<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-9808
PLAINS RESOURCES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2898764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 SMITH STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices)
(Zip Code)
(713) 654-1414
(Registrant's telephone number, including area code)
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 ____
----
16,211,192 shares of common stock $.10 par value, issued and outstanding at May
7, 1996.
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PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
<S> <C>
Condensed Consolidated Balance Sheets:
March 31, 1996 and December 31, 1995................................ 3
Condensed Consolidated Statements of Operations:
For the three months ended March 31, 1996 and 1995.................. 4
Condensed Consolidated Statements of Cash Flows:
For the three months ended March 31, 1996 and 1995.................. 5
Notes to Condensed Consolidated Financial Statements.................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS.................................. 9
PART II. OTHER INFORMATION.......................................... 15
</TABLE>
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
-------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,853 $ 6,129
Accounts receivable and other 64,655 52,383
Inventory 4,031 5,120
--------- ----------
Total current assets 70,539 63,632
--------- ----------
PROPERTY AND EQUIPMENT
Oil and natural gas properties - full cost method:
Subject to amortization 336,259 328,712
Not subject to amortization 49,843 48,795
Downstream assets, primarily crude oil terminal and storage facility 34,570 32,788
Other property and equipment 7,305 7,789
--------- ----------
427,977 418,084
Less allowance for depreciation, depletion and amortization (142,126) (137,546)
--------- ----------
285,851 280,538
--------- ----------
DEFERRED INCOME TAXES, NET 11,000 --
OTHER ASSETS 9,460 7,876
--------- ----------
$ 376,850 $ 352,046
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 70,893 $ 56,573
Interest payable 1,159 3,977
Royalties payable and drilling advances 6,539 6,364
Notes payable and other current obligations 2,021 1,467
--------- ----------
Total current liabilities 80,612 68,381
BANK DEBT 62,400 98,000
SUBORDINATED DEBT 149,079 100,000
OTHER LONG-TERM DEBT 5,589 7,089
OTHER LONG-TERM LIABILITIES 1,407 1,547
-------- ----------
299,087 275,017
--------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 50,000,000 shares authorized;
issued and outstanding 16,183,320 at March 31, 1996,
and 16,178,670 shares at December 31, 1995 1,618 1,618
Additional paid-in capital 118,115 118,090
Accumulated deficit (41,970) (42,679)
-------- ----------
77,763 77,029
--------- ----------
$ 376,850 $ 352,046
========= ==========
</TABLE>
See notes to condensed consolidated financial statements
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
-------- ---------
REVENUE
Oil and natural gas sales $ 20,657 $ 14,689
Marketing, transportation and storage 102,790 78,886
Interest and other income 66 72
-------- ---------
123,513 93,647
-------- ---------
EXPENSES
Production expenses 9,312 6,759
Purchases, transportation and storage 100,841 77,388
General and administrative 2,058 1,898
Depreciation, depletion and amortization 4,889 3,998
Interest expense 4,197 3,285
Litigation settlement 4,000 --
-------- ---------
125,297 93,328
-------- ---------
Income (loss) before income taxes and extraordinary item (1,784) 319
Income tax expense (benefit) (11,000) --
-------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 9,216 319
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt (8,507) --
-------- ---------
NET INCOME $ 709 $ 319
======== =========
Net income (loss) per common and common equivalent share:
Primary:
Before extraordinary item $ .54 $ .03
Extraordinary item (.50) --
-------- ---------
$ .04 $ .03
======== =========
Assuming full dilution:
Before extraordinary item $ .54 $ .02
Extraordinary item (.50) --
-------- ---------
$ .04 $ .02
======== =========
Weighted average number of common and common
equivalent shares:
Primary 16,933 11,768
======== =========
Assuming full dilution 16,986 15,623
======== =========
See notes to consolidated financial statements
</TABLE>
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
- ------------------------------------------------------------------------------
<TABLE>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
<S> <C> <C>
1996 1995
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,004 $ 7,059
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of oil and natural gas properties -- 1,936
Payment for acquisition, exploration and development costs (10,123) (3,526)
Payment for additions to other property and assets (833) (195)
--------- --------
Net cash used in investing activities (10,956) (1,785)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 170,023 9,850
Principal payments of long-term debt (160,300) (7,150)
Costs incurred to redeem long-term debt (6,967) --
Payments of other long-term debt (933) (1,500)
Other (147) (30)
--------- --------
Net cash provided by financing activities 1,676 1,170
--------- --------
Net increase (decrease) in cash and cash equivalents (4,276) 6,444
Cash and cash equivalents, beginning of period 6,129 1,291
--------- --------
Cash and cash equivalents, end of period $ 1,853 $ 7,735
========= ========
See notes to condensed consolidated financial statements
</TABLE>
Page 5 of 17
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PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the SEC.
All material adjustments consisting only of normal recurring adjustments which,
in the opinion of management, were necessary for a fair statement of the results
for the interim periods, have been reflected. Certain reclassifications have
been made to the prior year statements to conform with the current year
presentation. The Company evaluates the capitalized costs of its oil and
natural gas properties on an ongoing basis and has utilized the most recently
available information to estimate its reserves at March 31, 1996, in order to
determine the realizability of such capitalized costs. Future events, including
drilling activities, product prices and operating costs, may affect future
estimates of such reserves.
NOTE 2 -- LONG-TERM DEBT AND EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
On March 19, 1996, the Company sold $150 million of Senior Subordinated Notes
due 2006, Series A, bearing a coupon rate of 10.25% (the "Series A 10.25%
Notes"). Such notes were issued pursuant to a Rule 144A private placement at
approximately 99.38% to yield 10.35%. The Series A 10.25% Notes are redeemable,
at the option of the Company, on or after March 15, 2001 at 105.13%, at
decreasing prices thereafter prior to March 15, 2004, and thereafter at 100%
plus, in each case, accrued interest to the date of redemption. In addition,
prior to March 15, 1999, up to $45 million in principal amount of the Series A
10.25% Notes are redeemable at the option of the Company, in whole or in part,
from time to time, at 110.25% of the principal amount thereof, with the Net
Proceeds (as defined) of any Public Equity Offering (as defined).
The indenture under which the Series A 10.25% Notes were issued (the
"Indenture") contains covenants including, but not limited to, covenants with
respect to the following: (i) limitations on incurrence of additional
indebtedness; (ii) limitations on certain investments; (iii) limitations on
restricted payments; (iv) limitations on disposition of assets; (v) limitations
on dividends and other payment restrictions affecting subsidiaries; (vi)
limitations on transactions with affiliates; (vii) limitations on liens; and
(viii) restrictions on mergers, consolidations and transfers of assets. In the
event of a Change of Control and a corresponding rating decline, as both are
defined in the Indenture, the Company will be required to make an offer to
repurchase the Series A 10.25% Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of the repurchase. The Series A
10.25% Notes are unsecured general obligations of the Company and are
subordinated in right of payment to all existing and future senior indebtedness
of the Company and are guaranteed by all of the Company's principal
subsidiaries.
Proceeds from the sale of the Series A 10.25% Notes, net of offering costs, were
approximately $144.9 million and were used to redeem the Company's 12% Senior
Subordinated Notes (the "12% Notes") at 106% of the $100 million principal
amount outstanding and to retire bridge bank indebtedness which was
Page 6 of 17
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incurred in December 1995 in connection with the acquisition of certain oil
properties. Prior to redemption, the 12% Notes had an average remaining life of
three years and scheduled maturities of $50 million in each of 1998 and 1999.
On May 7, 1996, the Company filed a registration statement on Form S-4 for an
offer to exchange 10.25% Senior Subordinated Notes due 2006, Series B, (the
"Series B 10.25% Notes") for all of the outstanding Series A 10.25% Notes. The
Series B 10.25% Notes are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Series A 10.25% Notes for
which they may be exchanged, except for certain transfer restrictions and
registration rights relating to the Series A 10.25% Notes and except for certain
interest provisions relating to such rights. Comments on the registration
statement have not yet been received from the SEC.
On March 19, 1996, the Company called for the redemption of the 12% Notes and
deposited $112.6 million with the trustee of the 12% Notes to cover the
principal amount called, the call premium of $6 million and $6.6 million for
accrued interest through the redemption date. The 12% Notes were redeemed on
April 18, 1996. For financial reporting purposes, the debt is considered to be
extinguished as of March 19, 1996. Accordingly, the $112.6 million on deposit
with the trustee, the $100 million principal amount of 12% Notes and the related
unamortized debt issue costs of approximately $2 million were defeased from the
Condensed Consolidated Balance Sheet at March 31, 1996, and the Company
recognized an extraordinary loss of $8.5 million.
In April 1996, the Company's revolving credit facility (the "Revolving Credit
Facility") and borrowing base thereunder was increased to $125 million from $75
million. The Revolving Credit Facility, as amended, converts to a term loan on
May 1, 1998, with a final maturity of May 1, 2003 and bears interest at the
option of the Company at LIBOR plus 1.75% or Base Rate (as defined therein) plus
.375%. The Revolving Credit Facility is guaranteed by all of the Company's
principal subsidiaries and is secured by the oil and gas properties of the
Company and its subsidiaries and the stock and personal property of all
subsidiary guarantors. At March 31, 1996, the Company had $62.4 million in
borrowings and a $1 million standby letter of credit outstanding under the
Revolving Credit Facility.
NOTE 3 -- LITIGATION SETTLEMENT
The Company and certain of its officers and directors and a former director and
officer were named in two class action lawsuits filed in 1992 and 1993 seeking
an aggregate of approximately $90 million in compensatory damages and punitive
damages in an unspecified amount for alleged violations of the federal
securities laws and state common law arising out of certain alleged
misrepresentations and omissions in the Company's disclosure regarding its
onshore natural gas exploration activities. On March 6, 1996, the Company
announced that it had notified the court that a settlement in principle had been
reached in such cases. Under the terms of the settlement, the plaintiffs agreed
to dismiss all claims against the Company and its officers and directors in
exchange for a cash payment of approximately $6.25 million. Approximately $4.1
million of such amount is expected to be paid by the Company's insurance
carrier, leaving approximately $2.1 million to be contributed by the Company.
Taking into account prior costs incurred by the Company to defend these suits,
this settlement resulted in a charge to 1996 first quarter earnings of $4
million. The settlement is subject to the approval of the court. If the
settlement is not consummated and if the Company ultimately were required to pay
a substantial portion of the $90 million in compensatory damages sought by the
plaintiffs, it would have a material adverse effect on the Company.
Page 7 of 17
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NOTE 4 -- INCOME TAXES
During the first quarter of 1996, the Company reversed $11 million of the $18.3
million valuation allowance which was reserved against its net deferred tax
asset of $18.3 million. Accordingly, a credit to deferred income tax expense of
$11 million is reflected in the accompanying Condensed Consolidated Statement of
Operations for such period. As of March 31, 1996, the valuation allowance was
approximately $7.3 million.
The reversal of the valuation allowance was due to management's belief that the
benefits derived from the net deferred tax asset will be realized prior to their
expiration. This assessment is based on the cumulative progress made by the
Company over the last three years to reduce unit expenses, increase gross
margins and substantially increase its production and proved reserves through
its acquisition and exploitation activities. This assessment was further
confirmed during the first quarter of 1996 with the sale of the Series A 10.25%
Notes, which enhanced the Company's financial flexibility and provided
additional liquidity, achievement of substantial expense reductions on a
significant property acquired late in the fourth quarter of 1995 and results of
drilling and exploitation activities. Management believes that its current oil
and natural gas properties and its downstream marketing and crude oil storage
and terminalling activities provide lower risk opportunities to generate taxable
income which can be offset by the tax net operating loss carryforwards which
comprise a significant portion of the net deferred tax asset. Despite the
significant turnaround achieved over the last four years and the current outlook
for profitability, due to the uncertainties in the oil and gas industry,
including but not limited to forecasting production, proved reserves, product
prices, production expenses and similar events beyond management's control,
there can be no assurance that the Company will generate any earnings or
specific level of continuing earnings.
NOTE 5 -- EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common and common
equivalent shares of Common Stock outstanding. Common equivalent shares include
employee stock options and warrants.
Earnings per share for the three months ended March 31, 1995, has been restated
to reflect the payment of 1995 accrued dividends on the Company's Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") through
the 1995 conversion of such series into common stock. Prior to the restatement,
the Company had previously reported a net loss of $.02 per common share for the
three months ended March 31, 1995. The previously reported amount was
calculated as if the accrued dividends on the Series C Preferred Stock would be
paid in cash.
Page 8 of 17
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Three month periods ended March 31, 1996 and 1995
For the quarter ended March 31, 1996, the Company reported net income of
$709,000, or $.04 per share, on total revenue of $123.5 million. Before the
impact of nonrecurring items, the Company reported net income of $2.2 million,
or $.13 per share. This compares with net income of $319,000, or $.02 per
share, on total revenue of $93.6 million for the first quarter of 1995. The
improvement in operating results is primarily attributable to increased oil
production and expanded unit operating margins in the upstream segment and
continued growth in the downstream segment.
Nonrecurring items during the quarter include an $8.5 million extraordinary loss
associated with the early redemption of the Company's $100 million of 12% Senior
Subordinated Notes (the "12% Notes"), a $4.0 million charge related to the
settlement of litigation and an $11.0 million tax benefit related to the
reversal of a portion of the valuation reserve against the Company's deferred
tax asset.
Cash flow from operations (net income plus noncash expenses) increased 65% to
$7.1 million as compared to $4.3 million in the first quarter of 1995. Earnings
before interest, taxes, depreciation, depletion and amortization ("EBITDA")
increased 50% to $11.3 million as compared to $7.6 million in last year's first
quarter. Such amounts are presented before the effects of the nonrecurring
items noted above. Net cash provided by operating activities, as reported in
the consolidated statements of cash flows, decreased to $5.0 million for the
three months ended March 31, 1996, as compared to $7.1 million for the 1995
comparative period primarily due to the timing of interest payments resulting
from the redemption of the 12% Notes.
The following table sets forth certain operating information of the Company for
the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------------
1996 1995
---------------------- ----------------------
AVERAGE DAILY PRODUCTION VOLUMES (in thousands, except per unit data)
(unaudited)
<S> <C> <C>
BARRELS OF OIL EQUIVALENT ("BOE")
LA Basin (91% oil) 8.7 8.1
S. Florida (100% oil) 3.2 3.6
Illinois Basin (100% oil) 3.5 --
Sold properties 0.2 1.0
------ ------
Total (94% oil) 15.6 12.7
====== ======
AVERAGE SALES PRICE
Per barrel of oil $15.22 $13.61
====== ======
Per Mcf of natural gas $ 0.79 $ 1.09
====== ======
UNIT ECONOMICS
Average sales price per BOE $14.55 $12.82
Production expenses per BOE 6.56 5.90
------ ------
Gross margin per BOE 7.99 6.92
Upstream G&A expense per BOE .91 1.09
------ ------
Gross profit per BOE $ 7.08 $ 5.83
====== ======
</TABLE>
Oil and natural gas production for the first quarter of 1996 increased to 1.4
million BOE, as compared to the 1.1 million BOE produced in last year's first
quarter. The Company's unit gross margin increased to
Page 9 of 17
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$7.99 per BOE, a 15% improvement over the $6.92 per BOE recorded in last year's
first quarter. Unit gross profit, which deducts all pre-interest cash costs
attributable to the upstream segment, was $7.08 per BOE, up 21% over 1995's
first quarter amount of $5.83 per BOE.
The quarter to quarter comparisons of production volumes and unit margins were
affected by sales of nonstrategic properties in 1995 and 1996 and the
acquisition of the Company's Illinois Basin properties in December 1995.
Production attributable to properties sold in 1995 totaled 67,000 BOE or an
average of 744 BOE per day during the 1995 first quarter. During the first
quarter of 1996, net production from the Illinois Basin properties totaled
318,000 barrels of oil or an average of 3,500 barrels of oil per day. The
Illinois Basin properties have higher unit production expenses than the
Company's other properties and also receive higher oil price realizations
against the benchmark NYMEX index price.
Oil and natural gas revenues increased 41% to $20.7 million for the first
quarter of 1996 due to increased production volumes and higher average product
prices. The Company's average wellhead price, which represents a combination of
fixed and floating price sales arrangements and incorporates location and
quality discounts from the benchmark NYMEX prices, increased 13% to $14.55 per
BOE. The increase in product price is attributable to the higher priced
Illinois Basin production and the impact on the Company's floating price barrels
of increased crude oil prices. The average crude oil spot price on the NYMEX
for the first quarter of 1996 was $19.55 per barrel, $1.20 above the $18.35 per
barrel average for the 1995 first quarter. Approximately 72% of the Company's
production was hedged during the 1996 first quarter. Financial swap
arrangements and futures transactions entered into by the Company to hedge
production are included in the foregoing product prices. Such transactions
(which do not include fixed price, physical delivery arrangements) had the
effect of decreasing the average price per BOE by $1.47 and $.46 in the first
quarter of 1996 and 1995, respectively.
The Company's oil production, revenues and unit margins in future periods will
be affected by the Company's development well at its South Florida Raccoon Point
Field which was completed in late March. The well was placed on production March
26, 1996, and averaged around 3,300 barrels of oil and 300 barrels of water per
day through its first full month of production. The Company owns a 100% working
interest (84% net revenue interest) in this well.
The Company's downstream segment reported a gross margin (marketing,
transportation and storage revenues less purchases, transportation and storage
expenses) of $2.0 million for the first quarter of 1996, reflecting an
approximate 30% increase over the $1.5 million reported for the 1995 quarter.
Gross revenues were $102.8 million and $78.9 million for the respective periods.
Such results are directly attributable to continued expansion of its base level
activities. Total average daily crude oil volumes marketed and terminalled
during the 1996 first quarter were 53,000 barrels and 59,000 barrels,
respectively. Such amounts represent respective increases of 15% and 34% as
compared with average daily volumes of 46,000 barrels and 44,000 barrels in last
year's first quarter. As a result of the relatively fixed portion of this
segment's overhead and operating infrastructure, gross profit (gross margin less
downstream general and administrative ("G&A") expenses) increased 41%, totaling
$1.2 million versus $851,000 in last year's first quarter.
Primarily as a result of the higher cost Illinois Basin production, unit
production expenses in the first quarter of 1996 increased approximately 11% to
$6.56 per BOE. Unit production expenses for the Illinois Basin properties
averaged $12.00 per barrel in the fourth quarter of 1995 but were reduced by 30%
to an average of $8.50 per barrel during the first quarter of 1996 due to
changes implemented by the Company subsequent to the December 1995 acquisition
of these properties. As a result, unit gross margin for the Illinois Basin
properties increased approximately 60% to over $9.00 per barrel. Total
production expenses
Page 10 of 17
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increased to $9.3 million from $6.8 million for the first quarter of 1995
primarily due to the acquisition of the Illinois Basin properties.
The Company extended its three year trend of reducing unit G&A expenses as unit
upstream G&A expenses decreased 17% to $.91 per BOE as compared to $1.09 per BOE
in last year's first quarter. On an annual basis, unit upstream G&A expenses
were $2.48, $1.34, $1.04 and $.99 per BOE in 1992, 1993, 1994 and 1995,
respectively. Total G&A expenses, including downstream activities, were $2.1
million for the three months ended March 31, 1996, compared to $1.9 million for
the 1995 period. The increase is primarily attributable to increased expenses
associated with the Company's downstream activities.
Depreciation, depletion and amortization ("DD&A") expense increased to $4.9
million from $4.0 million reported in the first quarter of 1995 due primarily to
higher production volumes. The Company's DD&A rate was $3.00 per BOE in both
quarters. Interest expense for the quarter ended March 31, 1996, increased to
$4.2 million from $3.3 million reported for the comparative prior year quarter
primarily due to higher outstanding debt levels.
In the first quarter of 1996, the Company recorded a $4.0 million charge related
to the settlement of litigation. The Company and certain of its officers and
directors and a former director and officer were named in two class action
lawsuits filed in 1992 and 1993 seeking an aggregate of approximately $90
million in compensatory damages and punitive damages in an unspecified amount
for alleged violations of the federal securities laws and state common law
arising out of certain alleged misrepresentations and omissions in the Company's
disclosure regarding its onshore natural gas exploration activities. On March
6, 1996, the Company announced that it had notified the court that a settlement
in principle had been reached in such cases. Under the terms of the settlement,
the plaintiffs agreed to dismiss all claims against the Company and its officers
and directors in exchange for a cash payment of approximately $6.25 million.
Approximately $4.1 million of such amount is expected to be paid by the
Company's insurance carrier, leaving approximately $2.1 million to be
contributed by the Company. Taking into account prior costs incurred by the
Company to defend these suits, this settlement resulted in a charge to 1996
first quarter earnings of $4 million. The settlement is subject to the approval
of the court.
Effective in 1992, Financial Accounting Standard 109 ("FAS 109") required
companies to record an asset or a liability, as appropriate for the net tax
position of each company as a result of temporary differences between financial
reporting standards and tax reporting requirements. However, FAS 109 also
required companies with deferred tax assets to provide a valuation allowance for
the portion of the deferred tax asset that management concluded was more likely
than not to expire before the company would generate sufficient income to
realize such tax asset. The Company adopted FAS 109 in 1992 and at such time
recorded a net tax asset of approximately $20.8 million, but also recorded a
valuation reserve against the full amount of such asset to reflect management's
uncertainty, based on all information then available, with respect to the
realization of such asset.
At December 31, 1995, the Company had a net deferred tax asset of approximately
$18.3 million. While such amount was fully reserved, management was reassessing
the Company's ability to realize a portion of such asset in light of recent and
anticipated improvement in the Company's outlook for sustained profitability.
In the first quarter of 1996, the Company reduced its valuation allowance
resulting in the immediate recognition of an $11 million credit to deferred
income tax expense. Management believes that it is more likely than not that it
will generate taxable income sufficient to realize the $11 million of unreserved
tax benefits associated with certain of the Company's Net Operating Loss ("NOL")
carryforwards prior to their expiration. The reserve adjustment incorporates
management's assessment of the significant, cumulative
Page 11 of 17
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progress made by the Company over the last three years to reduce unit expenses,
increase unit gross margins and substantially increase its production and proved
reserves through its acquisition and exploitation activities. From 1992 to 1995,
unit G&A expense declined 60%, unit gross profit increased 26% and production
and proved reserves increased 84% and 154%, respectively. Such reassessment is
also reinforced by first quarter 1996 events which include refinancing of long-
term debt, achievement of substantial expense reductions on the Illinois Basin
properties and results of drilling and other exploitation activities in the
Company's other core areas.
The remaining $7.3 million of deferred tax asset was not recognized due to
limitations imposed by the IRS regarding the utilization of NOLs generated prior
to certain of the Company's subsidiaries being acquired and the uncertainty of
utilizing the Company's investment tax credit ("ITC") carryforwards. While the
Company's tax planning strategies address certain of these restrictions on the
application of subsidiary NOLs, management is currently uncertain as to the
extent such strategies will be successful and therefore concluded that a reserve
for these amounts was appropriate.
Estimates of future taxable income generated using future net cash flows
contained in reserve reports prepared by independent consulting firms in
accordance with regulations prescribed by the Securities and Exchange Commission
(the "SEC") also indicate that the unreserved portion of such deferred tax
assets will be realized. Such reserve data was utilized in calculating the
standardized measure of discounted future net cash flows (the "Standardized
Measure") presented in the Company's year-end financial statements. See Form 10-
K, Item 2, "Properties--Oil and Natural Gas Reserves". Despite the significant
turnaround achieved over the last three years and the current outlook for
profitability, due to the uncertainties in the oil and gas industry, including
but not limited to forecasting production, proved reserves, product prices,
production expenses and similar events beyond management's control, there can be
no assurance that the Company will generate any earnings or specific level of
continuing earnings.
The Company had carryforwards of approximately $164.1 million of regular tax
NOLs at December 31, 1995, which expire as follows: 1996 - $7.2 million; 1997 -
$3.6 million; 1998 - $5.1 million; 1999 - $7.1 million; 2000 - $7.9 million;
2001 - $4.4 million; 2002 - $11.8 million; 2003 - $9.4 million; 2004 - $0; 2005
- - $7.2 million; and thereafter through 2010 - $100.4 million.
On March 19, 1996, the Company sold $150 million of Senior Subordinated Notes
due 2006, Series A, bearing a coupon rate of 10.25% (the "Series A 10.25%
Notes"). A portion of the proceeds from the Series A 10.25% Notes were used to
redeem the 12% Notes. On March 19, 1996, the Company called for the redemption
of the 12% Notes and deposited $112.6 million with the trustee of the 12% Notes
to cover the principal amount called, the call premium of $6 million and $6.6
million for accrued interest through the redemption date. The 12% Notes were
redeemed on April 18, 1996. For financial reporting purposes, the debt is
considered to be extinguished as of March 19, 1996. Accordingly, the $112.6
million on deposit with the trustee, the $100 million principal amount of 12%
Notes and the related unamortized debt issue costs of approximately $2 million
were defeased from the Condensed Consolidated Balance Sheet at March 31, 1996,
and the Company recognized an extraordinary loss of $8.5 million.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
On March 19, 1996, the Company sold $150 million of Senior Subordinated Notes
due 2006, Series A, bearing a coupon rate of 10.25%. Such notes were issued
pursuant to a Rule 144A private placement at approximately 99.38% to yield
10.35%. The Series A 10.25% Notes are redeemable, at the option of the Company,
on or after March 15, 2001 at 105.13%, at decreasing prices thereafter prior to
March 15, 2004, and thereafter at 100% plus, in each case, accrued interest to
the date of redemption. In addition, prior to March 15, 1999, up to $45 million
in principal amount of the Series A 10.25% Notes are
Page 12 of 17
<PAGE>
redeemable at the option of the Company, in whole or in part, from time to time,
at 110.25% of the principal amount thereof, with the Net Proceeds (as defined)
of any Public Equity Offering (as defined).
The indenture under which the Series A 10.25% Notes were issued (the
"Indenture") contains covenants including, but not limited to, covenants with
respect to the following: (i) limitations on incurrence of additional
indebtedness; (ii) limitations on certain investments; (iii) limitations on
restricted payments; (iv) limitations on disposition of assets; (v) limitations
on dividends and other payment restrictions affecting subsidiaries; (vi)
limitations on transactions with affiliates; (vii) limitations on liens; and
(viii) restrictions on mergers, consolidations and transfers of assets. In the
event of a Change of Control and a corresponding rating decline, as both are
defined in the Indenture, the Company will be required to make an offer to
repurchase the Series A 10.25% Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of the repurchase. The Series A
10.25% Notes are unsecured general obligations of the Company and are
subordinated in right of payment to all existing and future senior indebtedness
of the Company and are guaranteed by all of the Company's principal
subsidiaries.
Proceeds from the sale of the Series A 10.25% Notes, net of offering costs, were
approximately $144.9 million and were used to redeem the 12% Notes at 106% of
the $100 million principal amount outstanding and together with amounts borrowed
under the Company's revolving credit facility (the "Revolving Credit Facility")
to retire the Illinois Basin acquisition bridge indebtedness. Prior to
redemption, the 12% Notes had an average remaining life of three years and
scheduled maturities of $50 million in each of 1998 and 1999.
On May 7, 1996, the Company filed a registration statement on Form S-4 for an
offer to exchange 10.25% Senior Subordinated Notes due 2006, Series B, (the
"Series B 10.25% Notes") for all of the outstanding Series A 10.25% Notes. The
Series B 10.25% Notes are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Series A 10.25% Notes for
which they may be exchanged, except for certain transfer restrictions and
registration rights relating to the Series A 10.25% Notes and except for certain
interest provisions relating to such rights. Comments on the registration
statement have not yet been received from the SEC.
In April 1996, the Revolving Credit Facility and borrowing base thereunder was
increased to $125 million from $75 million. The Revolving Credit Facility, as
amended, converts to a term loan on May 1, 1998, with a final maturity of May 1,
2003 and bears interest at the option of the Company at LIBOR plus 1.75% or Base
Rate (as defined therein) plus .375%. The Revolving Credit Facility is
guaranteed by all of the Company's principal subsidiaries and is secured by the
oil and gas properties of the Company and its subsidiaries and the stock and
personal property of all subsidiary guarantors. At March 31, 1996, the Company
had $62.4 million in borrowings and a $1 million standby letter of credit
outstanding under the Revolving Credit Facility.
At March 31, 1996, the Company had a working capital deficit of approximately
$10.1 million compared to a deficit of $4.7 million at December 31, 1995. The
Company has historically operated with a working capital deficit due primarily
to ongoing capital expenditures that have been financed through cash flow and
the Revolving Credit Facility.
Investing and Financing Activities
Net cash flows used in investing activities were $11.0 million and $1.8 million
for the three months ended March 31, 1996 and 1995, respectively. Investing
activities include payments for acquisition, exploration and development costs
of $10.1 million and $3.5 million for these same periods, respectively. Also
Page 13 of 17
<PAGE>
included in investing activities are proceeds from the sale of certain minor
properties of $1.9 million for the three months ended March 31, 1995.
Net cash provided by financing activities amounted to $1.7 million and $1.2
million for the three months ended March 31, 1996 and 1995, respectively.
Financing activities during 1996 include net proceeds of approximately $144.9
million from the Series A 10.25% Notes, approximately $107 million for the
repayment of the 12% Notes, including the 6% call premium and the net defeasance
costs and approximately $42 million for the repayment of the Illinois Basin
acquisition bridge indebtedness. Included in both years are net proceeds from
borrowings under the Revolving Credit Facility as a result of acquisition,
exploration and development activities.
Changing Oil and Natural Gas Prices
The Company is heavily dependent on crude oil prices which have
historically been volatile. Although the Company has routinely hedged a
substantial portion of its crude oil production and intends to continue
this practice, future crude oil price declines would have a negative impact
on the Company's overall results, and therefore its liquidity.
Furthermore, low crude oil prices could affect the Company's ability to
raise capital on terms favorable to the Company. For the remainder of
1996, the Company has committed an average of approximately 11,600 barrels
of oil per day to fixed price arrangements that expire at various times
throughout 1996 at a NYMEX index price (before location and quality
discounts) of approximately $18 per barrel. Such arrangements represent
approximately 75% of the Company's 1995 average daily oil production pro
forma for the acquisition of the Illinois Basin properties and partially
mitigate the adverse impact of potential oil price declines on the
Company's operating results.
Page 14 of 17
<PAGE>
PART II. OTHER INFORMATION
Item 1 - On April 27, 1992, the Company and certain of its officers and
directors and a former director and officer were named as defendants in a
lawsuit filed in the United States District Court for the Southern District of
Texas captioned Judith Rubinstein and Howard Greenwald v. Collins, et al., C.A.
No. H-92-1297. The complaint brought a class action (the class period of which
is October 23, 1991, through April 13, 1992) for, among other things, alleged
violations of Sections 10(b) and 20(a) of the Exchange Act and for state law
fraud and negligent misrepresentation, arising out of certain alleged
misrepresentations and omissions in the Company's disclosures regarding its
onshore natural gas exploration activities. The plaintiffs, who purport to have
purchased their Common Stock in open market transactions (300 and 375 shares,
respectively), contend the class is entitled to approximately $30 million for
compensatory damages and punitive damages in an unspecified amount. The Company
filed a motion to dismiss in July 1992. On August 24, 1992, the Court entered
an Order of Dismissal and a Final Judgment dismissing the plaintiffs' complaint
for failure to state a claim under the federal securities laws and/or under the
common law of the State of Texas. On September 10, 1992, the plaintiffs filed a
Notice of Appeal of the District Court's judgment with the United States Court
of Appeals for the Fifth Circuit (No. 92-2736). On May 5, 1994, the Fifth
Circuit Court ruled, among other things, that the plaintiffs had sufficiently
pleaded claims under the federal securities laws and under Texas common law and
reversed the trial court's dismissal and remanded the case to the trial court
for further proceedings.
On July 27, 1993, a second case similar to the Rubinstein case described in the
preceding paragraph was filed in the United States District Court for the
Southern District of Texas captioned Gloria Moroson v. Collins, et al., C.A. No.
H-93-2305, naming the Company and certain of its officers and directors and a
former director and officer as defendants. The complaint brought a class action
(the class period of which is May 11, 1992, through August 14, 1992) for, among
other things, alleged violations of Sections 10(b) and 20(a) of the Exchange Act
and for state law fraud and negligent misrepresentation, arising out of certain
alleged misrepresentations and omissions in the Company's disclosures regarding
its onshore natural gas exploration activities. The plaintiff, who purported to
have purchased 50 shares of Common Stock in an open market transaction, contends
the class is entitled to approximately $60 million for compensatory damages and
punitive damages in an unspecified amount. These amounts were alleged to be in
addition to the damages claimed in the Rubinstein case. In June 1994, the trial
court granted the Company's motion to consolidate the Rubinstein and Moroson
cases. On February 20, 1996, the Court denied the Company's motion for summary
judgment in these two cases and set a trial date for May 8, 1996.
On March 6, 1996, the Company announced that it had notified the Court that a
settlement in principle had been reached in the Rubinstein and Moroson cases.
Under the terms of the settlement, the plaintiffs agreed to dismiss all claims
against the Company and its officers and directors in exchange for a cash
payment of approximately $6.25 million. Approximately $4.1 million of such
amount is expected to be paid by the Company's insurance carrier, leaving
approximately $2.1 million to be contributed by the Company. Taking into
account prior costs incurred by the Company to defend these suits, this
settlement resulted in a charge to 1996 first quarter earnings of approximately
$4 million. The settlement is subject to the approval of the Court. If the
settlement is not consummated and if the Company ultimately were required to pay
a substantial portion of the $90 million in compensatory damages sought by the
plaintiffs, it would have a material adverse effect on the Company.
Page 15 of 17
<PAGE>
On July 9, 1987, Exxon filed an interpleader action in the United
States District Court for the Middle District of Florida, Exxon Corporation v.
E. W. Adams, et al., Case Number 87-976-CIV-T-23-B. This action was filed by
Exxon Corporation ("Exxon") to interplead royalty funds as a result of a title
controversy between certain mineral owners in the Raccoon Point field in the
Sunniland Trend in Florida. One group of mineral owners, John W. Hughes, et al.
(the "Hughes Group"), filed a counterclaim against Exxon alleging fraud,
conspiracy, conversion of funds, declaratory relief, federal and Florida RICO
violations, breach of contract and accounting, as well as challenging the
validity of certain oil and natural gas leases owned by Exxon, and seeking
exemplary and treble damages. In March 1993, but effective November 1, 1992,
Calumet Florida Inc. ("Calumet"), a wholly-owned subsidiary of the Company,
acquired all of Exxon's leases in the field affected by this lawsuit. In order
to address those counterclaims challenging the validity of certain oil and
natural gas leases, which constitute approximately 10% of the lands underlying
this unitized field, Calumet filed a motion to join Exxon as plaintiff in the
subject lawsuit, which was granted July 29, 1994. In August 1994, the Hughes
Group amended its counterclaim to add Calumet as a counter-defendant. Exxon and
Calumet filed a motion to dismiss the counterclaims. On March 22, 1996, the
Court granted Exxon's and Calumet's motion to dismiss the counterclaims alleging
fraud, conspiracy, and federal Florida RICO violations and challenging the
validity of certain of the Company's oil and natural gas leases but denied such
motion as to the counterclaim alleging conversion of funds. The Company
believes that the counterclaim alleging conversion of funds is without merit and
intends to vigorously defend against such claim. No trial date has been set in
this case.
Item 2 - None
Item 3 - None
Item 4 - None
Item 5 - None
Item 6 -
A. Exhibits
10(n) Third Amended and Restated Credit Agreement dated as of April
11, 1996, between Plains Resources Inc., Internationale Nederlanden (U.S.)
Capital Corporation, The First National Bank of Boston, Den norske Bank AS,
First Interstate Bank of Texas, N.A., and Texas Commerce Bank National
Association.
11. Computation of per share earnings
27. Financial Data Schedule
B. Report on Form 8-K
The Company filed a Current Report on Form 8-K dated March 5, 1996,
reporting under Item 5 thereof the commencement of the offering of $125 million
of Senior Subordinated Notes.
Page 16 of 17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS RESOURCES INC.
Date: May 9, 1996 By:/s/ Cynthia A. Feeback
----------- ----------------------
Cynthia A. Feeback, Controller and
Principal Accounting Officer
(Principal Accounting Officer)
Page 17 of 17
<PAGE>
Ehibit 10(n)
- --------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
-----------------------------------------
PLAINS RESOURCES INC.
and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
as Agent
and
CERTAIN INSTITUTIONS
as Lenders
-----------------------------------------
$125,000,000
April 11, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions and Accounting Matters.................... 1
1.01 Certain Defined Terms................................. 1
1.02 Oil and Gas Terms..................................... 14
1.03 Accounting Terms and Determinations................... 14
1.04 Types of Loans........................................ 15
Section 2. The Commitment........................................ 15
2.01 Loans................................................. 15
2.02 Borrowings............................................ 16
2.03 Changes of Commitment................................. 16
2.04 Commitment and Agency Fees............................ 17
2.05 Lending Offices....................................... 17
2.06 Notes................................................. 17
2.07 Prepayments and Conversions or Continuations of Loans. 18
2.08 Borrowing Base........................................ 18
2.09 Support Letter of Credit.............................. 20
Section 3. Payments of Principal and Interest.................... 21
3.01 Repayment of Term Loans............................... 21
3.02 Interest.............................................. 22
Section 4. Payments; Computations; Etc. ......................... 22
4.01 Payments.............................................. 22
4.02 Computations.......................................... 23
4.03 Minimum Amounts....................................... 24
4.04 Certain Notices....................................... 24
4.05 Set-off............................................... 25
Section 5. Yield Protection, Etc. ............................... 25
5.01 Additional Costs...................................... 25
5.02 Limitation on Types of Loans.......................... 27
5.03 Illegality............................................ 27
5.04 Treatment of Affected Loans........................... 28
5.05 Compensation.......................................... 28
Section 6. Conditions Precedent.................................. 28
6.01 Initial Loan.......................................... 29
6.02 Initial and Subsequent Loans.......................... 30
i
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 7. Representations and Warranties.................... 31
7.01 Corporate Existence............................... 31
7.02 Financial Condition............................... 31
7.03 Litigation........................................ 31
7.04 No Breach......................................... 32
7.05 Due Execution..................................... 32
7.06 Approvals......................................... 32
7.07 Use of Loans...................................... 32
7.08 ERISA............................................. 32
7.09 Taxes............................................. 32
7.10 Investment Company Act............................ 33
7.11 Public Utility Holding Company Act................ 33
7.12 Titles to Oil and Gas Properties.................. 33
7.13 Foreign Assets Control Regulations, Etc. ......... 34
7.14 Gas Imbalances.................................... 34
7.15 Rate Filings...................................... 34
7.16 Qualification to Hold Federal Oil and Gas Leases.. 35
7.17 Drilling and Operations........................... 35
7.18 Payments by Purchasers of Production.............. 35
7.19 Credit Agreements................................. 35
7.20 Hazardous Materials............................... 36
7.21 Subsidiaries and Partnerships..................... 38
7.22 True and Complete Disclosure...................... 38
7.23 No Election to be Treated as a Utility............ 38
Section 8. Covenants of the Company.......................... 39
8.01 Financial Statements.............................. 39
8.02 Litigation........................................ 41
8.03 Corporate Existence, Etc. ........................ 42
8.04 Engineering Reports............................... 42
8.05 Acquisition of Oil and Gas Properties............. 43
8.06 Insurance......................................... 45
8.07 Prohibition of Fundamental Changes................ 46
8.08 Limitation on Liens............................... 47
8.09 Indebtedness...................................... 48
8.10 Investments....................................... 49
8.11 Dividend Payments................................. 50
8.12 Tangible Net Worth................................ 50
8.13 Current Ratio..................................... 50
8.14 Subordinated Indebtedness......................... 50
8.15 Lines of Business................................. 52
8.16 Transactions with Affiliates...................... 52
8.17 Use of Proceeds................................... 52
8.18 Certain Obligations Respecting Subsidiaries....... 52
8.19 Additional Subsidiary Guarantors.................. 52
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.20 Environmental Matters; Environmental Reviews...... 53
8.21 Environmental Indemnification..................... 53
8.22 Environmental Certification....................... 53
8.23 Modifications of Certain Documents................ 54
8.24 Gas Imbalances.................................... 54
8.25 Sale of Oil and Gas Properties.................... 54
8.26 Partnership Units; New Partnerships............... 55
8.27 Amendments of Partnership Agreements.............. 55
8.28 Notice to Purchasers of Production................ 55
8.29 Restrictions on Plains Marketing.................. 55
8.30 Lien Releases..................................... 56
8.31 Additional Security............................... 56
8.32 Post Closing Curative............................. 56
8.33 Hedging Contracts................................. 56
8.34 Transactions with PMCT............................ 57
Section 9. Events of Default................................. 58
Section 10. Agent............................................. 61
10.01 Appointment and Authority........................ 61
10.02 Exculpation, Agent's Reliance, Etc. ............. 61
10.03 Lenders' Credit Decisions........................ 62
10.04 Indemnification.................................. 62
10.05 Rights as Lender................................. 62
10.06 Sharing of Set-Offs and Other Payments........... 63
10.07 Investments...................................... 63
10.08 Benefit of Section 10............................ 63
10.09 Resignation...................................... 64
Section 11. Miscellaneous.................................... 64
11.01 Waiver........................................... 64
11.02 Notices.......................................... 64
11.03 Expenses, Etc. .................................. 64
11.04 Amendments, Etc. ................................ 66
11.05 Successors and Assigns........................... 66
11.06 Assignments and Participation.................... 66
11.07 Survival......................................... 68
11.08 Captions......................................... 68
11.09 Counterparts..................................... 68
11.10 Governing Law; Submission to Jurisdiction........ 68
11.11 Waiver of Jury Trial, Punitive Damages, Etc. .... 69
11.12 Rate of Interest................................. 70
11.13 Release of Liens................................. 71
11.14 Confidentiality.................................. 71
</TABLE>
iii
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 6.01(g) - Security Documents
Schedule 7.01 - Licenses, Franchises, Etc.
Schedule 7.02 - Contingent Liabilities
Schedule 7.03 - Litigation
Schedule 7.12 - Unmortgaged Oil and Gas Properties
Schedule 7.19 - Credit Agreements
Schedule 7.21 - Subsidiaries, Partnerships and Investments
Schedule 8.01(c) - Immaterial Partnerships
Schedule 8.08 - Existing Liens
Schedule 8.09 - Indebtedness
Exhibit A - Promissory Note
Exhibit B-1 - Amended and Restated Guaranty of Subsidiary Guarantors
other than Stocker Resources, L.P., Calumet Florida,
Inc. and Plains Illinois Inc.
Exhibit B-2 - Amended and Restated Guaranty of Stocker
Resources, L.P., Calumet Florida, Inc. and Plains
Illinois Inc.
Exhibit C - Opinion of Michael R. Patterson, Esq., General Counsel
to Obligors
Exhibit D - Opinion of Fulbright & Jaworski L.L.P., special Texas
and New York counsel to Obligors
Exhibit E - Environmental Compliance Certificate
Exhibit F - Agreement to Be Bound and Assignment and Acceptance
iv
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated as
---------
of April 11, 1996, by and among PLAINS RESOURCES INC., a corporation duly
organized and validly existing under the laws of the state of Delaware (the
"Company"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
-------
corporation, as agent for the Lenders ("Agent"), and the Lenders named herein,
-------
amending and restating the Original Agreement referred to herein.
W I T N E S S E T H
WHEREAS, the Company, Agent and Lenders entered into that certain Second
Amended and Restated Credit Agreement dated as of February 11, 1994, as amended
(the "Original Agreement"), providing for extensions of credit by Lenders to the
------------------
Company up to the amount of $75,000,000; and
WHEREAS, the Company has requested that Agent and Lenders amend and
restate the Original Agreement to (i) renew and extend the aggregate unpaid
principal balance of the loans under the Original Agreement, as evidenced by the
Notes (herein defined), and (ii) provide for the extension of additional credit
to the Company, such balance and such additional credit to be in an aggregate
principal amount of up to but not exceeding $125,000,000, and Agent and Lenders
are prepared to amend and restate the Original Agreement and renew, extend and
increase such credit upon the terms and conditions hereof; and
WHEREAS, to induce Lenders to renew and extend such credit, certain
subsidiaries of the Company will execute and deliver guaranties guaranteeing the
Obligations (herein defined) of the Company to Lenders, and the Company and
certain of its subsidiaries will execute mortgages and security agreements
granting, confirming, amending and/or ratifying security interests and liens on
substantially all of their respective properties as collateral security for the
obligations of the Obligors (as defined herein) to Lenders (or in favor of Agent
for the benefit of Lenders) hereunder, each of the Obligors expecting to derive
benefit, direct or indirect, from the credit so extended to the Company, both in
its separate capacity and as a member of the integrated group.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used herein, the following terms shall
---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Adjusted Borrowing Base" shall mean, at any time, an amount equal to (i)
-----------------------
the Borrowing Base in effect at such time minus (ii) the aggregate amount at
such time that Lenders might be called upon to advance under the Support Letter
of Credit.
<PAGE>
"Affiliate" shall mean any Person which directly or indirectly controls,
---------
or is under common control with, or is controlled by, the Company and, if such
Person is an individual, any member of the immediate family (including parents,
spouse and children) 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 its 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), provided that, in any event, any Person which owns
--------
directly or indirectly 5% or more of the securities having ordinary voting power
for the election of directors or other governing body of a corporation or 5% or
more of the partnership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agent" shall have the meaning assigned to such term in the first
-----
paragraph of this Agreement as agent hereunder, and its successors in such
capacity.
"Applicable Lending Office" shall mean the Principal Office or, with
-------------------------
respect to any Type of Loan, such other office of each Lender (or of an
affiliate of such Lender) as such Lender may from time to time specify to the
Company as the office by which the Loans of such Type are to be made and
maintained.
"Applicable Margin" shall mean (i) with respect to Base Rate Loans three-
-----------------
eighths percent (0.375%) per annum and (ii) with respect to Eurodollar Loans,
one and three-quarters percent (1.75%) per annum.
"Bank of Boston/ING Capital Facility" shall mean, collectively, two
-----------------------------------
uncommitted secured demand transactional line of credit facilities, in an
aggregate amount not to exceed $80,000,000, dated August 23, 1995 among The
First National Bank of Boston, individually and as agent, Internationale
Nederlanden (U.S.) Capital Corporation, the other lenders named therein and (i)
Plains Marketing, and (ii) PMCT, together with the security documents and other
documents and agreements executed in connection with each such facility.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code, as amended from
---------------
time to time.
"Base Rate" shall mean, for any day, the higher of (a) the Federal Funds
---------
Rate for such day plus one-half percent (0.5%) per annum and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans which bear interest at rates based
---------------
upon the Base Rate.
2
<PAGE>
"Basic Documents" shall mean, collectively, this Agreement, the Notes,
---------------
the Security Documents and each Hedging Agreement.
"Borrowing Base" shall mean, at any time, an amount equal to the amount
--------------
determined in accordance with Section 2.08 hereof.
"Business Day" shall mean any day on which commercial banks are not
------------
authorized or required to close in New York City or Houston, Texas and, if such
day relates to a borrowing of, a payment or prepayment of principal of or
interest on, or a Conversion of or into, or an Interest Period for, Eurodollar
Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, Conversion or Interest Period, which is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"CERCLA" has the meaning given it in Section 7.20(d).
------
"CERCLIS" has the meaning given it in Section 7.20(d).
-------
"Chief Financial Officer" shall mean the senior executive officer of the
-----------------------
Company who is primarily responsible for the financial affairs of the Company.
"Closing Date" shall mean the date upon which the conditions precedent to
------------
the initial Loan hereunder set forth in Section 6 hereof have been satisfied and
the initial extension of credit hereunder made.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Commitment" shall mean the obligation of Lenders to make Loans in an
----------
aggregate amount at any one time outstanding up to but not exceeding
$125,000,000, as the same may be reduced at any time or from time to time
pursuant to Sections 2.03(a), (b) or (c).
"Company" shall have the meaning assigned to such term in the first
-------
paragraph of this Agreement.
"Company Reserve Reports" shall have the meaning assigned to such term in
-----------------------
Section 8.04(b) hereof.
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary of
-----------------------
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Continue", "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.07(a) hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
3
<PAGE>
"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.07(a) hereof of Base Rate Loans into Eurodollar Loans or
of Eurodollar Loans into Base Rate Loans, which may be accompanied by the
transfer by a Lender (at its sole discretion) of a Loan from one Applicable
Lending Office to another.
"Default" shall mean an Event of Default or an event which with notice or
-------
lapse of time or both would become an Event of Default.
"Dividend Payment" shall mean dividends (in cash, Property or
----------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company, but excluding (i) dividends payable solely in
shares of common stock of the Company, and (ii) dividends from a Subsidiary of
the Company to the Company.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Engineering Report" shall mean any Independent Reserve Report or Company
------------------
Reserve Report.
"Environmental Affiliate" shall mean, as to any Person (the "successor"),
----------------------- ---------
any other Person whose liability (contingent or otherwise) for an Environmental
Claim the successor may have retained, assumed or otherwise become or remained
liable for suits or other procedures (contingently or otherwise), whether by
contract, operation of law or otherwise; provided that each Subsidiary of the
--------
successor, and each former Subsidiary or division of the successor transferred
to another Person, shall in any event be an "Environmental Affiliate" of the
successor; provided, further, that whenever reference is made to liabilities or
-------- -------
properties of an Environmental Affiliate, such reference shall exclude the
liabilities of the Environmental Affiliate which the successor did not retain,
assume or otherwise become or remain liable for and the properties of the
Environmental Affiliate which were not acquired in any manner by the successor
for and with respect to which the successor did not retain or assume or
otherwise become liable for any liability on any Environmental Claims.
"Environmental Claim" shall mean, with respect to any Person, any notice,
-------------------
claim, demand, order, citation, complaint, penalty assessment or other
communication (whether written or oral) by any other Person alleging or
asserting such Person's liability for investigatory costs, cleanup costs,
governmental response costs, damages to natural resources or other Property,
personal injuries, fines or penalties arising out of, based on or resulting from
(a) the presence, or Release into the environment, of any Hazardous Material at
any location, whether or not owned by such Person, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" shall mean any and all applicable Federal, state,
------------------
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses, agreements
or other governmental restrictions
4
<PAGE>
relating to the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment, including, without
limitation, ambient air, surface water, groundwater or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which
---------------
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or is under common control (within
the meaning of Section 414(c) of the Code) with the Company.
"Eurodollar Loans" shall mean Loans the interest rates on which are
----------------
determined on the basis of rates based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
---------------
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) reported, on the date two Business Days prior to the first day of
such Interest Period, on Telerate Access Service Page 3750 (British Bankers
Association Settlement Rate) as the London Interbank Offered Rate for dollar
deposits having a term comparable to such Interest Period and in an amount of
$1,000,000 or more (or, if such Page shall cease to be publicly available or if
the information contained on such Page, in Agent's sole judgment, shall cease to
accurately reflect such London Interbank Offered Rate, such rate as reported by
any publicly available source of similar market data selected by Agent that, in
Agent's sole judgment, accurately reflects such London Interbank Offered Rate).
"Events of Default" shall have the meaning assigned to such term in
-----------------
Section 10 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be such rate as reported by any
publicly available source of similar market data selected by Agent that, in
Agent's sole judgment, accurately reflects such rate on overnight Federal funds
transactions.
"Financial Statements" shall have the meaning assigned to such term in
--------------------
Section 7.02 hereof.
5
<PAGE>
"GAAP" shall mean generally accepted accounting principles applied on a
----
basis consistent with those which, in accordance with Section 1.03(a) hereof,
are to be used in making the calculations for purposes of determining compliance
with the terms of this Agreement.
"Guaranty" shall mean a guaranty, an endorsement, a contingent agreement
--------
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guaranty of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of his or its obligations
or an agreement to assure a creditor against loss, including, without
limitation, causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guaranty" and "Guaranteed" used as a verb shall have a
-------- ----------
correlative meaning.
"Hazardous Materials" shall have the meaning assigned to such term in
-------------------
Section 7.20(b) hereof.
"Hedging Agreement" shall mean (i) any currency rate swap, rate cap, rate
-----------------
floor, rate collar, exchange transaction, forward rate agreement, or other
exchange or rate protection agreements or any option with respect to any such
transaction now existing or hereafter entered into between any Obligor and Agent
or any Lender or (ii) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection agreements
relating to crude oil, natural gas or other hydrocarbons, or any option with
respect to any such transaction now existing or hereafter entered into between
any Obligor and Agent or any Lender.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
---------------------
estates in and to oil and gas leases, oil, gas and mineral leases, or other
liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty
and royalty interests, net profits interests and production payment interests,
including any remainder or reversionary interest of whatever nature, and the
lands covered or affected thereby.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
------------
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all constituents, elements or compounds thereof and products
refined therefrom.
"Indebtedness" shall mean, for any Person (without duplication): (a)
------------
indebtedness created, issued or incurred by such Person for borrowed money
(whether by loan or the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of
6
<PAGE>
Property or services, other than trade accounts payable (other than for borrowed
money) arising, and accrued expenses incurred, in the ordinary course of
business so long as such trade accounts payable or accrued expenses are payable
within 120 days of the date the respective goods are delivered or the respective
services are rendered; (c) indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) indebtedness of others
Guaranteed by such Person; (f) past due obligations of such Person (including,
without limitation, any joint interest billings) that are more than 60 days past
due in respect of leases, operating agreements, gas balancing agreements, farm-
out agreements, capital lease obligations, purchase and sale agreements and
other agreements and instruments pertaining to the Properties mortgaged to
Lenders (or Agent for the benefit of Lenders) pursuant to the Security
Documents; (g) production payments in connection with Oil and Gas Properties of
such Person; (h) uncovered or unhedged obligations of such Person arising under
futures contracts, forward contracts, or other commodity agreements; (i)
obligations of such Person in respect of an interest rate swap, cap or collar
agreement or similar arrangement providing for the transfer or mitigation of
interest risks generally or under specific contingencies; (j) indebtedness of
such Person arising under leases serving as a source of financing or otherwise
capitalized in accordance with GAAP (but excluding customary oil, gas and
mineral leases); and (k) obligations of such Person arising under conditional
sales or other title retention agreements.
"Independent Reserve Reports" shall have the meaning assigned to such
---------------------------
term in Section 8.04(a) hereof.
"Initial Reserve Reports" shall mean the Independent Reserve Reports
-----------------------
dated (i) February 29, 1996 by Ryder Scott Company, (ii) March 4, 1996 by H.J.
Gruy and Associates, Inc., and (iii) March 7, 1996 by Netherland, Sewell &
Associates, Inc., each as of January 1, 1996.
"Interest Period" shall mean, with respect to any Eurodollar Loan, each
---------------
period commencing on the date such Eurodollar Loan is made or Converted from a
Base Rate Loan or the last day of the next preceding Interest Period for such
Loan and ending on the numerically corresponding day in the third calendar month
thereafter, as the Company may select as provided in Section 4.04 hereof, except
that each Interest Period which commences on the last Business Day of a calendar
month (or 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. Notwithstanding the foregoing: (i) no
Interest Period may commence before and end after any Quarterly Date unless,
after giving effect thereto, the aggregate principal amount of the Loans having
Interest Periods which end after such Quarterly Date shall be equal to or less
than the aggregate principal amount of the Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on such
Quarterly 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,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding
7
<PAGE>
Business Day); and (iii) notwithstanding clause (i) above, no Interest Period
shall have a duration of less than one month and, if the Interest Period for any
Eurodollar Loan would otherwise be a shorter period, such Loan shall not be
available hereunder.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
short sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including, without limitation, the
purchase of Property from another person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person, but
excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies sold
in the ordinary course of business); or (c) the entering into of any Guaranty
of, or other contingent obligation with respect to, Indebtedness or other
liability of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person.
"Lenders" means each signatory hereto (other than the Company), including
-------
Internationale Nederlanden (U.S.) Capital Corporation in its capacity as a
Lender hereunder rather than as Agent, and the successors of each as holder of a
Note.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge (including, without limitation, production payments and the like
burdening such Properties), security interest, preferential right to purchase,
right of first refusal, call on production or other burden or encumbrance of any
kind in respect of such Property. For purposes of this Agreement, the Company
or any of its Subsidiaries or any Partnership shall be deemed to own subject to
a Lien any Property 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 Property.
"Loans" shall mean the loans provided for by Section 2.01 hereof and
-----
shall include Revolving Credit Loans and Term Loans.
"Majority Lenders" shall mean Lenders having Percentage Shares equal to
----------------
one hundred percent (100%).
"Margin Stock" shall mean margin stock within the meaning of Regulations
------------
U and X.
"Material Adverse Effect" shall mean a material adverse effect on any of
-----------------------
the following, either individually or in the aggregate with all other events and
circumstances then existing which would be a Default if such events or
circumstances were to have a Material Adverse Effect: (a) the consolidated
financial condition, business, operations or prospects taken as a whole of the
Company and its Consolidated Subsidiaries, (b) the ability of the Company to
perform its obligations under any of the Basic Documents or (c) the aggregate
value of the
8
<PAGE>
security provided to Lenders (or Agent for the benefit of Lenders) under the
Security Documents.
"Material Subsidiary" shall mean, at any time, a Subsidiary of the
-------------------
Company which as of such time meets the definition of a "significant subsidiary"
contained as of the date hereof in Regulation S-X of the Securities and Exchange
Commission.
"Maximum Rate" shall mean, with respect to Agent and each Lender, the
------------
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
other Obligations under laws from time to time applicable to Agent or such
Lender.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Notes" shall mean the notes provided for by Section 2.06 hereof. "Note"
-----
shall mean any of the Notes.
"Obligations" shall mean, as at any date of determination thereof, all
-----------
obligations of the Obligors, now existing or hereafter arising, owing to Agent
or any Lender under this Agreement, the Notes or any other Basic Document,
whether for principal, interest, fees, expenses or otherwise.
"Obligors" shall mean the Company and each of the Subsidiary Guarantors.
--------
"Oil and Gas Properties" shall mean the Hydrocarbon Interests; the
----------------------
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization agreements, pooling agreements and
declarations of pooled units and the units created thereby (including, without
limitation, all units created under orders, regulations and rules of any
governmental body or agency having jurisdiction) which may affect all or any
portion of the Hydrocarbon Interests; all operating agreements, contracts and
other agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange, transporting, treating or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced from or attributable to the
Hydrocarbon Interests, the lands covered thereby and all oil in tanks and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in anywise appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, Properties, rights, titles, interests
and estates described or referred to above, including any and all Property, real
or personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property primarily located or used elsewhere but
which may be on such premises for the purpose of drilling a well or for other
similar temporary uses) and including any and all oil wells, gas
9
<PAGE>
wells, injection wells or other wells, buildings, structures, improvements, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods, surface
leases, rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.
"Original Agreement" shall have the meaning assigned to such term in the
------------------
second paragraph of this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Partnerships" shall mean the partnerships in which the Company or any of
------------
its Subsidiaries owns a general partnership interest (including, without
limitation, those listed in Schedule 7.21 hereof) other than (i) any partnership
regarded as such solely for Federal income tax purposes if such partnership has
made or is deemed to have made an election to be excluded from Subchapter K,
Chapter 1, Subtitle A of the Code as permitted by Section 761 of the Code and
the regulations thereunder and (ii) any partnership of which all of the
partnership interests are owned, directly or indirectly, by the Company and/or
any of its Subsidiaries.
"Percentage Share" shall mean, with respect to any Lender (a) when used
----------------
in Section 2.01 or when no Loans are outstanding hereunder, the percentage set
forth opposite such Lender's name on the signature pages of this Agreement, or
with respect to a Person who shall become a Lender after the date of this
Agreement, the percentage of the Commitment and Loans assigned to and assumed by
such Lender, as set forth in the assignment made pursuant to Section 11.06(b),
and (b) when used otherwise, the percentage equal to the unpaid principal
balance of such Lender's Loans at the time in question divided by the aggregate
unpaid principal balance of all Loans at such time.
"Permitted Investments" shall mean, for any Person: (a) direct
---------------------
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America, or of any agency thereof, in either case maturing not more than 90 days
from the date of acquisition thereof by such Person; (b) certificates of deposit
issued by (i) Bank First of Oklahoma not exceeding an aggregate principal amount
of $1,500,000 or (ii) any bank or trust company organized under the laws of the
United States of America or any state thereof and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than 90 days from
the date of acquisition thereof by such Person; and (c) commercial paper rated
A-1 or better or P-1 by Standard & Poor's Corporation or Moody's Investors
Services, Inc., respectively, maturing not more than 90 days from the date of
acquisition thereof by such Person.
10
<PAGE>
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plains Marketing" shall mean Plains Marketing & Transportation, Inc., a
----------------
Delaware corporation and a Wholly-Owned Subsidiary of the Company and the
corporate successor to Sunnybrook Transmission, Inc.
"Plan" shall mean an employee benefit or other plan established or
----
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"PMCT" shall mean PMCT Inc., a Delaware corporation, a Wholly-Owned
----
subsidiary of the Company.
"Post-Default Rate" shall mean, in respect of any principal of any Loan
-----------------
or any other amount under this Agreement, the Notes or any other Basic Document
that is not paid when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid in
full equal to 3% above the Base Rate as in effect from time to time plus the
Applicable Margin (provided that, if the amount so in default is principal of a
Eurodollar Loan and the due date thereof is a day other than the last day of an
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period from and including such due date to but excluding the last day of
such Interest Period, 3% above the interest rate for such Loan as provided in
Section 3.02(b) hereof and, thereafter, the rate provided for above in this
definition). In no event shall the Post-Default Rate exceed the Maximum Rate.
"Prime Rate" shall mean the arithmetic average of the rates of interest
----------
publicly announced by The Chase Manhattan Bank (National Association), Citibank,
N.A. and Morgan Guaranty Trust Company of New York (or their respective
successors) as their respective prime commercial lending rates (or, as to any
such bank that does not announce such a rate, such bank's "base" or other rate
determined by Agent to be the equivalent rate announced by such bank), except
that, if any such bank shall, for any period, cease to announce publicly its
prime commercial lending (or equivalent) rate, Agent shall, during such period,
determine the "Prime Rate" based upon the arithmetic average of the prime
commercial lending (or equivalent) rates announced publicly by the other such
banks.
"Principal Office" shall mean the principal office of each Lender, as set
----------------
forth on the signature pages hereto.
"Property" shall mean any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Quarterly Dates" shall mean the first Business Day of May, August,
---------------
November and February in each year, the first of which shall be the first such
day after the Closing Date.
11
<PAGE>
"Regulations D, U and X" shall mean, respectively, Regulations D, U and X
----------------------
of the Board of Governors of the Federal Reserve System (or any successor), as
the same may be amended or supplemented from time to time.
"Regulatory Change" shall mean any change after the date of this
-----------------
Agreement in United States Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks (including any Lender who is such a bank) of or under any United States
Federal, state or foreign law or regulations (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" shall have the meaning assigned to such term in Section 7.20(b)
-------
hereof.
"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
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
or (ii) any category of extensions of credit or other assets which includes
Eurodollar Loans.
"Revolving Credit Loan" shall have the meaning assigned to such term in
---------------------
Section 2.01(a) hereof.
"Revolving Credit Termination Date" shall mean the earlier of (a) May 1,
---------------------------------
1998 and (b) the date on which the Commitment is reduced to zero or terminated
pursuant to Section 2.03 hereof.
"Security Documents" shall mean, collectively, each Security Document
------------------
listed on Schedule 6.01(g) attached hereto and all Uniform Commercial Code
financing statements required by this Agreement or any Security Document to be
filed with respect to the security interests in personal Property and fixtures
created pursuant to any Security Document and all other security agreements,
deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing
statements, continuation statements, extension agreements and other agreements
or instruments now, heretofore, or hereafter delivered by the Company and any of
its Subsidiaries to, Agent or any Lender in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any other duties and obligations
under the Basic Documents.
"Senior Subordinated Indenture" shall mean that certain Indenture dated
-----------------------------
as of March 15, 1996 among the Company, Subsidiary Guarantors and Texas Commerce
Bank
12
<PAGE>
National Association, as Trustee, as amended or modified from time to time in
compliance with Section 8.23.
"Senior Subordinated Notes" shall mean the 10 1/4% senior subordinated
-------------------------
notes due 2006 in the aggregate principal amount of $150,000,000 issued by the
Company pursuant to the Senior Subordinated Indenture.
"Society of Petroleum Engineers" shall mean the Society of Petroleum
------------------------------
Engineers of the American Institute of Petroleum or any successor organization
or, if there is no successor organization, a similar organization designated by
Agent.
"Subordinated Indebtedness" shall mean, collectively, (i) Indebtedness of
-------------------------
the Company and its Subsidiaries listed in Schedule 8.09 hereto which is
identified as subordinated indebtedness on such Schedule 8.09, (ii) Indebtedness
of the Company evidenced by the Senior Subordinated Notes and the Indebtedness
of its Subsidiaries from time to time evidenced by the guaranties of such Senior
Subordinated Notes, and (iii) other Indebtedness for which the Company is
directly and primarily liable, in respect of which none of its Subsidiaries is
contingently or otherwise obligated and which is subordinated to the obligations
of the Company to pay principal of and interest on the Loans and the Notes
hereunder on terms satisfactory to Majority Lenders, which contain other terms
(including interest rate, amortization and financial covenants) satisfactory to
Majority Lenders and where the aggregate Indebtedness of the Company and the
Company's ability to pay its Indebtedness when due, after giving effect to such
Subordinated Indebtedness, is satisfactory to Majority Lenders.
"Subsidiary" shall mean, for any Person, any corporation or other entity
----------
of which at least a majority of the securities or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation or other entity 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 such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person; provided that the term
--------
"Subsidiary" shall not include any of the Partnerships other than any
----------
Partnership of which all of the partnership interests are owned, directly or
indirectly, by the Company and/or any of its Subsidiaries. "Wholly-Owned
------------
Subsidiary" shall mean any such corporation or other entity of which all of such
- ----------
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are so owned or controlled.
"Subsidiary Guaranty" shall mean a Guaranty guaranteeing some or all of
-------------------
the Obligations executed by one or more Subsidiary Guarantors or any Subsidiary
of the Company which now or hereafter executes and delivers a Guaranty in favor
of Lenders (or Agent for the benefit of Lenders), as the same shall be amended,
modified and supplemented and in effect from time to time. "Subsidiary
Guaranties" shall mean, collectively, all Subsidiary Guaranties.
13
<PAGE>
"Subsidiary Guarantor" shall mean each of the following Subsidiaries of
--------------------
the Company: Stocker Resources, L.P., Calumet Florida, Inc., Plains Illinois
Inc., Plains Marketing & Transportation Inc., Plains Resources International
Inc., Plains Terminal & Transfer Corporation, PRI Producing Inc., PLX Crude
Lines Inc., Stocker Resources, Inc. and PLX Ingleside Inc.
"Support Letter of Credit" shall mean that certain Letter of Credit No.
------------------------
672917 dated August 23, 1995, issued by Agent for the benefit of The First
National Bank of Boston, as agent, for the account of the Company, in the face
amount of $1,000,000, expiring June 30, 1996, as from time to time extended or
replaced, which secures a guaranty by the Company of the Indebtedness of Plains
Marketing and its Wholly-Owned Subsidiaries under the Bank of Boston/ING Capital
Facility.
"Tangible Net Worth" shall mean, as at any date, the sum for the Company
------------------
and its Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, plus
(b) the amount of surplus and retained earnings (or in the case of a
surplus or retained earnings deficit, minus the amount of such deficit), minus
(c) the sum of the following: cost of treasury shares and the book value
of all assets which should be classified as intangibles (without duplication of
deductions in respect of items already deducted in arriving at surplus and
retained earnings) but in any event including goodwill, research and development
costs, trademarks, trade names, copyrights, patents and franchises, unamortized
debt discount and expense, all reserves and any write-up in the book value of
assets resulting from a revaluation thereof subsequent to December 31, 1995.
"Term Loan" shall have the meaning assigned to such term in Section
---------
2.01(b) hereof.
"Type" shall have the meaning assigned that term in Section 1.04 hereof.
----
1.02 Oil and Gas Terms. As used herein, the terms "reserves," "proved
-----------------
reserves," "proved developed reserves," "proved developed producing reserves,"
"proved developed nonproducing reserves" and "proved undeveloped reserves" shall
have the meanings given such terms from time to time by the Society of Petroleum
Engineers.
1.03 Accounting Terms and Determinations. (a) Except as otherwise
-----------------------------------
expressly provided herein, all accounting terms used herein shall be
interpreted, all determinations and calculations 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 to Agent and
Lenders hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time applied on a basis
consistent with that used in the
14
<PAGE>
preparation of the latest financial statements furnished to Agent and Lenders
hereunder (which, prior to the first financial statements delivered under
Sections 8.01(a), (b) and (c) hereof, shall mean the financial statements
referred to in Section 7.02 hereof).
(b) To enable the ready and consistent determination of compliance with
the covenants set forth in Sections 8.12 and 8.13 hereof, the Company will not
change the last day of its fiscal year from December 31, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31, June 30
and September 30, respectively.
1.04 Types of Loans. Loans hereunder are distinguished by "Type". The
--------------
"Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar
Loan, each of which constitutes a Type.
Section 2. The Commitment.
--------------
2.01 Loans. (a) Each Lender agrees, on the terms of this Agreement,
-----
to make revolving credit loans to the Company in Dollars during the period from
and including the Closing Date to but excluding the Revolving Credit Termination
Date (each, such Lender's "Revolving Credit Loans") in an aggregate principal
----------------------
amount at any one time outstanding up to but not exceeding the amount of such
Lender's Percentage Share of the Commitment as in effect from time to time,
provided that at no time shall the Revolving Credit Loans outstanding be in
- --------
excess of the Adjusted Borrowing Base as then in effect. Subject to the terms
of this Agreement, during such period the Company may borrow, repay and reborrow
up to the amount of the lesser of the Commitment and the amount of the Adjusted
Borrowing Base by means of Base Rate Loans and Eurodollar Loans and may Convert
Revolving Credit Loans of one Type into Revolving Credit Loans of another Type
(as provided in Section 2.07(a) hereof) or Continue Revolving Credit Loans of
one Type as Revolving Credit Loans of the same Type; provided that no more than
--------
three separate Interest Periods in respect of Eurodollar Loans may be
outstanding at any one time.
(b) Each Lender agrees, on the terms of this Agreement, to make a term
loan to the Company by converting the Revolving Credit Loans pursuant to Section
3.01(a) hereof, in Dollars on the Revolving Credit Termination Date (such
Lender's "Term Loan") in an amount up to but not exceeding the aggregate unpaid
---------
principal amount of such Lender's Revolving Credit Loans outstanding at the
opening of business on the Revolving Credit Termination Date, provided that the
--------
Term Loans shall not exceed the Adjusted Borrowing Base as then in effect.
Thereafter, the Company may Convert Term Loans of one Type into Term Loans of
another Type (as provided in Section 2.07(a) hereof) or Continue Term Loans of
one Type as Term Loans of the same Type; provided that no more than three
--------
separate Interest periods in respect of Eurodollar Loans may be outstanding at
any one time.
2.02 Borrowings. The Company shall give Agent notice of each borrowing
----------
hereunder as provided in Section 4.04 hereof, after which Agent shall give each
Lender prompt written notice thereof. On the date specified for each borrowing
hereunder, each Lender shall, subject to the terms and conditions of this
Agreement, promptly remit to Agent at Agent's Principal
15
<PAGE>
Office the amount of such Lender's Percentage Share of such borrowing in
immediately available funds, and upon receipt of such funds, subject to the
terms and conditions of this Agreement, Agent shall promptly make available the
amount of such borrowing to the Company by depositing the same, in immediately
available funds, in an account of the Company designated by the Company. Unless
Agent shall have received prompt notice from a Lender that such Lender will not
make available to Agent such Lender's Percentage Share of a requested borrowing,
Agent may in its discretion assume that such Lender has made its Percentage
Share of such requested borrowing available to Agent in accordance with this
section and Agent may if it chooses, in reliance upon such assumption, make such
borrowing available to the Company and shall use its best efforts to notify the
Company of such action, provided, however, that any failure by Agent to notify
-------- -------
the Company of such action shall not in any way or manner diminish, nullify or
reduce the Company's and such Lender's obligations in the following sentence.
If and to the extent such Lender shall not so make its Percentage Share of such
requested borrowing available to Agent, such Lender and the Company severally
agree to pay or repay to Agent within three days after demand the amount of such
Lender's Percentage Share of such requested borrowing together with interest
thereon, for each day from the date such amount is made available to the Company
until the date such amount is paid or repaid to Agent, such interest to be paid
(i) by such Lender at the Federal Funds Rate plus $200 per day, and (ii) by the
----
Company at the interest rate applicable at the time to the remainder of the
requested borrowing made on such date. The failure of any Lender to make its
Percentage Share of any requested borrowing available to Agent hereunder shall
not relieve any other Lender of its obligation hereunder, if any, to make its
Percentage Share of such requested borrowing available to Agent, but no Lender
shall be responsible for any other Lender's failure to make its Percentage Share
of any requested borrowing available to Agent.
2.03 Changes of Commitment. (a) The Company shall make any mandatory
---------------------
prepayments required by Section 2.07(b) hereof resulting from such Commitment
reduction on the date of such Commitment reduction. The reduction in the
Commitment under this Section 2.03(a) shall be in addition to any reduction in
the Commitment pursuant to Section 2.03(b) below.
(b) The Company shall have the right at any time or from time to time (i)
so long as no Loans are outstanding, to terminate the Commitment and (ii) to
reduce the unused amount of the Commitment; provided that (x) the Company shall
--------
give notice of each such termination or reduction as provided in Section 4.04
hereof, and (y) each partial reduction shall be in an amount at least equal to
$500,000 and in multiples of $100,000 in excess thereof.
(c) The Commitment shall be automatically reduced to zero at the close of
business on the Revolving Credit Termination Date.
(d) The Commitment once terminated or reduced may not be reinstated.
2.04 Commitment and Agency Fees. (a) The Company shall pay to Agent
--------------------------
for the account of each Lender a commitment fee on the lesser of the daily
average unused amount of such Lender's Percentage Share of the Commitment and
the daily average unused amount of
16
<PAGE>
the Adjusted Borrowing Base, for the period from and including the date hereof
to but not including the earlier of the date the Commitment is terminated and
the Revolving Credit Termination Date, at a rate per annum equal to one-half of
one percent (0.5%). Accrued commitment fees (including commitment fees accruing
under the Original Agreement during the period from January 1, 1996 through and
including the date hereof) shall be payable on each Quarterly Date and on the
earlier of the date the Commitment is terminated or the Revolving Credit
Termination Date.
(b) The Company shall pay to Agent for its own account an agency fee
pursuant to a letter agreement of even date herewith between Agent and the
Company.
2.05 Lending Offices. The Loans of each Type shall be made and
---------------
maintained at each Lender's Applicable Lending Office for Loans of such Type.
2.06 Notes. (a) Each Lender's Loans shall be evidenced by a single
-----
promissory note (such Lender's "Note" and collectively, the "Notes") of the
---- -----
Company substantially in the form of Exhibit "A" hereto, dated the Closing Date,
payable to such Lender at the Principal Office of Agent, in a principal amount
equal to the amount of such Lender's Percentage Share of the Commitment as
originally in effect and otherwise duly completed, such Notes to be given in
renewal and extension of, but not in extinguishment or novation of, those
certain Promissory Notes dated December 20, 1995 in the original aggregate
principal amount of $75,000,000 issued by the Company under the Original
Agreement.
(b) The date, amount, Type, interest rate, and duration of Interest
Period (if applicable) of each Loan made by each Lender to the Company, and each
payment made on account of the principal thereof, shall be recorded by Agent on
its books and by such Lender on its books and, prior to any transfer of such
Lender's Note, endorsed by such Lender on the schedule attached to such Lender's
Note or any Continuation thereof; provided that the failure of such Lender to
--------
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under such Lender's Note.
(c) No Lender shall be entitled to have its Note subdivided, by exchange
for promissory notes of lesser denominations or otherwise, except in connection
with a permitted assignment of all or any portion of its Percentage Share of the
Commitment, its Loans and its Note pursuant to Section 11.06(b) hereof.
2.07 Prepayments and Conversions or Continuations of Loans. (a)
-----------------------------------------------------
Optional. Subject to Section 4.03 hereof, the Company shall have the right to
- --------
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue Loans of one Type as Loans of the same Type, at any time or from time
to time; provided that: (i) the Company shall give Agent and each Lender notice
--------
of each such prepayment, Conversion or Continuation as provided in Section 4.04
hereof and (ii) a Eurodollar Loan may be prepaid or converted only on the last
day of an Interest Period for such Loan. Notwithstanding the foregoing, and
without limiting the rights and remedies of Agent and Lenders under Section 10
hereof, in the event that any Event of Default shall have occurred and be
continuing, Majority Lenders may suspend the
17
<PAGE>
right of the Company to Convert any Loan into a Eurodollar Loan, or to Continue
any Loan as a Eurodollar Loan, in which event all Loans shall be Converted (on
the last day(s) of the respective Interest Periods therefor) or Continued, as
the case may be, as Base Rate Loans.
(b) Mandatory. The Company shall from time to time prepay the Loans in
---------
such amounts as shall be necessary so that at all times (i) the aggregate
outstanding principal amount of the Revolving Credit Loans and the Term Loans,
as the case may be, shall be less than or equal to the Adjusted Borrowing Base
then in effect (unless the Company shall have provided additional collateral
acceptable to Majority Lenders in their sole discretion) and (ii) the aggregate
outstanding principal amount of the Revolving Credit Loans shall be less than or
equal to the Commitment then in effect.
(c) Inverse Order. After the Revolving Credit Termination Date, all
-------------
optional and mandatory prepayments made on the Term Loans pursuant to Sections
2.07(a) and (b) above shall be applied to the scheduled installments of the Term
Loans in inverse order of their maturity.
2.08 Borrowing Base. (a) During the period commencing on the Closing
--------------
Date and ending on the date the first redetermination of the Borrowing Base
becomes effective, the Borrowing Base shall be $125,000,000.
(b) Majority Lenders shall endeavor on each May 1 and October 1,
commencing on October 1, 1996, and may at any time upon the occurrence of any
event or change which in the reasonable judgment of such Majority Lenders would
have a Material Adverse Effect or a material adverse change in the value or
nature of the Oil and Gas Properties included in the Borrowing Base from the
most recent redetermination pursuant to this Section 2.08 or upon the incurrence
of additional Subordinated Indebtedness, of not less than $10,000,000,
redetermine the amount of the Borrowing Base in accordance with this Section
2.08. The Company may from time to time request in writing a redetermination of
the Borrowing Base (a "Special Redetermination") on a date other than May 1 or
------- ---------------
October 1, by delivering to each Lender additional Company Reserve Reports and
other relevant information (including, without limitation, as to any additional
Indebtedness of the Obligors) that any Lender may request and as otherwise
provided in Section 8.04 hereof.
(c) Upon receipt of each Engineering Report required by Section 8.04
hereof or as furnished pursuant to Section 2.08(b) hereof and such other
financial statements, reports, data and supplemental information as may from
time to time be reasonably requested by any Lender, together with a certificate
from a senior officer of the Company that (i) to the best of his knowledge, the
information upon which such Engineering Report is based is true and complete in
all material respects, (ii) identifies the properties covered by such
Engineering Report that have not been previously included in any prior
Engineering Reports, (iii) no Properties mortgaged to Lenders (or Agent for the
benefit of Lenders) pursuant to the Security Documents have been sold since the
date of the last Borrowing Base determination except as set forth on an exhibit
to the certificate, listing all Properties mortgaged to Lenders (or Agent for
the benefit of Lenders) pursuant to the Security Documents sold in such detail
as
18
<PAGE>
reasonably required by Agent, (iv) except as set forth on an exhibit to the
certificate, the Company owns good and defensible title to the Oil and Gas
Properties included in such Engineering Report free of all Liens except as
permitted by Section 8.08 hereof, (v) Lenders (or Agent for the benefit of
Lenders) have valid first and prior liens pursuant to the Security Documents on
not less than 80% of the value of all Oil and Gas Properties included in such
Engineering Report, and (vi) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take-or-pay or other
prepayments with respect to such Oil and Gas Properties which would require the
Company to deliver Hydrocarbons produced from such Oil and Gas Properties at
some future time, without then or thereafter receiving full payment therefor,
which would (1) exceed $100,000 for any individual well, (2) exceed $250,000 in
the aggregate or (3) with respect to any individual material well, exceed the
proved developed producing reserves attributable to such well. Based upon such
information and such other information as any Lender, in its sole reasonable
discretion, deems appropriate, Majority Lenders shall endeavor to determine a
new Borrowing Base in accordance with the principles described below.
(d) Determination of the Borrowing Base shall be made by Majority
Lenders, in good faith, in the exercise of their respective sole discretion, and
in accordance with their respective customary practices and standards in effect
from time to time for oil and gas loans to borrowers similar to the Company. In
determining the Borrowing Base, Majority Lenders shall adjust the reserve
volumes and economics as required by such respective practices and standards of
such Lenders. Majority Lenders shall evaluate the proved developed producing
reserves and proved developed nonproducing reserves; provided that Majority
--------
Lenders may, in their respective sole discretion, take into account in
determining the Borrowing Base proved undeveloped reserves. Notwithstanding
anything to the contrary contained herein, Majority Lenders may, in their
respective sole discretion, exclude from the Borrowing Base any Oil and Gas
Properties as to which Lenders (i) have not received (x) title opinions that are
reasonably acceptable to Agent issued by attorneys competent in the examination
of land titles in the states in which such Oil and Gas Properties are located or
(y) other verification of title acceptable to Agent in its sole discretion and
(ii) do not (or Agent for the benefit of Lenders does not) have a valid first
priority perfected Lien pursuant to the Security Documents. Prices used may be
the prices actually being received by the Company or the prices set by Majority
Lenders from time to time and utilized generally in evaluating their respective
other oil and gas loans. The pricing, escalation rate and discount factor may
be changed from time to time by Majority Lenders in accordance with their
respective current oil and gas lending criteria. Majority Lenders' evaluation
may consider, but shall not be limited to the following: (i) the Properties
included in the Engineering Reports which are Properties mortgaged to Lenders
(or Agent for the benefit of Lenders) pursuant to the Security Documents, (ii)
the degree of title assurance and Lien priority concerning the Properties
mortgaged to Lenders (or Agent for the benefit of Lenders) pursuant to the
Security Documents, (iii) the production history of the reserves of the Company,
its Subsidiaries and the Partnerships, (iv) take-or-pay, gas balancing,
operating and other agreements affecting the reserves of the Company, its
Subsidiaries and the Partnerships, (v) nature of ownership of the reserves, (vi)
the existence of other collateral, (vii) the financial condition of the Company,
its Subsidiaries and the Partnerships, (viii) the existence of all Liens
affecting the Properties of the Company, its Subsidiaries and the Partnerships,
and (ix) the total
19
<PAGE>
Indebtedness of the Company, its Subsidiaries and the Partnerships and the debt
service thereon.
(e) Each redetermination of the Borrowing Base shall be effective and
applicable for all purposes of this Agreement until the effective date of the
next redetermination. Agent shall promptly notify the Company in writing of
each redetermination of the Borrowing Base made by Majority Lenders. Until such
notification, the Borrowing Base established for the immediately preceding
period shall remain in effect, and thereafter the new Borrowing Base as set
forth in such notification shall be in effect.
2.09 Support Letter of Credit. (a) The Company and Lenders hereby
------------------------
acknowledge and agree that (i) the Support Letter of Credit shall be deemed to
have been issued hereunder, (ii) the reimbursement obligations of the Company
relating to the Support Letter of Credit constitute Obligations hereunder, (iii)
such Obligations are secured by the Security Documents, including without
limitation the Subsidiary Guaranties, and (iv) the Support Letter of Credit and
any related applications and agreements executed in connection therewith are
Basic Documents.
(b) Upon the honoring by Agent of any draft or demand under the Support
Letter of Credit, such payment shall constitute a loan by Agent to the Company.
The Company hereby promises to pay to Agent, or to Agent's order, immediately on
demand, the full amount of such Obligation. Upon such demand by Agent of the
full amount of such Obligations, Lenders may without notice to the Company, but
shall have no obligation to, make Revolving Credit Loans to the Company in the
amount of such Obligation, which shall be immediately used by Agent to repay
such Obligation. Commencing upon demand by Agent for payment of any Obligation
resulting from honoring such draft or demand under the Support Letter of Credit,
interest shall accrue on the unpaid portion thereof for the account of the
Company at the Post-Default Rate. Agent may, but shall have no obligation to,
notify the Company of the presentation of any such draft or demand prior to
honoring such draft, and, upon any such notice, the Company may request Lenders
to make Revolving Credit Loans to the Company in the amount of such draft or
demand, which Revolving Credit Loans may be made concurrently with Agent's
payment of such draft or demand and shall be immediately used by Agent to repay
the amount of the Obligation resulting from honoring such draft or demand. Any
such request by the Company shall comply in all respects with the provisions of
this Agreement.
(c) Agent irrevocably agrees to grant and hereby grants to each Lender,
and each Lender irrevocably agrees to accept and purchase and hereby accepts and
purchases from Agent, on the terms and conditions hereinafter stated and for
such Lender's own account and risk an undivided interest equal to such Lender's
Percentage Share of Agent's obligations and rights under the Support Letter of
Credit and the amount of each draft or demand paid by Agent thereunder. Each
Lender unconditionally and irrevocably agrees with Agent that, if any such draft
or demand is paid for which Agent is not reimbursed in full by the Company in
accordance with the terms hereof and the other Basic Documents, such Lender
shall (in all circumstances and without set-off or counterclaim) pay to Agent on
demand, in immediately available funds at Agent's address for notices hereunder,
such Lender's Percentage Share of
20
<PAGE>
such draft or demand (or any portion thereof which has not been reimbursed by
the Company). Each Lender's obligation to make such payment to Agent is
irrevocable and unconditional. If any amount required to be paid by any Lender
to Agent hereunder is paid within three Business Days after the due date, Agent
shall in addition to such amount be entitled to recover from such Lender, on
demand, interest thereon calculated from such due date at the Federal Funds Rate
plus $200 per day. If any amount required to be paid by any Lender to Agent
- ----
hereunder is not paid within three Business Days after the due date, Agent shall
in addition to such amount be entitled to recover from such Lender, on demand,
interest thereon calculated from such due date at the Post-Default Rate.
Whenever Agent receives payment of any Lender's Percentage Share of any such
draft of demand, if Agent thereafter receives any payment thereof or any payment
of interest thereon (whether directly from the Company or otherwise, and
excluding only interest for any period prior to Agent's demand that such Lender
make such payment of its Percentage Share), Agent will distribute to such Lender
its Percentage Share of the amounts so received by Agent; provided, however,
-------- -------
that if any such payment must thereafter be returned by Agent, such Lender shall
return to Agent the portion thereof previously distributed to such Lender. A
written advice setting forth in reasonable detail the amounts owing hereunder,
submitted by Agent to the Company or any Lender from time to time, shall be
conclusive, absent manifest error, as to the amounts thereof.
(d) In consideration of each Lender's acceptance and purchase from Agent
of an undivided interest equal to such Lender's Percentage Share of Agent's
obligations and rights under the Support Letter of Credit as set forth above,
Agent hereby agrees to pay to each Lender for such Lender's account such
Lender's Percentage Share of the quarterly letter of credit fee paid by the
Company to Agent in connection with the Support Letter of Credit.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Term Loans. (a) Subject to the terms of this
-----------------------
Agreement, the aggregate outstanding principal of the Revolving Credit Loans
shall convert to Term Loans on the Revolving Credit Termination Date.
(b) The Company will repay the principal of the Term Loans in twenty
installments payable on each Quarterly Date beginning August 1, 1998, with the
final installment being due and payable on or before May 1, 2003. Each such
installment shall be equal to one-twentieth of the original principal amount of
the Term Loans as of the Revolving Credit Termination Date. In any event all
unpaid principal and interest shall be due and payable in full on the final
maturity of May 1, 2003. As set forth in Section 2.07(c), all optional and
mandatory prepayments made on the Term Loans shall be applied to the scheduled
installments in inverse order of their maturity.
3.02 Interest. The Company hereby promises to pay to Agent for the
--------
account of each Lender interest on the unpaid principal amount of each Lender's
Loans for the period from and including the date of such Lender's Loans to but
excluding the date such Lender's Loans shall be paid in full, at the following
rates per annum:
21
<PAGE>
(a) during such periods as such Lender's Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) plus the Applicable Margin; and
----
(b) during such periods as such Lender's Loan is a Eurodollar Loan, for
each Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period plus the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to Agent and
each Lender (without duplication) interest at the applicable Post-Default Rate
on any principal of any Loan and on any other amount payable by the Company
hereunder or under any Note which shall not be paid in full when due (whether at
stated maturity, by acceleration, by mandatory prepayment or otherwise), for the
period from and including the due date thereof to but excluding the date the
same is paid in full. Accrued interest on each Loan shall be payable (i) in the
case of a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of
a Eurodollar Loan, on the last day of each Interest Period therefor (and if such
Interest Period is longer than three months, at three month intervals following
the first day of such Interest Period) and (iii) in the case of any Eurodollar
Loan, upon the payment or prepayment thereof or the Conversion of such Loan to a
Loan of another Type (but only on the principal amount so paid, prepaid or
Converted), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, Agent shall give notice
thereof to the Company. Notwithstanding anything to the contrary herein, in no
event shall the interest on any principal of any Loan or on any other amount
payable by the Company hereunder or under the Notes exceed the Maximum Rate.
Section 4. Payments; Computations; Etc.
----------------------------
4.01 Payments. (a) Except to the extent otherwise provided herein,
--------
all payments of principal, interest and other amounts to be made by the Company
under this Agreement and the Notes, and, except to the extent otherwise provided
therein, all payments to be made by the Company under any other Basic Document,
shall be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to Agent, for the account of the Lender to whom such
payment is owed, as set forth on the signature pages hereto (or such other
account as directed by Agent through notice pursuant to Section 11.02 hereof),
not later than 1:00 p.m. New York 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) Any Lender may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary deposit account
of the Company with such Lender (with notice to Agent and the Company).
(c) The Company shall, at the time of making each payment under this
Agreement or the Notes, specify to Agent the Loans or other amounts payable by
the Company hereunder to which such payment is to be applied. When Agent
collects or receives money on account of
22
<PAGE>
the Obligations, Agent shall distribute all money so collected or received, and
Lenders shall apply all such money they receive from Agent, as follows:
(i) first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Sections 8.06(d) or 11.03 and then to the
partial payment of all other Obligations then due in proportion to the amounts
thereof, or as Lenders shall otherwise agree);
(ii) then for the prepayment of amounts owing under the Basic Documents
(other than principal on the Notes) if so specified by the Company;
(iii) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(iv) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.07(c) and 3.01 hereof. All distributions of amounts described in any of
clauses (ii), (iii) or (iv) above shall be made by Agent pro rata to Agent and
each Lender that is owed Obligations under such clause, in proportion to all
amounts owed to Agent and all Lenders that are owed Obligations under such
clause.
(d) If the due date of any payment under this Agreement or the Notes
would otherwise fall on a day which is not a Business Day such date 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.
4.02 Computations. Interest on Base Rate Loans and Eurodollar Loans
------------
and all fees shall be computed on the basis of a year of 360 days and actual
days elapsed (including the first day but excluding the last say) occurring in
the period for which payable.
4.03 Minimum Amounts. Each borrowing, Conversion and prepayment of
---------------
principal of Loans shall be in an amount at least equal to $100,000 and in
multiples of $100,000 in excess thereof (borrowings, Conversions or prepayments
of or into Loans of different Types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one for
each Type or Interest Period). Anything in this Agreement to the contrary
notwithstanding, the aggregate principal amount of Eurodollar Loans having the
same Interest Period shall be in an amount at least equal to $100,000 and in
multiples of $100,000 in excess thereof and, if any Eurodollar Loans would
otherwise be in a lesser principal amount for any period, such Loans shall be
Base Rate Loans during such period.
4.04 Certain Notices. Notices by the Company to Agent and Lenders of
---------------
terminations or reductions of the Commitment, of borrowings, Conversions,
Continuations and optional
23
<PAGE>
prepayments of Loans, and of Types of Loans and of the duration of Interest
Periods shall be irrevocable and shall be effective only if received by Agent
and each Lender not later than 11:00 a.m. New York time on at least the number
of Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
<TABLE>
<CAPTION>
Number of Business
Notice Days Prior
------ ------------------
<S> <C>
Termination or reduction
of the Commitment 2
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitment to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.03 hereof) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or optional
prepayment (which shall be a Business Day). Each such notice of the duration of
an Interest Period shall specify the Loans to which such Interest Period is to
relate. In the event that the Company fails to select the Type of Loan, or the
duration of any Interest Period, for any Eurodollar Loan within the time period
and otherwise as provided in this Section 4.04, such Loan (if outstanding as a
Eurodollar Loan) will be automatically Converted into a Base Rate Loan on the
last day of the then current Interest Period for such Loan or (if outstanding as
a Base Rate Loan) will remain as, or (if not then outstanding) will be made as,
a Base Rate Loan.
4.05 Set-off. The Company agrees that, in addition to (and without
-------
limitation of) any right of set-off, banker's lien or counterclaim any Lender
may otherwise have, any Lender shall be entitled, at its option, to offset
balances held by it for account of the Company at any of its offices, in Dollars
or in any other currency, against any principal of or interest on any of the
Loans or any other amount payable to such Lender hereunder, that is not paid
when due (regardless of whether such balances are then due to the Company), in
which case it shall promptly notify Agent and the Company thereof, provided that
--------
such Lender's failure to give such notice shall not affect the validity thereof.
Section 5. Yield Protection, Etc.
----------------------
24
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5.01 Additional Costs. (a) The Company shall pay to each Lender from
----------------
time to time such amounts as such Lender may determine to be necessary to
compensate it for any costs of such Lender which such Lender determines are
attributable to its making or maintaining of any Eurodollar Loans or its
obligation to make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender 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"), resulting from any Regulatory Change
----------------
which:
(i) changes the basis of taxation of any amounts payable to such Lender
under this agreement or its Note in respect of any of such Loans (other than
taxes imposed on or measured by the overall net income of such Lender or of
its Applicable Lending Office for any of such loans by the jurisdiction in
which such Applicable Lending Office or the Principal Office is located); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the determination
of the Eurodollar Rate for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Lender
(including any of such Loans or any deposits referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof), or any commitment of such Lender
(including the Commitment of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or the Notes
(or any of such extensions of credit or liabilities) or the Commitment.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender, suspend the obligation of such Lender
to make or Continue Eurodollar Loans, or to Convert Base Rate Loans into
Eurodollar Loans, until the Regulatory Change giving rise to such request ceases
to be in effect.
(b) Without limiting the effect of the provisions of Section 5.01(a)
above, in the event that, by reason of any Regulatory Change, any Lender 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
Lender 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 Lender which includes Eurodollar
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 Lender so elects by
notice to the Company, the obligation of such Lender to make or Continue, or to
Convert Base Rate Loans into, Eurodollar Loans hereunder shall be suspended
until such Regulatory Change ceases to be in effect.
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay to any Lender from
time to time on request such amounts as such Lender may determine to be
necessary to compensate such Lender (or, without duplication, the bank holding
company of which such Lender is a subsidiary) for any
25
<PAGE>
costs of such Lender which it determines are attributable to the maintenance by
such Lender (or any Applicable Lending Office or such bank holding company),
pursuant to any law or regulation or any interpretation, directive or request
(whether or not having the force of law) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing,
after the Closing Date, any risk-based capital guideline or requirement (whether
or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord (including, without limitation, the Final Risk-Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 CFR Part
208, Appendix A; 12 CFR Part 225, Appendix A) and the Final Risk-Based Capital
Guidelines of the Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A)), of capital in respect of the Commitment or Loans or Support Letter
of Credit and commitment and loans and letters of credit of similar type (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c), "Basle Accord" shall mean the proposals for
------------
risk-based capital framework described by the Basle Committee on Lending
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) A Lender shall notify the Company of any event occurring after the
date of this Agreement that will entitle such Lender to compensation under
Sections 5.01(a) or (c) above as promptly as practicable, but in any event
within 90 days, after such Lender obtains actual knowledge thereof; provided,
--------
that (i) if such Lender fails to give such notice within 90 days after it
obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 90 days prior to the date that such
Lender does give such notice and (ii) such Lender will designate a different
Applicable Lending Office for the Loans affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Company a certificate setting forth the basis and amount of
each request by such Lender for compensation under Sections 5.01(a) or (c)
above. Determinations and allocations by a Lender for purposes of this Section
5.01 of the effect of any Regulatory Change pursuant to Sections 5.01(a) or (b)
above, or of the effect of capital maintained pursuant to Section 5.01(c) above,
on its costs or rate of return of maintaining Loans or its obligation to make
Loans, or on amounts receivable by it in respect of Loans, and of the amounts
required to compensate such Lender under this Section 5.01, shall, absent
manifest error, be conclusive, provided that such determinations and allocations
--------
are made on a reasonable basis.
26
<PAGE>
5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Rate for
any Interest Period, any Lender determines (which determination shall, absent
manifest error, be conclusive) that:
(a) quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein; or
(b) the relevant rates of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Eurodollar Loans for such Interest Period is to be determined are
not likely adequately to cover the cost to such Lender of making or maintaining
Eurodollar Loans for such Interest Period;
then such Lender shall give the Company prompt notice thereof, and so long as
such condition remains in effect, such Lender shall be under no obligation to
make additional Eurodollar Loans, to Continue Eurodollar Loans or to Convert
Base Rate Loans into Eurodollar Loans and the Company shall, on the last day(s)
of the then current Interest Period(s) for the outstanding Eurodollar Loans,
either prepay such Loans or Convert such Loans into Base Rate Loans in
accordance with Section 2.07 hereof.
5.03 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof and
such Lender's obligation to make or Continue, or to Convert Loans of any other
Type into, Eurodollar Loans shall be suspended until such time as such Lender
may again make and maintain Eurodollar Loans and the Company shall, upon the
request of such Lender, prepay any of such Loans then outstanding hereunder
together with accrued interest thereon.
5.04 Treatment of Affected Loans. If the obligation of any Lender to
---------------------------
make Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof
(Loans of such type being herein called "Affected Loans" and such type being
--------------
herein called the "Affected Type"), all Loans which would otherwise be made by
-------------
such Lender as Loans of the Affected Type shall be made instead as Base Rate
Loans and, if an event referred to in Sections 5.01(b) or 5.03 hereof has
occurred and such Lender so requests by notice to the Company, all Affected
Loans of such Lender then outstanding shall be automatically converted into Base
Rate Loans on the date specified by such Lender in such notice (which date for
Affected Loans, subject to the event referred to in Section 5.01(b) hereof,
shall be the last day of the then current Interest Period for outstanding
Eurodollar Loans or, if such Lender waives any requirements for the payment of
Additional Costs in respect of an earlier date, such earlier date as is
specified in such notice) and, to the extent that Affected Loans are so made (or
converted), all payments of principal which would otherwise be applied to such
Lender's Affected Loans shall be applied instead to such Loans.
27
<PAGE>
5.05 Compensation. The Company shall pay to any Lender, upon the
------------
request of such Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense of such Lender which such Lender determines is attributable to:
(a) any payment, prepayment or Conversion of a Eurodollar Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 10 hereof) on a date other than the last day of the Interest Period for
such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
7 hereof to be satisfied) to borrow a Eurodollar Loan on the date for such
borrowing specified in the relevant notice of borrowing given pursuant to
Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest which otherwise would have accrued
on such principal amount at a rate per annum equal to the interest component of
the amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
Section 6. Conditions Precedent.
--------------------
6.01 Initial Loan. The obligation of each Lender to make the initial
------------
Loan hereunder is subject to the receipt by each Lender of the following
documents, each of which shall be satisfactory to each Lender in form and
substance:
(a) Corporate Documents. The following documents, each certified as
-------------------
indicated below:
(i) a copy of the charter, as amended, of the Company certified by the
Secretary of State of Delaware, a copy of the charter, as amended, of each
Subsidiary Guarantor of the Company certified by the Chief Financial Officer or
the Secretary of the Company, a certificate dated as of a recent date as to the
good standing of and charter documents filed by such Obligor from the Secretary
of State of its jurisdiction of incorporation, and certificates dated as of a
recent date issued by appropriate officials in each state in which such Obligor
owns property subject to any Security Document as to such Obligor's good
standing and due qualification to do business;
28
<PAGE>
(ii) a certificate of the Secretary or an Assistant Secretary of each
Obligor, dated the Closing Date and certifying (A) that attached thereto is a
true and complete copy of the by-laws of such Person as in effect on the date of
such certificate, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors of such Person authorizing
the execution, delivery and performance of such of the Basic Documents to which
such Person is or is intended to be a party and the extensions of credit
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the charter of such Person
has not been amended since the date of the certification thereto furnished
pursuant to Section 6.01(a)(i) above, and (D) as to the incumbency and specimen
signature of each officer of such Person executing such of the Basic Documents
to which such Person is intended to be a party and each other document to be
delivered by such Person from time to time in connection therewith (and Agent
and Lenders may conclusively rely on such certificate until it receives notice
in writing from such Person);
(iii) a certificate of another officer of each Obligor as to the
incumbency and specimen signature of the Secretary or Assistant Secretary, as
the case may be, of such Obligor, and a corresponding certificate of another
officer of such Obligor as to its signing officers.
(b) Officer's Certificate. A certificate of the President or Chief
---------------------
Financial Officer to the effect set forth in the first sentence of Section 6.02
hereof.
(c) Opinion of General Counsel to the Obligors. An opinion of Michael R.
------------------------------------------
Patterson, general counsel to the Obligors, substantially in the form of Exhibit
"C" hereto.
(d) Opinions of Special Counsel to the Obligors. An opinion of Fulbright
-------------------------------------------
& Jaworski L.L.P., special Texas and New York counsel to the Obligors,
substantially in the form of Exhibit "D" hereto.
(e) Opinions of Special Counsel to Agent. An opinion of Thompson &
------------------------------------
Knight, special Texas counsel to Agent, in form and substance satisfactory to
Agent.
(f) Notes. Each Lender's Note, duly completed and executed.
-----
(g) Security Documents. Each Security Document listed on Schedule
------------------
6.01(g) attached hereto, duly executed and delivered by each party thereto.
(h) Insurance. Certificates of insurance evidencing the existence of all
---------
insurance required to be maintained by the Company pursuant to Section 8.06
hereof, such certificates to be in such form and contain such information as is
specified in said Section 8.06. In addition, the Company shall have delivered a
certificate of a senior officer of the Company setting forth the insurance
obtained by it in accordance with the requirements of said Section 8.06 and
29
<PAGE>
stating that such insurance is in full force and effect and that all premiums
then due and payable thereon have been paid.
(i) Environmental Compliance Certificate. A certificate of the President
------------------------------------
or Chief Financial Officer of the Company substantially in the form attached
hereto as Exhibit "E".
(j) Subsidiary Guaranty. A Subsidiary Guaranty by each of the
-------------------
Subsidiaries other than PMCT, substantially in the form attached hereto as
Exhibit B-1 (as to each Subsidiary Guarantor other than Stocker Resources, L.P.,
Calumet Florida, Inc. and Plains Illinois Inc.) and Exhibit B-2 (as to Stocker
Resources, L.P., Calumet Florida, Inc. and Plains Illinois Inc.).
(k) Other Documents. Such other documents as Agent may reasonably
---------------
request.
6.02 Initial and Subsequent Loans. The obligation of each Lender to
----------------------------
make any Loan to the Company upon the occasion of each borrowing hereunder
(including the initial borrowing) is subject to the further conditions precedent
that, both immediately prior to the making of such Loan and also after giving
effect thereto: (i) no Default shall have occurred and be continuing; (ii) the
representations and warranties made by the Company in Section 8 hereof, and by
each Obligor in each of the other Basic Documents to which such Obligor is a
party, shall be true and complete on and as of the date of the making of such
Loan with the same force and effect as if made on and as of such date except to
the extent that such representation or warranty was made as of a specific date
or updated, modified or supplemented as of a subsequent date with the consent of
Majority Lenders; (iii) the aggregate principal amount of the Loans shall not
exceed the Adjusted Borrowing Base or the Commitment; and (iv) no Material
Adverse Effect shall have occurred and be continuing since the date of the
immediately preceding Loan made hereunder (and in the case of the initial Loan,
since the date of the Financial Statements delivered to Agent and Lenders as
described in Section 7.02 hereof). Each notice of borrowing by the Company
hereunder shall constitute a certification by the Company to the effect set
forth in the preceding sentence (both as of the date of such notice and, unless
the Company otherwise notifies Agent and Lenders prior to the date of such
borrowing, as of the date of such borrowing).
Section 7. Representations and Warranties. The Company represents and
------------------------------
warrants to Agent and each Lender that:
7.01 Corporate Existence. Each of the Company, its Subsidiaries and
-------------------
each of the Partnerships: (a) is a corporation, partnership or other entity duly
organized and validly existing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, franchises, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted, except as disclosed in Schedule 7.01 hereto; and
(c) is qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure so
to qualify would have a Material Adverse Effect.
30
<PAGE>
7.02 Financial Condition. The Company has delivered to Agent and each
-------------------
Lender copies of the consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows of the Company and
its Consolidated Subsidiaries for the fiscal year ended on said date, with
reports thereon by Price Waterhouse, independent public accountants. Such
financial statements are called the "Financial Statements". The Financial
--------------------
Statements (including in each case, without limitation, the related schedules
and notes) are complete and correct and fairly present the consolidated position
of the Company and its Consolidated Subsidiaries as of the respective dates of
said balance sheets and the consolidated results of their operations for the
respective periods covered by said statements of operations, shareholders'
equity and cash flows, and have been prepared in accordance with GAAP
consistently applied by the Company and its Consolidated Subsidiaries throughout
the periods involved. Except as set forth in Schedule 7.02 hereto, neither the
Company nor any of its Subsidiaries had on December 31, 1995 any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments
not referred to or reflected or provided for in said balance sheet as at said
date. Since December 31, 1995, there has been no material adverse change in the
consolidated financial condition, operations, business or prospects taken as a
whole of the Company and its Consolidated Subsidiaries. Except as set forth in
Schedule 7.02 hereto, the Partnerships do not have any material assets except as
reflected in the Initial Reserve Reports heretofore delivered to Agent and each
Lender, or liabilities.
7.03 Litigation. Except as set forth in Schedule 7.03 hereto, there
----------
are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the best
knowledge of the Company) threatened against the Company, any of its
Subsidiaries or any of the Partnerships which, if adversely determined, could
have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement,
---------
the Notes and the other Basic Documents, the consummation of the transactions
herein and therein contemplated and compliance with the terms and provisions
hereof and thereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of any Obligor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any material agreement or instrument to
which the Company, any of its Subsidiaries or any of the Partnerships is a party
or by which any of them is bound or to which any of them is subject, or
constitute a default under any such agreement or instrument, or (except for the
Liens created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any Property of the Company or any of its
Subsidiaries or any of the Partnerships pursuant to the terms of any such
agreement or instrument.
7.05 Due Execution. Each Obligor has all necessary corporate power and
-------------
authority to execute, deliver and perform its obligations under each of the
Basic Documents to which it is or is intended to be a party; the execution,
delivery and performance by each Obligor of each of the Basic Documents to which
it is or is intended to be a party have been duly authorized by
31
<PAGE>
all necessary corporate action on its part; and this Agreement has been duly and
validly executed and delivered by each Obligor and constitutes, and each of the
other Basic Documents to which such Obligor is or is intended to be a party when
executed and delivered by such Obligor (in the case of any Note, for value) will
constitute, its legal, valid and binding obligation, enforceable against it in
accordance with its terms except as such enforceability may be limited by
bankruptcy or other similar laws of general applicability affecting the
enforcement of creditor's rights and general principals of equity.
7.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by any Obligor
of the Basic Documents to which such Obligor is a party or for the validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to the Security Documents.
7.07 Use of Loans. Neither the Company nor any of its Subsidiaries or
------------
any of the Partnerships is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying Margin Stock and no
part of the proceeds of any extension of credit hereunder will be used to buy or
carry any Margin Stock.
7.08 ERISA. The Company and the ERISA Affiliates have fulfilled their
-----
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or any Plan or Multiemployer Plan (other than to make
contributions in the ordinary course of business).
7.09 Taxes. Except as disclosed to Agent and Lenders as set forth in
-----
Schedule 7.09, the United States Federal income tax returns of the Company, its
subsidiaries and the Partnerships have never been examined. The Company, its
subsidiaries and the partnerships have filed all United States Federal income
tax returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company, any of its Subsidiaries and any of the
Partnerships. The charges, accruals and reserves on the books of the Company,
its Subsidiaries and the Partnerships in respect of taxes and other governmental
charges are, in the opinion of the Company, adequate. If the Company is a
member of an affiliated group of corporations filing consolidated returns for
United States Federal Income tax purposes, it is the "common parent" of such
group. There are no applicable taxes, fees or other governmental charges
payable in connection with the execution and delivery of this Agreement, the
Notes or any of the other Basic Documents, except for fees and taxes payable in
connection with the filing or recording of the Security Documents.
7.10 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries or any of the Partnerships is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
32
<PAGE>
7.11 Public Utility Holding Company Act. Neither the Company nor any
----------------------------------
of its Subsidiaries or any of the Partnerships is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
7.12 Titles to Oil and Gas Properties. The Oil and Gas Properties
--------------------------------
listed in the Initial Reserve Reports are true, complete and correct lists of
all Oil and Gas Properties owned, as of the date hereof, by the Company, its
Subsidiaries and the Partnerships, other than (i) such Oil and Gas Properties
that individually have a value (determined in accordance with the guidelines
established by the Securities and Exchange Commission) of less than $1,000 and,
in the aggregate, have a value (so determined) of less than $200,000 and (ii)
Oil and Gas Properties without any proven reserves. The Properties mortgaged to
Lenders (or Agent for the benefit of Lenders) by the Company and its
Subsidiaries pursuant to the Security Documents consist, in part, of all Oil and
Gas Properties of the Company and its Subsidiaries, other than the Oil and Gas
Properties referred to in clauses (i) and (ii) above of this Section 7.12 and as
otherwise set forth on Schedule 7.12 hereto. Each of the Company, its
Subsidiaries and the Partnerships has, as of the Closing Date, good and
defensible title to the Oil and Gas Properties listed in the Initial Reserve
Reports and to all of its other properties, free and clear of all Liens except
Liens permitted by Section 8.08 hereof and except as disclosed in title opinions
and other title verification materials delivered in connection with the Original
Agreement. The Company, its Subsidiaries and the Partnerships own the working
interest and the net revenue interests in production attributable to the wells
and units reflected in the Initial Reserve Reports and the ownership of such
Properties does not obligate the Company, any of its Subsidiaries or any
Partnership to bear the costs and expenses relating to the maintenance,
development and operations of any such Property in an amount in excess of the
working interest of such Property set forth in the Initial Reserve Reports
(except in connection with the assumption of a joint interest owner's share of
costs under the nonconsent provisions of standard operating agreements).
Further, upon delivery of each Engineering Report pursuant to Section 8.04
hereof, the statements made in the preceding sentence shall be true with respect
to such Engineering Report. All information contained in the Initial Reserve
Reports is true and correct in all material respects as of the date thereof and
as of the Closing Date. The Company has delivered to Agent and each Lender all
available copies of the most recent title opinions that the Company has
commissioned with respect to the Properties mortgaged to Lenders (or Agent for
the benefit of Lenders) pursuant to the Security Documents.
7.13 Foreign Assets Control Regulations, Etc. Neither the Company nor
----------------------------------------
any of its Subsidiaries or any of the Partnerships is a "national" of any
foreign country designated in the Foreign Assets Control Regulations, the
Company hereunder nor its use of the proceeds thereof will violate the Foreign
Assets Control Regulations, the Cuban Assets Control Regulations, the Iranian
Assets Control Regulations, the Nicaraguan Trade Control Regulations, the South
African Transactions Regulations, the Libyan Sanctions Regulations, the Iranian
Transactions Regulations or the Panamanian Transaction Regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or the
Comprehensive Anti-Apartheid Act of 1986 (P.L. 99-440) or Executive Orders 12722
and 12724 (55 Fed. Reg. 31803 and 55 Fed. Reg 33089) Blocking Iraqi Government
Property and
33
<PAGE>
Prohibiting Transactions with Iraq and Executive Orders 12723 and 12725 (55 Fed.
Reg. 31805 and 55 Fed. Reg. 33091) Blocking Kuwaiti Government Property and
Prohibiting Transactions with Kuwait. None of the proceeds of the Loans under
this Agreement will be used, directly or indirectly, for the purpose of engaging
in any transaction which violates any of said Regulations or which violates the
Regulations of the United States Treasury Department (31 C.F.R., Subtitle B,
Chapter V, as amended), or any regulation or ruling issued thereunder.
7.14 Gas Imbalances. As of and after the date hereof, except as
--------------
disclosed in the certificate delivered by the Company pursuant to Section
2.08(c) hereof, there are no net gas imbalances, take-or-pay or other prepayment
credit obligations with respect to any Obligor's Oil and Gas Properties which
would require such Obligor to deliver Hydrocarbons produced from such Oil and
Gas Properties at some future time, without then or thereafter receiving full
payment therefor, in amounts (i) exceeding $100,000 for any individual well,
(ii) exceeding $500,000 in the aggregate for all Obligors or (iii) with respect
to any individual material well, exceeding the proved developed producing
reserves attributable to such well.
7.15 Rate Filings. Neither the Company nor any of its Subsidiaries or
------------
any Partnership has violated any provisions of the Natural Gas Act or the
Natural Gas Policy Act of 1978 or any other Federal or state law or any of the
regulations thereunder (including those of the respective conservation
commissions and land offices of the various jurisdictions having authority over
the Property mortgaged to Lenders (or Agent for the benefit of Lenders) pursuant
to the Security Documents) with respect to the Property mortgaged to Lenders (or
Agent for the benefit of Lenders) pursuant to the Security Documents which would
have a Material Adverse Effect. The Company, each of its Subsidiaries and each
Partnership has made all necessary material rate filings, certificate
applications, well category filings, interim collection filings and notices, and
any other filings or certifications, and has received all necessary material
regulatory authorizations (including, without limitation, necessary
authorizations, if any, with respect to any processing arrangements conducted by
it or others respecting the Properties mortgaged to Lenders (or Agent for the
benefit of Lenders) pursuant to the Security Documents or production therefrom)
required under the laws and regulations with respect to all of the Properties
mortgaged to Lenders (or Agent for the benefit of Lenders) pursuant to the
Security Documents or production therefrom. No material rate filing,
certificate application, well category filing, interim collection filing or
notice, or other filing and certification contains any untrue statement of any
material fact or omits any statement of material fact necessary for said filing.
7.16 Qualification to Hold Federal Oil and Gas Leases. Each of the
------------------------------------------------
Company, its Subsidiaries and the Partnerships that own onshore oil and gas
leases is duly qualified to own and hold United States on shore oil and gas
leases and has obtained approval by the United States Bureau of Land Management
of its ownership thereof, and, to the extent it is the operator of such leases,
of its role as operator thereof. The Company does not own any United States
offshore oil and gas leases.
7.17 Drilling and Operations. Since owned by the Company and to the
-----------------------
best of its knowledge prior thereto, the oil and gas wells comprising the
producing Properties mortgaged
34
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to Lenders (or Agent for the benefit of Lenders) pursuant to the Security
Documents have been drilled and operated in all material respects in accordance
with the material terms of relevant leases and agreements and applicable
Federal, state, and local laws and regulations and are bottomed on and producing
from the drilling and spacing units or blocks therefor and no failure to comply
therewith could have a Material Adverse Effect.
7.18 Payments by Purchasers of Production. All material amounts of
------------------------------------
proceeds from the sale by the Company or any of its Subsidiaries of any interest
in oil and gas production from the Properties mortgaged to Lenders (or Agent for
the benefit of Lenders) pursuant to the Security Documents are currently being
paid in full to the Company or such Subsidiary or have been paid to the Company
or such Subsidiary or its respective predecessors in interest by the purchaser
thereof on a timely basis and at prices and terms comparable to market prices
and terms generally available at the time such prices and terms were negotiated
for oil and gas production from producing areas situated near the Properties
mortgaged to Lenders (or Agent for the benefit of Lenders) pursuant to the
Security Documents and none of such proceeds are currently being held in
suspense by such purchaser or any other party except for routine delays in the
ordinary course of business.
7.19 Credit Agreements. Schedule 7.19 hereto is a complete and correct
-----------------
list, as of the date of this Agreement, of each credit agreement, loan
agreement, indenture, purchase agreement, guaranty or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guaranty by, the
Company or any of its Subsidiaries or any Partnership the aggregate principal or
face amount of which equals or exceeds (or may equal or exceed) $1,000,000 and
the aggregate principal or face amount outstanding or which may become
outstanding under each such arrangement is correctly described in said Schedule
7.19.
7.20 Hazardous Materials. (a) The Company, each of its Subsidiaries
-------------------
and each Partnership have obtained all permits, licenses and other
authorizations which are required under all applicable Environmental Laws,
except to the extent failure to have any such permit, license or authorization
would not have a Material Adverse Effect. The Company, each of its Subsidiaries
and each Partnership are in compliance with the terms and conditions of all such
permits, licenses and authorizations, and are also in compliance with all
applicable Environmental Laws, except to the extent failure to comply would not
have a Material Adverse Effect. No action to revoke any permit, license or
other authorization is pending or, to the best knowledge of the Company,
threatened.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the best
knowledge of the Company, threatened by any governmental or other entity with
respect to any alleged failure by the Company, its Subsidiaries, any Partnership
or any Environmental Affiliate to have any permit, license or authorization
required in connection with the conduct of the business of the Company, its
Subsidiaries, any Partnership or any Environmental Affiliate or with respect to
any generation, treatment, storage, recycling, transportation, release or
disposal, or any release as defined in
35
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42 U.S.C. (S) 9601(22) ("Release"), of any substance regulated under
-------
Environmental Laws ("Hazardous Materials") generated by the Company, its
-------------------
Subsidiaries, any Partnership or any Environmental Affiliate.
(c) Neither the Company, its Subsidiaries, any Partnership or any
Environmental Affiliate has handled any Hazardous Materials, other than as a
generator, on any properties now or previously owned or leased by the Company,
its Subsidiaries, any Partnership or Environmental Affiliate to an extent that
it has, or may reasonably be expected to have, a Material Adverse Effect; and
(i) no PCB contamination is present at any Properties now (or, to the
best of the Company's knowledge, previously) owned or leased by the Company, its
Subsidiaries, any Partnership or any Environmental Affiliate;
(ii) no asbestos is present at any Properties now (or, to the best of
the Company's knowledge, previously) owned or leased by the Company, its
Subsidiaries, any Partnership or any Environmental Affiliate;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any Properties now (or, to the best of the Company's
knowledge, previously) owned or leased by the Company, its Subsidiaries, any
Partnership or any Environmental Affiliate; and
(iv) no Hazardous Materials have been Released at, on or under any
Properties now (or, to the best of the Company's knowledge, previously) owned or
leased by the Company, its Subsidiaries, any Partnership or any Environmental
Affiliate to an extent that it has, or may reasonably be expected to have, a
Material Adverse Effect.
(d) Neither (i) to the knowledge of the Company nor (ii) to an extent
that has or may be reasonably be expected to have a Material Adverse Effect,
whether or not known by the Company, has the Company, its Subsidiaries, any
Partnership or any Environmental Affiliate transported or arranged for the
transportation of, any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List by the Environmental
Protection Agency in the Comprehensive Environmental Response, Compensation and
Liability Information System List ("CERCLIS") or on any similar state list or
which is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against the Company, its Subsidiaries,
any Partnership or any Environmental Affiliate for clean-up costs, remedial
work, damages to natural resources or for personal injury claims, including, but
not limited to, claims under CERCLA.
(e) No Hazardous Material generated by the Company, its Subsidiaries,
any Partnership or any Environmental Affiliate has been recycled, treated,
stored, disposed of or released by the Company, its Subsidiaries, any
Partnership or any Environmental Affiliate at
36
<PAGE>
any location, to the extent that it has or may reasonably be expected to have, a
Material Adverse Effect.
(f) No written notification of a Release, to the extent that it has or
may reasonably be expected to have, a Material Adverse Effect, of a Hazardous
Material has been filed by or on behalf of the Company, its Subsidiaries, any
Partnership or any Environmental Affiliate and no Properties now or previously
owned or leased by the Company, its Subsidiaries, any Partnership or any
Environmental Affiliate is listed or listed for possible inclusion on the
National Priority list promulgated pursuant to CERCLA, on CERCLIS or on any
similar state list of sites requiring investigation or clean-up.
(g) No Liens have arisen under or pursuant to any Environmental Laws on
any of the real Properties or Properties owned or leased by the Company, its
Subsidiaries, any Partnership or any Environmental Affiliate, and no government
actions have been taken or are in process which could subject any of such
Properties to such Liens, and neither the Company, its Subsidiaries, any
Partnership or any Environmental Affiliate would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any Properties
owned by it in any deed to such properties.
(h) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
the Company, its Subsidiaries, any Partnership or any Environmental Affiliate in
relation to any Properties or facility now or previously owned or leased by the
Company, its Subsidiaries, any Partnership or any Environmental Affiliate which
have not been made available to Agent and each Lender or their agents, employees
or contractors. The Company has not received notice of any Environmental Claim
that has not been provided to Agent and each Lender.
(i) Each of the representations and warranties made in Sections 7.20(a),
(b), (c), (d), (e), (f), (g) and (h) herein are made subject to those matters
disclosed in a letter from the Company to Agent and Lenders delivered on the
date hereof and signed by the Company and Agent for identification with this
Agreement.
7.21 Subsidiaries and Partnerships. Set forth in Schedule 7.21 hereto
-----------------------------
is a complete and correct list, as of the date of this Agreement, of all
Subsidiaries of the Company and all partnerships (other than any partnership
regarded as such solely for Federal income tax purposes if such partnership has
made or is deemed to have made an election to be excluded from Subchapter K,
Chapter 1, Subtitle A of the Code as permitted by Section 761 of the Code and
the regulations thereunder) of which the Company or any of its Subsidiaries is a
general or limited partner (and the jurisdiction of incorporation or
organization of each such Subsidiary or partnership) and of all Investments held
by the Company or any of its Subsidiaries in any joint venture or other Person.
Except as disclosed in Schedule 7.21 hereto the Company owns, free and clear of
Liens, all outstanding shares of such Subsidiaries and interests in such
partnerships (and each such Subsidiary owns, free and clear of Liens, all
outstanding shares of its Subsidiaries) and all such shares are validly issued,
fully paid and nonassessable and the
37
<PAGE>
Company (or the respective Subsidiary) also owns, free and clear of Liens, all
such Investments.
7.22 True and Complete Disclosure. No information, report, financial
----------------------------
statement, exhibit, schedule or disclosure letter furnished to Agent or any
Lender in writing by or on behalf of the Company, any of its Subsidiaries or any
Partnership in connection with the negotiation, preparation or delivery of this
Agreement, the Notes, and the other Basic Documents or included therein or
delivered pursuant thereto contains any untrue statement of material fact or
omits or omitted to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by or on
behalf of the Company, its Subsidiaries and any Partnership to Agent or any
Lender in connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect or based on reasonable estimates on the date as of
which such information is stated or certified. There is no fact known to the
Company, any of its Subsidiaries or any Partnership that could have a Material
Adverse Effect that has not been disclosed herein, in the other Basic Documents
or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to Agent and each Lender for use in connection with the
transactions contemplated hereby.
7.23 No Election to be Treated as a Utility. No Obligor has made an
--------------------------------------
election to be treated as a utility (as defined in Section 35.01(a)(2) of the
Texas Business and Commerce Code).
Section 8. Covenants of the Company. The Company covenants and agrees
------------------------
with Agent and each Lender that, so long as the Commitment or any Loan is
outstanding and until payment in full of all amounts payable by the Company
hereunder:
8.01 Financial Statements. The Company will deliver to Agent and each
--------------------
Lender.
(a) as soon as available and in any event within 45 days after the end of
each of the first three quarterly fiscal periods of each fiscal year of the
Company, (i) consolidated statements of income, retained earnings and cash flow
of the Company and its Consolidated Subsidiaries for the period from the
beginning of the respective fiscal year to the end of such period, and the
related consolidated balance sheets as at the end of such period, setting forth
in each case in comparative form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year that is presently required to
be disclosed, and in the form presently required, in Form 10-Q promulgated by
the Securities and Exchange Commission, all in reasonable detail, accompanied by
a certificate of the Chief Financial Officer, which certificate shall state that
said financial statements fairly present the consolidated financial condition
and results of operations of the Company and its Consolidated Subsidiaries, in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments) and (ii) supporting
consolidating statements of income, retained earnings and cash flow of the
Company and its Consolidated Subsidiaries for the period from the beginning of
the respective fiscal year to the end of such period and the related
38
<PAGE>
consolidating balance sheets as at the end of such period for each unaudited
financial report described in clause (i) above of this Section 8.01(a), and
accompanied by a certificate of the Chief Financial Officer, which certificate
shall state that said consolidating financial statements are true and complete
and have been prepared in accordance with prudent accounting practice;
(b) as soon as available and in any event within 90 days after the end of
each fiscal year of the Company, (i) consolidated statements of income, retained
earnings and cash flow of the Company and its Consolidated Subsidiaries for such
year and the related consolidated balance sheet as at the end of such year,
setting forth in each case in comparative form the corresponding consolidated
figures for the preceding fiscal year, and accompanied, by an opinion thereon of
Price Waterhouse or other independent public accountants of recognized national
standing acceptable to Majority Lenders, which opinion shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default, or if such Default then exists, specifying
the nature and period of existence thereof and (ii) supporting consolidating
statements of income, retained earnings and cash flow of the Company and its
Consolidated Subsidiaries for such year and the related consolidating balance
sheets as at the end of such year for each annual audit report described in
clause (i) above of this Section 8.01(b), and accompanied by a certificate of
the Chief Financial Officer, which certificate shall state that said
consolidating financial statements are true and complete and have been prepared
in accordance with prudent accounting practice;
(c) as soon as available and in any event within 90 days after the end of
a fiscal year of each Partnership other than those Partnerships identified on
Schedule 8.01(c) hereto, the respective statements of operations, partners'
equity and cash flows of each such Partnership for such year and the related
balance sheets as at the end of such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, and
accompanied by an opinion of independent public accountants of recognized
national standing, which opinion shall state that said financial statements
fairly present the financial condition and results of operations of such
Partnership as at the end of, and for, such fiscal year in accordance with GAAP,
and a certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as specifically
stated, of any Default, or if such Default then exists, specifying the nature
and period of existence thereof;
(d) promptly upon their becoming available, copies of all registration
statements and regular periodic reports (including, without limitation, reports
filed on Form 8-K pursuant to the Securities Exchange Act of 1934), if any,
which any Obligor shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national securities
exchange;
(e) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed;
39
<PAGE>
(f) upon the release thereof, copies of any press releases or ether
public announcements of any Obligor;
(g) as soon as is available, and in any event within 90 days after the
end of each fiscal year of the Company (commencing with current fiscal year), a
five year financial plan for the Company (in form reasonably satisfactory to
Agent), prepared by a senior financial officer thereof (the "Five Year Plan"),
--------------
setting forth for the first year thereof, month by month financial projections
for the Company, and thereafter setting forth yearly financial projections for
the Company;
(h) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have occurred or
exist, a statement signed by the Chief Financial Officer setting forth details
respecting such event or condition and the action, if any, which the Company or
its ERISA Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by the Company or an
ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company or any ERISA
Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer Plan, or the
receipt by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA; and
(v) the institution of a proceeding by a fiduciary of any Multiemployer
Plan against the Company or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days;
40
<PAGE>
(i) promptly after the Company knows or has reason to believe that any
Default has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken and proposes to take with
respect thereto; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and
any reports or other information required to be filed under ERISA) as Agent may
reasonably request.
The Company will furnish to Agent and each Lender, at the time it furnishes each
set of financial statements pursuant to Sections 8.01(a), (b) or (c) above, a
certificate of the Chief Financial Officer (i) to the effect that (to the best
of his knowledge after due inquiry) no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Company has taken and
proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Company is in
compliance with Sections 8.12 and 8.13 hereof as of the end of the respective
quarterly fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to Agent and each
----------
Lender notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Company, any of its Subsidiaries or any Partnership, except proceedings which,
if adversely determined, could not have a Material Adverse Effect.
8.03 Corporate Existence, Etc. The Company will, and will cause each
-------------------------
of its Subsidiaries and each Partnership to: (a) preserve and maintain its legal
existence and all of its material rights, privileges and franchises (provided
that nothing in this Section 8.03 shall prohibit any transaction expressly
permitted under Section 8.07 hereof); (b) comply with the requirements of all
applicable laws, rules, regulations and orders of governmental or regulatory
authorities if failure to comply with such requirements could have a Material
Adverse Effect; (c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained; (d) maintain all of its material Properties used or useful in
its business in good working order and condition, ordinary wear and tear
excepted, or as permitted by Section 8.07(b)(iv) hereof; and (e) permit
representatives of Agent, during normal business hours, to examine, copy and
make extracts from the books and records of the Company, its Subsidiaries and
each Partnership, to inspect their Properties, and to discuss their business and
affairs with their officers, all to the extent reasonably requested by Agent.
8.04 Engineering Reports. (a) As soon as available and in any event
-------------------
on or before March 15 of each year, the Company will furnish to Agent and each
Lender reports (the "Independent Reserve Reports") in form and substance
---------------------------
reasonably satisfactory to Agent in its
41
<PAGE>
sole discretion, prepared by independent petroleum consultants acceptable to
Agent, which independent Reserve Reports shall evaluate as of January 1 of such
year the Oil and Gas Properties of the Company, its Subsidiaries and the
Partnerships and shall, together with any other information reasonably requested
by Agent, set forth for each property the separate categories of proved
developed producing reserves, proved developed nonproducing reserves and proved
undeveloped reserves attributable to such Property together with a projection of
the rate of production and future net income with respect thereto as of such
date, based upon (i) the pricing assumptions consistent with Securities and
Exchange Commission reporting requirements at the time and (ii) the pricing
assumptions acceptable to Agent (together with any volume adjustments necessary
as a result of such pricing assumptions).
(b) As soon as available and in any event on or before September 1 of
each year, the Company will furnish to Agent and each Lender reports (the
"Company Reserve Reports"), in form and substance reasonably satisfactory to
- ------------------------
Agent, which may be prepared by or under the supervision of a petroleum engineer
who is an employee of the Company and certified by a senior officer of the
Company as to its truth and completeness, which shall evaluate the Oil and Gas
Properties of the Company, its Subsidiaries and the Partnerships and which
shall, together with any other information reasonably requested by Agent, set
forth for each such Property the separate categories of proved developed
producing reserves, proved developed nonproducing reserves and proved
undeveloped reserves attributable to such Property as of the immediately
preceding July 1, together with a projection of the rate of production and net
future income with respect thereto as of such date, based upon the pricing
assumptions reasonably acceptable to Agent (together with any volume adjustments
necessary as a result of such pricing assumptions).
(c) With the delivery of each report required in Sections 8.04(a) or (b)
above, the Company shall provide to Agent and each Lender a statement reflecting
any material changes in the net revenue interest of each well or lease as
reflected in the Security Documents after giving effect to all encumbrances
listed therein from the net revenue interests as reflected in such report, and,
if requested by Agent, the nature of such changes.
(d) Concurrently with the delivery of each report required in Sections
8.04(a) or (b) above, the Company shall provide to Agent and each Lender a
report in form reasonably satisfactory to Agent in its sole discretion prepared
and certified by the Chief Financial Officer, which report shall, together with
any other information requested by Agent, set forth in reasonable detail the
volume, estimated amount and nature of any and all gas imbalances with respect
to the Oil and Gas properties of the Company, its Subsidiaries and any
Partnership as of the date of each Engineering Report delivered hereunder.
8.05 Acquisition of Oil and Gas Properties. (a) If, subsequent to the
-------------------------------------
date hereof, the Company or any of its Subsidiaries develops, acquires or
receives any interest or interests in Oil and Gas Properties with proved
reserves having a net present value of $100,000 or more (determined in
accordance with the guidelines established by the Securities and Exchange
Commission), and which interest is not already subject to the Lien of the
Security Documents and therefore not part of the Property mortgaged to Lenders
(or Agent for the benefit of
42
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Lenders) pursuant to the Security Documents, then not later than the earlier of
(i) the first July 1 or January 1 to occur after such development, acquisition
or receipt or (ii) 90 days after such development, acquisition or receipt, the
Company or such Subsidiary will grant to Lenders (or Agent for the benefit of
Lenders) as security for the Obligations a first priority Lien (subject only to
Liens permitted by Section 8.08 hereof) on such Oil and Gas Properties, which
Lien will be created and perfected by and in accordance with the provisions of
the Security Documents, all in form and substance reasonably satisfactory to
Agent in its sole discretion and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.
(b) Concurrently with the granting of the Lien or other action referred
to in Section 8.05(a) hereof, and concurrently with the development, acquisition
subsequent to the date hereof or receipt by the Company, its Subsidiaries or
Partnerships of any interest or interests in Oil and Gas Properties with proved
reserves having a net present value of $250,000 in the aggregate (or, if less,
upon the request of Agent) or more (determined in accordance with the guidelines
established by the Securities and Exchange Commission), the Company will provide
to Agent and Lenders title information (which may include current title
opinions) in form and substance satisfactory to Agent in its sole reasonable
discretion with respect to such Oil and Gas Properties. The title information
or opinions will state or reflect to the satisfaction of Agent, at a minimum (i)
that the applicable Security Documents have been filed in all records with
respect to such Oil and Gas Properties which are Properties mortgaged to Lenders
(or Agent for the benefit of Lenders) pursuant to the Security Documents and
that all releases, waivers and consents have been obtained which are necessary
for Lenders (or Agent for the benefit of Lenders) to perfect a first priority
Lien (subject only to Liens permitted by Section 8.08 hereof) on the subject Oil
and Gas Properties which are Properties mortgaged to Lenders (or Agent for the
benefit of Lenders) pursuant to the Security Documents, (ii) that the Company,
its Subsidiary or the Partnership, as the case may be, owns good and defensible
record title to such Oil and Gas Properties free and clear of all Liens except
for those permitted under Section 8.08 hereof, (iii) the Company's, the
Subsidiary's or the Partnership's, as the case may be, record interest in such
Oil and Gas Properties, after giving effect to such permitted Liens, and (iv)
that the descriptions set forth in the Security Documents of such Oil and Gas
Properties are complete, accurate and legally sufficient descriptions for
purposes of creating the Liens purported to be created by such Security
Documents.
(c) The Company shall give written notice to Agent and each Lender at
least 20 days prior to (i) the acquisition, subsequent to the date hereof, by
the Company, any of its Subsidiaries or any partnership of any interest or
interests in Oil and Gas properties with proved reserves having a net present
value of $100,000 or more (determined in accordance with the guidelines
established by the Securities and Exchange Commission) and (ii) the
commencement, subsequent to the date hereof, of initial drilling operations with
respect to any Oil and Gas Property now owned or hereafter acquired by the
Company, any of its Subsidiaries or any Partnership. Such notice shall set forth
a description, in reasonable detail, of such Oil and Gas Property, the proposed
activities in respect thereof and any known environmental conditions or risks,
or potential sources of future liabilities, relating to such Oil and Gas
Property. In addition, the Company shall, at or prior to giving Agent and each
43
<PAGE>
Lender such notice, deliver to Agent and each Lender copies of any and all
environmental surveys or assessments available to the Company which relate to
such Oil and Gas Property. Upon the request of Agent at any time, the Company
shall cause to be conducted a Phase I Environmental Review (as defined below) in
respect of such Oil and Gas Property as soon as practicable after such request.
The Company shall cause such Phase I Environmental Review to be completed, and
the results thereof delivered to Agent and each Lender, prior to the time the
Company is required to subject such Oil and Gas Property to the Lien of the
Security Documents pursuant to Section 8.05(a) hereof. As used herein, the term
"Phase I Environmental Review" shall mean, with respect to any such Oil and Gas
----------------------------
Property, an environmental survey and assessment prepared by an independent
environmental consultant of recognized national standing (the "Environmental
-------------
Consultant") selected by the Company, expert in the identification and analysis
- ----------
of environmental risks, such survey and assessment to (i) estimate current
liabilities and assess potential sources of future liabilities relating to the
Property under any Environmental Law and (ii) be based upon (w) a physical on-
site inspection by the Environmental Consultant of such Property, (x) interviews
by the Environmental Consultant of individuals who have direct managerial
responsibility for operations in respect of such Property, (y) a review by the
Environmental Consultant of records relating to current and historical
operations conducted in respect of such Property and (z) as deemed appropriate
by the Environmental Consultant, interviews by the Environmental Consultant of
Federal, state and local governmental authorities, or other individuals familiar
with such Property who may have knowledge of current and historical operations
conducted in respect of such Property. The Company will promptly furnish to
Agent and each Lender all Phase I Environmental Reviews of Oil and Gas
Properties prepared pursuant to this Section 8.05(c).
(d) Promptly after the filing of any Security Document in any state, upon
the reasonable request of Agent, the Company will provide to Agent and Lenders
an opinion addressed to Agent and Lenders in form and substance reasonably
satisfactory to Agent in its sole discretion from counsel acceptable to Agent,
stating that such Security Document is valid, binding and enforceable against
the Company or its Subsidiary, as the case may be, in accordance with its terms
and addressing such priority questions as Agent may request.
(e) Upon the development or acquisition of Oil and Gas properties as
contemplated by, and the compliance with the provisions of, this Section 8.05,
Lenders shall include such Oil and Gas Properties in the next redetermination of
the Borrowing Base in accordance with and subject to the terms and conditions of
Section 2.08 hereof.
8.06 Insurance.
---------
(a) The Company will, and will cause each of its Subsidiaries and each
Partnership to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such Persons and carry such other
insurance as is usually carried by such Persons including, without limitation,
well control, redrill and pollution insurance. The Company and each Subsidiary
Guarantor will maintain the additional insurance coverage as described in the
respective Security Documents.
44
<PAGE>
(b) The Company, each Subsidiary and each Partnership shall at all times
maintain insurance against its liability for injury to persons or property of
the kinds and in the amounts usually carried by Persons engaged in the same or
similar business similarly situated, which insurance shall be by financially
sound and reputable insurers.
(c) From time to time at Agent's request, the Company will furnish Agent
and each Lender with certificates of all such policies of insurance setting
forth the coverage, the limits of liability, the names of the carriers, the
policy numbers, and the expiration dates. All such policies shall contain a
provision that such policies will not be canceled or materially amended, which
term shall include any reduction in the scope of limits of coverage, without at
least 30 days prior written notice to Agent.
(d) In the event the Company fails to provide, maintain, keep in force or
deliver and furnish to Agent and each Lender the certificates of insurance
required by this Section 8.06, Agent may procure such insurance or single
interest insurance for risks covering Lenders' interest, and the Company will
pay, or if paid by Agent, will reimburse to Agent all premiums thereon promptly
upon demand by Agent, together with interest on the amount reimbursed to Agent
at Post-Default Rate. Agent shall have the right to retain from time to time,
at the expense of the Company, an insurance consultant to review the adequacy of
the insurance coverage maintained by the Company, its Subsidiaries and each
Partnership and to confirm compliance with this Section 8.06.
8.07 Prohibition of Fundamental Changes. (a) The Company will not,
----------------------------------
and will not permit any of its Subsidiaries or any Partnership to, (i) enter
into any transaction of merger or consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution), (ii)
acquire any business or Property from, or capital stock of, or be a party to any
acquisition of, any Person except for purchases of inventory and other Property
to be sold or used in the ordinary course of business and Investments permitted
under Section 8.10 hereof or (iii) sell, lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests), having an aggregate fair
market value in excess of $5,000,000.
(b) Notwithstanding the provisions of Section 8.07(a) hereof:
(i) any Subsidiary of the Company may be merged or consolidated with or
into: (x) the Company if the Company shall be the continuing or surviving
corporation or (y) any other such Subsidiary; provided that if any such
--------
transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the
Wholly-Owned Subsidiary shall be the continuing or surviving corporation and
provided, further, that if any such transaction shall be between a Subsidiary
- -------- -------
Guarantor and a Subsidiary not a Subsidiary Guarantor, and such Subsidiary
Guarantor is not the continuing or surviving corporation, then the continuing or
surviving corporation shall have assumed all of the obligations of such
Subsidiary Guarantor hereunder;
45
<PAGE>
(ii) any such Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its Property (upon voluntary liquidation or otherwise)
to the Company or a Wholly-Owned Subsidiary of the Company provided that if any
--------
such sale is by a Subsidiary Guarantor to a Subsidiary of the Company not a
Subsidiary Guarantor, then such Subsidiary shall have assumed all of the
obligations of such Subsidiary Guarantor under its Subsidiary Guaranty;
(iii) the Company or any Subsidiary of the Company may merge or
consolidate with any other Person if (x) in the case of a merger or
consolidation of the Company, the Company is the surviving corporation and, in
any other case, the surviving corporation is a Wholly-Owned Subsidiary of the
Company and (y) after giving effect thereto no Default would exist hereunder;
and
(iv) the Company or any such Subsidiary may sell (x) obsolete or worn-out
Property, tools or equipment no longer used or useful in its business so long as
the amount thereof sold in any single fiscal year by the Company and its
Subsidiaries shall not have a fair market value in excess of $5,000,000 and (y)
any inventory or, subject to Section 8.25 hereof, other Property in the ordinary
course of business and on ordinary business terms.
8.08 Limitation on Liens. The Company will not, and will not permit
-------------------
any of its Subsidiaries or any Partnership to, create, incur, assume or suffer
to exist any Lien upon any of its properties, whether now owned or hereafter
acquired, except:
(a) Liens created pursuant to the Security Documents and Liens existing
on the date hereof and listed in Schedule 8.08 hereto:
(b) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Company, any of its Subsidiaries or any Partnership, as the
case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's, or other like Liens arising in the ordinary course of business for
amounts which are not overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate proceedings and for which
adequate accruals and reserves are maintained on the books of the Company or
such Subsidiary or partnership;
(d) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
46
<PAGE>
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of real
Property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the Property subject thereto or interfere with the ordinary conduct of
the business of the Company, or any of its Subsidiaries or any Partnership;
(g) Liens (other than Liens under ERISA or Environmental Laws) on
Property of any corporation that becomes a Subsidiary of the Company after the
date of this Agreement, provided that such Liens are in existence at the time
--------
such corporation becomes a Subsidiary of the Company and were not created in
anticipation thereof;
(h) Liens (other than Liens under ERISA or Environmental Laws) upon real
and/or tangible personal Property acquired after the date hereof (by purchase,
construction or otherwise) by the Company, its Subsidiaries or any Partnership,
each of which Liens either (i) existed on such Property before the time of its
acquisition and was not created in anticipation thereof, or (ii) was created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
such Property; provided that no such Lien shall extend to or cover any Property
--------
of the Company or such Subsidiary or Partnership other than the Property so
acquired and improvements thereon; and provided, further, that the principal
-------- -------
amount of Indebtedness secured by any such Lien shall at no time exceed 100% of
the fair market value of such Property at the time it was acquired (by purchase,
construction or otherwise);
(i) with respect to any Property from which Hydrocarbons may be severed
or extracted in commercially feasible quantities, Liens with respect to
obligations that are not yet due and payable under or for farm-out, farm-in,
joint operating, area of mutual interest agreements and/or similar arrangements
which Liens the Company determines in good faith to be necessary for the
economic development of such Property and are customary and usual for the area
in which such Property is located;
(j) Liens upon any Properties, including all deposit accounts of Plains
Marketing, PMCT or their Wholly-Owned Subsidiaries, securing the Bank of
Boston/ING Capital Facility;
(k) the Support Letter of Credit and Liens by the Company in favor of
the agent or lenders under the Bank of Boston/ING Capital Facility upon all
securities or other property belonging to the Company now or hereafter held by
such agent or lenders and in all deposits (general or special, time or demand,
provisional or final) and other sums credited by or due from such agent or
lenders to the Company or subject to withdrawal by the Company, securing the
guaranty by the Company of the Indebtedness of Plains Marketing and its Wholly-
Owned Subsidiaries under the Bank of Boston/ING Capital Facility; provided, any
--------
such securities or other property belonging to the Company acquired by such
agent or lenders pursuant to the exercise by such agent or lenders of any such
Lien shall be applied first, against the Obligations then due and owing, and
-----
then, against the obligations of the Company under such guaranty; and
- ----
47
<PAGE>
(l) any extension, renewal or replacement of the foregoing, provided,
--------
however, that the Liens permitted hereunder shall not be spread to cover any
- -------
additional Indebtedness or Property (other than a substitution of like
Property).
8.09 Indebtedness. The Company will not, and will not permit any of
------------
its Subsidiaries or any Partnership to, create, incur or suffer to exist any
Indebtedness except:
(a) Indebtedness to Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in Schedule
8.09 hereto (excluding, however, following the making of the initial Loan
hereunder, the Indebtedness to be repaid with the proceeds of such Loan, as
indicated on said Schedule 8.09);
(c) Subordinated Indebtedness; provided, the Subordinated Indebtedness of
--------
the Company evidenced by its 12% senior subordinated notes due 1999 in the
aggregate principal amount of $100,000,000, issued by the Company pursuant to
the Indenture dated October 1, 1992 among the Company, certain Subsidiary
Guarantors and Texas Commerce Bank National Association, successor-in-interest
to Ameritrust Texas National Association, as trustee, and the Subordinated
Indebtedness of its Subsidiaries evidenced by the guaranties of such senior
subordinated notes, shall be paid in full on or prior to April 30, 1996;
(d) Indebtedness of Subsidiaries of the Company or Partnerships to the
Company or to Wholly-Owned Subsidiaries of the Company or Partnerships in which
the Company owns all the limited partnership interests;
(e) (i) Indebtedness of Plains Marketing, PMCT and their Wholly-Owned
Subsidiaries under the Bank of Boston/ING Capital Facility, and the guaranty by
the Company of such Indebtedness (together with reimbursement obligations of the
Company in connection with the Support Letter of Credit), (ii) other
Indebtedness of Plains Marketing, PMCT and their Wholly-Owned Subsidiaries
arising in the ordinary course of their businesses under crude oil purchase or
sale agreements, crude oil future, forward or similar contracts, or letters of
credit supporting such obligations, and the unsecured guaranty by the Company of
such other Indebtedness, and (iii) the unsecured guaranty by the Company of
indebtedness of Plains Marketing, PMCT and their Wholly-Owned Subsidiaries
arising in the ordinary course of their businesses under crude oil purchase or
sale agreements, crude oil future, forward or similar contracts, or letters of
credit supporting such obligations; provided, the aggregate outstanding amount
--------
of such Indebtedness under the preceding clauses (ii) and (iii) shall not at any
time exceed (A) $90,000,000 minus (B) the outstanding Indebtedness under the
-----
Bank of Boston/ING Capital Facility.
(f) obligations constituting Indebtedness by reason of clauses (e) and
(f) of the definition of Indebtedness contained in this Agreement (i) not
exceeding an aggregate principal amount of $1,500,000 at any one time or (ii)
permitted pursuant to Section 8.09(e); and
48
<PAGE>
(g) other Indebtedness of the Company and its Subsidiaries (including
without limitation Indebtedness secured by Liens permitted by Section 8.08(h)
hereof) not exceeding an aggregate principal amount of $1,500,000 at any one
time outstanding.
8.10 Investments. The Company will not, and will not permit any of its
-----------
Subsidiaries or any Partnership to, make or permit to remain outstanding any
Investments except:
(a) operating deposit accounts with banks;
(b) Permitted Investments;
(c) loans, advances and other extensions of credit made after the date
hereof by the Company and its Subsidiaries to Subsidiaries of the Company in the
ordinary course of business, provided that (i) the aggregate amount of such
--------
loans, advances and other extensions of credit by the Company to any one of its
Subsidiaries shall not exceed $5,000,000 at any one time outstanding and (ii)
the aggregate amount of such loans, advances and other extensions of credit by
the Company to its Subsidiaries taken as a whole shall not exceed $5,000,000 at
any one time outstanding; in addition to the foregoing (1) the Company may make
loans, advances or other extensions of credit or capital contributions of up to
$5,000,000 in the aggregate to Plains Marketing and/or its Subsidiaries in
connection with acquisitions and other capital investments, (2) the Company (or
Plains Marketing) may make capital contributions to PMCT as provided in, and
subject to the limitations contained in, Section 8.34, and (3) so long as no
Default shall have occurred and be continuing or would exist after giving effect
thereto, the Company may make Investments without limitation in Stocker
Resources, Inc., Stocker Resources, L.P., Calumet Florida Inc. and Plains
Illinois Inc.
(d) Investments outstanding (or, as to Investments to Plains Marketing
and/or its Subsidiaries in connection with the cost of the construction of the
Cushing, Oklahoma storage facility, contemplated) on the date hereof and
identified in Schedule 7.21 hereto;
(e) additional Investments not otherwise permitted by this Section 8.10
up to but not exceeding $1,000,000 in the aggregate; and
(f) advances in the ordinary course of business of operating funds on
behalf of co-owners of Oil and Gas Properties of the Company, its Subsidiaries
or the Partnerships pursuant to joint operating agreements.
8.11 Dividend Payments. The Company will not, and will not permit any
-----------------
of its Subsidiaries to, declare or make any Dividend Payment at any time.
8.12 Tangible Net Worth. The Company will not permit Tangible Net
------------------
Worth at any time to be less than the sum of (a) $40,000,000 plus (b) fifty
percent (50%) of the net proceeds received by the Company from any capital stock
issued by the Company on or after December 31, 1995 other than capital stock
issued by the Company (y) as a dividend on any of its capital stock or (z) in
exchange or conversion of any of its preferred stock to other capital stock.
For
49
<PAGE>
purposes of this Section 8.12, Tangible Net Worth will not be reduced by the
amount of any accrued dividends on preferred stock that (i) are not yet due,
(ii) are payable in additional shares of preferred stock, and (iii) will in fact
be paid by the Company in additional shares of preferred stock.
8.13 Current Ratio. The Company will not at any time permit current
-------------
assets of the Company and its Consolidated Subsidiaries to be less than 50% of
current liabilities. For purposes hereof, the terms "current assets" and
--------------
"current liabilities" shall have the respective meanings assigned to them by
- --------------------
GAAP.
8.14 Subordinated Indebtedness. (a) Except as provided in this
-------------------------
Section 8.14, neither the Company, nor any of its Subsidiaries nor any
Partnership shall purchase, redeem, retire or otherwise acquire for value, or
set apart any money for a sinking, defeasance or other analogous fund for, the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Subordinated Indebtedness, except for regularly
scheduled payments of principal and interest in respect thereof required
pursuant to the instruments evidencing such Subordinated Indebtedness.
(b) The Company may offer to purchase and redeem Senior Subordinated
Notes in the amount and under the circumstances described in Section
4.12(iii)(c) of the Senior Subordinated Indenture, provided that: (i) the
--------
Company shall have given Agent and each Lender written notice of its intent to
so purchase and redeem (collectively "redeem") the Senior Subordinated Notes at
least 25 days prior to the date (the "Net Proceeds Payment Date") that it will
become obligated to so redeem such Senior Subordinated Notes pursuant to Section
4.12(iii)(c) of the Senior Subordinated Indenture, such notice to specify the
Net Proceeds Payment Date and, based upon the proceeds available for such
redemption, the maximum amount of Senior Subordinated Notes that may be so
redeemed, (ii) the Company shall have provided to Agent and each Lender such
information as Agent shall have reasonably requested with regard to such
redemption, (iii) no Default or Event of Default shall have occurred and be
continuing at the time of any such redemption, and (iv) if elected by Majority
Lenders, by written notice to the Company during the 25 day period after such
notice is given, a new Borrowing Base shall have been determined by Majority
Lenders in the manner specified by Section 2.08 hereof and the outstanding
aggregate principal balance of the Notes shall not exceed such Adjusted
Borrowing Base as so redetermined.
(c) The Company may offer to purchase and redeem Senior Subordinated
Notes in an amount of up to $45,000,000 under the circumstances described in
Paragraph 5 thereof, provided that: (i) the Company shall have given Agent and
--------
each Lender written notice of its intent to so purchase or redeem (collectively
"redeem") such Senior Subordinated Notes at least 25 days prior to the date (the
"Net Proceeds of a Public Offering Redemption Date") that it will become
obligated to so redeem such Senior Subordinated Notes pursuant to Paragraph 5
thereof, such notice to specify the Net Proceeds of a Public Offering Redemption
Date and, based upon the proceeds available for such redemption, the maximum
amount of Senior Subordinated Notes that may be so redeemed, (ii) the Company
shall have provided to Agent
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<PAGE>
and each Lender such information as Agent shall have reasonably requested with
regard to such redemption, (iii) no Default or Event of Default shall have
occurred and be continuing at the time of any such redemption, and (iv) if
elected by Majority Lenders, by written notice to the Company during the 25 day
period after such notice is given, a new Borrowing Base shall have been
determined by Majority Lenders in the manner specified by Section 2.08 hereof
and the outstanding aggregate principal balance of the Notes shall not exceed
such Adjusted Borrowing Base as so redetermined.
(d) The Company shall on or before April 30, 1996 redeem the Subordinated
Indebtedness of the Company evidenced by its 12% senior subordinated notes due
1999 in the aggregate principal amount of $100,000,000, issued by the Company
pursuant to the Indenture dated October 1, 1992 among the Company, certain
Subsidiary Guarantors and Texas Commerce Bank National Association, successor-
in-interest to Ameritrust Texas National Association, as trustee, and the
Subordinated Indebtedness of its Subsidiaries evidenced by the guaranties of
such senior subordinated notes.
8.15 Lines of Business. Neither the Company nor any of its
-----------------
Subsidiaries nor any Partnership shall engage to any substantial extent in any
line or lines of business activity other than the lines of business conducted by
the Company, its Subsidiaries and each Partnership on the date of this
Agreement.
8.16 Transactions with Affiliates. The Company will not, and will not
----------------------------
permit any of its Subsidiaries to, enter into any material transaction with any
Affiliate or any director, officer, employee or shareholder of the Company,
except upon fair and reasonable terms.
8.17 Use of Proceeds. The Company will use the proceeds of the Loans
---------------
hereunder solely (i) to refinance, extend, renew and/or rearrange the
outstanding principal balance under the Original Agreement, (ii) to acquire
additional Oil and Gas Properties and (iii) to finance the ongoing working
capital requirements and other general corporate purposes of the Company and its
Subsidiaries (in compliance with all applicable legal and regulatory
requirements including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System and the Securities Act of 1933 and the
Securities Exchange Act of 1934, and the rules and regulations thereunder);
provided that no Lender shall have any responsibility as to the use of any of
- --------
such proceeds.
8.18 Certain Obligations Respecting Subsidiaries. The Company will,
-------------------------------------------
and will cause each of its Subsidiaries to, take such action from time to time
as shall be necessary to ensure that the Company and each of its Subsidiaries at
all times owns (subject only to the Lien of the Security Documents) at least the
same percentage of the issued and outstanding shares of each class of stock of
each of its Subsidiaries as is owned on the date of this Agreement. Without
limiting the generality of the foregoing, none of the Company nor any of its
Subsidiaries shall sell, transfer or otherwise dispose of any shares of stock in
any Subsidiary owned by them, nor permit any Subsidiary to issue any shares of
stock of any class whatsoever to any Person (other than to the Company or
another of its Subsidiaries). In the event that any such additional shares of
stock shall be issued by any Subsidiary, the Company agrees forthwith that it
shall
51
<PAGE>
cause such Obligor to deliver to Agent pursuant to any Security Document the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and shall take such other action as Agent shall request
to perfect the security interest created therein pursuant to any Security
Document.
8.19 Additional Subsidiary Guarantors. The Company will take such
--------------------------------
action, and will cause each of its Subsidiaries to take such action, from time
to time as shall be necessary to ensure that all Subsidiaries of the Company
(other than PMCT) are Subsidiary Guarantors and, thereby, Obligors hereunder;
provided, however, that Majority Lenders may, in their sole discretion, consent
- -------- -------
to the release of Plains Marketing and/or any of its Wholly-owned Subsidiaries
as a Subsidiary Guarantor if such Person is not obligated on a Guaranty of the
Indebtedness of the Company or any Subsidiary or Partnership (other than Plains
Marketing or its Wholly-owned Subsidiaries). Without limiting the generality of
the foregoing and subject to the limitations on Investments in Section 8.10
hereof, in the event that the Company or any of its Subsidiaries shall form any
new Subsidiary after the date hereof, the Company or the respective Subsidiary
will cause such new Subsidiary to become a "Subsidiary Guarantor" (and, thereby,
an Obligor) hereunder pursuant to a written instrument in form and substance
satisfactory to Agent, and to deliver such proof of corporate action, incumbency
of officers, opinions of counsel and other documents as is consistent with those
delivered by each Obligor pursuant to Section 6.01 hereof on the Closing Date or
as Agent shall have requested.
8.20 Environmental Matters; Environmental Reviews. (a) The Company
--------------------------------------------
will comply, and will cause each of its Subsidiaries and the Partnerships to
comply in all material respects with all Environmental Laws now or hereafter
applicable to the Company, each of its Subsidiaries, or the Partnerships and
shall obtain, at or prior to the time required by applicable Environmental Laws,
all environmental, health and safety permits, licenses and other authorizations
necessary for its operations and maintain such authorizations in full force and
effect.
(b) The Company will promptly furnish to Agent and each Lender all
written notices of any Environmental Claim received by the Company, any of its
Subsidiaries, Environmental Affiliates, or any Partnership, or of which it has
notice, pending or threatened against the Company, any of its Subsidiaries, any
Environmental Affiliates, or any Partnership which could result in fines or
liabilities in excess of $200,000.
(c) The Company will promptly furnish to Agent and each Lender all
requests for information, notices of claim, demand letters, and other
notifications, received by the Company, any of its Subsidiaries, Environmental
Affiliates, or any Partnership, that in connection with its ownership or use of
the Properties or the conduct of its business, it may be potentially responsible
with respect to any investigation or clean-up of Hazardous Material at any
location which could result in fines or liabilities in excess of $200,000.
(d) The Company shall carry out with reasonable diligence the remediation
of the Hazardous Materials on the Properties of the Company and its Subsidiaries
as disclosed in the Environmental Compliance Certificate described in Section
6.01(i) hereof.
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<PAGE>
8.21 Environmental Indemnification. The Company will defend, indemnify
-----------------------------
and hold harmless Agent and each Lender, its employees, agents, officers and
directors, from and against all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, including, without limitation, reasonable
attorney and consultant fees, investigation and laboratory fees, court costs and
litigation expenses incurred by any of them arising out of, or in any way
relating to (a) any violation or noncompliance with any Environmental Laws by
the Company or any of its Subsidiaries, or the Partnerships or (b) any Release
of a Hazardous Material into the environment, except to the extent that any of
the foregoing arise out of the gross negligence or willful misconduct of the
party seeking indemnification therefor.
8.22 Environmental Certification. As soon as available, and in any
---------------------------
event within thirty (30) days after the end of each fiscal year, the Company
shall deliver to Agent and each Lender a certificate signed by the president or
chief executive officer of the Company in the form attached hereto as Exhibit
"E", setting forth certain matters regarding the environmental practices and
policies of the Company, its Subsidiaries and the Partnerships. Further, upon
request by Agent, and no more often than one time during each fiscal year, the
Company and its Subsidiaries shall permit and cooperate with an environmental
and safety review made in connection with the operations of the Company's and
Subsidiaries' Oil and Gas Properties by consultants selected by Agent which
review shall, if requested by Agent, be arranged and supervised by environmental
legal counsel for Agent, all at the Company's cost and expense; provided such
--------
costs and expense shall be reasonable in relation to the services rendered;
provided, further, that the Company shall be responsible, for any fiscal year,
- -------- -------
for only 50% of such costs and expenses of such consultant and legal counsel
that exceed in the aggregate $25,000 for such fiscal year. The consultant shall
render a verbal or written report, as specified by Agent, based upon such review
at the Company's cost and expense, as so limited.
8.23 Modifications of Certain Documents. The Company will not, and
----------------------------------
will not permit any of its Subsidiaries to, (i) consent to any termination,
modification, supplement or waiver of any of the provisions of its charter or
by-laws (or equivalent document) in any manner which could have a Material
Adverse Effect and (ii) amend or modify any indenture or other agreement
providing for or otherwise relating to any Subordinated Indebtedness if such
amendment or modification will affect or impair the subordination provisions of
such indenture or agreement or modify the Persons obligated thereon or the
interest rate, amortization, repurchase or redemption provisions or financial
covenants of such indenture or agreement.
8.24 Gas Imbalances. The Company will not, and will not permit any of
--------------
its Subsidiaries or any Partnership to, have any gas imbalances, take-or-pay or
other prepayments with respect to any Obligor's Oil and Gas Properties which
would require any Obligor to deliver Hydrocarbons produced from any Oil and Gas
Property at some future time without then or thereafter receiving full payment
therefor, which would (i) exceed $500,000 for any individual well, (ii) exceed
$1,000,000 in the aggregate for all Obligors or (iii) with respect to any
individual material well, exceed the proved developed producing reserves
attributable to such well.
53
<PAGE>
8.25 Sale of Oil and Gas Properties. The Company will not, and will
------------------------------
not permit any of its Subsidiaries or any Partnership to, sell, assign, transfer
or convey any interest in any of the Oil and Gas Properties except for (unless
otherwise prohibited in the Security Documents):
(a) Hydrocarbons sold in the ordinary course of business as and when
produced;
(b) routine farm-outs of non-proven acreage;
(c) sales of Oil and Gas Properties provided that the aggregate value
--------
(determined in accordance with the guidelines of the Securities and Exchange
Commission) of the sales of all such Oil and Gas Properties permitted under this
Section 8.25(c) since the date of the last redetermination of the Borrowing Base
shall not exceed $1,000,000; or
(d) in addition to sales permitted by Section 8.25(c) above, sales of Oil
and Gas Properties included in the Borrowing Base, provided simultaneously with
each such sale the Borrowing Base is reduced by amounts agreed to at the time by
Majority Lenders and the outstanding principal balance of the Loans shall not
exceed the Adjusted Borrowing Base as so reduced after giving effect to the net
proceeds received in respect of such sale that are applied to prepay the
Obligations.
In connection with any sale permitted by this Section 8.25, Agent and Lenders
shall grant appropriate releases from the Security Documents subject to
retention of the Lien on any retained, reversionary or back-in interest.
8.26 Partnership Units; New Partnerships. The Company will not, and
-----------------------------------
will not permit any of its Subsidiaries or any Partnership to, (i) sell, assign
or transfer any units or other interests in any Partnership, other than to the
Company, any Wholly-Owned Subsidiary or any Partnership in which the Company
owns all the partnership interests subject in all respects to the Lien of the
applicable Security Documents and upon prior notice to Agent and each Lender,
(ii) make distributions of assets or Properties of any Partnership to any Person
other than to the Company or its Subsidiaries and the other partners of such
Partnership as a portion of pro rata distributions to the partners of such
Partnership generally, (iii) create any new general or limited partnership in
which the Company or any of its Subsidiaries or any Partnership shall have a
general partnership interest other than in the ordinary course of business and
upon prior notice to Agent and each Lender, or (iv) consent to or permit any
additional units, interests or rights to distributions in any Partnership to be
created, issued or sold by any Partnership, other than such additional units,
interests or rights to distributions which are issued to and held by the
Company.
8.27 Amendments of Partnership Agreements. The Company will not amend,
------------------------------------
modify or terminate (or consent to amend, modify or terminate), or permit any of
its Subsidiaries to amend, modify, or terminate (or consent to amend, modify or
terminate), any partnership agreement in any manner which could have a Material
Adverse Effect.
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8.28 Notice to Purchasers of Production. The Company will, and shall
----------------------------------
cause each other Obligor to, upon the occurrence and during the continuance of
an Event of Default and upon request of Agent, join with Agent in notifying the
purchaser or purchasers of oil and gas production of the existence of the
Security Documents, such notification to be in writing and accompanied (if
necessary) by certified copies of the Security Documents.
8.29 Restrictions on Plains Marketing. Neither Plains Marketing nor
--------------------------------
any Subsidiary thereof will (a) own any Oil and Gas Properties or (b) engage in
any business other than (i) the marketing and transportation of Hydrocarbons,
(ii) the ownership and operation of Hydrocarbon storage facilities, and (iii)
the ownership and operation of Hydrocarbon processing facilities which are
utilized at least in part in connection with the processing of Hydrocarbons
owned by the Company, any Subsidiary or Partnership.
8.30 Lien Releases. Within 30 days after the Closing Date, the Company
-------------
shall obtain, or cause to be obtained, written releases in form and substance
satisfactory to Agent of all Liens shown in Schedule 8.08 hereto which secure
obligations that the Company has indicated on said Schedule 8.08 have been paid
or satisfied in full as of the Closing Date. In addition, the Company shall
obtain, or cause to be obtained, written releases in form and substance
satisfactory to Agent of all other Liens shown on Schedule 8.08 hereto within 30
days after the obligations secured by such Liens have been paid or satisfied in
full.
8.31 Additional Security. Notwithstanding anything in this Agreement
-------------------
or any other Basic Document to the contrary, and subject to the provisions of
8.05(e) hereof, at Agent's request from time to time, and at the Company's sole
cost and expense, the Company shall execute and deliver, or cause to be executed
and delivered, to Agent and each Lender such mortgages, security interests, UCC
financing statements and such other instruments and documents and do, or cause
to be done, all such other acts that Agent deems reasonably necessary for
Lenders (or Agent for the benefit of Lenders) to obtain and perfect a Lien under
the Security Documents in any Oil and Gas Properties of the Company or any of
its Subsidiaries not constituting Properties mortgaged to Lenders (or Agent for
the benefit of Lenders) pursuant to the Security Documents at the time of such
request which the Company or such Subsidiary may mortgage to Lenders (or Agent
for the benefit of Lenders) without breaching any existing covenant in favor of,
or agreement with, any third party. Further, the Company will from time to time
deliver to Agent and each Lender any financing statements, continuation
statements, modification agreements, extension agreements and other documents,
properly completed and executed (and acknowledged when required by Agent) by the
Obligors in form and substance reasonably satisfactory to Agent, which Agent
requests for the purpose of continuing or extending the perfection and priority,
or for confirming and protecting, the Liens and other rights securing the
Obligations.
8.32 Post Closing Curative. If any title opinion furnished to Agent
---------------------
and Lenders as contemplated herein or other title information received by Agent
and Lenders discloses a title defect requiring or recommending curative action
which Agent deems material in its sole but reasonable discretion, the Company
shall, upon Agent's written request, use its reasonable best
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efforts to cure such defect, satisfy such requirement or take such recommended
action within a reasonable time but in any event within sixty days following the
date of such request by Agent.
8.33 Hedging Contracts. Neither the Company nor any Subsidiary or
-----------------
Partnership will be a party to or in any manner be liable on any forward,
future, swap or hedging contract, except:
(a) (i) contracts by Plains Marketing (1) for which neither the Company
nor any subsidiary other than Plains Marketing or PMCT is liable or (2) that are
guaranteed by the Company as permitted under Section 8.09(e), or (ii) contracts
by PMCT for which neither the Company nor any subsidiary other than PMCT is
liable;
(b) contracts entered into with the purpose and effect of fixing prices
on oil or gas expected to be produced by the Company, any Subsidiary or
Partnership, provided that at all times: (i) no such contract (other than a
--------
physical delivery contract) fixes a price for a term of more than three (3)
years; (ii) the aggregate monthly production covered by all such contracts
(determined, in the case of contracts that are not settled on a monthly basis,
by a monthly proration acceptable to Agent) for any single month does not in the
aggregate exceed eighty-five percent (85%) of the aggregate Projected Oil and
Gas Production of the Company, its Subsidiaries and Partnerships anticipated to
be sold in the ordinary course of their businesses for such month, (iii) no such
contract (unless the counterparty is Agent, any Lender or one of their
respective Affiliates) requires the Company, any Subsidiary or Partnership to
put up money, assets, letters of credit or other security against the event of
its nonperformance prior to actual default by such Person in performing its
obligations thereunder, and (iv) each such contract is with a counterparty or
has a guarantor of the obligation of the counterparty who (unless such
counterparty is Agent, any Lender or one of their respective Affiliates) at the
time the contract is made has long-term obligations rated BBB- or Baa3 or
better, respectively, by Standard & Poor's Corporation or Moody's Investors
Services, Inc. (or a successor credit rating agency). As used in this
subsection, the term "Projected Oil and Gas Production" means the projected
production of oil or gas (measured by volume unit or BTU equivalent, not sales
price) for the term of the contracts or a particular month, as applicable, from
properties and interests owned by the Company, its Subsidiaries and Partnerships
which are located in or offshore of the United States and which have
attributable to them proved oil or gas reserves, as such production is projected
in the most recent reports delivered pursuant to Section 8.04, after deducting
projected production from any properties or interests sold or under contract for
sale that had been included in such reports and after adding projected
production from any properties or interests that had not been reflected in such
reports but that are reflected in a separate or supplemental reports meeting the
requirements of such Section 8.04 hereof and otherwise are satisfactory to
Agent; or
(c) contracts entered into by the Company with the purpose and effect of
fixing interest rates on a principal amount of indebtedness of the Company that
is accruing interest at a variable rate, provided that (i) the aggregate
--------
notional amount of such contracts never exceeds seventy-five percent (75%) of
the anticipated outstanding principal balance of the indebtedness to be hedged
by such contracts or an average of such principal balances calculated using a
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generally accepted method of matching interest swap contracts to declining
principal balances, (ii) the floating rate index of each such contract generally
matches the index used to determine the floating rates of interest on the
corresponding indebtedness to be hedged by such contract, and (iii) each such
contract is with a counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is Agent, any Lender or one of their
respective Affiliates) at the time the contract is made has long-term
obligations rated BBB- or Baa3 or better, respectively, by Standard & Poor's
Corporation or Moody's Investors Services, Inc. (or a successor credit rating
agency).
8.34 Transactions with PMCT. The Company (or Plains Marketing) may
----------------------
make capital contributions to PMCT from time to time in an aggregate amount at
any time outstanding not to exceed $2,500,000. Except as otherwise permitted in
this Section 8.34, the Company shall not, and shall not permit any of its
Subsidiaries (other than PMCT) to (i) Guarantee any Indebtedness or other
obligations of PMCT (including, without limitation, the Bank of Boston/ING
Capital Facility), (ii) enter into any transaction with PMCT except for services
and other transactions provided by the Company or its Subsidiaries (other than
PMCT) in the ordinary course of their respective businesses on an arms length
basis on terms not less favorable to the Company and its Subsidiaries (other
than PMCT) than similar transactions with unaffiliated third parties, (iii)
grant or permit any Lien on any of its Property to secure any Indebtedness or
other obligations of PMCT (including, without limitation, the Bank of Boston/ING
Capital Facility), (iv) transfer any Property to PMCT, except as pursuant to an
arms length transaction permitted under clause (ii), or (v) make any Investment
in PMCT. PMCT shall not engage in any line of business other than the purchase,
storage, forward sale, and delivery of crude oil and related activities as
contemplated at the time of its initial organization.
Section 9. Events of Default. If one or more of the following events
-----------------
(herein called "Events of Default") shall occur and be continuing:
-----------------
(a) the Company or any Subsidiary Guarantor shall default in the payment
when due of (i) any principal of any Loan or (ii) any interest on any Loan and
(iii) any fee or any other amount payable by it hereunder, under any Note or
under any other Basic Document (other than principal or interest) and such
default with respect to a payment of interest shall continue unremedied for one
day or with respect to any fee or other amount (other than principal or
interest) shall continue unremedied for five days; or
(b) the Company or any Subsidiary Guarantor or any Partnership shall
default in the payment when due of any principal of or interest on any of its
other Indebtedness in excess of $1,000,000 in the aggregate, or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause, such Indebtedness to become due, or to be
prepaid in full (whether by redemption, purchase, offer to purchase or
otherwise), prior to its stated maturity; or
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(c) any representation, warranty or certification made or deemed made in
any Basic Document (or in any modification or supplement thereto) by any
Obligor, or any certificate furnished to Agent or any Lender pursuant to the
provisions thereof, shall have been false or misleading in any material respect
as of the time made or furnished; or
(d) the Company shall default in the performance of any of its
obligations under Sections 8.05, 8.07, 8.08, 8.09, 8.10, 8.11, 8.12, 8.13, 8.14,
8.17, 8.20, 8.21, 8.22 or 8.30 hereof or any Obligor shall default in the
performance of any of its obligations under any material provision of any
Security Document; or any Obligor shall default in the performance of any of its
other obligations in this Agreement or any other Basic Document and such default
shall continue unremedied for a period of ten days after the occurrence thereof;
or
(e) the Company or any Subsidiary Guarantor shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due;
or
(f) the Company or any Material Subsidiary shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its Property,
(ii) make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code (as now or hereafter in effect), (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any Petition filed against it in an
involuntary case under the Bankruptcy Code, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Company or any Material Subsidiary, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Company or such Subsidiary or of all or any substantial part of its assets, or
(iii) similar relief in respect of the Company or such Subsidiary under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of 60 or more days;
or an order for relief against the Company or such Subsidiary shall be entered
in an involuntary case under the Bankruptcy Code; or
(h) a final judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such judgment)
or in excess of $1,000,000 in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against the Company and/or any Subsidiary Guarantor
or any Partnership and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the Company or the
relevant Subsidiary or
58
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Partnership shall not, within said period of 30 days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) an event or condition specified in Section 8.01(h) hereof shall occur
or exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, the
Company or any ERISA Affiliate shall incur or in the opinion of Agent shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC
(or any combination of the foregoing) which would constitute, in the
determination of Agent, a Material Adverse Effect; or
(j) either (i) an event or series of events by which any Person or other
entity or group of Persons or other entities acting in concert as a partnership
or other group (a "Group of Persons") shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases, merger,
consolidation or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 40% or
more of the combined voting power of the then outstanding voting stock of the
Company, (ii) during any period of two consecutive years (A) the members of the
board of directors of the Company (the "Board") as of January 1, 1996, (B) any
director elected thereafter in any annual meeting of the stockholders of the
Company upon the recommendation of the Board, and (C) any other member of the
Board who will be recommended or elected to succeed those Persons described in
subclauses (A) and (B) of this clause (ii) by a majority of such Persons who are
then members of the Board, cease for any reason to constitute collectively a
majority of the Board then in office, or (iii) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company to any Person or Group of Persons; or
(k) except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force and
effect, for whatever reason except for releases granted pursuant to the terms of
this Agreement.
THEREUPON: (1) in the case of an Event of Default other than one referred to in
Sections 9(f) or (g) above with respect to any Obligor, Agent may (and upon
written notification from Majority Lenders, Agent shall), by notice to the
Company, terminate the Commitment and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Obligors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby expressly
waived by the Company and each other Obligor; and (2) in the case of the
occurrence of an Event of Default referred to in Sections 9(f) or (g) above with
respect to any Obligor, the Commitment shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Obligors hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
shall automatically become immediately due and
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payable without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are hereby
expressly waived by each Obligor. If any Event of Default shall occur and be
continuing, each Lender may protect and enforce its rights under the Basic
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Basic Document, and
each Lender may enforce the payment of any Obligations due it or enforce any
other legal or equitable right which it may have. All rights, remedies and
powers conferred upon Agent and Lenders under the Basic Documents shall be
deemed cumulative and not exclusive of any other rights, remedies or powers
available under the Basic Documents or at law or in equity.
Section 10. Agent.
-----
10.01 Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein and to take all
other actions and to exercise such powers under the Basic Documents as are
specifically delegated to Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of Agent to
Lenders is only that of one company acting as administrative agent for others,
and nothing in the Basic Documents shall be construed to constitute Agent a
trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other than
those expressly provided for in the Basic Documents. With respect to any
matters not expressly provided for in the Basic Documents and any matters which
the Basic Documents place within the discretion of Agent, Agent shall not be
required to exercise any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in which case it
shall be required to act or to refrain from acting (and shall be fully protected
and free from liability to all Lenders in so acting or refraining from acting)
upon the instructions of Majority Lenders (including itself), provided, however,
-------- -------
that Agent shall not be required to take any action which exposes it to a risk
of personal liability that it considers unreasonable or which is contrary to the
Basic Documents or to applicable law. Upon receipt by Agent from the Company of
any communication calling for action on the part of Lenders or upon notice from
any Lender to Agent of any Default or Event of Default, Agent shall promptly
notify each Lender thereof.
10.02 Exculpation, Agent's Reliance, Etc. NEITHER AGENT NOR ANY OF ITS
-----------------------------------
DIRECTORS, OFFICERS, AGENTS, ATTORNEYS, OR EMPLOYEES SHALL BE LIABLE FOR ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY OF THEM UNDER OR IN CONNECTION WITH
THE BASIC DOCUMENTS, INCLUDING THEIR NEGLIGENCE OF ANY KIND, EXCEPT THAT EACH
SHALL BE LIABLE FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for the Company), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any
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Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with the Basic Documents; (d) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of the Basic Documents on the part
of any Obligor or to inspect the property (including the books and records) of
any Obligor; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Basic Document or any instrument or document furnished in connection therewith;
(f) may rely upon the representations and warranties of the Obligors and the
Lenders in exercising its powers hereunder; and (g) shall incur no liability
under or in respect of the Basic Documents by acting upon any notice, consent,
certificate or other instrument or writing (including any telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
Person or Persons.
10.03 Lenders' Credit Decisions. Each Lender acknowledges that it has,
-------------------------
independently and without reliance upon Agent or any other Lender, made its own
analysis of the Company and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Basic Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon Agent or any other Lender 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 the Basic Documents.
10.04 Indemnification. Each Lender agrees to indemnify Agent (to the
---------------
extent not reimbursed by the Company within ten (10) days after demand) from and
against such Lender's Percentage Share of any and all liabilities, obligations,
claims, losses, damages, penalties, fines, actions, judgments, suits,
settlements, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts, and advisors) of any kind or nature whatsoever
(in this section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
Agent growing out of, resulting from or in any other way associated with any of
the Basic Documents and the transactions and events (including the enforcement
thereof) at any time associated therewith or contemplated therein (including any
violation or noncompliance with any Environmental Laws by any Person or any
liabilities or duties of any Person with respect to Hazardous Materials found in
or released into the environment). The foregoing indemnification shall apply
whether or not such liabilities and costs are in any way or to any extent
caused, in whole or in part, by any negligent act or omission of any kind by
Agent, provided only that no Lender shall be obligated under this section to
--------
indemnify Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by the Company
under Section 11.03 to the extent that Agent is not timely reimbursed for such
expenses by the Company as provided in such section. As used in this Section
10.04, the term "Agent" shall refer not only to the Person designated as such in
Section 1.01 but also to each director, officer, agent attorney, employee,
representative and Affiliate of such Person.
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10.05 Rights as Lender. In its capacity as a Lender, Agent shall have
----------------
the same rights and obligations as any Lender and may exercise such rights as
though it were not Agent. Agent may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with
any of the Obligors or their Affiliates, all as if it were not Agent hereunder
and without any duty to account therefor to any other Lender.
10.06 Sharing of Set-Offs and Other Payments. Each of Agent and Lender
--------------------------------------
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against the
Company or otherwise, obtain payment of a portion of the aggregate Obligations
owed to it which, taking into account all distributions made by Agent under
Section 4.01, causes Agent or such Lender to have received more than it would
have received had such payment been received by Agent and distributed pursuant
to Section 4.01, then (a) it shall be deemed to have simultaneously purchased
and shall be obligated to purchase interests in the Obligations as necessary to
cause Agent and all Lenders to share all payments as provided for in Section
4.01, and (b) such other adjustments shall be made from time to time as shall be
equitable to ensure that Agent and all Lenders share all payments of Obligations
as provided in Section 4.01; provided, however, that nothing herein contained
-------- -------
shall in any way affect the right of Agent or any Lender to obtain payment
(whether by exercise of rights of banker's lien, set-off or counterclaim or
otherwise) of indebtedness other than the Obligations. The Company expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to court order to be paid on
account of the possession of such funds prior to such recovery.
10.07 Investments. Whenever Agent in good faith determines that it is
-----------
uncertain about how to distribute to Lenders any funds which it has received, or
whenever Agent in good faith determines that there is any dispute among Lenders
about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending distribution; all
interest on any such investment shall be distributed upon the distribution of
such investment and in the same proportion and to the same Persons as such
investment. All moneys received by Agent for distribution to Lenders (other
than to the Person who is Agent in its separate capacity as a Lender) shall be
held by Agent pending such distribution solely as Agent for such Lenders, and
Agent shall have no equitable title to any portion thereof.
10.08 Benefit of Section 10. The provisions of this Section 10 (other
---------------------
than the following Section 10.09) are intended solely for the benefit of Agent
and Lenders, and no
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Obligor shall be entitled to rely on any such provision or assert any such
provision in a claim or defense against Agent or any Lender. Agent and Lenders
may waive or amend such provisions as they desire without any notice to or
consent of the Company.
10.09 Resignation. Agent may resign at any time by giving written
-----------
notice thereof to Lenders and the Company. Each such notice shall set forth the
date of such resignation. Upon any such resignation Majority Lenders shall have
the right to appoint a successor Agent. A successor must be appointed for any
retiring Agent, and such Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of
the retiring Agent's resignation, no successor Agent has been appointed and has
accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be a commercial bank organized or licensed to conduct a
banking or trust business under the laws of the United States of America or of
any state thereof. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Basic Documents. After any
retiring Agent's resignation hereunder the provisions of this Section 10 shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under the Basic Documents.
Section 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of Agent or any Lender to
------
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or the Notes shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or the Notes preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 Notices. All notices and other communications provided for
-------
herein and under the Security Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telex or telecopy)
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (below the name of the Company, in the
case of any Subsidiary Guarantor); or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier and confirmed by
telephone call or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid. All notices and
communications provided for under any Basic Document which is required to be
delivered to Agent shall be deemed given to Agent if it is delivered to a Lender
who is then also Agent, and vice versa.
11.03 Expenses, Etc. Whether or not the transactions contemplated by
--------------
this Agreement are consummated, the Company will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay (a) all
reasonable costs and expenses incurred by or
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on behalf of Agent (including attorneys' fees, consultants fees and engineering
fees) in connection with (i) the negotiation, preparation, execution and
delivery of the Basic Documents and any other documents requested by the Company
or required to preclude the Company from being in Default, any and all consents,
waivers or other documents or instruments relating thereto, (ii) the filing,
recording, refiling and re-recording of any Basic Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or re-recorded by the terms of any Basic Document, (iii) any
amendment, modification or waiver of any of the terms of this Agreement or any
of the other Basic Documents requested by the Company or required to preclude
the Company from being in default, (iv) the borrowings hereunder and other
action reasonably required in the course of administration hereof, (v)
monitoring or confirming (or preparation or negotiation of any document related
to) the Company's compliance with any covenants or conditions contained in this
Agreement or in any Basic Document, and (vi) the enforcement of this Section
11.03; and (b) all transfer, stamp, mortgage, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Basic Documents or any other
document referred to herein or therein. In addition to the foregoing, without
duplication, until all Obligations to Agent and Lenders have been paid in full,
the Company will also pay or reimburse Agent for all reasonable out-of-pocket
costs and expenses of Agent or its agents or employees in connection with the
continuing administration of the Loans and the related due diligence of Agent,
including, without limitation, travel and miscellaneous expenses and fees and
expenses of Agent's outside counsel, reserve engineers and consultants engaged
in connection with the Basic Documents.
The Company hereby agrees to indemnify and hold harmless Agent and each
Lender and its directors, officers, employees and agents for, and hold each of
them harmless against, any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to the extensions of
credit hereunder or any actual or proposed use by the Company or any of its
Subsidiaries of the proceeds of any of the extensions of credit hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
In addition, the Company hereby agrees to indemnify and hold harmless
Agent, each Lender and any trustee under any Security Document for and against,
and the Company shall promptly (and in any event, within thirty days after any
invoice or other statement or notice) pay, all expenditures, including
reasonable attorneys' fees and expenses, incurred or expended in connection with
(i) the breach by any Obligor of any covenant, agreement or condition contained
herein or in any Security Document, (ii) the exercise by Agent, any Lender or
any trustee under any Security Document of any of their rights and remedies
under the Basic Documents, and (iii) the protection of the Collateral and/or the
liens and security interests of Agent, any Lender or any trustee therein.
Agent, each Lender and any trustee under any Security Document shall have the
right to compromise and adjust any such claims, actions and
64
<PAGE>
judgments, and in addition to the rights to be indemnified as herein provided,
all amounts paid by Agent, such Lender or such trustee in compromise,
satisfaction or discharge of any such claim, action or judgment, and all court
costs, attorneys' fees and other expenses of every character expended by Agent,
such Lender or such trustee pursuant to the provisions hereof shall be a demand
obligation (which obligation the Company hereby expressly promises to pay) owing
by the Company to such Person. The "Release Date" as used in this Section shall
mean the earlier of the following two dates: (i) the date on which the
Obligations have been paid and performed in full and each Security Document has
been released of record, or (ii) the date on which the liens of all Security
Documents are foreclosed or a deed in lieu of such foreclosure is fully
effective and recorded. WITHOUT LIMITATION, IT IS THE INTENTION OF THE COMPANY,
AGENT AND EACH LENDER THAT THE FOREGOING INDEMNITIES SHALL APPLY TO EACH
INDEMNIFIED PARTY WITH RESPECT TO CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES,
CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT
LIMITATION REASONABLE ATTORNEYS' FEES) WHICH IN WHOLE OR IN PART ARE CAUSED BY
OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY.
However, such indemnities shall not apply to any particular indemnified party
(but shall apply to the other indemnified parties) to the extent the subject of
the indemnification is caused by or arises out of the gross negligence or
willful misconduct of such particular indemnified party. The foregoing
indemnities shall not terminate upon the Release Date or upon the release,
foreclosure or other termination of the Security Documents but will survive the
Release Date, foreclosure of the Collateral or conveyance in lieu of
foreclosure, and the repayment of the Obligations and the discharge and release
of the Security Documents and the other documents evidencing and/or securing the
Obligations. Any amount to be paid hereunder by the Company to Agent, any
Lender or any trustee under any Security Document shall be a demand obligation
owing by the Company to such Person.
11.04 Amendments, Etc. No provision of this Agreement may be amended
----------------
or modified or waived except by an instrument in writing signed by the Company
and Majority Lenders.
11.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 Assignments and Participation. (a) The Company may not assign
-----------------------------
its rights or obligations hereunder or under any Note without the prior consent
of each Lender. The Company shall not directly or indirectly purchase or
otherwise retire any Obligations owed to any Lender nor will any Lender accept
any offer to do so, unless each Lender shall have received substantially the
same offer with respect to the same Percentage Share of the Obligations owed to
it. If the Company at any time purchases or otherwise retires some but less
than all of the Obligations owed to Agent and all Lenders, such purchaser shall
not be entitled to any rights of Agent or Lender under the Basic Documents
unless and until the Company has purchased all of the Obligations.
65
<PAGE>
(b) Any Lender may assign any of its Loans, its Note, and its Percentage
Share of the Commitment; provided that, (i) such Lender gives written notice of
--------
such assignment to the Company; (ii) any such partial assignment shall be in an
amount at least equal to $5,000,000; (iii) the assignee shall be a bank or other
financial institution having a combined capital and surplus greater than
$100,000,000; and (iv) each such assignment by any Lender of its Loans, its
Note, or its Percentage Share of the Commitment shall be made in such manner so
that the same portion of its Loans, its Note, and its Percentage Share of the
Commitment is assigned to the respective assignee. Upon execution and delivery
by the assignee to the Company of an Agreement to Be Bound, substantially in the
form of Exhibit F attached hereto, pursuant to which such assignee agrees to
become a "Lender" hereunder having the Percentage Share of the Commitment and
Loans specified in such instrument, the assignee shall have, to the extent of
such assignment (unless otherwise provided in such assignment), the obligations,
rights and benefits of a Lender hereunder holding the Percentage Share of the
Commitment and Loans (or portions thereof) assigned to it (in addition to the
Percentage Share of the Commitment and Loans, if any, theretofore held by such
assignee) and such Lender shall, to the extent of such assignment, be released
from its Percentage Share of the Commitment (or portion thereof) so assigned.
Within five (5) Business Days after its receipt of notice that the Agent has
received copies of any assignment and the other documents relating thereto, the
Company shall execute and deliver to Agent (for delivery to the relevant
assignee) a new Note, evidencing such assignee's assigned Loans and, if the
assignor Lender has retained a portion of its Loans, a replacement Note in the
principal amount of the Loans retained by the assignor Lender (such Notes to be
in exchange for, but not in payment of, the Note held by such Lender).
(c) Any Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans, or in the Commitment, in which
event each purchaser of a participation (a "Participant") shall be entitled to
-----------
the rights and benefits of the provisions of Section 8.01(j) hereof with respect
to its participation in such Loans and Commitment as if (and the Company shall
be directly obligated to such Participant under such provisions as if) such
Participant were a "Lender" for purposes of said Section, but shall not have any
other rights or benefits under this Agreement, the Notes or any other Basic
Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender in
favor of the Participant). All amounts payable by the Company to such Lender
under Section 5 hereof in respect of Loans, and the Commitment, shall be
determined as if such Lender had not sold or agreed to sell any participation in
such Loans and Commitment, and as if such Lender were funding each of such Loan
and Commitment in the same way that it is funding the portion of such Loan and
Commitment in which no participations have been sold. In no event shall any
Lender agree with the Participant to take or refrain from taking any action
hereunder or under any other Basic Document except that any Lender may agree
with the Participant that it will not, without the consent of the Participant,
agree to (i) increase or extend the term, or extend the time or waive any
requirement for the reduction or termination, of the Commitment, (ii) extend the
date fixed for the payment of principal of or interest on the related Loan or
Loans or any portion of any fee hereunder payable to the Participant, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon, or any fee hereunder payable to the
Participant, to a level below the rate at which the Participant is
66
<PAGE>
entitled to receive such interest or fee, or (v) alter the rights or obligations
of the Company to prepay the related Loans.
(d) Anything in this Section 11.06 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of its Loans and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank, and such Loans and Note shall be fully
transferrable as provided therein. No such assignment shall release any Lender
from its obligations hereunder.
(e) Any Lender may furnish any information concerning the Company or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
11.07 Survival. The obligations of the Company under Sections 5.01,
--------
5.05, 8.21 and 11.03 hereof shall survive the repayment of the Loans and the
termination of the Commitment. In addition, each representation and warranty
made, or deemed to made by a notice of any extension of credit, herein or
pursuant hereto shall survive the making of such representation and warranty,
and neither Agent nor any Lender shall be deemed to have waived, by reason of
making any extension of credit hereunder, any Default which may arise by reason
of such representation or warranty proving to have been false or misleading,
notwithstanding that Agent or any Lender may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such extension of credit was made.
11.08 Captions. The table of contents and 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.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction.
-----------------------------------------
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
--------------------------------------------------------------------
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
- -------------------------------------------------------------
(b) THE COMPANY HEREBY SUBMITS, AND SHALL CAUSE EACH SUBSIDIARY GUARANTOR
TO SUBMIT, TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR
67
<PAGE>
THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY WAIVES, AND SHALL
CAUSE EACH SUBSIDIARY GUARANTOR TO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c) The Company hereby irrevocably designates, and shall cause each
Subsidiary Guarantor to irrevocably designate, Prentice-Hall Corporation System,
Inc., located at 15 Columbus Circle, New York, New York 10023-7773, (212) 373-
7500, as its designee, appointee and agent to receive, for and on its behalf,
service of process in such respective jurisdictions in any legal action or
proceeding with respect to this Agreement, the Notes or the other Security
Documents. It is understood that a copy of such process served on such agent
will be promptly forwarded by overnight courier to the Company or the Subsidiary
Guarantor at its address for notices pursuant to Section 11.02, but the failure
of the Company or the Subsidiary Guarantor to receive such copy shall not affect
in any way the service of such process. The Company further irrevocably
consents, and shall cause each Subsidiary Guarantor to irrevocably consent, to
the service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its said address, such service to become effective 30
days after such mailing.
(d) Nothing herein shall affect the right of the Company, Agent, any
Lender or any holder of a Note to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company,
Agent or any Lender in any other jurisdiction.
11.11 Waiver of Jury Trial, Punitive Damages, Etc. EACH OF THE
--------------------------------------------
COMPANY, AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES, AND THE COMPANY SHALL
CAUSE EACH SUBSIDIARY GUARANTOR TO IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH OF AGENT, EACH LENDER AND THE COMPANY HEREBY FURTHER (I)
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (II) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE
68
<PAGE>
FOREGOING WAIVERS, AND (III) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER BASIC DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION, AND THE COMPANY SHALL CAUSE EACH SUBSIDIARY GUARANTOR
TO MAKE SUCH WAIVER, CERTIFICATION, AND ACKNOWLEDGEMENT.
11.12 Rate of Interest. It is the intention of the parties hereto that
----------------
Agent and each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to
Agent or any Lender under laws applicable to it (including the laws of the
United States of America and the State of New York or any other jurisdiction
whose laws may be mandatorily applicable to Agent or such Lender notwithstanding
the other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any Note, this Agreement or in any other Security
Document or agreement entered into in connection with or as security for any
Note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under law applicable to Agent or such Lender that is
contracted for, taken, reserved, charged or received by Agent or such Lender
under any Note, this Agreement or under any of the other aforesaid Security
Documents or agreements or otherwise in connection with any Note shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be cancelled automatically and if theretofore paid shall be
credited by Agent or such Lender on the principal amount of the Obligations (or,
to the extent that the principal amount of the Obligations shall have been or
would thereby be paid in full, refunded by Agent or such Lender to the Company);
and (ii) in the event that the maturity of any Note is accelerated by reason of
an election of the holder thereof resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to Agent
or such Lender may never include more than the maximum amount allowed by such
applicable law, and excess interest, if any, provided for in this Agreement or
otherwise shall be cancelled automatically by Agent or such Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by Agent or such Lender on the principal amount of the Obligations (or,
to the extent that the principal amount of the Obligations shall have been or
would thereby be paid in full, refunded by Agent or such Lender to the Company).
All sums paid or agreed to be paid to Agent or such Lender for the use,
forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to Agent or such Lender, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the Loans evidenced by the
Notes until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to Agent or Lender on any date shall be computed at the Maximum Rate
applicable to Agent or such Lender pursuant to this Section 11.12 and (ii) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to Agent or such Lender would be less than the amount of
interest payable to Agent or such Lender computed at the Maximum Rate applicable
to Agent or such Lender, then the amount of interest payable to Agent or such
Lender in respect of such subsequent interest
69
<PAGE>
computation period shall continue to be computed at the Maximum Rate applicable
to Agent or such Lender until the total amount of interest payable to Agent or
such Lender shall equal the total amount of interest which would have been
payable to Agent or such Lender if the total amount of interest had been
computed without giving effect to this Section.
Without limiting the intent of the parties expressed under Sections 11.11
and 11.12 hereof, to the extent, if any, that Article 5069-1.04 of the Texas
Revised Civil Statutes is relevant to Agent or any Lender for the purpose of
determining the Maximum Rate, Agent or such Lender hereby elects to determine
the applicable rate ceiling under such Article by the indicated (weekly) rate
ceiling from time to time in effect and, in no event, shall Tex. Rev. Civ. Stat.
Ann. Art. 5069, ch. 15 (which regulates certain revolving credit loan accounts
and revolving tri-party accounts) apply to this Agreement or any Note.
11.13 Release of Liens. Notwithstanding anything to the contrary
----------------
contained herein neither Agent nor any Lender shall be required to release any
Lien under the Security Documents in connection with any sale of Property by any
of the Obligors if, at the time of such sale, a Default shall have occurred and
be continuing or would result therefrom.
11.14 Confidentiality. Agent and each Lender agrees (on behalf of
---------------
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices, any non-
public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same is
delivered to Agent or such Lender, provided that nothing herein shall limit the
--------
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for Agent or any Lender, (iii)
to bank examiners, auditors or accountants, (iv) in connection with any
litigation to which Agent or any Lender is a party or (v) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first enters into a
confidentiality agreement with Agent or such Lender; and provided, further, that
-------- -------
in no event shall Agent or any Lender be required to return any materials
furnished by the Company.
70
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PLAINS RESOURCES INC.
By:/s/ Phillip D. Kramer
---------------------------
Phillip D. Kramer
Vice President and Chief
Financial Officer
Address for Notices:
-------------------
1600 Smith Street, Suite 1500
Houston, Texas 77002
Telecopier No.: (713) 654-1523
Telephone No.: (713) 654-1414
Attention: Phillip D. Kramer
71
<PAGE>
Percentage Initial INTERNATIONALE NEDERLANDEN (U.S.)
Share Commitment CAPITAL CORPORATION, as Agent and a Lender
---------- -----------
20 % $25,000,000
By:/s/ Robi Artman-Hodge
---------------------
Robi Artman-Hodge, Managing Director
Principal Office for all Loans:
------------------------------
Internationale Nederlanden (U.S.) Capital
Corporation
135 East 57th Street
New York, New York 10022-2101
Address for Notices:
-------------------
Internationale Nederlanden (U.S.) Capital
Corporation
135 East 57th Street
New York, New York 10022-2101
Telex No.: TRT 177792
RCA Intl 238686
ITT Intl 428379
Telecopy No.: (212) 832-3616
Telephone No.: (212) 446-1729
Attention: Robi Artman-Hodge, Managing
Director
72
<PAGE>
Percentage Initial THE FIRST NATIONAL BANK OF BOSTON,
Share Commitment Lender
----------- ----------
20 % $25,000,000
By:/s/ George W. Passela
---------------------
George W. Passela
Managing Director
Principal Office for all Loans:
------------------------------
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Address for Notices:
-------------------
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Telephone: (617) 434-7160
Telecopy: (617) 434-3652
Attention: George W. Passela, Managing
Director
73
<PAGE>
Percentage Initial DEN NORSKE BANK AS, Lender
Share Commitment
----------- ----------
20 % $25,000,000
By:/s/Haakon Sandborg
------------------
Haakon Sandborg
Senior Vice President
By:/s/ William V. Moyer
--------------------
William V. Moyer
Vice President
Principal Office for all Loans:
------------------------------
Den norske Bank AS
333 Clay Street, Suite 4890
Houston, Texas 77002
Address for Notices:
-------------------
Den norske Bank AS
333 Clay Street, Suite 4890
Houston, Texas 77002
Telephone: (713) 757-0246
Telecopy: (713) 757-1167
Attention: Byron L. Cooley, First Vice
President
74
<PAGE>
Percentage Initial FIRST INTERSTATE BANK OF TEXAS, N.A.,
Share Commitment Lender
----------- ----------
20 % $25,000,000
By:/s/ Ann M. Rhoads
-----------------
Ann M. Rhoads
Vice President
Principal Office for all Loans:
------------------------------
First Interstate Bank of Texas, N.A.
1000 Louisiana, Mail Station 156
Houston, Texas 77002
Address for Notices:
-------------------
First Interstate Bank of Texas, N.A.
1000 Louisiana, Mail Station 156
Houston, Texas 77002
Telephone: (713) 250-1853
Telecopy: (713) 250-7912
Attention: Ann M. Rhoads, Vice President
75
<PAGE>
Percentage Initial TEXAS COMMERCE BANK
Share Commitment NATIONAL ASSOCIATION, Lender
----------- ----------
20 % $25,000,000
By:/s/ Michael V. Addy
-------------------
Michael V. Addy
Executive Vice President
Principal Office for all Loans:
------------------------------
Texas Commerce Bank National Association
712 Main
Houston, Texas 77002-8086
Address for Notices:
-------------------
Texas Commerce Bank National Association
712 Main
Houston, Texas 77002-8086
Telephone: (713) 216-4395
Telecopy: (713) 216-4117
Attention: Manager of Energy Group
76
<PAGE>
EXHIBIT 11. - Computation of Per Share Earnings (in thousands except per share
data) (unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
MARCH 31, 1996 MARCH 31, 1995(1)
---------------------------------------------------------------
Common and Common and
Common Common
Equivalent Full Equivalent Full
Shares Dilution Shares Dilution
-------------- ------------ -------------- --------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 16,182 16,182 11,594 11,594
Incremental shares assumed to be issued 751 804 174 4,029
------- ------- ------- -------
Total shares outstanding for calculation 16,933 16,986 11,768 15,623
======= ======= ======= =======
Net income before extraordinary item as reported $ 9,216 $ 9,216 $ 319 $ 319
Deduct dividends on Cumulative Convertible Preferred Stock -- -- (15) (15)
------- ------- ------- -------
Net income available to common shareholders before
extraordinary item $ 9,216 $ 9,216 $ 304 $ 304
Extraordinary item (8,507) (8,507) -- --
------- ------- ------- -------
Net income for calculation $ 709 $ 709 $ 304 $ 304
======= ======= ======= =======
Net income (loss) per share:
Before extraordinary item $ .54 $ .54 $ .03 $ .02
Extraordinary item (.50) (.50) -- --
------- ------- ------- -------
$ .04 $ .04 $ .03 $ .02
======= ======= ======= =======
(1) Earnings per share for the three months ended March 31, 1995, has been restated to reflect the payment of 1995 accrued
dividends on the Company's Series C Cumulative Preferred Stock (the "Series C Preferred Stock") through the 1995 conversion
of such series into common stock. Prior to the restatement, the Company had previously reported a net loss of $.02 per
common share on a primary and fully diluted basis for the three months ended March 31, 1995. The previously reported
amounts were calculated as if the accrued dividends on the Series C Preferred Stock would be paid in cash.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS
RESOURCES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH
31, 1996, AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,853
<SECURITIES> 0
<RECEIVABLES> 64,655
<ALLOWANCES> 0
<INVENTORY> 4,031
<CURRENT-ASSETS> 70,539
<PP&E> 427,977
<DEPRECIATION> 142,126
<TOTAL-ASSETS> 376,850
<CURRENT-LIABILITIES> 80,612
<BONDS> 217,068
1,618
0
<COMMON> 0
<OTHER-SE> 76,145
<TOTAL-LIABILITY-AND-EQUITY> 376,850
<SALES> 123,447
<TOTAL-REVENUES> 123,513
<CGS> 110,153
<TOTAL-COSTS> 115,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,197
<INCOME-PRETAX> (1,784)
<INCOME-TAX> (11,000)
<INCOME-CONTINUING> 9,216
<DISCONTINUED> 0
<EXTRAORDINARY> (8,507)
<CHANGES> 0
<NET-INCOME> 709
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
