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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 JUNE 30, 1998
[_] 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.)
500 DALLAS 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
___ ___
16,851,879 shares of common stock $.10 par value, issued and outstanding at
July 31, 1998.
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PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets:
June 30, 1998 and December 31, 1997.................................. 3
Consolidated Statements of Income:
For the three and six months ended June 30, 1998 and 1997............ 4
Consolidated Statements of Cash Flows:
For the six months ended June 30, 1998 and 1997...................... 5
Notes to Consolidated Financial Statements............................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS...................................... 10
PART II. OTHER INFORMATION............................................... 21
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<TABLE>
<CAPTION>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
- -------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1998 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,584 $ 3,714
Accounts receivable 89,840 99,597
Inventory 32,132 22,802
Prepaids and other 470 667
--------------- ---------------
Total current assets 154,026 126,780
--------------- ---------------
PROPERTY AND EQUIPMENT
Oil and natural gas properties full cost method:
Subject to amortization 539,222 498,038
Not subject to amortization 54,715 52,024
Midstream assets, primarily crude oil terminal and storage facility 35,691 35,451
Other property and equipment 8,764 8,074
--------------- ---------------
638,392 593,587
Less allowance for depreciation, depletion and amortization (193,328) (180,279)
--------------- ---------------
445,064 413,308
--------------- ---------------
OTHER ASSETS 16,728 16,731
--------------- ---------------
$ 615,818 $ 556,819
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 101,844 $ 102,663
Interest payable 7,090 6,601
Royalties payable 4,475 5,016
Notes payable and other current obligations 18,411 18,511
--------------- ---------------
Total current liabilities 131,820 132,791
BANK DEBT 136,000 80,000
SUBORDINATED DEBT 202,546 202,661
OTHER LONG-TERM DEBT 3,067 3,067
OTHER LONG-TERM LIABLITIES 4,937 5,107
--------------- ---------------
478,370 423,626
--------------- ---------------
STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock, $1.00 par value,
46,600 shares authorized, issued and outstanding,
net of discount of $2,001,000 and $2,629,000 at June 30, 1998,
and December 31, 1997, respectively 21,299 20,671
Common stock, $.10 par value, 50,000,000 shares authorized;
issued and outstanding, 16,845,326 at June 30, 1998,
and 16,703,074 shares at December 31, 1997 1,685 1,670
Additional paid-in capital 124,278 122,887
Accumulated deficit (9,814) (12,035)
--------------- ---------------
137,448 133,193
--------------- ---------------
$ 615,818 $ 556,819
=============== ===============
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ----------------------------------
1998 1997 1998 1997
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
REVENUE
Oil and natural gas sales $ 25,547 $ 26,285 51,711 $ 52,564
Marketing, transportation and storage 163,479 162,219 330,683 343,014
Interest and other income 415 88 619 146
------------ ------------ ------------- ------------
189,441 188,592 383,013 395,724
------------ ------------ ------------- ------------
EXPENSES
Production expenses 12,835 10,771 25,673 20,965
Purchases, transportation and storage 158,283 159,155 321,483 337,484
General and administrative 2,437 2,120 4,813 4,215
Depreciation, depletion and amortization 6,838 5,944 13,593 11,264
Interest expense 6,757 5,181 12,866 9,891
------------ ------------ ------------- ------------
187,150 183,171 378,428 383,819
------------ ------------ ------------- ------------
Income before income taxes 2,291 5,421 4,585 11,905
Income tax expense:
Current 19 96 22 210
Deferred 854 2,073 1,714 4,552
------------ ------------ ------------- ------------
NET INCOME $ 1,418 $ 3,252 $ 2,849 $ 7,143
============ ============ ============= ============
Less: cumulative preferred stock dividends 316 -- 628 --
------------ ------------ ------------- ------------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 1,102 $ 3,252 $ 2,221 $ 7,143
============ ============ ============= ============
Earnings per share:
Basic $ .07 $ 0.20 $ .13 $ 0.43
============ ============ ============= ============
Diluted $ .06 $ 0.18 $ .12 $ 0.40
============ ============ ============= ============
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
----------------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,849 $ 7,143
Items not affecting cash flows from operating activities:
Depreciation, depletion and amortization 13,593 11,264
Deferred income taxes 1,714 4,552
Other noncash items 131 173
Change in assets and liabilities resulting from operating activities:
Accounts receivable 9,524 24,292
Inventory (9,330) (35,020)
Prepaids and other 197 (432)
Accounts payable and other current liabilities (7,016) (9,606)
Interest payable 499 1,029
Royalties payable (354) (16)
--------------- ---------------
Net cash provided by operating activities 11,807 3,379
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for acquisition, exploration and development costs (39,405) (50,554)
Payment for additions to other property and assets (951) (3,817)
--------------- ---------------
Net cash used in investing activities (40,356) (54,371)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 119,560 105,600
Proceeds from short-term debt 17,900 16,490
Principal payments of long-term debt (63,560) (69,100)
Principal payments of short-term debt (18,000) --
Other 519 42
--------------- ---------------
Net cash provided by financing activities 56,419 53,032
--------------- ---------------
Net increase in cash and cash equivalents 27,870 2,040
Cash and cash equivalents, beginning of period 3,714 2,517
--------------- ---------------
Cash and cash equivalents, end of period $ 31,584 $ 4,557
=============== ===============
See notes to consolidated financial statements.
</TABLE>
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PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(UNAUDITED)
Note 1 -- Accounting Policies
The accompanying unaudited 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, 1997, 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 June 30, 1998, 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 (See Note 5).
NOTE 2 -- ACQUISITION
On July 30, 1998, Plains All American Inc. ("PAAI"), a wholly owned unrestricted
subsidiary of the Company, as defined in the indentures for the Company's $200
million 10.25% Senior Subordinated Notes (the "Indentures"), acquired all of the
outstanding capital stock of the All American Pipeline Company, Celeron
Gathering Corporation and Celeron Trading & Transportation Company (collectively
the "Celeron Companies") from Wingfoot Ventures Seven Inc., a wholly-owned
subsidiary of The Goodyear Tire & Rubber Company ("Goodyear") for approximately
$400 million, including transaction costs. The principal assets of the entities
acquired include the All American Pipeline System, a 1,233-mile crude oil
pipeline extending from California to Texas, and a 45-mile crude oil gathering
system in the San Joaquin Valley of California, as well as other assets related
to such operations.
Financing for the acquisition was provided through (i) PAAI's $325 million,
limited recourse bank facility with ING (U.S.) Capital Corporation, BankBoston,
N.A. and other lenders (the "PAAI Credit Facility") (See Note 4) and (ii) an
approximate $110 million capital contribution to PAAI by the Company.
Approximately $25 million of the capital contribution was made in the first
quarter of 1998 and the remaining $85 million was provided by a privately placed
issuance of the Company's Series E Cumulative Convertible Preferred Stock (the
"Series E Preferred Stock") (See Note 3).
NOTE 3 -- PREFERRED STOCK
On July 30, 1998, the Company sold in a private placement 170,000 shares of its
Series E Preferred Stock for $85 million. Each share of the Series E Preferred
Stock has a stated value of $500 per share and bears a dividend of 9.5% per
annum. Dividends are payable semi-annually in either cash or additional shares
of Series E Stock at the Company's option and are cumulative from the date of
issue. Each share of Series E Preferred Stock is convertible into 27.78 shares
of Common Stock (an initial effective conversion price of $18.00 per share) and
in certain circumstances may be converted at the
Page 6 of 23
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Company's option into Common Stock if the average trading price for any thirty-
day trading period is equal to or greater than $21.60 per share. The Series E
Preferred Stock is redeemable at the option of the Company after March 31, 1999,
at 110% of stated value and at declining amounts thereafter. If not previously
redeemed or converted, the Series E Preferred Stock is required to be redeemed
in 2012.
Proceeds from the Series E Preferred Stock were used to fund a portion of the
Company's capital contribution to PAAI to acquire all of the outstanding capital
stock of the Celeron Companies (See Note 2).
NOTE 4 -- DEBT
Plains All American Inc. Credit Facility
On July 30, 1998, PAAI borrowed $300 million under the PAAI Credit Facility.
Such proceeds were used to acquire all of the outstanding capital stock of the
Celeron Companies from Goodyear and to provide initial working capital (See Note
2).
The PAAI Credit Facility is guaranteed by the Celeron Companies and is secured
by the assets of PAAI and the Celeron Companies, including all pipelines,
gathering lines, available accounts receivable, inventory (including associated
linefill) and the capital stock of the Celeron Companies. The PAAI Credit
Facility consists of (i) a $100 million reducing, revolving line of credit with
a $30 million sub-limit for letters of credit ("Tranche A") and (ii) a $225
million non-amortizing term loan ("Tranche B"). PAAI incurs a commitment fee of
.5% per annum on the unused portion of Tranche A. The commitment for Tranche A
reduces in twenty-four equal quarterly amounts commencing September 30, 1998,
with final maturity on June 30, 2004. Tranche B of the PAAI Credit Facility is
repayable at maturity on June 30, 2005. Prepayment of principal on Tranche B is
subject to a penalty of 1% on amounts prepaid prior to December 31, 1998, and
.5% thereafter through June 30, 1999. The PAAI Credit Facility bears interest at
PAAI's option at Base Rate (as defined therein) or LIBOR plus 1.75% and 3.00%
for Tranche A and Tranche B, respectively. The interest rate margin on Tranche B
may decrease in certain situations based on attainment of certain debt ratios or
ratings received from rating agencies. Such interest rate margin will reduce by
25 basis points on September 30, 1998, based on the current debt rating of the
PAAI Credit Facility. PAAI has entered into 10 year interest rate swaps with
three of the lending banks to fix the LIBOR portion of the interest rate for
$200 million of Tranche B at 5.96%.
The PAAI Credit Facility contains covenants, which among other things, require
PAAI to maintain certain financial ratios and minimum net worth. In addition,
the PAAI Credit Facility contains restrictions on additional debt or liens,
hedging contracts, asset sales other than those in the ordinary course of
business, dividends and other distributions, investments, and capital
expenditures above a specified amount.
Plains Marketing & Transportation Inc. Revolving Credit Facility
As a result of the PAAI acquisition and the projected increased activity, Plains
Marketing & Transportation Inc. ("PMTI"), increased its letter of credit and
inventory credit facility from $90 million to $175 million. On July 30, 1998,
PMTI, a wholly owned subsidiary of the Company, established a $175 million
secured revolving credit facility with BankBoston, N.A., ING (U.S.) Capital
Corporation and other lenders (the "PMTI Credit Facility"). The purpose of the
PMTI Credit Facility is to provide standby letters of credit to support the
purchase of crude oil for resale and borrowings to finance crude oil inventory
which has been hedged against future price risk. The PMTI Credit Facility is
guaranteed by the Company and by Plains Terminal & Transfer Corporation and PLX
Crude Lines Inc., both wholly-owned subsidiaries of the Company. The PMTI Credit
Facility is secured by all of
Page 7 of 23
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the assets of PMTI, primarily accounts receivable and crude oil inventory.
Aggregate availability under the PMTI Credit Facility for direct borrowings and
letters of credit is limited to a borrowing base which is determined monthly
based on certain current assets and current liabilities of PMTI, primarily crude
oil inventory and accounts receivable and accounts payable related to the
purchase and sale of crude oil.
PMTI has established a $40 million sublimit (the "Sublimit") within the PMTI
Credit Facility for borrowings to finance crude oil purchased in connection with
operations at the Company's crude oil terminal and storage facilities. Under the
terms of the Sublimit, all purchases of crude oil inventory financed are
required to be hedged against future price risk on terms acceptable to the
lenders.
Letters of credit under the PMTI Credit Facility are generally issued for up to
seventy day periods and bear fees of 1.1% per annum on the undrawn face amount
of each outstanding letter of credit. Borrowings incur interest at the
borrower's option of either (i) the Base Rate, as defined, or (ii) LIBOR plus
1.5%. PMTI incurs a commitment fee of .25% per annum on the unused portion of
the PMTI Credit Facility. The PMTI Credit Facility has a final maturity date of
July 30, 2001.
The PMTI Credit Facility contains covenants, which among other things, require
PMTI to maintain certain financial ratios and minimum levels of working capital
and net worth. In addition, the PMTI Credit Facility contains restrictions on
additional indebtedness, acquisitions, mergers, sale of assets, affiliate
transactions, derivative contracts and capital expenditures.
Plains Resources Inc. Revolving Credit Facility
In May 1998, the Company's Revolving Credit Facility (the "Revolving Credit
Facility") and borrowing base thereunder were increased to $225 million from
$165 million. The Revolving Credit Facility, as amended, converts to a term loan
on July 1, 2000, with a final maturity of July 1, 2005, and bears interest at
the option of the Company at LIBOR plus 1.375% or Base Rate (as defined
therein). 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 of all subsidiaries excluding PAAI
and the Celeron Companies. At June 30, 1998, the Company had $136 million in
borrowings and a $1 million standby letter of credit outstanding under the
Revolving Credit Facility.
NOTE 5 -- CHANGING OIL AND NATURAL GAS PRICES
Decreases in the prices of oil and natural gas have had, and could have in the
future, an adverse effect on the carrying value of the Company's proved reserves
and the Company's revenues, profitability and cash flow. Almost all of the
Company's reserve base (approximately 94% of year-end 1997 reserve volumes) is
comprised of long-life oil properties that are sensitive to crude oil price
volatility. The crude oil price received by the Company at December 31, 1997,
upon which proved reserve volumes, the estimated present value (discounted at
10%) of future net revenue from the Company's proved oil and natural gas
reserves (the "Present Value of Proved Reserves") and the Present Value of
Proved Reserves reduced by future discounted income taxes (the "Standardized
Measure") as of such date were based, was $18.34 per barrel. During 1998, the
benchmark NYMEX crude oil price has fluctuated significantly, closing as high as
$17.82 per barrel and as low as $11.56 per barrel. Under full cost accounting
rules as prescribed by the SEC, unamortized costs of proved oil and natural gas
properties are subject to a ceiling, which limits such costs to the Standardized
Measure. At December 31, 1997, the Standardized Measure of the Company's proved
reserves was greater than the book carrying cost of the Company's oil and gas
properties by approximately $85 million. At June 30, 1998, based on the NYMEX
price and average wellhead realizations received by the Company, the book
carrying cost of the Company's
Page 8 of 23
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proved oil and gas properties exceeded the Standardized Measure by approximately
$13 million. However, prices increased subsequent to the end of the quarter, and
the Company was not required to writedown its book carrying cost by such amount.
NOTE 6 -- EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators of the
basic and diluted earnings per share ("EPS") computations for income from
continuing operations for the three and six months ended June 30, 1998 and 1997,
respectively, as required by Statement of Financial Accounting Standards No. 128
("FAS 128"), Earnings Per Share. Prior period EPS data has been restated in
accordance with the provisions of FAS 128.
<TABLE>
<CAPTION>
For the Quarter ended June 30,
-----------------------------------------------------------------------------
1998 1997
-------------------------------------- -------------------------------------
Income SHARES PER INCOME SHARES PER
(NUMERATOR) (DENOMINATOR) SHARE (NUMERATOR) (DENOMINATOR) SHARE
AMOUNT AMOUNT
-------------- ------------- ------ ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Net income $ 1,418 $ 3,252
Less: preferred stock dividends (316) --
--------- ---------
Income available to common
stockholders 1,102 16,820 $ 0.07 3,252 16,551 $ 0.20
======= =======
Effect of dilutive securities:
Employee stock options -- 1,151 -- 906
Warrants -- 579 -- 468
--------- ------ --------- ------
Income available to common
stockholders assuming dilution $ 1,102 18,550 $ 0.06 $ 3,252 17,925 $ 0.18
========= ====== ======= ========= ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1998 1997
-------------------------------------- --------------------------------------
Income SHARES PER INCOME SHARES PER
(NUMERATOR) (DENOMINATOR) SHARE (NUMERATOR) (DENOMINATOR) SHARE
AMOUNT AMOUNT
-------------- ------------- ------ ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Net income $ 2,849 $ 7,143
Less: preferred stock dividends (628) --
--------- --------
Income available to common
stockholders 2,221 16,772 $ 0.13 7,143 16,543 $ 0.43
====== =======
Effect of dilutive securities:
Employee stock options -- 1,090 -- 954
Warrants -- 549 -- 481
--------- ------ -------- ------
Income available to common
stockholders assuming dilution $ 2,221 18,411 $ 0.12 $ 7,143 17,978 $ 0.40
========= ====== ====== ======== ====== =======
</TABLE>
Certain options and warrants to purchase shares of Common Stock were not
included in the computations of diluted EPS because the exercise prices were
greater than the average market price of the Common Stock during the periods of
the EPS calculations, resulting in antidilution. In addition, the Company's
Series D Preferred Stock, which was issued during 1997, is convertible into
932,000 shares of Common Stock but was not included in the computation of
diluted EPS because the effect was antidilutive.
Page 9 of 23
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
The Company reported continued improvement in the fundamental performance
drivers in both its operating segments during the second quarter of 1998. Oil
and gas production in the upstream segment increased 13% and gross margin from
midstream activities increased 70% over the similar results from last year's
second quarter. Despite record operating results in both segments, financial
results were adversely affected by a 26% decline in the average benchmark oil
price between the two periods. The NYMEX benchmark oil price averaged $14.69 per
barrel in the second quarter of 1998, compared to the $19.94 per barrel average
for the second quarter of 1997.
For the quarter ended June 30, 1998, the Company reported net income of $1.4
million, or $.07 per share ($.06 per share assuming dilution). These results
compare with net income in the prior year period of $3.3 million or $.20 per
share ($.18 per share assuming dilution) on substantially higher oil prices.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the second quarter of 1998 totaled $16.0 million, a 3% decline from the $16.5
million reported for the prior year period. Cash flow from operations (net
income plus noncash expenses) was $9.2 million for the second quarter of 1998 as
compared to $11.4 million in last year's second quarter.
Upstream Results
The following table sets forth certain upstream operating information of the
Company for the periods presented:
THREE MONTHS ENDED
JUNE 30,
------------------------------------
1998 1997
---------------- ---------------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
AVERAGE DAILY PRODUCTION VOLUMES
Barrels of oil equivalent ("BOE")
California (90% oil) 13.8 10.8
S. Florida (100% oil) 5.3 5.6
Illinois Basin (100% oil) 3.6 3.4
Sold Properties -- 0.2
----------- --------
Total (94% oil) 22.7 20.0
=========== ========
UNIT ECONOMICS
Average sales price per BOE $ 12.38 $ 14.44
Production expenses per BOE 6.22 5.92
----------- --------
Gross margin per BOE 6.16 8.52
Upstream G&A expense per BOE 0.67 0.69
----------- --------
Gross profit per BOE $ 5.49 $ 7.83
=========== ========
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Oil and natural gas production for the second quarter of 1998 increased
approximately 13% to an average of 22,700 BOE per day as compared to the second
quarter 1997 average of 20,000 BOE per day. The increase in production volumes
is primarily attributable to the Company's ongoing exploitation activities on
its three core properties and to the acquisition of the California Arroyo Grande
Field during the fourth quarter of 1997. Excluding the impact of this
acquisition, total production was up approximately 6% from the prior year
quarter.
Net daily production in California increased approximately 28% to 13,800 BOE in
the second quarter of 1998 compared to 10,800 BOE in the same quarter of 1997.
Excluding production from the Arroyo Grande Field, total California production
was up approximately 15% over the comparative prior year quarter. Net daily
production in the Illinois Basin averaged approximately 3,600 barrels per day
during the second quarter of 1998, an increase of approximately 3% as compared
to the 1997 second quarter average of 3,400 barrels per day. Net daily
production in South Florida averaged approximately 5,300 barrels per day during
the second quarter of 1998, a 5% decrease from the 1997 comparative period, but
an increase of 8% over the 1998 first quarter production. The decrease is
attributable to normal decline on high volume wells that were drilled in 1996.
The second quarter 1997 South Florida production was the highest quarterly
production since the Company acquired the fields in 1993. Due to the high volume
of production that is generated by a few wells in South Florida, abrupt or
abnormal declines or downtime due to mechanical, marketing, or other conditions
on any of the properties in this area could have a significant impact on
production.
Oil and natural gas revenues were $25.5 million for the second quarter of 1998,
a decrease of 3% from the 1997 second quarter amount due to decreased product
prices which offset increased production volumes. The Company's average product
price, which represents a combination of fixed and floating price sales
arrangements and incorporates location and quality discounts from the benchmark
NYMEX price was $12.38 per BOE, a decrease of approximately 14% as compared to
1997's second quarter average realized price of $14.44 per BOE. The NYMEX
benchmark West Texas Intermediate ("WTI") crude oil price averaged $14.69 per
barrel during the 1998 second quarter, 26% or $5.25 per barrel below the $19.94
per barrel average for the second quarter of 1997. The Company maintained hedges
on approximately 57% and 75% of its crude oil production in the second quarter
of 1998 and 1997, respectively, with the current year's hedge price averaging a
NYMEX WTI price of approximately $19.80 per barrel, approximately $.55 per
barrel higher than last year's average hedge price. Hedging transactions had the
effect of increasing the Company's average price per BOE by $2.75 in the second
quarter of 1998 and decreasing such price by approximately $.60 per BOE in the
1997 second quarter.
The Company's realized product price was also negatively affected by higher
location and quality differentials from the NYMEX benchmark price due to the
weakening of heavy light spreads and the impact of the lower quality Arroyo
Grande crude. The Company's weighted average differential for all areas was
approximately $5.23 per barrel for the 1998 second quarter, compared to
approximately $4.43 per barrel during last year's second quarter.
Unit gross margin in the upstream segment was $6.16 per BOE, a 28% decrease as
compared to $8.52 per BOE reported for the second quarter of 1997 on
substantially higher oil prices. Upstream unit gross profit, which deducts all
pre-interest cash costs, was $5.49 per BOE, 30% lower than the 1997 amount of
$7.83 per BOE. Unit production expenses increased by 5% to $6.22 per BOE for the
second quarter of 1998, from $5.92 for the prior year quarter. Total production
expenses increased to $12.8 million from $10.8 million for the second quarter of
1997 primarily due to increased production volumes related to the Company's
acquisition and exploitation activities.
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Unit general and administrative ("G&A") expense in the upstream segment declined
3% to $.67 per BOE from $.69 per BOE primarily due to increased production
levels. Depreciation, depletion and amortization ("DD&A") per BOE was $3.00 for
the second quarter of 1998 compared to $2.85 per BOE in the 1997 comparative
quarter. Such increase is primarily attributable to the impact of lower
commodity prices on proved reserve volumes. Total DD&A expense increased to $6.8
million from $5.9 million due to increased production volumes and the higher
DD&A rate.
Midstream Results
The following table sets forth certain midstream operating information of the
Company for the periods presented:
THREE MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
----------- -----------
(IN THOUSANDS)
(UNAUDITED)
OPERATING RESULTS
Gross Margin $5,196 $3,064
G&A expense 1,055 869
------ ------
Gross profit $4,141 $2,195
====== ======
AVERAGE DAILY VOLUMES
Crude oil barrels marketed 83 71
Crude oil terminal throughput barrels 72 80
The Company's midstream segment reported gross margin (marketing, transportation
and storage revenues less purchases, transportation and storage expenses) of
$5.2 million for the second quarter of 1998, reflecting an approximate 70%
increase over the $3.1 million reported for the 1997 quarter. Gross profit
(gross margin less midstream G&A expenses) increased 89% to $4.1 million versus
$2.2 million in the second quarter of 1997. Net of interest expense associated
with contango inventory transactions, midstream gross margin and gross profit
for the current year quarter were $5.0 million and $4.0 million, respectively,
representing increases of approximately 67% and 85% over the 1997 respective
amounts. The increases in gross margin and gross profit are due to increased
marketing activities, strong marketing margins in areas where the Company
conducts a large part of its marketing activities which offset weaker marketing
margins in other areas and to profits from contango crude oil inventory
transactions. Gross margin net of related interest expense from contango crude
oil inventory transactions was $1.5 million and $.7 million for the three months
ended June 30, 1998 and 1997, respectively. Gross revenues were $163.5 million
and $162.2 million for the respective periods reflecting the increased barrels
marketed offset by lower oil prices. Midstream G&A expenses increased from $.9
million to $1.1 million in the current year quarter primarily as a result of
additional personnel added to further expand marketing activities. Average crude
oil volumes marketed increased approximately 17% to 83,000 barrels per day from
71,000 barrels per day averaged during the 1997 quarter. Because the crude oil
market was in contango during the second quarter of 1998, the Company utilized
its storage and terminal facility in Cushing, Oklahoma (the "Cushing Terminal")
to take advantage of available market arbitrages. Accordingly, average volumes
terminalled through the Cushing Terminal decreased about 8,000 barrels per day
to 72,000 barrels in the 1998 second quarter from 80,000 barrels per day in the
1997 comparative period.
General
Total G&A expense increased approximately 15% to $2.4 million for the second
quarter of 1998. The increase is a result of higher G&A expenses in the
midstream segment primarily due to expansion of the Company's marketing
activities and to increased expenses in the upstream segment primarily
Page 12 of 23
<PAGE>
related to the Company's 1997 acquisitions. Unit upstream G&A expense declined
3% to $.67 per BOE in the second quarter of 1998 due to increased production
volumes.
Interest expense for the second quarter of 1998 increased to $6.8 million from
$5.2 million for the comparative prior year period primarily due to higher
outstanding debt levels. The current year quarter includes approximately $.4
million of interest associated with amounts borrowed to fund the Company's
capital contribution to Plains All American Inc. ("PAAI"). See "Capital
Resources, Liquidity and Financial Condition". Capitalized interest was $.9
million and $.8 million for the three months ended June 30, 1998 and 1997,
respectively.
The Company's total tax provision for the quarter ended June 30, 1998, was
approximately $.9 million, as compared to the second quarter 1997 tax provision
of approximately $2.2 million. Such decrease is due to the decrease in income
before taxes between the two periods and a slight decrease in the Company's
effective tax rate. In both periods, substantially all of the Company's income
tax provision was deferred.
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
The Company reported continued improvement in the fundamental performance
drivers in both its operating segments during the first half of 1998. Oil and
gas production in the upstream segment increased 16% and gross margin from
midstream activities increased 66% over the similar results from last year's
first half. Despite record operating results in both segments, financial results
were adversely affected by a 28% decline in the average benchmark oil price
between the two periods. The NYMEX benchmark oil price averaged $15.33 per
barrel in the first six months of 1998, compared to the $21.38 per barrel
average for the 1997 period.
For the six months ended June 30, 1998, the Company reported net income of $2.8
million, or $.13 per share ($.12 per share assuming dilution). This compares
with net income in the prior year period of $7.1 million or $.43 per share ($.40
per share assuming dilution) on substantially higher oil prices. For the first
half of 1998, cash flow from operations decreased 21% to $18.3 million and
EBITDA decreased 5% to $31.3 million. Net cash provided by operating activities,
as reported in the consolidated statements of cash flows, increased to $11.8
million for the six months ended June 30, 1998, as compared to $3.4 million for
the 1997 comparative period. Such increase is primarily due to an increase in
inventory levels in the prior year period.
Page 13 of 23
<PAGE>
Upstream Results
The following table sets forth certain upstream operating information of the
Company for the periods presented:
SIX MONTHS ENDED
JUNE 30,
------------------------------------
1998 1997
---------------- ---------------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
AVERAGE DAILY PRODUCTION VOLUMES
Barrels of oil equivalent
California (90% oil) 13.7 10.5
S. Florida (100% oil) 5.1 5.4
Illinois Basin (100% oil) 3.7 3.4
Sold Properties -- 0.1
-------- --------
Total (94% oil) 22.5 19.4
======== ========
UNIT ECONOMICS
Average sales price per BOE $ 12.70 $ 14.96
Production expenses per BOE 6.31 5.97
-------- --------
Gross margin per BOE 6.39 8.99
Upstream G&A expense per BOE 0.68 0.71
-------- --------
Gross profit per BOE $ 5.71 $ 8.28
======== ========
Oil and natural gas production for the first six months of 1998 averaged
approximately 22,500 BOE per day, a 16% increase over the 19,400 BOE per day
averaged during the first half of 1997. Total production for the first six
months of 1998 increased to 4.1 million BOE versus the 3.5 million BOE produced
in the 1997 comparative period. The increase in production volumes is primarily
attributable to the Company's ongoing exploitation activities on its three core
properties and to the acquisition of two California producing properties during
1997. The Montebello and the Arroyo Grande Fields were acquired during the first
quarter and fourth quarter of 1997, respectively. Excluding the impact of these
acquisitions, total production was up approximately 6% from the prior year
period.
Net daily production in California increased approximately 30% to 13,700 BOE in
the first half of 1998, compared to 10,500 BOE in the 1997 comparative period.
Excluding production from the two 1997 acquisitions, total California production
was 11,000 BOE per day which represents a 14% increase over the comparative
prior year period, likewise excluding production from the acquired properties.
Net daily production in the Illinois Basin averaged approximately 3,700 barrels
per day during the first half of 1998 or 7% over the 1997 period. Net daily
production from the Company's South Florida properties decreased approximately
6% to average 5,100 barrels of oil per day in the first half of 1998 as compared
to 5,400 barrels per day in last year's comparative period. This decrease is
attributable to normal decline on high volume wells that were drilled in 1996.
Due to the high volume of production that is generated by a few wells in South
Florida, abrupt or abnormal declines or downtime due to mechanical, marketing,
or other conditions on any of the properties in this area could have a
significant impact on production.
Oil and natural gas revenues were $51.7 million for the first six months of
1998, a decrease of 2% from the 1997 comparative period due to decreased product
prices which offset increased production volumes. The Company's average product
price, which represents a combination of fixed and floating price sales
arrangements and incorporates location and quality discounts from the benchmark
NYMEX price was $12.70 per BOE, a decrease of approximately 15% as compared to
1997's first half average of $14.96 per BOE. During the current year, the NYMEX
benchmark price averaged $15.33 per
Page 14 of 23
<PAGE>
barrel, down 28% as compared to an average of $21.38 in the correlative period
of 1997. Approximately 58% of the Company's oil production was hedged during the
first half of 1998 at an average NYMEX price of $19.80 per barrel. Hedging
transactions had the effect of increasing the average price per BOE by $2.43 in
the first half of 1998 and decreasing such price by approximately $2.03 per BOE
in the 1997 period.
The Company's realized product price was also negatively affected by higher
location and quality differentials from the NYMEX benchmark price due to the
weakening of heavy light spreads and the impact of the lower quality Arroyo
Grande crude. The Company's weighted average differential for all areas was
approximately $5.17 per barrel for the first half of 1998, compared to
approximately $4.10 per barrel during last year's comparative period.
Unit gross margin in the upstream segment was $6.39 per BOE, a 29% decrease as
compared to $8.99 per BOE reported for the second half of 1997 on substantially
higher oil prices. Upstream unit gross profit, which deducts all pre-interest
cash costs, was $5.71 per BOE, 31% lower than the 1997 amount of $8.28 per BOE.
Unit production expenses increased $.34 per BOE from $5.97 per BOE last year,
largely as a result of the addition late in 1997 of properties with higher
operating costs and the first quarter effects of El Nino. Total production
expenses increased to $25.7 million from $21.0 million for the first half of
1997 primarily due to increased production volumes related to the Company's
acquisition and exploitation activities.
Unit G&A expense in the upstream segment declined 4% to $.68 per BOE from $.71
per BOE primarily due to increased production levels. DD&A per BOE was $3.00 for
the first half of 1998 compared to $2.80 per BOE in the 1997 comparative period.
Such increase is primarily attributable to the impact of lower commodity prices
on proved reserve volumes. Total DD&A expense increased to $13.6 million from
$11.3 million due to increased production volumes and the higher DD&A rate.
Midstream Results
The following table sets forth certain midstream operating information of the
Company for the periods presented:
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
----------- -----------
(IN THOUSANDS)
(UNAUDITED)
OPERATING RESULTS
Gross Margin $ 9,200 $ 5,530
G&A expense 2,041 1,706
----------- -----------
Gross profit $ 7,159 $ 3,824
=========== ===========
AVERAGE DAILY VOLUMES
Crude oil barrels marketed 82 67
Crude oil terminal throughput barrels 64 75
The Company's midstream segment reported gross margin (marketing, transportation
and storage revenues less purchases, transportation and storage expenses) of
$9.2 million for the first half of 1998, reflecting an approximate 66% increase
over the $5.5 million reported for the 1997 period. Gross profit (gross margin
less midstream G&A expenses) increased 87% to $7.2 million versus $3.8 million
in the second half of 1997. Net of interest expense associated with contango
inventory transactions, midstream gross margin and gross profit for the current
year period were $8.9 million and $6.8 million respectively, representing
increases of approximately 62% and 81% over the 1997 respective amounts.
Page 15 of 23
<PAGE>
Gross margin net of related interest expense from contango crude oil inventory
transactions was $1.8 million and $.7 million for the six months ended June 30,
1998 and 1997, respectively. Gross revenues decreased to $330.7 million from
$343.0 million for the prior year period reflecting the increased barrels
marketed offset by lower crude oil prices between the two periods. Midstream G&A
expenses increased from $1.7 million to $2.0 million in the current year period
primarily as a result of additional personnel added to further expand marketing
activities. Average crude oil volumes marketed increased approximately 22% to
82,000 barrels per day from 67,000 barrels per day averaged during the 1997
period. Because the crude oil market was in contango during the first half of
1998, the Company utilized its Cushing Terminal to take advantage of available
market arbitrages. Accordingly, average volumes terminalled through the Cushing
Terminal decreased about 11,000 barrels per day to 64,000 barrels in the 1998
first half from 75,000 barrels per day in the 1997 comparative period.
General
Total G&A expense increased approximately 14% to $4.8 million for the first half
of 1998. The increase is a result of higher G&A expenses in the midstream
segment primarily due to expansion of the Company's marketing activities and to
increased expenses in the upstream segment primarily related to the Company's
1997 acquisitions. Unit upstream G&A expense declined 4% to $.68 per BOE in the
first half of 1998 due to increased production volumes.
Interest expense for the first half of 1998, increased to $12.9 million from
$9.9 million for the comparative prior year period primarily due to higher
outstanding debt levels. The current year period includes approximately $.5
million of interest associated with amounts borrowed to fund the Company's
capital contribution to PAAI. See "Capital Resources, Liquidity and Financial
Condition". Capitalized interest was $1.8 million and $1.5 million for the six
months ended June 30, 1998 and 1997, respectively.
The Company's total tax provision for the six months ended June 30, 1998, was
approximately $1.7 million, as compared to comparative period's 1997 tax
provision of approximately $4.8 million. Such decrease is due to the decrease in
income before taxes between the two periods and a slight decrease in the
Company's effective tax rate. In both periods, substantially all of the
Company's income tax provision was deferred.
In July 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 131 ("FAS 131"), Disclosures About
Segments of an Enterprise and Related Information, effective for fiscal years
beginning after December 15, 1997. FAS 131 introduces a new model for segment
reporting and requires disclosures for each segment that are similar to those
required under current standards with the addition of quarterly disclosure
requirements and a finer partitioning of geographic disclosures. Reportable
segments are based on products and services, geography, legal structure,
management structure or any manner in which management disaggregates a company.
This statement replaces the notion of industry and geographic segments in
current FASB standards. Management is currently evaluating the impact of this
statement on the Company's disclosures.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133").
FAS 133 is effective for all fiscal years beginning after June 15, 1999 (January
1, 2000 for the Company). FAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. For fair-value hedge
transactions in which the Company is hedging changes in an asset's, liability's,
or firm
Page 16 of 23
<PAGE>
commitment's fair value, changes in the fair value of the derivative instrument
will generally be offset in the income statement by changes in the hedged item's
fair value. For cash-flow hedge transactions, in which the Company is hedging
the variability of cash flows related to a variable-rate asset, liability, or a
forecasted transaction, changes in the fair value of the derivative instrument
will be reported in other comprehensive income. The gains and losses on the
derivative instrument that are reported in other comprehensive income will be
reclassified as earnings in the periods in which earnings are impacted by the
variability of the cash flows of the hedged item. The Company has not yet
determined the impact that the adoption of FAS 133 will have on its earnings or
statement of financial position.
The Company has initiated a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue. The
Company expects to incur internal staff costs as well as some consulting and
other expenses necessary to prepare the systems for the year 2000. The Company
does not expect the amounts required to be expensed over the next 18 months to
have a material effect on its results of operations. The Company expects all
Year 2000 issues to be resolved in a timely manner during 1998 and 1999. There
can be no assurance that the systems of other companies on which the Company
relies will be converted in a timely manner or that any such failure to convert
by another company would not have an adverse effect on the Company. In order to
minimize this impact, the Company is in contact with its vendors and customers
to work toward their compliance.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
On July 30, 1998, Plains All American Inc. ("PAAI"), a wholly owned unrestricted
subsidiary of the Company, as defined in the indentures for the Company's $200
million 10.25% Senior Subordinated Notes (the "Indentures"), acquired all of the
outstanding capital stock of the All American Pipeline Company, Celeron
Gathering Corporation and Celeron Trading & Transportation Company (collectively
the "Celeron Companies") from Wingfoot Ventures Seven, Inc., a wholly-owned
subsidiary of The Goodyear Tire & Rubber Company ("Goodyear") for approximately
$400 million, including transaction costs. The principal assets of the entities
acquired include the All American Pipeline System, a 1,233-mile crude oil
pipeline extending from California to Texas, and a 45-mile crude oil gathering
system in the San Joaquin Valley of California, as well as other assets related
to such operations.
Financing for the acquisition was provided through (i) PAAI's $325 million,
limited recourse bank facility with ING (U.S.) Capital Corporation, BankBoston,
N.A. and other lenders (the "PAAI Credit Facility") and (ii) an approximate $110
million capital contribution to PAAI by the Company. Approximately $25 million
of the capital contribution was made in the first quarter of 1998 and the
remaining $85 million was provided by a privately placed issuance of the
Company's Series E Cumulative Convertible Preferred Stock (the "Series E
Preferred Stock").
On July 30, 1998, the Company sold in a private placement 170,000 shares of its
Series E Preferred Stock for $85 million. Each share of the Series E Preferred
Stock has a stated value of $500 per share and bears a dividend of 9.5% per
annum. Dividends are payable semi-annually in either cash or additional shares
of Series E Stock at the Company's option and are cumulative from the date of
issue. Each share of Series E Preferred Stock is convertible into 27.78 shares
of Common Stock (an initial effective conversion price of $18.00 per share) and
in certain circumstances may be converted at the Company's option into Common
Stock if the average trading price for any thirty-day trading period is equal to
or greater than $21.60 per share. The Series E Preferred Stock is redeemable at
the option of the Company after March 31, 1999, at 110% of stated value and at
declining amounts thereafter. If not previously redeemed or converted, the
Series E Preferred Stock is required to be redeemed in 2012.
Page 17 of 23
<PAGE>
Proceeds from the Series E Preferred Stock were used to fund a portion of the
Company's capital contribution to PAAI to acquire all of the outstanding capital
stock of the Celeron Companies.
On July 30, 1998, PAAI borrowed $300 million under the PAAI Credit Facility.
Such proceeds were used to acquire all of the outstanding capital stock of the
Celeron Companies from Goodyear and to provide initial working capital.
The PAAI Credit Facility is guaranteed by the Celeron Companies and is secured
by the assets of PAAI and the Celeron Companies, including all pipelines,
gathering lines, available accounts receivable, inventory (including associated
linefill) and the capital stock of the Celeron Companies. The PAAI Credit
Facility consists of (i) a $100 million reducing, revolving line of credit with
a $30 million sub-limit for letters of credit ("Tranche A") and (ii) a $225
million non-amortizing term loan ("Tranche B"). PAAI incurs a commitment fee of
.5% per annum on the unused portion of Tranche A. The commitment for Tranche A
reduces in twenty-four equal quarterly amounts commencing September 30, 1998,
with final maturity on June 30, 2004. Tranche B of the PAAI Credit Facility is
repayable at maturity on June 30, 2005. Prepayment of principal on Tranche B is
subject to a penalty of 1% on amounts prepaid prior to December 31, 1998, and
.5% thereafter through June 30, 1999. The PAAI Credit Facility bears interest at
PAAI's option at Base Rate (as defined therein) or LIBOR plus 1.75% and 3.00%
for Tranche A and Tranche B, respectively. The interest rate margin on Tranche B
may decrease in certain situations based on attainment of certain debt ratios or
ratings received from rating agencies. Such interest rate margin will reduce by
25 basis points on September 30, 1998, based on the current debt rating of the
PAAI Credit Facility. PAAI has entered into 10 year interest rate swaps with
three of the lending banks to fix the LIBOR portion of the interest rate for
$200 million of Tranche B at 5.96%.
The PAAI Credit Facility contains covenants, which among other things, requires
PAAI to maintain certain financial ratios and minimum net worth. In addition,
the PAAI Credit Facility contains restrictions on additional debt or liens,
hedging contracts, asset sales other than those in the ordinary course of
business, dividends and other distributions, investments and capital
expenditures above a specified amount.
As a result of the PAAI acquisition and the projected increased activity, Plains
Marketing & Transportation Inc. ("PMTI"), increased its letter of credit and
inventory credit facility from $90 million to $175 million. On July 30, 1998,
PMTI, a wholly owned subsidiary of the Company, established a $175 million
secured revolving credit facility with BankBoston, N.A., ING (U.S.) Capital
Corporation and other lenders (the "PMTI Credit Facility"). The purpose of the
PMTI Credit Facility is to provide standby letters of credit to support the
purchase of crude oil for resale and borrowings to finance crude oil inventory
which has been hedged against future price risk. The PMTI Credit Facility is
guaranteed by the Company and by Plains Terminal & Transfer Corporation and PLX
Crude Lines Inc., both wholly-owned subsidiaries of the Company. The PMTI Credit
Facility is secured by all of the assets of PMTI, primarily accounts receivable
and crude oil inventory. Aggregate availability under the PMTI Credit Facility
for direct borrowings and letters of credit is limited to a borrowing base which
is determined monthly based on certain current assets and current liabilities of
PMTI, primarily crude oil inventory and accounts receivable and accounts payable
related to the purchase and sale of crude oil.
PMTI has established a $40 million sublimit (the "Sublimit") within the PMTI
Credit Facility for borrowings to finance crude oil purchased in connection with
operations at the Company's crude oil terminal and storage facilities. Under the
terms of the Sublimit, all purchases of crude oil inventory financed are
required to be hedged against future price risk on terms acceptable to the
lenders.
Page 18 of 23
<PAGE>
Letters of credit under the PMTI Credit Facility are generally issued for up to
seventy day periods and bear fees of 1.1% per annum on the undrawn face amount
of each outstanding letter of credit. Borrowings incur interest at the
borrower's option of either (i) the Base Rate, as defined, or (ii) LIBOR plus
1.5%. PMTI incurs a commitment fee of .25% per annum on the unused portion of
the PMTI Credit Facility. The PMTI Credit Facility has a final maturity date of
July 30, 2001.
The PMTI Credit Facility contains covenants, which among other things, require
PMTI to maintain certain financial ratios and minimum levels of working capital
and net worth. In addition, the PMTI Credit Facility contains restrictions on
additional indebtedness, acquisitions, mergers, sale of assets, affiliate
transactions, derivative contracts, and capital expenditures.
In May 1998, the Company's Revolving Credit Facility and borrowing base
thereunder were increased to $225 million from $165 million. The Revolving
Credit Facility, as amended, converts to a term loan on July 1, 2000, with a
final maturity of July 1, 2005, and bears interest at the option of the Company
at LIBOR plus 1.375% or Base Rate (as defined therein). 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 of all subsidiaries excluding PAAI and the Celeron Companies. At June
30, 1998, the Company had $136 million in borrowings and a $1 million standby
letter of credit outstanding under the Revolving Credit Facility.
At June 30, 1998, the Company had working capital of approximately $22.2 million
including the amount contributed to PAAI which at June 30, 1998, was invested in
short-term investments. Excluding such contribution, the Company had a working
capital deficit of approximately $6.8 million compared to a working capital
deficit of $6.0 million at December 31, 1997. The Company has historically
operated with a working capital deficit due primarily to ongoing capital
expenditures that have been financed through cash flow, the Revolving Credit
Facility, and the sale of subordinated notes, common stock and preferred stock.
The Company intends to make aggregate capital expenditures of approximately $103
million in 1998, primarily on the development and exploitation if its
California, South Florida and Illinois Basin properties. Through June 30, 1998,
the Company's capital expenditures were approximately $45 million. Approximately
$20 million of planned spending is designed to set up or optimize the Company's
1999 capital plan, and could be deferred without significantly affecting 1998's
forecasted production growth. In addition to the $103 million of 1998 planned
capital expenditures, the Company plans to construct an additional one million
barrels of tankage at the Cushing Terminal. Construction of the expansion
project is expected to begin during the second half of 1998 and is expected to
be completed in mid-1999 at a total cost of approximately $10 million.
INVESTING AND FINANCING ACTIVITIES
Net cash flows used in investing activities were $40.4 million and $54.4 million
for the six months ended June 30, 1998 and 1997, respectively. Investing
activities include payments for acquisition, exploration and development costs
of $39.4 million and $50.6 million for these same periods, respectively.
Included in the 1997 amount is approximately $25 million related to the
acquisition of the Montebello field.
Net cash provided by financing activities amounted to $56.4 million and $53.0
million for the six months ended June 30, 1998 and 1997, respectively.
Approximately $16 million and $25 million borrowed under the Revolving Credit
Facility to fund the capital contribution to PAAI and the acquisition of the
Montebello field, respectively, is included in proceeds from long-term debt in
1998 and 1997, respectively. Included in both years are net proceeds from
borrowings under the Revolving
Page 19 of 23
<PAGE>
Credit Facility as a result of acquisition, exploration, exploitation and
development activities. Financing activities during the first half of 1998
include approximately $17.9 million in short-term borrowings and approximately
$18.0 million of repayments related to contango crude oil inventory transactions
at the Cushing Terminal.
CHANGING OIL AND NATURAL GAS PRICES
The Company is affected by changes in 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, prolonged low
crude oil prices or 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. In order to manage its exposure to commodity price
risk, the Company has routinely hedged a portion of its crude oil production.
For 1998, the Company has entered into various hedging arrangements on
approximately 12,250 barrels of oil per day, or approximately 57% of 1998 second
quarter crude oil production at a NYMEX WTI price of approximately $19.80 per
barrel. In addition, the Company also has fixed price arrangements on 9,000
barrels per day in 1999 at a NYMEX WTI price of $18.25 per barrel, or
approximately 42% of second quarter 1998 crude oil production levels. The
foregoing NYMEX WTI prices are before quality and location differentials.
Management intends to continue to maintain hedging arrangements for a
significant portion of its production. Such contracts may expose the Company to
the risk of financial loss in certain circumstances.
Additionally, decreases in the prices of oil and natural gas have had, and
could have in the future, an adverse effect on the carrying value of the
Company's proved reserves and the Company's revenues, profitability and cash
flow. Almost all of the Company's reserve base (approximately 94% of year-end
1997 reserve volumes) is comprised of long-life oil properties that are
sensitive to crude oil price volatility. The crude oil price received by the
Company at December 31, 1997, upon which proved reserve volumes, the estimated
present value (discounted at 10%) of future net revenue from the Company's
proved oil and natural gas reserves (the "Present Value of Proved Reserves") and
the Present Value of Proved Reserves reduced by future discounted income taxes
(the "Standardized Measure") as of such date were based, was $18.34 per barrel.
During 1998, the benchmark NYMEX crude oil price has fluctuated significantly,
closing as high as $17.82 per barrel and as low as $11.56 per barrel. Under full
cost accounting rules as prescribed by the SEC, unamortized costs of proved oil
and natural gas properties are subject to a ceiling, which limits such costs to
the Standardized Measure. At December 31, 1997, the Standardized Measure of the
Company's proved reserves was greater than the book carrying cost of the
Company's oil and gas properties by approximately $85 million. At June 30, 1998,
based on the NYMEX price and average wellhead realizations received by the
Company, the book carrying cost of the Company's proved oil and gas properties
exceeded the Standardized Measure by approximately $13 million. However, prices
increased subsequent to the end of the quarter, and the Company was not required
to writedown its book carrying cost by such amount.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
All statements, other than statements of historical facts, included in this
report which address activities, events or developments that the Company expects
or anticipates will or may occur in the future are forward-looking statements.
Such forward-looking statements are subject to risks and uncertainties
including, among other things, market conditions, drilling and operating
hazards, uncertainties inherent in estimating oil and gas reserves and other
factors discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
Page 20 of 23
<PAGE>
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Material Modification of Rights of Registrant's Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The 1998 Annual Meeting of Stockholders (the "Meeting") of the Company was
held on May 21, 1998. At the Meeting, holders of common stock, $.10 par
value, of the Company ("Common Stock"), elected eight members of the
Company's Board of Directors. No other matters were voted on at the Meeting.
Out of the 16,745,022 shares of Common Stock entitled to vote at the Meeting,
there were 14,225,734 shares of Common Stock represented at the Meeting
either by proxies solicited in accordance with Schedule 14A or by security
holders voting in person.
The tabulation of votes for each director nominee is as follows:
NOMINEES FOR ELECTION TO THE
COMPANY'S BOARD OF DIRECTORS
- ------------------------------------- VOTES "FOR" WITHHELD
Greg Armstrong 12,800,685 7,983
Jerry L. Dees 12,801,120 7,548
Tom H. Delimitros 12,801,120 7,548
William H. Hitchcock 12,800,730 7,938
Dan M. Krausse 12,801,160 7,508
John H. Lollar 12,801,120 7,548
Robert V. Sinnott 12,801,120 7,548
J. Taft Symonds 12,801,160 7,508
Item 5 - Other Information
None
Page 21 of 23
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
A. Exhibits
10(x) -- Credit Agreement dated as of July 30, 1998, among Plains Marketing
& Transportation Inc. and BankBoston, N.A., and ING (U.S.) Capital
Corporation, et.al.
10(y) -- Fourth Amended and Restated Credit Agreement dated May 22, 1998,
among the Company and ING (U.S.) Capital Corporation, et.al.
27. -- Financial Data Schedule
B. Report on Form 8-K
A Form 8-K with respect to the Company's purchase by Plains All American
Inc. (a wholly owned subsidiary of the Company) of all the outstanding
capital stock of the All American Pipeline Company, Celeron Gathering
Corporation and Celeron Trading & Transportation Company from a subsidiary
of the Goodyear Tire & Rubber Company was filed on August 11, 1998. Such
form 8-K is hereby incorporated by reference.
Page 22 of 23
<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: August 14, 1998 By: /s/ Cynthia A. Feeback
-------------------------------
Cynthia A. Feeback, Controller,
Assistant Treasurer and
Principal Accounting Officer
(Principal Accounting Officer)
Page 23 of 23
<PAGE>
Execution
=======================================================================
CREDIT AGREEMENT
____________________________________
PLAINS MARKETING & TRANSPORTATION INC.
and
BANKBOSTON, N.A.,
as Administrative Agent,
BANCBOSTON SECURITIES INC.,
as Syndication Agent,
ING (U.S.) CAPITAL CORPORATION,
as Documentation Agent,
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
_______________________________________________________
$175,000,000
July 30, 1998
=======================================================================
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TABLE OF CONTENTS
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CREDIT AGREEMENT 1
ARTICLE I - Definitions and References 1
Section 1.1. Defined Terms 1
Section 1.2. Exhibits and Schedules; Additional Definitions 20
Section 1.3. Amendment of Defined Instruments 20
Section 1.4. References and Titles 21
Section 1.5. Calculations and Determinations 21
ARTICLE II - The Loans 21
Section 2.1. Commitments to Lend; Notes 21
Section 2.2. Requests for New Loans 22
Section 2.3. Continuations and Conversions of Existing Loans 23
Section 2.4. Use of Proceeds 24
Section 2.5. Optional Prepayments of Loans 24
Section 2.6. Mandatory Prepayments 24
Section 2.7. Letters of Credit 25
Section 2.8. Requesting Letters of Credit 25
Section 2.9. Reimbursement and Participations 26
Section 2.10. No Duty to Inquire 27
Section 2.11. LC Collateral 28
Section 2.12. Interest Rates and Fees; Reduction in Commitment 29
Section 2.13. Borrowing Base Reporting 30
ARTICLE III - Payments to Lenders 30
Section 3.1. General Procedures 30
Section 3.2. Capital Reimbursement 31
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit 31
Section 3.4. Notice; Change of Applicable Lending Office 32
Section 3.5. Availability 33
Section 3.6. Funding Losses 33
Section 3.7. Reimbursable Taxes 33
ARTICLE IV - Conditions Precedent to Credit 35
Section 4.1. Documents to be Delivered 35
Section 4.2. Additional Conditions to Initial Credit 37
Section 4.3. Additional Conditions Precedent 37
Section 4.4. Financial Conditions 38
ARTICLE V - Representations and Warranties 39
Section 5.1. No Default 39
Section 5.2. Organization and Good Standing 39
Section 5.3. Authorization 39
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Section 5.4. No Conflicts or Consents 40
Section 5.5. Enforceable Obligations 40
Section 5.6. Initial Financial Statements 40
Section 5.7. Other Obligations and Restrictions. 40
Section 5.8. Full Disclosure 40
Section 5.9. Litigation 41
Section 5.10. Labor Disputes and Acts of God 41
Section 5.11. ERISA Plans and Liabilities 41
Section 5.12. Compliance with Laws 41
Section 5.13. Environmental Laws 42
Section 5.14. Names and Places of Business 43
Section 5.15. Borrower's Subsidiaries 43
Section 5.16. Title to Properties; Licenses 44
Section 5.17. Government Regulation 44
Section 5.18. Insider 44
Section 5.19. Solvency 44
Section 5.20. Credit Arrangements 44
Section 5.21. Year 2000 44
ARTICLE VI - Affirmative Covenants of Borrower 45
Section 6.1. Payment and Performance 45
Section 6.2. Books, Financial Statements and Reports 45
Section 6.3. Other Information and Inspections 48
Section 6.4. Notice of Material Events and Change of Address 48
Section 6.5. Maintenance of Properties 49
Section 6.6. Maintenance of Existence and Qualifications 49
Section 6.7. Payment of Trade Liabilities, Taxes, etc. 50
Section 6.8. Insurance 50
Section 6.9. Performance on Borrower's Behalf 50
Section 6.10. Interest 50
Section 6.11. Compliance with Agreements and Law 50
Section 6.12. Environmental Matters; Environmental Reviews 51
Section 6.13. Evidence of Compliance 51
Section 6.14. Agreement to Deliver Security Documents 51
Section 6.15. Perfection and Protection of Security Interests and Liens 52
Section 6.16. Bank Accounts; Offset. 52
Section 6.17. Guaranties of Borrower's Subsidiaries 52
ARTICLE VII - Negative Covenants of Borrower 53
Section 7.1. Indebtedness 53
Section 7.2. Limitation on Liens 54
Section 7.3. Limitation on Mergers, Issuances of Securities 55
Section 7.4. Limitation on Sales of Property 56
Section 7.5. Limitation on Investments and New Businesses 56
Section 7.6. Limitation on Credit Extensions 56
Section 7.7. Transactions with Affiliates 56
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Section 7.8. Limitations on Capital Expenditures 56
Section 7.9. Open Inventory Position 57
Section 7.10. Fixed Charges Coverage Ratio 57
Section 7.11. Solvency 57
Section 7.12. Prohibited Contracts 57
Section 7.13. No Limitation of Certain Payment 57
ARTICLE VIII - Events of Default and Remedies 57
Section 8.1. Events of Default 57
Section 8.2. Remedies 60
ARTICLE IX - Administrative Agent 60
Section 9.1. Appointment and Authority 60
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. 61
Section 9.3. Credit Decisions 61
Section 9.4. Indemnification 62
Section 9.5. Rights as Lender 62
Section 9.6. Sharing of Set-Offs and Other Payments 63
Section 9.7. Investments 63
Section 9.8. Benefit of Article IX 63
Section 9.9. Resignation 64
Section 9.10. Other Agents 64
ARTICLE X - Miscellaneous 64
Section 10.1. Waivers and Amendments; Acknowledgments 64
Section 10.2. Survival of Agreements; Cumulative Nature 66
Section 10.3. Notices 66
Section 10.4. Payment of Expenses; Indemnity 67
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments 68
Section 10.6. Confidentiality 71
Section 10.7. Governing Law; Submission to Process 71
Section 10.8. Limitation on Interest 72
Section 10.9. Termination; Limited Survival 72
Section 10.10 Severability 72
Section 10.11. Counterparts 72
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. 73
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Schedules and Exhibits:
- ----------------------
Schedule 1 - Lender Schedule
Schedule 2 - Disclosure Schedule
Schedule 3 - Security Schedule
Schedule 4 - Insurance Schedule
Schedule 5 - Outstanding Letters of Credit
Schedule 6 - Borrowing Base Procedures
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D-1 -
and D-2 - Forms of Letter of Credit
Exhibit E - Letter of Credit Application and Agreement
Exhibit F - Certificate Accompanying Financial Statements
Exhibit G-1 - Opinion of In-house Counsel for Restricted Persons
Exhibit G-2 - Opinion of Counsel for Restricted Persons
Exhibit H - Borrowing Base Report
Exhibit I - Environmental Compliance Certificate
Exhibit J - Assignment and Acceptance Agreement
Exhibit K - Officers Certificate
Exhibit L - Service and Exchange Agreement
Exhibit M - Agreement for the Allocation of Taxes
Exhibit N - Netting Agreement
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CREDIT AGREEMENT
-----------------
THIS CREDIT AGREEMENT is made as of July 30, 1998, by and among PLAINS
MARKETING & TRANSPORTATION INC., a Delaware corporation ("Borrower"),
BANKBOSTON, N.A., as administrative agent (in such capacity, "Administrative
Agent"), BANCBOSTON SECURITIES INC., as syndication agent (in such capacity,
"Syndication Agent"), ING (U.S.) CAPITAL CORPORATION, as documentation agent (in
such capacity, "Documentation Agent") and the Lenders referred to below. In
consideration of the mutual covenants and agreements contained herein the
parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section 1.1 or in
the sections and subsections referred to below:
"Acceptable Issuer" means any national or state bank or trust company which
is organized under the laws of the United States of America or any state thereof
or any branch licensed to operate under the laws of the United States of America
or any state thereof, which is a branch of a bank organized under any country
which is a member of the Organization for Economic Cooperation and Development,
in each case which has capital, surplus and undivided profits of at least
$500,000,000 and whose commercial paper is rated at least P-1 by Moody's or A-1
by S&P.
"Account" shall have the meaning given that term in the UCC.
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account.
"Acquisition Documents" means the Stock Purchase Agreement dated as of
March 15, 1998 among Resources, PAAI and Wingfoot Ventures Seven Inc., and all
other agreements or instruments delivered in connection therewith to consummate
the acquisition contemplated thereby.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the per annum rate equal to the sum of (a) one and one-half
percent (1.5%) per annum plus (b) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to be
equal to the quotient obtained by dividing (i) the Eurodollar Rate for such
Eurodollar Loan for such Interest Period by (ii) 1 minus the Reserve Requirement
for such Eurodollar Loan for such Interest Period. The Adjusted Eurodollar Rate
for any Eurodollar Loan shall change whenever the Reserve Requirement changes.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
<PAGE>
(a) to vote 5% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Affiliate Agreements" has the meaning given to such term in Section 4.2.
"Affiliate Net Payable" means the remainder (if positive) of (a) all
Affiliate Payables due from Borrower or one of its Subsidiaries to an Affiliate
minus (b) all Affiliate Receivables due to such Person from such Affiliate.
"Affiliate Payables" means all accounts payable and other liabilities owed
by Borrower or any of its Subsidiaries to Resources or any of its Subsidiaries,
other than Borrower or its Subsidiaries.
"Affiliate Receivables" means an Account or other liability (i) owed to
Borrower or any of its Subsidiaries from Resources to the extent such Accounts
or other liabilities in the aggregate exceed $1,000,000 at the time of
determination, or (ii) owed to Borrower or any of its Subsidiaries from any of
Resources' Subsidiaries, other than Borrower or its Subsidiaries.
"Administrative Agent" means BankBoston N.A., as Administrative Agent
hereunder, and its successors in such capacity.
"Agreement" means this Credit Agreement.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Approved Eligible Receivables" means each Eligible Receivable (other than
Eligible Exchange Balances) (a) from a Person whose Debt Rating is either at
least Baa2 by Moody's or at least BBB by S&P; (b) fully and unconditionally
guaranteed as to payment by a Person whose Debt Rating is either at least Baa2
by Moody's or at least BBB by S&P; (c) from any other Person Currently Approved
by Majority Lenders; or (d) fully covered by a letter of credit from an
Acceptable Issuer.
"Base Rate" means the higher of (a) the annual rate of interest announced
from time to time by Administrative Agent at its "base rate" at its head office
in Boston, Massachusetts, or (b) the Federal Funds Rate plus one-half percent
(0.5%) per annum; provided that such rate may not be the lowest rate at which
funds are made available to customers of Administrative Agent at such time.
Each change in the Base Rate shall become effective without prior notice to
Borrower automatically as of the opening of business on the date of such change
in the Base Rate.
"Base Rate Loan" means a Loan which does not bear interest at the Adjusted
Eurodollar Rate.
2
<PAGE>
"Borrower" means Plains Marketing & Transportation, Inc., a Delaware
corporation.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a Continuation or Conversion of all or a portion of an existing
Loan (whether alone or as a combination with a new Loan) into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
"Borrowing Base" means the remainder of (a) minus (b) below as of the date
of determination:
(a) the sum of the following as of the date of determination :
(i) 100% of the Resources Letter of Credit Availability; plus
(ii) 100% of Eligible Cash Equivalents; plus
(iii) 90% of Approved Eligible Receivables; plus
(iv) the lesser of (A) 85% of Other Eligible Receivables or (B) 1/3
of the sum of the amounts of clauses (a)(ii) plus (a)(iii)
[(i.e., (a)(ii) plus (a)(iii) must be 75% of (a)(ii) plus
(a)(iii) plus (a)(iv)]; plus
(v) 85% of Eligible Margin Deposits; plus
(vi) the lesser of (A) 95% of Hedged Eligible Inventory plus 100% of
Other Eligible Inventory Value or (B) $40,000,000; plus
(vii) 80% of Eligible Exchange Balances, plus
(viii) 100% of all Paid but Unexpired Letters of Credit
MINUS (b) the following as of the date of determination:
(i) 100% of First Purchase Crude Payables; plus
(ii) 100% of Other Priority Claims, plus
(iii) The Estimate Adjustment Amount as provided in Section 2.13.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Boston, Massachusetts.
Any Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends)
3
<PAGE>
must also be a day on which, in the judgment of Administrative Agent,
significant transactions in dollars are carried out in the London interbank
eurocurrency market.
"Capital Lease" means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Cash Equivalents" means Investments in:
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;
(b) demand deposits and time deposits (including certificates of deposit)
maturing within 12 months from the date of deposit thereof, (i) with any office
of any Lender or (ii) with a domestic office of any national or state bank or
trust company which is organized under the Laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose long-term certificates of deposit are rated at
least Aa2 by Moody's or AA by S&P;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subsection (a) above entered
into with (i) any Lender or (ii) any other commercial bank meeting the
specifications of subsection (b) above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by Moody's or A-1 by S&P; and
(e) money market or other mutual funds substantially all of whose assets
comprise securities of the types described in subsections (a) through (d) above.
"Change of Control" means the occurrence of any of the following events:
(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 Resources, (ii)
during any period of two consecutive years (A) the members of the board of
directors of Resources (the "Board") as of January 1, 1998, (B) any director
elected thereafter in any annual meeting of the stockholders of Resources 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
4
<PAGE>
collectively a majority of the Board then in office, (iii) the direct or
indirect sale, lease, exchange or other transfer of all or substantially all of
the assets of Resources to any Person or Group of Persons, or (iv) any Person
other than Resources or a wholly owned Subsidiary of Resources shall own or
acquire legal or beneficial ownership of any equity securities of Borrower, PTTC
or any other Guarantor (other than Resources) or any securities which are
convertible into equity securities of Borrower, PTTC or any other Guarantor
(other than Resources).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with all rules and regulations promulgated with respect thereto.
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien, in each case granted or created to secure all or part of
the Obligations.
"Commitment Period" means the period from and including the date hereof
until July 31, 2001 (or, if earlier, the day on which (i) the obligation of
Lenders to make Loans hereunder and the obligations of LC Issuer to issue
Letters of Credit hereunder have terminated, (ii) the obligation of LC Issuer to
issue Letters of Credit hereunder has terminated, or (iii) the Notes first
become due and payable in full, whichever shall first occur).
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated EBITDA" means, for any four-Fiscal Quarter period, the sum of
(1) the Consolidated Net Income of Borrower and its Subsidiaries during such
period, plus (2) all Fixed Charges which were deducted in determining such
Consolidated Net Income for such period, plus (3) all income taxes (including
any franchise taxes to the extent based upon net income) which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges (including any provision for the reduction in the
carrying value of assets recorded in accordance with GAAP) which were deducted
in determining such Consolidated Net Income, minus (5) all non-cash items of
income which were included in determining such Consolidated Net Income except to
the extent of cash received in respect of such item in a prior period.
"Consolidated Net Income" means, for any period, Borrower's and its
Subsidiaries' gross revenues for such period, including any cash dividends or
distributions actually received from any other Person during such period, minus
Borrower's and its Subsidiaries' expenses and other proper charges against
income (including taxes on income to the extent imposed), determined on a
Consolidated basis after eliminating earnings or losses attributable to
outstanding minority interests and excluding the net earnings of any Person
other than a Subsidiary in which Borrower or any of its Subsidiaries has an
ownership interest. Consolidated Net Income shall not include any gain or loss
from the sale of assets or any extraordinary gains or losses.
5
<PAGE>
"Consolidated Net Worth" means the remainder of all Consolidated assets, as
determined in accordance with GAAP, of Borrower and its Subsidiaries (excluding
all Affiliate Receivables) minus the sum of (a) Borrower's Consolidated Total
Liabilities and (b) all outstanding Minority Interests. The effect of any
increase or decrease in net worth in any period as a result of (i) any
unrealized gains or losses from a mark to market of any Hedging Contracts not
reflected in the determination of net income but reflected in the determination
of comprehensive income and (ii) any Excluded Income Tax Accrual shall be
excluded in determining Consolidated Net Worth. "Minority Interests" means the
book value of any shares of stock of any of Borrower's Subsidiaries which shares
are owned by Persons other than Borrower or one of its wholly owned
Subsidiaries. "Excluded Income Tax Accrual" means accrued liabilities in
respect of federal or state income taxes (including state franchise taxes to the
extent based on net income) so long as such tax liabilities are deferred and not
then paid or payable as a result of combined income tax filings with Resources
or otherwise.
"Consolidated Total Liabilities" means the sum of the following (without
duplication): (a) all Consolidated liabilities of Borrower and its Subsidiaries
determined in accordance with GAAP (including but not limited to any outstanding
deferred tax liabilities and excluding all Affiliate Payables), plus (b) LC
Obligations (other than in respect of undrawn Letters of Credit issued to
support existing or future accounts payable which are or will be included in
such Consolidated liabilities), plus (c) all Affiliate Net Payables.
"Consolidated Working Capital Ratio" means the ratio of (a) consolidated
current assets of Borrower and its Subsidiaries (excluding Affiliate
Receivables) to (b) the sum of the following (without duplication): (i)
Consolidated current liabilities of Borrower and its Subsidiaries (excluding
Affiliate Payables), plus (ii) Loans, plus (iii) LC Obligations (other than in
respect of undrawn Letters of Credit issued to support existing or future
accounts payable which are or will be included in such Consolidated current
liabilities), plus (iv) all Affiliate Net Payables.
"Continuation/Conversion Notice" means a written or telephonic request, or
a written confirmation, made by Borrower which meets the requirements of Section
2.3.
"Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from
one Interest Period to the next Interest Period.
"Currently Approved by Majority Lenders" means such Person (including a
limit on the maximum credit exposure to any such Person), storage location,
pipeline, form of Letter of Credit or other matter as the case may be, as
reflected in the most recent written notice given by Administrative Agent to
Borrower as being approved by Majority Lenders. Each such written notice will
supersede and revoke each prior notice.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
"Debt Rating" means with respect to a Person, the rating then in effect by
a Rating Agency for the long term senior unsecured non-credit enhanced debt of
such Person.
6
<PAGE>
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Default Rate" means, at the time in question, (i) two percent (2%) per
annum plus the Adjusted Eurodollar Rate then in effect for any Eurodollar Loan
(up to the end of the applicable Interest Period) or (ii) two percent (2%) per
annum plus the Base Rate for each Base Rate Loan; provided, however, the Default
Rate shall never exceed the Highest Lawful Rate
"Default Rate Period" means (i) any period during which an Event of
Default, other than pursuant to Section 8.1 (a) or (b), is continuing, provided
that such period shall not begin until notice of the commencement of the Default
Rate has been given to Borrower by Administrative Agent upon the instruction by
Majority Lenders and (ii) any period during which any Event of Default pursuant
to Section 8.1 (a) or (b) is continuing unless Borrower has been notified
otherwise by Administrative Agent upon the instruction by Majority Lenders.
"Disclosure Schedule" means Schedule 2 hereto.
"Domestic Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" in the Lender Schedule
hereto, or such other office as such Lender may from time to time specify to
Borrower and Administrative Agent; with respect to LC Issuer, the office,
branch, or agency through which it issues Letters of Credit; and, with respect
to Administrative Agent, the office, branch, or agency through which it
administers this Agreement.
"Eligible Cash Equivalents" means Cash Equivalents in which Borrower has
lawful and absolute title, which are free from any express or implied at law
Lien, trust or other beneficial interest, in which Administrative Agent holds a
fully perfected first-priority security interest prior to the rights of, and
enforceable as such against, any other Persons pursuant to an account agreement
satisfactory to Administrative Agent and which remain under the sole dominion
and control of Administrative Agent.
"Eligible Exchange Balances" means each Approved Eligible Receivable
(including for this purpose only either the right to receive crude oil in kind
or to receive money) arising from the trading, lending, borrowing or exchange of
crude oil, net of any netted obligations or other offsets or counterclaims
determined in accordance with prices set forth in the applicable exchange
contracts, based on current value at the Market Price, in which Borrower has
lawful and absolute title, which is not subject to any Lien in favor of any
Person (other than Permitted Inventory Liens), and which is subject to a fully
perfected first-priority security interest (subject only to Permitted Inventory
Liens) in favor of Administrative Agent pursuant to the Loan Documents prior to
the rights of, and enforceable as such against, any other Persons minus without
duplication the amount of any Permitted Inventory Lien on any crude oil
receivable in kind.
"Eligible Inventory" means inventories of crude oil in which Borrower has
lawful and absolute title, which are not subject to any Lien in favor of any
Person (other than Permitted Inventory Liens), which are subject to a fully
perfected first priority security interest (subject only
7
<PAGE>
to Permitted Inventory Liens) in favor of Administrative Agent pursuant to the
Loan Documents prior to the rights of, and enforceable as such against, any
other Person, which are otherwise satisfactory to Majority Lenders in their
reasonable business judgment and which are located in storage locations
(including pipelines) which are either (a) owned by a wholly owned Subsidiary of
Resources or (b) Currently Approved by Majority Lenders minus without
duplication the amount of any Permitted Inventory Lien on any such inventory.
"Eligible Margin Deposit" means net equity value of investments by Borrower
in margin deposit accounts with commodities brokers on nationally recognized
exchanges subject to a perfected security interest in favor of Administrative
Agent and a three-party agreement among Borrower, Administrative Agent and the
depository institution, in form and substance satisfactory to Administrative
Agent.
"Eligible Receivables" means, at the time of any determination thereof (and
without duplication), each Account and, with respect to each determination made
on or after the 20th day of each calendar month and prior to the first day of
the next calendar month, each amount which will be, in the good faith estimate
reasonably determined by Borrower, an Account of the Borrower with respect to
sales and deliveries of crude oil during the remainder of such calendar month or
deliveries of crude oil during the next calendar month under firm written
purchase and sale agreements, in either event as to which the following
requirements have been fulfilled (or as to future Accounts, will be fulfilled as
of the date of such sales and deliveries of crude oil), to the reasonable
satisfaction of Administrative Agent:
(i) Borrower has lawful and absolute title to such Account;
(ii) such Account is a valid, legally enforceable obligation of an
Account Debtor payable in United States dollars, arising from the sale and
delivery of crude oil to such Person in the United States of America in the
ordinary course of business of Borrower, to the extent of the volumes of
crude oil delivered to such Person prior to the date of determination;
(iii) there has been excluded from such Account (A) any portion that
is subject to any dispute, rejection, loss, non-conformance , counterclaim
or other claim or defense on the part of any Account Debtor or to any claim
on the part of any Account Debtor denying liability under such Account, and
(B) the amount of any account payable or other liability owed by Borrower
to the Account Debtor on such Account, whether or not a specific netting
agreement may exist, excluding, however, any portion of any such account
payable or other liability which is at the time in question covered by a
Letter of Credit;
(iv) Borrower has the full and unqualified right to assign and grant a
security interest in such Account to Administrative Agent as security for
the Obligation;
(v) such Account (A) is evidenced by an invoice rendered to the
Account Debtor, or (B) represents the uninvoiced amount in respect to
actual deliveries of crude oil not earlier than 45 days prior to the date
of determination and is governed by a purchase
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and sale agreement, exchange agreement or other written agreement, and in
either event such Account is not evidenced by any promissory note or other
instrument;
(vi) such Account is not subject to any Lien in favor of any Person
and is subject to a fully perfected first priority security interest in
favor of Administrative Agent pursuant to the Loan Documents, prior to the
rights of, and enforceable as such against, any other Person except for a
Lien in respect of First Purchase Crude Payables;
(vii) such Account is due not more than 30 days following the last
day of the calendar month in which the crude oil delivery occurred and is
not more than 30 days past due (except that Accounts of a single Account
Debtor in excess of $500,000 which are not Approved Eligible Receivables
shall be excluded from Eligible Receivables if not paid within three
Business Days after the due date);
(viii) such Account is not payable by an Account Debtor with more
than twenty percent (20%) of its Accounts to Borrower that are outstanding
more than 60 days from the invoice date;
(ix) the Account Debtor in respect of such Account (A) is located, is
conducting significant business or has significant assets in the United
States of America or is a Person Currently Approved by Majority Lenders,
(B) is not an Affiliate of Borrower, and (C) is not the subject of any
event of the type described in Section 8.1(i);
(x) the Account Debtor in respect of such Account is not a
governmental authority, domestic or foreign; and
(xi) such Account is not the obligation of an Account Debtor that
Administrative Agent or Majority Lenders determine in good faith that there
is a legitimate concern over the timing or collection of such receivable.
"Eligible Transferee" means a Person which either (a) is a Lender, or (b)
is consented to as an Eligible Transferee by Administrative Agent and, so long
as no Default or Event of Default is continuing, by Borrower, which consents in
each case will not be unreasonably withheld (provided that no Person organized
outside the United States may be an Eligible Transferee if Borrower would be
required to pay withholding taxes on interest or principal owed to such Person).
"Environmental Laws" means any and all Laws 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 ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
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"ERISA Affiliate" means Borrower and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Restricted
Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" on the Lender
Schedule hereto (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to Borrower and Administrative Agent.
"Eurodollar Loan" means a Loan that bears interest at a rate based upon the
Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).
"Event of Default" has the meaning given to such term in Section 8.1.
"Existing Credit Documents" means that certain Uncommitted, Secured Demand
Transactional Line of Credit Facility Agreement dated August 23, 1995, as
heretofore amended, among Borrower and BankBoston, N.A., together with the
promissory notes and other documents delivered by Borrower thereunder.
"Facility Usage" means, at the time in question, the aggregate amount of
outstanding Loans and LC Obligations at such time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) 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 (i) 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
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transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate quoted to
Administrative Agent on such day on such transactions as determined by
Administrative Agent.
"Financial Condition" means each of the conditions set forth in Section
4.4.
"First Purchase Crude Payables" means the unpaid amount of any payable
obligation related to the purchase of crude oil by Borrower which Administrative
Agent determines will be secured by a statutory Lien, including but not limited
to the statutory Liens created under the laws of Texas, New Mexico and Wyoming,
to the extent such payable obligation is not at the time in question covered by
a Letter of Credit.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Fixed Charges" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between Borrower and its Subsidiaries and all other items required
to be eliminated in the course of the preparation of consolidated financial
statements of Borrower and its Subsidiaries in accordance with GAAP): (a) all
interest and fees in respect of Indebtedness of Borrower or any of its
Subsidiaries (including imputed interest on Capital Lease Obligations) deducted
in determining Consolidated Net Income for such period, together with all
interest capitalized or deferred during such period and not deducted in
determining Consolidated Net Income for such period, plus (b) net payments under
Hedging Contracts relating to interest rates, plus (c) all debt discount
amortized or required to be amortized in the determination of Consolidated Net
Income for such period, plus (d) all fees, expenses and charges in respect of
letters of credit issued for the account of Borrower or any of its Subsidiaries
deducted in determining Consolidated Net Income for such period.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated Subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower and its Consolidated Subsidiaries may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to Administrative Agent, and Majority Lenders agree to such
change insofar as it affects the accounting of Borrower or of Borrower and its
Consolidated Subsidiaries.
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"Guarantor" means any Person who has guaranteed some or all of the
Obligations pursuant to a guaranty listed on the Security Schedule or any other
Person who has guaranteed some or all of the Obligations and who has been
accepted by Administrative Agent as a Guarantor or any Subsidiary of Borrower
which now or hereafter executes and delivers a guaranty to Administrative Agent
pursuant to Section 6.17.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedged Eligible Inventory" means Eligible Inventory, which has been (a)
hedged on the New York Mercantile Exchange arranged through brokers approved by
Administrative Agent and with whom a three party agreement among Borrower,
Administrative Agent and such broker has been entered in form and substance
satisfactory to Administrative Agent or (b) otherwise hedged in a manner
satisfactory to Majority Lenders. The value of Hedged Eligible Inventory shall
be the volume of the inventory times the prices fixed in such hedge, minus all
storage, transportation and other applicable costs.
"Hedging Contract" means (a) any agreement providing for options, swaps,
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Indebtedness" of any Person means its Liabilities (without duplication) in
any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities (other than reserves for taxes and reserves for contingent
obligations) which (i) would under GAAP be shown on such Person's balance sheet
as a liability and (ii) are payable more than one year from the date of creation
or incurrence thereof,
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(e) Liabilities arising under Hedging Contracts (on a net basis to the
extent netting is provided for in the applicable Hedging Contract),
(f) Liabilities arising under operating leases constituting principal
under Capital Leases,
(g) Liabilities arising under conditional sales or other title retention
agreements,
(h) Liabilities owing under direct or indirect guaranties of Liabilities
of any other Person or otherwise constituting obligations to purchase or acquire
or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(i) Liabilities consisting of an obligation to purchase or redeem
securities or other property, if such Liabilities arises out of or in connection
with the sale or issuance of the same or similar securities or property (for
example, repurchase agreements, mandatorily redeemable preferred stock and
sale/leaseback agreements),
(j) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor,
(k) Liabilities with respect to banker's acceptances, or
(l) Liabilities with respect to obligations to deliver goods or services
in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred in the ordinary course of business by such Person
on ordinary trade terms to vendors, suppliers or other Persons providing goods
and services for use by such Person in the ordinary course of its business,
unless and until such Liabilities are outstanding more than 120 days after the
date the respective goods are delivered or the respective services are rendered,
other than Liabilities contested in good faith by appropriate proceedings, if
required, and for which adequate reserves are maintained on the books of such
Person in accordance with GAAP.
"Initial Financial Statements" means (i) the audited annual Consolidated
financial statements of Resources dated as of December 31, 1997, (ii) the
unaudited quarterly Consolidated financial statements of Resources dated as of
March 31, 1998, (iii) the audited annual Financial Statements of Borrower dated
as of December 31, 1997 and (iv) the unaudited monthly financial statements of
Borrower dated as of May 31, 1998.
"Insurance Schedule" means Schedule 4 attached hereto.
"Interest Payment Date" means (a) with respect to each Base Rate Loan, the
last day of each March, June, September and December, and (b) with respect to
each Eurodollar Loan, the last day of the Interest Period that is applicable
thereto.
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"Interest Period" means, with respect to each particular Eurodollar Loan in
a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two or three months thereafter,
as Borrower may elect in such notice; provided that: (a) any Interest Period
which would otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day; (b) any Interest Period which begins on the last
Business Day in a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day in a calendar month; and (c) notwithstanding
the foregoing, any Interest Period which would otherwise end after the last day
of the Commitment Period shall end on the last day of the Commitment Period (or,
if the last day of the Commitment Period is not a Business Day, on the next
preceding Business Day).
"Investment" means any investment made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or otherwise
and whether made in cash, by the transfer of property or by any other means.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.11(a).
"LC Issuer" means BankBoston, N.A. in its capacity as the issuer of Letters
of Credit hereunder, and its successors in such capacity. Administrative Agent
may, with the consent of Borrower and the Lender in question, appoint any Lender
hereunder as an LC Issuer in place of or in addition to BankBoston, N.A.
"LC Obligations" means, at the time in question, the sum of all Matured LC
Obligations plus the maximum amounts which LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit then outstanding.
"Lender Parties" means Administrative Agent, Syndication Agent,
Documentation Agent, LC Issuer, and all Lenders.
"Lender Schedule" means Schedule 1 hereto.
"Lenders" means each signatory hereto (other than Borrower and any
Restricted Person that is a party hereto), including BankBoston, N.A. and ING
(U.S.) Capital Corporation in their
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capacities as Lenders hereunder rather than as Administrative Agent, LC Issuer,
Documentation Agent, and the successors of each such party as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer hereunder
at the application of Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business.
"Lien" also means any filed financing statement, any registration of a pledge
(such as with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"Loans" has the meaning given to such term in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets and commitment
letters).
"Majority Lenders" means Lenders whose aggregate Percentage Shares equal or
exceed sixty-six and two-thirds percent (66 2/3%).
"Market Price" means on each day a spot price for the inventory of crude
oil being valued, determined by published prices and methodology approved by
Administrative Agent from time to time, based on an index gravity and grade of
crude oil at a delivery point reflecting as nearly as practical the actual
gravity, grade, and location of the crude oil being valued, adjusted to reflect
any differences in gravity and grade between the index crude oil and the actual
inventory and to reflect transportation costs or other appropriate location
price differential from the actual location to the index location.
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements or as represented
or warranted in any Loan Document, to (a) Borrower's Consolidated financial
condition, (b) Borrower's Consolidated
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operations, properties or prospects, considered as a whole, (c) Borrower's
ability to timely pay the Obligations, or (d) the enforceability of the material
terms of any Loan Document.
"Material Market Open Position Loss" means a cumulative amount of net
losses resulting from open inventory positions of Borrower on a mark to market
basis during any period of 12 consecutive months in excess of $5,000,000.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Facility Amount" means the amount of $175,000,000, as such amount
may be reduced by Borrower from time to time as provided in Section 2.12.
"Moody's" means Moody's Investor Service, Inc., or its successor.
"Note" has the meaning given to such term in Section 2.1.
"Obligations" means all Liabilities from time to time owing by any
Guarantor or any Restricted Person to any Lender Party under or pursuant to any
of the Loan Documents, including all LC Obligations. "Obligation" means any
part of the Obligations.
"Other Eligible Inventory Value" means the following amount of Eligible
Inventory, other than Hedged Eligible Inventory: (a) if the WTI Price is less
than or equal to $30 per barrel, 80% of the product of the volume of such crude
oil times the Market Price, or (b) if the WTI Price is greater than $30 per
barrel the greater of (i) 70% of the product of the volume of such crude oil
times the Market Price or (ii) 80% of the product of the volume of such crude
oil times $30 per barrel; minus, in each case, all storage, transportation and
other applicable costs. As used herein "WTI Price" means on each day the
Platt's Average Spot Price for West Texas intermediate crude oil (Cushing,
Oklahoma).
"Other Eligible Receivable" means any Eligible Receivable which is not an
Approved Eligible Receivable nor an Eligible Exchange Balance. The portions of
the aggregate of the Other Eligible Receivables owed by any obligor and its
Affiliates exceeding 20% of the aggregate amount of all Other Eligible
Receivables shall not be included without the prior written approval of the
Majority Lenders.
"Other Priority Claims" means any account payable, obligation or liability
which Administrative Agent has determined has or will have a Lien upon or claim
against any Cash Equivalent, account or inventory of Borrower senior or equal in
priority to the security interests in favor of Administrative Agent for the
benefit of Lenders, in each case to the extent such Cash
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Equivalent, account or inventory of Borrower is otherwise included in the
determination of the Borrowing Base and the included portion thereof has not
already been reduced by such Lien or claim.
"PAAI" means Plains All American Inc., a Delaware corporation.
"PAAI Company" means PAAI and any Subsidiary of PAAI.
"Paid but Unexpired Letters of Credit" means, on any day, the maximum
drawing amount of Letters of Credit on such day where no underlying obligation
exists on such day, or if the amount of the Letter of Credit exceeds the
underlying obligation on such day, the amount of such excess. As used herein,
"underlying obligation" includes without limitation, all existing and future
obligations to the beneficiary of such Letter of Credit in respect of crude oil
purchased or received on or prior to such day or in respect of crude oil
Borrower is then obligated to purchase or receive or has then nominated to
purchase or receive.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1, 2.2 or 2.12, in any Borrowing Notice or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Lender Schedule hereto, and (b) when used otherwise, the percentage obtained
by dividing (i) the sum of the unpaid principal balance of such Lender's Loans
at the time in question plus the Matured LC Obligations which such Lender has
funded pursuant to Section 2.9(c) plus the portion of the Maximum Drawing Amount
which such Lender might be obligated to fund under Section 2.9(c), by (ii) the
sum of the aggregate unpaid principal balance of all Loans at such time plus the
aggregate amount of LC Obligations outstanding at such time.
"Permitted Debt Limit" means on any day the sum of (a) the Indebtedness
with respect to the Loans and Letters of Credit which on such day can be
incurred as "Permitted Marketing Obligations", "Permitted Contango Transactions
Obligations" or "Permitted Refinancing Indebtedness" as defined in the Resources
Indentures plus (b) any Indebtedness which is permitted to be incurred on such
day under clause (ix) of the definition of "Permitted Indebtedness" as defined
in the Resources Indentures plus (c) any Indebtedness which is permitted to be
incurred under the first clause of Section 4.09 of the Resources Indentures.
"Permitted Inventory Liens" means any Lien, and the amount of any Liability
secured thereby, on crude oil inventory which would be a Permitted Lien under
Section 7.2(d).
"Permitted Investments" means (a) Cash Equivalents, (b) Investments by
Borrower in any of its wholly owned Subsidiaries which is a Guarantor, (c) any
Investment by a Subsidiary of Borrower in Borrower or in any wholly owned
Subsidiary of Borrower which is a Guarantor, and (d) advances to Resources or
any of its Subsidiaries (other than a PAAI Company).
"Permitted Lien" has the meaning given to such term in Section 7.2.
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"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, Tribunal, or any
other legally recognizable entity.
"Plains Terminal" means either the storage terminal in Cushing, Oklahoma
owned by PTTC or the storage terminal owned by Plains Ingleside, Inc.
"PTTC" means Plains Terminal & Transfer Corporation, a Delaware
corporation.
"Qualified Inventory Purchases" means (i) purchases of crude oil for
physical storage at a Plains Terminal or in transit in pipelines Currently
Approved by Majority Lenders which constitutes Hedged Eligible Inventory and
(ii) purchases of crude oil designated as working inventory at a Plains Terminal
and line fill in pipelines Currently Approved by Majority Lenders.
"Refinancing Loans" means Loans to repay or extend an outstanding Loan.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (a) any category of liabilities
which includes deposits by reference to which the Adjusted Eurodollar Rate is to
be determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans.
"Resources" means Plains Resources Inc., a Delaware corporation.
"Resources Credit Agreement" means that certain Fourth Amended and Restated
Credit Agreement dated as of May 22, 1998 by and among Resources, ING (U.S.)
Capital Corporation, as agent, and the lenders party thereto, as such credit
agreement may be amended, modified or restated from time to time, and each other
credit agreement to which Resources is a party replacing such credit agreement
in whole or in part.
"Resources Default Threshold" means $2,500,000 in the aggregate; provided
however, that if Indebtedness is outstanding or there are commitments in effect
under the Resources Credit Agreement and the Resources Credit Agreement permits
Resources to be in default in the payment of any principal or interest with
respect to any Indebtedness in an aggregate amount greater than $2,500,000
without causing a default or event of default under the Resources Credit
Agreement, the Resources Default Threshold shall be such greater amount, but in
no event will the Resources Default Threshold exceed $5,000,000.
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"Resources Indentures" means those certain Indentures dated March 15, 1996
and July 21, 1997, each such Indenture being among Resources, the Subsidiary
Guarantors named therein and Texas Commerce Bank (now known as Chase Bank of
Texas, National Association), Trustee.
"Resources Letter of Credit Availability" means the unfunded amount
available on an unconditional basis under a letter of credit in such form, with
such expiry date and by such issuer as shall be satisfactory to Majority
Lenders, naming as the beneficiary Administrative Agent, under which Resources
is the account party.
"Restricted Person" means any of Borrower, each Subsidiary of Borrower and
each Guarantor (other than Resources).
"S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill,
Inc.) or its successor.
"Security Documents" means the instruments listed in the Security Schedule
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 any Guarantor or Restricted Person to Administrative Agent 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 Guarantor's or Restricted Person's other duties and obligations under the
Loan Documents.
"Security Schedule" means Schedule 3 hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled or owned more than
fifty percent by such Person.
"Surety Letter of Credit" means a Letter of Credit issued to support, or in
lieu of an obligation to deliver, a surety bond or similar obligation.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(c) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an
ERISA Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent
to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.
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"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such Loans
as either Base Rate Loans or Eurodollar Loans.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Lender Party of amounts to be
paid under Article III or any other matters which are to be determined hereunder
by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, Interest Period, or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements
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and reports furnished to any Lender Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such loans, the aggregate principal amount of outstanding Loans will
not exceed $40,000,000, (c) after giving effect to such Loans, the Facility
Usage does not exceed the lesser of (i) the Maximum Facility Amount and (ii) the
Borrowing Base determined as of the date on which the requested Loans are to be
made and (d) such Loans can be incurred pursuant to the Permitted Debt Limit at
the time the requested Loans are to be made. The aggregate amount of all Loans
in any Borrowing must be equal to $2,000,000 or any higher integral multiple of
$250,000. Borrower may have no more than five Borrowings of Eurodollar Loans
outstanding at any time. The obligation of Borrower to repay to each Lender the
aggregate amount of all Loans made by such Lender, together with interest
accruing in connection therewith, shall be evidenced by a single promissory note
(herein called such Lender's "Note") made by Borrower payable to the order of
such Lender in the form of Exhibit A with appropriate insertions. The amount of
principal owing on any Lender's Note at any given time shall be the aggregate
amount of all Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Note. Interest on each
Note shall accrue and be due and payable as provided herein and therein. Each
Note shall be due and payable as provided herein and therein, and shall be due
and payable in full on the last day of the Commitment Period. Subject to the
terms and conditions of this Agreement, Borrower may borrow, repay, and reborrow
hereunder.
Section 2.2. Requests for New Loans. Borrower must give to
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of any requested Borrowing of Loans to be made by Lenders. Each such
notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of Base
Rate Loans and the date on which such Base Rate Loans are to be advanced,
or (ii) the aggregate amount of any such Borrowing of Eurodollar Loans, the
date on which such Eurodollar Loans are to be advanced (which shall be the
first day of the Interest Period which is to apply thereto), and the length
of the applicable Interest Period; and
(b) be received by Administrative Agent not later than 11:00 a.m.,
Boston, Massachusetts time, on (i) the day on which any such Base Rate
Loans are to be made, or (ii) the third Business Day preceding the day on
which any such Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request
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shall be deemed a representation, warranty, acknowledgment and agreement by
Borrower as to the matters which are required to be set out in such written
confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent
shall give each Lender prompt notice of the terms thereof. If all conditions
precedent to such new Loans have been met, each Lender will on the date
requested promptly remit to Administrative Agent at Administrative Agent's
office in Boston, Massachusetts the amount of such Lender's Loan in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any conditions precedent to such Loans have been neither met nor waived as
provided herein, Administrative Agent shall promptly make such Loans available
to Borrower. Unless Administrative Agent shall have received prompt notice from
a Lender that such Lender will not make available to Administrative Agent such
Lender's new Loan, Administrative Agent may in its discretion assume that such
Lender has made such Loan available to Administrative Agent in accordance with
this section and Administrative Agent may if it chooses, in reliance upon such
assumption, make such Loan available to Borrower. If and to the extent such
Lender shall not so make its new Loan available to Administrative Agent, such
Lender and Borrower severally agree to pay or repay to Administrative Agent
within three days after demand the amount of such Loan together with interest
thereon, for each day from the date such amount was made available to Borrower
until the date such amount is paid or repaid to Administrative Agent, with
interest at (i) the Federal Funds Rate, if such Lender is making such payment
and (ii) the interest rate applicable at the time to the other new Loans made on
such date, if Borrower is making such repayment. If neither such Lender nor
Borrower pays or repays to Administrative Agent such amount within such three-
day period, Administrative Agent shall be entitled to recover from Borrower, on
demand, in lieu of interest provided for in the preceding sentence, interest
thereon at the Default Rate, calculated from the date such amount was made
available to Borrower. The failure of any Lender to make any new Loan to be made
by it hereunder shall not relieve any other Lender of its obligation hereunder,
if any, to make its new Loan, but no Lender shall be responsible for the failure
of any other Lender to make any new Loan to be made by such other Lender.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
Convert, in whole or in part, Base Rate Loans to Eurodollar Loans, to Convert,
in whole or in part, Eurodollar Loans to Base Rate Loans on the last day of the
Interest Period applicable thereto, and to Continue, in whole or in part,
Eurodollar Loans beyond the expiration of such Interest Period by designating a
new Interest Period to take effect at the time of such expiration. In making
such elections, Borrower may combine existing Loans made pursuant to separate
Borrowings into one new Borrowing or divide existing Loans made pursuant to one
Borrowing into separate new Borrowings, provided that Borrower may have no more
than five Borrowings of Eurodollar Loans outstanding at any time. To make any
such election, Borrower must give to Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) of any such Conversion or
Continuation of existing Loans, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or
Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be Continued or Converted and
the date on which such
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Continuation or Conversion is to occur, or (ii) the aggregate amount of any
Borrowing of Eurodollar Loans into which such existing Loans are to be
Continued or Converted, the date on which such Continuation or Conversion
is to occur (which shall be the first day of the Interest Period which is
to apply to such Eurodollar Loans), and the length of the applicable
Interest Period; and
(c) be received by Administrative Agent not later than 11:00 a.m.,
Boston, Massachusetts time, on (i) the day on which any such Conversion to
Base Rate Loans is to occur, or (ii) the third Business Day preceding the
day on which any such Continuation or Conversion to Eurodollar Loans is to
occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Continuation/Conversion Notice, Administrative Agent shall give each Lender
prompt notice of the terms thereof. Each Continuation/Conversion Notice shall
be irrevocable and binding on Borrower. During the continuance of any Default,
Borrower may not make any election to Convert existing Loans into Eurodollar
Loans or Continue existing Loans as Eurodollar Loans beyond the expiration of
their respective and corresponding Interest Period then in effect. If (due to
the existence of a Default or for any other reason) Borrower fails to timely and
properly give any Continuation/Conversion Notice with respect to a Borrowing of
existing Eurodollar Loans at least three days prior to the end of the Interest
Period applicable thereto, such Eurodollar Loans, to the extent not prepaid at
the end of such Interest Period, shall automatically be Converted into Base Rate
Loans at the end of such Interest Period. No new funds shall be repaid by
Borrower or advanced by any Lender in connection with any Continuation or
Conversion of existing Loans pursuant to this section, and no such Continuation
or Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
Section 2.4. Use of Proceeds. Borrower shall use the proceeds of all
Loans to make Qualified Inventory Purchases and to refinance Matured LC
Obligations. In no event shall any Loan or any Letter of Credit be used
directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others directly or indirectly for the
purpose of purchasing or carrying any such margin stock. Borrower represents and
warrants that Borrower is not engaged principally, or as one of Borrower's
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock.
Section 2.5. Optional Prepayments of Loans. Borrower may, upon five
Business Days' notice to Administrative Agent (and Administrative Agent will
promptly give notice to the other Lenders) each Lender, from time to time and
without premium or penalty prepay the Loans, in whole or in part, so long as the
aggregate amounts of all partial prepayments of principal on the
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Loans equals $2,000,000 or any higher integral multiple of $250,000. Each
prepayment of principal under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents at the time
of such prepayment.
Section 2.6. Mandatory Prepayments. If at any time the Facility Usage
exceeds the Borrowing Base (whether due to a reduction in the Borrowing Base in
accordance with this Agreement, or otherwise), Borrower shall immediately upon
demand prepay the principal of the Loans in an amount at least equal to such
excess. Each prepayment of principal under this section shall be accompanied by
all interest then accrued and unpaid on the principal so prepaid. Any principal
or interest prepaid pursuant to this section shall be in addition to, and not in
lieu of, all payments otherwise required to be paid under the Loan Documents at
the time of such prepayment.
Section 2.7. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request LC Issuer to issue,
amend, or extend the expiration date of, one or more Letters of Credit, provided
that:
(a) after taking such Letter of Credit into account (i) the Facility
Usage does not exceed the lesser of (A) the Maximum Facility Amount at such
time or (B) the Borrowing Base at such time and (ii) such Letter of Credit
can be incurred by Borrower pursuant to the Permitted Debt Limit at such
time;
(b) the expiration date of such Letter of Credit is prior to the
earlier of (i) 70 days (or 100 days, if the beneficiary thereof is Exxon
Company U.S.A.) after the date of issuance of such Letter of Credit (or 180
days after the date of issuance in the case of a Surety Letter of Credit)
or (ii) 30 days prior to the end of the Commitment Period;
(c) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will
not subject LC Issuer to any cost which is not reimbursable under Article
III;
(d) either (i) such Letter of Credit is related to the purchase or
exchange by Borrower of crude oil and is in the Form of Exhibit D-1 or D-2
hereto or such other form and terms as shall be acceptable to LC Issuer in
its sole and absolute discretion and Currently Approved by Majority
Lenders, or (ii) such Letter of Credit is a Surety Letter of Credit and
after taking such Letter of Credit into account the aggregate amount of LC
Obligations in respect to all Surety Letters of Credit does not exceed
$1,000,000; and
(e) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(e) (in the following Section 2.8 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. The letters of credit
outstanding as of the date hereof issued by BankBoston, N.A. under
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the Existing Credit Documents as set forth on Schedule 5 attached hereto shall
be deemed to be Letters of Credit issued hereunder as of the date hereof;
Borrower hereby represents and warrants that the LC Conditions have been met as
of the date hereof with respect to each such Letter of Credit.
Section 2.8. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least two Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application, unless otherwise expressly stated therein,
Borrower shall be deemed to have represented and warranted that the LC
Conditions described in Section 2.7 will be met as of the date of issuance of
such Letter of Credit. Each such written application for a Letter of Credit must
be made in writing in the form and substance of Exhibit E, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by LC Issuer and Borrower). If all LC
Conditions for a Letter of Credit have been met as described in Section 2.7 on
any Business Day before 11:00 a.m, Boston, Massachusetts time, LC Issuer will
issue such Letter of Credit on the same Business Day at LC Issuer's office in
Boston, Massachusetts. If the LC Conditions are met as described in Section 2.7
on any Business Day on or after 11:00 a.m, Boston, Massachusetts time, LC Issuer
will issue such Letter of Credit on the next succeeding Business Day at LC
Issuer's office in Boston, Massachusetts. If any provisions of any LC
Application conflict with any provisions of this Agreement, the provisions of
this Agreement shall govern and control.
Section 2.9. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon (i) at the Base Rate to and including
the second Business Day after the Matured LC Obligation is incurred and (ii) at
the Default Rate on each day thereafter.
(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit
makes a draft or other demand for payment thereunder then Borrower may, during
the interval between the making thereof and the honoring thereof by LC Issuer,
request Lenders to make Loans to Borrower in the amount of such draft or demand,
which Loans shall be made concurrently with LC Issuer's payment of such draft or
demand and shall be immediately used by LC Issuer to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower shall be made in
compliance with all of the provisions hereof, provided that for the purposes of
the first sentence of Section 2.1, the amount of such Loans shall be considered,
but the amount of the Matured LC Obligation to be concurrently paid by such
Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, 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 LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid
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by LC Issuer thereunder. Each Lender unconditionally and irrevocably agrees with
LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit
for which LC Issuer is not reimbursed in full by Borrower in accordance with the
terms of this Agreement and the related LC Application (including any
reimbursement by means of concurrent Loans or by the application of LC
Collateral), such Lender shall (in all circumstances and without set-off or
counterclaim) pay to LC Issuer on demand, in immediately available funds at LC
Issuer's address for notices hereunder, such Lender's Percentage Share of such
Matured LC Obligation (or any portion thereof which has not been reimbursed by
Borrower). Each Lender's obligation to pay LC Issuer pursuant to the terms of
this subsection is irrevocable and unconditional. If any amount required to be
paid by any Lender to LC Issuer pursuant to this subsection is paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer 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. If any amount required to be paid by any Lender to LC Issuer
pursuant to this subsection is not paid by such Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer shall in addition to
such amount be entitled to recover from such Lender, on demand, interest thereon
calculated from such due date at the Base Rate.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from Borrower or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail the
amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.10. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to accept
and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower releases each Lender Party
from, and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the subject matter of
this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY
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WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party
shall be entitled to indemnification for that portion, if any, of any liability
or claim which is proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by LC Issuer, LC Issuer's correspondents, or any Lender
Party in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
LC Issuer to any purported transferee or transferees as determined by LC Issuer
is hereby authorized and approved, and Borrower releases each Lender Party from,
and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the foregoing, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
Section 2.11. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.6, the outstanding LC
Obligations will exceed the Borrowing Base, then in addition to prepayment of
the entire principal balance of the Loans Borrower will immediately pay to LC
Issuer an amount equal to such excess. LC Issuer will hold such amount as
collateral security for the remaining LC Obligations (all such amounts held as
collateral security for LC Obligations being herein collectively called "LC
Collateral") and the other Obligations, and such collateral may be applied from
time to time to pay Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which LC Issuer
may have under any other document or agreement relating to any Letter of Credit,
LC Collateral or LC Obligation, including any LC Application, or any rights
which any Lender Party may have to otherwise apply any payments by Borrower and
any LC Collateral under Section 3.1.
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(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
all Lenders otherwise specifically elect to the contrary (which election may
thereafter be retracted by all Lenders at any time), all LC Obligations shall
become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC
Obligations which are then outstanding.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such Cash Equivalents as LC Issuer
may choose in its sole discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured LC Obligations or other
Obligations which are due and payable. When all Obligations have been satisfied
in full, including all LC Obligations, all Letters of Credit have expired or
been terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, LC Issuer shall release any remaining LC
Collateral. Borrower hereby assigns and grants to LC Issuer a continuing
security interest in all LC Collateral paid by it to LC Issuer, all Investments
purchased with such LC Collateral, and all proceeds thereof to secure its
Matured LC Obligations and its Obligations under this Agreement, each Note, and
the other Loan Documents, and Borrower agrees that such LC Collateral,
Investments and proceeds shall be subject to all of the terms and conditions of
the Security Documents. Borrower further agrees that LC Issuer shall have all
of the rights and remedies of a secured party under the UCC with respect to such
security interest and that an Event of Default under this Agreement shall
constitute a default for purposes of such security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
or Administrative Agent may provide such LC Collateral (whether by application
of proceeds of other Collateral, by transfers from other accounts maintained
with LC Issuer, or otherwise) using any available funds of Borrower or any other
Person also liable to make such payments, and LC Issuer or Administrative Agent
will give notice thereof to Borrower promptly after such application or
transfer. Any such amounts which are required to be provided as LC Collateral
and which are not provided on the date required shall, for purposes of each
Security Document, be considered past due Obligations owing hereunder, and LC
Issuer is hereby authorized to exercise its respective rights under each
Security Document to obtain such amounts.
Section 2.12. Interest Rates and Fees; Reduction in Commitment.
(a) Interest Rates. Unless the Default Rate shall apply, (i) each Base
Rate Loan shall bear interest on each day outstanding at the Base Rate in effect
on such day and (ii) each Eurodollar Loan shall bear interest on each day during
the related Interest Period at the related Adjusted Eurodollar Rate in effect on
such day. During a Default Rate Period, all Loans shall bear interest on each
day outstanding at the Default Rate. If an Event of Default based upon Section
8.1(a), Section 8.1(b) or, with respect to Borrower, based upon Section
8.1(i)(i), (i)(ii) or (i)(iii) exists and the Loans are not bearing interest at
the Default Rate, the past due principal and past due interest shall bear
interest on each day outstanding at the Default Rate. The interest rate shall
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change whenever the applicable Base Rate, the Adjusted Eurodollar Rate or the
Eurodollar Rate Margin changes. In no event shall the interest rate on any Loan
exceed the Highest Lawful Rate.
(b) Commitment Fees. In consideration of each Lender's commitment to make
Loans, Borrower will pay to Administrative Agent for the account of each Lender
a commitment fee determined on a daily basis by applying a rate of one-fourth of
one percent (.25%) per annum to such Lender's Percentage Share of the unused
portion of the Maximum Facility Amount on each day during the Commitment Period,
determined for each such day by deducting from the amount of the Maximum
Facility Amount at the end of such day the Facility Usage. This commitment fee
shall be due and payable in arrears on the last day of each Fiscal Quarter and
at the end of the Commitment Period. Borrower shall have the right from time to
time to permanently reduce the Maximum Facility Amount, provided that (i) notice
of such reduction is given not less than 2 business Days prior to such
reduction, (ii) the resulting Maximum Facility Amount is not less than the
Facility Usage, and (iii) each partial reduction shall be in an amount at least
equal to $500,000 and in multiples of $100,000 in excess thereof.
(c) Letter of Credit Fees. In consideration of LC Issuer's issuance of
any Letter of Credit, Borrower agrees to pay (i) to Administrative Agent, for
the account of all Lenders in accordance with their respective Percentage
Shares, a letter of credit fee at a rate equal to one percent (1%) per annum,
and (ii) to such LC Issuer for its own account, a letter of credit fronting fee
at a rate equal to one-tenth of one percent (.10%) per annum. Each such fee
will be calculated on the face amount of each Letter of Credit outstanding on
each day at the above applicable rates and will be payable monthly in arrears on
the last day of each month. In addition, Borrower will pay to LC Issuer a
minimum administrative issuance fee of $100 for each Letter of Credit and such
other fees and charges customarily charged by the LC Issuer in respect of any
amendment or negotiation of any Letter of Credit in accordance with the LC
Issuer's published schedule of such charges as of the date of such amendment or
negotiation.
(d) Administrative Agent's Fees. In addition to all other amounts due to
Administrative Agent under the Loan Documents, Borrower will pay fees to
Administrative Agent as described in a letter agreement of even date herewith
between Administrative Agent and Borrower.
Section 2.13. Borrowing Base Reporting. The Borrowing Base Reports are
subject to the procedures set forth on Schedule 6.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Administrative Agent for the account of the
Lender Party to whom such payment is owed in lawful money of the United States
of America, without set-off, deduction or counterclaim, and in immediately
available funds. Each such payment must be received by Administrative Agent not
later than noon, Boston, Massachusetts time, on the date such payment becomes
due and payable. Any payment received by Administrative Agent after such time
will be deemed to have been made on the next following Business Day. Should any
such payment become due and payable on a day other than a Business Day, the
maturity of such payment shall
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be extended to the next succeeding Business Day, and, in the case of a payment
of principal or past due interest, interest shall accrue and be payable thereon
for the period of such extension as provided in the Loan Document under which
such payment is due. Each payment under a Loan Document shall be due and payable
at the place provided therein and, if no specific place of payment is provided,
shall be due and payable at the place of payment of Administrative Agent's Note.
When Administrative Agent collects or receives money on account of the
Obligations, Administrative Agent shall distribute all money so collected or
received, and each Lender Party shall apply all such money so distributed, as
follows:
(a) 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 Administrative Agent under Section 6.9 or 10.4 and then
to the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) 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
2.5 and 2.6. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Administrative Agent pro rata to each Lender
Party then owed Obligations described in such subsection in proportion to all
amounts owed to all Lender Parties which are described in such subsection;
provided that if any Lender then owes payments to LC Issuer for the purchase of
a participation under Section 2.9(c) or to Administrative Agent under Section
9.4, any amounts otherwise distributable under this section to such Lender shall
be deemed to belong to LC Issuer or Administrative Agent, respectively, to the
extent of such unpaid payments, and Administrative Agent shall apply such
amounts to make such unpaid payments rather than distribute such amounts to such
Lender.
Section 3.2. Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party or any corporation controlling any Lender Party, then, within five
Business Days after demand by such Lender Party, Borrower will pay to
Administrative Agent for the benefit of such Lender Party, from time to time as
specified by such Lender Party, such additional amount or amounts which such
Lender Party shall determine to be appropriate to compensate such Lender Party
or any corporation controlling such Lender Party in light of such circumstances,
to the extent that such Lender Party reasonably determines that the amount of
any such capital would be increased or the rate of return on any such capital
would be reduced by or in whole or in part based on the
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existence of the face amount of such Lender Party's Loans, Letters of Credit,
participations in Letters of Credit or commitments under this Agreement.
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit. If
any applicable Law (whether now in effect or hereinafter enacted or promulgated,
including Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender
Party of any principal, interest, or other amounts attributable to any
Eurodollar Loan or Letter of Credit or otherwise due under this Agreement
in respect of any Eurodollar Loan or Letter of Credit (other than taxes
imposed on, or measured by, the overall net income of such Lender Party or
any Applicable Lending Office of such Lender Party by any jurisdiction in
which such Lender Party or any such Applicable Lending Office is located);
or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any
Eurodollar Loan or any Letter of Credit (excluding those for which such
Lender Party is fully compensated pursuant to adjustments made in the
definition of Eurodollar Rate) or against assets of, deposits with or for
the account of, or credit extended by, such Lender Party; or
(c) shall impose on any Lender Party or the interbank eurocurrency
deposit market any other condition affecting any Eurodollar Loan or Letter
of Credit, the result of which is to increase the cost to any Lender Party
of funding or maintaining any Eurodollar Loan or of issuing any Letter of
Credit or to reduce the amount of any sum receivable by any Lender Party in
respect of any Eurodollar Loan or Letter of Credit by an amount deemed by
such Lender Party to be material,
then such Lender Party shall promptly notify Administrative Agent and Borrower
in writing of the happening of such event and of the amount required to
compensate such Lender Party for such event (on an after-tax basis, taking into
account any taxes on such compensation), whereupon (i) Borrower shall, within
five Business Days after demand therefor by such Lender Party, pay such amount
to Administrative Agent for the account of such Lender Party and (ii) Borrower
may elect, by giving to Administrative Agent and such Lender Party not less than
three Business Days' notice, to Convert all (but not less than all) of any such
Eurodollar Loans into Base Rate Loans.
Section 3.4. Notice; Change of Applicable Lending Office. A Lender Party
shall notify Borrower of any event occurring after the date of this Agreement
that will entitle such Lender Party to compensation under Section 3.2, 3.3 or
3.5 hereof above as promptly as practicable, but in any event within 90 days,
after such Lender Party obtains actual knowledge thereof; provided, that (i) if
such Lender Party fails to give such notice within 90 days after it obtains
actual knowledge of such an event, such Lender Party shall, with respect to
compensation payable pursuant to Section 3.2, 3.3 or 3.5 in respect of any costs
resulting from such event, only be entitled to payment under Section 3.2, 3.3 or
3.5 hereof for costs incurred from and after the date 90 days prior to the date
that such Lender Party does give such notice and (ii) such Lender Party will
designate a different Applicable Lending Office for the Loans affected by such
event if such
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designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender Party, be disadvantageous to
such Lender Party, except that such Lender Party shall have no obligation to
designate an Applicable Lending Office located in the United States of America.
Each Lender Party will furnish to Borrower a certificate setting forth the basis
and amount of each request by such Lender Party for compensation under Section
3.2, 3.3 or 3.5 hereof.
Section 3.5. Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender Party to fund or maintain Eurodollar Loans or to issue or participate in
Letters of Credit, or shall materially restrict the authority of any Lender
Party to purchase or take offshore deposits of dollars (i.e., "eurodollars"), or
(b) any Lender Party determines that matching deposits appropriate to fund or
maintain any Eurodollar Loan are not available to it, or (c) any Lender Party
determines that the formula for calculating the Eurodollar Rate does not fairly
reflect the cost to such Lender Party of making or maintaining loans based on
such rate, then, upon notice by such Lender Party to Borrower and Administrative
Agent, Borrower's right to elect Eurodollar Loans from such Lender Party (or, if
applicable, to obtain Letters of Credit) shall be suspended to the extent and
for the duration of such illegality, impracticability or restriction and all
Eurodollar Loans of such Lender Party which are then outstanding or are then the
subject of any Borrowing Notice and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain, or shall be funded as,
Base Rate Loans of such Lender Party. Borrower agrees to indemnify each Lender
Party and hold it harmless against all costs, expenses, claims, penalties,
liabilities and damages which may result from any such change in Law,
interpretation or administration. Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as indemnity.
Section 3.6. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender
Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or
prepayment (whether or not authorized or required hereunder) of all or a portion
of a Eurodollar Loan on a day other than the day on which the applicable
Interest Period ends, (b) any payment or prepayment, whether or not required
hereunder, of a Loan made after the delivery, but before the effective date, of
a Continuation/Conversion Notice, if such payment or prepayment prevents such
Continuation/Conversion Notice from becoming fully effective, (c) the failure of
any Loan to be made or of any Continuation/Conversion Notice to become effective
due to any condition precedent not being satisfied or due to any other action or
inaction of any Restricted Person, or (d) any Conversion (whether or not
authorized or required hereunder) of all or any portion of any Eurodollar Loan
into a Base Rate Loan or into a different Eurodollar Loan on a day other than
the day on which the applicable Interest Period ends. Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
Section 3.7. Reimbursable Taxes. Borrower covenants and agrees that:
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(a) Borrower will indemnify each Lender Party against and reimburse
each Lender Party for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of this Agreement or any Eurodollar Loans or Letters of
Credit (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on or measured by the
overall net income of Administrative Agent or such Lender Party or any
Applicable Lending Office of such Lender Party by any jurisdiction in which
such Lender Party or any such Applicable Lending Office is located (all
such non-excluded taxes, levies, costs and charges being collectively
called "Reimbursable Taxes" in this section). Such indemnification shall
be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
each Lender Party's Loans and Note, and all other amounts payable by
Borrower to any Lender Party hereunder, shall be made in full without set-
off or counterclaim and shall be made free and clear of and without
deductions or withholdings of any nature by reason of any Reimbursable
Taxes, all of which will be for the account of Borrower. In the event of
Borrower being compelled by Law to make any such deduction or withholding
from any payment to any Lender Party, Borrower shall pay on the due date of
such payment, by way of additional interest, such additional amounts as are
needed to cause the amount receivable by such Lender Party after such
deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall
within 60 days thereafter forward to such Lender Party an official receipt
or other official document evidencing payment of such deduction or
withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to
Administrative Agent and such Lender Party not less than three Business
Days' notice, to Convert all (but not less than all) of any such Eurodollar
Loan into a Base Rate Loan, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes.
(d) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by Law,
to deduct or withhold (and not to make any indemnification or reimbursement
for) income or other similar taxes imposed by the United States of America
(other than any portion thereof attributable to a change in federal income
tax Laws effected after the date hereof) from interest, fees or other
amounts payable hereunder for the account of any Lender Party, other than a
Lender Party (i) who is a U.S. person for Federal income tax purposes or
(ii) who has the Prescribed Forms on file with Administrative Agent (with
copies provided to Borrower) for the applicable year to the extent
deduction or withholding of such taxes is not required as a result of the
filing of such Prescribed Forms, provided that if Borrower shall so deduct
or withhold any such taxes, it shall provide a statement to Administrative
Agent and such Lender Party, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Lender Party may reasonably request for assisting
such Lender Party to obtain any allowable credits or
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deductions for the taxes so deducted or withheld in the jurisdiction or
jurisdictions in which such Lender Party is subject to tax. As used in this
section, "Prescribed Forms" means such duly executed forms or statements,
and in such number of copies, which may, from time to time, be prescribed
by Law and which, pursuant to applicable provisions of (x) an income tax
treaty between the United States and the country of residence of the Lender
Party providing the forms or statements, (y) the Internal Revenue Code of
1986, as amended from time to time, or (z) any applicable rules or
regulations thereunder, permit Borrower to make payments hereunder for the
account of such Lender Party free of such deduction or withholding of
income or similar taxes.
Section 3.8 Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.7, then within
ninety days thereafter -- provided no Event of Default then exists -- Borrower
shall have the right (unless such Lender Party withdraws its request for
additional compensation) to replace such Lender Party by requiring such Lender
Party to assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Administrative Agent and to Borrower,
provided that: (i) all Obligations of Borrower owing to such Lender Party being
replaced (including such increased costs, but excluding principal and accrued
interest on the Notes being assigned) shall be paid in full to such Lender Party
concurrently with such assignment, and (ii) the replacement Eligible Transferee
shall purchase the Note being assigned by paying to such Lender Party a price
equal to the principal amount thereof plus accrued and unpaid interest and
accrued and unpaid commitment fees thereon. In connection with any such
assignment Borrower, Administrative Agent, such Lender Party and the replacement
Eligible Transferee shall otherwise comply with Section 10.5. Notwithstanding
the foregoing rights of Borrower under this section, however, Borrower may not
replace any Lender Party which seeks reimbursement for increased costs under
Section 3.2 through 3.7 unless Borrower is at the same time replacing all Lender
Parties which are then seeking such compensation.
ARTICLE IV - Conditions Precedent to Credit
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit unless Administrative Agent shall have received all of the following,
at Administrative Agent's office in Boston, Massachusetts, duly executed and
delivered and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates of Borrower including:
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(i) An "Omnibus Certificate" of the secretary and of the
president of Borrower, which shall contain the names and signatures of
the officers of Borrower authorized to execute Loan Documents and
which shall certify to the truth, correctness and completeness of the
following exhibits attached thereto: (1) a copy of resolutions duly
adopted by the Board of Directors of Borrower and in full force and
effect at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Loan Documents delivered or
to be delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of the
charter documents of Borrower and all amendments thereto, certified by
the appropriate official of Borrower's state of organization, and (3)
a copy of any bylaws of Borrower; and
(ii) A certificate of the president and of the chief financial
officer of Borrower, of even date with such Loan or such Letter of
Credit, regarding satisfaction of the conditions set out in
subsections (a) and (b) of Section 4.2 and subsections (a), (b), (c)
and (d) of Section 4.3 in the form of hereto.
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization,
issued by the appropriate authorities of such jurisdiction, and
certificates of Borrower's good standing and due qualification to do
business, issued by appropriate officials in any states in which Borrower
owns property subject to Security Documents.
(f) Documents similar to those specified in subsections (d)(i) and
(e) of this section with respect to each Guarantor and the execution by it
of its guaranty of Borrower's Obligations.
(g) A favorable opinion of Michael Patterson, Esq., General Counsel
for Restricted Persons, substantially in the form set forth in Exhibit G-1,
and Fulbright & Jaworski L.L.P., special Texas and New York counsel to
Restricted Persons, substantially in the form set forth in Exhibit G-2.
(h) The Initial Financial Statements.
(i) Certificates or binders evidencing Restricted Persons' insurance
in effect on the date hereof.
(j) A certificate signed by the chief executive officer of Borrower
in form and detail acceptable to Administrative Agent confirming the
insurance that is in effect as of the date hereof and certifying that such
insurance is customary for the businesses conducted by Restricted Persons
and is in compliance with the requirements of this Agreement.
(k) Payment of all commitment, facility, agency and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment agreement heretofore entered into.
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(l) Documents (i) confirming the payment in full of all Indebtedness
under the Existing Credit Documents and the transfer to this Agreement of
any outstanding letters of credit under the Existing Credit Documents, (ii)
releasing and terminating all Liens on any Restricted Person's property
securing such Indebtedness (or assigning such Liens to Administrative Agent
for the benefit of Lenders, and (iii) terminating the credit facility under
the Existing Credit Documents.
Section 4.2. Additional Conditions to Initial Credit. No Lender has any
obligation to make its first Loan, and LC Issuer has no obligation to issue the
first Letter of Credit unless the following conditions precedent have been
satisfied:
(a) PAAI shall have consummated all of the transactions contemplated
under the Acquisition Documents, in compliance with the terms and
conditions thereof, in form and substance satisfactory to Administrative
Agent.
(b) All conditions precedent to the initial Loans under the Credit
Agreement of even date herewith among PAAI, ING (U.S.) Capital Corporation,
as administrative agent, and the Lenders Parties named therein have been
satisfied.
(c) Borrower shall have delivered to Administrative Agent (i) a
Consolidated balance sheet for Borrower and its Subsidiaries and (ii) a
proforma Consolidated balance sheet for Borrower and its Subsidiaries
reflecting any transactions with PAAI and its Subsidiaries to be entered
into on or about the time of the closing of the transactions under the
Acquisition Documents, in each case as of a date not more than 60 days
prior to such first Loan and first Letter of Credit, certified by the chief
financial officer of Borrower, reflecting compliance with each event
specified in Section 4.4 and Section 7.8 through 7.13, inclusive.
(d) The Borrowing Base as of the date of such first Loan and first
Letter of Credit shall be at least $5,000,000 more than the initial
Facility Usage on such date after giving effects to the Loans and Letters
of Credit requested for such date, and Borrower shall have delivered to the
Administrative Agent a Borrowing Base Report in reasonable detail
demonstrating compliance with this requirement.
(e) The Administrative Agent shall have conducted a commercial
finance exam of the Company, the results of which shall be reasonably
satisfactory to Lenders.
(f) Borrower shall have entered into (i) the Service and Exchange
Agreement with Celeron Gathering Corporation in the form of Exhibit L, (ii)
the Agreement for the Allocation of Taxes in the form of Exhibit M and
(iii) the Netting Agreement with Resources and Borrower's other Affiliates
in the form of Exhibit N (collectively the "Affiliate Agreements").
Section 4.3. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
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(a) All representations and warranties made by any Restricted Person
in any Loan Document shall be true on and as of the date of such Loan or
the date of issuance of such Letter of Credit as if such representations
and warranties had been made as of the date of such Loan or the date of
issuance of such Letter of Credit 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.
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) Each Financial Condition shall be true on the date of such Loan
or the date of issuance of such Letter of Credit.
(d) No Material Adverse Change shall have occurred to, and no event
or circumstance shall have occurred that could cause a Material Adverse
Change to, Borrower's Consolidated financial condition or businesses since
the date of the Initial Financial Statements.
(e) Each Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or the date of
issuance of such Letter of Credit.
(f) The making of such Loan or the issuance of such Letter of Credit
shall not be prohibited by any Law and shall not subject any Lender or any
LC Issuer to any penalty or other onerous condition under or pursuant to
any such Law.
(g) Administrative Agent shall have received all documents and
instruments which Administrative Agent has then requested, in addition to
those described in Section 4.1 (including opinions of legal counsel for
Restricted Persons and Administrative Agent; corporate documents and
records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials
and of officers and representatives of Borrower and other Persons), as to
(i) the accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in this Agreement
and the other Loan Documents, (ii) the satisfaction of all conditions
contained herein or therein, and (ii) all other matters pertaining hereto
and thereto. All such additional documents and instruments shall be
satisfactory to Administrative Agent in form, substance and date.
Section 4.4. Financial Conditions. Each of the following events
constitutes a "Financial Condition" under this Agreement:
(a) Net Worth. The sum of (i) Consolidated Net Worth plus (ii) the
Resources Letter of Credit Availability will not be less than the sum of (A)
$13,000,000 plus (B) fifty percent (50%) of the Consolidated Net Income (if
positive) for each Fiscal Quarter from and after March 31, 1998 to and including
Fiscal Quarter ending on, or most recently ended prior to, such day.
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(b) Working Capital Leverage Ratio. The ratio of (i) the sum of
Borrower's Consolidated current liabilities (excluding Affiliate Payables) plus
LC Obligations (other than in respect of undrawn Letters of Credit issued to
support existing or future accounts payable which are or will be included in
such Consolidated current liabilities) plus Affiliate Net Payables to (ii) the
sum of the Resources Letter of Credit Availability plus the remainder of (A)
Borrower's Consolidated current assets (excluding Affiliate Receivables) minus
(B) Borrower's Consolidated current liabilities (excluding Affiliate Payables
but including Affiliate Net Payables) will not be greater than 9.0 to 1.0.
(c) Leverage Ratio. The ratio of (i) Consolidated Total Liabilities to
(ii) the sum of Consolidated Net Worth plus the Resources Letter of Credit
Availability will not be greater than 7.0 to 1.0.
(d) Positive Working Capital. The Consolidated Working Capital Ratio will
not be less than 1.0 to 1.0.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons and
Restricted Persons' businesses, properties and obligations and to induce each
Lender to enter into this Agreement and to extend credit hereunder, Borrower
represents and warrants to each Lender that:
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where the failure to
so qualify would not cause a Material Adverse Change. Each Restricted Person
has taken all actions and procedures customarily taken in order to enter, for
the purpose of conducting business or owning property, each jurisdiction outside
the United States wherein the character of the properties owned or held by it or
the nature of the business transacted by it makes such actions and procedures
necessary except where the failure to so qualify would not cause a Material
Adverse Change.
Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
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Section 5.4. No Conflicts or Consents. The execution and delivery by the
various Restricted Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person or any of its Affiliates, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Restricted Person or any of its Affiliates, (ii result in the
acceleration of any Indebtedness owed by any Restricted Person, or any of its
Affiliates, or (ii result in or require the creation of any Lien upon any assets
or properties of any Restricted Person or any of its Affiliates except as
expressly contemplated in the Loan Documents. Except as expressly contemplated
in the Loan Documents no consent, approval, authorization or order of, and no
notice to or filing with, any Tribunal or third party is required in connection
with the execution, delivery or performance by any Restricted Person of any Loan
Document or to consummate any transactions contemplated by the Loan Documents.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Borrower has heretofore
delivered to each Lender true, correct and complete copies of the Initial
Financial Statements. The Initial Financial Statements fairly present
Resources' Consolidated and Borrower's Consolidated financial positions,
respectively, at the respective dates thereof and the Consolidated results of
Resources' and Borrower's operations and Consolidated cash flows, respectively,
for the respective periods thereof. Since the date of the annual Initial
Financial Statements no Material Adverse Change has occurred, except as
reflected in the quarterly Initial Financial Statements or in the Disclosure
Schedule. All Initial Financial Statements were prepared in accordance with
GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which are, in the
aggregate, material to Borrower or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule. Except as shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule, no
Restricted Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which could cause a
Material Adverse Change.
Section 5.8. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading as of the date made or deemed made. All
written information furnished after the date hereof by or on behalf of any
Restricted Person to Administrative Agent or any Lender Party in
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connection with this Agreement and the other Loan 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 any Restricted
Person that has not been disclosed to each Lender in writing which could cause a
Material Adverse Change.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (ii) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in the
Disclosure Schedule, neither the business nor the properties of any Restricted
Person has been affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance), which
could cause a Material Adverse Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in the Disclosure Schedule: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Code exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, and (ii)
the current value of each ERISA Plan's benefits does not exceed the current
value of such ERISA Plan's assets available for the payment of such benefits by
more than $500,000.
Section 5.12. Compliance with Laws. Except as set forth in the
Disclosure Schedule, each Restricted Person is conducting its businesses in
compliance with all applicable Laws, including Environmental Laws, and has all
permits, licenses and authorizations required in connection with the conduct of
its businesses, except to the extent failure to have any such permit, license or
authorization could not cause a Material Adverse Change. Each Restricted Person
is in compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Law, including applicable
Environmental Law, or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply could not cause a Material
Adverse Change.
Section 5.13. Environmental Laws. As used in this section: "CERCLA"
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended,
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"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List of the Environmental Protection Agency, and
"Release" has the meaning given such term in 42 U.S.C. (S) 9601(22). Without
limiting the provisions of Section 5.12 and except as set forth in the
Disclosure Schedule:
(a) 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 threatened by any
Tribunal or any other Person with respect to (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials in any material amount, either by any Restricted Person or
on any property owned by any Restricted Person, (ii) any material remedial
action which might be needed to respond to any such alleged generation,
treatment, storage, recycling, transportation, disposal, or Release, or (iii)
any alleged failure in any material respect by any Restricted Person to have any
permit, license or authorization required in connection with the conduct of its
business or with respect to any such generation, treatment, storage, recycling,
transportation, disposal, or Release.
(b) No Restricted Person otherwise has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Materials.
(c) No Restricted Person has handled any Hazardous Materials, other than
as a generator, on any properties now or previously owned or leased by any
Restricted Person to an extent that such handling has caused, or could cause, a
Material Adverse Change.
(d) Except to the extent that the following in the aggregate has not
caused and could not cause a Material Adverse Change:
(i) no PCBs are or have been present at any properties now or previously
owned or leased by any Restricted Person;
(ii) no asbestos is or has been present at any properties now or previously
owned or leased by any Restricted Person;
(iii) there are no underground storage tanks for Hazardous Materials,
active or abandoned, at any properties now or previously owned or leased by
any Restricted Person; and
(iv) no Hazardous Materials have been Released at, on or under any
properties now or previously owned or leased by any Restricted Person.
(e) No Restricted Person has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under CERCLA, listed for possible inclusion on the
National Priorities List by the Environmental Protection Agency in CERCLIS, or
listed 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 any Restricted
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Person for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under CERCLA.
(f) No Hazardous Material generated by any Restricted Person has been
recycled, treated, stored, disposed of or released by any Restricted Person at
any location other than those listed in Disclosure Schedule.
(g) No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of any Restricted Person (and to the best
knowledge of Borrower, no such notification has been filed with respect to any
Restricted Person by any other Person), and no property now or previously owned
or leased by any Restricted Person is listed or proposed for listing on the
National Priority list promulgated pursuant to CERCLA, in CERCLIS, or on any
similar state list of sites requiring investigation or clean-up.
(h) There are no Liens arising under or pursuant to any Environmental Laws
on any of the real properties or properties owned or leased by any Restricted
Person, and no government actions of which Borrower is aware have been taken or
are in process which could subject any of such properties to such Liens; nor
would any Restricted Person 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.
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
any Restricted Person in relation to any properties or facility now or
previously owned or leased by any Restricted Person which have not been made
available to Administrative Agent.
Section 5.14. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of Borrower set out in Section
10.3. Except as indicated in the Disclosure Schedule, no Restricted Person has
any other office or place of business.
Section 5.15. Borrower's Subsidiaries. Borrower does not presently have
any Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule. Neither Borrower nor any Restricted
Person is a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule. Borrower owns, directly or indirectly, the equity interest in each of
its Subsidiaries which is indicated in the Disclosure Schedule.
Section 5.16. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business. Each
Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses
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the right to use such intellectual property without violation of the rights of
any other Person) which are necessary to carry out its business as presently
conducted and as presently proposed to be conducted hereafter, and no Restricted
Person is in violation in any material respect of the terms under which it
possesses such intellectual property or the right to use such intellectual
property.
Section 5.17. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.18. Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. (S) 375b(9) or in regulations
promulgated pursuant thereto) of any Restricted Person, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined in 12
U.S.C. (S) 375b(8) or (9) or in regulations promulgated pursuant thereto) of any
Lender, of a bank holding company of which any Lender is a Subsidiary or of any
Subsidiary of a bank holding company of which any Lender is a Subsidiary.
Section 5.19. Solvency. Upon giving effect to the issuance of the Notes,
the execution of the Loan Documents by Borrower and each Guarantor and the
consummation of the transactions contemplated hereby, Borrower and each
Guarantor will be solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws).
Section 5.20. Credit Arrangements. The Disclosure Schedule contains 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, any Restricted Person, or to which any Restricted Person is subject, other
than the Loan Documents, and the aggregate principal or face amount outstanding
or which may become outstanding under each such arrangement is correctly
described in the Disclosure Schedule. No Restricted Person is subject to any
restriction under any 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, any Affiliate other than the Resources Indenture.
Section 5.21. Year 2000.
(a) Borrower and Resources have (i) begun analyzing the operations of
Restricted Persons and their Subsidiaries and Affiliates that could be adversely
affected by failure to be become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) and (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects. Borrower and
Resources reasonably believe that Restricted Persons and their Affiliates will
become Year 2000 compliant
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for their operations on a timely basis except to the extent that a failure to do
so could not reasonably be expected to cause a Material Adverse Change.
(b) Borrower and Resources reasonably believe any suppliers and vendors
that are material to the operations of Borrower or its Subsidiaries and
Affiliates will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
cause a Material Adverse Change.
ARTICLE VI - Affirmative Covenants of Borrower
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Borrower covenants and agrees that
until the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders, or all Lenders as required under Section
10.1, have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Restricted Person will pay
all amounts due under the Loan Documents, to which it is party, in accordance
with the terms thereof and will observe, perform and comply with every covenant,
term and condition expressed in the Loan Documents to which it is a party.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender at Borrower's expense:
(a) As soon as available, and in any event within one hundred twenty
(120) days after the end of each Fiscal Year (i) complete Consolidated
financial statements of Borrower together with all notes thereto, prepared
in reasonable detail in accordance with GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
PriceWaterhouse Coopers, or other independent certified public accountants
selected by Borrower and acceptable to Majority Lenders, stating that such
Consolidated financial statements have been so prepared and (ii) supporting
unaudited consolidating balance sheets and statements of income of
Borrower. These financial statements shall contain a Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of earnings for such Fiscal Year,
each setting forth in comparative form the corresponding figures for the
preceding Fiscal Year. In addition, within one hundred twenty (120) days
after the end of each Fiscal Year Borrower will furnish a certificate
signed by such accountants (i) stating that they have read this Agreement,
(ii) containing calculations showing compliance (or non-compliance) at the
end of such Fiscal Year with the Financial Conditions and requirements of
Sections 7.8 through 7.11, inclusive, and (iii) further stating that in
making their examination and reporting on the Consolidated financial
statements described above they obtained no knowledge of any Default
existing at the end of such Fiscal Year,
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or, if they did so conclude that a Default existed, specifying its nature
and period of existence.
(b) As soon as available, and in any event within thirty-five (35)
days after the end of each month, other than the last month of a Fiscal
Year (i) Borrower's Consolidated balance sheet as of the end of such month
and Consolidated statements of Borrower's earnings and cash flows for such
month and for the period from the beginning of the then current Fiscal Year
to the end of such month, and (ii) unaudited supporting consolidating
balance sheets and statements of income of Borrower, all in reasonable
detail and prepared in accordance with GAAP (but without footnotes),
subject to changes resulting from normal year-end adjustments, and as soon
as available, and in any event within thirty-five (35) days after the end
of the last month of each Fiscal Year, Borrower's unaudited Consolidated
balance sheet as of the end of such month and income statement for such
month and for the period from the beginning of the current Fiscal Year to
the end of such month. In addition Borrower will, together with each such
set of financial statements and each set of financial statements furnished
under subsection (a) of this section, furnish a certificate in the form of
Exhibit F signed by the chief financial officer or the principal accounting
officer of Borrower stating that such financial statements are accurate and
complete in all material respects (subject to normal year-end adjustments),
stating that he has reviewed the Loan Documents, containing calculations
showing compliance (or non-compliance) at the end of such month with the
Financial Conditions and requirements of Sections 7.8 through 7.11,
inclusive and stating that no Default exists at the end of such month or at
the time of such certificate or specifying the nature and period of
existence of any such Default.
(c) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete Consolidated financial
statements of Resources together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
Price Waterhouse, or other independent certified public accountants
selected by Resources and acceptable to Majority Lenders, stating that such
Consolidated financial statements have been so prepared. These financial
statements shall contain a Consolidated balance sheet as of the end of such
Fiscal Year and Consolidated statements of earnings, of cash flows, and of
changes in owners' equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal Year.
(d) As soon as available, and in any event within forty-five (45)
days after the end of each of the first three Fiscal Quarters of each
Fiscal Year Resources' Consolidated balance sheet as of the end of such
Fiscal Quarter and Consolidated statements of Resources' earnings and cash
flows for such Fiscal Quarter and for the period from the beginning of the
then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments.
(e) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Resources to its
stockholders and all
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registration statements, periodic reports and other statements and
schedules filed by Resources with any securities exchange, the Securities
and Exchange Commission or any similar governmental authority.
(f) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, a business and financial plan for
Borrower in form reasonably satisfactory to Administrative Agent, prepared
by a senior financial officer thereof, setting forth for the first year
thereof, quarterly financial projections and budgets for Borrower, and
thereafter yearly financial projections and budgets during the Commitment
Period.
(g) On the twenty-sixth (26th) day of each calendar month, a
Borrowing Base Report in the form of Exhibit H duly completed by an
authorized officer of Borrower and conforming with the requirements of
Section 2.13.
(h) On the twenty-sixth (26th) day of each calendar month, a
Borrowing Base Report in the form of Exhibit H duly completed by an
authorized officer of Borrower and including a statement reconciliating
such report with the Borrowing Base Report delivered on the 26th day of the
preceding calendar month.
(i) As soon as available, and in any event within thirty-five (35)
days after the end of each calendar month, a report setting forth for such
month aggregate volumes and margins for all marketing activities of
Borrower and its Subsidiaries.
(j) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Year, Borrower at its own cost and expense
shall deliver to Administrative Agent an environmental compliance
certificate signed by the president or chief executive officer of Borrower
in the form attached hereto as Exhibit I. Further, if requested by
Administrative Agent, Borrower shall permit and cooperate with an
environmental and safety review made in connection with the operations of
Borrower's properties one time during each Fiscal Year beginning with the
Fiscal Year 1999, by Pilko & Associates, Inc. or other consultants selected
by Administrative Agent which review shall, if requested by Administrative
Agent, be arranged and supervised by environmental legal counsel for
Administrative Agent, all at Borrower's cost and expense. The consultant
shall render a verbal or written report, as specified by Administrative
Agent, based upon such review at Borrower's cost and expense and a copy
thereof will be provided to Borrower.
(k) Concurrently with the annual renewal of Borrower's insurance
policies, Borrower shall at its own cost and expense, if requested by
Administrative Agent in writing, cause a certificate or report to be issued
by Administrative Agent's professional insurance consultants or other
insurance consultants satisfactory to Administrative Agent certifying that
Borrower's insurance for the next succeeding year after such renewal (or
for such longer period for which such insurance is in effect) complies with
the provisions of this Agreement and the Security Documents.
Section 6.3. Other Information and Inspections. In each case subject to
the last sentence of this Section 6.3, each Restricted Person will furnish to
each Lender any information which
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Administrative Agent or any Lender may from time to time request concerning any
covenant, provision or condition of the Loan Documents or any matter in
connection with Restricted Persons' businesses and operations. In each case
subject to the last sentence of this Section 6.3, each Restricted Person will
permit representatives appointed by Administrative Agent (including independent
accountants, auditors, agents, attorneys, appraisers and any other Persons) to
visit and inspect during normal business hours any of such Restricted Person's
property, including its books of account, other books and records, and any
facilities or other business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down and record any
information such representatives obtain, and each Restricted Person shall permit
Administrative Agent or its representatives to investigate and verify the
accuracy of the information furnished to Administrative Agent or any Lender in
connection with the Loan Documents and to discuss all such matters with its
officers, employees and, upon prior notice to Borrower, its representatives.
Each of the foregoing inspections shall be made subject to compliance with
applicable safety standards and the same conditions applicable to any Restricted
Person in respect of property of that Restricted Person on the premises of
Persons other than a Restricted Person or an Affiliate of a Restricted Person,
and all information, books and records furnished or requested to be furnished,
or of which copies, photocopies or photographs are made or requested to be made,
all information to be investigated or verified and all discussions conducted
with any officer, employee or representative of any Restricted Person shall be
subject to any applicable attorney-client privilege exceptions which the
Restricted Person determines is reasonably necessary and compliance with
conditions to disclosures under non-disclosure agreements between any Restricted
Person and Persons other than a Restricted Person or an Affiliate of a
Restricted Person and the express undertaking of each Person acting at the
direction of or on behalf of any Lender Party to be bound by the confidentiality
provisions of Section 10.6 of this Agreement.
Section 6.4. Notice of Material Events and Change of Address. Borrower
will notify each Lender Party, not later than five (5) Business Days after any
executive officer of Borrower has knowledge thereof, stating that such notice is
being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default could cause a Material Adverse
Change,
(d) the occurrence of any Termination Event,
(e) the failure to comply on any day with any Financial Condition,
(f) any claim of $1,000,000 or more, any notice of potential
liability under any Environmental Laws which might be reasonably likely to
exceed such amount, or any
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other material adverse claim asserted against any Restricted Person or with
respect to any Restricted Person's properties taken as a whole, and
(g) the filing of any suit or proceeding against any Restricted
Person in which an adverse decision could cause a Material Adverse Change.
Upon the occurrence of any of the foregoing, Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default, Termination Event or failure to comply
with any Financial Condition, to protect against any such adverse claim, to
defend any such suit or proceeding, and to resolve all controversies on account
of any of the foregoing. Borrower will also notify Administrative Agent and
Administrative Agent's counsel in writing at least twenty Business Days prior to
the date that any Restricted Person changes its name or the location of its
chief executive office or principal place of business or the place where it
keeps its books and records concerning the Collateral, furnishing with such
notice any necessary financing statement amendments or requesting Administrative
Agent and its counsel to prepare the same.
Borrower will promptly notify Administrative Agent in the event Borrower
determines that any computer application which is material to the operations of
Borrower, its Subsidiaries, its Affiliates or any of its material vendors or
suppliers will not be fully Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to cause a Material
Adverse Change.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition (ordinary wear and
tear excepted) and in compliance with all applicable Laws, and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns including any extensions;
(b) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (c) within one hundred
twenty (120) days after the date such goods are delivered or such services are
rendered, pay all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other Persons providing goods and services used by it in the
ordinary course of its business; (d) pay and discharge when due all other
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Restricted
Person may, however, delay paying or discharging any of the foregoing so long as
it is in good faith contesting the validity thereof by appropriate proceedings,
if necessary, and has set aside on its books adequate reserves therefor which
are required by GAAP.
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Section 6.8. Insurance. Each Restricted Person shall at all times
maintain insurance for its property in accordance with the Insurance Schedule
which insurance shall be by financially sound and reputable insurers. Borrower
will maintain any additional insurance coverage as described in the respective
Security Documents. Upon demand by Administrative Agent any insurance policies
covering Collateral shall be endorsed (a) to provide for payment of losses to
Administrative Agent as its interests may appear, (b) to provide that such
policies may not be canceled or reduced or affected in any material manner for
any reason without fifteen days prior notice to Administrative Agent, and (c) to
provide for any other matters specified in any applicable Security Document or
which Administrative Agent may reasonably require. Each Restricted Person shall
at all times maintain insurance against its liability for injury to persons or
property in accordance with the Insurance Schedule, which insurance shall be by
financially sound and reputable insurers. Without limiting the foregoing, each
Restricted Person shall at all time maintain liability insurance in accordance
with the Insurance Schedule.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Administrative Agent may
pay the same after notice of such payment by Administrative Agent is given to
Borrower. Borrower shall immediately reimburse Administrative Agent for any
such payments and each amount paid by Administrative Agent shall constitute an
Obligation owed hereunder which is due and payable on the date such amount is
paid by Administrative Agent.
Section 6.10. Interest. Borrower hereby promises to each Lender to pay
interest at the Default Rate on all Obligations (including Obligations to pay
fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted Person
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease, and
franchise, and each material agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound. Each Restricted Person will conduct its business and affairs in
compliance with all Laws applicable thereto.
Section 6.12. Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person as well
as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters 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 will maintain such authorizations in full force and effect.
(b) Borrower will promptly furnish to Administrative Agent all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings
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received by Borrower, or of which it has notice, pending or threatened against
Borrower, the potential liability of which exceeds $1,000,000 or would cause a
Material Adverse Change if resolved adversely against Borrower, by any
governmental authority with respect to any alleged violation of or non-
compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.
(c) Borrower will promptly furnish to Administrative Agent all requests
for information, notices of claim, demand letters, and other notifications,
received by Borrower in connection with its ownership or use of its properties
or the conduct of its business, relating to potential responsibility with
respect to any investigation or clean-up of Hazardous Material at any location,
the potential liability of which exceeds $1,000,000 or would cause a Material
Adverse Change if resolved adversely against Borrower.
Section 6.13. Evidence of Compliance. Subject to the last sentence of
Section 6.3, each Restricted Person will furnish to each Lender at such
Restricted Person's or Borrower's expense all evidence which Administrative
Agent from time to time reasonably requests in writing as to the accuracy and
validity of or compliance with all representations, warranties and covenants
made by any Restricted Person in the Loan Documents, the satisfaction of all
conditions contained therein, and all other matters pertaining thereto.
Section 6.14. Agreement to Deliver Security Documents. Borrower agrees
to deliver and to cause each other Restricted Person to deliver, to further
secure the Obligations whenever requested by Administrative Agent in its sole
and absolute discretion, deeds of trust, mortgages, chattel mortgages, security
agreements, financing statements and other Security Documents in form and
substance satisfactory to Administrative Agent for the purpose of granting,
confirming, and perfecting first and prior liens or security interests in any
real or personal property now owned or hereafter acquired by any Restricted
Person.
Section 6.15. Perfection and Protection of Security Interests and Liens.
Borrower will from time to time deliver, and will cause each other Restricted
Person from time to time to deliver, to Administrative Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Restricted
Persons in form and substance satisfactory to Administrative Agent, which
Administrative Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in Collateral securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower hereby grants to each Lender a security interest, a lien,
and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of any Lender at common Law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any and
all moneys, securities or other property (and the proceeds therefrom) of
Borrower now or hereafter held or received by or in transit to any Lender from
or for the account of Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower with any Lender, and
(c) any other credits and claims of Borrower at any time existing against any
Lender,
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including claims under certificates of deposit. At any time and from time to
time during the continuance of any Event of Default, each Lender is hereby
authorized to foreclose upon, or to offset against the Obligations then due and
payable (in either case without notice to Borrower), any and all items
hereinabove referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.17. Guaranties of Borrower's Subsidiaries. Each Subsidiary of
Borrower now existing or created, acquired or coming into existence after the
date hereof shall, promptly upon request by Administrative Agent, execute and
deliver to Administrative Agent an absolute and unconditional guaranty of the
timely repayment of the Obligations and the due and punctual performance of the
obligations of Borrower hereunder, which guaranty shall be satisfactory to
Administrative Agent in form and substance. Each Subsidiary of Borrower
existing on the date hereof shall duly execute and deliver such a guaranty prior
to the making of any Loan hereunder. Borrower will cause each of its
Subsidiaries to deliver to Administrative Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to Administrative
Agent and its counsel that such Subsidiary has taken all corporate or
partnership action necessary to duly approve and authorize its execution,
delivery and performance of such guaranty and any other documents which it is
required to execute.
Section 6.18. Compliance with Agreements. Each Restricted Person shall
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such agreement or instrument is materially
significant to Borrower or to Borrower and its Subsidiaries on a Consolidated
basis or materially significant to any Guarantor, and such failure is not
remedied within the applicable period of grace (if any) provided in such
agreement or instrument.
ARTICLE VII - Negative Covenants of Borrower
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and make the Loans, Borrower covenants and agrees that until the
full and final payment of the Obligations and the termination of this Agreement,
unless Majority Lenders, or all Lenders as required under Section 10.1, have
previously agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations.
(b) unsecured Indebtedness owed by a Restricted Person to (i) another
Restricted Person or (ii) Resources, in either case arising in the ordinary
course of business.
(c) Indebtedness arising under Hedging Contracts provided that: (i) all
such contracts are entered into with the purpose and effect of fixing prices on
crude oil (A) purchased or under
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contract for purchase by a Restricted Person for which such Restricted Person
does not have a contract to sell at a fixed price or (B) sold by a Restricted
Person for which such Restricted Person does not have a contract to purchase at
a fixed price, in each case entered into the ordinary course of its marketing
businesses; and (ii no such contract has a term of more than 12 months from the
date of its making (or most recent renewal).
(d) Guaranties of the Indebtedness under the Resources Credit Agreement.
(e) Guaranties of Indebtedness under the Resources Indentures.
(f) Liabilities with respect to obligations to deliver crude oil or to
render terminaling or storage services in consideration for advance payments to
a Restricted Person provided such delivery or rendering, as applicable, is to be
made within 60 days after such payment.
(g) Operating leases, provided that the annual rentals and other
obligations thereunder in the aggregate do not exceed $500,000.
(h) Indebtedness existing on the date of this Agreement and listed on the
Disclosure Schedule.
(i) Indebtedness incurred by PTTC (i) to pay or refinance the cost of
acquisition, expansion and/or construction incurred after the date of this
Agreement (or prior to the date of this Agreement and listed on the Disclosure
Schedule) of new facilities to be owned and operated by PTTC, which facilities
are completed or placed in operation (whichever is later) after the date of this
Agreement, provided that the principal amount of such Indebtedness does not
exceed the aggregate amount of such costs, and (ii) for renewals, extensions and
refinancing of such Indebtedness, provided that each such renewal, extension or
refinancing is not in excess of such principal amount.
(j) other Indebtedness not to exceed the aggregate principal amount of
$1,000,000 at any one time.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist (i) any Lien upon any Collateral except (A) Permitted
Inventory Liens, (B) Liens created pursuant to the Security Documents, (C)
statutory Liens in respect of First Purchase Crude Payables, (D) Liens of the
type described in clause (e) below in connection with any Eligible Margin
Deposit to secure Hedging Contracts permitted under Section 7.1 with the broker
that is the holder of such Eligible Margin Deposit, and (E) any other Liens
expressly permitted to encumber such Collateral under any Security Document
covering such Collateral or (ii) any Lien upon any of the properties or assets
other than Collateral (except as provided in the preceding clause (i)) which it
now owns or hereafter acquires except the following (Liens, to the extent
permitted by this Section, herein called "Permitted Liens"):
(a) Liens existing on the date of this Agreement and listed in the
Disclosure Schedule;
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(b) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or the validity of which is being contested in good faith
and by appropriate proceedings, if necessary, for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(c) pledges or deposits under worker's compensation, unemployment insurance
or other social security legislation;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's, or other like Liens (including, without limitation, Liens on
property in the possession of storage facilities, pipelines or barges) arising
in the ordinary course of business for amounts which are not more than 60 days
past due or the validity of which is being contested in good faith and by
appropriate proceedings, if necessary, and for which adequate reserves are
maintained on the books of any Restricted Person in accordance with GAAP;
(e) Liens under or with respect to accounts with brokers or counterparties
with respect to Hedging Contracts consisting of cash, commodities or futures
contracts, options, securities, instruments, and other like assets securing only
Hedging Contracts permitted under Section 7.1;
(f) deposits of cash or securities 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;
(g) 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 any Restricted Person;
(h) Liens in respect of operating leases as permitted under Section 7.1(g)
hereof;
(i) rights reserved to or vested in any governmental authority by the terms
of any right, power, franchise, grant, license or permit, or by any provision of
law, to revoke or terminate any such right, power, franchise, grant, license or
permit or to condemn or acquire by eminent domain or similar process;
(j) rights reserved to or vested by Law in any governmental authority to in
any manner, control or regulate in any manner any of the properties of any
Restricted Person or the use thereof or the rights and interests of any
Restricted Person therein, in any manner under any and all Laws;
(k) rights reserved to the grantors of any properties of any Restricted
Person, and the restrictions, conditions, restrictive covenants and limitations,
in respect thereto, pursuant to the terms, conditions and provisions of any
rights-of-way agreements, contracts or other agreements therewith; and
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(l) Inchoate Liens in respect of pending litigation or with respect to a
judgment which has not resulted in an Event of Default under Section 8.1.
(m) Liens securing Indebtedness of PTTC incurred under Section 7.1(i),
provided that such Liens attach only to the new facilities so acquired and/or
constructed with such Indebtedness and any easements or licences necessary for
the use thereof.
Section 7.3. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this section, no Restricted Person will (a) enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), (b) 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 7.5 hereof or (c) sell, transfer, lease, exchange, alienate 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, except for
sales or transfers not prohibited by under Section 7.4 hereof. Any Subsidiary
of Borrower may, however, be merged into or consolidated with (i) another
Subsidiary of Borrower, so long as a Guarantor is the surviving business entity,
or (ii) Borrower, so long as Borrower is the surviving business entity. Borrower
will not issue any securities other than shares of its common or preferred stock
and any options or warrants giving the holders thereof only the right to acquire
such shares. No Subsidiary of Borrower will issue any additional shares of its
capital stock or other securities or any options, warrants or other rights to
acquire such additional shares or other securities except to Borrower or to
wholly-owned Subsidiary of Borrower. No Subsidiary of Borrower which is a
partnership will allow any diminution of Borrower's interest (direct or
indirect) therein.
Section 7.4. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any Collateral or any of
its material assets or properties or any material interest therein except (a)
equipment which is (i) worthless, (ii) obsolete, (iii) replaced by equipment
acquired or leased by such Restricted Person of equal suitability and value, or
(iv) otherwise no longer used or useful in the ordinary course of business of
such Restricted Person and (b) inventory which is sold or facilities which are
leased in the ordinary course of business on ordinary trade terms. No
Restricted Person will sell, transfer or otherwise dispose of capital stock of
or interest in any of the Restricted Persons except as permitted by Section 7.3.
No Restricted Person will discount, sell, pledge or assign any notes payable to
it, accounts receivable or future income.
Section 7.5. Limitation on Investments and New Businesses. No Restricted
Person will (a) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (b) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, (c) make any acquisitions of or capital contributions to or other
Investments in any Person, other than Permitted Investments, or (d) make any
significant acquisitions or Investments in any properties other than crude oil
in the ordinary course of its business and other property to be used in the
ordinary course of its business.
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Section 7.6. Limitation on Credit Extensions. Except for Permitted
Investments, no Restricted Person will extend credit, make advances or make
loans other than normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated in
a normal and prudent manner.
Section 7.7. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates except: (a)
transactions among Borrower and its wholly owned Subsidiaries, (b) transactions
governed by the Affiliate Agreements, (c) transactions entered into in the
ordinary course of business of such Restricted Person on terms which are no less
favorable to such Restricted Person than those which would have been obtainable
at the time in arm's-length transactions with Persons other than such Affiliates
("market terms"), (d) transactions consisting of crude oil marketing services
by Borrower with respect to crude oil produced from wells operated by Resources
or any of its Subsidiaries either (i) on market terms or (ii) on terms which are
less favorable to Borrower than market terms but which are not burdensome to
Borrower and do not and will not result in a loss to Borrower, and (e)
transactions between Borrower and PTTC which are less favorable to PTTC than
market terms.
Section 7.8. Limitations on Capital Expenditures. Borrower shall not
make any capital expenditures other than (i) capital expenditures not to exceed
the aggregate amount of $3,000,000 in any Fiscal Year for tangible assets of a
business, division or line from one or more Persons other than an Affiliate, and
(ii) capital expenditures not to exceed the aggregate amount of $2,000,000 in
any Fiscal Year for any purposes other than in the foregoing clause (i).
Section 7.9. Open Inventory Position. Borrower shall not at any time
have an open inventory position greater than 600,000 barrels.
Section 7.10. Fixed Charges Coverage Ratio. At the end of any Fiscal
Quarter, the ratio of (i) Consolidated EBITDA for the four consecutive Fiscal
Quarters ending with such Fiscal Quarter to (ii) Fixed Charges for such period
will not be less than 1.05 to 1.0.
Section 7.11. Solvency. On each day, Consolidated Net Worth will not be
less than zero.
Section 7.12. Prohibited Contracts. Except as expressly provided for in
the Loan Documents, no Restricted Person will, directly or indirectly, enter
into, create, or otherwise allow to exist any contract or other consensual
restriction on the ability of any Subsidiary of Borrower to: (a) pay dividends
or make other distributions to Borrower, (b) redeem equity interests held in it
by Borrower, (c) repay loans and other indebtedness owing by it to Borrower, or
(d) transfer any of its assets to Borrower. No Restricted Person will enter
into any "take-or-pay" contract or other contract or arrangement for the
purchase of goods or services which obligates it to pay for such goods or
service regardless of whether they are delivered or furnished to it. No
Restricted Persons will amend, modify or release any of the Affiliate
Agreements. No Restricted Person will amend or permit any amendment to any
contract or lease which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights and benefits of Administrative Agent
or any Lender under or acquired pursuant to any Security Documents. No ERISA
Affiliate will
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incur any obligation to contribute to any "multiemployer plan" as defined in
Section 4001 of ERISA that is subject to Title IV of ERISA.
Section 7.13. No Limitation of Certain Payment. Nothing contained in
this Agreement or any other Loan Document shall restrict, directly or
indirectly, the ability of any Restricted Person to pay dividends or make other
distributions on its capital stock or make payments on any Indebtedness owed to,
make loans or advances to, or transfer property to Resources or any of its
Subsidiaries, or to receive or retain any such dividends, distributions or
payments, loans or advances, or transfers of property, and the provisions of
this covenant shall supersede all other provisions of this Agreement which may
be in conflict with it, including without limitation, the final sentence of
Section 10.2.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Restricted Person or Resources fails to pay the principal
component of any Loan or any reimbursement obligation with respect to any Letter
of Credit when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise;
(b) Any Restricted Person or Resources fails to pay any Obligation (other
than the Obligations in subsection (a) above) when due and payable, whether at a
date for the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise, within
three Business Days after the same becomes due;
(c) Any event defined as a "default" or "event of default" in any Loan
Document occurs, and the same is not remedied within the applicable period of
grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person or Resources fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with
any covenant, agreement, condition or provision of any Loan Document to which it
is a party, and such failure remains unremedied for a period of thirty (30) days
after notice of such failure is given by Administrative Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Restricted Person or Resources in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made, or any Loan Document at any
time ceases to be valid, binding and enforceable as warranted in Section 5.5 for
any reason other than its release or subordination by Administrative Agent;
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(g) Any Restricted Person or Resources shall default in the payment when
due of any principal of or interest on any of its other Indebtedness in excess
of the Resources Default Threshold in the case of Resources or $1,000,000 in the
aggregate in the case of any Restricted Person (other than Indebtedness the
validity of which is being contested in good faith by appropriate proceedings
and for which adequate reserves with respect thereto are maintained on the books
of Resources or such Restricted Person in accordance with GAAP), 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;
(h) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Code) in excess of $500,000 exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, or (ii
any Termination Event occurs with respect to any ERISA Plan and the then current
value of such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit liabilities
by more than $500,000 (or in the case of a Termination Event involving the
withdrawal of a substantial employer, the withdrawing employer's proportionate
share of such excess exceeds such amount);
(i) Any PAAI Company, any Restricted Person, or Resources:
(i) has entered against it of a judgment, decree or order for relief
by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it, in each case, which remains undismissed for a period
of sixty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
Law; or makes a general assignment for the benefit of creditors; or is
generally unable to pay (or admits in writing its inability to so pay) its
debts as such debts become due; or takes corporate or other action to
authorize any of the foregoing; or
(iii) has entered against it the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets in a proceeding
brought against or initiated by it, and such appointment or taking
possession is neither made ineffective nor discharged within sixty days
after the making thereof, or such appointment or taking possession is at
any time consented to, requested by, or acquiesced to by it; or
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(iv) has entered against it the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any part of the Collateral of a value in excess of
$1,000,000 in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor discharged
within sixty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to by
it; or
(v) has entered against it a final judgment for the payment of money
in excess of $1,000,000 (in each case not covered by insurance satisfactory
to Administrative Agent in its discretion), unless the same is stayed or
discharged within thirty days after the date of entry thereof or an appeal
or appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(vi) suffers a writ or warrant of attachment or any similar process
to be issued by any Tribunal against all or any substantial part of its
assets or any part of the Collateral of a value in excess of $1,000,000,
and such writ or warrant of attachment or any similar process is not stayed
or released within thirty days after the entry or levy thereof or after any
stay is vacated or set aside;
(j) Any Change in Control occurs; or
(k) Any Material Open Market Position Loss occurs.
Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Lender to make any further Loans and any obligation of LC Issuer to issue
Letters of Credit hereunder shall be permanently terminated. During the
continuance of any other Event of Default, Administrative Agent at any time and
from time to time may (and upon written instructions from Majority Lenders,
Administrative Agent shall), without notice to Borrower or any other Restricted
Person, do either or both of the following: (1) terminate any obligation of
Lenders to make Loans hereunder and any obligation of LC Issuer to issue Letters
of Credit hereunder, and (2) declare any or all of the Obligations immediately
due and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each Restricted
Person who at any time ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or
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enforce any other legal or equitable right which it may have. All rights,
remedies and powers conferred upon Lender Parties under the Loan Documents shall
be deemed cumulative and not exclusive of any other rights, remedies or powers
available under the Loan Documents or at Law or in equity.
ARTICLE IX - Administrative Agent
Section 9.1. Appointment and Authority. Each Lender Party hereby
irrevocably authorizes Administrative Agent, and Administrative 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 Loan Documents as are specifically delegated to Administrative
Agent by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. The relationship of Administrative Agent to the other
Lender Parties is only that of one commercial lender acting as administrative
agent for others, and nothing in the Loan Documents shall be construed to
constitute Administrative Agent a trustee or other fiduciary for any Lender
Party or any holder of any participation in a Note nor to impose on
Administrative Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Administrative Agent, Administrative 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 Lender Parties in so acting or refraining from
acting) upon the instructions of Majority Lenders (including itself), provided,
however, that Administrative 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 Loan Documents or to applicable Law. Upon receipt
by Administrative Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from Borrower or any Lender to Administrative
Agent of any Default or Event of Default, Administrative Agent shall promptly
notify each other Lender thereof.
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative 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 Loan 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,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any other
Lender Party and shall not be responsible to any other Lender Party for any
statements, warranties or representations made in or in connection with the Loan
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
Loan Documents
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on the part of any Restricted Person or to inspect the property (including the
books and records) of any Restricted Person; (e) shall not be responsible to any
other Lender Party for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any instrument or
document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Restricted Person or Lender Party in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3. Credit Decisions. Each Lender Party acknowledges that it
has, independently and without reliance upon any other Lender Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party 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 Loan Documents.
Section 9.4. Indemnification. EACH LENDER AGREES TO INDEMNIFY
ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER 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 ADMINISTRATIVE AGENT GROWING OUT OF, RESULTING
FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN
DOCUMENTS AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT THEREOF) AT
ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN
CONTRACT OR IN TORT OR OTHERWISE AND 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 OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Administrative Agent for that portion, if any, of any liabilities and costs
which is proximately caused by Administrative Agent's own individual gross
negligence or willful misconduct, as determined in a final judgment. Cumulative
of the foregoing, each Lender agrees to reimburse Administrative
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Agent promptly upon demand for such Lender's Percentage Share of any costs and
expenses to be paid to Administrative Agent by Borrower under Section 10.4(a) to
the extent that Administrative Agent is not timely reimbursed for such expenses
by Borrower as provided in such section. As used in this section the term
"Administrative Agent" shall refer not only to the Person designated as such in
Section 1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 9.5. Rights as Lender. In its capacity as a Lender,
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent.
Administrative Agent may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with any
Restricted Person or their Affiliates, all as if it were not Administrative
Agent hereunder and without any duty to account therefor to any other Lender.
Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party
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 Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Administrative Agent
under Section 3.1, causes such Lender Party to have received more than it would
have received had such payment been received by Administrative Agent and
distributed pursuant to Section 3.1, then (a) it shall be deemed to have
simultaneously purchased and shall be obligated to purchase interests in the
Obligations as necessary to cause all Lender Parties to share all payments as
provided for in Section 3.1, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that Administrative Agent and all
Lender Parties share all payments of Obligations as provided in Section 3.1;
provided, however, that nothing herein contained shall in any way affect the
right of any Lender Party to obtain payment (whether by exercise of rights of
banker's lien, set-off or counterclaim or otherwise) of indebtedness other than
the Obligations. Borrower 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 and, subject to the provisions of Section
6.16, 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 the order of a Tribunal to
be paid on account of the possession of such funds prior to such recovery.
Section 9.7. Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lender Parties any
funds which it has received, or whenever Administrative Agent in good faith
determines that there is any dispute among Lender Parties about how such funds
should be distributed, Administrative Agent may choose to defer distribution of
the funds which are the subject of such uncertainty or dispute. If
Administrative Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Administrative Agent is otherwise required to
invest funds pending distribution to Lender Parties, Administrative Agent shall
invest such funds pending distribution; all interest on any such
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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 Administrative Agent for distribution to Lender Parties (other than
to the Person who is Administrative Agent in its separate capacity as a Lender
Party) shall be held by Administrative Agent pending such distribution solely as
Administrative Agent for such Lender Parties, and Administrative Agent shall
have no equitable title to any portion thereof.
Section 9.8. Benefit of Article IX. The provisions of this Article are
intended solely for the benefit of Lender Parties, and no Restricted Person
shall be entitled to rely on any such provision or assert any such provision in
a claim or defense against any Lender (other than in relation to the reference
to Section 6.16 contained in Section 9.6 or the right to reasonably approve a
successor Administrative Agent under Section 9.9). Lender Parties may waive or
amend such provisions as they desire without any notice to or consent of
Borrower or any other Restricted Person.
Section 9.9. Resignation. Administrative Agent may resign at any time by
giving written notice thereof to Lenders and Borrower. 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 Administrative Agent,
subject to the approval of Borrower, which approval will not be unreasonably
withheld. A successor must be appointed for any retiring Administrative Agent,
and such Administrative Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of
the retiring Administrative Agent's resignation, no successor Administrative
Agent has been appointed and has accepted such appointment, then the retiring
Administrative Agent may appoint a successor Administrative 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 Administrative Agent hereunder by a
successor Administrative Agent, the retiring Administrative Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Administrative Agent's resignation hereunder
the provisions of this Article IX shall continue to inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
Section 9.10. Other Agents. Neither the Syndication Agent nor the
Documentation Agent, in such capacities, shall have any duties or
responsibilities or incur any liabilities under this Agreement or the other Loan
Documents.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right,
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power or remedy preclude any other or further exercise thereof or of any other
right, power or remedy. No waiver of any provision of any Loan Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No notice to or
demand on any Restricted Person shall in any case of itself entitle any
Restricted Person to any other or further notice or demand in similar or other
circumstances. This Agreement and the other Loan Documents set forth the entire
understanding between the parties hereto with respect to the transactions
contemplated herein and therein and supersede all prior discussions and
understandings with respect to the subject matter hereof and thereof, and no
waiver, consent, release, modification or amendment of or supplement to this
Agreement or the other Loan Documents shall be valid or effective against any
party hereto unless the same is in writing and signed by (i) if such party is
Borrower, by Borrower, (ii) if such party is Administrative Agent or LC Issuer,
by such party, and (ii) if such party is a Lender, by such Lender or by
Administrative Agent on behalf of Lenders with the written consent of Majority
Lenders (which consent has already been given as to the termination of the Loan
Documents as provided in Section 10.9). Notwithstanding the foregoing or
anything to the contrary herein, Administrative Agent shall not, without the
prior consent of each individual Lender, execute and deliver on behalf of such
Lender any waiver or amendment which would: (1) waive any of the conditions
specified in Article IV (provided that Administrative Agent may in its
discretion withdraw any request it has made under Section 4.3(g)), (2) increase
the Maximum Facility Amount of such Lender or subject such Lender to any
additional obligations, (3) reduce any fees payable to such Lender hereunder, or
the principal of, or interest on, such Lender's Note, (4) change any date fixed
for any payment of any such fees, principal or interest, (5) amend the
definition herein of "Borrowing Base" or any of the terms used in that
definition, (6) amend the definition herein of "Majority Lenders" or otherwise
change the aggregate amount of Percentage Shares which is required for
Administrative Agent, Lenders or any of them to take any particular action under
the Loan Documents, (7) release Borrower from its obligation to pay such
Lender's Note or any Guarantor from its guaranty of such payment, or (8) release
any Collateral, except such releases relating to sales of property permitted
under Section 7.4.
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
other Lender Party, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after the
date hereof, (ii) there are no representations, warranties, covenants,
undertakings or agreements by any Lender Party as to the Loan Documents except
as expressly set out in this Agreement or in another Loan Document delivered on
or after the date hereof, (iv) no Lender Party has any fiduciary obligation
toward Borrower with respect to any Loan Document or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Borrower and the other Restricted Persons, on one hand, and each Lender
Party, on the other hand, is and shall be solely that of debtor and creditor,
respectively, (vi) no partnership or joint venture exists with respect to the
Loan Documents between any Restricted Person and any Lender Party, (vii)
Administrative Agent
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is not Borrower's Administrative Agent, but Administrative Agent for Lenders,
(viii) should an Event of Default or Default occur or exist, each Lender Party
will determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (ix) without limiting
any of the foregoing, Borrower is not relying upon any representation or
covenant by any Lender Party, or any representative thereof, and no such
representation or covenant has been made, that any Lender Party will, at the
time of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (x) all Lender Parties have relied upon the
truthfulness of the acknowledgments in this section in deciding to execute and
deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents that it will
acquire its Note for its own account in the ordinary course of its commercial
lending business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents subject to compliance with Sections
10.5(b) through (f), inclusive, and applicable law.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Lender Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity, covenant,
right, power or privilege. In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant
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shall be subject only to those exceptions which are expressly made applicable to
it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to the other Lender
Parties), and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by facsimile or other electronic transmission, by delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, to Borrower and Restricted Persons at the address of
Borrower specified on the signature pages hereto and to each Lender Party at its
address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of facsimile or other electronic transmission, upon
receipt, or (c) in the case of registered or certified United States mail, three
days after deposit in the mail; provided, however, that no Borrowing Notice or
Continuation/Conversion Notice shall become effective until actually received by
Administrative Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
30 days after any invoice or other statement or notice) pay: (i) 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 Loan Documents or any other document referred to herein or
therein, (ii all reasonable costs and expenses incurred by or on behalf of
Administrative Agent (including attorneys' fees, consultants' fees and
engineering fees, travel costs and miscellaneous expenses) in connection with
(1) the negotiation, preparation, execution and delivery of the Loan Documents,
and any and all consents, waivers or other documents or instruments relating
thereto, (2) the filing, recording, refiling and re-recording of any Loan
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 Loan
Document, (3) the borrowings hereunder and other action reasonably required in
the course of administration hereof, (4) monitoring or confirming (or
preparation or negotiation of any document related to) Borrower's compliance
with any covenants or conditions contained in this Agreement or in any Loan
Document, and (ii all reasonable costs and expenses incurred by or on behalf of
any Lender Party (including attorneys' fees, consultants' fees and accounting
fees) in connection with the defense or enforcement of any of the Loan Documents
(including this section) or the defense of any Lender Party's exercise of its
rights thereunder. In addition to the foregoing, until all Obligations have
been paid in full, Borrower will also pay or reimburse Administrative Agent for
all reasonable out-of-pocket costs and expenses of Administrative Agent or its
agents or employees in connection with the continuing administration of the
Loans and the related due diligence of Administrative Agent, including travel
and miscellaneous expenses and fees and expenses of Administrative Agent's
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outside counsel, reserve engineers and consultants engaged in connection with
the Loan Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party, upon
demand, from and against 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 such Lender Party
growing out of, resulting from or in any other way associated with any of the
Collateral, the Loan Documents and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein whether arising in contract or in tort or otherwise and including any
violation or noncompliance with any Environmental Laws by any Lender Party or
any other Person or any liabilities or duties of any Lender Party or any other
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 OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including
Borrower or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender Party" shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest;
Assignments.
(a) All Obligations which are incurred by two or more Restricted Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and permitted
assigns; provided, however, that no Restricted Person may assign or transfer any
of its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of all Lenders. Neither Borrower nor any
Affiliates of Borrower shall 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 Borrower
or any Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to all
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Lender Parties, such purchaser shall not be entitled to any rights of any Lender
under the Loan Documents unless and until Borrower or its Affiliates have
purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person unless the agreement between such Lender and such participant at all
times provides: (i) that such participation exists only as a result of the
agreement between such participant and such Lender and that such transfer does
not give such participant any right to vote as a Lender or any other direct
claims or rights against any Person other than such Lender, (ii) that such
participant is not entitled to payment from any Restricted Person under Sections
3.2 through 3.6 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender to take any action
under any Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which would
require the consent of all Lenders under subsection (a) of Section 10.1. No
Lender selling such a participation shall, as between the other parties hereto
and such Lender, be relieved of any of its obligations hereunder as a result of
the sale of such participation. Each Lender which sells any such participation
to any Person (other than an Affiliate of such Lender) shall give prompt notice
thereof to Administrative Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection, no Lender shall make any assignment or transfer of any kind of its
commitments or any of its rights under its Loans or under the Loan Documents,
except for assignments to an Eligible Transferee, or, subject to the provisions
of subsection (g) below, to an Affiliate and then only if such assignment is
made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing to the
assignor Lender hereunder and to the unused portion of the assignor
Lender's commitments, so that after such assignment is made the assignor
Lender shall have a fixed (and not a varying) Percentage Share in its Loans
and Note and be committed to make that Percentage Share of all future
Loans, the assignee shall have a fixed Percentage Share in such Loans and
Note and be committed to make that Percentage Share of all future Loans,
and the Percentage Share of the Maximum Loan Amount of both the assignor
and assignee shall equal or exceed $5,000,000.
(ii) The parties to each such assignment shall execute and deliver to
Administrative Agent, for its acceptance and recording in the "Register"
(as defined below in this section), an Assignment and Acceptance in the
form of Exhibit J, appropriately completed, together with the Note subject
to such assignment and a processing fee payable by such assignor Lender
(and not at Borrower's expense) to Administrative Agent of $3,500. Upon
such execution, delivery, and payment and upon the satisfaction of the
conditions set out in such Assignment and Acceptance, then (i) Borrower
shall issue new Notes to such assignor and assignee upon return of the old
Notes to Borrower, and (ii) as of the "Settlement Date" specified in such
Assignment and Acceptance the assignee thereunder shall be a party hereto
and a Lender hereunder and Administrative Agent shall thereupon deliver to
Borrower and each Lender a schedule showing the revised
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Percentage Shares of such assignor Lender and such assignee Lender and the
Percentage Shares of all other Lenders.
(iii) Each assignee Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, shall (to the extent it has not already done so) provide
Administrative Agent and Borrower with the "Prescribed Forms" referred to
in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any Lender
from assigning or pledging all or any portion of its Loans and 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; provided that (i) no such assignment or
pledge shall relieve such Lender from its obligations hereunder and (ii) all
related costs, fees and expenses incurred by such Lender in connection with such
assignment and the reassignment back to it, free of any interests of such
Federal Reserve Banks, shall be for the sole account of such Lender.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Administrative Agent and each other Lender Party that such assignee understands
and agrees to the terms hereof, including Article IX hereof.
(f) Administrative Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of
Lenders and the Percentage Shares of, and principal amount of the Loans owing
to, each Lender from time to time (in this section called the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and each Lender Party may treat each Person whose name is recorded
in the Register as a Lender Party hereunder for all purposes. The Register
shall be available for inspection by Borrower or any Lender Party at any
reasonable time and from time to time upon reasonable prior notice.
(g) Any Lender may assign or transfer its commitment or its rights under
its Loans or under the Loan Documents to (i) any Affiliate that is wholly-owned
direct or indirect subsidiary of such Lender or of any Person that wholly owns,
directly or indirectly, such Lender, or (ii) if such Lender is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by (A) the same investment advisor as any Lender or (B) any Affiliate
of such investment advisor that is a wholly-owned direct or indirect subsidiary
of any Person that wholly owns, directly or indirectly, such investment advisor,
subject to the following additional conditions:
(x) any right of such Lender assignor and such assignee to vote as a
Lender, or any other direct claims or rights against any other Persons,
shall be uniformly exercised or pursued in the manner that such Lender
assignor would have so exercised such vote, claim or right if it had not
made such assignment or transfer.
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(y) such assignee shall not be entitled to payment from any Restricted
Person under Sections 3.2 through 3.7 of amounts in excess of those payable
to such Lender assignor under such sections (determined without regard to
such assignment or transfer); and
(z) if such Lender assignor assigns or transfers to such assignee any of
such Lender's commitment, such assignee may become primarily liable for
such commitment, but such assignment or transfer shall not relieve or
release such Lender from such commitment.
Section 10.6. Confidentiality. Each Lender Party agrees (on behalf of
itself and each of its Affiliates, and each of its and their directors,
officers, agents, attorneys, employees, and representatives) that it (and each
of them) will take all reasonable steps to keep confidential any non-public
information supplied to it by or at the direction of any Restricted Person so
identified when delivered, provided, however, that this restriction shall not
apply to information which (a) has at the time in question entered the public
domain, (b) is required to be disclosed by Law (whether valid or invalid) of any
Tribunal, (c) is disclosed to any Lender Party's Affiliates, auditors,
attorneys, or agents, (d) is furnished to any other Lender Party or to any
purchaser or prospective purchaser of participations or other interests in any
Loan or Loan Document (provided each such purchaser or prospective purchaser
first agrees to hold such information in confidence on the terms provided in
this section), or (d) is disclosed in the course of enforcing its rights and
remedies during the existence of an Event of Default.
Section 10.7. Governing Law; Submission to Process. EXCEPT TO THE EXTENT
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER
HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT
TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND
WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE
SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE
FOREGOING, BORROWER HEREBY IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 80 STATE STREET, ALBANY, NEW YORK 12207, AS AGENT OF BORROWER
TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST BORROWER WITH RESPECT TO ANY
SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY
REGISTERED MAIL TO BORROWER AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE OF
BORROWER TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH
69
<PAGE>
PROCESS AS AFORESAID. BORROWER SHALL FURNISH TO LENDER PARTIES A CONSENT OF
CORPORATION SERVICE COMPANY AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE
DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER PARTIES
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF LENDER PARTIES TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION. IF FOR ANY REASON CORPORATION SERVICE COMPANY SHALL RESIGN
OR OTHERWISE CEASE TO ACT AS BORROWER'S AGENT, BORROWER HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO
ADMINISTRATIVE AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW
AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CORPORATION SERVICE COMPANY FOR ALL
PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO AGENT THE WRITTEN CONSENT (IN FORM
AND SUBSTANCE SATISFACTORY TO ADMINISTRATIVE AGENT) OF SUCH NEW AGENT AGREEING
TO SERVE IN SUCH CAPACITY.
Section 10.8. Limitation on Interest. Lender Parties, Restricted Persons
and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the maximum amount of interest permitted to be charged
by applicable Law from time to time in effect. Neither any Restricted Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable Law from time
to time in effect, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.
Section 10.9. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing or outstanding
elect in a written notice delivered to Administrative Agent to terminate this
Agreement. Upon receipt by Administrative Agent of such a notice, if no
Obligations are then owing or outstanding this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any
Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Administrative
Agent shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents. Administrative Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 10.10. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
70
<PAGE>
Section 10.11. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. TO THE
EXTENT PERMITTED BY LAW, LENDER PARTIES AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF SUCH PERSONS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDER PARTIES' ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
BORROWER AND EACH LENDER PARTY HEREBY FURTHER (A) 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 DAMAGES," AS DEFINED BELOW, (B) 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 FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
71
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
PLAINS MARKETING & TRANSPORTATION INC.,
Borrower
By: /s/ Phil Kramer
-----------------------------
Name: Phil Kramer
Title: Vice President
Address:
500 Dallas Street
Suite 700
Houston, Texas 77002
Attention: Phil Kramer
Telephone: (713) 654-1414
Fax: (713) 654-1523
S-1
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BANKBOSTON, N.A.,
Administrative Agent,
LC Issuer and Lender
By: /s/ Terrence Ronan
---------------------
Name: Terrence Ronan
Title: Vice President
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Terrence Ronan
Mail Code: 01-08-04
Telephone: (617) 434-5472
Fax: (617) 434-3652
BANCBOSTON SECURITIES INC.,
Syndication Agent
By: /s/ John R. Barlow
---------------------
Name: John R. Barlow
Title: Vice President
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Mike Hannon
Mail Code: 01-09-03
Telephone: (617) 434-1649
Fax: (617) 434-0382
S-2
<PAGE>
ING (U.S.) CAPITAL CORPORATION,
Documentation Agent and Lender
By: /s/ Christopher R. Wagner
----------------------------
Christopher R. Wagner
Senior Vice President
Address:
135 East 57th Street
New York, New York 10022
Attention: Christopher Wagner
Telephone: (212) 409-1717
Fax: (212) 832-3616
S-3
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Irene C. Rummel
----------------------
Name: Irene C. Rummel
Title: Vice President
Address:
333 Clay St., Suite 4550
Houston, Texas 77002
Attention: Irene Rummel
Telephone: (713) 651-4921
Fax: (713) 651-4801
S-4
<PAGE>
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
----------------------
Name: Annie Chin Tat
Title: Senior Vice President
Address:
565 Fifth Avenue
New York, New York 10017
Attention: Annie Chin Tat
Telephone: (212) 450-0871
Fax: (212) 557-9460
With Copy to:
1200 Smith Street
Houston, Texas 77002
Attention: Richard C. Butler
Telephone: (713) 651-1870
Fax: (713) 651-9714
S-5
<PAGE>
DEN NORSKE BANK ASA
By: /s/ Byron L. Cooley
----------------------
Name: Byron L. Cooley
Title: Senior Vice President
By: /s/ William V. Moyer
-----------------------
Name: William V. Moyer
Title: First Vice President
Address:
Three Allen Center
333 Clay Street, Suite 4890
Houston, Texas 77002
Attention: Byron L. Cooley
Telephone: (713) 844-9258
Fax: (713) 757-1167
S-6
<PAGE>
COMERICA BANK - TEXAS
By:/s/ James Kimble
-------------------
Name: James Kimble
Title: Vice President
Address:
910 Louisiana, Suite 410
Houston, Texas 77002
Attention: Jim Kimble
Telephone: (713) 220-5614
Fax: (713) 220-5650
S-7
<PAGE>
NATIONSBANK, N.A.
By: /s/ James R. Allred
----------------------
Name: James R. Allred
Title: Senior Vice President
Address:
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention: James Allred
Telephone: (713) 247-6327
Fax: (713) 247-6432
S-8
<PAGE>
THE SANWA BANK LIMITED
By: /s/ C. Lawrence Murphy
-------------------------
C. Lawrence Murphy
Senior Vice President
Address:
55 East 52nd Street
New York, New York 10055
Attention: Kentaro Yamagishi
Telephone: (212) 339-6207
Fax: (212) 754-2360
S-9
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Thierry Namuroy
----------------------
Name: Thierry Namuroy
Title: Vice President
Address:
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Thierry Namuroy
Telephone: (713) 759-6316
Fax: (713) 650-0824
S-10
<PAGE>
THE FUJI BANK, LIMITED
By: /s/ Teiji Teramoto
---------------------
Name: Teiji Teramoto
Title: Vice President & Manager
Address:
1221 McKinney, Suite 4100
Houston, Texas 77010
Attention: Mark Polasek
Telephone: (713) 650-7863
Fax: (713) 759-0717
S-11
<PAGE>
BHF-BANK AKTIENGSELLSCHAFT
By: /s/ JOHN COUSSA
-----------------------------------
Name: John Coussa
Title: Vice President
By: /s/ HUUB KOTS
------------------------------------
Name: Huub Kots
Title: Assistant Vice President
Address:
590 Madison Avenue
New York, New York 10022
Attention: Robert Novak
Telephone: (212) 756-5976
Fax: (212) 756-5536
S-12
<PAGE>
HIBERNIA NATIONAL BANK
By: /s/ Tammy Angelety
-------------------------------
Name: Tammy Angelety
Title: Assistant Vice President
Address:
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Tammy Angelety
Telephone: (504) 533-2045
Fax: (504) 533-5434
S-13
<PAGE>
MEESPIERSON CAPITAL CORP.
By: /s/ Darrell W. Holley
------------------------------
Name: Darrell W. Holley
Title: Senior Vice President
By: /s/ Deirdre M. Sanborn
-------------------------------
Name: Deirdre M. Sanborn
Title: Assistant Vice President
Address:
Three Stamford Plaza
301 Tresser Blvd.
Stamford, Connecticut 06901-3239
Attention: Darrell W. Holley
Telephone: (214) 953-9307
Fax: (214) 154-5981
S-14
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Monte E. Deckerd
-----------------------------
Name: Monte E. Deckerd
Title: Vice President
Address:
918 17th Street
Denver, Colorado 80202
Attention: Monte E. Deckerd
Telephone: (303) 585-4212
Fax: (303) 585-4362
S-15
<PAGE>
WELLS FARGO BANK (TEXAS)
NATIONAL ASSOCIATION
By: /s/ Ann M. Rhoads
----------------------------
Ann M. Rhoads
Vice President
Address:
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Ann Rhoads
Telephone: (713) 250-4035
Fax: (713) 850-7912
S-16
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------
PLAINS RESOURCES INC.
and
ING (U.S.) CAPITAL CORPORATION,
as Agent
and
CERTAIN INSTITUTIONS
as Lenders
--------------------------------------------
$225,000,000
May 22, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Page
Section 1. Definitions and Accounting Matters...................... 1
1.01 Certain Defined Terms................................... 1
1.02 Oil and Gas Terms....................................... 15
1.03 Accounting Terms and Determinations..................... 16
1.04 Types of Loans.......................................... 16
Section 2. The Commitment.......................................... 16
2.01 Loans................................................... 16
2.02 Borrowings.............................................. 17
2.03 Changes of Commitment................................... 17
2.04 Commitment and Agency Fees.............................. 18
2.05 Lending Offices......................................... 18
2.06 Notes................................................... 18
2.07 Prepayments and Conversions or Continuations of Loans... 19
2.08 Borrowing Base.......................................... 19
2.09 Letters of Credit....................................... 21
2.10 Requesting Letters of Credit............................ 22
2.11 Reimbursement and Participations........................ 22
2.12 Letter of Credit Fees................................... 24
2.13 No Duty to Inquire...................................... 24
2.14 LC Collateral........................................... 25
Section 3. Payments of Principal and Interest...................... 26
3.01 Repayment of Term Loans................................. 26
3.02 Interest................................................ 26
Section 4. Payments; Computations; Etc............................. 27
4.01 Payments................................................ 27
4.02 Computations............................................ 28
4.03 Minimum Amounts......................................... 28
4.04 Certain Notices......................................... 29
4.05 Set-off................................................. 29
Section 5. Yield Protection, Etc................................... 30
5.01 Additional Costs........................................ 30
5.02 Limitation on Types of Loans............................ 32
5.03 Illegality.............................................. 32
5.04 Treatment of Affected Loans............................. 32
5.05 Compensation............................................ 33
i
<PAGE>
Section 6. Conditions Precedent.................................... 34
6.01 Initial Loan............................................ 34
6.02 Initial and Subsequent Loans............................ 35
Section 7. Representations and Warranties.......................... 36
7.01 Corporate Existence..................................... 36
7.02 Financial Condition..................................... 36
7.03 Litigation.............................................. 37
7.04 No Breach............................................... 37
7.05 Due Execution........................................... 37
7.06 Approvals............................................... 37
7.07 Use of Loans............................................ 37
7.08 ERISA................................................... 37
7.09 Taxes................................................... 38
7.10 Investment Company Act.................................. 38
7.11 Public Utility Holding Company Act...................... 38
7.12 Titles to Oil and Gas Properties........................ 38
7.13 Foreign Assets Control Regulations, Etc................. 39
7.14 Gas Imbalances.......................................... 39
7.15 Rate Filings............................................ 39
7.16 Qualification to Hold Federal Oil and Gas Leases........ 40
7.17 Drilling and Operations................................. 40
7.18 Payments by Purchasers of Production.................... 40
7.19 Credit Agreements....................................... 40
7.20 Hazardous Materials..................................... 41
7.21 Subsidiaries and Partnerships........................... 43
7.22 True and Complete Disclosure............................ 43
7.23 No Election to be Treated as a Utility.................. 44
Section 8. Covenants of the Company................................ 44
8.01 Financial Statements.................................... 44
8.02 Litigation.............................................. 47
8.03 Corporate Existence, Etc................................ 47
8.04 Engineering Reports..................................... 47
8.05 Acquisition of Oil and Gas Properties................... 48
8.06 Insurance............................................... 50
8.07 Prohibition of Fundamental Changes...................... 51
8.08 Limitation on Liens..................................... 52
8.09 Indebtedness............................................ 53
8.10 Investments............................................. 54
8.11 Dividend Payments....................................... 55
8.12 Tangible Net Worth...................................... 56
8.13 Current Ratio........................................... 56
8.14 Subordinated Indebtedness............................... 56
8.15 Lines of Business....................................... 57
8.16 Transactions with Affiliates............................ 57
ii
<PAGE>
8.17 Use of Proceeds......................................... 57
8.18 Certain Obligations Respecting Subsidiaries............. 57
8.19 Additional Subsidiary Guarantors........................ 58
8.20 Environmental Matters; Environmental Reviews............ 58
8.21 Environmental Indemnification........................... 59
8.22 Environmental Certification............................. 59
8.23 Modifications of Certain Documents...................... 59
8.24 Gas Imbalances.......................................... 59
8.25 Sale of Oil and Gas Properties.......................... 60
8.26 Partnership Units; New Partnerships..................... 60
8.27 Amendments of Partnership Agreements.................... 60
8.28 Notice to Purchasers of Production...................... 61
8.29 Restrictions on PMTI.................................... 61
8.30 Lien Releases........................................... 61
8.31 Additional Security..................................... 61
8.32 Post Closing Curative................................... 62
8.33 Hedging Contracts....................................... 62
8.34 Transactions with PMCT.................................. 63
8.35 Unrestricted Subsidiaries............................... 63
Section 9. Events of Default....................................... 64
Section 10. Agent................................................... 67
10.01 Appointment and Authority............................... 67
10.02 Exculpation, Agent's Reliance, Etc...................... 67
10.03 Bank Parties' Credit Decisions.......................... 68
10.04 Indemnification......................................... 68
10.05 Rights as Lender........................................ 68
10.06 Sharing of Set-Offs and Other Payments.................. 69
10.07 Investments............................................. 69
10.08 Benefit of Section 10................................... 69
10.09 Resignation............................................. 69
Section 11. Miscellaneous........................................... 70
11.01 Waiver.................................................. 70
11.02 Notices................................................. 70
11.03 Expenses, Etc........................................... 70
11.04 Amendments, Etc......................................... 72
11.05 Successors and Assigns.................................. 72
11.06 Assignments and Participation........................... 73
11.07 Survival................................................ 74
11.08 Captions................................................ 74
11.09 Counterparts............................................ 74
11.10 Governing Law; Submission to Jurisdiction............... 75
11.11 Waiver of Jury Trial, Punitive Damages, Etc............. 75
11.12 Rate of Interest........................................ 76
iii
<PAGE>
11.13 Release of Liens........................................ 77
11.14 Confidentiality......................................... 77
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
Exhibit G - Standby Letter of Credit Application and Agreement
iv
<PAGE>
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated
as of May 22, 1998, by and among PLAINS RESOURCES INC., a corporation duly
organized and validly existing under the laws of the state of Delaware (the
"Company"), ING (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 certain of the Lenders entered into that
certain Third Amended and Restated Credit Agreement dated as of April 11, 1996,
as amended (the "Original Agreement"), providing for extensions of credit by
such certain Lenders to the Company up to the amount of $165,000,000; 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 $225,000,000, 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 Bank Parties (or in favor of
Agent for the benefit of Bank Parties) 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):
"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,
1
<PAGE>
"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, and with respect to LC Issuer, the office, branch, or agency through
which it issues Letters of Credit.
"Applicable Margin" shall mean (i) with respect to Base Rate Loans zero
percent (0%) per annum and (ii) with respect to Eurodollar Loans, one and three-
eighths percent (1.375%) per annum.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code, as amended from
time to time.
"Bank Parties" means Agent, LC Issuer, and all Lenders.
"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.
"Basic Documents" shall mean, collectively, this Agreement, the Notes, the
Letters of Credit, the LC Applications, 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,
2
<PAGE>
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
$225,000,000, as the same may be reduced at any time or from time to time
pursuant to Sections 2.03(a), (b) or (c).
"Company" shall have the meaning assigned to such term in the first
paragraph of this Agreement.
"Company Reserve Reports" shall have the meaning assigned to such term in
Section 8.04(b) hereof.
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Continue", "Continuation" and "Continued" shall refer to the continuation
pursuant to Section 2.07(a) hereof of a Eurodollar Loan from one Interest Period
to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.07(a) hereof of Base Rate Loans into Eurodollar Loans or
of Eurodollar Loans into Base Rate Loans, which may be accompanied by the
transfer by a Lender (at its sole discretion) of a Loan from one Applicable
Lending Office to another.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dividend Payment" shall mean dividends (in cash, Property or obligations)
on, or other payments or distributions on account of, or the setting apart of
money for a sinking or other analogous fund for, or the purchase, redemption,
retirement or other acquisition of, any shares of any class of stock of the
Company, but excluding (i) dividends payable solely in shares of common
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or preferred stock of the Company, and (ii) dividends from a Subsidiary of the
Company to the Company.
"Dollars" and "$" 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 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
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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.
"Facility Usage" means, at the time in question, the aggregate amount of
outstanding Loans and existing LC Obligations at such time.
"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.
"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
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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, any Lender or an Affiliate thereof, 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, any Lender or an Affiliate thereof.
"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 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 Bank
Parties (or Agent for the benefit of Bank Parties) pursuant to the Security
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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.
"ING Capital" means ING (U.S.) Capital Corporation, a Delaware corporation,
and its successors and assigns.
"Initial Reserve Reports" shall mean the Independent Reserve Reports dated
(i) February 23, 1998 by Ryder Scott Company, (ii) February 25, 1998 by H.J.
Gruy and Associates, Inc., and (iii) February 25, 1998 by Netherland, Sewell &
Associates, Inc., each as of December 31, 1997, and the Independent Reserve
Report dated February 12, 1998 by System Technology Associates, Inc., as of
January 1, 1998.
"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 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
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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.
"LC Application" means any application for a Letter of Credit hereunder
made by the Company to LC Issuer.
"LC Collateral" has the meaning given it in Section 2.14(a).
"LC Issuer" means ING Capital in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity. Agent may, with the
consent of the Company and the Lender in question, appoint any Lender hereunder
as the LC Issuer in place of or in addition to ING Capital.
"LC Obligations" means, at the time in question, the sum of all Matured LC
Obligations plus the Maximum Drawing Amount.
"Lenders" means each signatory hereto (other than the Company), including
ING (U.S.) Capital Corporation in its capacity as a Lender hereunder rather than
as Agent or LC Issuer, and the successors of each as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer hereunder
at the application of the Company.
"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 or
greater than fifty-one percent (51%).
"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
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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 security provided to Bank Parties
(or Agent for the benefit of Bank Parties) 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.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Revolving Credit Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which LC Issuer might be called upon to advance under all
Letters of Credit then outstanding.
"Maximum Rate" shall mean, with respect to each Bank Party, 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 such Bank Party.
"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 any
Bank Party under this Agreement, the Notes or any other Basic Document, whether
for principal, interest, fees, expenses or otherwise, including all LC
Obligations.
"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,
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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
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.
"PAAI" shall mean Plains All American Inc., a Delaware corporation and a
Wholly-Owned Subsidiary of the Company.
"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.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"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 Lender Schedule attached to this
Agreement, as from time to time amended or supplemented, 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 (i) the sum of (A) the unpaid principal
balance of such Lender's Loans at the time in question, plus (B) Matured LC
Obligations which such Lender has funded pursuant to Section 2.11(c), plus (C)
the portion of the Maximum Drawing Amount which such Lender might be obligated
to fund under Section 2.11(c), divided by (ii) the sum of (I) the
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aggregate unpaid principal balance of all Loans at such time plus (II) the
aggregate amount of LC Obligations outstanding 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 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.
"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).
"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.
"PMTI" shall mean Plains Marketing & Transportation, Inc., a Delaware
corporation and a Wholly-Owned Subsidiary of the Company.
"PMTI Credit Facility" shall mean: (i) initially, the uncommitted secured
demand transactional line of credit facility, in an amount not to exceed
$90,000,000, dated August 23, 1995, as heretofore amended, among BankBoston,
N.A. (f/k/a The First National Bank of Boston), individually and as agent, ING
Capital, the other lenders named therein and PMTI, and (ii) any secured credit
facility refinancing the facility described in clause (i) above, in an amount
not to exceed $175,000,000, among PMTI, BankBoston, N.A., as agent, and the co-
agents and lenders named therein, constituting "Permitted Marketing
Obligations", "Permitted Operating Obligations", or "Permitted Contango Market
Transaction Obligations", as such terms are defined in the Senior Subordinated
Indenture, in each case together with the security documents and other documents
and agreements executed in connection with such facilities.
"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
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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 July, October,
January and April in each year, the first of which shall be July 1, 1998.
"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 Bank Party 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
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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) July 1,
2000 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, any Bank Party 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 (i) that certain Indenture dated
as of March 15, 1996 among the Company, Subsidiary Guarantors and Chase Bank of
Texas, National Association (f/k/a Texas Commerce Bank National Association), as
Trustee, and (ii) that certain Indenture dated as of July 21, 1997 among the
Company, Subsidiary Guarantors and Chase Bank of Texas, National Association
(f/k/a Texas Commerce Bank National Association), as Trustee, in each case as
amended or modified from time to time in compliance with Section 8.23.
"Senior Subordinated Notes" shall mean (i) 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 dated as of March 15, 1996
and (ii) the 10 1/4% senior subordinated notes due 2006 in the aggregate
principal amount of $50,000,000 issued by the Company pursuant to the Senior
Subordinated Indenture dated as of July 21, 1997.
"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
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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. Notwithstanding the foregoing, pursuant to
Section 8.35 no Unrestricted Subsidiary shall be deemed a "Subsidiary" of the
Company for purposes of this Agreement and each other Basic Document.
"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
Bank Parties (or Agent for the benefit of Bank Parties), as the same shall be
amended, modified and supplemented and in effect from time to time. "Subsidiary
Guaranties" shall mean, collectively, all Subsidiary Guaranties.
"Subsidiary Guarantor" shall mean each of the following Subsidiaries of the
Company: Stocker Resources, L.P., Calumet Florida, Inc., Plains Illinois Inc.,
PMTI, Plains Resources International Inc., Plains Terminal & Transfer
Corporation, PLX Crude Lines Inc., Stocker Resources, Inc. and PLX Ingleside
Inc.
"Supermajority Lenders" shall mean Lenders having Percentage Shares equal
to or greater than sixty-six and two-thirds percent (66 2/3%).
"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
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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, 1997.
"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.
"Unrestricted Subsidiary" shall mean PAAI and each of its Subsidiaries,
whether now existing or hereafter formed or acquired.
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 Bank Parties
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 preparation of the latest financial statements furnished to
Bank Parties 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 Facility Usage be in excess of the Borrowing
Base as then in effect. Subject to the terms of this Agreement, during such
period the Company may borrow, repay and reborrow by means of Base Rate Loans
and Eurodollar Loans and may Convert
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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
six 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
Facility Usage shall not exceed the 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 six 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 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
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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 the 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 three-eighths of one percent (0.375%). Accrued commitment fees (including
commitment fees accruing under the Original Agreement during the period from
April 1, 1998 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, extension and increase of, but not in extinguishment or novation of,
those certain Promissory Notes dated March 7, 1997 in the original aggregate
principal amount of $165,000,000 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.
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(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 Bank Parties under Section 10
hereof, in the event that any Event of Default shall have occurred and be
continuing, Majority Lenders may suspend the 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 Facility Usage
shall be less than or equal to the Borrowing Base then in effect (unless the
Company shall have provided additional collateral acceptable to Majority Lenders
in their sole discretion) (or, if the Revolving Credit Loans have been paid in
full, deliver LC Collateral to LC Issuer as required under Section 2.14(a)). and
(ii) the Facility Usage 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 $225,000,000.
(b) Supermajority Lenders shall endeavor on each May 1 and October 1,
commencing on October 1, 1998, and may at any time upon the occurrence of any
event or change which in the reasonable judgment of such Supermajority 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.
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(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 Bank Parties (or Agent for the benefit of Bank Parties)
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 Bank Parties) pursuant to the Security Documents sold in such detail
as 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) Bank Parties (or Agent for the benefit of
Bank Parties) 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, Supermajority 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 Supermajority
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, Supermajority Lenders shall adjust the reserve
volumes and economics as required by such respective practices and standards of
such Lenders. Supermajority Lenders shall evaluate the proved developed
producing reserves and proved developed nonproducing reserves; provided that
Supermajority 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, Supermajority 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 Bank Parties
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 Supermajority 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
Supermajority Lenders in accordance with their respective current oil and gas
lending criteria. Supermajority Lenders' evaluation may consider, but shall not
be limited to the following: (i) the Properties
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included in the Engineering Reports which are Properties mortgaged to Bank
Parties (or Agent for the benefit of Bank Parties) pursuant to the Security
Documents, (ii) the degree of title assurance and Lien priority concerning the
Properties mortgaged to Bank Parties (or Agent for the benefit of Bank Parties)
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 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 Supermajority 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 Letters of Credit. Subject to the terms and conditions hereof, the
Company may during the Revolving Credit Commitment Period request LC Issuer to
issue one or more Letters of Credit, provided that, after taking such Letter of
Credit into account:
(a) the Facility Usage does not exceed the Borrowing Base at such
time; and
(b) the aggregate amount of LC Obligations at such time does not
exceed fifteen percent (15%) of the Borrowing Base at such time; and
(c) the expiration date of such Letter of Credit is prior to the end
of the Revolving Credit Commitment Period; and
(d) such Letter of Credit is to be used for general business purposes
of the Company or its Subsidiaries;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Indebtedness of any Person other than
Indebtedness of any Obligor;
(f) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will
not subject LC Issuer to any cost which is not reimbursable hereunder;
(g) the form and terms of such Letter of Credit are acceptable to LC
Issuer in its sole and reasonable discretion; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
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LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.10 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. The Company and Bank Parties
hereby acknowledge and agree that (i) any letters of credit issued under the
Original Agreement and outstanding as of the Closing Date, including without
limitation that certain Letter of Credit No. 672917 dated August 23, 1995,
issued by LC Issuer for the benefit of BankBoston, N.A. (f/k/a The First
National Bank of Boston), as agent, for the account of the Company, in the face
amount of $1,000,000, shall be deemed to have been issued hereunder and,
together with any related applications and agreements executed in connection
therewith, are Basic Documents, and (ii) the reimbursement obligations of the
Company relating thereto constitute LC Obligations hereunder, secured by the
Security Documents, including without limitation the Subsidiary Guaranties.
2.10 Requesting Letters of Credit. The Company must make written
application for any Letter of Credit at least three Business Days before the
date on which the Company desires for LC Issuer to issue such Letter of Credit.
By making any such written application the Company shall be deemed to have
represented and warranted that the LC Conditions described in Section 2.09 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a Letter of Credit must be made in writing in the form and
substance of Exhibit G, the terms and provisions of which are hereby
incorporated herein by reference (or in such other form as may mutually be
agreed upon by LC Issuer and the Company). Two Business Days after the LC
Conditions for a Letter of Credit have been met as described in Section 2.09 (or
if LC Issuer otherwise desires to issue such Letter of Credit), LC Issuer will
issue such Letter of Credit at LC Issuer's office in New York, New York. If any
provisions of any LC Application conflict with any provisions of this Agreement,
the provisions of this Agreement shall govern and control.
2.11 Reimbursement and Participations.
(a) Reimbursement by the Company. Each Matured LC Obligation shall
constitute a loan by LC Issuer to the Company. The Company promises to pay to
LC Issuer, or to LC Issuer's order, on demand, the full amount of each Matured
LC Obligation, unless funded under Section 2.11(b) hereof, together with
interest thereon at the Post-Default Rate.
(b) Revolving Credit Loans Upon Letter of Credit Drawings. If the
beneficiary of any Letter of Credit makes a draft or other demand for payment
thereunder, then the Company shall be deemed to have requested Lenders to make
Revolving Credit Loans to the Company on the date such draft or demand is to be
paid in the amount of such draft or demand. If all conditions precedent to such
Revolving Credit Loans shall be satisfied as of the date on which such Revolving
Credit Loans are to be made, Lenders shall make such Revolving Credit Loans
pursuant to Section 2.01(a) concurrently with LC Issuer's payment of such draft
or demand, and such Revolving Credit Loans shall be immediately used by LC
Issuer to repay the amount of the resulting Matured LC Obligation. For the
purposes of the first sentence of Section 2.01(a) the amount of such Revolving
Credit Loans shall be considered but the amount of the Matured LC Obligation to
be concurrently paid by such Revolving Credit Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and -- to induce LC Issuer to issue Letters of
Credit hereunder -- each Lender
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irrevocably agrees to accept and purchase and hereby accepts and purchases from
LC Issuer, 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 LC Issuer's obligations and rights under each Letter of Credit issued
hereunder and the amount of each Matured LC Obligation paid by LC Issuer
thereunder. Each Lender unconditionally and irrevocably agrees with LC Issuer
that, if a Matured LC Obligation is paid under any Letter of Credit for which LC
Issuer is not reimbursed in full by the Company in accordance with the terms of
this Agreement and the related LC Application (including any reimbursement by
means of concurrent Revolving Credit Loans or by the application of LC
Collateral), such Lender shall (in all circumstances and without set-off or
counterclaim) pay to LC Issuer on demand, in immediately available funds at LC
Issuer's address for notices hereunder, such Lender's Percentage Share of such
Matured LC Obligation (or any portion thereof which has not been reimbursed by
the Company). Each Lender's obligation to pay LC Issuer pursuant to the terms of
this subsection is irrevocable and unconditional. If any amount required to be
paid by any Lender to LC Issuer pursuant to this subsection is paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer 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. If any amount required to be paid by any Lender to LC Issuer
pursuant to this subsection is not paid by such Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer 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.
(d) Distributions to Participants. Whenever LC Issuer has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment
of such Matured LC Obligation or any payment of interest thereon (whether
directly from the Company or by application of LC Collateral or otherwise, and
excluding only interest for any period prior to LC Issuer's demand that such
Lender make such payment of its Percentage Share), LC Issuer will distribute to
such Lender its Percentage Share of the amounts so received by LC Issuer;
provided, however, that if any such payment received by LC Issuer must
thereafter be returned by LC Issuer, such Lender shall return to LC Issuer the
portion thereof which LC Issuer has previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail the
amounts owing under this section, submitted by LC Issuer to the Company or any
Lender from time to time, shall be conclusive, absent demonstrable error, as to
the amounts thereof.
2.12 Letter of Credit Fees. In consideration of LC Issuer's issuance of
any Letter of Credit, the Company agrees to pay to Agent, for the account of all
Lenders in accordance with their respective Percentage Shares, a letter of
credit issuance fee at a rate equal to one and one-quarter percent (1.25%) per
annum, and to Agent, for its own account, a letter of credit fronting fee at a
rate equal to one-eighth percent (0.125%) per annum; provided that the aggregate
amount of such fees shall not be less than $500 as to any Letter of Credit.
Each such fee will be calculated based on the term and face amount of such
Letter of Credit and the above applicable rate and will be payable on each
Quarterly Date in arrears. In addition, The Company will pay to LC Issuer a
minimum administrative issuance fee of $100 for each Letter of Credit and an
administrative drawing fee of $300 upon any drawing under a Letter of Credit.
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2.13 No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to accept
and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance of
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. The Company agrees to hold LC Issuer
and each other Bank Party harmless and indemnified against any liability or
claim in connection with or arising out of the subject matter of this section,
WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ANY BANK PARTY, provided only that no Bank Party shall
be entitled to indemnification for that portion, if any, of any liability or
claim which is proximately caused by its own individual gross negligence or
willful misconduct.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by 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 or other governmental action having
jurisdiction over LC Issuer, if any extension of the maturity or time for
presentation of drafts or any other modification of the terms of any Letter of
Credit is made at the request of the Company or any Subsidiary, or if the amount
of any Letter of Credit is increased at the request of the Company or any
Subsidiary, this Agreement shall be binding upon Obligors with respect to such
Letter of Credit as so extended, increased or otherwise modified, with respect
to drafts and property covered thereby, and with respect to any action taken by
LC Issuer, LC Issuer's correspondents, or any Bank Party in accordance with such
extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and
payment by LC Issuer to any purported transferee or transferees as determined by
LC Issuer is hereby authorized and approved, and the Company further agrees to
hold LC Issuer and each other Bank Party harmless and indemnified against any
liability or claim in connection with or arising out of the foregoing, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY BANK PARTY, provided only that no Bank Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct.
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2.14 LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.07(b), the outstanding LC
Obligations will exceed the Borrowing Base, then in addition to prepayment of
the entire principal balance of the Revolving Credit Loans, the Company will
immediately pay to LC Issuer an amount equal to such excess. LC Issuer will
hold such amount as security for the remaining LC Obligations (all such amounts
held as security for LC Obligations being herein collectively called "LC
Collateral") until such LC Obligations become Matured LC Obligations, at which
time such LC Collateral may be applied to such Matured LC Obligations. So long
as no Default has occurred and is continuing, if such LC Obligations shall
expire or otherwise terminate without a drawing or other demand for payment, or
if the Borrowing Base shall increase such that the Borrowing Base exceeds the
Facility Usage, LC Collateral in an amount equal to such expired or terminated
and undrawn LC Obligation shall be returned to the Company. Neither this
subsection nor the following subsection shall, however, limit or impair any
rights which LC Issuer may have under any other document or agreement relating
to any Letter of Credit or LC Obligation, including any LC Application, or any
rights which any Bank Party may have to otherwise apply any payments by the
Company and any LC Collateral under Section 4.01.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 9, then all LC
Obligations shall become immediately due and payable without regard to whether
or not actual drawings or payments on the Letters of Credit have occurred, and
the Company shall be obligated to pay to LC Issuer immediately an amount equal
to the aggregate LC Obligations which are then outstanding. All amounts so paid
shall first be applied to Matured LC Obligations and then held by LC Issuer as
LC Collateral until such LC Obligations become Matured LC Obligations, at which
time such LC Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such investments as LC Issuer may
choose in its sole discretion. All interest on such investments shall be
reinvested or applied to Matured LC Obligations. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of the Company's reimbursement obligations
in connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. The Company hereby assigns and grants to LC Issuer a
continuing security interest in all LC Collateral paid by it to LC Issuer, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, the
Notes, and the other Basic Documents, and the Company agrees that such LC
Collateral and investments shall be subject to all of the terms and conditions
of the Security Documents. The Company further agrees that LC Issuer shall have
all of the rights and remedies of a secured party under the Uniform Commercial
Code as adopted in the State of New York with respect to such security interest
and that an Event of Default under this Agreement shall constitute a default for
purposes of such security interest.
(d) Payment of LC Collateral. When the Company is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC Issuer
may without notice to the
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Company or any other Obligor provide such LC Collateral (whether by application
of proceeds of other Collateral, by transfers from other accounts maintained
with LC Issuer, or otherwise) using any available funds of the Company or any
other Person also liable to make such payments. Any such amounts which are
required to be provided as LC Collateral and which are not provided on the date
required shall, for purposes of each Security Document, be considered past due
Obligations owing hereunder, and LC Issuer is hereby authorized to exercise its
respective rights under each Security Document to obtain such amounts.
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 October 1, 2000, with the
final installment being due and payable on or before July 1, 2005. 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 July 1, 2005. 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:
(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 each Bank
Party (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
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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 Bank Party 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 Bank Party 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 Bank Party (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 the Obligations, Agent shall distribute
all money so collected or received, and Bank Parties 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 Bank Parties 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 each Bank
Party that is owed Obligations under such clause, in proportion to all amounts
owed to Agent and
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all Bank Parties that are owed Obligations under such clause; provided that if
any Lender then owes payments to LC Issuer for the purchase of a participation
under Section 2.11(c) hereof, any amounts otherwise distributable under this
section to such Lender shall be deemed to belong to LC Issuer, to the extent of
such unpaid payments, and Agent shall apply such amounts to make such unpaid
payments rather than distribute such amounts to such Lender.
(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 day) 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 Bank Parties of
terminations or reductions of the Commitment, of borrowings, Conversions,
Continuations and optional 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 each Bank Party 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:
Number of Business
Notice Days Prior
------ ------------------
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
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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 Bank
Party may otherwise have, any Bank Party 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 Bank Party 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 Bank Party's failure to give such notice shall not affect the validity
thereof.
Section 5. Yield Protection, Etc.
5.01 Additional Costs. (a) The Company shall pay to each Bank Party from
time to time such amounts as such Bank Party may determine to be necessary to
compensate it for any costs of such Bank Party which such Bank Party 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 Bank Party hereunder in respect of any of such Loans
or such obligation, or the issuance of or participation in Letters of Credit
(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
Bank Party under this agreement or its Note in respect of any of such Loans
or Letters of Credit (other than taxes imposed on or measured by the
overall net income of such Bank Party 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 Bank Party (including any of such Loans or any
deposits referred to in the definition of "Eurodollar Rate" in Section 1.01
hereof), or the issuance of or participation in Letters of Credit, or any
commitment of such Bank Party (including the Commitment of such Bank Party
hereunder); or
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(iii) imposes any other condition affecting this Agreement or the
Notes (or any of such extensions of credit or liabilities), or the issuance
of or participation in Letters of Credit, or the Commitment.
If any Bank Party requests compensation from the Company under this Section
5.01(a) with respect to Eurodollar Loans, the Company may, by notice to such
Bank Party, suspend the obligation of such Bank Party 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 Bank Party either (i)
incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such Bank
Party which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank Party 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 Bank Party so
elects by notice to the Company, the obligation of such Bank Party 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 Bank Party from
time to time on request such amounts as such Bank Party may determine to be
necessary to compensate such Bank Party (or, without duplication, the bank
holding company of which such Bank Party is a subsidiary) for any costs of such
Bank Party which it determines are attributable to the maintenance by such Bank
Party (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, Loans, or
issuance of or participations in Letters of Credit and commitments 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 Bank Party (or any Applicable Lending Office or such bank holding
company) to a level below that which such Bank Party (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.
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(d) A Bank Party shall notify the Company of any event occurring after the
date of this Agreement that will entitle such Bank Party to compensation under
Sections 5.01(a) or (c) above as promptly as practicable, but in any event
within 90 days, after such Bank Party obtains actual knowledge thereof;
provided, that (i) if such Bank Party fails to give such notice within 90 days
after it obtains actual knowledge of such an event, such Bank Party 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 Bank Party does give such notice and (ii) such Bank Party 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 Bank Party, be disadvantageous to such
Bank Party, except that such Bank Party shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Bank
Party will furnish to the Company a certificate setting forth the basis and
amount of each request by such Bank Party for compensation under Sections
5.01(a) or (c) above. Determinations and allocations by a Bank Party 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, or issue Letters of Credit or its obligation to participate in Letters of
Credit, and of the amounts required to compensate such Bank Party under this
Section 5.01, shall, absent manifest error, be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
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 Bank Party 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 Bank Party of making or
maintaining Eurodollar Loans for such Interest Period;
then such Bank Party shall give the Company prompt notice thereof, and so long
as such condition remains in effect, such Bank Party 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 Bank Party or its Applicable
Lending Office to honor its obligation to
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make or maintain Eurodollar Loans hereunder, or to issue or participate in
Letters of Credit, then such Bank Party shall promptly notify the Company
thereof and such Bank Party's obligation to make or Continue, or to Convert
Loans of any other Type into, Eurodollar Loans, or its obligation to issue or
participate in Letters of Credit, shall be suspended until such time as such
Bank Party may again make and maintain Eurodollar Loans, or issue or participate
in Letters of Credit, and the Company shall, upon the request of such Bank
Party, prepay any of such Loans then outstanding hereunder together with accrued
interest thereon, or purchase such Bank Party's participation in any of such
outstanding Letters of Credit.
5.04 Treatment of Affected Loans. If the obligation of any Bank Party to
make Eurodollar Loans or participate in Letters of Credit 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 Bank Party as Loans of the Affected
Type shall be made instead as Base Rate Loans, and all participations in Letters
of Credit that would otherwise be purchased by such Bank Party shall be instead
purchased by the Company, and, if an event referred to in Sections 5.01(b) or
5.03 hereof has occurred and such Bank Party so requests by notice to the
Company, all Affected Loans of such Bank Party then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such Bank
Party in such notice, and all such Bank Party's participations in any
outstanding Letters of Credit shall be purchased by the Company (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 Bank Party 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
Bank Party's Affected Loans shall be applied instead to such Loans.
5.05 Compensation. The Company shall pay to any Bank Party, upon the
request of such Bank Party, such amount or amounts as shall be sufficient (in
the reasonable opinion of such Bank Party) to compensate it for any loss, cost
or expense of such Bank Party which such Bank Party 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
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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 Bank
Party 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 Bank Party).
Section 6. Conditions Precedent.
6.01 Initial Loan. The obligation of each Lender to make the initial Loan
hereunder, and of LC Issuer to issued its first Letter of Credit 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;
(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 Bank Parties 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.
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(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
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), and the obligation of LC Issuer to issue any Letter of
Credit hereunder (including its first Letter of Credit), 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, or the date of issuance of such Letter of Credit,
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,
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modified or supplemented as of a subsequent date with the consent of Majority
Lenders; (iii) the Facility Usage shall not exceed the 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, or the date of
issuance of the immediately preceding Letter of Credit issued, hereunder (and in
the case of the initial Loan or the first Letter of Credit, since the date of
the Financial Statements delivered to Bank Parties as described in Section 7.02
hereof). Each notice of borrowing or LC Application 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 Bank Parties prior to the date of such borrowing or the date
of issuance of such Letter of Credit, as of the date of such borrowing or the
date of issuance of such Letter of Credit).
Section 7. Representations and Warranties. The Company represents and
warrants to each Bank Party 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.
7.02 Financial Condition. The Company has delivered to Each Bank Party
copies of the consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of December 31, 1997, 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, and the
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of March 31, 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows of the Company and its Consolidated
Subsidiaries for the fiscal quarter ended on such date. 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
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hereto, neither the Company nor any of its Subsidiaries had on December 31, 1997
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, 1997, 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 each Bank Party, 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 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.
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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 Bank Parties 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.
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 $25,000 and,
in the aggregate, have a value (so determined) of less than $2,000,000 and (ii)
Oil and Gas Properties without any proven reserves. The Properties mortgaged to
Bank Parties (or Agent for the benefit of Bank Parties) 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
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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 each Bank Party all available copies of the most recent title
opinions that the Company has commissioned with respect to the Properties
mortgaged to Bank Parties (or Agent for the benefit of Bank Parties) 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 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 or Letters of Credit 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 $500,000 for any individual well,
(ii) exceeding $2,000,000 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 Bank Parties (or Agent for the benefit of Bank
Parties) pursuant to the Security Documents) with respect to the Property
mortgaged to Bank Parties (or Agent for the benefit of Bank Parties) pursuant to
the Security Documents which would have a Material Adverse Effect. The Company,
each of its Subsidiaries and each Partnership has made all
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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 Bank Parties (or Agent for the benefit of Bank
Parties) pursuant to the Security Documents or production therefrom) required
under the laws and regulations with respect to all of the Properties mortgaged
to Bank Parties (or Agent for the benefit of Bank Parties) 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 to Bank Parties (or Agent for the benefit of Bank Parties)
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 Bank Parties (or
Agent for the benefit of Bank Parties) 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 Bank Parties (or Agent for the benefit of Bank
Parties) 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
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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 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
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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 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 each Bank Party or their agents, employees or
contractors. The Company has not received notice of any Environmental Claim
that has not been provided to each Bank Party.
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(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 Bank Parties 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 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 Bank
Party 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 Bank
Party 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 each Bank Party 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 each Bank Party 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 each Bank Party.
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(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
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
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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;
(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
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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;
(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 each Bank Party, 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 each Bank Party 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,
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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 each Bank Party
reports (the "Independent Reserve Reports") in form and substance reasonably
satisfactory to Agent in its 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 each Bank Party 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 each Bank Party 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 each Bank Party 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
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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 $1,000,000 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 Bank
Parties (or Agent for the benefit of Bank Parties) 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 Bank Parties (or Agent for the benefit of Bank Parties) 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 $5,000,000 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 each Bank Party 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 Bank Parties (or
Agent for the benefit of Bank Parties) pursuant to the Security Documents and
that all releases, waivers and consents have been obtained which are necessary
for Bank Parties (or Agent for the benefit of Bank Parties) 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 Bank Parties
(or Agent for the benefit of Bank Parties) 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 each Bank Party at least 20
days prior to (i) the acquisition, subsequent to the date hereof, by the
Company, any of its Subsidiaries or any
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partnership of any interest or interests in Oil and Gas properties with proved
reserves having a net present value of $1,000,000 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 each Bank Party such notice, deliver to each Bank Party 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 each Bank Party, 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 each
Bank Party 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 Bank Parties an
opinion addressed to Bank Parties 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.
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(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.
(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 each
Bank Party 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 each Bank Party the certificates of insurance required by
this Section 8.06, Agent may procure such insurance or single interest insurance
for risks covering Bank Parties' 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
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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;
(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
wornout 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;
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(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;
(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 by PMTI and the other obligors under the PMTI Facility in favor
of the agent or lenders under the PMTI Facility upon any of their Properties,
securing the PMTI Facility;
(k) Liens by the Company in favor of the agent or lenders under the PMTI
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 under the PMTI
Facility; provided, any such Liens shall be subordinated to any Liens by the
Company in favor of Bank Parties (or Agent for the benefit of Bank Parties) in
such securities or other
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property belonging to the Company securing the Obligations, on terms and
conditions satisfactory to Agent; and
(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) the Obligations;
(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;
(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 PMTI and the other obligors under the PMTI
Facility, and the guaranty by the Company of such Indebtedness (together with
reimbursement obligations of the Company in connection with any Letter of Credit
issued in connection therewith), (ii) other Indebtedness of PMTI and its 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 (iii) the
unsecured guaranty by the Company of indebtedness of PMTI and its 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 shall not at any time exceed (A)
$250,000,000 minus (B) the outstanding Indebtedness under the PMTI 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 $3,000,000 at any one time or (ii) permitted
pursuant to Section 8.09(e); and
(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 $5,000,000 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;
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(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 PMTI and/or its Subsidiaries in connection with
acquisitions and other capital investments, (2) the Company may make additional
loans, advances or other extensions of credit of up to $15,000,000 in the
aggregate to PMTI and/or its Subsidiaries, the proceeds of which are used to
finance purchases and physical storage of crude oil that is fully hedged on the
NYMEX and located in the Cushing, Oklahoma storage facility or which is in
transit in specified pipelines approved by Majority Lenders and listed on
Schedule 8.10(c) hereto, 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 PMTI 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) capital contributions to Unrestricted Subsidiaries from time to time in
an aggregate amount not to exceed $55,000,000;
(f) in addition to any capital contributions permitted in subsection (e)
above, the following Investments in Unrestricted Subsidiaries: (i) capital
contributions of up to $85,000,000 of the proceeds of any preferred or common
stock of the Company issued after January 1, 1998; and (ii) any Investment
represented by, or required to comply with the obligations undertaken under, the
Stock Purchase Agreement described in Section 8.35(c);
(g) additional Investments not otherwise permitted by this Section 8.10 up
to but not exceeding $1,000,000 in the aggregate; and
(h) 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; provided,
however, the Company may make:
(a) regularly scheduled Dividend Payments in cash in respect of the
Company's Series D Cumulative Convertible Preferred Stock, par value $500 per
share (i) the aggregate amount of
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all such Dividend Payments not to exceed (A) 6% ($30 per share) in any one
fiscal year, or (B) in the event the purchaser thereof shall desire to sell such
stock in a secondary offering, and the investment bankers representing such
purchaser shall issue a written opinion to the Company that the gross proceeds
of such secondary offering shall not exceed $23,300,000, such percentage as is
necessary to enable such Purchaser to receive $23,300,000 of gross proceeds from
such secondary offering, but in no event exceeding 7.5% ($37.50 per share)) in
any one fiscal year, and (ii) the aggregate stated value of such outstanding
Convertible Preferred Stock at issuance not to exceed $23,300,000; and
(b) regularly scheduled Dividend Payments in cash in respect of the
Company's proposed issuance of Series E Cumulative Convertible Preferred Stock,
stated value $500 per share, the aggregate amount of all such Dividend Payments
not to exceed $8,075,000 during the term of this Agreement.
8.12 Tangible Net Worth. The Company will not permit Tangible Net Worth
at any time to be less than the sum of (a) $85,000,000 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, 1997 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 plus (c) fifty
percent (50%) of the Company's cumulative Consolidated net income (if positive)
for each fiscal quarter from and after December 31, 1997 to and including the
date of determination thereof, computed on a cumulative basis for such period.
For 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, and, in addition, all LC Obligations shall be included as current
liabilities, regardless of whether or not contingent (but without duplication).
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 dated as of March 15, 1996 and Section
4.12(iv) of the Senior Subordinated Indenture dated as of July 21, 1997,
provided that: (i) the Company shall have given each Bank Party written notice
of its intent to so purchase and redeem (collectively "redeem") the Senior
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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 such Section 4.12(iii)(c) or Section 4.12(iv), as appropriate, 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 each Bank Party
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
Supermajority Lenders in the manner specified by Section 2.08 hereof and the
Facility Usage shall not exceed the Borrowing Base as so redetermined.
(c) The Company may offer to purchase and redeem Senior Subordinated Notes
in an amount of up to $60,000,000 under the circumstances described in Paragraph
5 thereof, provided that: (i) the Company shall have given each Bank Party
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 each Bank Party 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 Supermajority Lenders in the manner specified by Section 2.08
hereof and the Facility Usage shall not exceed the Borrowing Base as so
redetermined.
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 refinance
Matured LC Obligations, (iii) to acquire additional Oil and Gas Properties and
(iv) to finance the ongoing working capital requirements and other general
corporate purposes of the Company and its Subsidiaries, and will use all Letters
of Credit for its general business purposes (all 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
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use of any of such proceeds or Letters of Credit. In addition, the Company may
use up to $55,000,000 of the proceeds of the Loans hereunder to make or
refinance capital contributions to Unrestricted Subsidiaries as permitted in
Section 8.10(e).
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 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,
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 PMTI 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 PMTI 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 each Bank Party all written
notices of any Environmental Claim received by the Company, any of
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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 $1,000,000.
(c) The Company will promptly furnish to each Bank Party 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 $1,000,000.
(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.
8.21 Environmental Indemnification. The Company will defend, indemnify
and hold harmless each Bank Party, 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 each Bank Party 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
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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 $1,000,000 for any individual well, (ii) exceed
$2,000,000 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.
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 $2,000,000; 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 Facility Usage shall not exceed the 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, Bank Parties 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 each Bank Party, (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 each Bank Party, or (iv) consent to or permit any
additional units, interests or rights to distributions in any Partnership to
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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.
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 PMTI. Neither PMTI 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 each Bank Party 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 Bank
Parties (or Agent for the benefit of Bank Parties) 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 Bank Parties (or
Agent for the benefit of Bank Parties) pursuant to the Security Documents at the
time of such request which the Company or such Subsidiary may mortgage to Bank
Parties (or Agent for the benefit of Bank Parties) without breaching any
existing covenant in favor of, or agreement with, any third party. Further, the
Company will from time to time deliver to each Bank Party 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. Each Bank
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Party hereby acknowledges and agrees that at the request of the Company the
Security Documents limit the indebtedness secured by properties located in the
State of Florida to the amount of $125,000,000.
8.32 Post Closing Curative. If any title opinion furnished to Bank
Parties as contemplated herein or other title information received by Bank
Parties 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 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 PMTI (1) for which neither the Company nor any
subsidiary other than PMTI is liable or (2) that are guaranteed by the Company
as permitted under Section 8.09(e);
(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 a Bank Party or an Affiliate thereof)
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 a Bank Party or
Affiliate thereof) 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
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(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
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 a Bank Party or Affiliate thereof)
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 shall not, and shall not permit
any Subsidiary to (i) Guarantee any Indebtedness or other obligation of PMCT or
any Subsidiary of PMCT, (ii) grant or permit any Lien on any Property of the
Company or any Subsidiary of the Company to secure any Indebtedness or other
obligation of PMCT or any Subsidiary of PMCT, (iii) make any Investment in or
transfer any Property to PMCT or any Subsidiary of PMCT, (iv) assume or grant an
indemnity with respect to PMCT or any Subsidiary of PMCT, (v) provide any other
form of credit support to PMCT or any Subsidiary of PMCT, or (vi) enter into any
transaction with PMCT or any Subsidiary of PMCT.
8.35 Unrestricted Subsidiaries. Each Unrestricted Subsidiary shall be
subject to the following:
(a) Subject to subsection (d) below, no Unrestricted Subsidiary shall be
deemed to be a "Subsidiary" of the Company for purposes of this Agreement or any
other Basic Document, and no Unrestricted Subsidiary shall be subject to or
included within the scope of any provision herein or in any other Basic
Document, including without limitation any representation, warranty,
covenant or Event of Default herein or in any other Basic Document, except as
set forth in this Section 8.35.
(b) Except as permitted under Section 8.10(e) and (f) or Section 8.35 (c),
neither the Company nor any of its Subsidiaries shall Guarantee any Indebtedness
or other obligation of, grant any Lien on any of its Property to secure any
Indebtedness or other obligation of, make any Investment in, assume or grant an
indemnity with respect to, or provide any other form of credit support to, any
Unrestricted Subsidiary, and neither the Company nor any of its Subsidiaries
shall enter into (i) any management contract or agreement with any Unrestricted
Subsidiary, except upon the prior written consent of Majority Lenders, not to be
unreasonably withheld, or (ii) any other contract or agreement with any
Unrestricted Subsidiary, except in the course of ordinary business on terms no
less favorable to the Company or such Subsidiary, as applicable, than could be
obtained in a comparable arm's length transaction from an unaffiliated party.
(c) Notwithstanding anything to the contrary contained in this Agreement,
the Company and PAAI may observe and perform their respective obligations under,
and
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consummate the stock purchases set forth in that certain Stock Purchase
Agreement dated as of March 15, 1998 among the Company, PAAI and Wingfoot
Ventures Seven Inc., as may be amended or modified as may be agreed to by the
Company and PAAI, provided that (i) such observance or performance does not
constitute or result in a default or violation of any Indenture or other
agreement governing Indebtedness of the Company or its Subsidiaries, and (ii)
such additions or modifications shall not modify or increase any direct or
indirect liability of the Company or any of its Subsidiaries which arises or may
arise thereunder, unless such additions or modifications have been consented to
by Majority Lenders.
(d) In the event Unrestricted Subsidiaries shall fail to consummate the
transactions contemplated by such Stock Purchase Agreement prior to September
30, 1998, then on and after October 1, 1998 each Unrestricted Subsidiary shall
be deemed to be a "Subsidiary" of the Company for purposes of this Agreement and
shall be subject to the terms and conditions hereof.
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 $2,500,000 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
(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 any Bank Party 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
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(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 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
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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, 1998, (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 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 Bank Party 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 Bank Parties
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 Bank Party 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,
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together with all other powers reasonably incidental thereto. The relationship
of Agent to Bank Parties 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 Bank Parties 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 Bank Parties 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 Bank Parties or
upon notice from any Bank Party to Agent of any Default or Event of Default,
Agent shall promptly notify each bank Party 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 Bank
Party and shall not be responsible to any Bank Party 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 Bank Party 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 Bank Parties 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 Bank Parties' Credit Decisions. Each Bank Party acknowledges that
it has, independently and without reliance upon Agent or any other Bank Party,
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 Bank Party also acknowledges that it will, independently
and without reliance upon Agent or any other Bank Party and based on such
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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 Bank Party 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 Bank Party 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 Bank Party 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.
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 Bank Party 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 such Bank Party 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 all
Bank Parties 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 Bank Parties 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 any Bank Party 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
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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 Bank Parties any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Bank Parties 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 Bank Parties, 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
Bank Parties (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 Bank Parties, 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 Bank
Parties, and no Obligor shall be entitled to rely on any such provision or
assert any such provision in a claim or defense against any Bank Party. Bank
Parties 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 Bank Parties 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 any Bank Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this
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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 or LC Issuer shall be deemed given to Agent or LC Issuer if
it is delivered to a Bank Party who is then also Agent or LC Issuer, 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 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 Bank
Parties 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
Letters of Credit 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.
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The Company hereby agrees to indemnify and hold harmless each Bank Party
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 each
Bank Party 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 any Bank Party 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 any Bank Party or any trustee therein. Each Bank Party
and any trustee under any Security Document shall have the right to compromise
and adjust any such claims, actions and judgments, and in addition to the rights
to be indemnified as herein provided, all amounts paid by such Bank Party 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 such Bank Party 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 AND EACH BANK PARTY 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 any Bank Party or
any trustee
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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 (a) if such
party is the Company, by the Company, (b) if such party is Agent or LC Issuer,
by such party, and (c) if such party is a Lender, by Majority Lenders, except as
to determinations of a new Borrowing Base, as set forth in Section 2.08, and
increases in the aggregate Commitment of all Lenders, which shall require
Supermajority Lenders; provided, notwithstanding the foregoing or anything to
the contrary herein, no such amendment, modification or waiver shall be valid or
effective against any Lender (unless signed by such Lender) which would: (i)
increase the Commitment of such Lender or subject such Lender to any additional
obligations, (ii) reduce any fees hereunder, or the principal of, or interest
on, such Lender's Note, (iii) postpone any date fixed for any payment of any
such fees, principal or interest, (iv) amend the definition herein of "Majority
Lenders" or "Supermajority Lenders" or otherwise change the aggregate amount of
Percentage Shares which is required for Agent, Lenders or any of them to take
any particular action under the Loan Documents, or (v) release the Company from
its obligation to pay such Lender's Note or any Guarantor from its guaranty of
such payment; provided, further, in clarification of the foregoing,
Supermajority Lenders may increase the aggregate Commitment of all Lenders
(pursuant to an increase in such Supermajority Lenders' individual Commitments),
provided that no individual Lender's Commitment may be increased in connection
with any such increase in the aggregate Commitment of all Lenders without such
individual Lender's consent as set forth in clause (i) above.
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 Bank Party. The Company shall not directly or indirectly purchase or
otherwise retire any Obligations owed to any Bank Party nor will any Bank Party
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 Bank Parties, such purchaser shall not be
entitled to any rights of any Bank Party under the Basic Documents unless and
until the Company has purchased all of the Obligations.
(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
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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 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.
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(e) Any Bank Party may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Bank Party 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 no Bank Party 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 such Bank Party 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 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
71
<PAGE>
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, any Bank
Party 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 or any Bank Party in any other jurisdiction.
11.11 Waiver of Jury Trial, Punitive Damages, Etc. THE COMPANY AND EACH
BANK PARTY 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
BANK PARTY 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 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 ACKNOWLEDGMENT.
11.12 Rate of Interest. It is the intention of the parties hereto that
each Bank Party shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Bank Party 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 such Bank Party 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
72
<PAGE>
security for any Note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to such Bank Party
that is contracted for, taken, reserved, charged or received by such Bank Party
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 canceled automatically and if theretofore paid shall be credited
by such Bank Party 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 such Bank Party 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 such Bank Party
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 canceled automatically by such Bank Party as of the date of such acceleration
or prepayment and, if theretofore paid, shall be credited by such Bank Party 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 such Bank Party to the Company). All sums paid or agreed to be paid
to such Bank Party for the use, forbearance or detention of sums due hereunder
shall, to the extent permitted by law applicable to such Bank Party, 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 any Bank Party on any date shall be
computed at the Maximum Rate applicable to such Bank Party pursuant to this
Section 11.12 and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such Bank Party would be less than
the amount of interest payable to such Bank Party computed at the Maximum Rate
applicable to such Bank Party, then the amount of interest payable to such Bank
Party in respect of such subsequent interest computation period shall continue
to be computed at the Maximum Rate applicable to such Bank Party until the total
amount of interest payable to such Bank Party shall equal the total amount of
interest which would have been payable to such Bank Party 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 Chapter 303 of the Texas Finance
Code is relevant to any Bank Party for the purpose of determining the Maximum
Rate, such Bank Party 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 no Bank Party 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.
73
<PAGE>
11.14 Confidentiality. Each Bank Party 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 such Bank
Party, 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 any Bank Party, (iii) to bank examiners, auditors
or accountants, (iv) in connection with any litigation to which any Bank Party
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 such Bank Party;
and provided, further, that in no event shall any Bank Party be required to
return any materials furnished by the Company.
74
<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
Senior Vice President and Chief Financial Officer
Address for Notices:
-------------------
500 Dallas Street, Suite 700
Houston, Texas 77002
Telecopier No.: (713) 654-1523
Telephone No.: (713) 654-1414
Attention: Phillip D. Kramer
75
<PAGE>
ING (U.S.) CAPITAL CORPORATION,
as Agent, a Lender and as LC Issuer
By: /s/ Christopher R. Wagner
--------------------------------------------
Christopher R. Wagner, Vice President
Principal Office for all Loans:
------------------------------
ING (U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022-2101
Address for Notices:
-------------------
ING (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) 446-1717
Attention: Christopher R. Wagner, Vice President
PAYMENT INFORMATION:
Morgan Guaranty Trust Company of New York
for the account of ING (U.S.) Capital Corporation
Account No. 3123152, ABA No. 021000238
Reference: ING (U.S.) Capital Corporation for
Natural Resources Department/Plains
76
<PAGE>
BANKBOSTON, N.A., Lender
By: /s/ Terrence Ronan
------------------------------------
Name: Terrence Ronan
Title: Vice President
Principal Office for all Loans:
------------------------------
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Address for Notices:
-------------------
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Telephone: (617) 434-5472
Telecopy: (617) 434-3652
Attention: Terrence Ronan
PAYMENT INFORMATION:
BankBoston, N.A.
ABA #011000390
Attn: Commercial Loan Services -
Debra Williams
Ref: Plains Resources
77
<PAGE>
DEN NORSKE BANK ASA, Lender
By: /s/ Byron L. Cooley
---------------------------------------
Name: Byron L. Cooley
Title: Senior Vice President
By: /s/ William V. Moyer
---------------------------------------
Name: William V. Moyer
Title: First Vice President
Principal Office for all Loans:
------------------------------
Den norske Bank ASA
333 Clay Street, Suite 4890
Houston, Texas 77002
Address for Notices:
-------------------
Den norske Bank ASA
333 Clay Street, Suite 4890
Houston, Texas 77002
Telephone: (713) 844-9258
Telecopy: (713) 757-1167
Attention: Byron L. Cooley, First Vice President
PAYMENT INFORMATION:
Unibank New York
ABA #026005694
ACC# 27260999
Ref: Plains Resources
78
<PAGE>
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, Lender
By: /s/ Ann Rhoads
---------------------------------------
Name: Ann Rhoads
Title: Vice President
Principal Office for all Loans:
------------------------------
Wells Fargo Bank (Texas), National Association
1000 Louisiana, Mail Station 156
Houston, Texas 77002
Address for Notices:
-------------------
Wells Fargo Bank (Texas), National Association
1000 Louisiana, Mail Station 156
Houston, Texas 77002
Telephone: (713) 250-4035
Telecopy: (713) 250-7912
Attention: Ann M. Rhoads, Vice President
PAYMENT INFORMATION:
Wells Fargo Bank (Texas), National Association
ABA #1130-01064
Ref: Plains Resources
79
<PAGE>
CHASE BANK OF TEXAS, N.A, Lender
By: /s/ Russell A. Johnson
---------------------------------------
Name: Russell A. Johnson
Title: Vice President
Principal Office for all Loans:
------------------------------
Chase Bank of Texas, N.A.
600 Travis, 20th Floor
Houston, Texas 77002-8086
Address for Notices:
-------------------
Chase Bank of Texas, N.A.
600 Travis, 20th Floor
Houston, Texas 77002-8086
Telephone: (713) 216-5617
Telecopy: (713) 216-4295
Attention: Russell A. Johnson
PAYMENT INFORMATION:
ABA #113-000-609
ACC# GL #13681-7800
Commercial Loan Clearing Account
Ref: Plains Resources
80
<PAGE>
COMERICA BANK-TEXAS, Lender
By: /s/ Daniel G. Steele
---------------------------------------
Name: Daniel G. Steele
Title: Senior Vice President
Principal Office for all Loans:
------------------------------
Comerica Bank-Texas
910 Louisiana, 4th Floor
Houston, Texas 77002
Address for Notices:
-------------------
Comerica Bank-Texas
910 Louisiana, 4th Floor
Houston, Texas 77002
Telephone: (713) 722-6540
Telecopy: (713) 722-6550
Attention: Daniel G. Steele
PAYMENT INFORMATION:
ABA #111-000-753
Account No. __________
Reference: Plains Resources Inc.
81
<PAGE>
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Darrell W. Holley /s/ Karel Louman
---------------------------------------------------
Name: Darrell W. Holley Karel Louman
Title: Senior Vice President Managing Director
Principal Office for all Loans:
------------------------------
MeesPierson Capital Corp.
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Address for Notices:
-------------------
MeesPierson Capital Corp.
300 Crescent Court, Suite 1750
Dallas, Texas 75201
Telephone: (214) 754-0009
Telecopy: (214) 754-5981
Attention: Darrell W. Holley, Senior Vice President
PAYMENT INFORMATION:
Chase Manhattan Bank
ABA No. 021 000 021
Account name: MeesPierson New York Agency
Account No. 001-1-624418
Ref: Plains Resources - Account #___________
82
<PAGE>
BANK OF SCOTLAND, Lender
By: /s/ Annie Chi Tat
---------------------------------------
Name: Annie Chin Tat
Title: Vice President
Principal Office for all Loans:
------------------------------
Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Address for Notices:
-------------------
Bank of Scotland
1200 Smith Street, Suite 1750
Houston, Texas 77002-4312
Telephone: (713) 651-1870
Telecopy: (713) 651-9714
Attention: Richard Butler
PAYMENT INFORMATION:
Citibank N.A., New York
ABA No. 021 000 089
Account Name: Bank of Scotland, NY
Account No. 36046633
Ref: Plains Resources
Attention: Loan Admin.
83
<PAGE>
U.S. BANK NATIONAL ASSOCIATION, Lender
By: /s/ Monte E. Deckerd
---------------------------------------
Name: Monte E. Deckerd
Title: Vice President
Principal Office for all Loans:
------------------------------
U.S. Bank
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Address for Notices:
-------------------
U.S. Bank
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Telephone: (303) 585-4212
Telecopy: (303) 585-4362
Attention: Monte Deckerd
PAYMENT INFORMATION:
ABA #102000021
Account No. 28888532160600
Ref: Plains Resources
84
<PAGE>
HIBERNIA NATIONAL BANK, Lender
By: /s/ S. John Castellano
---------------------------------------
Name: S. John Castellano
Title: Vice President
Principal Office for all Loans:
------------------------------
Hibernia National Bank
313 Carondelet Street, Suite 1300
New Orleans, Louisiana 70130
Address for Notices:
-------------------
Hibernia National Bank
313 Carondelet Street, Suite 1300
New Orleans, Louisiana 70130
Telephone: (504) 533-2045
Telecopy: (504) 533-5434
Attention: Tammy Angelety
PAYMENT INFORMATION:
ABA #___________
Account No. ___________
Ref: Plains Resources
85
<PAGE>
LENDER SCHEDULE
Lender Commitment Percentage Share
- ------ ---------- ----------------
ING (U.S.) Capital Corporation $28,000,000 12.444444%
BankBoston, N.A. $25,000,000 11.111111%
Den Norske Bank ASA $25,000,000 11.111111%
Wells Fargo Bank (Texas), $25,000,000 11.111111%
National Association
Chase Bank of Texas, N.A. $25,000,000 11.111111%
Comerica Bank-Texas $20,000,000 8.888889%
MeesPierson Capital Corp. $20,000,000 8.888889%
Bank of Scotland $20,000,000 8.888889%
U.S. Bank National Association $20,000,000 8.888889%
Hibernia National Bank $17,000,000 7.555556%
============ ==========
TOTAL $225,000,000 100.000000%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS
RESOURCES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998,
AND CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 31,584
<SECURITIES> 0
<RECEIVABLES> 89,840
<ALLOWANCES> 0
<INVENTORY> 32,132
<CURRENT-ASSETS> 154,026
<PP&E> 638,392
<DEPRECIATION> 193,328
<TOTAL-ASSETS> 615,818
<CURRENT-LIABILITIES> 131,820
<BONDS> 341,613
0
21,299
<COMMON> 1,685
<OTHER-SE> 114,464
<TOTAL-LIABILITY-AND-EQUITY> 615,818
<SALES> 382,394
<TOTAL-REVENUES> 383,013
<CGS> 347,156
<TOTAL-COSTS> 360,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,866
<INCOME-PRETAX> 4,585
<INCOME-TAX> 1,736
<INCOME-CONTINUING> 2,849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,849
<EPS-PRIMARY> .13
<EPS-DILUTED> .12
</TABLE>
