the Bankruptcy and Insolvency Act
(Canada), as amended, and any successor statute.
"Beluga Financing Documents" shall mean that certain Inducement
Agreement and that certain Note Agreement (together with the Notes, as defined
therein), each dated June 17, 1985, and amended as of June 15, 1990, by and
among the Parent and The Equitable Life Assurance Society of the United States
and the Travelers Insurance Company, any documentation executed in connection
with any renewal, extension or rearrangement of the Indebtedness that is the
subject of the foregoing documents, the Gas Sales Contract, the Intercompany
Mortgage, as defined in the above-mentioned Note Agreement, and any documents
executed in replacement of any of the foregoing documents, if and only if the
Administrative Agent has received notice thereof pursuant to Section 10.8.
"Borrowing Base" shall have the meaning ascribed to such term in the
U.S. Facility (without amendment except as permitted pursuant to the
Intercreditor Agreement).
"Borrowing Base Debt" shall have the meaning ascribed to such term in
the U.S. Facility (without amendment except as permitted pursuant to the
Intercreditor Agreement).
"Borrowing Base Deficiency" shall have the meaning ascribed to such
term in the U.S. Facility (without amendment except as permitted pursuant to the
Intercreditor Agreement).
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas, United States,
Calgary, Alberta, Canada, or Toronto, Ontario, Canada, and where such term is
used in the definition of "Quarterly Date" in this Section 1.1 or if such day
relates to a borrowing of, a payment or prepayment of principal of or interest
on, or an Interest Period for, a Eurodollar Loan or a notice by the Company with
respect to any such borrowing, payment, prepayment or Interest Period, a day
which is also a day on which dealings in U.S. Dollar deposits are carried out in
the relevant interbank market.
"Canadian Bankers' Acceptance Discount Proceeds" means, in respect of
any Bankers' Acceptance required to be accepted and purchased by a Bank
hereunder, an amount (rounded to
4
<PAGE>
the nearest whole cent with one-half of one cent being rounded up) calculated on
the date of acceptance of the Bankers' Acceptance by multiplying:
(a) the face amount of such Bankers' Acceptance divided by
one hundred (100); by
(b) the price, where the price is determined by dividing one
hundred (100) by the sum of one plus the product of:
(i) the Canadian Bankers' Acceptance Discount Rate
(expressed as a decimal); and
(ii) a fraction, the numerator of which is the term
(expressed in days) of such Bankers' Acceptance and
the denominator of which is three hundred sixty-five
(365); with the price as so determined being rounded
up or down to the fifth decimal place and .000005
being rounded up; "Canadian Bankers' Acceptance
Discount Rate" shall mean
(i) with respect to each Bankers' Acceptance which is required to be
accepted and purchased by a Bank hereunder and which has a term of more than 90
days, the percentage discount rate (expressed to two decimal places) determined
by the Paying Agent to be the average of the quoted discount rates at which
Canadian Dollar Bankers' Acceptances having a comparable issue and maturity date
are being bid for discount by the B.A. Reference Banks at approximately 11:00
a.m. Toronto, Ontario time (or as soon thereafter as practicable) on the day of
the issuance and acceptance of the Bankers' Acceptances. If either B.A.
Reference Bank does not furnish a timely quotation, the Paying Agent shall
determine the relevant discount rate on the basis of the quotation or quotations
furnished by the remaining B.A. Reference Bank; if neither of such quotations is
available on a timely basis, the provisions of Section 6.2 shall apply; and
(ii) with respect to each Bankers' Acceptance which is required to be
accepted and purchased by a Bank hereunder and which has a term of 90 days or
less, the percentage discount rate (expressed to two decimal places) for
Canadian Dollar Bankers' Acceptances having a comparable issue and maturity date
which is quoted on the Reuter's Canadian Discount Offer Rate Screen for
"Schedule 1" accepting banks (or if such screen shall not be available, any
successor or similar services may be selected by the Paying Agent and the
Company) as of 11:00 a.m. Toronto, Ontario time (or as soon thereafter as
practicable) on the day of acceptance of the Bankers' Acceptances. If none of
such screen nor any successor
5
<PAGE>
or similar services is available then the "Canadian Bankers' Acceptance
Discount Rate" shall mean, with respect to each Bankers' Acceptance which is
required to be accepted and purchased by a Bank hereunder and which has a term
of 90 days or less, the percentage discount rate (expressed to two decimal
places) determined by the Paying Agent to be the average of the quoted discount
rates at which Canadian Dollar Bankers' Acceptances having a comparable issue
and maturity date are being bid for discount by the B.A. Reference Banks at
approximately 11:00 a.m. Toronto, Ontario time (or as soon thereafter as
practicable) on the day of the issuance and acceptance of the Bankers'
Acceptances. If either B.A. Reference Bank does not furnish a timely quotation,
the Paying Agent shall determine the relevant discount rate on the basis of the
quotation or quotations furnished by the remaining B.A. Reference Bank; if
neither of such quotations is available on a timely basis, the provisions of
Section 6.2 shall apply.
Each determination of the Canadian Bankers' Acceptance Discount Rate
shall be conclusive and binding, absent manifest error, and may be computed
using any reasonable averaging and attribution method.
"Canadian Dollars" and "Canadian $" shall mean lawful money of Canada.
"Canadian Prime Rate" for any day shall mean the variable lending rate
of interest (expressed as a rate per annum) established on such day by the
Paying Agent from time to time as the reference rate of interest which the
Paying Agent employs in order to determine the interest rate it will charge for
demand loans denominated in Canadian Dollars to its customers in Canada and
which it designates as its prime rate. Without notice to the Company or any
other Person, the Canadian Prime Rate shall change automatically from time to
time as and in the amount by which said prime rate shall fluctuate. The Canadian
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. Any Agent or any Bank may make
commercial loans or other loans at rates of interest at, above or below the
Canadian Prime Rate. For purposes of this Agreement any change in the Canadian
Prime Rate due to a change in the said prime rate shall be effective on the date
such change in said prime rate is announced.
"Canadian Prime Rate Loans" shall mean Loans which bear interest at a
rate based upon the Canadian Prime Rate.
"Capital Expenditures" shall mean expenditures in respect of fixed or
capital assets (calculated in accordance with GAAP) excluding expenditures for
the restoration, repair or replacement of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent financed by the
proceeds of an insurance policy. Expenditures in respect of replacements and
maintenance consistent with the business practices of the Parent and its
Subsidiaries in respect of plant facilities, machinery, fixtures and other like
capital assets utilized
6
<PAGE>
in the ordinary course of business are not Capital Expenditures to the extent
such expenditures are not capitalized in preparing a balance sheet of the Parent
in accordance with GAAP.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Capitalization" shall mean an amount equal to the sum of (a) Funded
Indebtedness of the Parent and its Subsidiaries on a consolidated basis plus (b)
Current Maturities of the Parent and its Subsidiaries on a consolidated basis
plus (c) borrowed money Indebtedness of the Parent and its Subsidiaries on a
consolidated basis that is not Funded Indebtedness plus (d) Indebtedness of the
Parent and its Subsidiaries on a consolidated basis constituting obligations
payable out of Hydrocarbons (except such obligations payable solely by recourse
to properties not included in the Borrowing Base) plus (e) the Tangible Net
Worth of the Parent and its Subsidiaries on a consolidated basis.
"Change of Control" shall mean a change resulting when any Unrelated
Person or any Unrelated Persons acting together which would constitute a Group
together with any Affiliates or Related Persons thereof (in each case also
constituting Unrelated Persons) shall at any time either (i) Beneficially Own
more than 50% of the aggregate voting power of all classes of Voting Stock of
the Parent or (ii) succeed in having sufficient of its or their nominees elected
to the Board of Directors of the Parent such that such nominees, when added to
any existing director remaining on the Board of Directors of the Parent after
such election who is an Affiliate or Related Person of such Unrelated Person or
Group, shall constitute a majority of the Board of Directors of the Parent. As
used herein (a) "Beneficially Own" means "beneficially own" as defined in Rule
13d-3 of the United States Securities Exchange Act of 1934, as amended, or any
successor provision thereto; provided, however, that, for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates until such tendered securities are accepted for
purchase or exchange; (b) "Group" means a "group" for purposes of Section 13(d)
of the United States Securities Exchange Act of 1934, as amended; (c) "Unrelated
Person" means at any time any Person other than the Parent or any Subsidiary and
other than any trust for any employee benefit plan of the Parent or any
Subsidiary of the Parent; (d) "Related Person" of any Person shall mean any
other Person owning (1) 5% or more of the outstanding common stock of such
Person or (2) 5% or more of the Voting Stock of such Person; and (e) "Voting
Stock" of any Person shall mean capital stock of such Person which ordinarily
has voting power for the election of directors (or persons performing similar
functions) of such Person, whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency.
7
<PAGE>
"Code" shall mean, as applicable, (i) the Internal Revenue Code of
1986, as amended, or any successor statute, together with all regulations,
rulings and interpretations thereof or thereunder by the Internal Revenue
Service or (ii) the Income Tax Act (Canada), as amended, or any successor
statute, together with all regulations, rulings and interpretations thereof or
thereunder.
"Commitment Percentage" shall mean, as to any Bank, the percentage
equivalent of a fraction the numerator of which is the amount of such Bank's
Commitment and the denominator of which is the aggregate amount of the
Commitments of all Banks.
"Commitment" shall mean, as to any Bank, the obligation, if any, of
such Bank to make Loans, accept and purchase Bankers' Acceptances and incur
Letter of Credit Liabilities in an aggregate principal amount (including therein
the full face amount of all Bankers' Acceptances then outstanding) at any one
time outstanding up to but not exceeding the amount, if any, set forth opposite
such Bank's name on the signature pages hereof under the caption "Commitment"
(as the same may be reduced from time to time pursuant to Section 2.3).
"Cover" for Letter of Credit Liabilities shall be effected by paying to
the Paying Agent immediately available funds, to be held by the Paying Agent in
a collateral account maintained by Paying Agent at its Payment Office and
collaterally assigned as security for the financial accommodations extended
pursuant to this Agreement using documentation satisfactory to the
Administrative Agent, in an amount equal to any required prepayment. Such amount
shall be retained by the Paying Agent in such collateral account until such time
as (x) in the case of Cover being provided pursuant to Section 2.2(a), the
applicable Letter of Credit shall have expired and Reimbursement Obligations, if
any, with respect thereto shall have been fully satisfied or (y) in the case of
Cover being provided pursuant to Section 3.2(b)(1), the outstanding principal
amount of all Revolving Credit Obligations is not greater than the aggregate
amount of the Commitments.
"Current Maturities" shall mean, on any day on which Current Maturities
are calculated, the sum of (a) scheduled principal payments on Funded
Indebtedness which are payable within one (1) year after such day plus (b) the
principal component of payments required to be made with respect to Capital
Lease Obligations within one (1) year of said date plus (c), to the extent not
included above, all items which in accordance with GAAP would be classified as
current maturities of long term debt.
"Debt/Capitalization Ratio" shall mean the ratio of (a) the sum of
Funded Indebtedness of the Parent and its Subsidiaries on a consolidated basis
plus Current Maturities of the Parent and its Subsidiaries on a consolidated
basis plus borrowed money Indebtedness of the Parent and its Subsidiaries on a
consolidated basis that is not Funded Indebtedness plus Indebtedness of the
Parent and its Subsidiaries on a consolidated basis constituting obligations
payable out of Hydrocarbons (except such obligations payable solely by recourse
to properties not included in the Borrowing Base) to (b) Capitalization.
8
<PAGE>
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
"Disclosure Statement" shall mean the Disclosure Statement dated
concurrently herewith delivered to the Administrative Agent by the Company.
"Dividend Payment" shall mean, with respect to any Person, dividends
(in cash, property or obligations) on, or other payments or distributions on
account of, or the redemption of, or the setting apart of money for a sinking or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, any shares of any class of capital stock of such Person, or the
exchange or conversion of any shares of any class of capital stock of such
Person for or into any obligations of or shares of any other class of capital
stock of such Person or any other property, but excluding dividends to the
extent payable in, or exchanges or conversions for or into, shares of common
stock of the Parent or options or warrants to purchase common stock of the
Parent.
"EBITDAX" shall mean net earnings (excluding gains and losses on sales
and retirement of assets, non-cash write downs, charges resulting from
accounting convention changes and deductions for dry hole expenses) before
deduction for federal, provincial, municipal and state taxes, interest expense
(including capitalized interest), operating lease rentals or depreciation,
depletion and amortization expense, all determined in accordance with GAAP.
"EBITDAX/Interest Ratio" shall mean the ratio of (a) EBITDAX of the
Parent and its Subsidiaries on a consolidated basis to (b) operating lease
rentals and interest expense (including capitalized interest but excluding
non-cash amortization of deferred financing costs) on all Indebtedness of the
Parent and its Subsidiaries on a consolidated basis for any twelve-month period
ending on the last day of every calendar quarter during the period with respect
to which the EBITDAX/Interest Ratio is to be calculated.
"Engineering Report" shall mean one or more reports, in form
satisfactory to the Administrative Agent and the Majority Banks, prepared by one
or more independent consulting firms acceptable to the Administrative Agent and
the Majority Banks in their reasonable business judgment, which shall evaluate
at least 85% of the present value of the Included Reserves (as defined in the
U.S. Facility, without amendment except as permitted under the Intercreditor
Agreement) as of the immediately preceding January 1. Each Engineering Report
shall set forth a projection of the future rate of production, Net Proceeds of
Production and present value of the Net Proceeds of Production, in each case
based upon economic assumptions acceptable to the Administrative Agent and
approved by the Majority Banks.
"ENSTAR Alaska" shall collectively mean (i) the gas distribution system
in south-central Alaska known as ENSTAR Natural Gas Company, a division of the
Parent, and (ii) APC.
9
<PAGE>
"Environmental Claim" means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
"Environmental Liabilities" includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
"Environmental Permit" means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into 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 or Hazardous Substances.
"Equivalent U.S. Dollar Amount" shall mean, with respect to any amount
of Canadian Dollars, the equivalent amount of U.S. Dollars determined by using
the Bank of Canada noon day rate at which it offers to provide U.S. Dollars in
exchange for such amount of Canadian Dollars on the date as of which such
Equivalent U.S. Dollar Amount is to be determined.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations and interpretations by
the Internal Revenue Service or the Department of Labor thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is a member of a group of which the Parent is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
10
<PAGE>
"Eurodollar Base Rate" shall mean, with respect to any Interest Period
for any Eurodollar Loan, the lesser of (A) the rate per annum (rounded upwards,
if necessary, to the nearest 1/16th of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall not
be available, any successor or similar service as may be selected by the Paying
Agent and the Company) as of 11:00 a.m., Toronto, Ontario time (or as soon
thereafter as practicable) on the day two Business Days prior to the first day
of such Interest Period for U.S. Dollar deposits having a term comparable to
such Interest Period and in an amount comparable to the principal amount of the
Eurodollar Loan to which such Interest Period relates or (B) the Highest Lawful
Rate. If none of such Telerate Page 3750 nor any successor or similar service is
available, then the "Eurodollar Base Rate" shall mean, with respect to any
Interest Period for any applicable Eurodollar Loan, the lesser of (A) the rate
per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%)
determined by the Paying Agent to be the average of the rates quoted by the
Reference Banks at approximately 11:00 a.m., Toronto, Ontario time (or as soon
thereafter as practicable) on the day two Business Days prior to the first day
of such Interest Period for the offering by such Reference Banks to leading
banks in the London interbank market of U.S. Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the Eurodollar Loan to which such Interest Period relates or (B) the
Highest Lawful Rate. If any Reference Bank does not furnish a timely quotation,
the Paying Agent shall determine the relevant interest rate on the basis of the
quotation or quotations furnished by the remaining Reference Bank or Banks; if
none of such quotations is available on a timely basis, the provisions of
Section 6.2 shall apply. Each determination of the Eurodollar Base Rate shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method.
"Eurodollar Loans" shall mean Loans the interest on which is determined
on the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.1.
"Eurodollar Rate" shall mean, for any Interest Period for any
Eurodollar Loan, a rate per annum determined by the Paying Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 11 hereof.
"Facility Fee Percentage" shall mean, on any date, the applicable per
annum percentage set forth at the appropriate intersection in the table shown
below, based on the Rating as of the close of business on the preceding Business
Day:
11
<PAGE>
<TABLE>
<CAPTION>
Facility
Fee
Rating Percentage
<S> <C>
BBB/Baa2 and higher 0.125
BBB-/Baa3 0.150
BB+/Ba1 0.20
BB/Ba2 and lower 0.30
</TABLE>
"Financial Statements" shall mean the financial statement or
statements, together with the notes and schedules thereto, described or referred
to in Sections 8.6 and 9.1.
"Funded Indebtedness" shall mean all Indebtedness which by its terms
matures more than one (1) year from the date as of which any calculation of
Funded Indebtedness is made, and any Indebtedness maturing within one (1) year
from such date which is renewable at the option of the obligor to a date beyond
one (1) year from such date (if Indebtedness provides for amortization, only the
amount of the principal payment required to be made within one (1) year from the
date as of which any calculation of Funded Indebtedness is made shall be
excluded from "Funded Indebtedness").
"GAAP" shall mean as to a particular Person, such accounting practice
as, in the opinion of KPMG Peat Marwick or other independent accountants of
recognized national standing retained by such Person and acceptable to the
Majority Banks, conforms at the time to generally accepted accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
relevant Person furnished to the Banks, except only for such changes in
principles and practices with which the applicable independent public
accountants concur and which are disclosed to the Banks in writing, and (c)
which are consistently applied for all periods after the date hereof so as to
reflect properly the financial condition and results of operations of such
Person.
"Gas and Liquids Pipeline Subsidiaries" shall mean each company (which
may include the Parent) engaged in the Pipeline Operations (as defined in the
U.S. Facility, without amendment except as permitted under the Intercreditor
Agreement).
"Gas Sale Contract" shall mean that certain Gas Sale Contract dated
January 1, 1984, between APC, as Seller, and ENSTAR Natural Gas Company, as
Purchaser, as amended on June 17, 1985, and from time to time thereafter, if and
only if the Administrative Agent has received notice thereof pursuant to Section
10.8.
"Governmental Authority" shall mean any sovereign governmental
authority, Canada, the United States of America, any Province of Canada, any
State of the United States and any political subdivision of any of the
foregoing, and any central bank, agency, instrumentality, department,
12
<PAGE>
commission, board, bureau, authority, court or other tribunal or
quasi-governmental authority in each case whether executive, legislative,
judicial, regulatory or administrative, having jurisdiction over the Parent, any
of its Subsidiaries, any of their respective property, any Agent or any Bank.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of any such Person directly or indirectly guaranteeing any
Indebtedness 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 Indebtedness (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, other than agreements to purchase assets, goods, securities or
services at an arm's length price in the ordinary course of business) or (ii)
entered into for the purpose of assuring in any other manner the holder of such
Indebtedness 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 endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substance" shall mean petroleum products, and any hazardous
or toxic waste or substance defined or regulated as such from time to time by
any law, rule, regulation or order described in the definition of "Requirements
of Environmental Law".
"Highest Lawful Rate" shall mean, on any day, the maximum nonusurious
rate of interest permitted for that day by whichever of applicable Canadian or
provincial law permits the higher interest rate, stated as a rate per annum.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate and all other liquid or gaseous hydrocarbons and
related minerals, in each case whether in a natural or a processed state.
"Indebtedness" shall mean, as to any Person: (i) indebtedness of such
Person for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase or acquisition price of property or
services, including, without limitation, obligations (excluding volumetric
obligations with respect to pre-sales of Hydrocarbon production which have
already been accounted for in the calculation of the Borrowing Base) payable out
of Hydrocarbon production; (ii) obligations, whether fixed or contingent, of
such Person in respect of letters of credit, acceptances or similar instruments
issued or accepted by banks and other financial institutions for the account of
such Person or any other Person; (iii) Capital Lease Obligations of such Person;
(iv) Redemption Obligations of such Person and other obligations of such Person
to redeem or otherwise retire shares of capital stock of such Person or any
other Person, in each case to the extent that the redemption obligations will
arise prior to the stated maturity of the Obligations; (v) indebtedness of
others of the type described in clause (i), (ii), (iii) or (iv) above secured by
a Lien on the property of such Person, whether or not the respective obligation
so
13
<PAGE>
secured has been assumed by such Person; and (vii) indebtedness of others of the
type described in clause (i), (ii), (iii) or (iv) above Guaranteed by such
Person.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated December 30, 1993 executed by and among the Company, the Parent,
the Administrative Agent and the "Administrative Agent"(now known as "Agent")
under the U.S. Facility, as amended by that certain First Amendment to
Intercreditor Agreement dated May 24, 1994 and by that certain Second Amendment
to Intercreditor Agreement dated December 23, 1996, and as the same may be
further amended or modified from time to time.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Loan, the period commencing
on (i) the date such Loan is made or converted into or continued as a Eurodollar
Loan or (ii) in the case of a roll-over to a successive Interest Period, the
last day of the immediately preceding Interest Period and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Company may select as provided in Section 3.3 hereof,
except that each such Interest Period which commences on any day for which there
is no numerically corresponding day in the appropriate subsequent calendar month
shall end on the last Business Day of the appropriate subsequent calendar month.
(b) With respect to any Alternate Base Rate Loan or any
Canadian Prime Rate Loan, the period commencing on the date such Loan is made
and ending on the next succeeding Quarterly Date.
Notwithstanding the foregoing: (i) no Interest Period with respect to a
Eurodollar Loan may commence before and end after the date of any scheduled
reduction in the Commitments if, after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans having Interest Periods which end after
such reduction date shall be greater than the aggregate principal amount of the
Commitments scheduled to be in effect after such reduction date; (ii) each
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or, in the case of an Interest
Period for Eurodollar Loans, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (iii) no
Interest Period with respect to a Eurodollar Loan shall extend beyond the end of
the scheduled Revolving Credit Availability Period; and (iv) no Interest Period
for any Eurodollar Loans shall have a duration of less than one month and, if
the Interest Period therefor would otherwise be a shorter period, such Loans
shall not be available hereunder.
"Investments" shall have the meaning assigned to such term in Section
10.3 hereof.
"Investments Tests" shall mean compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Investments):
14
<PAGE>
(i) there shall exist no Borrowing Base Deficiency;
(ii) no Default or Event of Default shall have occurred
and be continuing; and
(iii) the applicable Investment, when aggregated with any
prior permitted Investments (exclusive of Investments
permitted under Sections 10.3(a) through (o) hereof),
shall not exceed 10% of Tangible Net Worth of the
Parent and its Subsidiaries on a consolidated basis.
"Issuer" shall mean each Bank issuing a Letter of Credit hereunder.
"Legal Requirement" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, now or hereafter in effect.
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.2 hereof.
"Letter of Credit Fee" shall mean a per annum rate equal to the
Applicable Margin for Eurodollar Loans in effect from time to time.
"Letter of Credit Liabilities" shall mean, at any time and in respect
of any Letter of Credit, the sum of (i) the amount available for drawings under
such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, collateral assignment, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Liquid Investments" shall mean:
(I) in the case of investments of U.S. Dollars
(i) securities issued or directly, fully and unconditionally
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of issue;
15
<PAGE>
(ii) U.S. Dollar time deposits and certificates of deposit (A) of any
Bank having capital and surplus in excess of U.S. $300,000,000, or (B) of any
commercial bank incorporated in the United States, of recognized standing,
having capital and surplus in excess of U.S. $500,000,000 and which has (or
which is a Subsidiary of a holding company which has) publicly traded debt
securities rated, at the time of issuance of such time deposits, AA or higher by
Standard & Poor's Ratings Group or Aa-2 or higher by Moody's Investors Service,
Inc. with maturities of not more than one year from the date of issue;
(iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (I)(i) above entered
into with any bank meeting the qualifications specified in clause (I)(ii) above,
provided that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Institution Examination Counsel Supervisory
Policy--Repurchase Agreements of Depository Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985;
(iv) commercial paper or other U.S. Dollar obligations issued by the
parent corporation (A) of any Bank having capital and surplus in excess of U.S.
$300,000,000, or (B) of any commercial bank (provided that the parent
corporation and the bank are both incorporated in the United States) of
recognized standing having capital and surplus in excess of U.S. $500,000,000
and commercial paper or other U.S. Dollar obligations issued by any Person
incorporated in the United States, which commercial paper is rated at least A-2
or the equivalent thereof by Standard & Poor's Ratings Group or at least P-2 or
the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing not more than six months after the date of issue;
(v) obligations of any state or political subdivision thereof rated at
least F-1 by Fitch Investors Service, Inc. or AA by Standard & Poor's Ratings
Group with an original maturity of 180 days or less; and
(vi) investments in money market funds substantially all the assets of
which are comprised of securities of the types described in clauses (I)(i)
through (v) above; and
(II) in the case of investments of Canadian dollars
16
<PAGE>
(i) bonds or other evidences of indebtedness of, or the principal and
interest of which is fully guaranteed by, the Government of Canada or any
province of Canada, payable in Canadian dollars and (in the case of any
provincial obligations and any Government of Canada obligations that are rated)
rated AAA or AA (or the then equivalent grade) by Dominion Bond Rating Service
Limited, or any other nationally recognized bond rating service, having a
maturity not in excess of one year,
(ii) certificates of deposit issued or guaranteed by a bank or trust
company organized under the laws of Canada or any province thereof, provided
such bank or trust company has capital and retained earnings in the aggregate in
excess of Canadian $500,000,000 on its most recent balance sheet (whether
audited or unaudited), having a maturity not in excess of one year,
(iii) bankers' acceptances of any bank or trust company the
certificates of deposit of which would constitute Liquid Investments as provided
in clause (II)(ii) above, if outstanding unsecured debt of such bank or trust
company is rated no less than AA (or the then equivalent grade) by Dominion Bond
Rating Service Limited, or any other nationally recognized bond rating service;
and
(iv) commercial paper rated no less than R-1 (or the then equivalent
grade) by Dominion Bond Rating Service Limited or A-1 (or the then equivalent
grade) by CBRS Inc., having a maturity not in excess of one year; excluding any
bonds or other evidences of indebtedness, certificates of deposit or commercial
paper which a Canadian chartered bank may not hold as security under the Bank
Act (Canada).
"Loan Documents" shall mean this Agreement, the Notes, the Bank
Guarantee, the Intercreditor Agreement, the Bankers' Acceptances, all
Applications, all instruments, certificates and agreements now or hereafter
executed or delivered to any Agent or any Bank pursuant to any of the foregoing,
and all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"Majority Banks" shall mean Banks having greater than 66-2/3% of the
aggregate amount of Commitments.
"Material Adverse Effect" shall mean a material adverse effect on the
business, condition (financial or otherwise), operations or properties
(including proven oil and gas reserves) of the
17
<PAGE>
Parent and its Subsidiaries, taken as a whole, or on the ability of any Relevant
Party to perform its material obligations under any Loan Document to which it is
a party.
"Maximum Outstanding Amount" shall have the meaning ascribed to such
term in Section 2.9 hereof.
"Maximum Revolving Credit Available Amount" shall mean, at any date, an
amount equal to the lesser of (i) the aggregate of the Commitments or (ii) the
Maximum Outstanding Amount designated from time to time by the Company in
accordance with the terms hereof.
"Mesa Contract" shall mean that certain Purchase and Sale Agreement
dated Febru ary 6, 1991 executed by and among Mesa Limited Partnership, a
Delaware limited partnership, Mesa Operating Limited Partnership, a Delaware
limited partnership, and Mesa Midcontinent Limited Partnership, a Delaware
limited partnership, as Sellers, and the Parent, as Buyer, as amended by that
certain First Amendment to Purchase and Sale Agreement dated Febru ary 22, 1991
and as further amended by that certain Second Amendment to Purchase and Sale
Agreement dated March 8, 1991.
"Net Proceeds of Production" shall mean, with respect to any Person,
all revenue received by or credited to the account of such Person from the sale
of Hydrocarbons and other minerals in, under or produced from their respective
oil, gas and mineral properties after deducting royalties, overriding royalties,
volumetric production payments with respect to pre-sales of Hydrocarbon
production, production payments pledged to secure non-recourse financing payable
solely out of such production payments, net profits interests and other burdens
payable out of production, normal and reasonable operating expenses and
severance, ad valorem, excise, freehold mineral and windfall profit taxes.
"Notes" shall mean the promissory notes of the Company evidencing the
Loans, in the form of Exhibit C hereto, together with all renewals, extensions,
modifications and replacements thereof and substitutions therefor.
"Novalta" shall mean Novalta Resources Inc., a corporation incorporated
under the laws of the Province of Alberta.
"Novalta Contract" shall mean that certain Sale Agreement dated
November 19, 1993 executed by and between Novacor Petrochemicals Ltd., as
Vendor, and the Parent, as Purchaser.
"Obligations" shall mean, as at any date of determination thereof, the
sum of the following: (i) the aggregate principal amount of Loans outstanding
hereunder plus (ii) the aggregate face amount of all outstanding Bankers'
Acceptances plus (iii) the aggregate amount of the Letter of Credit Liabilities
hereunder plus (iv) all other liabilities, obligations and indebtedness of the
Parent or any Subsidiary of the Parent under any Loan Document.
18
<PAGE>
"Oil and Gas Subsidiaries" shall mean any Subsidiary of the Parent
whose assets consist primarily of oil and gas properties. As of the date hereof,
the Oil and Gas Subsidiaries are listed as such on Exhibit A hereto.
"Organizational Documents" shall mean, with respect to a corporation,
the certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document.
"Parent" shall mean Seagull Energy Corporation, a Texas corporation.
"Parent Report" shall mean one or more reports, in form satisfactory to
the Administrative Agent and the Majority Banks, prepared by petroleum engineers
employed by the Parent or its Subsidiaries, which shall evaluate (i) at least
85% of the present value of the Included Reserves (as defined in the U.S.
Facility, without amendment except as permitted under the Intercreditor
Agreement) and (ii) any other properties as to which the Parent has conducted
successful exploration activities subsequent to the most recent Engineering
Report, in each case effective as of the immediately preceding July 1. Each
Parent Report shall set forth production, drilling and acquisition information
and other information requested by the Administrative Agent and shall be based
upon updated economic assumptions acceptable to the Administrative Agent and
approved by the Majority Banks at the beginning of the applicable year.
"Payment Office" shall mean the Toronto, Ontario office of the Paying
Agent, presently located at The Bank of Nova Scotia, International Banking
Division-Loan Accounting, 14th Floor, 44 King Street West, Toronto, Ontario,
Canada M5H 1H1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a bank, a
voluntary association, a partnership, a trust, an unincorporated organization,
any Governmental Authority or any other entity.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Parent or any ERISA Affiliate
for employees of the Parent or any ERISA Affiliate or (b) maintained pursuant to
a collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Parent or any ERISA Affiliate
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
19
<PAGE>
"Post-Default Rate" shall mean, in respect of any principal of any
Loan, any Reimburse ment Obligation or any other amount payable by the Company
under this Agreement or any other Loan Document which is not paid when due
(whether at stated maturity, by acceleration, or otherwise), a rate per annum
during the period commencing on the due date until such amount is paid in full
equal to the lesser of (a) the sum of (w) with respect to Eurodollar Loans, 2%
per annum plus the applicable Eurodollar Rate then in effect plus the Applicable
Margin for Eurodollar Loans until the expiration of the applicable Interest
Period, (x) with respect to Canadian Prime Rate Loans, 2% per annum plus the
applicable Canadian Prime Rate as in effect from time to time plus the
Applicable Margin for Canadian Prime Rate Loans, and (y) with respect to
Alternate Base Rate Loans and with respect to Eurodollar Loans after the
expiration of the applicable Interest Period (and also with respect to
indebtedness other than Loans), 2% plus the Alternate Base Rate as in effect
from time to time plus the Applicable Margin for Alternate Base Rate Loans or
(b) the Highest Lawful Rate.
"Quarterly Dates" shall mean the last day of each March, June,
September and December, provided that, if any such date is not a Business Day,
then the relevant Quarterly Date shall be the next succeeding Business Day.
"Quarterly Equivalent" shall mean, as of any date, the Bank of Canada
noon day rate at which it offers to provide U.S. Dollars in exchange for
Canadian Dollars on the later of (i) the last Business Day immediately preceding
the then current calendar quarter or (ii) the last Business Day immediately
preceding the most recent revision of the Maximum Outstanding Amount pursuant to
Section 2.9.
"Rating" shall mean the senior debt rating for the Parent publicly
announced by Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
(in the event the ratings are not equivalent, the higher rating shall be treated
as the "Rating" hereunder); provided, that if such ratings differ by more than
one (1) level, the Rating shall be the average, rounded upwards, of the two
ratings.
"Redemption Obligations" shall mean with respect to any Person all
mandatory redemption obligations of such Person with respect to preferred stock
or other equity securities issued by such Person or put rights in favour of the
holder of such preferred stock or other equity securities, to the extent that
the redemption obligations will arise prior to the stated maturity of the
Obligations.
"Reference Banks" shall mean The Bank of Nova Scotia and The Chase
Manhattan Bank of Canada and such other Banks (up to a maximum of two (2)
additional Banks) as the Company, with the approval of the Paying Agent (which
approval shall not be unreasonably withheld), may from time to time designate.
20
<PAGE>
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time and any successor or other regulation relating to reserve requirements.
"Regulatory Change" shall mean, with respect to any Bank, any change on
or after the date of this Agreement in Legal Requirements (including Regulation
D) or the adoption or making on or after such date of any interpretation,
directive or request applying to a class of banks including such Bank under any
Legal Requirements (whether or not having the force of law) by any Governmental
Authority.
"Reimbursement Obligations" shall mean, as at any date, the obligations
of the Company then outstanding in respect of Letters of Credit under this
Agreement, to reimburse the Paying Agent for the account of the applicable
Issuer for the amount paid by the applicable Issuer in respect of any drawing
under such Letter of Credit.
"Relevant Party" shall mean the Company, the Parent and each other
party to any of the Loan Documents other than (a) the Banks and (b) the Agents.
"Request for Extension of Credit" shall mean a request for extension of
credit duly executed by any Responsible Officer of the Company, appropriately
completed and substantially in the form of Exhibit B attached hereto.
"Requirements of Environmental Law" means all requirements imposed by
any law (including for example and without limitation The Resource Conservation
and Recovery Act (U.S.) and The Comprehensive Environmental Response,
Compensation, and Liability Act (U.S.), the Environmental Protection and
Enhancement Act (Alberta) and the Canadian Environmental Protection Act), rule,
regulation, or order of any federal, state, provincial or local executive,
legislative, judicial, regulatory or administrative agency, board or authority
in effect at the applicable time which relate to (i) noise; (ii) pollution,
protection or clean-up of the air, surface water, ground water or land; (iii)
solid, gaseous or liquid waste generation, treatment, storage, disposal or
transportation; (iv) exposure to Hazardous Substances; (v) the safety or health
of employees or (vi) regulation of the manufacture, processing, distribution in
commerce, use, discharge or storage of Hazardous Substances.
"Reserve Requirement" shall mean, for any Eurodollar Loan for any
Interest Period therefor, the stated maximum rate for all reserves (including
any marginal, supplemental or emergency reserves) required to be maintained
during such Interest Period under applicable Legal Requirements by any Bank
against eurocurrency liabilities. Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect and include any other reserves required to
be maintained by any Bank by reason of any Regulatory Change against (i) any
category of liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined as provided in the definition of "Eurodollar
Base Rate" in this Section 1.1 or (ii) any category of extensions
21
<PAGE>
of credit or other assets which include Eurodollar Loans. Any determination by
the Paying Agent of the Reserve Requirement shall be conclusive and binding,
absent manifest error, and may be made using any reasonable averaging and
attribution method.
"Responsible Officer" shall mean the chairman of the board, the
president, any executive vice president, the vice president of finance and
administration, the chief executive officer or the chief operating officer or
any equivalent officer (regardless of title) and in the case of the Company, any
other vice president, and in respect of financial or accounting matters, shall
also include the chief financial officer, the treasurer and the controller or
any equivalent officer (regardless of title).
"Revolving Credit Availability Period" shall mean the period from and
including the date hereof to but not including May 31, 2004 or the date the
Commitments are terminated pursuant to Section 11.1, whichever is first to
occur.
"Revolving Credit Obligations" shall mean, as at any date of
determination thereof, the sum of the following (determined without
duplication): (i) the aggregate principal amount of Loans outstanding hereunder
plus (ii) the aggregate of the face amounts of all outstanding Bankers'
Acceptances plus (iii) the aggregate amount of the Letter of Credit Liabilities
hereunder.
"Senior Debt" shall mean Indebtedness having a weighted average
maturity at least seven (7) years from the date of issuance and having no
conditions precedent or covenants materially more onerous to the Parent than the
conditions precedent and covenants contained herein and in the other Loan
Documents with respect to the Loans. The documents evidencing any Senior Debt
shall contain a provision substantially identical to Section 10.2(y) hereof
permitting Liens securing the Notes and the other Obligations on a pari passu
basis with such Senior Debt.
"Subordinated Debt" shall mean Indebtedness of the Parent having a
weighted average maturity at least seven (7) years from the date of issuance and
having no conditions precedent or covenants materially more onerous to the
Parent than the conditions precedent and covenants contained in the U.S.
Facility, in this Agreement and in the other Loan Documents with respect to the
Loans and which is expressly made subordinate and junior in right of payment to
the Obligations and in respect of any collateral or security by the express
terms of the instruments evidencing the Subordinated Debt or the indenture or
other similar instrument under which the Subordinated Debt is issued (which
indenture or other instrument will be binding on all holders of such
Subordinated Debt), by provisions not more favourable to the holders of the
Subordinated Debt than the following:
(a) in the event a Default exists and is continuing, no payment of
principal or interest will be made on account of Subordinated Debt and no remedy
for default shall be exercised until (i) such Default will have been cured or
waived or until the Obligations will have been paid in full (or provisions made
therefor reasonably satisfactory to the Banks) or (ii) 179 days after the
22
<PAGE>
occurrence of such Default (as to which the Banks have knowledge as a result of
having received notice from the Company pursuant to this Agreement or otherwise)
and no action being taken by the Banks with respect to such Default, whichever
occurs earlier;
(b) upon the occurrence of any of the events or proceedings specified
in Subsec tions 11.1(f) or (g) hereof (or, as to any Subsidiary of the Parent,
Subsection 11.1(j) to the extent that it refers to Subsections 11.1(f) or (g)),
the holders of any Obligations will be entitled to receive payment in full of
all principal or interest on all Obligations before the holders of the
Subordinated Debt are entitled to receive any payment on account of principal or
interest on the Subordinated Debt, and to that end (but subject to the power of
a court of competent jurisdiction to make other provision) the holders of the
Obligations will be entitled to receive distributions of any kind or character,
whether in cash or property or securities (other than equity securities and
other securities establishing rights in the holders thereof which are
subordinate to the rights of the holders of the Obligations in accordance with
this definition of Subordinated Debt), which may be or would otherwise be
payable or deliverable in any such proceedings in respect of the Subordinated
Debt (provided that, the Subordinated Debt may provide that if the Obligations
have been paid in full or provision therefor reasonably satisfactory to the
Banks has been made, the holders of the Subordinated Debt will be subrogated to
the rights of the holders of the Obligations);
(c) in the event that any Subordinated Debt is declared due and payable
before its expressed maturity because of the occurrence of an event of default
thereunder (under circumstances when the provisions of the foregoing clauses (a)
and (b) will not be applicable), the holders of the Obligations at the time such
Subordinated Debt becomes due and payable because of such an event of default
will be entitled to receive payment in full of all Obligations (or have
provision therefor satisfactory to the Banks made) before the holders of the
Subordinated Debt are entitled to receive any payment on account of the
principal or interest on the Subordinated Debt; and
(e) no holder of the Obligations will be prejudiced in its right to
enforce subordination of the Subordinated Debt by any act or failure to act on
the part of the Parent or the part of the holders of the Obligations; provided
that, the Subordinated Debt may provide that the foregoing provisions are solely
for the purpose of defining the relative rights of the holders of the
Obligations on the one hand, and the holders of the Subordinated Debt on the
other hand, and that nothing therein will impair, as between the Parent and the
holders of the Subordinated Debt, the obligation of the Parent, which may be
unconditional and absolute, to pay to the holders of the Subordinated Debt the
principal and interest thereon in accordance with its terms, nor will anything
herein prevent the holders of the Subordinated Debt from exercising all remedies
otherwise permitted by applicable law or thereunder upon default thereunder,
subject to the rights under clauses (a), (b) and (c) above of
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the holders of the Obligations to receive cash, property or securities otherwise
payable or deliverable to the holders of the Subordinated Debt.
"Subsidiary" shall mean, with respect to any Person (the "parent"),
(a) any corporation of which at least a majority of the outstanding shares of
stock having by the terms thereof ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether or not at
the time stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by the parent or one or more of
the Subsidiaries of the parent or by the parent and one or more of the
Subsidiaries of the parent, and (b) any partnership, limited partnership, joint
venture or other form of entity, the majority of the legal or beneficial
ownership of which is at the time directly or indirectly owned or controlled by
the parent or one or more of the Subsidiaries of the parent or by the parent and
one or more of the Subsidiaries of the parent.
"Tangible Net Worth" shall mean the sum of the redemption price of
preferred stock, par value of common stock, capital in excess of par value of
common stock (additional paid-in capital) and retained earnings, less treasury
stock, goodwill, deferred development costs, franchises, licenses, patents,
trademarks and copyrights and all other assets which are properly classified as
intangible assets in accordance with GAAP less any Redemption Obligations.
"Type" shall have the meaning assigned to such term in Section 1.3
hereof.
"Unfunded Liabilities" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.
"U.S. Dollars" and "U.S. $" shall mean lawful money of the United
States of America.
"U.S. Facility" shall mean that certain Credit Agreement dated
concurrently herewith executed by and among the Parent, The Chase Manhattan
Bank, as Agent, and certain banks therein named, as amended by the Intercreditor
Agreement and as the same may be further amended or modified from time to time.
1.2 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP.
To enable the ready determination of compliance with the provisions hereof, the
Parent will not change from December 31 in each year the date on which its
fiscal year ends, nor from March 31, June 30 and September 30 the dates on which
the first three fiscal quarters in each fiscal year end.
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1.3 Types of Loans. Loans hereunder are distinguished by "Type". The
"Type" of a Loan refers to the determination whether such Loan is a Eurodollar
Loan, an Alternate Base Rate Loan or a Canadian Prime Rate Loan.
1.4 Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. Any
reference to Sections shall refer to Sections of this Agreement. Whenever it is
necessary to convert an amount denominated in Canadian Dollars to U.S. Dollars,
such as calculating the aggregate outstanding principal amount of the Revolving
Credit Obligations, such conversion shall be effected using the Equivalent U.S.
Dollar Amount or, where applicable, the Quarterly Equivalent. Unless payments
are otherwise required by the terms of this Agreement or by any other applicable
Loan Document to be made in U.S. Dollars or Canadian Dollars, such payment shall
be made in U.S. Dollars or in Canadian Dollars converted by using the Equivalent
U.S. Dollar Amount as of the date of such payment calculated, where applicable,
using the Quarterly Equivalent.
Section 2. Commitments; Designation of Maximum Outstanding Amount.
2.1 Loans and Bankers' Acceptances. From time to time on or
after the date hereof and during the Revolving Credit
Availability Period, each Bank shall:
(a) make Loans under this Section 2.1, in Canadian Dollars or
U.S. Dollars, to the Company; and
(b) accept and purchase Bankers' Acceptances and deliver the
Canadian Bankers' Acceptance Discount Proceeds (less the
applicable acceptance fees payable by the Company to such
Bank pursuant to Sections 4.3) in respect thereof for the
account of the Company through the Paying Agent at the
Payment Office,
in an aggregate principal amount (including therein the aggregate face amount of
any outstanding Bankers' Acceptances) at any one time outstanding (including its
Commitment Percentage of all Letter of Credit Liabilities at such time) up to
but not exceeding such Bank's Commitment Percentage of the Maximum Revolving
Credit Available Amount. Subject to the conditions herein, any such Loan or
Bankers' Acceptance repaid prior to the end of the Revolving Credit Availability
Period may be reborrowed or reissued, as the case may be, pursuant to the terms
of this Agreement; provided, that any and all such Loans and the full face
amount of all outstanding Bankers' Acceptances shall be due and payable in full
at the end of the Revolving Credit Availability Period. For purposes of
determining the amount available for borrowing hereunder (or the maximum
availability for the issuance of Bankers' Acceptances or Letters of Credit), the
Equivalent U.S. Dollar Amount as of the Business Day preceding the Loan request,
Bankers' Acceptance Request or Letter of Credit request shall be used to
determine availability hereunder, rather than the Quarterly Equivalent.
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2.2 Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions hereof, and
on the condition that aggregate Letter of Credit Liabilities shall never exceed
U.S. $10,000,000, the Company shall have the right, in addition to Loans
provided for in Section 2.1 hereof, to utilize the Commitments from time to time
from and after the date hereof through the expiration of the Revolving Credit
Availability Period by obtaining the issuance of letters of credit for the
account of the Company and on behalf of the Company by the applicable Issuer if
the Company shall so request in the notice referred to in Section 2.2(b)(i)
(such letters of credit being collectively referred to as the "Letters of
Credit"). Letters of Credit may, upon written request of the Company, be
denominated in Canadian Dollars and if so all payments and fees with respect
thereto shall be paid in Canadian Dollars. Upon the date of the issuance of a
Letter of Credit, the applicable Issuer 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 the
applicable Issuer, a participation, to the extent of such Bank's Commitment
Percentage, in such Letter of Credit and the related Letter of Credit
Liabilities. Any Letter of Credit having an expiry date after the end of the
Revolving Credit Availability Period shall have been fully Covered or shall be
backed by a letter of credit in form and substance, and issued by an issuer,
acceptable to the Administrative Agent in its reasonably exercised discretion.
Subject to the terms and conditions hereof, upon the request of the Company, if
BNS is the designated Issuer, BNS shall issue the applicable Letter of Credit
and if any other Bank is the designated Issuer, such Bank may, but shall not be
obligated to, issue such Letter of Credit.
(b) Additional Provisions. The following additional provisions shall
apply to each Letter of Credit:
(i) The Company shall give the Administrative Agent and the
Paying Agent at least three (3) Business Days' prior notice (effective upon
receipt) specifying the proposed Issuer and the date such Letter of Credit is to
be issued and describing the proposed terms of such Letter of Credit and the
nature of the transaction proposed to be supported thereby, and shall furnish
such additional information regarding such transaction as the Administrative
Agent, the Paying Agent or the applicable Issuer may reasonably request. Upon
receipt of such notice the Paying Agent shall promptly notify each Bank of the
contents thereof and of such Bank's Commitment Percentage of the amount of such
proposed Letter of Credit.
(ii) No Letter of Credit may be issued if after giving
effect thereto the Revolving Credit Obligations would exceed the Maximum
Revolving Credit Available Amount. On each day during the period commencing with
the issuance of any Letter of Credit and until such Letter of Credit shall have
expired or been terminated, the Commitment of each Bank shall be deemed to be
utilized for all purposes hereof in an amount equal to such Bank's Commitment
Percentage of the amount then available for drawings under such Letter of
Credit.
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(iii) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment thereunder, the applicable Issuer shall
promptly notify the Company and each Bank as to the amount to be paid as a
result of such demand and the payment date. If at any time the applicable Issuer
shall have made a payment to a beneficiary of a Letter of Credit in respect of a
drawing under such Letter of Credit, each Bank will pay to the applicable Issuer
immediately upon demand by the applicable Issuer at any time during the period
commencing after such payment until reimbursement thereof in full by the
Company, an amount equal to such Bank's Commitment Percentage of such payment,
together with interest on such amount for each day from the date of demand for
such payment (or, if such demand is made after 11:00 a.m. Toronto, Ontario time
on such date, from the next succeeding Business Day) to the date of payment by
such Bank of such amount at a per annum rate of interest determined by the
Issuer (such rate to be conclusive and binding on the Banks) in accordance with
the Issuer's usual banking practice for similar advances to financial
institutions of like standing to the applicable Bank.
(iv) The Company shall be irrevocably and unconditionally
obligated forthwith to reimburse the applicable Issuer for any amount paid by
the applicable Issuer upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind. Such
reimbursement may, subject to satisfaction of the conditions in Sections 7.1 and
7.2 hereof and to the existence of the Maximum Revolving Credit Available Amount
(after adjustment in the same to reflect the elimination of the corresponding
Letter of Credit Liability) be made by borrowing of Loans. In the event any such
reimbursement is not made by borrowing of Loans, the Company shall make such
reimbursement in immediately available funds within five (5) days after demand
therefor by the applicable Issuer. The applicable Issuer will pay to each Bank
such Bank's Commitment Percentage of all amounts received from the Company for
application in payment, in whole or in part, of the Reimbursement Obligation in
respect of any Letter of Credit, but only to the extent such Bank has made
payment to the applicable Issuer in respect of such Letter of Credit pursuant to
clause (iii) above.
(v) The Company will pay to the Paying Agent at the Payment
Office for the account of each Bank a fee on such Bank's Commitment Percentage
of the daily average amount available for drawings under each Letter of Credit,
in each case for the period from and including the date of issuance of such
Letter of Credit to and including the date of expiration or termination thereof
at a rate per annum equal to the Letter of Credit Fee in effect from time to
time, such fee to be paid in arrears on the Quarterly Dates and on the date of
the expiration or termination thereof. The Paying Agent will pay to each Bank,
promptly after receiving any payment in respect of letter of credit fees
referred to in the preceding sentence of this clause (v), an amount equal to
such Bank's Commitment Percentage of such fees. The Company shall pay to the
applicable Issuer an administration and issuance fee in an amount equal to 1/8
of 1% per annum of the daily average amount available for drawings under such
Letter of Credit, in each case for the period from and including the date of
issuance of such Letter of Credit to and including the date of expiration or
termination thereof, such fee to be paid in arrears on the Quarterly Dates and
on the
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date of the expiration or termination thereof. Such administration and issuance
fee shall be retained by the applicable Issuer.
(vi) The issuance by the applicable Issuer of each Letter of
Credit shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that such Letter of Credit shall
be in such form and contain such terms as shall be reasonably satisfactory to
the applicable Issuer and that the Company shall have executed and delivered
such other instruments and agreements relating to such Letter of Credit as the
applicable Issuer shall have reasonably requested and are not inconsistent with
the terms of this Agreement including an Application therefor. In the event of a
conflict between the terms of this Agreement and the terms of any Application,
the terms of this Agreement shall control. Without limiting the generality of
the foregoing sentence, in the event any such Application shall include
requirements for Cover, it is agreed that there shall be no requirements for the
Company to provide Cover except as expressly required in this Agreement.
(c) Indemnification. The Company hereby indemnifies and holds harmless
each Agent, the applicable Issuer and each Bank from and against any and all
claims and damages, losses, liabilities, costs or expenses which such Bank, the
applicable Issuer or such Agent may incur (or which may be claimed against such
Bank, the applicable Issuer or such Agent by any Person whatsoever) in
connection with the execution and delivery or transfer of or payment or failure
to pay under any Letter of Credit, including, without limitation, any claims,
damages, losses, liabilities, costs or expenses which such Agent, the applicable
Issuer or such Bank, as the case may be, may incur (whether incurred as a result
of its own negligence or otherwise) by reason of or in connection with the
failure of any other Bank (whether as a result of its own negligence or
otherwise) to fulfill or comply with its obligations to such Agent, the
applicable Issuer or such Bank, as the case may be, hereunder (but nothing
herein contained shall affect any rights the Company may have against such
defaulting Bank); provided that, the Company shall not be required to indemnify
any Bank, the applicable Issuer or any Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(i) the willful misconduct or gross negligence of the party seeking
indemnification, or (ii) by such Bank's, the applicable Issuer's or such
Agent's, as the case may be, failure to pay under any Letter of Credit after the
presentation to it of a request required to be paid under applicable law.
Nothing in this Section 2.2(c) is intended to limit the obligations of the
Company under any other provision of this Agreement.
(d) Co-issuance or Separate Issuance of Letters of Credit. The Company
may, at its option, request that any requested Letter of Credit which exceeds
U.S. $1,000,000 be issued severally, but not jointly, by any two or more of the
Banks or issued through separate Letters of Credit issued by any two or more of
the Banks, respectively, each in an amount equal to a portion of the amount of
the applicable Letter of Credit requested by the Company. In either such event,
the Banks issuing such Letters of Credit shall each constitute an "Issuer" and
the Letters of Credit so issued shall each constitute a "Letter of Credit" for
all purposes hereunder and under the Loan
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Documents. Notwithstanding the foregoing, no Bank other than BNS shall have any
obligation to issue any Letter of Credit, but may do so at its option.
2.3 Reductions and Changes of Commitments.
(a) Mandatory. On May 31, 2004, all Commitments shall be terminated
in their entirety unless terminated at an earlier date pursuant to Section 11.1.
(b) Optional. The Company shall have the right to terminate or reduce
the unused portion of the Commitments at any time or from time to time, provided
that: (i) the Company shall give notice of each such termination or reduction to
the Administrative Agent and the Paying Agent as provided in Section 5.5 hereof
and (ii) each such partial reduction shall be permanent and in an aggregate
amount at least equal to U.S. $5,000,000.
(c) No Reinstatement. Any reduction in or termination of the
Commitments may not be reinstated without the approval of the Administrative
Agent and each of the Banks.
2.4 Fees.
(a) The Company shall pay to the Paying Agent for the account of each
Bank a facility fee accruing from the date hereof, computed for each day at a
rate per annum equal to the Facility Fee Percentage times such Bank's pro rata
share (based on its respective Commitment) of the Maximum Revolving Credit
Available Amount on such day. Such facility fees shall be payable on the
Quarterly Dates and on the earlier of the date the Commitments are terminated or
the last day of the Revolving Credit Availability Period. Such fees shall be
calculated in U.S. Dollars, but paid in Canadian Dollars converted by using the
Equivalent U.S. Dollar Amount as of the date of payment.
(b) For purposes of determining the amount of any payment required to
be made under this Section 2.4, the Quarterly Equivalent shall be used as the
conversion rate with respect to Canadian Dollars.
2.5 Affiliates; Lending Offices.
(a) Any Bank may, if it so elects, fulfill its Commitment as to any
Eurodollar Loan by causing a branch, foreign or otherwise, or Affiliate of such
Bank to make such Loan and may transfer and carry such Loan at, to or for the
account of any branch office or Affiliate of such Bank which is a resident of
Canada under the Income Tax Act (Canada); provided that, in such event for the
purposes of this Agreement such Loan shall be deemed to have been made by such
Bank and the obligation of the Company to repay such Loan shall nevertheless be
to such Bank and shall be deemed to be held by such Bank and, to the extent of
such Loan, to have been made for the account of such branch or Affiliate.
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(b) Notwithstanding any provision of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of all or any part
of its Loans hereunder in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement all determinations hereunder shall be
made as if such Bank had actually funded and maintained each Eurodollar Loan
during each Interest Period through the purchase of deposits having a maturity
corresponding to such Interest Period and bearing an interest rate equal to the
Eurodollar Rate, as the case may be, for such Interest Period for such Interest
Period.
2.6 Several Obligations. The failure of any Bank to make any Loan to be
made by it or accept and purchase Bankers' Acceptances to be purchased by it on
the date specified therefor shall not relieve any other Bank of its obligation
to make its Loan or accept and purchase such Bankers' Acceptances on such date,
but neither any Agent nor any Bank shall be responsible for the failure of any
other Bank to make a Loan to be made by such other Bank or to accept and
purchase any Bankers' Acceptances to be accepted and purchased by such other
Bank.
2.7 Notes. The Loans made by each Bank shall be evidenced by a single
Canadian Dollar denominated Note of the Company in the case of Loans denominated
in Canadian Dollars and by a single U.S. Dollar denominated Note of the Company
in the case of Loans denominated in U.S. Dollars, such notes to be in
substantially the forms of Exhibit C-1 and C-2, respectively, hereto payable to
the order of such Bank in a principal amount equal to the Commitment of such
Bank, and otherwise duly completed. Each Bank is hereby authorized by the
Company to endorse on the schedule (or a continuation thereof) attached to the
Note of such Bank, to the extent applicable, the date, amount and Type of and
the Interest Period for each Loan made by such Bank to the Company hereunder,
and the amount of each payment or prepayment of principal of such Loan received
by such Bank, provided, that any failure by such Bank to make any such
endorsement shall not affect the obligations of the Company under such Note or
hereunder in respect of such Loan.
2.8 Use of Proceeds. The proceeds of the Loans and the Canadian
Bankers' Acceptance Discount Proceeds, as the case may be, shall be used for
general corporate purposes.
2.9 Designation of Maximum Outstanding Amount. The Company shall from
time to time designate a maximum principal amount, denominated in U.S. Dollars,
permitted to be outstanding hereunder for the period during which such
designation is effective (such amount being herein called the "Maximum
Outstanding Amount"). The initial Maximum Outstanding Amount, effective from the
date hereof, is U.S. $95,000,000. The Company may, at any time, by written
notice delivered to the Administrative Agent and the Paying Agent no later than
two (2) Business Days prior to the effective date thereof, revise the Maximum
Outstanding Amount upwards or downwards; provided, however, that (i) the Maximum
Outstanding Amount may not at any time exceed the aggregate amount of the
Commitments, as reduced from time to time pursuant to Section 2.3 hereof and
(ii) the Maximum Outstanding Amount may not at any time exceed the amount by
which the Borrowing Base from time to time in effect exceeds the sum of
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the aggregate amount of all "Revolving Credit Obligations" from time to time
outstanding under the U.S. Facility plus the aggregate amount of all other
Borrowing Base Debt of the Parent and its Subsidiaries from time to time
outstanding.
Section 3. Borrowings, Prepayments and Selection of Interest Rates.
3.1 Borrowings. The Company shall give the Administrative Agent and the
Paying Agent notice of each borrowing or the issuance of each Bankers'
Acceptance to be made hereunder as provided in Section 5.5 hereof. Not later
than 2:00 p.m. Toronto, Ontario time on the date specified for each such
borrowing or the issuance of each such Bankers' Acceptance hereunder, each Bank
shall make available the amount of the Loan, if any, to be made by it on such
date or make available Canadian Bankers' Acceptance Discount Proceeds in respect
of Bankers' Acceptances to be accepted and purchased by it on such date (less
the applicable acceptance fees payable by the Company in respect of such
Bankers' Acceptances), in each case to the Paying Agent, at the Payment Office,
in immediately available funds, for the account of the Company. The amount so
received by the Paying Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account designated by the Company maintained
with the Paying Agent at the Payment Office.
3.2 Prepayments.
(a) Optional Prepayments. Subject to the provisions of Sections 4, 5
and 6, the Company shall have the right to prepay, on any Business Day, in whole
or in part, without the payment of any penalty or fee, Loans at any time or from
time to time, provided that, the Company shall give the Administrative Agent and
the Paying Agent notice of each such prepayment as provided in Section 5.5
hereof. Eurodollar Loans may be prepaid on the last day of an Interest Period
applicable thereto and Bankers' Acceptances may be prepaid on their stated
maturity date. Eurodollar Loans and Bankers' Acceptances may not be otherwise
prepaid unless prepayment is accompanied by payment of all compensation required
by Section 6.
(b) Mandatory Prepayments and Cover.
(1) Reduction of Commitments. The Company shall from time to
time on demand by the Administrative Agent prepay the Loans (or provide Cover
for Letter of Credit Liabilities and the face amount of Bankers' Acceptances) in
such amounts as shall be necessary so that at all times the aggregate
outstanding principal amount (including therein the face amount of all
outstanding Bankers' Acceptances) of all Revolving Credit Obligations shall not
be in excess of the Maximum Outstanding Amount plus any Cover provided under
this Section 3.2(b)(1).
(2) Borrowing Base Deficiency. Any payments required to cure
any Borrowing Base Deficiency shall be made by Parent to the lenders under the
U.S. Facility and by the
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Company to the Banks (with the Maximum Outstanding Amount to be reduced by the
amount of such payments by the Company) in the manner provided in the
Intercreditor Agreement.
(3) Use of Quarterly Equivalent. For purposes of determining
whether any payment is required to be made under this Section 3.2, and the
amount thereof, when such determination requires a conversion of U.S. Dollars
into Canadian Dollars and vice versa, the Quarterly Equivalent shall be used as
the conversion rate.
3.3 Selection of Interest Rates. Subject to Section 5.1 and Section 6
hereof, the Company shall have the right, by giving written notice to the
Administrative Agent and the Paying Agent as provided in Section 5.5 hereof,
either to convert any Bankers' Acceptance (in whole or in part) into a Loan, to
convert any Loan (in whole or in part) into a Bankers' Acceptance, to convert
any Loan (in whole or in part) into a Loan of another Type (provided that no
such conversion of Eurodollar Loans shall be permitted other than on the last
day of an Interest Period applicable thereto and no conversion of Bankers'
Acceptances shall be permitted other than on the maturity date thereof), to
continue any Bankers' Acceptance (in whole or in part) or to continue any Loan
(in whole or in part) as a Loan of the same Type. Any such notice of conversion
of a Bankers' Acceptance into a Loan or of conversion of a Loan into, or
continuation of a Loan as, a Eurodollar Loan or a Bankers' Acceptance shall
specify the new Interest Period or maturity date, as applicable. In the event
the Company fails to so give such notice prior to the end of any Interest Period
for any Eurodollar Loan, such Loan shall become an Alternate Base Rate Loan on
the last day of such Interest Period.
3.4 Conditions Applicable to Bankers' Acceptances.
(a) Acceptance and Purchase of Bankers' Acceptances. Subject to the
terms and conditions of this Agreement, each Bank agrees to accept its
Commitment Percentage of Bankers' Acceptances issued by the Company and to
purchase same at the applicable Canadian Bankers' Acceptance Discount Rate and
to provide to the Paying Agent for the account of the Company the Canadian
Bankers' Acceptance Discount Proceeds in respect thereof less the applicable
acceptance fees payable by the Company to such Bank pursuant to Section 4.3.
Each such Bank may at any time and from time to time hold, sell, rediscount or
otherwise dispose of any or all Bankers' Acceptances purchased by it.
(b) Waiver of Presentment and Other Conditions. The Company waives
presentment for payment and any other defence to payment of any amounts due to a
Bank in respect of a Bankers' Acceptance accepted and purchased by it pursuant
to this Agreement which might exist solely by reason of such Bankers' Acceptance
being held, at the maturity thereof, by such Bank in its own right and the
Company agrees not to claim any days of grace if such Bank as holder sues the
Company on the Bankers' Acceptance for payment of the amount payable by the
Company
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thereunder. On the specified maturity date of a Bankers' Acceptance, or such
earlier date as may be required or permitted pursuant to the provisions of this
Agreement, the Company shall pay the Bank that has accepted and purchased such
Bankers' Acceptance the full face amount of such Bankers' Acceptance.
(c) Terms of Each Bankers' Acceptance: Each Bankers' Acceptance shall:
(1) have a maturity date which shall be on a Business
Day;
(2) have a term of not less than thirty (30) days and not
more than one hundred and eighty (180) days
(excluding days of grace);
(3) be in the form of Exhibit I attached hereto or in
such other form as the Company may agree to in
writing;
(4) be issued in face amounts of Canadian $100,000 or
whole multiples thereof (each of the Banks agrees
that it will use its best efforts to minimize the
number of separate Bankers' Acceptances required to
be executed); and
(5) not have a maturity date which extends beyond the end
of the scheduled Revolving Credit Availability
Period.
(d) Delivery of Blank Bankers' Acceptances. As a condition precedent to
each Banks' obligation to accept and purchase Bankers' Acceptances hereunder,
the Company shall have delivered to such Bank through the Paying Agent at the
Payment Office sufficient bankers' acceptances endorsed in blank in sufficient
time for such Bank to forward to and hold the same for issuance in accordance
with a request from the Company. Each Bank is hereby authorized to issue such
bankers' acceptances endorsed in blank in such face amounts as may be determined
by such Bank; provided that the aggregate amount thereof is equal to the
aggregate amount of Bankers' Acceptances required to be accepted and purchased
by such Bank hereunder. No Bank shall be liable for any damage, loss or other
claim arising by reason of any loss or improper use of any bankers' acceptance
endorsed in blank except any loss arising by reason of the negligence or wilful
misconduct of such Bank or its officers, employees, agents or representatives.
The Paying Agent shall maintain a record with respect to bankers' acceptances
endorsed in blank that are received from the Company and that are delivered to a
Bank hereunder. Each Bank shall maintain a record with respect to bankers'
acceptances endorsed in blank that are:
(1) received by such Bank from the Paying Agent hereunder;
(2) voided by such Bank for any reason;
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(3) accepted and purchased by such Bank hereunder; and
(4) cancelled by such Bank at the maturity thereof.
Each Bank agrees to provide such record to the Paying Agent upon request
therefor by the Paying Agent as well as concurrently with any request by such
Bank to the Paying Agent for any additional bankers' acceptances endorsed in
blank required from the Company. The Paying Agent shall provide a report of such
records received by the Paying Agent to the Company upon request from the
Company.
(e) Failure to Give Notice of Repayment. If the Company fails to give
notice to the Paying Agent at the Payment Office of the method of repayment of a
Bankers' Acceptance prior to the date of maturity of such Bankers' Acceptance in
accordance with the same period of notice required for the original acceptance
of such Bankers' Acceptance as set forth herein, the face amount of such
Bankers' Acceptance shall, on its maturity, automatically be converted to a
Canadian Prime Rate Loan.
(f) Execution of Bankers' Acceptances. Bankers' acceptances of the
Company which are endorsed in blank and are to be accepted as Bankers'
Acceptances hereunder shall be signed by a duly authorized signatory or duly
authorized signatories of the Company, and may, at the option of the Company, be
signed by way of affixing a reproduction of the signature or signatures of such
duly authorized signatory or signatories. Notwithstanding that any person whose
signature appears on any Bankers' Acceptance as a signatory may no longer be an
authorized signatory of the Company at the date of issuance of a Bankers'
Acceptance, and notwithstanding that the signature affixed may be a reproduction
only, such signature shall nevertheless be valid and sufficient for all purposes
as if such authority had remained in force at the time of such issuance and as
if such signature had been manually applied, and any such Bankers' Acceptance so
signed shall be binding on the Company.
3.5 Paying Agent's Duties Re Bankers' Acceptances.
(a) Advice to the Lenders. The Paying Agent, promptly following receipt
of a Request for Extension of Credit by way of Bankers' Acceptance, shall so
advise the Banks and shall advise each Bank of the amount of each issue of
Bankers' Acceptances to be accepted and purchased by it and the term thereof,
which term shall be identical for all Banks.
(b) Agent's Confirmation of Bankers' Acceptance Issuance. At or prior
to 11:00 a.m. (Toronto, Ontario time) on the date on which the Bankers'
Acceptances are to be accepted and purchased hereunder, the Paying Agent shall
provide telephone advice to the Company and each Bank confirming the particulars
with respect to the issuance, acceptance and purchase of such
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Bankers' Acceptances. Such advice shall be confirmed in writing at or prior to
4:30 p.m. (Toronto, Ontario time) on such date by delivery to the Company and
each Bank of a written confirmation of such telephone advice with respect to the
issuance, acceptance and purchase of such Bankers' Acceptances. Each Bank will
forthwith advise the Paying Agent of the particulars of the Bankers' Acceptances
accepted and purchased by it.
(c) Completion of Bankers' Acceptance. Upon receipt of the telephone
advice referred to in Section 3.5(a), each Bank is thereupon authorized to
complete bankers' acceptances held by it in blank in accordance with the
particulars so advised by the Paying Agent.
(d) Paying Agent's Discretion on Allocation. In the event it is not
practicable to allocate Bankers' Acceptances to each Lender in accordance with
Section 5.2 such that the aggregate amount of Bankers' Acceptances required to
be accepted and purchased by such Bank hereunder is in a whole multiple of
Canadian $100,000, the Paying Agent is authorized by the Company and each Bank
to make such allocation as the Paying Agent determines in its sole and
unfettered discretion may be equitable in the circumstances.
3.6 Certain Provisions Relating to Bankers' Acceptances Forms.
(a) The Company shall hold and use prudently the bankers' acceptance
forms delivered to it in blank from time to time and shall return them from time
to time to the Paying Agent for onward conveyance to the respective Banks,
properly pre-signed and pre-endorsed and in sufficient quantities to be dealt
with by each Bank in conformity with this Agreement. The Paying Agent shall
provide to the Company written acknowledgment of the receipt of such pre-signed
and pre-endorsed bankers' acceptance forms.
(b) The Paying Agent and each Bank shall deal prudently with any
bankers' acceptance forms pre-signed and pre-endorsed by the Company and
delivered from time to time by the Company and shall use them only in accordance
with the instructions of the Company given to the Paying Agent, in conformity
with this Agreement.
(c) In accordance with the instructions given from time to time by the
Company, each Bank is hereby authorized to complete the aforementioned bankers'
acceptance forms, to provide its acceptance thereon and, at such Bank's option,
to put them into circulation, the whole as provided in and subject to this
Agreement.
(d) Neither the Paying Agent nor any Bank shall be responsible or
liable for any failure to make credit available by way of Bankers' Acceptances
under the terms of the Credit Agreement if such failure is due to the failure of
the Company to return duly pre-signed and pre-endorsed bankers' acceptance forms
to the Paying Agent on a timely basis.
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(e) On request by the Paying Agent on behalf of the Banks, the Company
shall return to the Paying Agent all bankers' acceptance forms then held by the
Company, provided that all such bankers' acceptance forms which have been
pre-signed or pre-endorsed by the Company may be cancelled prior to their return
and on request by the Company made to the Paying Agent, a Bank shall cancel all
pre-signed or pre-endorsed bankers' acceptance forms held by such Bank and not
yet issued in accordance with the Company's instructions and shall confirm such
cancellation to the Paying Agent who shall in turn inform the Company.
Section 4. Payments of Principal and Interest.
4.1 Repayment of Loans and Reimbursement Obligations. The Company will
pay to the Paying Agent for the account of each Bank (a) the principal of each
Loan made by such Bank on the dates provided in the respective Notes and as
provided hereunder, (b) the face amount of each Bankers' Acceptance on its
maturity date and (c) the amount of each Reimbursement Obligation promptly upon
its occurrence. The face amount of any Bankers' Acceptance or the amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in Section 7 hereof have been satisfied, be paid with the proceeds of Loans.
Repayments of Loans or Reimbursement Obligations denominated in Canadian Dollars
and repayments of Bankers' Acceptances shall be made in Canadian Dollars and
repayments of Loans or Reimbursement Obligations denominated in U.S. Dollars
shall be made in U.S. Dollars.
4.2 Interest.
(a) Subject to Section 13.6 hereof, the Company will pay to the Paying
Agent for the account of each Bank interest on the unpaid principal amount of
each Loan made by such Bank for the period commencing on the date of such Loan
to but excluding the date such Loan shall be paid in full, in the currency in
which the Loan is denominated, at the lesser of (I) the following rates per
annum:
(i) if such Loan is an Alternate Base Rate Loan, the Alternate Base
Rate plus the Applicable Margin, and
(ii) if such Loan is a Canadian Prime Rate Loan, the Canadian Prime
Rate plus the Applicable Margin, and
(iii) if such Loan is a Eurodollar Loan, the applicable Eurodollar
Rate plus the Applicable Margin, or (II) the Highest Lawful Rate.
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<PAGE>
(b) Notwithstanding any of the foregoing but subject to Section 13.6
hereof, the Company will pay to the Paying Agent for the account of each Bank
interest in the applicable currency at the applicable Post-Default Rate on any
principal of any Loan made by such Bank, on any Reimbursement Obligation and on
any other amount payable by the Company hereunder to or for the account of such
Bank (but, if such amount is interest, only to the extent legally allowed),
which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise), for the period commencing on the due date thereof
until the same is paid in full.
(c) Accrued interest on each Loan shall be payable on the last day of
each Interest Period for such Loan (and, if such Interest Period exceeds three
months' duration, quarterly, commencing on the first quarterly anniversary of
the first day of such Interest Period), except that (i) accrued interest payable
at the Post-Default Rate shall be due and payable from time to time on demand of
the Administrative Agent or the Majority Banks (through the Administrative
Agent) and (ii) accrued interest on any amount prepaid or converted pursuant to
Section 6 hereof shall be paid on the amount so prepaid or converted.
4.3 Acceptance Fees. The Company shall pay to each Bank acceptance fees
in Canadian Dollars forthwith upon the acceptance by such Bank of each Bankers'
Acceptance issued by the Company at a rate per annum equal to the B/A Stamping
Rate in effect at the time of the acceptance of such Bankers' Acceptance,
calculated on the face amount of such Bankers' Acceptance and on the basis of
the number of days in the term of such Bankers' Acceptance divided by three
hundred sixty-five (365). Acceptance fees payable to the Banks pursuant to this
Section 4.3 shall be paid in the manner specified in Section 3.4(a).
Section 5. Payments; Pro Rata Treatment; Computations, Etc.
5.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, the full face amount of Bankers' Acceptances, Reimbursement
Obligations and other amounts to be made by the Company hereunder and under the
Notes and the other Loan Documents shall be made in U.S. Dollars or Canadian
Dollars, as the case may be, in immediately available funds, to the Paying Agent
at the Payment Office (or in the case of a successor Paying Agent, at the
payment office designated by such successor Paying Agent in Canada), not later
than 11:00 a.m. Toronto, Ontario time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment hereunder or
under any Note or any other Loan Document, specify to the Paying Agent the
Loans, the Bankers'
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Acceptances or other amounts payable by the Company hereunder or thereunder to
which such payment is to be applied. Each payment received by the Paying Agent
hereunder or under any Note, Bankers' Acceptance or any other Loan Document for
the account of a Bank shall be paid promptly to such Bank, in immediately
available funds for the account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder or under any Note or any
other Loan Document falls on a day which is not a Business Day, the due date for
such payment (subject to the definition of Interest Period) shall be extended to
the next succeeding Business Day and interest shall be payable for any principal
so extended for the period of such extension.
5.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof shall be made ratably
from the Banks on the basis of their respective Commitments and each payment of
commitment fees shall be made for the account of the Banks, and each termination
or reduction of the Commitments of the Banks under Section 2.3 hereof shall be
applied, pro rata, according to the Banks' respective Commitments; (b) each
payment by the Company of the full face amount of Bankers' Acceptances and
principal of or interest on Loans of a particular Type shall be made to the
Paying Agent for the account of the Banks pro rata in accordance with the
respective full face amount of such Bankers' Acceptances or the unpaid principal
amounts of such Loans held by the Banks; and (c) the Banks (other than the
applicable Issuer) shall purchase from the applicable Issuer participations in
the Letters of Credit to the extent of their respective Commitment Percentages.
5.3 Computations. Subject to Section 13.7, interest based on the
Eurodollar Base Rate or the Federal Funds Rate will be computed on the basis of
a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable, unless the
effect of so computing shall be to cause the rate of interest to exceed the
Highest Lawful Rate, in which case interest shall be calculated on the basis of
the actual number of days elapsed in a year composed of 365 or 366 days, as the
case may be. All other interest and fees shall be computed on the basis of a
year of 365 (or 366) days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
5.4 Minimum and Maximum Amounts. Except for prepayments made pursuant
to Section 3.2(b) hereof, each borrowing and repayment of principal of Loans,
each acceptance, purchase and repayment of Bankers' Acceptances and each
termination or reduction of Commitments, each optional prepayment and each
conversion of Type shall be in an aggregate principal amount at least equal to
(a) in the case of Eurodollar Loans, U.S. $5,000,000,(b) in the case of Bankers'
Acceptances, Canadian $5,000,000, (c) in the case of Canadian Prime Rate Loans,
Canadian $1,000,000, and (d) in the case of Alternate Base Rate Loans, U.S.
$1,000,000 (borrowings or prepayments of Loans of different Types or, in the
case of Eurodollar Loans,
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<PAGE>
having different Interest Periods at the same time hereunder to be deemed
separate borrowings and prepayments for purposes of the foregoing, one for each
Type or Interest Period). Upon any mandatory prepayment that would reduce
Eurodollar Loans having the same Interest Period to less than U.S. $5,000,000
such Loans shall automatically be converted into Alternate Base Rate Loans on
the last day of the applicable Interest Period. Notwithstanding anything to the
contrary contained in this Agreement, there shall not be, at any one time, more
than eight (8) Interest Periods in effect with respect to Eurodollar Loans.
5.5 Certain Actions, Notices, Etc. Notices to the Administrative Agent
and the Paying Agent of any termination or reduction of Commitments, of
borrowings and prepayments, of issuance, acceptance and purchase of Bankers'
Acceptances, of conversions and continuations of Loans and Bankers' Acceptances,
of the term of Bankers' Acceptances and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent and the Paying Agent not later than 11:00 a.m. Toronto,
Ontario time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing and/or repayment, conversion or continuance
specified below:
<PAGE>
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
<S> <C>
Termination or
Reduction of Commitments 2
Borrowing or prepayment
of or conversion into or
continuance of
Alternate Base Rate
Loans or Canadian same day
Prime Rate Loans
which are equal to or less
than (in the aggregate with
respect to all Loans
requested on a given day)
U.S. $20,000,000
Borrowing or prepayment
of or conversion into or
continuance of
Alternate Base Rate 1
Loans or Canadian
Prime Rate Loans
which exceed
(in the aggregate with
respect to all Loans
requested on a given day)
U.S. $20,000,000
Issuance of Bankers' Acceptances 2
Borrowing or
prepayment of or conversion
into or continuance of 3
Eurodollar Loans
</TABLE>
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<PAGE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
prepayment shall specify the amount of Bankers' Acceptances to be accepted and
purchased or prepaid and the Type of the Loans to be borrowed or prepaid
(subject to Sections 3.2(a) and 5.4 hereof), the date of borrowing, acceptance
and purchase or prepayment (which shall be a Business Day) and, in the case of
Eurodollar Loans, the duration of the Interest Period therefor (subject to the
definition of "Interest Period") and, in the case of Bankers' Acceptances, the
term and maturity date therefor (subject to Section 3.4(c)). Each such notice of
conversion of a Bankers' Acceptance into a Loan or conversion of a Loan into a
Loan of another Type or a Bankers' Acceptance shall identify such Bankers'
Acceptance or Loan (or portion thereof) being converted and specify the Type of
Loan into which such Bankers' Acceptance or Loan is being converted (subject to
Section 5.4 hereof) and the date for conversion (which shall be a Business Day)
and, unless such Bankers' Acceptance or Loan is being converted into an
Alternate Base Rate Loan or a Canadian Prime Rate Loan, the duration (subject to
the definition of "Interest Period") of the Interest Period therefor which is to
commence as of the last day of the then current Interest Period therefor (or the
date of conversion, if such Loan is being converted from an Alternate Base Rate
Loan or a Canadian Prime Rate Loan). In the case of any such notice for a
Bankers' Acceptance, the term and maturity date of such Bankers' Acceptance
shall also be specified. Each such notice of continuation of a Loan (or portion
thereof) as the same Type of Loan shall identify such Loan (or portion thereof)
being continued (subject to Section 5.4
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hereof) and, unless such Loan is an Alternate Base Rate Loan or a Canadian Prime
Rate Loan, the duration (subject to the definition of "Interest Period") of the
Interest Period therefor which is to commence as of the last day of the then
current Interest Period therefor. The Paying Agent shall promptly notify the
affected Banks of the contents of each such notice. Notice of any prepayment
having been given, the principal amount specified in such notice, together with
interest thereon to the date of prepayment, shall be due and payable on such
prepayment date.
5.6 Non-Receipt of Funds by the Paying Agent. Unless the Paying Agent
shall have been notified by a Bank or the Company (the "Payor") prior to the
date on which such Bank is to make payment to the Paying Agent of the Canadian
Bankers' Acceptance Discount Proceeds in respect of a Bankers' Acceptance to be
purchased by it or the proceeds of a Loan to be made by it hereunder (or the
payment of any amount by such Bank to reimburse the applicable Issuer for a
drawing under any Letter of Credit) or the Company is to make a payment to the
Paying Agent for the account of one or more of the Banks, as the case may be
(such payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Paying Agent, the Paying Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Paying Agent on or before such date, the recipient of such payment (or, if such
recipient is the beneficiary of a Letter of Credit, the Company and, if the
Company fails to pay the amount thereof to the Paying Agent forthwith upon
demand, the Banks ratably in proportion to their respective Commitment
Percentages) shall, on demand, pay to the Paying Agent the amount made available
to it together with interest thereon in respect of the period commencing on the
date such amount was so made available by the Paying Agent until the date the
Paying Agent recovers such amount at a per annum rate of interest determined by
the Paying Agent (such rate to be conclusive and binding on the Banks) in
accordance with the Paying Agent's usual banking practice for similar advances
to financial institutions of like standing to the applicable Bank.
5.7 Sharing of Payments, Etc. If a Bank shall obtain payment of the
full face amount of an outstanding Bankers' Acceptance accepted and purchased by
it under this Agreement or of any principal of or interest on any Loan made by
it under this Agreement, or on any Reimbursement Obligation or other obligation
then due to such Bank hereunder, through the exercise of any right of set-off,
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Banks participations in the Loans made, the outstanding
Bankers' Acceptances or Reimbursement Obligations or other obligations held, by
the other Banks in such amounts, and make such other adjustments from time to
time as shall be equitable to the end that all the Banks shall share the benefit
of such payment (net of any expenses which may be incurred by such Bank in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal and interest on the Obligations then due to each of them. To such end
all the
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Banks shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. The Company agrees, to the fullest extent it may effectively do so
under applicable law, that any Bank so purchasing a participation in the Loans
made, the outstanding Bankers' Acceptances or Reimbursement Obligations or other
obligations held, by other Banks may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct holder of Loans, Bankers' Acceptances and
Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of the Company.
Section 6. Yield Protection and Illegality.
6.1 Additional Costs.
(a) Subject to Section 13.6, the Company shall pay to the Paying Agent,
on demand for the account of each Bank from time to time such amounts as such
Bank may determine to be necessary to compensate it for any costs incurred by
such Bank which such Bank determines are attributable to its making or
maintaining of any Eurodollar Loan or any Bankers' Acceptance hereunder or its
obligation to make any such Loan hereunder, or any reduction in any amount
receivable by such Bank hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), in each case resulting from any Regulatory
Change which:
(i) subjects such Bank (or makes it apparent that such Bank is
subject) to any tax, levy, impost, duty, charge or fee (collectively, "Taxes"),
or any deduction or withholding for any Taxes on or from the payment due in
respect of any Bankers' Acceptance or under any Eurodollar Loan or other amounts
due hereunder, other than income and franchise taxes of each jurisdiction (or
any subdivision thereof) in which such Bank has an office or its Applicable
Lending Office; or
(ii) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or its Notes in respect of any of such Loans or
in respect of Bankers' Acceptances (other than changes which affect taxes
measured by or imposed on the overall net income or franchise taxes of such Bank
or of its Applicable Lending Office for any of such Loans by each jurisdiction
(or any subdivision thereof) in which such Bank has an office or such Applicable
Lending Office); or
(iii) imposes or modifies or increases or deems applicable any
reserve, special deposit or similar requirements (including, without limitation,
any such requirement imposed by
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<PAGE>
the Office of the Superintendent of Financial Institutions Canada) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Bank or loans made by such Bank, or Bankers' Acceptances
accepted by such Bank or against any other funds, obligations or other property
owned or held by such Bank (including any of such Loans or, where applicable,
any deposits referred to in the definition of "Eurodollar Base Rate" in Section
1.1 hereof or any Bankers' Acceptances) and such Bank actually incurs such
additional costs.
Each Bank (if so requested by the Company through the Administrative Agent) will
designate a different available Applicable Lending Office for the Eurodollar
Loans or the Bankers' Acceptances of such Bank or take such other action as the
Company may request if such designation or action will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Bank exercised in good faith, be disadvantageous to such Bank (provided
that such Bank shall have no obligation so to designate an Applicable Lending
Office for Eurodollar Loans located in the United States of America or to
designate an Applicable Lending Office for Bankers' Acceptances located in any
jurisdiction that is not located in Canada). Each Bank will furnish the Company
with a statement setting forth the basis and amount of each request by such Bank
for compensation under this Section 6.1(a); subject to Section 6.8, such
certificate shall be conclusive, absent manifest error, and may be prepared
using any reasonable averaging and attribution methods.
(b) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any Bank
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes Eurodollar
Loans or Bankers' Acceptances or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, if
such Bank so elects by notice to the Company (with a copy to the Administrative
Agent and the Paying Agent), the obligation of such Bank to make Eurodollar
Loans or accept and purchase Bankers' Acceptances, as applicable, hereunder
shall be suspended until the date such Regulatory Change ceases to be in effect
(in which case the provisions of Section 6.4 hereof shall be applicable).
(c) Good faith determinations and allocations by any Bank for purposes
of this Section 6.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Loans or accept and purchase Bankers'
Acceptances or of making or maintaining Loans or accepting and purchasing
Bankers' Acceptances on amounts receivable by it in respect of Loans or Bankers'
Acceptances, and of the additional amounts required to compensate such Bank in
respect of any Additional Costs, shall be conclusive, absent manifest error.
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<PAGE>
(d) The Company's obligation to pay Additional Costs and compensation
with regard to each Eurodollar Loan and each Bankers' Acceptance shall survive
termination of this Agreement.
6.2 Limitations. Anything herein to the contrary notwithstanding, if,
with respect to any Eurodollar Loans or Bankers' Acceptance:
(a) the Paying Agent determines in good faith (which determination
shall be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof
are not being provided by the Reference Banks in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or
(b) the Paying Agent determines in good faith (which determination
shall be conclusive) that quotations of discount rates for the purchase of
Canadian Dollar bankers' acceptances referred to in the definition of "Canadian
Bankers' Acceptance Discount Rate" in Section 1.1 hereof are not available in
the relevant amounts or for the relevant maturities for purposes of determining
the Canadian Bankers' Acceptance Discount Rate therefor as provided in this
Agreement; or
(c) the Majority Banks determine in good faith (which determination
shall be conclusive) and notify the Paying Agent (with a copy to the
Administrative Agent) that the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.1 hereof upon the basis of
which the rates of interest for such Loans (where applicable) are to be
determined do not accurately reflect the cost to such Banks of making or
maintaining such Loans for Interest Periods therefor; or
(d) the Paying Agent determines in good faith (which determination
shall be conclusive) that by reason of circumstances affecting the interbank
U.S. Dollar market generally, deposits in United States dollars in the relevant
interbank U.S. Dollar market are not being offered for the applicable Interest
Period and in an amount equal to the amount of the Eurodollar Loan requested by
the Company; then the Paying Agent shall promptly notify the Company and each
Bank thereof, and, so long as such condition remains in effect, the Banks shall
be under no obligation to make Eurodollar Loans or accept and purchase Bankers'
Acceptances, as the case may be (but shall maintain until the end of the
Interest Period then in effect the Eurodollar Loans and until the specified
maturity date of the Bankers' Acceptances, as the case may be, then
outstanding).
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6.3 Illegality. Notwithstanding any other provision of this Agreement
to the contrary, if (x) by reason of the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Bank with any request or directive (whether or not having the
force of law) of any central bank or other Governmental Authority or (y) with
respect to Eurodollar Loans, circumstances affecting the relevant interbank U.S.
Dollar market or the position of a Bank therein or (z) with respect to Bankers'
Acceptances, circumstances affecting the market for Canadian Dollar bankers'
acceptance or the position of a Bank therein shall at any time make it unlawful
or impracticable in the sole discretion of a Bank exercised in good faith for
such Bank or its Applicable Lending Office to (a) honour its obligation to make
Eurodollar Loans or accept and purchase Bankers' Acceptances, as the case may
be, hereunder, or (b) maintain Eurodollar Loans or Bankers' Acceptances, as the
case may be, hereunder, then such Bank shall promptly notify the Company thereof
through the Paying Agent and such Bank's obligation to make or maintain
Eurodollar Loans or accept and purchase Bankers' Acceptances, as the case may
be, hereunder shall be suspended until such time as such Bank may again make and
maintain Eurodollar Loans or accept and purchase Bankers' Acceptances, as the
case may be (in which case the provisions of Section 6.4 hereof shall be
applicable). Before giving such notice pursuant to this Section 6.3 with respect
to Eurodollar Loans only, such Bank will designate a different available
Applicable Lending Office for the Eurodollar Loans of such Bank or take such
other action as the Company may request if such designation or action will avoid
the need to suspend such Bank's obligation to make Eurodollar Loans hereunder
and will not, in the sole opinion of such Bank exercised in good faith, be
disadvantageous to such Bank (provided, that such Bank may not designate an
Applicable Lending Office that is not located in Canada).
6.4 Substitute Alternate Base Rate Loans or Canadian Prime Rate Loans.
If the obligation of any Bank to make or maintain Eurodollar Loans shall be
suspended pursuant to Section 6.1, 6.2 or 6.3 hereof, all Loans which would
otherwise be made by such Bank as Eurodollar Loans shall be made instead as
Alternate Base Rate Loans (and, if an event referred to in Section 6.1(b) or 6.3
hereof has occurred and such Bank so requests by notice to the Company with a
copy to the Paying Agent, each Eurodollar Loan of such Bank then outstanding
shall be automatically converted into an Alternate Base Rate Loan on the date
specified by such Bank in such notice) and, to the extent that Eurodollar Loans
are so made as (or converted into) Alternate Base Rate Loans, all payments of
principal which would otherwise be applied to such Eurodollar Loans shall be
applied instead to such Alternate Base Rate Loans. If the obligation of any Bank
to accept and purchase Bankers' Acceptances shall be suspended pursuant to
Section 6.1, 6.2 or 6.3 hereof, all advances which would otherwise be made by
such Bank by way of acceptance and purchase of Bankers' Acceptances shall be
made instead as Canadian Prime Rate Loans (and, if an event referred to in
Section 6.1(b) or 6.3 hereof has occurred and such Bank so requests by notice to
the Company with a copy to the Paying Agent, the face amount of each
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Bankers' Acceptance of such Bank then outstanding shall be automatically
converted into a Canadian Prime Rate Loan on the date specified by such Bank in
such notice).
6.5 Compensation. Subject to Section 13.6 hereof, the Company shall pay
to the Paying Agent for the account of each Bank, within four (4) Business Days
after demand therefor by such Bank through the Administrative Agent, such amount
or amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost or expense actually incurred by it (exclusive
of any lost profits or opportunity costs) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan made by
such Bank or a Bankers' Acceptance accepted by such Bank on a date other than
the last day of an Interest Period for such Eurodollar Loan or the specified
maturity date for such Bankers' Acceptance, as the case may be; or
(b) any failure by the Company to borrow a Eurodollar Loan to be made
by such Bank or to issue a Bankers' Acceptance to be accepted and purchased by
such Bank on the date for such borrowing or such issuance specified in the
relevant notice under Section 5.5 hereof or to convert a Eurodollar Loan into a
Bankers' Acceptance after giving notice of such conversion;
such compensation to include, without limitation, any loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by the applicable Bank to fund or maintain its share of any Loan or to fund the
acceptance and purchase of any Bankers' Acceptance. Compensation due pursuant to
this Section with respect to Bankers' Acceptances shall be calculated using the
Canadian Bankers' Acceptance Discount Rate for bankers' acceptances maturing on
(or as close as reasonably possible) to the maturity date of the Bankers'
Acceptances with respect to which such compensation arises (versus the actual
Canadian Bankers' Acceptance Discount Rate for such Bankers' Acceptances).
Subject to Section 6.8, each determination of the amount of such compensation by
a Bank shall be conclusive and binding, absent manifest error, and may be
computed using any reasonable averaging and attribution method.
6.6 Additional Costs in Respect of Letters of Credit. If as a result of
any Regulatory Change there shall be imposed, modified or deemed applicable any
tax, reserve, special deposit or similar requirement against or with respect to
or measured by reference to Letters of Credit issued or to be issued hereunder
or participations in such Letters of Credit, and the result shall be to increase
the cost to any Bank of issuing or maintaining any Letter of Credit or any
participation therein, or reduce any amount receivable by any Bank hereunder in
respect of any Letter of Credit or any participation therein (which increase in
cost, or reduction in amount receivable, shall be the result of such Bank's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event), then such Bank shall notify the Company through the
Administrative
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Agent, and upon demand therefor by such Bank through the Administrative Agent,
the Company (subject to Section 13.6 hereof) shall pay to such Bank, from time
to time as specified by such Bank, such additional amounts as shall be
sufficient to compensate such Bank for such increased costs or reductions in
amount. Before making such demand pursuant to this Section 6.6, such Bank will
designate a different available Applicable Lending Office for the Letter of
Credit of such Bank or take such other action as the Company may request, if
such designation or action will avoid the need for, or reduce the amount of,
such compensation and will not, in the sole opinion of such Bank exercised in
good faith, be disadvantageous to such Bank. A statement as to such increased
costs or reductions in amount incurred by such Bank, submitted by such Bank to
the Company, shall be conclusive as to the amount thereof, absent manifest
error.
6.7 Capital Adequacy. If any Bank shall have determined that a
Regulatory Change resulting in the adoption after the date hereof or
effectiveness after the date hereof (whether or not previously announced) of any
applicable law, rule, regulation or treaty regarding capital adequacy, or any
change therein after the date hereof, or any change in the interpretation or
administration thereof after the date hereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by any
Bank (or its Applicable Lending Office) with any request or directive after the
date hereof regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of such Bank's
obligations hereunder, under the Loans made by it, under the Bankers'
Acceptances accepted and purchased by it, under the Letters of Credit and under
the Notes held by it to a level below that which such Bank could have achieved
but for such adoption, change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy) by an amount deemed by such
Bank to be material, then from time to time, upon satisfaction of the conditions
precedent set forth in this Section 6.7, upon demand by such Bank (with a copy
to the Administrative Agent and the Paying Agent), the Company (subject to
Section 13.6 hereof) shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction. A certificate as to such amounts,
submitted to the Company and the Administrative Agent and the Paying Agent by
such Bank, setting forth the basis for such Bank's determination of such
amounts, shall constitute a demand therefor and shall be conclusive and binding
for all purposes, absent manifest error. The Company shall pay the amount shown
as due on any such certificate within four (4) Business Days after delivery of
such certificate. Subject to Section 6.8, in preparing such certificate, a Bank
may employ such assumptions and allocations of costs and expenses as it shall in
good faith deem reasonable and may use any reasonable averaging and attribution
method.
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination. Anything in this Section 6 notwithstanding:
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(a) the Company shall not be required to pay to any Bank reimbursement
with regard to any costs or expenses, unless such Bank notifies the Company of
such costs or expenses within 90 days after the date paid or incurred;
(b) none of the Banks shall be permitted to pass through to the Company
charges and costs under this Section 6 on a discriminatory basis (i.e., which
are not also passed through by such Bank to other customers of such Bank
similarly situated where such customer is subject to documents providing for
such pass through); and
(c) if any Bank elects to pass through to the Company any material
charge or cost under this Section 6 or elects to terminate the availability of
Eurodollar Loans or Bankers' Acceptances for any material period of time, the
Company may, within 60 days after the date of such event and so long as no
Default shall have occurred and be continuing, elect to terminate such Bank as a
party to this Agreement; provided that, concurrently with such termination the
Company shall (i) if the Administrative Agent and each of the other Banks shall
consent, pay that Bank all principal, interest and fees and other amounts owed
to such Bank through such date of termination or (ii) have arranged for another
financial institution approved by the Administrative Agent (such approval not to
be unreasonably withheld) as of such date, to become a substitute Bank for all
purposes under this Agreement in the manner provided in Section 13.5; provided
further that, prior to substitution for any Bank, the Company shall have given
written notice to the Administrative Agent and the Paying Agent of such
intention and the Banks shall have the option, but no obligation, for a period
of 60 days after receipt of such notice, to increase their Commitments in order
to replace the affected Bank in lieu of such substitution.
Section 7. Conditions Precedent.
7.1 Initial Loans and Acceptance and Purchase of Bankers' Acceptances.
The obligation of each Bank or any applicable Issuer to make its initial Loans
after the date hereof or to accept and purchase the initial Bankers' Acceptance
after the date hereof or issue or participate in a Letter of Credit after the
date hereof (whichever shall first occur) hereunder is subject to the following
conditions precedent, each of which shall have been fulfilled or waived to the
satisfaction of the Majority Banks:
(a) Corporate Action and Status. The Administrative Agent shall have
received from the appropriate Governmental Authorities certified copies of the
Organizational Documents (other than bylaws) of the Parent and each of its
Subsidiaries, and evidence satisfactory to the Administrative Agent of all
corporate action taken by the Parent or any of its Subsidiaries authorizing the
execution, delivery and performance of the Loan Documents and all other
documents related to this Agreement to which it is a party (including, without
limitation, a certificate of the secretary of each such party setting forth the
resolutions of its Board of Directors
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authorizing the transactions contemplated thereby and attaching a copy of its
bylaws), together with such certificates as may be appropriate to demonstrate
the qualification and good standing of and payment of taxes by the Parent and
each of its Subsidiaries in each state or province in which such qualification
is necessary.
(b) Incumbency. The Parent and each Relevant Party shall have delivered
to the Administrative Agent a certificate in respect of the name and signature
of each of the officers (i) who is authorized to sign on its behalf the
applicable Loan Documents related to any Loan or the issuance of any Letter of
Credit and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
any Loan or the issuance of any Letter of Credit. The Agents and each Bank may
conclusively rely on such certificates until they receive notice in writing from
the Parent or the appropriate Relevant Party to the contrary.
(c) Notes. The Administrative Agent shall have received the
appropriate Notes of the Company for each Bank, duly completed and executed.
(d) Loan Documents. The Company and each other Relevant Party shall
have duly executed and delivered the other Loan Documents to which it is a party
(in such number of copies as the Administrative Agent shall have requested) and
each such Loan Document shall be in form satisfactory to Administrative Agent.
Each such Loan Document shall be in substantially the form furnished to the
Banks prior to their execution of this Agreement, together with such changes
therein as the Administrative Agent may approve.
(e) Fees and Expenses. The Company shall have paid to the Paying Agent
for the account of each Bank all accrued and unpaid commitment fees and other
fees in the amounts previously agreed upon in writing among the Company and the
respective Agents; and shall have in addition paid to the Paying Agent all
amounts payable under Section 9.7 hereof, on or before the date of this
Agreement.
(f) Opinions of Counsel. The Administrative Agent shall have received
(1) an opinion of Vinson & Elkins L.L.P., counsel to the Parent and its
Subsidiaries, in form and substance reasonably satisfactory to the
Administrative Agent and (2) an opinion of Bennett Jones Verchere, Canadian
counsel to the Parent and its Subsidiaries, in form and substance reasonably
satisfactory to the Administrative Agent.
(g) Execution by Banks. The Administrative Agent shall have received
counterparts of this Agreement executed and delivered by or on behalf of each of
the Banks or the Administrative Agent shall have received evidence satisfactory
to it of the execution and delivery by each of the Banks of a counterpart
hereof.
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(h) Consents. The Administrative Agent shall have received evidence
satisfactory to it that, except as disclosed in the Disclosure Statement, all
material consents of each Governmental Authority and of each other Person, if
any, reasonably required in connection with (a) the Loans, the Bankers'
Acceptances and the Letters of Credit and (b) the execution, delivery and
performance of this Agreement and the other Loan Documents have been
satisfactorily obtained.
(i) Amendment to Intercreditor Agreement. The Administrative Agent
shall have received counterparts of the Second Amendment to Intercreditor
Agreement referred to in the definition of "Intercreditor Agreement" in Section
1.1 hereof executed and delivered by or on behalf of each of the Company and by
the "Agent" under the U.S. Facility or the Administrative Agent shall have
received evidence satisfactory to it of the execution and delivery by each such
Person of a counterpart of such Second Amendment to Intercreditor Agreement.
(j) U.S. Facility. The Administrative Agent shall have received
counterparts of the Credit Agreement referred to in the definition of "U.S.
Facility" in Section 1.1 hereof executed and delivered by or on behalf of each
of Parent, The Chase Manhattan Bank, as Agent, and certain banks parties thereto
or Administrative Agent shall have received evidence satisfactory to it of the
execution and delivery by each such Person of a counterpart of such Credit
Agreement.
(k) Other Documents. The Administrative Agent shall have received such
other documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as the Administrative Agent may reasonably
request.
All provisions and payments required by this Section 7.1 are subject to
the provisions of Section 13.6.
7.2 Initial and Subsequent Loans. The obligation of each Bank or any
applicable Issuer to make any Loan (including, without limitation, its initial
Loan) to be made by it hereunder or to accept and purchase Bankers' Acceptances
or to issue or participate in any Letter of Credit is subject to the additional
conditions precedent that (i) the Administrative Agent and the Paying Agent
shall have received a Request for Extension of Credit and such other
certifications as the Administrative Agent may reasonably require and (ii) as of
the date of such Loan or such acceptance and purchase or such issuance, and
after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except for facts timely disclosed to the Administrative Agent from
time to time in writing, which facts (i) are not materially more adverse to the
Parent and its Subsidiaries, (ii) do not materially decrease the ability of the
Banks to collect the Obligations as and when due and payable and (iii) do not
materially increase the liability of any of the Agent or any of the Banks,
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in each case compared to those facts existing on the date hereof and the
material details of which have been set forth in the Financial Statements
delivered to the Administrative Agent prior to the date hereof or in the
Disclosure Statement, and except for the representations set forth in the Loan
Documents which, by their terms, are expressly (or by means of similar phrasing)
made as of the date hereof only, the representations and warranties made in each
Loan Document shall be true and correct in all material respects on and as of
the date of the making of such Loan or such acceptance and purchase or such
issuance, with the same force and effect as if made on and as of such date;
(c) the making of such Loan or the acceptance and purchase of such
Bankers' Acceptance or the issuance of such Letter of Credit shall not violate
any Legal Requirement applicable to any Bank.
Each Request for Extension of Credit by the Company hereunder or
request for issuance of a Letter of Credit shall include a representation and
warranty by the Company to the effect set forth in Subsections 7.2(a) and (b)
(both as of the date of such notice and, unless the Company otherwise notifies
the Administrative Agent prior to the date of such borrowing or issuance, as of
the date of such borrowing or issuance).
Section 8. Representations and Warranties. To induce the Banks to enter
into this Agreement and to make the Loans, accept and purchase Bankers'
Acceptances and issue or participate in the Letters of Credit, the Company (or,
where applicable, the Parent) represents and warrants (such representations and
warranties to survive any investigation and the making of the Loans, the
acceptance and purchase Bankers' Acceptances and the issuance of the Letters of
Credit) to the Banks and the Agents as follows:
8.1 Corporate Existence. The Parent and each Subsidiary of the Parent
are corporations duly incorporated and organized, legally existing and in good
standing under the laws of the respective jurisdictions in which they are
incorporated, and are duly qualified as foreign corporations in all
jurisdictions wherein the property owned or the business transacted by them
makes such qualification necessary and the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect.
8.2 Corporate Power and Authorization. Each of the Company and the
other Relevant Parties is duly authorized and empowered to execute, deliver, and
perform the Loan Documents to which it is a party; and all corporate action on
the part of the Company and the other Relevant Parties requisite for the due
creation and issuance of the Notes and for the due execution, delivery, and
performance of this Agreement and the other Loan Documents to which each of the
Company and the other Relevant Parties is a party has been duly and effectively
taken.
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8.3 Binding Obligations. This Agreement, the Notes and the other Loan
Documents constitute legal, valid and binding obligations of the Company and the
other Relevant Parties, to the extent each is a party thereto, enforceable
against the Company and the other Relevant Parties, to the extent each is a
party thereto, in accordance with their respective terms, except as may be
limited by (i) any applicable bankruptcy, insolvency, fraudulent transfer,
winding up, arrangement, liquidation, reorganization, moratorium or other
similar laws affecting creditors' rights generally, (ii) equitable limitations
on the availability of remedies, (iii) the statutory power of a court to grant
relief from forfeiture, (iv) applicable laws regarding limitations of actions,
(v) general principles of equity which may apply to any proceeding in equity or
at law, and (vi) the powers of a court to stay proceedings before it and to stay
the execution of judgments.
8.4 No Legal Bar or Resultant Lien. The Company's and each of the other
Relevant Parties' creation, issuance, execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents, to the extent they are
parties thereto, do not and will not violate any provisions of the
Organizational Documents of the Company or any other Relevant Party or any
Subsidiary of the Parent, or any Legal Requirement to which the Company or any
other Relevant Party or any Subsidiary of the Parent is subject or by which its
property may be presently bound or encumbered, or result in the creation or
imposition of any Lien upon any properties of the Company or any other Relevant
Party or any Subsidiary of the Parent, other than those permitted by this
Agreement.
8.5 No Consent. Except as set forth in the Disclosure Statement, the
Company's creation and issuance of the Notes and the Company's and each of the
other Relevant Parties' execution, delivery, and performance of this Agreement,
the Notes and the other Loan Documents to which they are parties do not and will
not require the consent or approval of any Person other than such consents
and/or approvals obtained contemporaneously with or prior to the execution of
this Agreement, including, without limitation, any Governmental Authorities,
other than those consents the failure to obtain which could not be reasonably
expected to have a Material Adverse Effect.
8.6 Financial Condition. The audited consolidated annual financial
statements of the Parent and its Subsidiaries for the year ended December 31,
1996 and the unaudited consolidated interim financial statements of the Parent
and its Subsidiaries for the quarter and three-month period ended March 31,
1997, which have been delivered to the Banks, have been prepared in accordance
with GAAP, and present fairly the financial condition and results of the
operations of the Parent and its Subsidiaries for the period or periods stated
(subject only to normal year-end audit adjustments with respect to the unaudited
interim statements). No material adverse change, either in any case or in the
aggregate, has occurred since March 31, 1997 in the assets, liabilities,
financial condition, business, operations, affairs or circumstances of the
Parent and its Subsidiaries taken as a whole, except as disclosed to the Banks
in the Disclosure Statement. Each Engineering
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Report and Parent Report fairly presents the values and prospective performances
of the property described therein and there are no statements or conclusions
therein which were based upon or included materially misleading information or
fail to take into account material information.
8.7 Investments and Guaranties. As of the date hereof, neither the
Parent nor any Subsidiary of the Parent had made Investments in, advances to, or
Guarantees of, the obligations of any Person, except as (a) disclosed to the
Banks in the Disclosure Statement or (b) not prohibited by applicable provisions
of Section 10.
8.8 Liabilities and Litigation. Neither the Parent nor any Subsidiary
of the Parent has any material (individually or in the aggregate) liabilities,
direct or contingent, except as (a) disclosed or referred to in the Financial
Statements, (b) disclosed to the Banks in the Disclosure Statement, (c)
disclosed in a notice to the Administrative Agent pursuant to Section 9.11 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (d) not prohibited by applicable provisions of Section 10. Except as
(a) described in the Financial Statements, (b) otherwise disclosed to the Banks
in the Disclosure Statement, (c) disclosed in a notice to the Administrative
Agent pursuant to Section 9.11 with respect to such as could reasonably be
expected to have a Material Adverse Effect or (d) not prohibited by applicable
provisions of Section 10, no litigation, legal, administrative or arbitral
proceeding, investigation, or other action of any nature exists or (to the
knowledge of the Parent or the Company) is threatened against or affecting the
Parent or any Subsidiary of the Parent which could reasonably be expected to
result in any judgment which could reasonably be expected to have a Material
Adverse Effect, or which in any manner challenges or may challenge or draw into
question the validity of this Agreement, the Notes or any other Loan Document,
or enjoins or threatens to enjoin or otherwise restrain any of the transactions
contemplated by any of them.
8.9 Taxes and Governmental Charges. The Parent and its Subsidiaries
have filed, or obtained extensions with respect to the filing of, all material
tax returns and reports required to be filed and have paid all material taxes,
assessments, fees and other governmental charges levied upon any of them or upon
any of their respective properties or income which are due and payable,
including interest and penalties, or have provided adequate reserves for the
payment thereof.
8.10 Title to Properties. The Parent and its Subsidiaries have good and
defensible title to their respective properties included in the Borrowing Base
(including, without limitation, all fee and leasehold interests), free and clear
of all Liens except (a) those referred to in the Financial Statements, (b) as
disclosed to the Banks in the Disclosure Statement or (c) as permitted by
Section 10.2.
8.11 Defaults. Neither the Parent nor any Subsidiary of the Parent is
in default, which default could reasonably be expected to have a Material
Adverse Effect, under any indenture,
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mortgage, deed of trust, agreement or other instrument to which the Parent or
any Subsidiary of the Parent is a party or by which the Parent or any Subsidiary
of the Parent or the property of the Parent or any Subsidiary of the Parent is
bound, except as (a) disclosed to the Banks in the Disclosure Statement, (b)
disclosed in a notice to the Administrative Agent pursuant to Section 9.11 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (c) specifically permitted by applicable provisions of Section 10. No
Default under this Agreement, the Notes or any other Loan Document has occurred
and is continuing.
8.12 Location of Businesses and Offices. Except to the extent that the
Administrative Agent has been furnished written notice to the contrary or of
additional locations, pursuant to Section 9.11, the Company's principal place of
business and chief executive offices are located at the address stated on the
signature page hereof and the principal places of business and chief executive
offices of each Subsidiary of the Parent are described on Exhibit D hereto. The
Parent's principal place of business and chief executive office is at 1001
Fannin, Suite 1700, Houston, Texas 77002.
8.13 Compliance with Law. Neither the Parent nor any Subsidiary of the
Parent (except as (a) disclosed to the Banks in the Disclosure Statement, (b)
disclosed in a notice to the Administrative Agent pursuant to Section 9.11 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (c) not prohibited by applicable provisions of Section 10):
(a) is in violation of any Legal Requirement; or
(b) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of their respective
properties or the conduct of their respective business; which violation or
failure could reasonably be expected to have a Material Adverse Effect.
8.14 Margin Stock. None of the proceeds of the Loans will be used for
the purpose of, and neither the Parent nor any Subsidiary of the Parent is
engaged in the business of extending credit for the purpose of (a) purchasing or
carrying any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 221) or (b) reducing or retiring
any indebtedness which was originally incurred to purchase or carry margin
stock, if such purpose under either (a) or (b) above would constitute this
transaction a "purpose credit" within the meaning of said Regulation U, or for
any other purpose which would constitute this transaction a "purpose credit".
Neither the Parent nor any Subsidiary of the Parent is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stocks. Neither the Parent nor any
Subsidiary of the Parent nor
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any Person acting on behalf of the Parent or any Subsidiary of the Parent has
taken or will take any action which might cause the Notes or any of the Loan
Documents, including this Agreement, to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System, or to
violate any similar provision of the Securities Exchange Act of 1934 or any rule
or regulation under any such provision thereof.
8.15 Subsidiaries. The Parent has no Subsidiaries as of the date of
this Agreement except those shown in Exhibit D hereto.
8.16 ERISA. With respect to each Plan, the Parent and each ERISA
Affiliate have fulfilled their obligations, including obligations under the
minimum funding standards of ERISA and the Code, and are in compliance in all
material respects with the provisions of ERISA and the Code. The Parent has no
knowledge of any event which could result in a liability of the Parent or any
ERISA Affiliate to the PBGC or a Plan (other than to make contributions in the
ordinary course). Since the effective date of Title IV of ERISA, there have not
been any nor are there now existing any events or conditions that would cause
the Lien provided under Section 4068 of ERISA to attach to any property of the
Parent or any ERISA Affiliate. There are no Unfunded Liabilities with respect to
any Plan other than those specifically described in the certificate delivered in
accordance with Section 7.1(i). No "prohibited transaction" has occurred with
respect to any Plan.
8.17 Investment Company Act. Neither the Parent nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
8.18 Public Utility Holding Company Act. Neither the Parent nor any of
its Subsidiaries (i) is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended (the "PUHC Act"), except as to Section 9(a)(2)
thereof (15 U.S.C.A. ss.79(i)(a)(2)), or (ii) is in violation of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of the transactions contemplated under this Agreement, including without
limitation, the making of the Loans, the issuance of the Letters of Credit and
the creation of any Liens pursuant to the Loan Documents, shall cause or
constitute a violation of any of the provisions, rules, regulations or orders of
or under the PUHC Act and the PUHC Act does not in any manner impair the
legality, validity or enforceability of the Notes or any Liens created pursuant
to the Loan Documents. The Parent has duly filed with the Securities and
Exchange Commission good faith applications (each an "Application") under
Section 2(a)(8) of the PUHC Act (15 U.S.C.A. ss.79(b)(a)(8)) for a declaration
of non-subsidiary status pursuant to such Section 2(a)(8) with respect to each
Person (each a "Specified Shareholder") which owns, controls or holds with power
to vote, directly or indirectly, a sufficient quantity of the voting securities
of the Parent to be construed as a "holding company", as such term is defined in
the PUHC Act, in respect of the
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Parent. All of the information contained in such Applications, as amended, was
true as of the most recent filing date with respect thereto (provided that the
Parent may, unless it has actual current knowledge to the contrary, rely solely
upon written information furnished by any Specified Shareholder with respect to
background information about the Specified Shareholder and the nature of the
ownership by such Specified Shareholder or its Affiliates of the voting
securities of the Parent), and the Parent knows of no reason why each such
Application, if acted upon by the Securities and Exchange Commission, would not
be approved. True and correct copies of each such Application and any amendments
thereto, as filed, have been furnished to the Administrative Agent. The Parent
has not received any written notice from the Securities and Exchange Commission
with respect to any such Application other than as disclosed in writing to the
Administrative Agent.
8.19 Environmental Matters. Except as disclosed in the Disclosure
Statement, (i) the Parent and it Subsidiaries have obtained and maintained in
effect all Environmental Permits (or has initiated the necessary steps to
transfer the Environmental Permits into its name), the failure to obtain which
could reasonably be expected to have a Material Adverse Effect, (ii) the Parent
and its Subsidiaries and their properties, assets, business and operations have
been and are in compliance with all applicable Requirements of Environmental Law
and Environmental Permits failure to comply with which could reasonably be
expected to have a Material Adverse Effect, (iii) the Parent and its
Subsidiaries and their properties, assets, business and operations are not
subject to any (A) Environmental Claims or (B) Environmental Liabilities, in
either case direct or contingent, and whether known or unknown, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which could reasonably be expected to
have a Material Adverse Effect, and (iv) no Responsible Officer of the Parent or
any of its Subsidiaries has received any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with its assets, properties, business or
operations which could reasonably be expected to have a Material Adverse Effect.
The liability (including without limitation any Environmental Liability and any
other damage to persons or property), if any, of the Parent and its Subsidiaries
and with respect to their properties, assets, business and operations which is
reasonably expected to arise in connection with Requirements of Environmental
Laws currently in effect and other environmental matters presently known by a
Responsible Officer of the Parent will not have a Material Adverse Effect. No
Responsible Officer of the Parent knows of any event or condition with respect
to Environmental Matters with respect to any of its properties or the properties
of any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect. For purposes of this Section 8.19, "Environmental Matters" shall
mean matters relating to pollution or protection of the environment, including,
without limitation, emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including, without limitation,
ambient air, surface water or ground water, or land surface or sub surface), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
8.20 Claims and Liabilities. Except as disclosed to the Banks in
writing, neither the Parent nor any of its Subsidiaries has accrued any
liabilities under gas purchase contracts for gas not taken, but for which it is
liable to pay if not made up and which, if not paid, would have a Material
Adverse Effect. Except as disclosed to the Banks in writing, no claims exist
against the Parent or its Subsidiaries for gas imbalances which claims if
adversely determined would have a Material Adverse Effect. No purchaser of
product supplied by the Parent or any of its Subsidiaries has any claim against
the Parent or any of its Subsidiaries for product paid for, but for which
delivery was not taken as and when paid for, which claim if adversely determined
would have a Material Adverse Effect.
8.21 Solvency. Neither the Parent nor the Parent and its Subsidiaries,
on a consolidated basis, is "insolvent", as such term is used (and, where
applicable, defined) in (i) the Bankruptcy Code and (ii) the Companies'
Creditors Arrangement Act (Canada).
Section 9. Affirmative Covenants. A deviation from the provisions of
this Section 9 will not constitute a Default under this Agreement if such
deviation is consented to in writing by the Majority Banks. Without the prior
written consent of the Majority Banks, the Company (or, where applicable, the
Parent) agrees with the Banks and the Agents that, so long as any of the
Commitments is in effect and until payment in full of all Loans hereunder, the
repayment in full of the full face amount of all outstanding Bankers'
Acceptances, the termination or expiry of all Letters of Credit and payment in
full of Letter of Credit Liabilities, all interest thereon and all other amounts
payable by the Company hereunder:
9.1 Financial Statements and Reports. The Parent will promptly furnish
to any Bank from time to time upon request such information regarding the
business and affairs and financial condition of the Parent and its Subsidiaries
as such Bank may reasonably request, and will furnish to the Administrative
Agent and each of the Banks:
(a) Annual Reports - promptly after becoming available and in any event
within 100 days after the close of each fiscal year of the Parent:
(i) the audited consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such year;
(ii) the audited consolidated statement of earnings of the Parent and
its Subsidiaries for such year;
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(iii) the audited consolidated statement of cash flows of the Parent
and its Subsidiaries for such year;
(iv) the unaudited consolidated balance sheet, statement of earnings
and statement of cash flows and unaudited consolidating balance sheet and
statement of earnings of the Company and its Subsidiaries, each for such year or
as of the end of such year, as the case may be;
(v) a report prepared by a petroleum engineer, who may be an employee
of the Parent or its Subsidiaries, setting forth the historical monthly
production data for Hydrocarbons produced and sold by the Parent and its
Subsidiaries for such year; setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, and, in the case of the
audited Financial Statements, audited and accompanied by the related opinion of
KPMG Peat Marwick or other independent certified public accountants of
recognized national standing acceptable to the Majority Banks, which opinion
shall state that such audited balance sheets and statements have been prepared
in accordance with GAAP consistently followed throughout the period indicated
and fairly present the consolidated financial condition and results of
operations of the applicable Persons as at the end of, and for, such fiscal
year; and
(b) Quarterly Reports - as soon as available and in any event within 50
days after the end of each of the first three quarterly periods in each fiscal
year of the Parent:
(i) the unaudited consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such quarter;
(ii) the unaudited consolidated statement of earnings of the Parent
and its Subsidiaries for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter;
(iii) the unaudited consolidated statement of cash flows of the Parent
and its Subsidiaries for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter;
(iv) the unaudited consolidated balance sheet, statement of earnings
and statement of cash flows and unaudited consolidating balance sheet and
statement of earnings of the Company and its Subsidiaries, each for such quarter
and for the period from the beginning of the fiscal year to the close of such
quarter;
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(v) a report prepared by a petroleum engineer, who may be an employee
of the Parent or its Subsidiaries, setting forth the historical monthly
production data for Hydrocarbons produced and sold by the Parent and its
Subsidiaries for such quarter; all of items (i) through (iv) above prepared on
substantially the same accounting basis as the annual reports described in
Subsection 9.1(a), subject to normal changes resulting from year-end
adjustments; and
(c) Parent Report - promptly after becoming available and in any event
on or before September 1 of each year, a Parent Report; and
(d) Other Bank Requirements - at such time as the same are required to
be furnished to other lenders under other financing arrangements to which the
Parent or any of its Subsidiaries may be a party or be bound from time to time,
a copy of any report, certificate, affidavit or other information required to be
furnished to any such lender; and
(e) SEC and Other Reports - promptly upon their becoming publicly
available, one copy of each financial statement, report, notice or definitive
proxy statement sent by the Parent or any of its Subsidiaries to shareholders
generally, and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal letters)
in respect thereof filed by the Parent or any of its Subsidiaries with, or
received by the Parent or any of its Subsidiaries in connection therewith from,
any securities exchange or the Securities and Exchange Commission or any
successor agency; and
(f) Engineering Report - promptly after becoming available and in any
event on or before March 15 of each year, commencing with March 15, 1998, an
Engineering Report.
All of the balance sheets and other financial statements referred to in
this Section 9.1 will be in such detail as any Bank may reasonably request and
will conform to GAAP applied on a basis consistent with those of the Financial
Statements as of December 31, 1996. In addition, if GAAP shall change with
respect to any matter relative to determination of compliance with this
Agreement, the Parent will also provide financial information necessary for the
Banks to determine compliance with this Agreement.
9.2 Officers' Certificates.
(a) Concurrently with the furnishing of the annual financial
statements pursuant to Subsection 9.1(a), commencing with the annual financial
statements required to be delivered in
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1998, the Parent will furnish or cause to be furnished to the Administrative
Agent certificates of compliance, as follows:
(i) a certificate signed by the principal financial officer of the
Parent and the principal financial officer of the Company in the form of Exhibit
E; and
(ii) a certificate from the independent public accountants stating
that their audit has not disclosed the existence of any condition which
constitutes a Default, or if their audit has disclosed the existence of any such
condition, specifying the nature and period of existence.
(b) Concurrently with the furnishing of the quarterly financial
statements pursuant to Subsection 9.1(b), the Parent will furnish to the
Administrative Agent a certificate signed by the principal financial officer of
the Parent and the principal financial officer of the Company in the form of
Exhibit E.
(c) Concurrently with the delivery of any Borrowing Base Certificate
under the U.S. Facility, the Parent will furnish to the Administrative Agent and
the Paying Agent a true, correct and complete copy thereof.
(d) Concurrently with the furnishing of any Engineering Report or
Parent Report, the Company will furnish to the Administrative Agent a
certificate signed by an appropriate officer of the Parent and any other
applicable Relevant Party in the form of Exhibit G.
9.3 Taxes and Other Liens. The Parent will and will cause each
Subsidiary of the Parent to pay and discharge promptly all taxes, assessments
and governmental charges or levies imposed upon the Parent or such Subsidiary,
or upon the income or any property of the Parent or such Subsidiary, as well as
all claims of any kind (including claims for labor, materials, supplies, rent
and payment of proceeds attributable to Hydrocarbon production) which, if
unpaid, might result in or become a Lien upon any or all of the property of the
Parent or such Subsidiary; provided, however, that neither the Parent nor such
Subsidiary will be required to pay any such tax, assessment, charge, levy or
claims if the amount, applicability or validity thereof will currently be
contested in good faith by appropriate proceedings diligently conducted and if
the Parent or such Subsidiary will have set up reserves therefor adequate under
GAAP.
9.4 Maintenance. Except as referred to in Sections 8.1 and 8.13 and
except as permitted under Section 10.5, the Parent will and will cause each
Subsidiary of the Parent to: (i) maintain its corporate existence; (ii) maintain
its rights and franchises, except for any mergers or consolidations otherwise
permitted by this Agreement and except to the extent failure to so maintain the
same would not have a Material Adverse Effect; (iii) observe and comply (to the
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extent that any failure would have a Material Adverse Effect) with all valid
Legal Requirements (including without limitation Requirements of Environmental
Law); and (iv) maintain (except to the extent failure to so maintain the same
would not have a Material Adverse Effect) its properties (and any properties
leased by or consigned to it or held under title retention or conditional sales
contracts) consistent with the standards of a reasonably prudent operator at all
times and make all repairs, replacements, additions, betterments and
improvements to its properties consistent with the standards of a reasonably
prudent operator.
9.5 Further Assurances. The Parent will and will cause each Subsidiary
of the Parent to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Loan Documents, including this
Agreement. The Parent at its expense will promptly execute and deliver to the
Administrative Agent upon request all such other and further documents,
agreements and instruments (or cause any of its Subsidiaries to take such
action) in compliance with or accomplishment of the covenants and agreements of
the Parent or any of its Subsidiaries in the Loan Documents, including this
Agreement, or to correct any omissions in the Loan Documents, or to make any
recordings, to file any notices, or obtain any consents, all as may be necessary
or appropriate in connection therewith.
9.6 Performance of Obligations. The Company will pay the Notes
according to the reading, tenor and effect thereof; and the Company will do and
perform every act and discharge all of the obligations provided to be performed
and discharged by the Company under this Agreement and the other Loan Documents
at the time or times and in the manner specified, and cause each of its
Subsidiaries to take such action with respect to their obligations to be
performed and discharged under the Loan Documents to which they respectively are
parties.
9.7 Reimbursement of Expenses. Whether or not any Loan is ever made or
any Letter of Credit is ever issued, the Company agrees to pay or reimburse the
Administrative Agent for paying the reasonable fees and expenses of Liddell,
Sapp, Zivley, Hill & LaBoon, L.L.P., special counsel to the Administrative
Agent, together with the reasonable fees and expenses of local counsel engaged
by the Administrative Agent, in connection with the negotiation of the terms and
structure of the Obligations, the preparation, execution and delivery of this
Agreement and the other Loan Documents and the making of the Loans and the
issuance of Letters of Credit hereunder, as well as any modification, supplement
or waiver of any of the terms of this Agreement and the other Loan Documents.
The Company will promptly upon request and in any event within 30 days from the
date of receipt by the Company of a copy of a bill for such amounts, reimburse
any Bank or any Agent for all amounts reasonably expended, advanced or incurred
by such Bank or such Agent to satisfy any obligation of the Company or any other
Relevant Party under this Agreement or any other Loan Document, to protect the
properties or business of the Parent or any Subsidiary of the Parent, to collect
the Obligations, or to enforce the rights of such Bank or such Agent under this
Agreement or any other Loan Document, which amounts will
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include without limitation all court costs, attorneys' fees (but not including
allocated costs of in-house counsel), any engineering fees and expenses, fees of
auditors, accountants and appraisers, investigation expenses, all transfer,
stamp, documentary or similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of any of the Loan Documents or any
other document referred to therein, all costs, expenses, taxes, assessments and
other charges incurred in connection with any filing, registration, recording or
perfection of any Lien contemplated by any of the Loan Documents or any document
referred to therein, fees and expenses incurred in connection with such Bank's
participation as a member of a creditors' committee in a case commenced under
the Bankruptcy Code or other similar law of the United States or any state
thereof or of Canada or any province thereof, fees and expenses incurred in
connection with lifting the automatic stay prescribed in ss.362 Title 11 of the
United States Code or in connection with any similar proceeding under the laws
of Canada or any province thereof, and fees and expenses incurred in connection
with any action pursuant to ss.1129 Title 11 of the United States Code or in
connection with any similar proceeding under the laws of Canada or any province
thereof, and all other customary out-of-pocket expenses incurred by such Bank or
such Agent in connection with such matters, together with interest after the
expiration of the 30-day period stated above in this Section if no Event of
Default has occurred and is continuing, or from the date of the request to the
Company if an Event of Default has occurred and is continuing, at either (i) the
Post-Default Rate on each such amount until the date of reimbursement to such
Bank or such Agent, or (ii) if no Event of Default will have occurred and be
continuing, the Alternate Base Rate plus the highest Applicable Margin for
Alternate Base Rate Loans (not to exceed the Highest Lawful Rate) on each such
amount until the date of the Company's receipt of written demand or request by
such Bank or such Agent for the reimbursement of same, and thereafter at the
applicable Post-Default Rate until the date of reimbursement to such Bank or
such Agent. The obligations of the Company under this Section are compensatory
in nature, shall be deemed liquidated as to amount upon receipt by the Company
of a copy of any invoice therefor, and will survive the non-assumption of this
Agreement in a case commenced under the Bankruptcy Code or other similar law of
the United States or any state thereof or of Canada or any province thereof, and
will remain binding on the Company and any trustee, receiver, or liquidator of
the Company appointed in any such case.
9.8 Insurance. The Parent and its Subsidiaries will maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and business against such liabilities, casualties, risks
and contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated.
Upon the request of the Administrative Agent acting at the instruction of the
Majority Banks, the Parent will furnish or cause to be furnished to the
Administrative Agent from time to time a summary of the insurance coverage of
the Parent and its Subsidiaries in form and substance satisfactory to the
Majority Banks in their reasonable judgment, and if requested will furnish the
Administrative Agent copies of the applicable policies. Subject to the terms of
Section 3 hereof, in the case of
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any fire, accident or other casualty causing loss or damage to any properties of
the Parent or any of its Subsidiaries, the proceeds of such policies will be
used (i) to repair or replace the damaged property or (ii) to prepay the
Obligations, at the election of the Company.
9.9 Accounts and Records. The Parent will keep and will cause each
Subsidiary of the Parent to keep books of record and account which fairly
reflect all dealings or transactions in relation to their respective businesses
and activities, in accordance with GAAP, which books of record and account will
be maintained, to the extent necessary to enable compliance with all provisions
of this Agreement, separately for each such Subsidiary, the Parent and any
division of the Parent.
9.10 Rights of Inspection. The Parent will permit and will cause each
of its Subsidiaries to permit any officer, employee, or agent of any Agent or
any Bank to meet with the consultants who prepared any applicable Engineering
Report and to review such Engineering Report with such consultants and to visit
and inspect any of the properties of the Parent or such Subsidiary, examine the
Parent's or such Subsidiary's books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of the Bank
or such Subsidiary with the Parent's or such Subsidiary's officers, accountants
and auditors, all at such reasonable times during normal business hours and as
often as such Agent or such Bank may reasonably desire, and will assist in all
such matters.
9.11 Notice of Certain Events. The Parent will promptly notify the
Administrative Agent (and the Administrative Agent will then notify all of the
Banks) if a Responsible Officer of the Parent learns of the occurrence of, or if
the Parent causes or intends to cause, as the case may be:
(i) any event which constitutes a Default, together with a detailed
statement by a Responsible Officer of the Parent of the steps being taken to
cure the effect of such Default; or
(ii) the receipt of any notice from, or the taking of any other action
by, the holder of any promissory note, debenture or other evidence of
indebtedness of the Parent or any Subsidiary of the Parent or of any security
(as defined in the Securities Act of 1933, as amended) of the Parent or any
Subsidiary of the Parent with respect to a claimed default, together with a
detailed statement by a Responsible Officer of the Parent specifying the notice
given or other action taken by such holder and the nature of the claimed default
and what action the Parent or such Subsidiary is taking or proposes to take with
respect thereto; or
(iii) any legal, judicial or regulatory proceedings affecting the
Parent or any Subsidiary of the Parent or any of the properties of the Parent or
any Subsidiary of the Parent in which the amount involved is materially adverse
to the Parent and its Subsidiaries taken as a
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whole, and is not covered by insurance or which, if adversely determined, would
have a Material Adverse Effect; or
(iv) any dispute between the Parent or any Subsidiary of the Parent
and any Governmental Authority or any other Person which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect; or
(v) the occurrence of a default or event of default by the Parent or
any Subsidiary of the Parent under any other agreement to which it is a party,
which default or event of default could reasonably be expected to have a
Material Adverse Effect; or
(vi) any change in the accuracy of the representations and warranties
of the Parent or any Subsidiary contained in this Agreement or any other Loan
Document; or
(vii) any material violation or alleged material violation of any
Requirements of Environmental Law or Environmental Permit or any Environmental
Claim or any Environmental Liability; or
(viii) any tariff and rate cases and other material reports filed by
the Parent or any of its Subsidiaries with any Governmental Authority and any
notice to the Parent or any of its Subsidiaries from any Governmental Authority
concerning noncompliance with any applicable Legal Requirement; or
(ix) the existence of any Borrowing Base Deficiency; or
(x) within 10 days after the date on which a Responsible Officer of
the Parent has actual knowledge thereof, the receipt of any notice by the Parent
or any of its Subsidiaries of any claim of nonpayment of, or any attempt to
collect or enforce, accounts payable of the Parent or any of its Subsidiaries
exceeding, in the case of any one account payable at one time outstanding, U.S.
$1,000,000 and in the case of all accounts payable in the aggregate at any one
time outstanding, U.S. $3,000,000; or
(xi) any requirement for the payment of all or any portion of any
Indebtedness of the Parent or any of its Subsidiaries prior to the stated
maturity thereof (whether by acceleration or otherwise) or as the result of any
failure to maintain or the reaching of any threshold amount provided in any
promissory note, bond, debenture, or other evidence of Indebtedness or under any
credit agreement, loan agreement, indenture or similar agreement executed in
connection with any of the foregoing; or
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(xii) any notice from the Securities and Exchange Commission with
respect to any Application (as defined in Section 8.18 hereof).
9.12 ERISA Information and Compliance. The Parent will promptly furnish
to the Administrative Agent (i) immediately upon receipt, a copy of any notice
of complete or partial withdrawal liability under Title IV of ERISA and any
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Plan, (ii) if requested by the
Administrative Agent, acting on the instruction of the Majority Banks, promptly
after the filing thereof with the United States Secretary of Labor or the PBGC
or the Internal Revenue Service, copies of each annual and other report with
respect to each Plan or any trust created thereunder, (iii) immediately upon
becoming aware of the occurrence of any "reportable event", as such term is
defined in Section 4043 of ERISA, for which the disclosure requirements of
Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of
any "prohibited transaction", as such term is defined in Section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by the President or the principal financial officer of the Parent
or the applicable ERISA Affiliate specifying the nature thereof, what action the
Parent or the applicable ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken by the PBGC, the Internal
Revenue Service or the Department of Labor with respect thereto, (iv) promptly
after the filing or receiving thereof by the Parent or any ERISA Affiliate of
any notice of the institution of any proceedings or other actions which may
result in the termination of any Plan, and (v) each request for waiver of the
funding standards or extension of the amortization periods required by Sections
303 and 304 of ERISA or Section 412 of the Code promptly after the request is
submitted by the Parent or any ERISA Affiliate to the Secretary of the Treasury,
the Department of Labor or the Internal Revenue Service, as the case may be. To
the extent required under applicable statutory funding requirements, the Parent
will fund, or will cause each ERISA Affiliate to fund, all current service
pension liabilities as they are incurred under the provisions of all Plans from
time to time in effect, and comply with all applicable provisions of ERISA,
except to the extent that any such failure to comply could not reasonably be
expected to have a Material Adverse Effect. The Parent covenants that it shall
and shall cause each ERISA Affiliate to (1) make contributions to each Plan in a
timely manner and in an amount sufficient to comply with the contribution
obligations under such Plan and the minimum funding standards requirements of
ERISA; (2) prepare and file in a timely manner all notices and reports required
under the terms of ERISA including but not limited to annual reports; and (3)
pay in a timely manner all required PBGC premiums, in each case, to the extent
failure to do so would have a Material Adverse Effect.
Section 10. Negative Covenants. A deviation from the provisions of this
Section 10 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. The Company (or, where
applicable, the Parent) agrees with the Banks and the Agents that, so long as
any of the Commitments is in effect and until payment in full of all Loans
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hereunder, the payment in full of the full face amount of all outstanding
Bankers' Acceptances, the termination or expiry of all Letters of Credit and
payment in full of Letter of Credit Liabilities, all interest thereon and all
amounts payable by the Company hereunder:
10.1 Debts, Guarantees and Other Obligations. The Parent will not and
will not permit any of its Subsidiaries (other than APC) to incur, create,
assume or in any manner become or be liable in respect of any Indebtedness
(including obligations for the payment of rentals); and the Parent will not and
will not permit any of its Subsidiaries (other than APC) to Guarantee or
otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the Indebtedness of any other Person or
agreement for the furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
Indebtedness of any other Person, or otherwise, except that the foregoing
restrictions will not apply to:
(a) the Notes, the Bankers' Acceptances or other Indebtedness under
the Loan Documents;
(b) liabilities, direct or contingent, of the Parent or any Subsidiary
of the Parent existing on the date of this Agreement which are reflected in the
Financial Statements or the Disclosure Statement and all renewals, extensions,
refinancings and rearrangements, but not increases, thereof;
(c) endorsements of negotiable or similar instruments for collection
or deposit in the ordinary course of business;
(d) trade payables, lease acquisition and lease maintenance
obligations, extensions of credit from suppliers or contractors, liabilities
incurred in exploration, development and operation of the Parent's or any of its
Subsidiaries' oil and gas properties or similar obligations from time to time
incurred in the ordinary course of business, other than for borrowed money,
which are paid within 90 days after the invoice date (inclusive of applicable
grace periods) or (i) are being contested in good faith, if such reserve as
required by GAAP has been made therefor or (ii) trade accounts payable of the
Parent and its Subsidiaries (with respect to which no legal proceeding to
enforce collection has been commenced or, to the knowledge of any Responsible
Officer of the Parent, threatened) not exceeding, in the aggregate at any time
outstanding, U.S. $25,000,000;
(e) taxes, assessments or other government charges which are not yet
due or are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as will be required by GAAP
will have been made therefor;
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(f) Borrowing Base Debt of the Parent; provided that the aggregate of
all Indebtedness permitted under this Subsection 10.1(f) shall not exceed the
amount by which the then current Borrowing Base exceeds the then current
"Revolving Credit Obligations" under the U.S. Facility;
(g) to the extent, if any, not covered by Subsection (b) hereinabove,
the Indebtedness of the Parent to APC evidenced solely by the Intercompany
Notes, as defined in the Beluga Financing Documents and the APC Long Term
Financing Documents, together with any renewals, extensions, amendments,
refinancings, rearrangements, modifications, restatements or supplements, but
not increases (other than increases which are permitted under the present terms
of the Beluga Financing Documents and the APC Long Term Financing Documents)
thereof from time to time;
(h) intercompany Indebtedness owed to the Parent by any Subsidiary of
the Parent and intercompany Indebtedness owed to any Subsidiary of the Parent by
the Parent or any other Subsidiary of the Parent which is fully subordinated to
the Obligations;
(i) loans, advances or extensions of credit to the Parent for the
purpose of financing no more than 75% of the purchase price of any fixed assets
which are not included in the property taken into account in determining the
Borrowing Base and which are considered in the categories of property, plant or
equipment according to GAAP applied on a consistent basis;
(j) obligations of the Parent under the Gas Sales Contract, together
with any renewals, extensions, amendments, refinancings, rearrangements,
modifications, restatements or supplements, but not increases, thereof from time
to time;
(k) the Guarantee by the Parent or any Subsidiary of the Parent of
payment or performance by any Subsidiary of the Parent under any agreement so
long as the obligation guaranteed does not constitute Indebtedness for borrowed
money;
(l) obligations of the Parent and Wacker Oil Inc. pursuant to that
certain Agreement Regarding Contingent Payments For Well No. 3 and Well No. 9
dated as of June 18, 1990, by and among Costain Holdings Inc., Wacker Oil Inc.
and the Parent;
(m) obligations of the Parent or any of its Subsidiaries under gas
purchase contracts for gas not taken, as to which the Parent or its respective
Subsidiary is liable to pay if not made up;
(n) obligations of the Parent or any of its Subsidiaries under any
contract for sale for future delivery of oil or gas (whether or not the subject
oil or gas is to be delivered), hedging contract, forward contract, swap
agreement, futures contract or other similar agreement;
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(o) obligations of the Parent or any of its Subsidiaries under any
interest rate swap agreement, or any contract implementing any interest rate
cap, collar or floor, or any similar interest hedging contract;
(p) obligations in connection with gas imbalances arising in the
ordinary course of business;
(q) Indebtedness not exceeding U.S. $1,000,000 in the aggregate
borrowed from the Amarillo Economic Development Commission and related
Guarantees and related obligations of the Parent and its Subsidiaries;
(r) liabilities under leases and lease agreements which do not cover
oil and gas properties to the extent the incurrence and existence of such
liabilities will still enable the Parent and each Subsidiary to comply with all
other requirements of this Agreement and the other Loan Documents to which they
respectively are parties;
(s) Subordinated Debt;
(t) Indebtedness of any Oil and Gas Subsidiary for borrowed money
payable solely by recourse to properties not included in the Borrowing Base and
Indebtedness incurred by any Gas and Liquids Pipeline Subsidiary in connection
with the construction or acquisition of new assets in connection with the
Pipeline Operations (as defined in the U.S. Facility, without amendment except
as permitted under the Intercreditor Agreement) which is payable solely by
recourse to the assets so constructed or acquired, each to the extent not
otherwise expressly permitted by this Section 10.1;
(u) the note payable which is to be assumed by the Company in
connection with the consummation of the Novalta Contract and is to be fully paid
and satisfied out of the initial proceeds available under this Agreement from
the making of Loans or the acceptance and purchase of Bankers' Acceptances; and
(v) the U.S. Facility;
(w) Indebtedness of the Company having a maturity of 364 days or less
from the date of its incurrence in an aggregate principal amount not exceeding
Canadian $10,000,000 at any one time outstanding.
10.2 Liens. The Parent will not and will not permit any of its
Subsidiaries to create, incur, assume or permit to exist any Lien on any of its
or their properties (now owned or hereafter acquired), except:
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(a) Liens securing the Indebtedness described in Subsection 10.1(a) or
10.1(v);
(b) Liens for taxes, assessments or other governmental charges or
levies not yet due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserve as will be
required by GAAP will have been made therefor;
(c) Liens of landlords, vendors, contractors, subcontractors,
carriers, warehousemen, mechanics, laborers or materialmen or other like Liens
arising by law in the ordinary course of business for sums not yet due or being
contested in good faith by appropriate action promptly initiated and diligently
conducted, if such reserve as will be required by GAAP will have been made
therefor;
(d) Liens existing on property owned by the Parent or any of its
Subsidiaries on the date of this Agreement which have been disclosed to the
Banks in the Disclosure Statement, together with any renewals, extensions,
amendments, refinancings, rearrangements, modifications, restatements or
supplements, but not increases, thereof from time to time;
(e) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, social security
and other like laws;
(f) inchoate liens arising under ERISA to secure the contingent
liability of the Parent permitted by Section 9.12;
(g) Liens in the ordinary course of business, not to exceed in the
aggregate U.S. $10,000,000 as to the Parent and its Subsidiaries at any time in
effect, regarding (i) the performance of bids, tenders, contracts (other than
for the repayment of borrowed money or the deferred purchase price of property
or services) or leases, (ii) statutory obligations, (iii) surety appeal bonds or
(iv) Liens to secure progress or partial payments made to the Parent or any of
its Subsidiaries and other Liens of like nature;
(h) covenants, restrictions, easements, servitudes, permits,
conditions, exceptions, reservations, minor rights, minor encumbrances, minor
irregularities in title or conventional rights of reassignment prior to
abandonment which do not materially interfere with the occupation, use and
enjoyment by the Parent or any Subsidiary of the Parent of its respective assets
in the normal course of business as presently conducted, or materially impair
the value thereof for the purpose of such business;
(i) Liens of operators under joint operating agreements or similar
contractual arrangements with respect to the relevant entity's proportionate
share of the expense of exploration, development and operation of oil, gas and
mineral leasehold or fee interests owned
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jointly with others, to the extent that same relate to sums not yet due or which
are being contested in good faith by appropriate action promptly initiated and
diligently conducted, if such reserve as will be required by GAAP will have been
made therefor;
(j) Liens created pursuant to the creation of trusts or other
arrangements funded solely with cash, cash equivalents or other marketable
investments or securities of the type customarily subject to such arrangements
in customary financial practice with respect to long-term or medium-term
indebtedness for borrowed money, the sole purpose of which is to make provision
for the retirement or defeasance, without prepayment, of Indebtedness permitted
under Section 10.1;
(k) Liens on the assets or properties of ENSTAR Alaska;
(l) the Vendor Financing Arrangements (as defined in the Mesa
Contract), to the extent that the same shall have been deducted in calculating
the Borrowing Base;
(m) purchase money Liens for the acquisition of fixed assets pursuant
to Subsec tion 10.1(i), so long as such Liens exist solely against the relevant
fixed asset acquired and secure only the purchase money debt; provided, that the
aggregate amount of Indebtedness which is secured by Liens described in this
subsection (other than Indebtedness which is payable solely by recourse to the
applicable property) shall not exceed U.S. $10,000,000 at any one time
outstanding;
(n) any Lien existing on any real or personal property of any
corporation or partnership at the time it becomes a Subsidiary of the Parent or
of any other Subsidiary of the Parent, or existing prior to the time of
acquisition upon any real or personal property acquired by the Parent or any of
its Subsidiaries; provided, that such Liens may at all times be deducted in
calculating the Borrowing Base from time to time in effect;
(o) legal or equitable encumbrances deemed to exist by reason of the
existence of any litigation or other legal proceeding or arising out of a
judgment or award with respect to which an appeal is being prosecuted in good
faith by appropriate action promptly initiated and diligently conducted, if such
reserve as will be required by GAAP will have been made therefor;
(p) any Liens securing Indebtedness neither assumed nor guaranteed by
the Parent or any of its Subsidiaries nor on which it customarily pays interest,
existing upon real estate or rights in or relating to real estate acquired by
the Parent or any of its Subsidiaries for substation, metering station, pump
station, storage, gathering line, transmission line, transportation line,
distribution line or right-of-way purposes, and any Liens reserved in leases for
rent and full compliance with the terms of the leases in the case of leasehold
estates, to the extent that any such Lien referred to in this clause arises in
the normal course of business as presently conducted and
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does not materially impair the use of the property covered by such Lien for the
purposes for which such property is held by the Parent or its applicable
Subsidiary;
(q) rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate such right,
power, franchise, grant, license or permit or to purchase, condemn, expropriate
or recapture or to designate a purchaser of any of the property of the Parent or
any of its Subsidiaries;
(r) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any property of the Parent
or any of its Subsidiaries, or to use such property in a manner which does not
materially impair the use of such property for the purposes for which it is held
by the Parent or its applicable Subsidiary;
(s) any obligations or duties affecting the property of the Parent or
any of its Subsidiaries to any municipality, governmental, statutory or public
authority with respect to any franchise, grant, license or permit;
(t) rights of a common owner of any interest in real estate,
rights-of-way or easements held by the Parent or any of its Subsidiaries and
such common owner as tenants in common or through other common ownership;
(u) any Liens arising from the matters described in Schedule 3.19 of
the Mesa Contract;
(v) Liens securing Indebtedness permitted under Section 10.1(t) hereof
(to the extent such Liens are permitted under such Section 10.1(t));
(w) reservations, limitations, provisos and conditions in any original
grant from the Crown or freehold lessor of any of the properties of the Company
or its Subsidiaries;
(x) other Liens securing Indebtedness not exceeding, in the aggregate,
U.S. $3,000,000 at any one time outstanding;
(y) other Liens securing Senior Debt, but only so long as such Liens
shall also secure the Obligations on a pari passu basis, in a manner and
pursuant to documentation acceptable to the Majority Banks;
(z) Liens (i) granted to or existing in favor of third parties on
margin accounts of the Parent or any of its Subsidiaries relating to exchange
traded contracts for the delivery of natural gas pursuant to which the Parent or
any such Subsidiary intends to take actual delivery of such
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natural gas within forty (40) days from the then current date in the ordinary
course of business and not for speculative purposes, and (ii) on margin accounts
of the Parent or any of its Subsidiaries relating to exchange traded contracts
for the delivery of natural gas, provided, however, the aggregate balance of the
margin accounts subject to the Liens permitted by this clause (ii) shall not
exceed from time to time $10,000,000.
10.3 Investments, Loans and Advances. The Parent will not and will not
permit its Subsidiaries to make or permit to remain outstanding any advances,
loans or other extensions of credit or capital contributions (other than prepaid
expenses in the ordinary course of business) to (by means of transfers of
property or assets or otherwise), or purchase or own any stocks, bonds, notes,
debentures or other securities of, or incur contingent liability with respect to
(except for the endorsement of checks in the ordinary course of business and
except for the Indebtedness and Liens permitted under this Agreement) any Person
(all such transactions being herein called "Investments"), except that the
foregoing restriction will not apply to:
(a) Investments (all prior to the date hereof) the material details of
which have been set forth in the Financial Statements delivered to the
Administrative Agent prior to the date hereof or the Disclosure Statement;
(b) Liquid Investments;
(c) advances or extensions of credit in the form of accounts
receivable incurred in the ordinary course of business;
(d) the acquisition of all of the capital stock of wholly owned
Subsidiaries incorporated or acquired subsequent to the date of this Agreement;
(e) investments where the consideration paid is capital stock of the
Parent, plus cash paid in lieu of issuing fractional shares and cash paid in
settlement of claims of dissenters, such cash not to exceed 10% of the aggregate
purchase price in any such transaction;
(f) Investments in any Person which after giving effect thereto will
be a Subsidiary of the Parent, so long as the Investment in such Person, when
consummated, would not result in a breach of the covenants set forth in Section
10.1;
(g) intercompany loans, advances or investments by the Parent to or in
any Subsidiary of the Parent (other than a Subsidiary that is obligated to pay
Funded Indebtedness for borrowed money payable solely by recourse to properties
not included in the Borrowing Base) or, to the extent permitted under Section
10.1(h) hereof, by any Subsidiary of the Parent to or in the Parent or to or in
any other Subsidiary of the Parent, provided, however, that APC may not make any
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intercompany loans, advances or investments in any Subsidiary of the Parent
pursuant to this clause (g);
(h) intercompany loans, advances or investments by the Parent, solely
from income or cash flow of the Parent subject to the Beluga Financing
Documents, to APC as required under the Beluga Financing Documents and the APC
Long Term Financing Documents;
(i) to the extent, if any, not covered by Subsection (a) hereinabove,
the Indebtedness of the Parent to APC evidenced solely by the Intercompany
Notes, as defined in the Beluga Financing Documents and the APC Long Term
Financing Documents, together with any renewals, extensions, amendments,
refinancings, rearrangements, modifications, restatements or supplements, but
not increases (other than increases which are permitted under the present terms
of the Beluga Financing Documents and the APC Long Term Financing Documents)
thereof from time to time;
(j) loans or advances to employees made in the ordinary course of
business, up to the aggregate principal amount at any one time outstanding of
U.S. $5,000,000;
(k) Investments in reasonable amounts of securities for purposes of
funding employee benefit plans maintained by the Parent;
(l) advances or extensions of credit made in the ordinary course of
business to third parties under applicable contracts and agreements in
connection with (i) oil, gas or other mineral exploration, development and
production activities or (ii) Hydrocarbon or chemical pipeline gathering or
transportation activities;
(m) Investments where the consideration paid is assets of the Parent
or its Subsidiaries other than capital stock, cash or oil and gas reserves;
(n) Investments in EBOC Energy Ltd. made in connection with and
pursuant to the Novalta Contract;
(o) any payment, prepayment, purchase or retirement of Indebtedness of
the Parent (other than payments, prepayments, purchases or retirement of
Subordinated Debt prohibited under the definition of "Subordinated Debt"); and
(p) any other Investments which in the aggregate do not cause the
Parent to be in violation of the Investments Tests.
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10.4 Dividend Payment Restrictions. The Parent will not declare or make
any Dividend Payment if any Default or Event of Default has occurred and is
continuing or if there exists any Borrowing Base Deficiency.
10.5 Mergers, Amalgamations and Sales of Assets. The Parent will not
(a) merge, amalgamate or consolidate with, or sell, assign, lease or otherwise
dispose of, whether in one transaction or in a series of transactions, more than
ten percent (10%) in the aggregate of the Parent's and its Subsidiaries'
consolidated total assets (whether now owned or hereafter acquired) to any
Person or Persons during the period since the most recent "Borrowing Base
Determination" (as defined in the U.S. Facility, without amendment except as
permitted under the Intercreditor Agreement), or permit any Subsidiary of the
Parent to do so (other than to the Parent or another Subsidiary of the Parent or
the issuance by any Subsidiary of the Parent of any stock to the Parent or
another Subsidiary of the Parent), or (b) sell, assign, lease or otherwise
dispose of, whether in one transaction or in a series of transactions, any other
properties if receiving therefor consideration other than cash or other
consideration readily convertible to cash or which is less than the fair market
value of the relevant properties, or permit any Subsidiary of the Parent to do
so; provided that the Parent or any Subsidiary of the Parent may merge,
amalgamate or consolidate with any other Person and any Subsidiary of the Parent
may transfer properties to any other Subsidiary of the Parent or to the Parent
so long as, in each case, (i) immediately thereafter and giving effect thereto,
no event will occur and be continuing which constitutes a Default, (ii) in the
case of any such merger, amalgamation or consolidation to which the Parent is a
party, the Parent is the surviving Person, (iii) in the case of any such merger,
amalgamation or consolidation to which any Subsidiary of the Parent is a party
(but not the Parent), after giving effect to all transactions closing
concurrently relating to such merger or consolidation, the surviving Person is a
Subsidiary of the Parent and (iv) the surviving Person ratifies each applicable
Loan Document and provided further that any Subsidiary of the Parent may merge
or consolidate with any other Subsidiary of the Parent so long as, in each case
(i) immediately thereafter and giving effect thereto, no event will occur and be
continuing which constitutes a Default and (ii) the surviving Person ratifies
each applicable Loan Document.
10.6 Use of Proceeds. The Company will not permit the proceeds of the
Loans or the Canadian Bankers' Acceptance Discount Proceeds to be used for any
purpose other than those permitted by this Agreement.
10.7 ERISA Compliance. The Parent will not at any time permit any Plan
maintained by it or any Subsidiary of the Parent to:
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code;
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(b) incur any "accumulated funding deficiency" as such term is defined
in Section 302 of ERISA; or
(c) terminate or be terminated in a manner which could result in the
imposition of a Lien on the property of the Parent or any Subsidiary of the
Parent pursuant to Section 4068 of ERISA, in each case, to the extent that
permitting the Plan to do so would have a Material Adverse Effect.
10.8 Amendment of Certain Documents. The Parent will not amend, modify
or obtain or grant a waiver of (except for waivers only of cross-defaults
created by a Default under this Agreement), or allow APC to enter into any
amendment or modification or obtain or grant any waiver of (except for waivers
only of cross-defaults created by a Default under this Agreement), any provision
of those documents relating to or constituting the Beluga Financing Documents or
the APC Long Term Financing Documents, without prior written notification to the
Administrative Agent.
10.9 Tangible Net Worth. The Parent will not permit the Tangible Net
Worth of the Parent and its Subsidiaries, on a consolidated basis, at any time
to be less than U.S. $465,000,000 plus 50% of net income of the Parent and its
Subsidiaries on a consolidated basis, if positive, beginning with the fiscal
year ended December 31, 1997 and calculated annually thereafter based upon
positive net income of the Parent and its Subsidiaries for each applicable
fiscal year taken cumulatively.
10.10 Parent Debt/Capitalization Ratio. The Parent will not permit the
Debt/Capitalization Ratio to be, at any time, more than 65%.
10.11 EBITDAX/Interest Ratio. The Parent will not permit the
EBITDAX/Interest Ratio to be, at any time, less than 3.50:1.00 for any twelve
month period ending on the last day of any calendar quarter.
10.12 Nature of Business. The Parent will not engage in, and will not
permit any Subsidiary of the Parent to engage in, businesses other than oil and
gas exploration and production, gas processing, transmission, distribution,
marketing and storage and gas and liquids pipeline operations and activities
related or ancillary thereto; provided, that if the Parent acquires one or more
Subsidiaries in transactions otherwise permitted by the terms hereof, any such
Subsidiary may be engaged in businesses other than those listed in this Section
so long as the assets of such Subsidiaries which are used in the conduct of such
other businesses do not constitute more than five percent (5%) of the
consolidated total assets of the Parent (inclusive of the assets of the
Subsidiary so acquired).
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10.13 Futures Contracts. The Parent will not, and will not permit any
Subsidiary of the Parent to, enter into or be obligated under any contract for
sale for future delivery of oil or gas (whether or not the subject oil or gas is
to be delivered), hedging contract, forward contract, swap agreement, futures
contract or other similar agreement except for (i) such contracts (x) which fall
within the parameters set forth on Exhibit H hereto or are otherwise approved in
writing by the Majority Banks and (y) which in the aggregate do not cover at any
time a volume of oil and/or gas equal to or greater than 50% of the proved
producing reserves attributable to the oil and gas properties of the Parent and
its Subsidiaries, taken as a whole, as evidenced by the most current Engineering
and Parent Reports and (ii) production sales contracts entered into in the
ordinary course of the Parent's or the applicable Subsidiary's business.
10.14 Covenants in Other Agreements. The Parent will not and will not
permit any of its Subsidiaries to become a party to or to agree that it or any
of its property is bound by any agreement, indenture, mortgage, deed of trust or
any other instrument directly or indirectly
(i) restricting any loans, advances or any other Investments to or in
the Parent by any of its Subsidiaries;
(ii) restricting the ability of any Subsidiary of the Parent to make
tax payments or management fee payments;
(iii) restricting the capitalization structure of any Subsidiary of
the Parent; or
(iv) restricting the ability or capacity of any Subsidiary of the
Parent to make Dividend Payments; provided, however, nothing in this Section
10.14 shall restrict the existence of negative covenants otherwise prohibited by
this Section in documentation evidencing or related to Indebtedness permitted by
Subsection 10.1(v) and, to the extent that the applicable Subsidiary does not
own any property included in the Borrowing Base, Subsections 10.1(n), (o) and
(p). Notwithstanding the foregoing, either of ENSTAR Alaska or APC may become a
party to, or grant a Lien in any of its property by way of, or agree that it
will be bound by, any indenture, mortgage, deed of trust or other instrument
containing provisions of the types described above in this Section 10.14 so long
as the terms and provisions thereof are not materially more restrictive than the
terms or provisions which were legally binding on ENSTAR Alaska or APC on the
date hereof.
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Section 11. Defaults.
11.1 Events of Default. If one or more of the following events (herein
called "Events of Default") shall occur and be continuing:
(a) Payments - (i) the Company or any other Relevant Party fails to
make any payment or prepayment of any installment of principal on the Loans or
any Reimbursement Obligation payable under the Notes, this Agreement or the
other Loan Documents or the full face amount of any outstanding Bankers'
Acceptances when due or (ii) the Company or any other Relevant Party fails to
make any payment or prepayment of interest with respect to the Loans, any
Reimbursement Obligation or any other fee or amount under the Notes, the
Bankers' Acceptances, this Agreement or the other Loan Documents and such
failure to pay continues unremedied for a period of five (5) Business Days; or
(b) Representations and Warranties - any representation or warranty
made by the Company or any other Relevant Party in this Agreement or in any
other Loan Document or in any instrument executed in connection herewith or
therewith proves to have been incorrect in any material respect as of the date
thereof; or any representation, statement (including Financial Statements),
certificate or data furnished or made by the Company or any other Relevant Party
(or any officer of the Company or any other Relevant Party) under or in
connection with this Agreement or any other Loan Document, including without
limitation in the Disclosure Statement, proves to have been untrue in any
material respect, as of the date as of which the facts therein set forth were
stated or certified; or
(c) Affirmative Covenants - (i) default shall be made in the due
observance or performance of any of the covenants or agreements contained in
Sections 9.11 (or in Section 9.6 to the extent such default is considered an
Event of Default under the other Subsections of this Sec tion 11.1) or (ii)
default is made in the due observance or performance of any of the other
covenants or agreements contained in Section 9 of this Agreement or any other
affirmative covenant of the Company or any other Relevant Party contained in
this Agreement or any other Loan Document and such default continues unremedied
for a period of 30 days after (x) notice thereof is given by the Administrative
Agent to the Company or (y) such default otherwise becomes known to the Company,
whichever is earlier; or
(d) Negative Covenants - (i) default shall be made in the observance or
performance of any of the covenants or agreements contained in Section 10.8 and
such default continues unremedied for a period of five (5) Business Days after
(x) notice thereof is given by the Administrative Agent to the Company or (y)
such default otherwise becomes known to the Parent, whichever is earlier, or
(ii) default is made in the due observance or performance by the Company or the
Parent, as the case may be, of any of the other covenants or agreements
contained in
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Section 10 of this Agreement or of any other negative covenant of the Company or
any other Relevant Party contained in this Agreement or any other Loan Document;
or
(e) Other Obligations - default is made in the due observance or
performance by the Parent or any of its Subsidiaries (as principal or guarantor
or other surety) of any of the covenants or agreements contained in any bond,
debenture, note or other evidence of Indebtedness in excess of U.S. $25,000,000
(singly or aggregating several such bonds, debentures, notes or other evidence
of Indebtedness) which default gives the holder the right to accelerate the
maturity of such Indebtedness, other than the Loan Documents, or under any
credit agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing, to
which it (respectively) is a party and such default is unwaived or continues
unremedied beyond the expiration of any applicable grace period which may be
expressly allowed under such instrument or agreement; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a receiver,
conservator, liquidator or trustee of the Parent or of any of its property is
appointed by the order or decree of any court or agency or supervisory authority
having jurisdiction, and such decree or order remains in effect for more than 60
days; or the Parent is adjudicated bankrupt or insolvent; or any of its property
is sequestered by court order and such order remains in effect for more than 60
days; or a petition is filed against the Parent under any provincial, state or
federal bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 60 days after such
filing; or
(g) Voluntary Petitions or Consents - the Parent commences a voluntary
case or other proceeding seeking liquidation, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or other relief with
respect to itself or its debt or other liabilities 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 consents 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 fails generally
to, or cannot, pay its debts generally as they become due or takes any corporate
action to authorize or effect any of the foregoing, or files a notice of
intention to make a proposal under the Bankruptcy Code; or
(h) Assignments for Benefit of Creditors or Admissions of Insolvency -
the Parent makes an assignment for the benefit of its creditors, or admits in
writing its inability to pay its debts generally as they become due, or consents
to the appointment of a receiver, trustee, or liquidator of the Parent or of all
or any part of its property; or
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(i) Undischarged Judgments - judgments (individually or in the
aggregate) for the payment of money in excess of U.S. $10,000,000 is rendered by
any court or other governmental body against the Parent or any of its
Subsidiaries and the Parent or such Subsidiary does not discharge the same or
provide for its discharge in accordance with its terms, or procure a stay of
execution thereof within 60 days from the date of entry thereof, and within said
period of 60 days from the date of entry thereof or such longer period during
which execution of such judgment will have been stayed, the Parent or such
Subsidiary fails to appeal therefrom and cause the execution thereof to be
stayed during such appeal while providing such reserves therefor as may be
required under GAAP; or
(j) Subsidiary Defaults - any Subsidiary of the Parent takes, suffers,
or permits to exist any of the events or conditions referred to in Subsections
11.1(f), (g) or (h); or
(k) Change in Control - there should occur any Change of Control.
THEREUPON: the Administrative Agent may (and, if directed by the Majority Banks,
shall) (a) declare the Commitments terminated (whereupon the Commitments shall
be terminated) and/or (b) terminate any Letter of Credit providing for such
termination by sending a notice of ter mination as provided therein and/or (c)
declare the principal amount then outstanding of and the accrued interest on the
Loans and Reimbursement Obligations and all fees and all other amounts payable
hereunder and under the Notes to be forthwith due and payable and/or (d) declare
the full face amount of all outstanding Bankers' Acceptances to be forthwith due
and payable, whereupon such amounts shall be and become immediately due and
payable, without notice (including without limitation notice of acceleration and
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company; provided that in the case of the occurrence of an Event of Default with
respect to the Parent referred to in clause (f) or (g) of this Section 11.1 or
in clause (j) of this Section 11.1 to the extent it refers to clauses (f) or
(g), the Commitments shall be automatically terminated and the principal amount
then outstanding of and the accrued interest on the Loans and Reimbursement
Obligations and all fees and all other amounts payable hereunder and under the
Notes and the full face amount of all outstanding Bankers' Acceptances shall be
and become automatically and immediately due and payable, without notice
(including but not limited to notice of intent to accelerate and notice of
acceleration) and without presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by the Company and/or (d)
exercise any and all other rights available to it under the Loan Documents, at
law or in equity.
11.2 Collateral Account. The Company hereby agrees, in addition to the
provisions of Section 11.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent or the Majority Banks (through the Administrative Agent),
pay to the Paying Agent an amount in immediately available funds equal
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to the then aggregate amount available for drawings under all Letters of Credit
issued for the account of the Company, which funds shall be held by the Paying
Agent as Cover.
11.3 Preservation of Security for Unmatured Reimbursement Obligations.
In the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to any Agent under the Loan Documents, and (ii)
payment in full of the principal amount then outstanding of and the accrued
interest on the Loans and Reimbursement Obligations and fees and all other
amounts payable hereunder and under the Notes and under the other Loan
Documents, and (iii) payment in full of the full face amount of all outstanding
Bankers' Acceptances, any Letters of Credit shall remain outstanding and undrawn
upon, the each Agent shall be entitled to hold (and the Company hereby grants
and conveys to each Agent a security interest in and to) all cash or other
property ("Proceeds of Remedies") realized or arising out of the exercise by
such Agent of any rights available to it under the Loan Documents, at law or in
equity, including, without limitation, the proceeds of any foreclosure, as
collateral for the payment of any amounts due or to become due under or in
respect of such Letters of Credit. Such Proceeds of Remedies shall be held for
the ratable benefit of the applicable Issuers. The rights, titles, benefits,
privileges, duties and obligations of each applicable Agent with respect thereto
shall be governed by the terms and provisions of this Agreement. The applicable
Agent may, but shall have no obligation to, invest any such Proceeds of Remedies
in such manner as such Agent, in the exercise of its sole discretion, deems
appropriate. Such Proceeds of Remedies shall be applied to Reimbursement
Obligations arising in respect of any such Letters of Credit and/or the payment
of any Issuer's obligations under any such Letter of Credit when such Letter of
Credit is drawn upon. The Company hereby agrees to execute and deliver to the
Administrative Agent and the Banks such security agreements, pledges or other
documents as the Administrative Agent or any of the Banks may, from time to
time, require to perfect the pledge, lien and security interest in and to any
such Proceeds of Remedies provided for in this Section 11.3.
11.4 Right of Setoff. Upon (i) the occurrence and during the
continuance of any Event of Default referred to in clauses (f), (g) or (h) of
Section 11.1, or in clause (j) of Section 11.1 to the extent it refers to
clauses (f), (g) or (h), or upon (ii) the occurrence and continuance of any
other Event of Default and upon the making of the notice specified in Section
11.1 to authorize the Administrative Agent to declare the Notes and the full
face amount of all Bankers' Acceptances outstanding due and payable pursuant to
the provisions thereof, or if (iii) the Parent or any of its Subsidiaries
becomes insolvent, however evidenced, the Banks are hereby authorized at any
time and from time to time, without notice to the Parent or any of its
Subsidiaries (any such notice being expressly waived by the Parent and its
Subsidiaries), to setoff and apply any and all deposits (general or special,
time or demand, provisional or final, whether or not such setoff results in any
loss of interest or other penalty, and including without limitation all
certificates of deposit) at any time held, and any other funds or property at
any time held, and other Indebtedness at any time owing by any Bank to or for
the credit or the account of the Company against any and all of the
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Obligations irrespective of whether or not such Bank will have made any demand
under this Agreement, any Bankers' Acceptances or the Notes and although such
obligations may be unmatured. Should the right of any Bank to realize funds in
any manner set forth hereinabove be challenged and any application of such funds
be reversed, whether by court order or otherwise, the Banks shall make
restitution or refund to the Company pro rata in accordance with their
Commitments. The Banks agree promptly to notify the Company and the
Administrative Agent and the Paying Agent after any such setoff and application,
provided that the failure to give such notice will not affect the validity of
such setoff and application. The rights of the Agents and the Banks under this
Section are in addition to other rights and remedies (including without
limitation other rights of setoff) which the Agents or the Banks may have.
Section 12. The Agents.
12.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Administrative Agent to act as arranger and
administrative agent hereunder and under the Letters of Credit and the other
Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto. Each Bank hereby irrevocably
appoints and authorizes the Paying Agent to act as co-agent and paying agent
hereunder and under the Bankers' Acceptances, the Letters of Credit and the
other Loan Documents with such powers as are specifically delegated to the
Paying Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. Each Bank hereby irrevocably appoints and
authorizes the Co-Agent to act as co-agent hereunder and under the Letters of
Credit and the other Loan Documents with such powers as are specifically
delegated to the Co-Agent by the terms hereof and thereof, together with such
other powers as are reasonably incidental thereto. None of the Agents (which
term as used in this Section 12 shall include reference to their affiliates and
their own and their affiliates' officers, directors, employees and agents) (a)
shall have any duties or responsibilities except those expressly set forth in
this Agreement, the Bankers' Acceptances, the Letters of Credit, and the other
Loan Documents, or shall by reason of this Agreement or any other Loan Document
be a trustee or fiduciary for any Bank; (b) shall be responsible to any Bank for
any recitals, statements, representations or warranties contained in this
Agreement, the Bankers' Acceptances, the Letters of Credit or any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement, the Bankers' Acceptances,
the Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Bankers' Acceptances, the Letters of Credit, or any other Loan Document or any
other document referred to or provided for herein or therein or any property
covered thereby or for any failure by any Relevant Party or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall be required to
initiate or conduct any litigation or collection proceedings hereunder or under
the Bankers' Acceptances, the Letters of Credit or any other Loan Document
except to the extent
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requested by the Majority Banks, and (d) shall be responsible for any action
taken or omitted to be taken by them hereunder or under the Bankers'
Acceptances, the Letters of Credit or any other Loan Document or any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, including, without limitation, pursuant to
their own negligence, except for their own gross negligence or wilful
misconduct. The Agents may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by them with reasonable care. Without in any way
limiting any of the foregoing, each Bank acknowledges that neither any Agent nor
any Issuer shall have any greater responsibility in the operation of the Letters
of Credit than is specified in the Uniform Customs and Practice for Documentary
Credits (1993 Revision, International Chamber of Commerce Publication No. 500).
In any foreclosure proceeding concerning any collateral for the Obligations,
each holder of an Obligation if bidding for its own account or for its own
account and the accounts of other Banks is prohibited from including in the
amount of its bid an amount to be applied as a credit against its Obligation or
Obligations or the Obligations of the other Banks; instead, such holder must bid
in cash only; provided that this provision is for the sole benefit of the Agents
and the Banks and shall not inure to the benefit of the Parent or any of its
Subsidiaries. However, in any such foreclosure proceeding, the Administrative
Agent may (but shall not be obligated to) submit a bid for all Banks (including
itself) in the form of a credit against the Notes of all of the Banks, and the
Administrative Agent or its designee may (but shall not be obligated to) accept
title to such collateral for and on behalf of all Banks.
12.2 Reliance by Agents. Each of the Agents shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by them to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel (which may be counsel for the
Company and/or the Parent and/or any Subsidiary of the Parent), independent
accountants and other experts selected by any Agent. As to any matters not
expressly provided for by this Agreement, the Bankers' Acceptances, the Letters
of Credit, or any other Loan Document, the Agents shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions of the Majority Banks (or, where unanimous consent
is required by the terms hereof or of the other Loan Documents, all of the
Banks), and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks. Pursuant to instructions of the Majority Banks (except as
otherwise provided in Section 13.4 hereof), the Administrative Agent shall have
the authority to execute releases of any Liens created by the Loan Documents on
behalf of the Banks without the joinder of any Bank.
12.3 Defaults. The Agents shall not be deemed to have knowledge of the
occurrence of a Default unless they have received notice from a Bank or the
Company specifying such Default and stating that such notice is a "Notice of
Default"; provided, however, that the Paying Agent shall be deemed to have
knowledge of the non-payment of principal of or interest on Loans or the
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full face amount of outstanding Bankers' Acceptances or Reimbursement
Obligations at the time of such non-payment. In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Banks. The Paying
Agent shall give each Bank prompt notice to the Banks of each non-payment of
principal of or interest on Loans, the full face amount of outstanding Bankers'
Acceptances or Reimbursement Obligations. The Administrative Agent shall
(subject to Section 12.7 hereof) take such action with respect to such Default
as shall be directed by the Majority Banks and within its rights under the Loan
Documents and at law or in equity, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, permitted hereby with respect to such Default as it shall
deem advisable in the best interests of the Banks and within its rights under
the Loan Documents, at law or in equity.
12.4 Rights as a Bank. With respect to their Commitments and the Loans
made, Bankers' Acceptances accepted and purchased and Letter of Credit
Liabilities, the Agents in their capacities as Banks hereunder shall have the
same rights and powers hereunder as any other Bank and may exercise the same as
though they were not acting as Agents, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agents in their individual
capacities. The Agents may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of banking,
trust, letter of credit, agency or other business with the Parent or its
Subsidiaries (and any of their Affiliates) as if they were not acting as Agents,
and the Agents may accept fees and other consideration from the Parent or its
Subsidiaries (and any of their Affiliates), in addition to the fees heretofore
agreed to between the Company and the Agents, for services in connection with
this Agreement or otherwise without having to account for the same to the Banks.
12.5 Indemnification. The Banks agree to indemnify the Agents (to the
extent not reimbursed under Section 2.2(c), Section 9.7 or Section 13.3 hereof,
but without limiting the obligations of the Company under said Sections 2.2(c),
9.7 and 13.3), ratably in accordance with their respective Commitments, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever (including but not limited to, the consequences of the negligence of
the Agents) which may be imposed on, incurred by or asserted against the Agents
in any way relating to or arising out of this Agreement, the Bankers'
Acceptances, the Letters of Credit or any other Loan Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses which the Company is obligated to pay under Sections 2.2(c), 9.8 and
13.3 hereof but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of their
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, including but not limited to the
negligence of the Agents, provided that
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no Bank shall be liable for any of the foregoing to the extent they arise from
the gross negligence or wilful misconduct of the party to be indemnified. The
obligations of the Banks under this Section 12.5 shall survive the termination
of this Agreement and the repayment of the Obligations.
12.6 Non-Reliance on Agents and Other Banks. Each Bank agrees that it
has received current financial information with respect to the Parent and its
Subsidiaries and that it has, independently and without reliance on the Agents
or any other Bank and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Parent and its Subsidiaries and
decision to enter into this Agreement and that it will, independently and
without reliance upon the Agents or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Loan Documents. The Agents shall not be required to keep
themselves informed as to the performance or observance by any Relevant Party of
this Agreement, the Bankers' Acceptances, the Letters of Credit or any of the
other Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Parent or its Subsidiaries.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agents hereunder, under the
Bankers' Acceptances, under the Letters of Credit or the other Loan Documents,
the Agents shall not have any duty or responsibility to provide any Bank with
any credit or other information concerning the affairs, financial condition or
business of the Parent or its Subsidiaries (or any of their Affiliates) which
may come into the possession of the Agents.
12.7 Failure to Act. Except for action expressly required of the Agents
hereunder, under the Bankers' Acceptances, under the Letters of Credit and under
the other Loan Documents, the Agents shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless they shall receive
further assurances to their satisfaction by the Banks of their indemnification
obligations under Section 12.5 hereof against any and all liability and expense
which may be incurred by them by reason of taking or continuing to take any such
action.
12.8 Resignation or Removal of Agents. Subject to the appointment and
acceptance of a successor Agent as provided below, any Agent may resign at any
time by giving notice thereof to the Banks and the Company, and any Agent may be
removed at any time with or without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent, provided deposits with such successor Agent shall be insured by
the Canada Deposit Insurance Corporation or its successor. If no successor Agent
shall have been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent. Any
successor Agent shall be a bank which has an office in Canada and a combined
capital and surplus of at least U.S. $250,000,000. Upon the acceptance of any
appointment as Agent
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hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. Any successor Paying Agent shall promptly specify by
notice to the Company its Payment Office referred to in Sections 3.1 and 5.1.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 12 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
Section 13. Miscellaneous.
13.1 Waiver. No waiver of any Default shall be a waiver of any other
Default. No failure on the part of any Agent or any Bank to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.
13.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable, mail or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a notice to the Company and the Administrative Agent given in accordance with
this Section 13.2. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly received when transmitted by
telex or telecopier during regular business hours, delivered to the telegraph or
cable office or personally delivered or, in the case of a mailed notice, three
(3) days after deposit in the Canadian mails, postage prepaid, registered mail
with return receipt requested (or upon actual receipt, if earlier), in each case
given or addressed as aforesaid.
13.3 Indemnification. The Company shall indemnify the Agents, the
Banks, and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject
(except as provided in clause (c) of this Section 13.3, regardless of whether
caused in whole or in part by the simple (but not gross) negligence of the
Person indemnified), insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by the Company of the
proceeds of any extension of credit (whether a Loan, Bankers' Acceptance or a
Letter of Credit) by any Bank hereunder, (ii) breach by the Company or any other
Relevant Party of this Agreement or any other Loan Document, (iii) violation by
the
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Parent or any of its Subsidiaries of any Legal Requirement, including but not
limited to those relating to Hazardous Substances, (iv) Liens or security
interests previously or hereafter granted on any real or personal property, to
the extent resulting from any Hazardous Substance located in, on or under any
such property, (v) ownership by the Banks or the Agents of any real or personal
property following foreclosure, to the extent such losses, liabilities, claims
or damages arise out of or result from any Hazardous Substance located in, on or
under such property, including, without limitation, losses, liabilities, claims
or damages which are imposed upon Persons under laws relating to or regulating
Hazardous Substances solely by virtue of ownership, (vi) Banks' or Agents' being
deemed an operator of any such real or personal property by a court or other
regulatory or administrative agency or tribunal in circumstances in which
neither any of the Agents nor any of the Banks is generally operating or
generally exercising control over such property, to the extent such losses,
liabilities, claims or damages arise out of or result from any Hazardous
Substance located in, on or under such property, (vii) investigation, litigation
or other proceeding (including any threatened investigation or proceeding)
relating to any of the foregoing, and the Company shall reimburse each Agent,
each Bank, and each Affiliate thereof and their respective directors, officers,
employees and agents, upon demand, for any expenses (including legal fees)
incurred in connection with any such investigation or proceeding or (viii) taxes
(excluding income taxes and franchise taxes) payable or ruled payable by any
Governmental Authority in respect of the principal and interest of the Loans,
the Bankers' Acceptances or any other Loan Document, together with interest and
penalties, if any; provided, however, that the Company shall not have any
obligations pursuant to this Section 13.3 with respect to any losses,
liabilities, claims, damages or expenses (a) arising from or relating solely to
events, conditions or circumstances which, as to clauses (iv), (v) or (vi)
above, first came into existence or which first occurred after the date on which
the Parent or any of its Subsidiaries conveyed to an unrelated third party all
of the Parent's or the applicable Subsidiary's rights, titles and interests to
the applicable real or personal property (whether by deed, deed-in-lieu,
foreclosure or otherwise) other than a conveyance made in violation of any Loan
Document, (b) incurred by the Person seeking indemnification by reason of the
gross negligence or wilful misconduct of such Person, (c) in the case of
liability arising with respect to Bankers' Acceptances, incurred by the Person
seeking indemnification by reason of the negligence or wilful misconduct of such
Person or (d) resulting from withholding tax liability incurred in connection
with payments made by the Company to any Agent, any Bank or any Affiliate
thereof. If the Company ever disputes a good faith claim for indemnification
under this Section 13.3 on the basis of the proviso set forth in the preceding
sentence, the full amount of indemnification provided for shall nonetheless be
paid, subject to later adjustment or reimbursement at such time (if any) as a
court of competent jurisdiction enters a final judgment as to the applicability
of any such exceptions.
13.4 Amendments, Etc. No amendment or waiver of any provision of this
Agreement, the Notes or any other Loan Document, nor any consent to any
departure by the Company or any other Relevant Party therefrom, shall in any
event be effective unless the same shall be agreed or
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consented to by the Majority Banks and the Company, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment, waiver or consent shall,
unless in writing and signed by each Bank affected thereby, do any of the
following: (a) increase the Commitment of such Bank (it being understood that
the waiver of any reduction in the Commitments or any mandatory repayment other
than (x) the repayment of all Loans at the end of the Revolving Credit
Availability Period and (y) the mandatory reductions of the Commitments provided
for in Section 2.3(a) and (z) the mandatory prepayments required by the terms of
Section 3.2(b), shall not be deemed to be an increase in any Commitment) or
subject the Banks to any additional obligation; (b) reduce the principal of, or
interest on, any Loan, Reimbursement Obligation or fee hereunder or the face
amount of any outstanding Bankers' Acceptances; (c) postpone any scheduled date
fixed for any payment or mandatory prepayment of principal of, or interest on,
any Loan, Reimbursement Obligation, fee or the face amount of any outstanding
Bankers' Acceptances or other sum to be paid hereunder; (d) change the
percentage of any of the Commitments or of the aggregate unpaid principal amount
of any of the Loans or the face amount of any outstanding Bankers' Acceptances
and Letter of Credit Liabilities, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Agreement;
(e) change any provision contained in Sections 2.2(c), 9.7 or 13.3 hereof or
this Section 13.4 or Section 6.7 hereof, or (f) release all or substantially all
of any security for the obligations of the Company under this Agreement or any
Note or all or substantially all of the personal liability of any obligor
created under any of the Loan Documents. Anything in this Section 13.4 to the
contrary, no amendment, waiver or consent shall be made with respect to Section
12 without the consent of the applicable Agent or Agents affected thereby.
13.5 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company, the Agents and the Banks and their respective successors and
assigns. The Company may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of all of the Banks. Each Bank may
sell participations to any Person which is a resident of Canada under the Income
Tax Act (Canada) in all or part of any Loan, Bankers' Acceptance or Letter of
Credit, or all or part of its Notes or Commitments, in which event, without
limiting the foregoing, the provisions of Section 6 shall inure to the benefit
of each purchaser of a participation and the pro rata treatment of payments, as
described in Section 5.2, shall be determined as if such Bank had not sold such
participation. In the event any Bank shall sell any participation, such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Company or any other Relevant Party relating to the Loans, Bankers' Acceptances
or Letters of Credit, including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement other than
amendments, modifications or waivers with respect to (i) any fees payable
hereunder to the Banks and (ii) the amount of principal or the rate of interest
payable on, or the dates fixed for the scheduled repayment of principal of, the
Loans.
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(b) Each Bank may assign to one or more Banks or any other Person, in
each case which is a resident of Canada under the Income Tax Act (Canada), all
or a portion of its interests, rights and obligations under this Agreement,
provided, however, that (i) other than in the case of an assignment to another
Bank that is, at the time of such assignment, a party hereto or an Affiliate of
such Bank which is a resident of Canada under the Income Tax Act (Canada), the
Company must give its prior written consent, which consent will not be
unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans,
the face amount of all outstanding Bankers' Acceptances or Letters of Credit of
the assigning Bank subject to each such assignment (determined as of the date
the Assignment and Acceptance (as defined below) with respect to such assignment
is delivered to the Administrative Agent) shall in no event be less than U.S.
$10,000,000 (or U.S. $5,000,000 in the case of an assignment to an Affiliate of
a Bank or between Banks), (iii) no assignment shall have the effect of reducing
the pro rata share of the Loans, the face amount of all outstanding Bankers'
Acceptances or Letters of Credit and the Commitments held by the assignor and
its Affiliates below U.S. $10,000,000, (iv) notwithstanding any other term or
provision of this Agreement, unless the Company shall have otherwise consented
in writing (such consent not to be unreasonably withheld), each such assignment
shall be pro rata with respect to the Loans, the Bankers' Acceptances, the
Letters of Credit and the Commitment of the assignor, and (v) the parties to
each such assignment shall execute and deliver to the Administrative Agent, for
its acceptance and recording in the Register (as defined below), an Assignment
and Acceptance in the form of Exhibit F hereto (each an "Assignment and
Acceptance") with blanks appropriately completed, together with any Note or
Notes subject to such assignment and a processing and recordation fee of U.S.
$2,500 paid by the assignee (for which the Company shall have no liability).
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (B) the Bank thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Bank assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Bank assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition
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of the Parent or any of its Subsidiaries or the performance or observance by the
Company or any other Relevant Party of any of its obligations under this
Agreement or any of the other Loan Documents or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 8.6 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon any Agent, such Bank assignor 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 action under
this Agreement and the other Loan Documents; (v) such assignee appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agents by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all obligations that by the terms of this Agreement
and the other Loan Documents are required to be performed by it as a Bank.
(d) The Administrative Agent shall maintain at its office a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitments of, and
principal amount of the Loans owing to, and the face amount of all Bankers'
Acceptances accepted and purchased by, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Agents and the Banks may treat each person
the name of which is recorded in the Register as a Bank hereunder for all
purposes of this Agreement and the other Loan Documents. The Register shall be
available for inspection by the Company or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and the assignee thereunder together with any Note or Notes
subject to such assignment, the written consent to such assignment executed by
the Company and the fee payable in respect thereto, the Administrative Agent
shall, if such Assignment and Acceptance has been completed with blanks
appropriately filled, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company. Within five Business Days after receipt of notice, the
Company, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for the surrendered Notes new Notes to the order of such
assignee in an amount equal to the Commitments and/or Loans or the face amount
of outstanding Bankers' Acceptances or Letters of Credit assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Bank has retained
Commitments and/or Loans hereunder, new Notes to the order of the assigning Bank
in an amount equal to the Commitment and/or Loans retained by it hereunder. Such
new Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Notes, shall be dated the effective date
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of such Assignment and Acceptance and shall otherwise be in substantially the
form of the respective Note. Thereafter, such surrendered Notes shall be marked
renewed and substituted and the originals delivered to the Company (with copies,
certified by the Company as true, correct and complete, to be retained by the
Administrative Agent).
(f) Any Bank may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 13.5, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Parent or its Subsidiaries furnished to such Bank by or on
behalf of the Parent or its Subsidiaries; provided, however, that, prior to any
such disclosure, the Parent shall have consented thereto, which consent shall
not be unreasonably withheld, and each such assignee or participant, or proposed
assignee or participant, shall execute an agreement whereby such assignee or
participant shall agree to preserve the confidentiality of any Confidential
Information (defined in Section 13.12) on terms substantially the same as those
provided in Section 13.12.
(g) The Company will have the right to consent to any material
intercreditor arrangements in connection with an assignment by any Bank of any
interest, right or obligation under this Agreement which is not pro rata with
respect to the Loans, or the face amount of outstanding Bankers' Acceptances,
the Letters of Credit and the Commitment of the assignor and the Company may
deny its consent to any such arrangements which, in the reasonable judgement of
the Company, would adversely affect the Company in a material respect.
13.6 Limitation of Interest. The Company and the Banks intend to
strictly comply with all applicable laws, including applicable usury laws.
Accordingly, the provisions of this Section 13.6 shall govern and control over
every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be character ized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall the Company or any other Person be obligated to pay, or any Bank
have any right or privilege to reserve, receive or retain, (a) any interest in
excess of the maximum amount of nonusurious interest permitted under the laws of
the Province of Alberta or the applicable laws (if any) of Canada or of any
other applicable jurisdiction, or (b) total interest in excess of the amount
which such Bank could lawfully have contracted for, reserved, received, retained
or charged had the interest been calculated for the full term of the Obligations
at the Highest Lawful Rate. On each day, if any, that the interest rate (the
"Stated Rate") called for under this Agreement or any other Loan Document
exceeds the Highest Lawful Rate, the rate at
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which interest shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain fixed at the
Highest Lawful Rate for each day thereafter until the total amount of interest
accrued equals the total amount of interest which would have accrued if there
were no such ceiling rate as is imposed by this sentence. Thereafter, interest
shall accrue at the Stated Rate unless and until the Stated Rate again exceeds
the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the Highest
Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate
per annum by the number of days in the calendar year for which such calculation
is being made. None of the terms and provisions contained in this Agreement or
in any other Loan Document which directly or indirectly relate to interest shall
ever be construed without reference to this Section 13.6, or be construed to
create a contract to pay for the use, forbearance or detention of money at an
interest rate in excess of the Highest Lawful Rate. If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of any
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason any Bank at any time,
including but not limited to, the stated maturity, is owed or receives (and/or
has received) interest in excess of interest calculated at the Highest Lawful
Rate, then and in any such event all of any such excess interest shall be
canceled automatically as of the date of such acceleration, prepayment or other
event which produces the excess, and, if such excess interest has been paid to
such Bank, it shall be credited pro tanto against the then-outstanding principal
balance of the Company's obligations to such Bank, effective as of the date or
dates when the event occurs which causes it to be excess interest, until such
excess is exhausted or all of such principal has been fully paid and satisfied,
whichever occurs first, and any remaining balance of such excess shall be
promptly refunded to its payor.
13.7 Interest Act (Canada); Interest Generally. For the purposes of
this Agreement, the Notes and the other Loan Documents, whenever interest or
fees to be paid hereunder are to be calculated on the basis of a year of 365 or
360 days, the yearly rate of interest to which the rate determined pursuant to
such calculation is equivalent is the rate so determined multiplied by the
actual number of days in the 12 month period commencing on the first day of the
period for which such calculation is made and divided by 365 or 360, as
applicable. The theory of deemed reinvestment shall not apply to the calculation
of interest or payment of fees or other amounts hereunder or under the Notes or
under the other Loan Documents, notwithstanding anything contained in this
Agreement or in the Notes or in the other Loan Documents, or in any other
instrument referred to herein or in the Notes or in the other Loan Documents,
and all interest and fees payable by the Borrower to the Lender shall accrue
from day to day and be computed as described herein or in the Notes or in the
other Loan Documents in accordance with the "nominal rate" method of interest
calculation. To the extent permitted by law, any provision of the Judgment
Interest Act (Alberta) and the Interest Act (Canada) which restricts the rate of
interest
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on any judgment debt shall be inapplicable to this Agreement and is hereby
waived by the Borrower.
13.8 Certain Saskatchewan Legislation. The Land Contracts (Actions) Act
of the Province of Saskatchewan shall have no application to any action, as
defined in the said Land Contracts (Actions) Act, with respect to this
Agreement; and the Limitation of Civil Rights Act in the Province of
Saskatchewan shall have no application to this Agreement. The Company agrees
that the provisions of both the Land Contracts (Actions) Act and the Limitation
of Civil Rights Act are hereby waived.
13.9 Survival. The obligations of the Company under Sections 2.2(c), 6,
9.7 and 13.3 hereof and the obligations of the Banks under Section 13.6 hereof
shall survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and the Letters of Credit.
13.10 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
13.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
13.12 Governing Law. This Agreement and the Notes and the Bankers'
Acceptances and (except as therein provided) the other Loan Documents are
performable in Calgary, Alberta, Canada, which shall be a proper place of venue
for suit on or in respect thereof. The Company irrevocably agrees that any legal
proceeding in respect of this Agreement or the other Loan Documents shall be
brought in the courts of the Province of Alberta and the courts of appeal
therefrom (collectively, the "Specified Courts"). The Company hereby irrevocably
submits to the nonexclusive jurisdiction of such courts. The Company hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to any Loan Document brought in any
Specified Court, and hereby further irrevocably waives any claims that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. The Company further (1) agrees to designate and maintain an
agent for service of process in Calgary, Alberta, Canada in connection with any
such suit, action or proceeding and to deliver to the Administrative Agent
evidence thereof and (2) irrevocably consents to the service of process out of
any of the aforementioned courts in any such suit, action or proceeding by the
mailing of copies thereof by registered mail, return receipt requested, postage
prepaid, to the Company at its address as provided in this Agreement or as
otherwise provided by governing law. Nothing herein shall
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<PAGE>
affect the right of any Agent or any Bank to commence legal proceedings or
otherwise proceed against the Company in any jurisdiction or to serve process in
any manner permitted by applicable law. The Company agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER
THAN THE CONFLICT OF LAWS RULES) OF THE PROVINCE OF ALBERTA AND OF CANADA FROM
TIME TO TIME IN EFFECT.
13.13 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
13.14 Confidential Information. Each Agent and each Bank separately
agrees that:
(a) As used herein, the term "Confidential Information" means written
information about the Parent or its Subsidiaries or the transactions
contemplated herein furnished by the Parent or its Subsidiaries to the Agents
and/or the Banks which is specifically designated as confidential by the Parent;
Confidential Information, however, shall not include information which (i) was
publicly known or available, or otherwise available on a non-confidential basis
to any Bank, at the time of disclosure from a source other than the Parent or
its Subsidiaries, (ii) subsequently becomes publicly known through no act or
omission by such Bank, (iii) otherwise becomes available on a non-confidential
basis to any Bank other than through disclosure by the Parent or its
Subsidiaries or (iv) has been in the possession of any Bank for a period of more
than two years from the date on which such information originally was furnished
to such Bank by the Parent or its Subsidiaries, unless the Parent shall have
requested the Agents and the Banks in writing, at least 30 days prior to the end
of such two-year period, to maintain the confidentiality of such information for
another two (2) year period (or for successive two (2) year periods); provided
that the Parent shall not unreasonably withhold its consent to a request made
after the initial two (2) year period to eliminate information from
"Confidential Information".
(b) Each Agent and each Bank agrees that it will take normal and
reasonable precautions to maintain the confidentiality of any Confidential
Information furnished to such Person; provided, however, that such Person may
disclose Confidential Information (i) upon the Parent's consent; (ii) to its
auditors; (iii) when required by any Legal Requirement; (iv) as may be required
or appropriate in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over it; (v) to
such Person's and its Subsidiaries'
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<PAGE>
or Affiliates' officers, directors, employees, agents, representatives and
professional consultants in connection with this Agreement or administration of
the Loans and Letters of Credit; (vi) as may be required or appropriate, should
such Bank elect to assign or grant participations in any of the Obligations in
connection with (1) the enforcement of the Obligations to any such Person under
any of the Loan Documents or related agreements, or (2) any potential transfer
pursuant to this Agreement of any Obligation owned by any Bank (provided any
potential transferee has been approved by the Company if required by this
Agreement, which approval shall not be unreasonably withheld, and has agreed in
writing to be bound by substantially the same provisions regarding Confidential
Information contained in this Section); (vii) as may be required or appropriate
in response to any summons or subpoena or in connection with any litigation or
administrative proceeding; (viii) to any other Bank; (ix) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under the other Loan Documents; or (x) to correct any false or misleading
information which may become public concerning such Person's relationship to the
Parent or its Subsidiaries.
13.15 Amendment and Restatement. This Agreement amends and restates in
its entirety that certain Credit Agreement dated as of December 23, 1996
executed by and among the Company, the Banks and the Agents, as amended.
13.16 Intercreditor Agreement. Reference is hereby made to the
Intercreditor Agreement, which provides for certain matters relating to both the
Obligations and the U.S. Facility. To the extent of any conflict between the
terms hereof and the terms of the Intercreditor Agreement, the Intercreditor
Agreement shall control. The execution and delivery by the Administrative Agent
of the Intercreditor Agreement on behalf of the Banks is hereby ratified and
confirmed by each of the Banks. Any Bank that becomes a party to this Agreement
after the date hereof agrees to be bound by the terms and provisions of the
Intercreditor Agreement.
13.17 Judgement Currency. Notwithstanding that this Agreement is
governed by the laws of the Province of Alberta, Canada, monies outstanding in
connection herewith may be stipulated in terms of lawful money of the United
States of America (which stipulation or expression is of the essence) and
payments to be made in regard thereto pursuant to this Agreement, or otherwise,
are and are intended to be payable in lawful money of the United States of
America; and to the extent permitted by law any judgment in respect of any such
monies outstanding as aforesaid or any obligation pertaining thereto arising
under this Agreement may be obtained or enforced either in lawful money of the
United States of America or the equivalent in lawful money of Canada, as the
Administrative Agent may elect, and the Administrative Agent shall to the extent
permitted by law be entitled to such election and the benefit (if any) from the
consequent conversion of currency at the date of payment or enforcement of the
judgment. Any such payment obligation stipulated or expressed in lawful money of
the United States of America shall not be discharged by an amount paid in lawful
money of Canada, whether pursuant to a judgment or otherwise, to the
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<PAGE>
extent that the amount so paid on prompt conversion into lawful money of the
United States of America does not, after deduction of any and all premiums
and/or costs of exchange paid or payable by the Administrative Agent in
connection with such conversion, yield the required amount of payment expressed
in terms of lawful money of the United States of America. In the event that any
payment in lawful money of Canada in respect of a payment in lawful money of
Canada in respect of a payment obligation stipulated or expressed in terms of
lawful money of the United States of America as aforesaid, whether pursuant to a
judgment or otherwise, upon conversion as aforesaid does not, after deduction of
any and all premiums and/or costs of exchange paid or payable by any Agent or
any Bank in connection with such conversion, yield the required amount expressed
in terms of lawful money of the United States of America, the Administrative
Agent shall, on behalf of and for the benefit of the affected Person, have a
separate cause of action for the additional amount required to yield the
required amount expressed in terms of lawful money of the United States of
America.
13.18 Withholding Tax Remittances. If any withholding for, or on
account of, any present or future tax, duty or charge of whatsoever nature is
imposed or levied by or on behalf of any taxing jurisdiction or authority
(together with any interest and penalties thereon and additions thereto) in
respect of any payments to be made pursuant to this Agreement or the Notes, the
Company shall be entitled to withhold and remit such payment to the applicable
taxing authority whereupon such payment, for the purposes of this Agreement and
the Notes, shall be deemed to have been made as required hereunder or under the
Notes, notwithstanding anything contained elsewhere in this Agreement or in the
Notes.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SEAGULL ENERGY CANADA LTD.
By: /s/ William L. Transier
Name: William L. Transier
Title: Vice Chairman & Chief
Financial Officer
Address for Notices:
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Steve Thorington
with a copy to:
2900 Western Canadian Place
707 8th Avenue S.W.
Calgary, Alberta T2P 2M7
Attention: Mr. Lorne Martin
95
<PAGE>
THE CHASE MANHATTAN BANK OF CANADA,
as Arranger, as Administrative Agent and as a Bank
By: /s/ D. McGorman
Name: D. McGorman
Commitment: Title: Vice President
U.S. $25,000,000
By: /s/ Alvin Bery
Name: Alvin Bery
Title: Vice President
Address for Notices:
First Canadian Place
100 King Street West, Suite 6900
Toronto, Ontario M5X 1A4
Attention: Mr. David McGorman
with copies to:
The Chase Manhattan Bank
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services
and
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Division
96
<PAGE>
THE BANK OF NOVA SCOTIA, as Paying Agent,
as Co-Agent and as a Bank
By: /s/ R. D. Lee
Commitment: Name: R. D. Lee
Title: Sr. Relationship Manager
U.S. $22,500,000
By: /s/ J. T. Cebryk
Name: J. T. Cebryk
Title: Account Officer
Address for Notices:
International Banking Division-Loan Accounting
14th Floor
44 King Street West
Toronto, Ontario CANADA M5H 1H1
Attention: Assistant Manager
with a copies to:
The Bank of Nova Scotia
Corporate Banking Calgary
Suite #3820, 700-2nd Street S.W.
Calgary, Alberta CANADA T2P 2N7
Attention: Vice President
and to:
The Bank of Nova Scotia
Suite 3000, 1100 Louisiana
Houston, Texas 77002
Attention: Mr. Mark A. Ammerman
97
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Agent and as a Bank
By: /s/ David J. Swain
Commitment: Name: David J. Swain
Title: Vice President
U.S. $22,5000,000
Address for Notices:
Oil and Gas Group
10th Floor, 855 2nd Street, S.W.
Calgary, Alberta CANADA T2P 2P2
Attention: Director
with a copy to:
Canadian Imperial Bank of Commerce
Two Houston Center, Suite 1200
909 Fannin Street
Houston, Texas 77010
Attention: Brian Myers
98
<PAGE>
ABN AMRO BANK CANADA
By: /s/ Robert Duffield
Commitment: Name: Robert Duffield
Title: Vice President
U.S. $10,000,000
By: /s/ P. K. Chan
Name: P. K. Chan
Title: Vice President, Credit
Address for Notices:
2500-650 West Georgia Street
Vancouver, British Columbia
CANADA V6B 4N8
Attention: Jane Taylor
with a copy to:
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Ms. Cheryl Lipshutz
99
<PAGE>
FIRST CHICAGO NBD BANK, CANADA
By: /s/ Dennis E. Petito
Commitment: Name: Dennis E. Petito
Title: Attorney-In-Fact
U.S. $5,000,000
Address for Notices:
BCE Place
161 Bay Street
P.O. Box 613
Toronto, Ontario CANADA M5J 2S1
Attention: Ms. Janet Beadle
with a copy to:
The First National Bank of Chicago
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention: Ms. Dixon Schultz
100
<PAGE>
BANK OF MONTREAL
By: /s/ Michael Gardner
Commitment: Name: Michael Gardner
Title: Director
U.S. $10,000,000
Address for Notices:
360-7th Avenue S.W.
24th Floor
Calgary, Alberta CANADA T29 3N9
Attention: Ms. Marge Wassenaar
101
<PAGE>
MELLON BANK
By:
Commitment: Name:
Title:
U.S. $5,000,000
Address for Notices:
Suite 3200
Royal Trust Tower
T-D Centre
Toronto, Ontario CANADA M5K 1K2
Attention: Mr. Joseph Cavanaugh
102
Approved April 29, 1997
SEAGULL ENERGY CORPORATION
1997
EXECUTIVE INCENTIVE PLAN
Background
The 1997 Executive Incentive Plan (the "Incentive Plan") for Seagull Energy
Corporation is designed to motivate key employees of the Company to achieve
tough, but realistic, performance goals and to reward those employees who
perform at or above the expected level. The Incentive Plan defines participants,
award opportunities and performance goals for the 1997 performance year. It is,
of course, based upon the 1997 Operating Plan (the "Operating Plan") and is
designed to maximize performance incentives while allowing for the recognition
of individual efforts through a significant discretionary component.
Participation
Participants in the Incentive Plan are officers or individuals whose positions
have been valued in the salary structure in and above Grade 12. These are the
persons responsible for the annual and longer-term success of the company.
Timing of Payments
Seventy-five percent of any Incentive Plan award is paid to the recipient early
in the year following the performance year, and the remaining 25% plus an
interest factor in the next year. In this case, the performance year is 1997.
The award will be determined and the first 75% increment paid in early 1998, and
the remaining installment (increased by a 10% interest factor, i.e., the
deferred payment will be 110% of such remaining installment) in early 1999. The
recipient must be an employee on the payment dates in order to receive any of
the respective payments.
Award Opportunities
Annual incentive targets are expressed as a percentage of total salary earned
during a given year and can increase to double the targeted amounts or decrease
to zero, relative to the achievement of predetermined performance goals and
subject to senior management and Board of Director discretion at year-end. The
Compensation Committee of the Board reserves the right to modify the performance
measures and award levels specified in the objective components of the Incentive
Plan if presently unforeseen circumstances should occur during the year which
invalidate any of the material assumptions that underlie the Operating Plan, or
if, in the opinion of the Compensation Committee, such modifications are
required to avoid a result that is inequitable to either the company or the
Incentive Plan participants.
<PAGE>
Performance Measures
The performance measures for the Incentive Plan are summarized on pages 3 - 7.
Four performance components are included with the following weightings:
Pre-tax cash flow from operations 20% weight
Reserve additions and production replacement costs 20% weight
Company stock performance assessment 20% weight
Discretionary individual performance assessment 40% weight
Pre-tax cash flow from operations (PCFO) - the first component is defined as
earnings before income taxes, plus operating and non-operating depreciation,
depletion and amortization, plus pre-tax incentive compensation expense, and is
based on actual corporate performance for the year as compared to the Company's
Operating Plan projection of PCFO.
Reserve additions and production replacement costs - the second component is
comprised of two subparts, reserve additions and production replacement costs,
weighted at 10% each. Using the Company's Operating Plan projections for the
Incentive Plan year, actual reserves added and actual production replacement
costs are compared to the corresponding projections for each.
Company stock performance assessment - the third component compares the
Company's average stock price for the Plan year to its average stock price for
the preceding year and then compares the resulting percentage change to the
percentage change (calculated in the same manner) for each of the peer group
companies.
Discretionary individual performance assessment - the fourth component will be
determined individually and subjectively, based on each participant's individual
job performance.
The performance components will be measured independently of the other at
year-end. At that time, the Chief Executive Officer will recommend specific
awards, subject to final approval of each element of the total awards by the
Compensation Committee and ultimately by the Board of Directors.
<PAGE>
Performance Weightings:
20% on pre-tax cash flow from operations
20% on reserve additions and production replacement cost
20% on Company stock performance assessment
40% on discretionary individual performance assessment
I. Objective Performance Assessments - 60%:
Pre-Tax Cash Flow from Operations (PCFO) - 20%
The performance award will be calculated as follows:
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3 Column 4
-------- -------- -------- --------
Pre-Tax Cash Percentage of Percentage of Percentage of Total
Flow From Operating Plan PCFOTarget Target Award
Operations (1) Projection (2) Award Earned (3) Earned (3)
-------------- -------------- ---------------- ----------
<S> <C> <C> <C>
219,575 85 0 0.00
232,491 90 25 5.00
245,407 95 60 12.00
258,323 100.00 100.00 20.00
322,904 125.00 160.00 32.00
387,485 150.00 200.00 40.00
</TABLE>
(1) Earnings before income taxes plus operating and
non-operating depreciation, depletion and amortization and also
plus pre-tax incentive compensation expense (dollars in
thousands).
(2) If subsequent events over the course of the performance year
invalidate any of the basic assumptions in the Operating Plan,
then the original Operating Plan projections will be revised to
conform the Operating Plan assumptions to reality. The initial
PCFO performance criteria for the Incentive Plan shown in Column
1 will then be adjusted by applying the percentages shown in
Column 2 to the revised Operating Plan projection of PCFO.
(3) If, after the actual PCFO for the performance year is
determined, it falls within the ranges shown in Column 1, the
exact incentive award percentages from Columns 3 and 4 will be
calculated by interpolation.
<PAGE>
Reserve Additions and Production Replacement Cost - 20%
The performance award will be comprised of two subparts as follows:
1. The first element is weighted at 10% and compares actual
reserves added during the Plan year to the Company's Operating
Plan projection for the Plan year.
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3 Column 4
-------- -------- ------- --------
Reserves Percentage of Percentage of Percentage of Total
Added Operating Plan Target Award Target Award
(BCFE) (1) Projection (2) Earned (3) Earned (3)
---------- -------------- ---------- ----------
<S> <C> <C> <C>
248.0 80.00 0.00 0.00
279.0 90.00 25.00 2.50
294.5 95.00 60.00 6.00
310.0 100.00 100.00 10.00
341.0 110.00 160.00 16.00
372.0 120.00 200.00 20.00
</TABLE>
(1) To the extent that reserves added by acquisition exceed the
Operating Plan projection of 44.1 BCFE, such excess shall be
reduced by 50 percent for purposes of this calculation.
(2) If subsequent events over the course of the performance year
invalidate any of the basic assumptions in the Operating Plan,
then the original Operating Plan projections will be revised to
conform the Operating Plan assumptions to reality. The initial
reserve addition performance criteria for the Incentive Plan
shown in Column 1 will then be adjusted by applying the
percentages shown in Column 2 to the revised Operating Plan
projection of reserve additions.
(3) If after the actual reserve additions for the performance
year are determined, the aggregate total falls between the ranges
shown in Column 1, the exact incentive award percentages from
Columns 3 and 4 will be calculated by interpolation.
<PAGE>
2. The second element is weighted at 10% and compares actual
production replacement costs for the Plan year to the Company's
Operating Plan projection for the Plan year, calculated in both
cases in the manner reflected in the Operating Plan.
<TABLE>
<CAPTION>
Column 1 Column 2 Column3 Column 4
-------- -------- ------- --------
Production Percentage of Percentage of Percentage of Total
Replacement Operating Plan Target Award Target Award
Cost (1) Projection (2) Earned (3) Earned (3)
-------- -------------- ---------- ----------
<S> <C> <C> <C>
1.056 120.00 0.00 0.00
0.968 110.00 40.00 4.00
0.880 100.00 100.00 10.00
0.792 90.00 140.00 14.00
0.704 80.00 200.00 20.00
</TABLE>
(1) Considers cost of all reserve additions, including
acquisitions.
(2) If subsequent events over the course of the performance year
invalidate any of the basic assumptions in the Operating Plan,
then the original Operating Plan projections will be revised to
conform the Operating Plan assumptions to reality. The initial
production replacement cost performance criteria for the
Incentive Plan shown in Column 1 will then be adjusted by
applying the percentages shown in Column 2 to the revised
Operating Plan projection of production replacement cost.
(3) If after the actual production replacement cost for the
performance year are determined, it falls within the ranges shown
in Column 1, the exact incentive award percentages from Columns 3
and 4 will be calculated by interpolation.
<PAGE>
Company Stock Performance Assessment - 20%
The performance award will be based upon the difference between
the Company's average stock price ("Average Price") for the
calendar year preceding performance year and the Average Price
for the performance year. The Average Price for each respective
year will be determined by dividing the number of trading days in
the year into the sum of the respective closing prices of the
Company's stock for each such trading day. The percentage change
in the Average Price from the previous year to the performance
year is calculated. Then the same comparison is made for each of
the peer group companies (1), which are listed in the Company's
Total Shareholder Return Graphs in the proxy statement, and the
Company is ranked accordingly. The performance award for this
component will then be calculated as follows:
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3
-------- -------- --------
Change In Percentage of Percentage of Total
Average Price Target Award Target Award
Relative to Peers Earned (2) Earned (2)
<S> <C> <C>
25th percentile 0.00 0.00
40th percentile 40.00 8.00
50th percentile 80.00 16.00
55th percentile 100.00 20.00
60th percentile 120.00 24.00
70th percentile 160.00 32.00
80th percentile 200.00 40.00
</TABLE>
(1) The peer group companies are: Anadarko Petroleum Corporation,
Apache Corporation, Burlington Resources Inc., Enron Oil & Gas
Company, Enserch Exploration, Inc., Equitable Resources, Inc.,
The Louisiana Land & Exploration Company, Mesa, Inc., Noble
Affiliates, Inc., Nuevo Energy Company, Oryx Energy Company,
Parker & Parsley Petroleum Company, Pogo Producing Company, Sante
Fe Energy Resources, Inc., Union Pacific Resources Group Inc.,
United Meridian Corporation and Vastar Resources Inc.
(2) If after the actual percentile is determined it falls within
the ranges shown in Column 1, the exact incentive award
percentages for Columns 2 and 3 will be calculated by
interpolation.
<PAGE>
II. Discretionary Individual Performance Assessment - 40%
The discretionary individual performance assessment will be determined
informally and subjectively on the participant's individual job
performance, based primarily on the extent to which individual and
collective goals and objectives established at the beginning of the
year are achieved.
At year-end, the Chief Executive Officer will counsel with his direct
reports in completing discretionary performance assessments for each
participant and recommend specific awards, which will be subject to
final approval by the Compensation Committee and ultimately by the
Board of Directors.
Total Plan Payout Potential:
Maximum potential is 200%
Target goal is 100%
Minimum potential is 0%
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
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0
0
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</TABLE>
